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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-38545
Landsea Homes Corporation
(Exact Name of Registrant as Specified in Its Charter)
Delaware82-2196021
(State or Other Jurisdiction of(I.R.S. Employer
Incorporation or Organization)Identification Number)
660 Newport Center Drive, Suite 300
Newport Beach, CA
92660
(Address of Principal Executive Offices,(Zip Code)
(949) 345-8080
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.0001 per shareLSEA 
The Nasdaq Capital Market
Warrants exercisable for Common StockLSEAW 
The Nasdaq Capital Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”



“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of May 7, 2021, 46,281,091 Class A common stock, par value $0.0001 per share, were issued and outstanding.


Landsea Homes Corporation
Form 10-Q Index
For the Three Months Ended March 31, 2021

PART I - FINANCIAL INFORMATIONPage
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020
Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020
Consolidated Statements of Equity for the Three Months Ended March 31, 2021 and 2020
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020
Notes to the Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Result of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Signatures




PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Landsea Homes Corporation
Consolidated Balance Sheets - (Unaudited)
(in thousands, except share and per share amounts)
March 31, 2021December 31, 2020
Assets
Cash and cash equivalents$190,736 $105,778 
Cash held in escrow4,138 11,618 
Restricted cash 4,270 
Real estate inventories (including related party interest of $15,819 and $18,721, respectively)
724,437 687,819 
Due from affiliates3,097 2,663 
Investment in and advances to unconsolidated joint ventures (including related party interest of $972 and $1,320, respectively)
17,172 21,342 
Goodwill20,705 20,705 
Other assets27,254 41,569 
Total assets$987,539 $895,764 
 
Liabilities
Accounts payable$40,826 $36,243 
Accrued expenses and other liabilities51,994 62,869 
Due to affiliates2,357 2,357 
Warrant liability16,225  
Notes and other debts payable, net 319,479 264,809 
Total liabilities430,881 366,278 
 
Commitments and contingencies
 
Equity
Stockholders' equity:
Preferred stock, $0.0001 par value, 50,000,000 shares authorized, none issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
  
Common stock, $0.0001 par value, 500,000,000 shares authorized, 46,231,025 and 32,557,303 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
5 3 
Additional paid-in capital530,427 496,171 
Retained earnings24,937 32,011 
Total stockholders' equity555,369 528,185 
Noncontrolling interests1,289 1,301 
Total equity556,658 529,486 
Total liabilities and equity$987,539 $895,764 
See accompanying notes to the consolidated financial statements.
- 1 -


Landsea Homes Corporation
Consolidated Statements of Operations - (Unaudited)
(in thousands, except share and per share amounts)
Three Months Ended March 31,
20212020
Revenue
Home sales$154,765 $136,295 
Lot sales5,654  
Total revenue160,419 136,295 
 
Cost of sales
Home sales (including related party interest of $2,902 and $2,846, respectively)
136,841 119,568 
Lot sales4,780  
Total cost of sales141,621 119,568 
 
Gross margin
Home sales17,924 16,727 
Lot sales874  
Total gross margin18,798 16,727 
 
Sales and marketing expenses9,931 9,636 
General and administrative expenses14,986 10,016 
Total operating expenses24,917 19,652 
 
(Loss) from operations(6,119)(2,925)
 
Other (expense) income, net(61)809 
Equity in net (loss) income of unconsolidated joint ventures (including related party interest of $348 and $278, respectively)
(21)(1,743)
(Loss) on remeasurement of warrant liability(4,950) 
Pretax (loss)(11,151)(3,859)
 
(Benefit) for income taxes(4,065)(1,235)
 
Net (loss)(7,086)(2,624)
Net (loss) attributed to noncontrolling interests(12)(88)
Net (loss) attributable to Landsea Homes Corporation$(7,074)$(2,536)
 
(Loss) per share:
Basic and diluted$(0.16)$(0.08)
 
Weighted average common shares outstanding:
Basic and diluted44,245,847 32,557,303 
See accompanying notes to the consolidated financial statements.
- 2 -


Landsea Homes Corporation
Consolidated Statements of Equity - (Unaudited)
(in thousands, except shares)

Common Stock
SharesAmountAdditional paid-in capitalRetained earningsNoncontrolling
interests
Total stockholders' equity
Balance at December 31, 20201,000 $ $496,174 $32,011 $1,301 $529,486 
Retroactive application of recapitalization32,556,303 3 (3)— —  
Adjusted balance, beginning of period32,557,303 $3 $496,171 $32,011 $1,301 $529,486 
Recapitalization transaction, net of fees and deferred taxes13,673,722 2 31,880 — — 31,882 
Stock-based compensation expense— — 2,376 — — 2,376 
Net loss— — — (7,074)(12)(7,086)
Balance at March 31, 202146,231,025 $5 $530,427 $24,937 $1,289 $556,658 
 
Common Stock
SharesAmountAdditional paid-in capitalRetained earningsNoncontrolling
interests
Total stockholders' equity
Balance at December 31, 20191,000 $ $524,516 $40,962 $17,892 $583,370 
Retroactive application of recapitalization32,556,303 3 (3)— —  
Adjusted balance, beginning of period32,557,303 $3 $524,513 $40,962 $17,892 $583,370 
Contributions from noncontrolling interests— — — — 150 150 
Net loss— — — (2,536)(88)(2,624)
Net transfers from parent— — (6,735)—  (6,735)
Balance at March 31, 202032,557,303 $3 $517,778 $38,426 $17,954 $574,161 
See accompanying notes to the consolidated financial statements.
- 3 -


Landsea Homes Corporation
Consolidated Statements of Cash Flows - (Unaudited)
(in thousands)
Three Months Ended March 31,
20212020
(dollars in thousands)
Cash flows from operating activities:
Net (loss)$(7,086)$(2,624)
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Depreciation and amortization914 816 
Loss on remeasurement of warrant liability4,950  
Stock-based compensation expense2,376  
Abandoned project costs88  
Equity in net loss of unconsolidated joint ventures21 1,743 
Deferred taxes116 (659)
Changes in operating assets and liabilities:
Cash held in escrow7,480 (2,291)
Real estate inventories(35,755)(245)
Due from affiliates(434)(272)
Other assets(4,539)1,509 
Accounts payable4,583 515 
Accrued expenses and other liabilities(11,060)(7,846)
Due to affiliates 281 
Net cash (used in) operating activities(38,346)(9,073)
 
Cash flows from investing activities:
Purchases of property and equipment(157)(460)
Distributions of capital from unconsolidated joint ventures4,149  
Payments for business acquisition, net of cash acquired (128,528)
Net cash provided by (used in) investing activities3,992 (128,988)
 
Cash flows from financing activities:
Borrowings from notes and other debts payable154,017 195,686 
Repayments of notes and other debts payable(100,062)(89,246)
Proceeds from merger, net of fees and other costs64,434  
Repayment of convertible note(1,500) 
Contributions from noncontrolling interests 150 
Deferred offering costs paid(1,612)(1,194)
Debt issuance costs paid(235)(2,252)
Cash (distributed to) parent, net (6,735)
Net cash provided by financing activities115,042 96,409 
 
Net increase (decrease) in cash, cash equivalents, and restricted cash80,688 (41,652)
Cash, cash equivalents, and restricted cash at beginning of period110,048 156,378 
Cash, cash equivalents, and restricted cash at end of period$190,736 $114,726 
See accompanying notes to the consolidated financial statements.
- 4 -


Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)

1.    Company
Landsea Homes Corporation (“LHC” or the “Company”), a majority owned subsidiary of Landsea Holdings Corporation (“Landsea Holdings”), together with its subsidiaries, is engaged in the acquisition, development and building of lots, homes, and condominiums in California, Arizona, New York, and New Jersey. The Company's operations are organized into the following three reportable segments: Arizona, California, and Metro New York.
On August 31, 2020, LHC and its parent, Landsea Holdings, entered into an Agreement and Plan of Merger (the “Merger Agreement”), with LF Capital Acquisition Corp. (“LF Capital”) and LFCA Merger Sub, Inc. (the “Merger Sub”), a direct, wholly-owned subsidiary of LF Capital. The Merger Agreement provided for, among other things, the merger of Merger Sub with and into Landsea Homes Incorporated ("LHI"), previously a wholly-owned subsidiary of Landsea Holdings, with LHI continuing as the surviving corporation (the "Merger").
On January 7, 2021 (the "Closing Date"), the Merger was consummated pursuant to the Merger Agreement (the "Closing"). The name of the surviving company, LF Capital Acquisition Corp., was changed at that time to Landsea Homes Corporation. Subject to the terms of the Merger Agreement, Landsea Holdings received $343.8 million of stock consideration, consisting of 32.6 million newly issued shares of LF Capital Acquisition Corp.’s publicly-traded Class A common stock. The shares were valued at $10.56 per share for purposes of determining the aggregate number of shares payable to Landsea Holdings (the “Stock Consideration”).
Upon Closing, Level Field Capital, LLC (the “Sponsor”) held 1.0 million shares which are subject to surrender and forfeiture for no consideration in the event the common stock does not reach certain thresholds during the twenty-four month period following the closing of the Merger (“Earnout Shares”). The Sponsor transferred 0.5 million Earnout Shares to Landsea Holdings. Additionally, the Sponsor forfeited 2.3 million private placement warrants and transferred 2.2 million private placement warrants to Landsea Holdings (such private placement warrants, each exercisable to purchase one share of Common Stock at an exercise price of $11.50 per share, are referred to as the “Private Placement Warrants”, together with the public warrants they are referred to as the "Warrants").

In connection with the Merger, the Company received $64.4 million from the Merger after payments of $28.7 million related to the public warrant amendment and of $7.5 million in transaction expenses incurred. The Company incurred direct and incremental costs of approximately $16.7 million related to the equity issuance, consisting primarily of investment banking, legal, accounting and other professional fees, which were recorded to additional paid-in capital as a reduction of proceeds. The Company recorded $2.7 million in general and administrative expenses in the three months ended March 31, 2021 related to the accelerated vesting of the phantom awards. The Company paid cash of $2.9 million for the phantom stock awards and issued 0.2 million shares with an issuance date value of $1.9 million at the time of the Merger.
The Merger was accounted for as a reverse recapitalization. Under this method of accounting, LF Capital is treated as the “acquired” company for financial reporting purposes. This determination was primarily based on the current stockholder of LHC, Landsea Holdings, having a relative majority of the voting power of the combined entity, the operations of LHI prior to the Merger comprising the only ongoing operations of the combined entity, and senior management of LHI comprising the senior management of the combined entity. Accordingly, for accounting purposes, the financial statements of the combined entity represent a continuation of the financial statements of LHI with the acquisition being treated as the equivalent of LHI issuing stock for the net assets of LF Capital, accompanied by a recapitalization. The net assets of LHI are stated at historical cost, with no goodwill or other intangible assets recorded. The shares and net (loss) income per share available to holders of the LHI’s common stock, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio established in the Merger Agreement.

2.     Summary of Significant Accounting Policies
Basis of Presentation and Consolidation—The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP")

- 5 -


Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
and include the accounts of the Company and all subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Prior to the Merger, the Company was historically funded as part of Landsea Holdings' treasury program. Cash and cash equivalents were primarily centrally managed through bank accounts legally owned by Landsea Holdings. Accordingly, cash and cash equivalents held by Landsea Holdings at the corporate level were not attributed to the Company for any of the periods presented prior to the Merger. Only cash amounts legally owned by entities consolidated by the Company are reflected in the consolidated balance sheets. Transfers of cash, both to and from Landsea Holdings' treasury program, were reflected as a component of additional paid-in capital in the consolidated balance sheets and as a financing activity on the accompanying consolidated statements of cash flows. As the functional departments that made up the Company were not held by a single legal entity, balances between the Company and Landsea Holdings that were not historically cash settled were included in additional paid-in capital.
Landsea Holdings holds a series of notes payable to affiliated entities of its parent. The cash Landsea Holdings received from this debt was partially utilized to fund operations of the Company. Related party interest incurred by Landsea Holdings (the “Related Party Interest”) was historically pushed down to the Company and reflected on the consolidated balance sheets of the Company, primarily in real estate inventories, and on the consolidated statements of operations in cost of sales. Refer to Note 5 - Capitalized Interest for further detail. As the Company did not guarantee the notes payable nor have any obligations to repay the notes payable, and as the notes payable will not be assigned to the Company, the notes payable do not represent the liability of the Company and accordingly have not been reflected in the consolidated balance sheets. Additionally, in connection with the Merger, LHC is precluded from repaying Landsea Holdings' notes payable to the affiliated entities of its parent. Therefore, as of January 7, 2021, the Related Party Interest is no longer pushed down to LHC.

During the periods presented in the consolidated financial statements prior to the Merger, the Company was included in the consolidated U.S. federal, and certain state and local income tax returns filed by Landsea Holdings, where applicable. Income tax expense and other income tax related information contained in these consolidated financial statements are presented on a separate return basis as if the Company had filed its own tax returns. Additionally, certain tax attributes such as net operating losses or credit carryforwards are presented on a separate return basis, and accordingly, may differ in the future. In jurisdictions where the Company has been included in the tax returns filed by Landsea Holdings, any income tax payables or receivables resulting from the related income tax provisions have been reflected in the consolidated balance sheets and the effect of the push down is reflected within additional paid-in capital.

Management of the Company believes that the assumptions underlying the consolidated financial statements reasonably reflect the utilization of services provided or benefit received by the Company during the periods presented. Nevertheless, the consolidated financial statements may not be indicative of the Company’s future performance and therefore periods prior to the Merger do not necessarily reflect the results of operations, financial position, or cash flows of the Company if it had been an independent entity during those periods.
The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") and should be read in conjunction with our consolidated financial statements and notes thereto included in our Current Report on Form 8-K/A for the year ended December 31, 2020 filed with the SEC on March 12, 2021. The accompanying unaudited consolidated financial statements include all adjustments (consisting of normal recurring entries) necessary for the fair statement of our results for the interim periods presented. Results for the interim periods are not necessarily indicative of the results to be expected for the full year due to seasonal variations and other factors. 
Use of Estimates—The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ materially from these estimates.

- 6 -


Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
Warrant liability—The Company’s outstanding Private Placement Warrants are presented on the consolidated balance sheets as a liability recorded at fair value with subsequent changes in fair value recognized in the consolidated statement of operations at each reporting date as a gain (loss) on remeasurement of the warrant liability. Each Private Placement Warrant is exercisable at $11.50 into one share of common stock. The Warrants will expire five years after the completion of the Merger or earlier upon redemption or liquidation. Refer to Note 16 - Stockholders' Equity for additional information on the Warrants. The fair value of the Private Placement Warrants is determined by a Black-Scholes options pricing model which includes Level 3 inputs as discussed further in Note 14 - Fair Value.
On April 12, 2021, the Staff of the SEC released a statement (the “SEC Statement”) emphasizing the potential accounting implications of certain terms that may be common in warrants issued by special purpose acquisition companies (“SPAC”) that may require classification of the warrants as a liability of the entity measured at fair value, with changes in fair value each period reported in earnings.

The Warrants initially issued by LF Capital in connection with its initial public offering and assumed by the Company in connection with the consummation of the Merger were previously classified as equity in the annual historical financial statements of LF Capital included in our Annual Report on Form 10-K for the year ended December 31, 2020. As a result, the Company has concluded that there is a material misstatement related to the accounting for the Warrants in the historical financial statements of LF Capital for the periods presented in that Form 10-K. The Company will file an amended Form 10-K as soon as practicable and has filed a Current Report on Form 8-K that includes a statement of non-reliance within Item 4.02 of that Form 8-K.
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application for fiscal years beginning after December 15, 2020. The Company adopted the amendments in this update on January 1, 2021. The adoption did not have a material impact on the Company's consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivative and Hedging (Topic 815). ASU 2020-01 clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The standard is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. The Company adopted the amendments in this update on January 1, 2021. The adoption did not have a material impact on the Company's consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform, particularly the cessation of the London Interbank Offered Rate ("LIBOR"), on financial reporting. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.
3.     Business Combinations
On January 15, 2020, the Company acquired 100% of the membership interest of Garrett Walker Homes (“GWH”) for cash consideration of approximately $133.4 million. GWH is a residential homebuilder located in Phoenix, Arizona focused on building entry-level, single-family detached homes in the Northwest Valley and Phoenix metropolitan. The total assets of GWH include approximately 20 projects and 1,750 lots in various stages of development.

- 7 -


Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
In accordance with Accounting Standards Codification ("ASC") Topic 805, Business Combinations, the assets acquired and liabilities assumed from our acquisition of GWH were measured and recognized at fair value as of the date of the acquisition to reflect the purchase price paid.
Acquired inventories consist of land, land deposits, and work in process inventories. The Company determined the estimate of fair value for acquired land inventory using a forecasted cash flow approach for the development, marketing, and sale of each community acquired. Significant assumptions included in our estimate were future development costs, construction and overhead costs, mix of products, as well as average selling price ("ASP"), and absorption rates. The Company estimated the fair value of acquired work in process inventories based upon the stage of production of each unit and a profit margin that a market participant would require to complete the remaining production and requisite selling efforts. On the acquisition date, the stage of production for each lot ranged from recently started lots to fully completed homes. The intangible asset acquired relates to the GWH trade name, which is estimated to have a fair value of $1.6 million and is being amortized over three years. Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. Goodwill of $15.4 million was recorded on the consolidated balance sheets as a result of this transaction and is expected to be deductible for tax purposes over 15 years. The acquired goodwill is included in the Arizona reporting segment in Note 13, Segment Information. The Company incurred transaction related costs of $0.4 million related to the GWH acquisition in the three months ended March 31, 2020.
The Company's results of operations include homebuilding revenues of $41.3 million, and income before tax inclusive of purchase price accounting and corporate G&A allocation, of $2.0 million, from GWH in the accompanying consolidated statement of operations for the three months ended March 31, 2020.
The following is a summary of the allocation of the purchase price based on the fair value of assets acquired and liabilities assumed (dollars in thousands).

Assets Acquired
Cash$2,905 
Real estate inventories119,466 
Goodwill15,392 
Trade name1,600 
Other assets532 
Total assets$139,895 
 
Liabilities Assumed
Accounts payable$5,425 
Accrued expenses1,037 
Total liabilities6,462 
Net assets acquired$133,433 
Unaudited Pro Forma Financial Information
Unaudited pro forma revenue and net (loss) income for the three months ended March 31, 2020 give effect to the results of the acquisition of GWH as though the acquisition date was as of January 1, 2019, the beginning of the year preceding the acquisition. Unaudited pro forma net (loss) income adjusts the operating results of GWH to reflect the additional costs that would have been recorded assuming the fair value adjustments had been applied as of the beginning of the year preceding the year of acquisition including the tax-effected amortization of the acquired trade name and transaction related costs.

- 8 -


Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
Three Months Ended March 31,
2020
(dollars in thousands)
Revenue$138,746 
Pretax loss(4,050)
Benefit for income taxes948 
Net loss$(3,102)
4.     Real Estate Inventories
Real estate inventories are summarized as follows:
March 31, 2021December 31, 2020
(dollars in thousands)
Deposits and pre-acquisition costs$35,938 $34,102 
Land held and land under development233,583 221,055 
Homes completed or under construction422,350 395,926 
Model homes32,566 36,736 
Total real estate inventory$724,437 $687,819 
Deposits and pre-acquisition costs include land deposits and other due diligence costs related to potential land acquisitions. Land held and land under development includes costs incurred during site development such as development, indirect costs, and permits. Homes completed or under construction and model homes include all costs associated with home construction, including land, development, indirect costs, permits, materials and labor.
In accordance with ASC 360, inventory is stated at cost, unless the carrying amount is determined not to be recoverable, in which case inventory is written down to its estimated fair value. The Company reviews each real estate asset at the community-level, on a quarterly basis or whenever indicators of impairment exist. We generally determine the estimated fair value of each community by using a discounted cash flow approach based on the estimated future cash flows at discount rates that reflect the risk of the community being evaluated. The discounted cash flow approach can be impacted significantly by our estimates of future home sales revenue, home construction costs, and the applicable discount rate, all of which are Level 3 inputs.
For the three months ended March 31, 2021 and 2020, the Company recognized no real estate inventory impairments.
5.     Capitalized Interest
Interest is capitalized to real estate inventories and investment in unconsolidated joint ventures during development and other qualifying activities. Interest capitalized as a cost of real estate inventories is included in cost of sales as related inventories are delivered. Interest capitalized to investments in unconsolidated joint ventures is relieved to equity in net (loss) income of unconsolidated joint ventures as related joint venture homes close.

- 9 -


Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
For the periods reported, interest incurred, capitalized, and expensed was as follows:
Three Months Ended March 31,
20212020
(dollars in thousands)
Related party interest pushed down$ $2,629 
Other interest incurred5,106 4,302 
Total interest incurred5,106 6,931 
 
Related party interest capitalized 2,629
Other interest capitalized5,106 4,302 
Total interest capitalized5,106 6,931 
 
Previously capitalized related party interest included in cost of sales$2,902 $2,846 
Previously capitalized other interest included in cost of sales4,165 4,465 
Related party interest relieved to equity in earnings (loss) from unconsolidated joint ventures348 278 
Other interest relieved to equity in earnings (loss) from unconsolidated joint ventures5 4 
Other interest expensed11 11 
Total interest expense included in pretax income (loss)$7,431 $7,604 
6.    Investment in and Advances to Unconsolidated Joint Ventures
As of March 31, 2021 and December 31, 2020, the Company had two unconsolidated joint ventures with ownership interests of 51% and 25% in LS-NJ Port Imperial JV LLC and LS-Boston Point LLC, respectively, and concluded that these joint ventures were variable interest entities. The Company concluded that it was not the primary beneficiary of the variable interest entities and, accordingly, accounted for these entities under the equity method of accounting. The Company's maximum exposure to loss is limited to the investment in the unconsolidated joint venture amounts included on the consolidated balance sheets.
The condensed combined balance sheets for the Company’s unconsolidated joint ventures accounted for under the equity method are as follows:
March 31, 2021December 31, 2020
(dollars in thousands)
Cash and cash equivalents$6,603 $2,740 
Restricted cash 4,870 
Real estate inventories30,145 41,214 
Other assets122 123 
Total assets$36,870 $48,947 
 
Accounts payable$207 $188 
Accrued expenses and other liabilities4,183 3,928 
Due to affiliates871 5,735 
Total liabilities5,261 9,851 
Members' capital31,609 39,096 
Total liabilities and members' capital$36,870 $48,947 

- 10 -


Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
The condensed combined statements of operations for the Company’s unconsolidated joint ventures accounted for under the equity method are as follows:
Three Months Ended March 31,
20212020
(dollars in thousands)
Revenues$14,080 $10,561 
Cost of sales and expenses(13,431)(13,106)
Net income (loss) of unconsolidated joint ventures649 (2,545)
Equity in net (loss) of unconsolidated joint ventures (1)
$(21)$(1,743)
(1)     The equity in net (loss) income of unconsolidated joint ventures consists of the allocation of the Company's proportionate share of income or loss from the unconsolidated joint ventures of $0.3 million income and $1.4 million loss, as well as $0.4 million and $0.3 million of expense related to capitalized interest and other costs for the three months ended March 31, 2021 and 2020, respectively.

For the three months ended March 31, 2021 and 2020, no impairment charges were recorded related to either of the unconsolidated joint ventures.
7.    Other Assets
Other assets consist of the following:
March 31, 2021December 31, 2020
(dollars in thousands)
Deferred tax asset, net$2,621 $13,248 
Property, equipment and capitalized selling and marketing costs, net5,790 6,386 
Right-of-use asset5,678 5,973 
Deferred offering costs 7,617 
Prepaid income taxes3,362 1,003 
Intangible asset, net885 1,046 
Prepaid expenses5,741 3,029 
Other3,177 3,267 
Total other assets$27,254 $41,569 

8.     Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following:
March 31, 2021December 31, 2020
(dollars in thousands)
Land development and home construction accrual$24,499 $25,910 
Warranty accrual12,020 11,730 
Accrued compensation and benefits3,630 10,966 
Lease liabilities6,089 6,396 
Interest payable1,612 1,134 
Income tax payable 1,355 
Sales tax payable735 1,867 
Other deposits and liabilities3,409 3,511 
Total accrued expenses and other liabilities$51,994 $62,869 


- 11 -


Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
Changes in the Company’s warranty accrual are detailed in the table below:
March 31, 2021December 31, 2020
(dollars in thousands)
Beginning warranty accrual$11,730 $8,693 
Warranty provision917 3,843 
Warranty payments(627)(806)
Ending warranty accrual$12,020 $11,730 

9.     Notes and Other Debts Payable, net
Amounts outstanding under notes and other debts payable, net consist of the following:
March 31, 2021December 31, 2020
(dollars in thousands)
Construction loans$91,504 $67,757 
Line of credit facilities179,019 140,142
EB-5 notes payable50,150 59,216
Loan payable5,136 5,144 
Notes Payable325,809 272,259
Deferred loan costs(6,330)(7,450)
Notes and other debts payable, net$319,479 $264,809 
The Company has various construction loan agreements secured by various real estate developments (“Construction Loans”) with maturity dates extending from February 2022 through November 2023. The Construction Loans have variable interest rates based on Prime or LIBOR. As of March 31, 2021, interest rates on the Construction Loans ranged from 4.00% to 5.50%. In 2018, the Company assumed two loans from a third-party land seller in connection with the acquisition of real estate inventories. Both loans have a variable interest rate of LIBOR plus 6.50% with a floor of 8.25%. As of March 31, 2021, the interest rate on both loans was 8.25%.
In 2018, the Company entered into a secured line of credit (“LOC”) with a bank. In 2020, the Company extended the loan resulting in a new maturity date of February 2024. As of March 31, 2021 the total commitment on the LOC was $195.0 million and it had an outstanding balance of $99.8 million. The LOC has a variable interest rate of Prime plus 1.25% with a floor of 5.25%. As of March 31, 2021, the interest rate was 5.25%.
In connection with the acquisition of GWH, the Company entered into an additional line of credit ("LOC2") with a bank as part of the transaction. On the date of acquisition, the Company drew $70.0 million from the LOC2. As of March 31, 2021 the total commitment on the LOC2 was $100.0 million and it had an outstanding balance of $79.2 million. The LOC2 has an interest rate of Prime plus 1.00% with a floor of 5.00% and matures in January 2024. As of March 31, 2021, the interest rate was 5.00%.
The Company has various EB-5 notes payable with maturity dates ranging from February 2022 through June 2023. As of March 31, 2021, the loans have fixed interest rates of 4.00% to 6.00%.
On April 15, 2020, Landsea Holdings entered into a Paycheck Protection Program (“PPP”) Note evidencing an unsecured loan in the amount of $4.3 million made to the Company under the PPP. The PPP was established under the CARES Act and is administered by the U.S. Small Business Association. The PPP Note matures on April 15, 2022 and bears interest at a rate of 1.00% per annum. The proceeds from the PPP Note may only be used for payroll costs (including benefits), interest on mortgage obligations, rent, utilities and interest on certain other debt obligations. The proceeds from the PPP Note were used in the operation of the Company and therefore the debt was included in the consolidated balance sheets of the Company. We fully utilized the proceeds from this loan to satisfy certain payroll and benefit obligations and have applied for relief of the full amount of the loan under the PPP.

- 12 -


Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
The Company’s loans have certain financial covenants, such as requirements for the Company to maintain a minimum liquidity balance, minimum tangible net worth, gross profit margin, leverage and interest coverage ratios. The Company's loans are secured by the assets of the Company and contain various representations, warranties, and covenants that are customary for these types of agreements. As of March 31, 2021, the Company was in compliance with all financial loan agreement covenants.
The aggregate maturities of the principal balances of the notes and other debts payable during the five years subsequent to March 31, 2021 are as follows (dollars in thousands):
2021$62 
2022121,308 
202324,777 
2024179,102 
2025560 
Thereafter 
 $325,809 

10.    Commitments and Contingencies
Legal—The Company is subject to the usual obligations associated with entering into contracts for the development and sale of real estate inventories and other potential liabilities incidental to its business.
Certain of the Company’s subsidiaries are a party to various claims, legal actions and complaints arising in the ordinary course of business. In management’s opinion, the disposition of these matters will not have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.
Performance Obligations—In the ordinary course of business, and as part of the entitlement and development process, the Company’s subsidiaries are required to provide performance bonds to assure completion of certain public facilities. The Company had $92.1 million and $78.0 million of performance bonds outstanding as of March 31, 2021 and December 31, 2020, respectively.
Operating Leases—The Company has various operating leases, most of which relate to office facilities. Future minimum payments under the noncancelable operating leases in effect at March 31, 2021 were as follows (dollars in thousands):
2021$1,201 
20221,624 
20231,397 
20241,182 
2025855 
Thereafter762 
Total lease payments7,021 
Less: Discount(932)
Present value of lease liabilities$6,089 
Operating lease expense for the three months ended March 31, 2021 and 2020 was $0.4 million and $0.5 million respectively, and is included in general and administrative expense on the consolidated statements of operations.
The Company primarily enters into operating leases for the right to use office space and computer and office equipment, which have remaining lease terms that range from one to seven years and often include one or more options to renew. The weighted average remaining lease term as of March 31, 2021 and December 31, 2020 was 4.1 and 4.4 years, respectively. Renewal terms are included in the lease term when it is reasonably certain the option will be exercised.

- 13 -


Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
The Company established a right-of-use asset and a lease liability based on the present value of future minimum lease payments at the later of January 1, 2019, the commencement date of the lease, or, if subsequently modified, the date of modification for active leases. As the rate implicit in each lease is not readily determinable, the Company's incremental borrowing rate is used in determining the present value of future minimum payments as of the commencement date. The weighted average rate as of March 31, 2021 was 5.9%. Lease components and non-lease components are accounted for as a single lease component. As of March 31, 2021, the Company had $5.7 million and $6.1 million recognized as a right-of-use asset and lease liability, respectively, which are presented on the consolidated balance sheets within other assets and accrued expenses and other liabilities, respectively. As of December 31, 2020, the Company had $6.0 million and $6.4 million recognized as a right-of-use asset and lease liability, respectively.
11.    Related Party Transactions
The Company has entered into agreements with its unconsolidated joint ventures to provide management services related to underlying projects for a management fee and reimbursement of agreed upon out of pocket operating expenses. As of March 31, 2021 and December 31, 2020, the Company had a net receivable due from affiliates balance of $0.7 million and a net receivable due from affiliates of $0.3 million, respectively. For the three months ended March 31, 2021 and 2020, the Company recorded $0.1 million and $0.3 million of management fees, respectively.
On June 30, 2020, the Company transferred its interest in a consolidated real estate joint venture that was previously included in the Metro New York segment to LHC. The interest was removed from the consolidated financial statements of the Company on a prospective basis. The real estate joint venture had net assets at the date of transfer of $28.9 million and a noncontrolling interest of $1.2 million as follows (dollars in thousands):
Assets Transferred
Cash$338 
Real estate inventories49,705 
Other assets174 
Total assets$50,217 
 
Liabilities Transferred
Accounts payable$1,416 
Construction loan17,825 
Accrued expenses and other liabilities2,102 
Total liabilities21,343 
Net assets transferred28,874 
Noncontrolling interest transferred$1,242 

In connection with the Merger we transferred a deferred tax asset ("DTA") to Landsea Holdings, our majority shareholder, of $12.1 million. The DTA represented the deferred tax on interest expensed through Cost of Sales from a related party loan which remained with Landsea Holdings during the Merger.

12.    Income Taxes
During the periods presented herein prior to the Merger, the Company reported income taxes on the consolidated income tax returns of Landsea Holdings since it was a wholly owned subsidiary of Landsea Holdings. The income tax provision and related balances in these consolidated financial statements have been calculated as if the Company filed a separate tax return and was operating as a separate business from Landsea Holdings. Therefore, cash tax payments and items of current and deferred taxes during that period may not be reflective of the Company’s actual tax balances.

- 14 -


Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
The effective tax rate of the Company was 36.5% and 32.0% for the three months ended March 31, 2021 and 2020, respectively. The difference between the statutory tax rate and the effective tax rate for the three months ended March 31, 2021 is primarily related to state income taxes net of federal income tax benefits, estimated deduction limitations for executive compensation, warrant fair market value adjustments, and tax credits for energy efficient homes. The difference between the statutory tax rate and the effective tax rate for the three months ended March 31, 2020 is primarily related to state income taxes net of federal income tax benefits and tax credits for energy efficient homes.
13. Segment Reporting

The Company is engaged in the development, design, construction, marketing and sale of single-family homes and condos in multiple states across the country. The Company is managed by geographic location and each of the three geographic regions targets a wide range of buyer profiles including: first time, move-up, and luxury homebuyers.

The management of the three geographic regions report to the Company's chief operating decision makers (“CODMs”), the Chief Executive Officer and Chief Operating Officer of the Company. The CODMs review the results of operations, including total revenue and income before income tax expense to assess profitability and to allocate resources. Accordingly, the Company has presented its operations as the following three reportable segments:

Arizona
California
Metro New York
The Company has also identified Corporate operations as a non-operating segment, as it serves to support the homebuilding operations through functional departments such as executive, finance, treasury, human resources, accounting and legal. The majority of the corporate personnel and resources are primarily dedicated to activities relating to the homebuilding operations and are allocated based on each segment's respective percentage of assets, revenue and dedicated personnel. 

The following table summarizes total revenue and income before income tax expense by segment:
Three Months Ended March 31,
20212020
(dollars in thousands)
Revenue
Arizona$65,326 $53,054 
California95,093 83,241 
Metro New York (1)
  
Total revenue$160,419 $136,295 
 
(Loss) income before income tax expense:
Arizona$1,433 $(972)
California(159)1,492 
Metro New York (1)
(831)(2,796)
Corporate(11,594)(1,583)
Total (loss) income before income tax expense $(11,151)$(3,859)
(1)     The Metro New York reportable segment does not currently have any active selling communities. Included in (loss) income before income tax expense is a $0.0 million loss and $1.7 million loss from unconsolidated joint ventures for the three months ended March 31, 2021 and 2020, respectively.


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Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
The following table summarizes total assets by segment:
March 31, 2021December 31, 2020
(dollars in thousands)
Assets
Arizona$279,246 $268,141 
California430,379 409,705 
Metro New York125,178 120,168 
Corporate152,736 97,750 
Total assets$987,539 $895,764 

As of March 31, 2021 and December 31, 2020, goodwill of $20.7 million and $20.7 million, respectively, was allocated to the Arizona segment and no other segment had goodwill.

14. Fair Value

ASC 820 defines fair value as the price that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and requires assets and liabilities carried at fair value to be classified and disclosed in the following three categories:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are inactive; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets at measurement date.

Level 3 — Valuations derived from techniques where one or more significant inputs or significant value drivers are unobservable in active markets at measurement date.

The following table presents carrying values and estimated fair values of financial instruments:
March 31, 2021December 31, 2020
HierarchyCarrying ValueFair ValueCarrying ValueFair Value
(dollars in thousands)
Liabilities:
Construction loans (1)
Level 2$91,504 $91,504 $67,757 $67,757 
Revolving credit facility (1)
Level 2$179,019 $179,019 $140,142 $140,142 
EB-5 notes payable (2)
Level 2$50,150 $50,150 $59,216 $59,216 
Loan payable (2)
Level 2$5,136 $5,136 $5,144 $5,144 
Warrant liabilityLevel 3$16,225 $16,225 $ $ 
(1)     Carrying amount approximates fair value due to the variable interest rate terms of these loans.
(2)     Carrying amount approximates fair value due to recent issuances of debt having similar characteristics, including interest rate.

The carrying values of accounts and other receivables, restricted cash, deposits and accounts payable and accrued liabilities approximate the fair value for these financial instruments based upon an evaluation of the underlying characteristics, market data and because of the short period of time between origination of the instruments and their expected realization. The fair value of cash and cash equivalents is classified in Level 1 of the fair value hierarchy. Non-financial assets such as real estate inventories are measured at fair value on a nonrecurring basis using a discounted cash flow approach with Level 3 inputs within the fair value hierarchy. This measurement is performed when events and circumstances indicate the asset's carrying value is not recoverable.


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Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
The Private Placement Warrants are measured at fair value on a recurring basis using a Black-Scholes option pricing model. The significant unobservable input as of March 31, 2021 was the volatility rate implied from the public warrants, which are exchanged on an open market, of 42.2%.

The following table reconciles the beginning and ending balances for the Level 3 recurring fair value measurements during the periods presented:

Three Months Ended March 31,
20212020
Warrant liability(dollars in thousands)
Beginning balance(1)
$11,275 $ 
Changes in fair value4,950  
Ending balance$16,225 $ 
(1)     The beginning balance for the three months ended March 31, 2021 represents the balance as of January 7, 2021, the Closing Date of the Merger.

15. Stock-Based Compensation

During 2018, Landsea Holdings created a long-term incentive compensation program designed to align the interests of Landsea Holdings, the Company, and its executives by enabling key employees to participate in the Company’s future growth through the issuance of phantom equity awards. Landsea Holdings’ phantom equity awards issued on or after January 1, 2018 were accounted for pursuant to ASC 710, Compensation, as the value was not based on the shares of comparable public entities or other equity, but was based on the book value of Landsea Holdings' equity. Landsea Holdings measured the value of phantom equity awards on a quarterly basis using the intrinsic value method and pushed down the expense to the Company as the employees participating in the long-term incentive compensation program primarily benefit the Company. In connection with the Merger all of the phantom equity awards vested and were either paid out in cash or were converted to stock of LHC and the program was terminated. The Company recorded $2.7 million in general and administrative expenses in the three months ended March 31, 2021 related to the accelerated vesting of the phantom awards. The Company paid cash of $2.9 million for the phantom stock awards and granted 0.2 million shares with a grant date value of $1.9 million at the time of the Merger.

The Company has developed the Landsea Homes Corporation 2020 Stock Incentive Plan ("the Plan") which provides for the grant of Options, Stock Appreciation Rights, Restricted Stock Units and Restricted Stock, any of which may be performance-based, as determined by the Company's Compensation Committee.

During the three months ended March 31, 2021, the Company granted restricted stock units (“RSUs”) covering 0.1 million shares of common stock with a grant date fair value of $9.69 per share that vested immediately. In association with all grants issued, we recognized stock-based compensation expense of $2.4 million during the three months ended March 31, 2021. Stock-based compensation expense is included in general and administrative expenses on our consolidated statements of operations. The Company did not grant any RSUs or recognize any stock-based compensation expense during the three months ended March 31, 2020.

There are no unvested grants of RSUs as of March 31, 2021.

16. Stockholders' Equity

The Company’s authorized capital stock consists of 500.0 million shares of common stock with a par value of $0.0001 per share, and 50.0 million shares of preferred stock with a par value of $0.0001 per share. As of March 31, 2021, there were 46.2 million shares of common stock issued and outstanding, and no shares of preferred stock outstanding.


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Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
On January 7, 2021, the Merger was consummated pursuant to the Merger Agreement. Prior to the Merger, LF Capital was authorized to issue, and had outstanding, two classes of common shares, Class A and Class B. Upon the consummation of the Merger, all issued and outstanding shares of Class B common stock converted to shares of Class A. Public stockholders were offered the opportunity to redeem, upon closing of the Merger, shares of Class A common stock for cash. All outstanding shares of Common Stock are validly issued, fully paid and nonassessable. Following the merger, the Company's equity was retroactively adjusted to reflect the 32.6 million shares issued to Landsea Holdings.

As of March 31, 2021 there were 21,025,000 outstanding Warrants, consisting of 15,525,000 public warrants and 5,500,000 Private Placement Warrants. At the time of the Merger, the Warrant Agreement was amended so that each public warrant is exercisable at $1.15 into one tenth share of common stock. As part of the amendment, each holder of the public warrants received $1.85 for a total of $28.7 million paid by the Company upon closing of the Merger. Each Private Placement Warrant is exercisable at $11.50 into one share of common stock. The Warrants will expire five years after the completion of the Merger or earlier upon redemption or liquidation.

The Private Placement Warrants are identical to the public warrants, except for the rate of exchange upon exercise. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the initial stockholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants, except that they will retain their rate of exchange as one-for-one.

The Company may call the public warrants for redemption (except with respect to the Private Placement Warrants):

in whole and not in part;
at a price of $0.01 per warrant;
upon a minimum of 30 days’ prior written notice of redemption; and
if, and only if, the last reported closing price of the shares equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

If the Company calls the public warrants for redemption, management will have the option to require all holders that wish to exercise the public warrants to do so on a “cashless basis,” as described in the Warrant Agreement.

The exercise price and number of common shares issuable upon exercise of the Warrants may be adjusted in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. However, the Warrants will not be adjusted for issuance of common shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Warrants shares. Accordingly, the Warrants may expire worthless.

17. Earnings Per Share

We use the treasury stock method to calculate earnings per share ("EPS") as our currently issued Warrants do not have participating rights.


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Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
The following table sets forth the computation of basic and diluted EPS for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,
20212020
(dollars in thousands, except share and per share amounts)
Numerator
Net (loss) attributable to Landsea Homes Corporation$(7,074)$(2,536)
Denominator
Weighted average common shares outstanding - basic45,167,513 32,557,303 
Adjustment for weighted average participating shares outstanding(922,222) 
Adjustment for weighted average shares vested but awaiting issuance556  
Adjusted weighted average common shares outstanding under two class method - basic44,245,847 32,557,303 
Dilutive effect of warrants  
Adjusted weighted average common shares outstanding under two class method - diluted44,245,847 32,557,303 
Earnings per share
Basic and diluted$(0.16)$(0.08)

Warrants are excluded from the calculation of diluted EPS as they are antidilutive. We excluded 7.1 million common stock unit equivalents from our diluted EPS during the three months ended March 31, 2021 and 2020.
18.    Supplemental Disclosures of Cash Flow Information
The following table presents certain supplemental cash flow information:
Three Months Ended March 31,
20212020
(dollars in thousands)
Supplemental disclosures of cash flow information
Interest paid, net of amounts capitalized$11 $11 
Income taxes paid$2 $46 
 
Supplemental disclosures of non-cash investing and financing activities
Transfer of deferred tax asset to Landsea Holdings$12,119 $ 
Conversion of deferred offering costs to additional paid-in-capital$9,229 $ 
Amortization of deferred financing costs$951 $1,016 
Business acquisition holdback$ $2,000 
 
Cash, cash equivalents, and restricted cash reconciliation:
Cash and cash equivalents$190,736 $113,950 
Restricted cash 776 
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows$190,736 $114,726 

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Landsea Homes Corporation
Notes to Consolidated Financial Statements - (unaudited)
19.    Subsequent Events
On May 4, 2021, the Company acquired 100% of Mercedes Premier Homes, LLC (also known as Vintage Estate Homes, LLC, “Vintage Estate Homes”), a Florida- and Texas-based homebuilder for an aggregate cash purchase price of $54.6 million, plus a paydown of existing debt of $3.8 million. In addition, we assumed $27.3 million of debt in connection with the acquisition. The determination of the purchase accounting is in process as of the date the consolidated financial statements were available to be issued.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with and is qualified in its entirety by the consolidated financial statements and notes thereto included elsewhere in this document. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in the section entitled “Risk Factors.” This section discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020.


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Consolidated Financial Data

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020.
Three Months Ended March 31,
20212020
(dollars in thousands, except per share amounts)
Revenue
Home sales$154,765 $136,295 
Lot sales5,654 — 
Total revenue160,419 136,295 
 
Cost of sales
Home sales (including related party interest of $2,902 and $2,846, respectively)
136,841 119,568 
Inventory impairments— — 
Lot sales4,780 — 
Total cost of sales141,621 119,568 
 
Gross margin
Home sales17,924 16,727 
Lot sales874 — 
Total gross margin18,798 16,727 
 
Sales and marketing expenses9,931 9,636 
General and administrative expenses14,986 10,016 
Total operating expenses24,917 19,652 
 
(Loss) from operations(6,119)(2,925)
 
Other (expense) income, net(61)809 
Equity in net (loss) income of unconsolidated joint ventures (including related party interest of $348 and $278, respectively)
(21)(1,743)
(Loss) on remeasurement of warrant liability(4,950)— 
Pretax (loss)(11,151)(3,859)
 
(Benefit) for income taxes(4,065)(1,235)
 
Net (loss)(7,086)(2,624)
Net (loss) attributed to noncontrolling interests(12)(88)
Net (loss) attributable to Landsea Homes Corporation$(7,074)$(2,536)
 
(Loss) per share:
Basic and diluted$(0.16)$(0.08)
Weighted average common shares outstanding: