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CONCENTRATION, RISKS, AND UNCERTAINTIES

9 Months Ended

Sep. 30, 2021

3. CONCENTRATION, RISKS, AND UNCERTAINTIES

Cash Concentrations

The Company maintains cash balances at various financial institutions. These balances are secured by the Federal Deposit Insurance Corporation. These balances generally exceed the federal insurance limits. Uninsured cash balances were $4,264,400 and $2,146,000 as of September 30, 2021 and December 31, 2020, respectively.

Revenue Concentrations

Homes

For the three months ended September 30, 2021, five customers each represented 19% of homes revenue. For the nine months ended September 30, 2021, there were no concentrations in relation to the homes revenue segment. For the three and nine months ended September 30, 2020, there were no concentrations in relation to the homes revenue segment.

Completed Lots

For the three months ended September 30, 2021, three customers represented 38%, 38%, and 24% of completed lots revenue, respectively. For the three months ended September 30, 2020, there were no concentrations in relation to the completed lots revenue segment. For the nine months ended September 30, 2021 and 2020, Lennar Northwest, Inc. (“Lennar”) represented 90% and 0% of the completed lots revenue, respectively.

Entitled Land

For the three months ended September 30, 2021 and 2020, Lennar represented 100% and 0% of entitled land revenue, respectively. For the nine months ended September 30, 2021 and 2020, Lennar represented 100% and 0% of entitled land revenue, respectively.

Fee Build

For the three months ended September 30, 2021 and 2020, Lennar represented 100% and 0% of fee build revenue, respectively. For the nine months ended September 30, 2021 and 2020, Lennar represented 100% and 0% of fee build revenue, respectively.

COVID-19

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to spread throughout the United States and the world. The Company is monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread, in addition to the impact on its employees. Due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company’s operations and liquidity are uncertain as of the date of this report.

The COVID-19 Pandemic has had the following effect on the Company’s business:

1.	Construction not related to safety, spoliation, or critical infrastructure was halted by Washington State Governor Inslee (the “Governor”) on March 23, 2020. Some operations could continue based on the aforementioned exceptions to the shutdown order, but the Company did experience a significant operational slowdown.
2.	Soundview Estates (a large Harbor Custom Development, Inc. site) continued selective activities that yielded rock byproduct, considered an essential material, needed for critical infrastructure projects for an Amazon distribution center and a local hospital.
3.	On April 24, 2020, the Governor approved the restart of most residential housing projects, deeming them essential, as long as they adhered to certain safety measures. Under this order, most existing permitted residential homes or projects were considered essential. The order allowed the Company to resume near full construction activities on all permitted lots.
4.	On May 1, 2020, the Governor established a four-phase plan for Washington businesses to follow. All Harbor Custom Development, Inc. development sites were in Phase 3 of the plan where construction was able to continue, and new construction was allowed, as long as the Company created a safety plan adhering to certain safety practices, which the Company had done.
5.	As of June 30, 2021, Washington State reopened the state under the Washington Ready plan. All industry sectors previously covered by the Roadmap to Recovery or the Safe Start Plan (which included all Harbor Custom Development, Inc. operational activities) returned to usual capacity and operations.

The Company has not, at this time, experienced any cancelled sales contracts. The Company has experienced some supply-chain issues with both cabinetry and appliances related to COVID-19. As of the date of this report, the Company’s projects are on-schedule and operations are not being materially impacted by the COVID-19 pandemic. While there could ultimately be a material impact on operations and liquidity of the Company, at the time of issuance of this report, the ultimate impact could not be determined.