10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 September 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39266

HARBOR CUSTOM DEVELOPMENT, INC.

(Exact name of registrant as specified in its charter)

Washington	46-4827436
(State of organization)	(I.R.S. Employer Identification No.)

1201 Pacific Avenue, Suite 1200

Tacoma, Washington 98402

(Address of principal executive offices)

(253) 649-0636

Registrant’s telephone number, including area code

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered.
Common Stock	HCDI	The Nasdaq Stock Market LLC
Series A Cumulative Convertible Preferred Stock	HCDIP	The Nasdaq Stock Market LLC
Warrants	HCDIW	The Nasdaq Stock Market LLC
Warrants	HCDIZ	The Nasdaq Stock Market LLC

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, a 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 filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller 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

There are 14,376,372 shares of common stock outstanding as of November 9, 2022.

Table of Contents

		Page
PART I - FINANCIAL INFORMATION		1
Item 1.	Interim Condensed Consolidated Financial Statements (Unaudited)	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
PART II - OTHER INFORMATION		32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	33
SIGNATURES		34

PART I

ITEM 1. FINANCIAL STATEMENTS

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Page
Condensed Consolidated Balance Sheets (Unaudited)	2
Condensed Consolidated Statements of Operations (Unaudited)	3
Condensed Consolidated Statements of Cash Flows (Unaudited)	4
Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7

1

HARBOR CUSTOM DEVELOPMENT, INC. AND SUBSIDIARIES

D/B/A HARBOR CUSTOM HOMES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2022		December 31, 2021
	(Unaudited)
ASSETS
Cash	$	13,707,900	$	25,629,200
Restricted Cash	597,600		597,600
Accounts Receivable, net	5,503,900		1,113,500
Contract Assets, net	—		2,167,200
Notes Receivable, net	9,754,200		2,000,000
Prepaid Expense and Other Assets	2,911,900		2,778,100
Real Estate	179,932,800		122,136,100
Property, Plant and Equipment, net	10,069,200		9,199,700
Right of Use Assets	2,323,400		3,429,700
Deferred Tax Asset	2,586,800		649,000
TOTAL ASSETS	$	227,387,700	$	169,700,100
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Accounts Payable and Accrued Expenses	$	13,340,300	$	10,662,800
Dividends Payable	634,700		670,900
Contract Liabilities	896,700		—
Deferred Revenue	63,900		44,800
Note Payable - D&O Insurance	537,500		903,800
Revolving Line of Credit Loan, net of Unamortized Debt Discount of $0.8 million and $0, respectively	24,011,400		—
Equipment Loans	4,296,100		5,268,500
Finance Leases	188,000		543,400
Construction Loans, net of Unamortized Debt Discount of $2.4 million and $4.4 million, respectively	83,263,500		34,957,100
Construction Loans - Related Party, net of Unamortized Debt Discount of $0.01 million and $1.1 million, respectively	8,926,100		13,426,600
Right of Use Liabilities	3,168,000		3,484,400
TOTAL LIABILITIES	139,326,200		69,962,300
COMMITMENTS AND CONTINGENCIES - SEE NOTE 12
STOCKHOLDERS’ EQUITY
Preferred Stock, no par value per share, 10,000,000 shares authorized and 3,799,799 issued and outstanding at September 30, 2022 and 4,016,955 issued and outstanding at December 31, 2021	62,912,100		66,507,500
Common Stock, no par value per share, 50,000,000 shares authorized and 14,352,365 issued and outstanding at September 30, 2022 and 13,155,342 issued and outstanding at December 31, 2021	35,704,700		32,122,700
Additional Paid In Capital	1,224,600		752,700
Retained Earnings (Accumulated Deficit)	(11,779,900)		1,646,500
Stockholders’ Equity	88,061,500		101,029,400
Non-Controlling Interest	—		(1,291,600)
TOTAL STOCKHOLDERS’ EQUITY	88,061,500		99,737,800
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	227,387,700	$	169,700,100

See accompanying notes to the condensed consolidated financial statements.

(Amounts rounded to the nearest $100)

2

HARBOR CUSTOM DEVELOPMENT, INC. AND SUBSIDIARIES

D/B/A HARBOR CUSTOM HOMES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Sales	$	11,748,500	$	18,010,600	$	50,616,000	$	46,017,200
Cost of Sales	11,310,800		10,866,200		46,055,400		34,938,300
Gross Profit	437,700		7,144,400		4,560,600		11,078,900
Operating Expenses	4,523,800		3,322,100		12,017,200		7,639,700
Operating Income (Loss)	(4,086,100)		3,822,300		(7,456,600)		3,439,200
Other Income (Expense)
Interest Expense	(565,800)		(115,100)		(1,046,800)		(298,500)
Interest Income	163,900		—		378,900		—
Loss on Sale of Equipment	(12,600)		—		(118,100)		(35,900)
Other Income	18,000		1,200		26,200		123,800
Total Other (Expense)	(396,500)		(113,900)		(759,800)		(210,600)
Income (Loss) Before Income Tax	(4,482,600)		3,708,400		(8,216,400)		3,228,600
Income Tax (Benefit)	(1,067,800)		—		(1,937,800)		—
Net Income (Loss)	(3,414,800)		3,708,400		(6,278,600)		3,228,600
Net Loss Attributable to Non-controlling interests	—		—		(600)		(1,700)
Preferred Dividends	(1,903,700)		(631,400)		(5,856,200)		(771,500)
Net Income (Loss) Attributable to Common Stockholders	$	(5,318,500)	$	3,077,000	$	(12,134,200)	$	2,458,800
Earnings (Loss) Per Share - Basic	$	(0.37)	$	0.21	$	(0.88)	$	0.17
Earnings (Loss) Per Share - Diluted	$	(0.37)	$	0.17	$	(0.88)	$	0.17
Weighted Average Common Shares Outstanding - Basic	14,350,899		14,898,594		13,862,865		14,350,143
Weighted Average Common Shares Outstanding - Diluted	14,350,899		22,063,584		13,862,865		14,522,663

See accompanying notes to the condensed consolidated financial statements.

(Amounts rounded to the nearest $100)

3

HARBOR CUSTOM DEVELOPMENT, INC. AND SUBSIDIARIES

D/B/A HARBOR CUSTOM HOMES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)	$	(6,278,600)	$	3,228,600
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation	1,022,200		783,500
Amortization of right of use assets	440,300		252,200
Loss on sale of equipment	119,800		35,900
Provision for loss on contract	421,400		—
Impairment loss on notes and related interest receivable	898,400		—
Stock compensation	473,800		416,100
Forgiveness on PPP loan	—		(10,000)
Amortization of revolver issuance costs	320,100		—
Net change in assets and liabilities:
Accounts receivable	(4,390,400)		(26,600)
Contract assets	2,167,200		(4,762,400)
Notes receivable	(8,524,600)		—
Prepaid expenses and other assets	(261,700)		820,300
Real estate	(56,179,400)		(82,755,400)
Deferred tax asset	(1,937,800)		—
Accounts payable and accrued expenses	2,677,600		3,175,800
Contract liabilities	475,300		390,900
Deferred revenue	19,100		(874,600)
Payments on right of use liability, net of incentives	349,600		(241,600)
NET CASH USED IN OPERATING ACTIVITIES	(68,187,700)		(79,567,300)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(1,808,000)		(378,100)
Proceeds on the sale of equipment	194,400		69,500
NET CASH USED IN INVESTING ACTIVITIES	(1,613,600)		(308,600)
CASH FLOWS FROM FINANCING ACTIVITIES
Construction loans	65,240,900		39,560,800
Payments on construction loans	(16,080,500)		(10,092,500)
Financing fees construction loans	(2,304,000)		(1,476,900)
Related party construction loans	8,576,500		15,500,000
Payments on related party construction loans	(13,220,500)		(9,197,200)
Financing fees related party construction loans	(23,600)		(1,983,900)
Revolving line of credit loan, net of payments	24,788,900		—
Financing fees revolving line of credit loan	(1,097,700)		—
Note payable D&O insurance	590,100		—
Payments on note payable D&O insurance	(956,400)		(867,600)
Payments on equipment loans	(1,655,300)		(1,430,500)
Payments on financing leases	(70,700)		(289,000)
Payments on PPP loan	—		(9,300)
Net proceeds from issuance of common stock	—		25,101,000
Net proceeds from issuance of preferred stock	—		28,661,000
Preferred dividends	(5,892,400)		(560,900)
Repurchase of common stock	(437,700)		—
Proceeds from exercise of stock options	8,600		18,000
Proceeds from exercise of warrants	413,800		—
Deferred offering cost	—		(68,300)

4

NET CASH PROVIDED BY FINANCING ACTIVITIES	57,880,000		82,864,700
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH	(11,921,300)		2,988,800
CASH AND RESTRICTED CASH AT BEGINNING OF YEAR	26,226,800		2,396,500
CASH AND RESTRICTED CASH AT END OF PERIOD	$	14,305,500	$	5,385,300
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid	$	5,350,400	$	2,165,300
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Termination of leases	$	52,100	$	—
Amortization of debt discount capitalized	$	1,617,300	$	2,338,000
Financing of fixed assets additions	$	110,000	$	1,566,800
Conversion of finance lease to equipment loan	$	394,800	$	—
Cancellation of finance leases	$	—	$	99,100
New right of use obligations	$	—	$	166,800
Conversion of preferred to common stock	$	3,595,400	$	—
Dividends declared but not paid	$	634,600	$	210,600

See accompanying notes to the condensed consolidated financial statements.

(Amounts rounded to the nearest $100)

5

HARBOR CUSTOM DEVELOPMENT, INC. AND SUBSIDIARIES

D/B/A HARBOR CUSTOM HOMES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

	Common Stock			Preferred Stock			Additional Paid in Capital		Retained Earnings (Accumulated Deficit)		Stockholders' Equity (Deficit)		Non-Controlling Interest		Total Equity (Deficit)
	Shares Issued	No Par		Shares Issued	No Par
Balance, January 1, 2021	5,636,548	$	11,956,900	—	$	—	$	234,800	$	(4,487,100)	$	7,704,600	$	(1,289,900)	$	6,414,700
Net Proceeds from Issuance of Common Stock	9,200,000	25,101,000									25,101,000				25,101,000
Exercise of Stock Options	45,046						18,000				18,000				18,000
Stock Compensation Expense	8,500						115,100				115,100				115,100
Net Income (Loss)									(1,549,800)		(1,549,800)		600		(1,549,200)
Balance, March 31, 2021	14,890,094	$	37,057,900	—	$	—	$	367,900	$	(6,036,900)	$	31,388,900	$	(1,289,300)	$	30,099,600
Net Proceeds from Issuance of Preferred Stock				1,260,555	28,661,000						28,661,000				28,661,000
Preferred Dividends									(140,100)		(140,100)				(140,100)
Stock Compensation Expense	8,500						115,800				115,800				115,800
Net Income (Loss)									1,071,700		1,071,700		(2,300)		1,069,400
Balance, June 30, 2021	14,898,594	$	37,057,900	1,260,555	$	28,661,000	$	483,700	$	(5,105,300)	$	61,097,300	$	(1,291,600)	$	59,805,700
Preferred Dividends									(631,400)		(631,400)				(631,400)
Stock Compensation Expense	23,500						185,200				185,200				185,200
Net Income (Loss)									3,708,400		3,708,400				3,708,400
Balance, September 30, 2021	14,922,094	$	37,057,900	1,260,555	$	28,661,000	$	668,900	$	(2,028,300)	$	64,359,500	$	(1,291,600)	$	63,067,900
Balance, January 1, 2022	13,155,342	$	32,122,700	4,016,955	$	66,507,500	$	752,700	$	1,646,500	$	101,029,400	$	(1,291,600)	$	99,737,800
Preferred Dividends									(2,012,500)		(2,012,500)				(2,012,500)
Exercise of Stock Options	21,623	10,500					(1,900)				8,600				8,600
Stock Compensation Expense	60,214						242,400				242,400				242,400
Dissolution of Non-Controlling Interest									(1,292,100)		(1,292,100)		1,292,100		—
Net Income (Loss)									1,645,800		1,645,800		(500)		1,645,300
Balance, March 31, 2022	13,237,179	$	32,133,200	4,016,955	$	66,507,500	$	993,200	$	(12,300)	$	99,621,600	$	—	$	99,621,600
Preferred Dividends									(1,940,000)		(1,940,000)				(1,940,000)
Stock Compensation Expense	17,500						112,300				112,300				112,300
Conversion of Preferred stock	1,206,515	3,595,400		(217,156)	(3,595,400)						—				—
Exercise of Warrants	139,295	413,800									413,800				413,800
Share Repurchase	(251,934)	(437,700)									(437,700)				(437,700)
Net Loss									(4,509,100)		(4,509,100)				(4,509,100)
Balance, June 30, 2022	14,348,555	$	35,704,700	3,799,799	$	62,912,100	$	1,105,500	$	(6,461,400)	$	93,260,900	$	—	$	93,260,900
Preferred Dividends									(1,903,700)		(1,903,700)				(1,903,700)
Stock Compensation Expense	3,810						119,100				119,100				119,100
Net Loss									(3,414,800)		(3,414,800)				(3,414,800)
Balance, September 30, 2022	14,352,365	$	35,704,700	3,799,799	$	62,912,100	$	1,224,600	$	(11,779,900)	$	88,061,500	$	—	$	88,061,500

See accompanying notes to the condensed consolidated financial statements.

(Amounts rounded to the nearest $100)

6

HARBOR CUSTOM DEVELOPMENT, INC. AND SUBSIDIARIES

D/B/A HARBOR CUSTOM HOMES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

The Company’s principal business activity involves acquiring raw land and developed lots for the purpose of building and selling single family and multi-family dwellings in Washington, California, Texas, and Florida. It utilizes its heavy equipment resources to develop an inventory of developed lots and provide development infrastructure construction, on a contract basis, for other home builders.

On August 1, 2019, the Company changed its name from Harbor Custom Homes, Inc. to Harbor Custom Development, Inc.

The Company became an effective filer with the SEC and started trading on The Nasdaq Stock Market LLC ("Nasdaq”) on August 28, 2020.

Principles of Consolidation

The condensed consolidated financial statements include the following subsidiaries of Harbor Custom Development, Inc. as of the reporting period ending dates as follow:

Names	Dates of Formation	Attributable Interest
		September 30, 2022		December 31, 2021
Saylor View Estates, LLC*	March 30, 2014	N/A		51	%
Harbor Materials, LLC**	July 5, 2018	N/A		N/A
Belfair Apartments, LLC	December 3, 2019	100	%	100	%
Pacific Ridge CMS, LLC	May 24, 2021	100	%	100	%
Tanglewilde, LLC	June 25, 2021	100	%	100	%
HCDI FL CONDO LLC	July 30, 2021	100	%	100	%
HCDI Mira, LLC	August 31, 2021	100	%	100	%
HCDI Bridgeview, LLC	October 28, 2021	100	%	100	%
HCDI Wyndstone, LLC	September 15, 2021	100	%	100	%
HCDI Semiahmoo, LLC	December 17, 2021	100	%	100	%
Mills Crossing, LLC	July 21, 2022	100	%	N/A
Broadmoor Ventures, LLC	August 24, 2022	100	%	N/A

*Saylor View Estates, LLC was voluntarily dissolved with the State of Washington as of January 20, 2022.

**Harbor Materials, LLC was voluntarily dissolved with the State of Washington as of January 29, 2021.

As of September 30, 2022 and December 31, 2021, the aggregate non-controlling interest was $0 and $(1.3) million, respectively.

Basis of Presentation

The unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021. The accompanying unaudited condensed consolidated financial statements include all adjustments that are of a normal recurring nature and necessary for the fair presentation of the results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for the full year.

7

All numbers in the financial statements are rounded to the nearest $100, except for Earnings (Loss) per Share (“EPS”) data, and numbers in the notes to the financial statements are rounded to the nearest million.

Reclassification

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

Use of Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used.

Stock-Based Compensation

Effective November 19, 2018, the Company’s Board of Directors and stockholders approved and adopted the 2018 Incentive and Non-Statutory Stock Option Plan (the “2018 Plan”). The 2018 Plan allows the Administrator (as defined in the 2018 Plan), currently the Board of Directors, to determine the issuance of incentive stock options and non-qualified stock options to eligible employees and outside directors and consultants of the Company. The Company reserved 675,676 shares of common stock for issuance under the 2018 Plan. On June 1, 2022, the stockholders of the Company voted to approve an amendment to the 2018 Plan to increase, by 2,000,000, the authorized number of shares of common stock reserved for issuance as options under the 2018 Plan.

Effective December 3, 2020, the Company’s Board of Directors and stockholders approved and adopted the 2020 Restricted Stock Plan (the “2020 Plan”). The 2020 Plan allows the Administrator, currently the Compensation Committee to determine the issuance of restricted stock to eligible officers, directors, and key employees. The Company reserved 700,000 shares of common stock for issuance under the 2020 Plan. On June 1, 2022, the stockholders of the Company voted to approve an amendment to the 2020 Plan to increase, by 2,000,000, the authorized number of shares of common stock available for awards under the 2020 Plan.

The Company accounts for stock-based compensation in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 718, “Compensation – Stock Compensation” (“ASC 718”) which establishes financial accounting and reporting standards for stock-based employee and non-employee compensation. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument.

The Company recognizes all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date.

Options and warrants are valued using a Black-Scholes option pricing model. Grants of share-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the share-based payment. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. The Company accounts for forfeitures of stock options as they occur. When forfeitures occur, the unvested portion of the previously recognized compensation cost is reversed in the period of the forfeiture.

Stock-based compensation expenses are included in operating expenses in the condensed consolidated statement of operations.

For the nine months ended September 30, 2022 and 2021 when computing fair value of share-based payments, the Company has considered the following range of assumptions:

	September 30, 2022	September 30, 2021
Risk-free interest rate	1.73% - 3.54%	0.23% - 1.11%
Exercise price	$1.12 - $3.00	$2.76 - $5.00
Expected life of grants in years	3.93 - 6.51	2.50 - 6.50
Expected volatility of underlying stock	42.34% - 48.13%	42.63% - 56.13%
Dividends	—	—

8

The expected term is computed using the “simplified” method as permitted under the provisions of FASB ASC Topic 718-10-S99. The Company uses the simplified method to calculate the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The share price is the public trading price at the time of grant. Expected volatility is based on the historical stock price volatility of comparable companies’ common stock as the stock does not have sufficient historical trading activity. Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods.

Repurchase of Equity Securities

Share repurchases are recorded to common stock at the value of the cash consideration paid, as the Company's common stock has no par value. These shares are being repurchased for the purpose of constructive retirement. See Note 15. Stockholder's Equity for additional information on the share repurchase program.

Earnings (Loss) Per Share

EPS is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to topic 260-10-45 of the FASB ASC. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16, basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the numerator may have to adjust for any dividends and income or loss associated with potentially dilutive securities that are assumed to have resulted in the issuance of shares of common stock and the denominator may have to adjust to include the number of additional shares of common stock that would have been outstanding if the dilutive potential shares of common stock had been issued during the period to reflect the potential dilution that could occur from shares of common stock issuable through a contingent shares issuance arrangement, stock options, warrants, RSUs, or convertible preferred stock. For purposes of determining diluted earnings per common share, the treasury stock method is used for stock options, warrants, and RSUs, and the if-converted method is used for convertible preferred stock as prescribed in FASB ASC Topic 260.

The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income (loss) attributable to common stockholders per share of common stock for the three and nine months ended September 30, 2022 and 2021.

9

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator:
Net income (loss) attributable to common stockholders	$	(5,318,500)	$	3,077,000	$	(12,134,200)	$	2,458,800
Effect of dilutive securities:	—		631,400		—		—
Diluted net income (loss)	$	(5,318,500)	$	3,708,400	$	(12,134,200)	$	2,458,800
Denominator:
Weighted average common shares outstanding - basic	14,350,899		14,898,594		13,862,865		14,350,143
Dilutive securities (a):
Restricted Stock Awards	—		—		—		288
Options	—		141,987		—		152,565
Warrants	—		19,359		—		19,667
Convertible Preferred Stock	—		7,003,644		—		—
Weighted average common shares outstanding and assumed conversion – diluted	14,350,899		22,063,584		13,862,865		14,522,663
Basic net earnings (loss) per common share	$	(0.37)	$	0.21	$	(0.88)	$	0.17
Diluted net earnings (loss) per common share	$	(0.37)	$	0.17	$	(0.88)	$	0.17
(a) - Outstanding anti-dilutive securities excluded:
Unvested restricted stock awards	274,583		62,500		274,583		62,500
Stock options	800,925		298,333		800,925		298,333
Warrants to purchase common stock	18,447,564		4,664,335		18,447,564		4,664,335
Convertible preferred stock*	3,799,799		—		3,799,799		1,260,555
Warrants to purchase convertible preferred stock*	12,000		12,000		12,000		12,000

*Preferred stock and warrants to purchase convertible preferred stock are convertible into common stock on a 5.556 to 1 ratio.

Fair Value of Financial Instruments

For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amount of the Company’s short-term financial instruments approximates fair value due to the relatively short period to maturity for these instruments.

Cash and Cash Equivalents

The Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents. There were no cash equivalents as of September 30, 2022 and December 31, 2021.

Restricted Cash

On August 10, 2021, the Company entered into a Letter of Credit (“LOC”) agreement with WaFd Bank in the amount of $0.6 million. The Company signed a lease on October 5, 2021 for a new office space. The landlord of the property, University Street Properties I, LLC, is the beneficiary of the LOC. The amount of funds that cover this LOC were moved by WaFd Bank to a controlled account on August 13, 2021. (See Note 10. Letter of Credit.)

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Accounts Receivable

Accounts receivables are reported at the amount the Company expects to collect from outstanding balances. The Company provides for an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information, and existing economic conditions. The Company determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management. The allowance for doubtful accounts was $0 as of September 30, 2022 and December 31, 2021.

Notes Receivable

Notes receivables are recorded at amounts due to the Company according to the contractual terms of the loan agreement. The Company's notes receivables are for the sale of real estate properties or financing the development of the properties prior to acquisition and are each secured by the underlying improved real estate properties.

The Company reviews notes receivable for impairment whenever events or circumstances indicate that the note may not be fully recoverable. Impairment is present when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. If management determines an amount to be uncollectible, impairment is measured based on the estimated uncollectible amount less the fair value of the underlying collateral. Impairment is recognized with a valuation allowance against the note receivable with a corresponding charge to bad debt expense under operating expenses. The valuation allowance was $0.8 million for notes receivable and $0.1 million for related interest receivables as of September 30, 2022. No impairment loss was recognized as of December 31, 2021. (See Note 3. Notes Receivable.)

Property and Equipment and Depreciation

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repair charges are expensed as incurred. Depreciation is computed by the straight-line method (after considering their respective estimated residual values) over the estimated useful lives:

Construction Equipment	5-10 years
Leasehold Improvements	The lesser of 10 years or the remaining life of the lease
Furniture and Fixtures	5 years
Computers	3 years
Vehicles	10 years

Real Estate Assets

Real estate assets are recorded at cost, except when real estate assets are acquired that meet the definition of a business combination in accordance with FASB ASC Topic 805, “Business Combinations,” where acquired assets are recorded at fair value. Interest, property taxes, insurance, and other incremental costs (including salaries) directly related to a project are capitalized during the construction period of major facilities and land improvements. The capitalization period begins when activities to develop the parcel commence and ends when the asset constructed is completed. The capitalized costs are recorded as part of the asset to which they relate and are expensed when the underlying asset is sold.

The Company capitalized interest from related party borrowings of $0.3 million and $0.2 million for the three months ended September 30, 2022 and 2021, respectively. The Company capitalized interest from related party borrowings of $0.9 million and $0.6 million for the nine months ended September 30, 2022 and 2021, respectively. The Company capitalized interest from third-party borrowings of $1.5 million and $0.3 million for the three months ended September 30, 2022 and 2021, respectively. The Company capitalized interest from third-party borrowings of $3.4 million and $0.8 million for the nine months ended September 30, 2022 and 2021, respectively.

A property is classified as “held for sale” when all of the following criteria for a plan of sale have been met:

(1) Management, having the authority to approve the action, commits to a plan to sell the property;

(2) The property is available for immediate sale in its present condition, subject only to terms that are usual and customary;

(3) An active program to locate a buyer and other actions required to complete the plan to sell have been initiated;

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(4) The sale of the property is probable and is expected to be completed within one year of the contract date;

(5) The property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and

(6) Actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

In addition to the annual assessment of potential triggering events in accordance with FASB ASC Topic 360, the Company applies a fair value-based impairment test to the net book value of assets on an annual basis and on an interim basis if certain events or circumstances indicate that an impairment loss may have occurred.

As of September 30, 2022 and December 31, 2021, the Company did not identify any triggering events that would require further investigation under ASC 360.

Revenue and Cost Recognition

FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.

In accordance with ASC 606, revenue is recognized when a customer obtains control of the promised good or service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. The provision of ASC 606 includes a five-step process by which the Company determines revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which the Company expects to be entitled in exchange for those goods or services.

ASC 606 requires the Company to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, performance obligations are satisfied.

A detailed breakdown of the five-step process for revenue recognitions is as follows:

Homes, Developed Lots, and Entitled Land

1. Identify the contract with a customer.

The Company signs an agreement with a buyer to purchase the parcel of entitled land, developed lots that have completed infrastructure, or completed homes.

2. Identify the performance obligations in the contract.

Performance obligations of the Company include delivering entitled land, developed lots, and completed homes to the customer, which are required to meet certain specifications outlined in the contract.

3. Determine the transaction price.

The transaction price is fixed and specified in the contract. Any subsequent change orders or price changes are required to be approved by both parties.

4. Allocation of the transaction price to performance obligations in the contract.

The parcel, lots, and homes are separate performance obligations for which the specific price is in the contract.

5. Recognize revenue when (or as) the entity satisfies a performance obligation.

The Company recognizes revenue when title is transferred. The Company does not have any further material performance obligations once title is transferred.

Fee Build

1. Identify the contract with a customer.

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The Company signs an agreement with a customer to construct the required infrastructure so that houses can be developed on the lots.

2. Identify the performance obligations in the contract.

Performance obligations of the Company include delivering developed lots which are required to meet certain specifications that are outlined in the contract.

3. Determine the transaction price.

The transaction price is fixed and specified in the contract. Any subsequent change orders or price changes are required to be approved by both parties.

4. Allocation of the transaction price to performance obligations in the contract.

The nature of the industry involves a number of uncertainties that can affect the current state of the contract. Variable considerations are the estimates made due to a contract modification in the contractual service. Change orders, claims, extras, or back charges are common in contractual services activity as a form of variable consideration. If there is going to be a contract modification, judgment by management will need to be made to determine if the variable consideration is enforceable. The following factors are considered in determining if the variable consideration is enforceable:

1.The customer’s written approval of the scope of the change order;

2.Current contract language that indicates clear and enforceable entitlement relating to the change order;

3.Separate documentation for the change order costs that are identifiable and reasonable; and

4.The Company’s experience in negotiating change orders, especially as it relates to the specific type of contract and change order being evaluated.

Once the Company receives a contract, it generates a budget of projected costs for the contract based on the contract price. If the scope of the contract during the contractual period needs to be modified, the Company files a change order. The Company does not continue to perform services until the change modification is agreed upon with documentation by both the Company and the customer. There are few times that claims, extras, or back charges are included in the contract.

If there are multiple performance obligations to the contract, the costs must be allocated appropriately and consistently to each performance obligation. In the Company’s experience, usually only one performance obligation is stated per contract. If there are multiple services provided for one customer, the Company has a policy of splitting out the services over multiple contracts.

5. Recognize revenue when (or as) the entity satisfies a performance obligation.

The Company uses the total costs incurred on the project relative to the total expected costs to satisfy the performance obligation. The input method involves measuring the resources consumed, labor hours expended, costs incurred, time lapsed, or machine hours used relative to the total expected inputs to the satisfaction of the performance obligation. Costs incurred prior to actual contract (i.e., design, engineering, procurement of material, etc.) should not be recognized as the Company does not have control of the good/service provided. When the estimate on a contract indicates a loss or claims against costs incurred reduce the likelihood of recoverability of such costs, the Company records the entire estimated loss in the period the loss becomes known. Project contracts typically provide for a schedule of billings or invoices to the customer based on the Company’s job to date percentage of completion of specific tasks inherent in the fulfillment of its performance obligation(s). The schedules for such billings usually do not precisely match the schedule on which costs are incurred. As a result, contract revenue recognized in the statement of operations can and usually does differ from amounts that can be billed or invoiced to the customer at any point during the contract. Amounts by which cumulative contract revenue recognized on a contract as of a given date exceed cumulative billings and unbilled receivables to the customer under the contract are reflected as a current contract asset in the Company’s balance sheet. Amounts by which cumulative billings to the customer under a contract as of a given date exceed cumulative contract revenue recognized on the contract would be reflected as a current contract liability in the Company’s balance sheet. (See Note 17. Uncompleted Contracts.)

Revenues from contracts with customers are summarized by category as follows for the three and nine months ended September 30, 2022 and 2021:

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	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Homes	$	4,693,900	$	3,762,000	$	25,758,100	$	13,947,900
Developed Lots	—		770,000		9,080,000		7,770,000
Entitled Land	3,400,000		10,440,000		7,880,000		19,750,000
Fee Build	3,623,500		2,871,300		7,825,300		4,219,500
Multifamily	27,200		—		27,200		—
Construction Materials	3,900		167,300		45,400		329,800
Total Revenue	$	11,748,500	$	18,010,600	$	50,616,000	$	46,017,200

Disaggregation of Revenue from Contracts with Customers:

The following table disaggregates the Company’s revenue based on the type of sale or service and the timing of satisfaction of performance obligations for the three and nine months ended September 30, 2022 and 2021:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Performance obligations satisfied at a point in time	$	8,125,000	$	15,139,300	$	42,790,700	$	41,797,700
Performance obligations satisfied over time	3,623,500		2,871,300		7,825,300		4,219,500
Total Revenue	$	11,748,500	$	18,010,600	$	50,616,000	$	46,017,200

Cost of Sales

Land acquisition costs are allocated to each lot based on the size of the lot in relation to the size of the total project. Development costs and capitalized interest are allocated to lots sold based on the same criteria.

Fee build costs are charged to cost of sales as incurred. See the revenue recognition criteria above.

Costs relating to the handling of recycled construction materials and converting items into usable construction materials for resale are charged to cost of sales as incurred.

Income Taxes

Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss, credit carryforwards, and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. Management applies the criteria established under FASB ASC Topic 740, Income Taxes, to determine whether any valuation allowances are needed each year.

The Company recognizes a tax benefit for an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities based on the technical merits of the position. There are no uncertain tax positions as of September 30, 2022 and December 31, 2021.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA includes a 15% Corporate Alternative Minimum Tax (“Corporate AMT”) for tax years beginning after December 31, 2022. The Company does not expect the Corporate AMT to have a material impact on its consolidated financial statements. Additionally, the IRA imposes a 1% excise tax on net repurchases of stock by certain publicly traded corporations. The excise tax is imposed on the value of the net stock repurchased or treated as repurchased. The new law will apply to stock repurchases occurring after December 31, 2022.

Recent Accounting Pronouncements

On June 16, 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurements of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets. This update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and

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other financial instruments held by financial institutions and other organizations. The underlying premise of the update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. Pursuant to ASU No. 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2022 for small reporting companies, non-SEC filers, and all other companies. The Company has not yet adopted ASU 2016-13 and will continue to evaluate any impact from this accounting standard on its notes receivables.

On March 12, 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASC 848 contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments in this update are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, for which an entity has applied certain optional expedients that are retained through the end of the hedging relationship. The Company continues to evaluate the impact of the guidance and may apply elections as applicable.

On May 3, 2021, the FASB released ASU No. 2021-04, Compensation – Earning Per Share (Topic 260), Debt - Modifications and Extinguishments (subtopic 470-50), Compensation - Stock Compensation (Topic 718), Contracts in Entity’s Own Equity (Subtopic 815-40), Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The FASB issued this update to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example warrants) that remain equity classified after modification or exchange. The standard is effective for fiscal years beginning after December 15, 2021. The Company adopted ASU 2021-04 on January 1, 2022, however the adoption did not have an impact on the Company’s Financial Statements.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is present when the sum of estimated undiscounted future cash flow expected to result from use of the assets is less than carrying value. If impairment is present, the carrying value of the impaired asset is reduced to its fair value. Fair value is determined based on discounted cash flow or appraised values, depending on the nature of the assets. As of September 30, 2022 and December 31, 2021, there were no impairment losses recognized for long-lived assets.

2. CONCENTRATIONS

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 $12.7 million and $24.5 million as of September 30, 2022 and December 31, 2021, respectively.

Revenue Concentrations

Homes

For the three months ended September 30, 2022, three customers each represented 32%, 33%, and 34% of the home revenue, respectively. For the three months ended September 30, 2021, five customers each represented 19% of the home revenue.

There were no concentrations in relation to the homes revenue segment for the nine months ended September 30, 2022 and 2021.

Developed Lots

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There were no concentrations in relation to the developed lots segment for the three months ended September 30, 2022. For the three months ended September 30, 2021, three customers each represented 38%, 38%, and 24% of the developed lots revenue, respectively.

For the nine months ended September 30, 2022, two customers represented 62% and 26%, respectively, of the developed lots revenue segment. Lennar Northwest, Inc. represented 90% of the developed lots revenue for the nine months ended September 30, 2021.

Entitled Land

For the three months ended September 30, 2022, 1031 Services, Inc. represented 100% of the entitled land revenue.

For the three months ended September 30, 2021, Lennar Northwest, Inc. represented 100% of the entitled land revenue.

Two customers represented 57% and 43% of the entitled land revenue for the nine months ended September 30, 2022. Lennar Northwest, Inc., represented 100% for the nine months ended September 30, 2021.

Fee Build

Lennar Northwest, Inc. represented 100% of fee build revenue for the three and nine months ended September 30, 2022 and 2021.

3. NOTES RECEIVABLE

As of September 30, 2022, the total principal balance of notes receivable amounted to $9.8 million. These notes arose as financing by the Company for the sale of real estate properties or financing the development of the properties prior to acquisition. These notes are secured by the underlying improved real estate properties and accrue interest at annual rates ranging from 5% to 9%. All payments of principal and interest are due in full between March 30, 2023 and December 20, 2024. The outstanding balance of the notes amounted to $9.8 million and $2.0 million at September 30, 2022 and December 31, 2021, respectively. Interest income was $0.2 million and $0 for the three months ended September 30, 2022 and 2021, respectively. Interest income was $0.4 million and $0 for the nine months ended September 30, 2022 and 2021, respectively.

In March 2022, the Company entered into a promissory note with Rocklin Winding Lane 22, LLC for $4.8 million ("the note") for the sale of developed lots. In the third quarter of 2022, Rocklin Winding Lane 22, LLC defaulted on the note due to a missed interest payment on June 30, 2022. As a result, the Company issued a letter of default in August 2022 and began foreclosure proceedings on the underlying real estate asset in October 2022. Pursuant to the subordination agreement, the underlying real estate asset has a $1.0 million senior loan to a third party that is prioritized over the note. The Company has performed an impairment analysis by reviewing the difference between the carrying amount of the note and the estimated fair value of the collateralized properties and determined that the note is not fully collectible. As of September 30, 2022, the Company recorded a valuation allowance against the note and related bad debt expense within operating expenses of $0.8 million.

The details of notes receivables, net of a valuation allowance are as follows:

	September 30, 2022		December 31, 2021
Broadmoor Commons LLC	$	942,100	$	500,000
Modern Homestead LLC	1,500,000		1,500,000
Rocklin Winding Lane 22, LLC	4,032,100		—
Noffke Horizon View, LLC	3,280,000		—
Total Notes Receivable	$	9,754,200	$	2,000,000

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4. PROPERTY AND EQUIPMENT

Property and equipment stated at cost, less accumulated depreciation and amortization, consisted of the following:

	September 30, 2022		December 31, 2021
Machinery and Equipment	$	10,613,100	$	10,577,600
Vehicles	104,000		71,800
Furniture and Fixtures	695,600		420,300
Leasehold Improvements	1,471,300		81,200
Total Fixed Assets	12,884,000		11,150,900
Less Accumulated Depreciation	(2,814,800)		(1,951,200)
Fixed Assets, Net	$	10,069,200	$	9,199,700

Depreciation expense was $0.4 million and $0.3 million for the three months ended September 30, 2022 and 2021, respectively.

Depreciation expense was $1.0 million and $0.8 million for the nine months ended September 30, 2022 and 2021, respectively.

5. REAL ESTATE

Real Estate consisted of the following components:

	September 30, 2022		December 31, 2021
Land Held for Development	$	47,311,900	$	73,524,400
Construction in Progress	101,894,900		43,362,700
Held for Sale	30,726,000		5,249,000
Total Real Estate	$	179,932,800	$	122,136,100

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued liabilities consisted of the following:

	September 30, 2022		December 31, 2021
Trade Accounts Payable	$	10,853,600	$	5,558,400
Income Tax Payable	—		2,415,900
Accrued Compensation, Bonuses, and Benefits	671,900		1,071,700
Accrued Quarry Reclamation Costs	154,600		500,000
Retainage Payable	1,029,200		445,800
Other Accruals	631,000		671,000
Total Accounts Payable and Accrued Expenses	$	13,340,300	$	10,662,800

7. REVOLVING LINE OF CREDIT

On March 7, 2022, the Company entered into a senior secured revolving credit facility (“the credit facility”) with BankUnited, N.A. (the "Lender") for $25.0 million. The credit facility has a two year term, with a maturity date of March 7, 2024. The unpaid principal bears interest at a fluctuating rate of interest per annum equal to the daily simple secured overnight financing rate (SOFR) plus the applicable margin of 4.75%. The credit facility is used to fund the Company’s general working capital needs and interest is expensed as incurred. For the three and nine months ended September 30, 2022, the Company capitalized debt issuance costs of $0 and $1.1 million, respectively. These costs are recorded as debt discount and amortized ratably over the life of the loan. The credit facility is collateralized by all of the Company's assets wherein the Lender is granted a junior priority interest in all collateralized Company assets that Lender has previously identified as a permitted lien or other encumbrance that the Company regularly incurs through its ordinary

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course of business; in all other Company assets, Lender maintains a first priority security interest. The credit facility also contains specific financial covenants. As of September 30, 2022, the Company was in compliance with these covenants except for its minimum interest coverage ratio requirement. The Company is actively engaged with the Lender to come to terms on a restructured financing arrangement, potentially including revised financial covenants for future periods. The discussions are on-going and there has been no formal revised agreement as of the date hereof. Interest expense was $0.5 million and $0 for the three months ended September 30, 2022 and 2021, respectively. Interest expense was $0.9 million and $0 for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, the revolving line of credit loan balance was $24.8 million and the unamortized debt discount balance was $0.8 million.

8. EQUIPMENT LOANS

Equipment loans consists of the following:

	September 30, 2022		December 31, 2021
Various notes payable to banks and financial institutions with interest rates varying from 0% to 13.89%, collateralized by equipment with monthly payments ranging from $400 to $11,600 through 2025:	$	4,296,100	$	5,268,500
Book value of collateralized equipment:	6,944,800		7,229,000

Future equipment loan maturities at September 30, 2022 are as follows:

Year Ending December 31,

2022 (three months)	$	502,600
2023	1,896,800
2024	1,673,200
2025	223,500
Total	$	4,296,100

Interest expense was $0.04 million and $0.05 million for the three months ended September 30, 2022 and 2021, respectively.

Interest expense was $0.1 million and $0.1 million for the nine months ended September 30, 2022 and 2021, respectively.

9. CONSTRUCTION LOANS

The Company has various construction loans with private individuals and finance companies. The loans are collateralized by specific construction projects. Most loans are generally on one to two year terms but will be refinanced if the project is not completed within one to two years and will be due upon the completion of the project. Interest accrues on the loans and is included with the payoff of the loan. Interest ranges from 5% to 10%. Interest expense and amortization of debt discount are capitalized when incurred and expensed as cost of goods sold when the corresponding property is sold. The loan balances related to third party lenders as of September 30, 2022 and December 31, 2021 were $85.6 million and $39.4 million, respectively. The unamortized debt discounts related to these construction loans as of September 30, 2022 and December 31, 2021 were $2.4 million and $4.4 million, respectively. The book value of collateralized real estate as of September 30, 2022 and December 31, 2021 was $165.9 million and $122.1 million, respectively.

10. LETTER OF CREDIT

The Company entered into a letter of credit agreement with WaFd Bank of $0.6 million on August 10, 2021. The letter of credit expires February 1, 2032. The interest rate of the letter of credit is Prime plus 1%. The letter of credit has been established for the purpose of collateralizing the Company’s new Tacoma office lease obligations with the landlord which is the beneficiary of the letter of credit. (See Note 1. Restricted Cash.)

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11. NOTE PAYABLE DIRECTORS & OFFICERS INSURANCE

The Company purchased Directors & Officers (D&O) insurance on August 28, 2022 for $0.6 million. A down payment of $0.1 million was made and the remaining balance was financed over 11 months. The interest rate on the loan is 4.75%. The loan balance as of September 30, 2022 and December 31, 2021 was $0.5 million and $0.9 million, respectively.

12. COMMITMENTS AND CONTINGENCIES

From time to time, the Company is subject to compliance audits by federal, state, and local authorities relating to a variety of regulations including wage and hour laws, taxes, and workers’ compensation. There are no significant or pending litigation or regulatory proceedings known at this time.

On June 15, 2020, the Company entered into a purchase and sale agreement to acquire property for the construction of 33 townhomes located in East Bremerton, Washington for $2.0 million. Closing is expected to take place in Q4 2022.

On December 2, 2021, the Company entered into a purchase and sale agreement for the acquisition of 438 acres in Blaine, Washington for $13.5 million. Closing is expected to take place in Q4 2023.

On April 21, 2022, the Company entered into a purchase and sale agreement for the purchase of 4.81 acres in Port Orchard, Washington for $2.6 million. Closing is expected to take place in Q4 2022.

13. RELATED PARTY TRANSACTIONS

Notes Payable

The Company entered into construction loans with Sound Equity, LLC of which Robb Kenyon, a former director and minority shareholder, is a partner. These loans were originated between April 2019 and June 2021; the loans generally have a 12 to 18 month maturity, including those that have been extended. The interest rates range between 7.99% and 9.99%. As of September 30, 2022, and December 31, 2021, the outstanding loan balances were $8.9 million and $14.5 million, respectively. For the three months ended September 30, 2022 and 2021, the Company capitalized loan fees of $0.01 million and $0, respectively. For the nine months ended September 30, 2022 and 2021, the Company capitalized loan fees of $0.02 million and $0.6 million, respectively. These fees are recorded as debt discount and amortized over the life of the loan. The amortization is capitalized to real estate. As of September 30, 2022 and December 31, 2021, there were $0.01 million and $0.2 million of remaining debt discounts, respectively. The interest is capitalized to real estate as incurred. During the three months ended September 30, 2022 and 2021, the Company incurred interest of $0.3 million and $0.2 million, respectively. During the nine months ended September 30, 2022 and 2021, the Company incurred interest of $0.9 million and $0.6 million, respectively.

Robb Kenyon resigned as a director of the Company on July 8, 2021.

Due to Related Party

The Company utilizes a quarry to process waste materials from the completion of raw land into sellable/buildable lots. The materials produced by the quarry and sold by the Company to others are subject to a 25% commission payable to SGRE, LLC, which is 100% owned by the Company’s Chief Executive Officer and President. The commission expense is recorded in operating expenses. On September 30, 2022 and December 31, 2021, the commission payable was $0 and $0.01 million, respectively. The commission expense for the three months ended September 30, 2022 and 2021, was $0.01 million and $0.02 million, respectively. The commission expense for the nine months ended September 30, 2022 and 2021, was $0.04 million and $0.1 million, respectively.

14. INCOME TAX

The Company’s effective tax rate for the nine months ended September 30, 2022 was a benefit of 23.6%, compared to 0% for the nine months ended September 30, 2021. The Company calculated the effective tax rate for the nine months ended September 30, 2022 based on the actual effective tax rate for the year-to-date period compared to the estimate of the annual effective tax rate for the nine months ended September 30, 2021. The increase in the effective tax rate for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 is driven by the release of the valuation allowance at December 31, 2021 and nondeductible incentive stock options.

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15. STOCKHOLDERS’ EQUITY

Common Stock

The Company is authorized to issue 50,000,000 shares of common stock, at no par value per share. At September 30, 2022, the Company has 14,352,365 shares of common stock issued and outstanding.

Each share of common stock has one vote per share for all purposes. Common stock does not provide any preemptive, subscription, or conversion rights and there are no redemption or sinking fund provisions or rights. Common stockholders are not entitled to cumulative voting for purposes of electing members to the Board of Directors.

Preferred Stock

At September 30, 2022, the Company is authorized to issue 10,000,000 shares of preferred stock, no par value per share. As of September 30, 2022, the Company has 3,799,799 shares of Series A Cumulative Convertible Preferred Stock (“Series A Preferred Shares”) issued and outstanding. The holders of the Series A Preferred Shares are entitled to receive dividends at $2.00 per share per annum which are paid monthly in arrears starting June 30, 2021. Beginning on June 9, 2024, the Company may, at its option, redeem the Series A Preferred Shares, in whole or in part, by paying $25.00 per share, plus any accrued and unpaid dividends to but not including the date of redemption. To the extent declared by the Board of Directors, dividends will be payable not later than 20 days after the end of each calendar month. Dividends on the Series A Preferred Shares will accumulate whether or not the Company has earnings, whether or not there are funds legally available for the payment of such dividends, and whether or not such dividends are declared by the Board of Directors.

Conversion at Option of Holder. Each Series A Preferred Share, together with accrued but unpaid dividends, is convertible into 5.556 shares of common stock (subject to adjustment) at any time at the option of the holder.

Dividends

Preferred Stock. The holders of the Series A Preferred Shares are entitled to receive dividends in the amount of $2.00 per share per annum, which is equivalent to 8% of the $25.00 liquidation preference per share. The Company has accrued dividends of $0.6 million as of September 30, 2022 which were paid on October 17, 2022.

Common Stock. The declaration of any future cash dividends is at the discretion of the board of directors and depends upon the Company’s earnings, if any, capital requirements and financial position, general economic conditions, and other pertinent conditions. It is the Company’s present intention not to pay any cash dividends on the Company’s common stock in the foreseeable future, but rather to reinvest earnings, if any, in business operations.

Repurchase of Equity Securities

On May 10, 2022, the Board of Directors approved a stock repurchase program authorizing the repurchase of up to $5.0 million worth of shares of common stock. The amount of the repurchase program represented approximately 15% of the outstanding shares of the Company’s common stock valued at the closing price on May 10, 2022. During the nine months ended September 30, 2022, the Company repurchased 251,934 shares of common stock under this repurchase program at an average price of $1.76 per share for a total of $0.4 million.

(A) Options

The following is a summary of the Company’s option activity:

	Options	Weighted Average Exercise Price
Outstanding – January 1, 2022	463,251	$	2.82
Exercisable – January 1, 2022	343,724	$	2.77
Granted	392,000	$	1.19
Exercised	(21,623)	$	0.40
Forfeited/Cancelled	(32,703)	$	1.90
Outstanding – September 30, 2022	800,925	$	2.05
Exercisable – September 30, 2022	383,049	$	2.76

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	Options Outstanding				Options Exercisable
Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$0.40 - $6.50	800,925	8.28	$	2.05	383,049	$	2.76

During the nine months ended September 30, 2022, the Company issued 392,000 options to employees. The options have an exercise price between $1.12 and $2.09 per share, a term of ten years, and vest over one or three years. The options have an aggregated fair value of approximately $0.2 million that was calculated using the Black-Scholes option-pricing model based on the assumptions discussed above in Note 1 under Stock-Based Compensation.

During the nine months ended September 30, 2022, the Company had 21,623 options exercised by former employees. These options were exercised at $0.40 per share for a total of $0.01 million.

The Company recognized share-based compensation net of forfeitures related to options of $0.02 million and $0.1 million for the three months ended September 30, 2022 and 2021, respectively.

The Company recognized share-based compensation net of forfeitures related to options of $0.1 million and $0.2 million for the nine months ended September 30, 2022 and 2021, respectively.

On September 30, 2022, unrecognized share-based compensation was $0.3 million.

The intrinsic value for outstanding and exercisable options as of September 30, 2022 was $0.1 million and $0.1 million.

(B) Warrants

The following is a summary of the Company’s common stock warrant activity:

	Warrants	Weighted Average Exercise Price
Outstanding – January 1, 2022	18,486,859	$	3.46
Exercisable – January 1, 2022	18,486,859	$	3.46
Granted	100,000	$	3.00
Exercised	(139,295)	$	2.97
Forfeited/Cancelled	—	$	—
Outstanding – September 30, 2022	18,447,564	$	3.47
Exercisable – September 30, 2022	18,372,564	$	3.47

	Warrants Outstanding				Warrants Exercisable
Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$0.40 - $7.50	18,447,564	3.93	$	3.47	18,372,564	$	3.47

During the nine months ended September 30, 2022, the Company issued 100,000 warrants in connection with investor relation services being performed. The warrants have an exercise price of $3.00 per share, a term of five years, and vest over three years. The fair value of these warrants is $0.1 million as of September 30, 2022.

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The intrinsic value for outstanding and exercisable warrants as of September 30, 2022 was $0.01 million and $0.01 million, respectively.

The following is a summary of the Company’s preferred stock warrant activity:

	Warrants	Weighted Average Exercise Price
Outstanding – January 1, 2022	12,000	$	24.97
Exercisable – January 1, 2022	12,000	$	24.97
Granted	—	$	—
Exercised	—	$	—
Forfeited/Cancelled	—	$	—
Outstanding – September 30, 2022	12,000	$	24.97
Exercisable – September 30, 2022	12,000	$	24.97

		Warrants Outstanding				Warrants Exercisable
Exercise Price		Number Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$	24.97	12,000	3.69	$	24.97	12,000	$	24.97

The intrinsic value for outstanding and exercisable preferred warrants as of September 30, 2022 was $0.

(C) Restricted Stock Plan

The following is a summary of the Company’s restricted stock activity:

	Restricted Stock	Weighted Average Fair Value
Non Vested Balance - January 1, 2022	145,000	$	2.45
Granted	231,100	$	1.96
Vested	101,517	$	2.66
Forfeited/Cancelled	—	$	—
Non Vested Balance - September 30, 2022	274,583	$	1.96

The Company periodically grants restricted stock awards to the Board of Directors and certain employees pursuant to the 2020 Plan. These typically are awarded by the Compensation Committee at one time and from time to time, to vest over one to three years, unless otherwise determined by the Compensation Committee.

The Company recognized $0.05 million and $0.1 million of share-based compensation during the three months ended September 30, 2022 and 2021, respectively.

The Company recognized $0.4 million and $0.2 million of share-based compensation during the nine months ended September 30, 2022 and 2021, respectively.

On September 30, 2022, there was $0.4 million of unrecognized compensation related to non-vested restricted stock.

16. SEGMENTS

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In accordance with FASB ASC Topic 280, Segment Reporting, an operating segment is defined as a component of an enterprise for which discrete financial information is available and reviewed regularly by the chief operating decision maker (“CODM”), or decision making group, to evaluate performance and make operating decisions.

The Company identified its CODM group as its three executive officers, the Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer. In determining the reportable segments, the CODM group considers similar economics and characteristics including product types, construction processes, customer type, regulatory environments, and underlying demand and supply.

The Company’s business is organized into five material reportable segments which aggregate 99.9% of revenue for the nine months ended September 30, 2022:

1) Homes

2) Developed lots

3) Entitled land

4) Multi-family

5) Fee Build

The reporting segments follow the same accounting policies used in the preparation of the Company’s condensed consolidated financial statements. The following represents revenue, cost of goods sold, and gross profit (loss) information for the Company’s reportable segments for the three and nine months ended September 30, 2022 and 2021:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue by segment
Homes	$	4,693,900	$	3,929,300	$	25,758,100	$	14,277,700
Developed lots	—		770,000		9,080,000		7,770,000
Entitled land	3,400,000		10,440,000		7,880,000		19,750,000
Multi-family	27,200		—		27,200		—
Fee Build	3,623,500		2,871,300		7,825,300		4,219,500
Other	3,900		—		45,400		—
	$	11,748,500	$	18,010,600	$	50,616,000	$	46,017,200
Cost of goods sold by segment
Homes	$	3,805,000	$	3,498,000	$	21,461,100	$	12,378,200
Developed lots	87,300		495,400		8,144,300		7,541,700
Entitled land	3,347,900		4,492,600		4,060,800		11,449,400
Multi-family	25,100		—		27,300		—
Fee Build	3,791,200		2,380,200		11,010,600		3,569,000
Other	254,300		—		1,351,300		—
	$	11,310,800	$	10,866,200	$	46,055,400	$	34,938,300
Gross profit (loss) by segment
Homes	$	888,900	$	431,300	$	4,297,000	$	1,899,500
Developed lots	(87,300)		274,600		935,700		228,300
Entitled land	52,100		5,947,400		3,819,200		8,300,600
Multi-family	2,100		—		(100)		—
Fee Build	(167,700)		491,100		(3,185,300)		650,500
Other	(250,400)		—		(1,305,900)		—
	$	437,700	$	7,144,400	$	4,560,600	$	11,078,900

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The following represents total assets for the Company’s reportable segments at September 30, 2022 and December 31, 2021:

	September 30, 2022		December 31, 2021
Homes	$	27,009,200	$	36,615,600
Developed lots	42,983,800		8,219,500
Entitled land	9,911,500		28,157,800
Multi-family	111,291,300		47,679,400
Fee Build	5,768,500		3,325,300
Unallocated (Shared)	30,423,400		45,702,500
Total Assets	$	227,387,700	$	169,700,100

17. UNCOMPLETED CONTRACTS

Costs, estimated earnings, and billings on uncompleted contracts are summarized as follows at September 30, 2022 and December 31, 2021:

	September 30, 2022		December 31, 2021
Costs incurred on uncompleted contracts	$	16,580,500	$	5,991,300
Estimated earnings (loss)	(1,944,600)		811,600
Costs and estimated earnings on uncompleted contracts	14,635,900		6,802,900
Billings to date	15,111,200		4,635,700
Costs and estimated earnings in excess of billings on uncompleted contracts	—		2,167,200
Billings in excess of costs and estimated earnings on uncompleted contracts	(475,300)		—
Provision for loss on contract	(421,400)		—
Contract Assets (Liabilities), net	$	(896,700)	$	2,167,200

At September 30, 2022, the contract liability of $0.9 million consists of a net loss of $1.9 million and provision for loss on contract of $0.4 million, partially offset by costs in excess of billings of $1.4 million. The uncollected billings as of September 30, 2022 were $5.5 million. At December 31, 2021, the contract asset of $2.2 million consisted of estimated earnings of $0.8 million and costs in excess of billings of $1.4 million. The uncollected billings as of December 31, 2021 were $1.0 million.

18. SUBSEQUENT EVENTS

On October 10, 2022, the board of directors of the Company declared a monthly cash dividend on the Company’s Series A Preferred Shares of $0.167 per share. The cash dividend is payable on November 20, 2022 to stockholders of record on October 31, 2022.

On October 20, 2022, the Company entered into a purchase and sale agreement for the sale of 56.63 acres in Punta Gorda, Florida for $7.3 million. Closing is expected to take place in Q4 2022.

On November 10, 2022, the board of directors of the Company declared a monthly cash dividend on the Company’s Series A Preferred Shares of $0.167 per share. The cash dividend is payable on December 20, 2022 to stockholders of record on November 30, 2022.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this Report are forward-looking statements. These forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future construction, revenues, income, cost of sales, expenses, and capital spending. Our forward-looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “intend,” “anticipate,” “potential,” “plan,” “goal,” “foresee,” “likely,” “target,” “may,” “should,” “could,” or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this Report speak only as of the date of this document and we disclaim any obligation to update these statements unless required by law and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory, and other risks, contingencies, and uncertainties, most of which are difficult to predict and many of which are beyond our control. The following factors, among others, may cause our actual results, performance, or achievements to differ materially from any future results, performance, or achievements expressed or implied by these forward-looking statements:

•economic changes either nationally or in the markets in which we operate, including declines in employment, volatility of mortgage interest rates, and inflation;    

•downturn in the homebuilding industry;    

•changes in assumptions used to make industry forecasts;    

•volatility and uncertainty in the credit markets and broader financial markets;

•our future operating results and financial condition;

•our business operations;

•changes in our business and investment strategy;

•availability of land to acquire and our ability to acquire such land on favorable terms or at all;

•availability, terms, and deployment of capital;

•shortages of or increased prices for labor, land, or raw materials used in housing construction;

•delays in land development or home construction resulting from adverse weather conditions or other events outside our control;

•the cost and availability of insurance and surety bonds;

•changes in, or the failure or inability to comply with, governmental laws and regulations;

•the timing of receipt of regulatory approvals and the opening of projects;

•the degree and nature of our competition;

•our leverage and debt service obligations;

•general volatility of the capital markets;

•availability of qualified personnel and our ability to retain our key personnel;

•our financial performance;

•our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act;    

•the extent to which the COVID-19 pandemic continues to impact our business; and

•additional factors discussed under Part I - Item 1A. Risk Factors in our Annual Report on Form 10-K/A for the year ended December 31, 2021 (the “Annual Report on Form 10-K/A”) as such factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission (the “SEC”) which are accessible on the SEC’s website at http://www.sec.gov.

These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this Report and are subject to risks and uncertainties. Moreover, we operate in a very highly competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on forward-looking statements contained herein.

You should read this Report and the documents that we reference and have filed as exhibits with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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The forward-looking statements made in this Report relate only to events as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements after the date of this Report or to conform such statements to actual results or revised expectations, except as required by law.

Overview

Harbor Custom Development, Inc. is a real estate development company involved in all aspects of the land development cycle including land acquisition, entitlements, development, construction of project infrastructure, single and multi-family vertical construction, marketing, sales, and management of various residential projects in Washington, California, Texas, and Florida.

As a land developer and builder of single-family homes, luxury homes, townhomes, and apartments, our business strategy is to acquire and develop land strategically based on an understanding of population growth patterns, entitlement restrictions and land use evaluation, infrastructure development, and geo-economic forces. We endeavor to acquire land with scenic views to develop and sell residential lots, new home communities, townhomes, and multi-story condominium or apartment properties within a 20- to 60-minute commute of some of the nation's fastest-growing metro employment corridors.

We are leading the real estate industry as the first national land developer and home builder accepting payment in the form of cryptocurrency for our properties.

Our portfolio of land, lots, home plans, and finishing options, coupled with a historic low inventory of residential and multi-family housing in our principal geographic areas, provide an opportunity for us to increase revenue and overall market share. In addition to our single-family residential projects, we plan to build and sell townhomes, and apartments. In an effort to strategically control the expanding needs of our corporate team, we signed a lease on October 5, 2021 for a new office space in Tacoma, Washington and moved our headquarters in April 2022. This office space is designed with a hybrid workforce in mind and takes into account employment trends that arose after the COVID-19 global pandemic, specifically the increase in hybrid or remote employees.

It is customary for us to sign purchase and sale agreements that contain a due diligence period which allows us time, usually between 30 and 60 days, to evaluate the acquisition. At times, through our due diligence efforts, we find that a property is not suitable for purchase due to economic forces, zoning issues, or other matters. If we determine that a property is not suitable for our desired purposes, we terminate the purchase and sale agreement. After termination within the due diligence period, our earnest money is returned to us.

Our infrastructure development division constructs a diverse range of residential communities and improved lots. We own and lease heavy equipment which we utilize to build and develop residential subdivisions and multi-family communities. The equipment is primarily used for land clearing, site development, public and private road improvements, installation of wet utilities such as sewer, water, and storm sewer lines, in addition to construction of dry utility lines for power, gas, telephone, and cable service providers.

We are a general contractor and construct single-family homes, townhomes, and apartments utilizing a base of employees in conjunction with third-party subcontractors.

As of November 9, 2022, we own or control 21 communities in Washington, Texas, California, and Florida, containing approximately 2,500 lots or units in various stages of development.

Results of Operations

Three Months Ended September 30, 2022 as Compared to the Three Months Ended September 30, 2021

The following table sets forth the summary statements of operations for the three months ended September 30, 2022 and 2021.

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	2022		2021
Sales	$	11,748,500	$	18,010,600
Cost of sales	(11,310,800)		(10,866,200)
Gross profit	437,700		7,144,400
Operating expenses	(4,523,800)		(3,322,100)
Other income (expense)	(396,500)		(113,900)
Income tax benefit	1,067,800		—
Net income (loss)	$	(3,414,800)	$	3,708,400

Sales

Our sales decreased by 34.8% to $11.7 million for the three months ended September 30, 2022 as compared to $18.0 million for the three months ended September 30, 2021. Sales decreased in 2022 primarily due to a decrease in the sale of entitled land of $7.0 million and decrease in the sale of developed lots of $0.8 million, partially offset by increases in home sales of $0.8 million and fee build revenue of $0.8 million. There was a large sale of entitled land to Lennar Northwest, Inc. ("Lennar") in the third quarter of 2021 compared to a less significant entitled land sale in the third quarter of 2022.

Gross Profit

Our overall gross profit for the quarter decreased by 93.9% to $0.4 million for the three months ended September 30, 2022 as compared to $7.1 million for the three months ended September 30, 2021. Gross margin was 3.7% for the three months ended September 30, 2022 compared to 39.7% for the three months ended September 30, 2021. The $6.7 million decrease in gross profit and 35.9% decrease in gross margin were primarily due to the non-recurrence of higher margin entitled land sales in 2022 and a decrease in fee build gross profit and gross margin due to significant cost overruns. The entitled land sales in the third quarter 2021 provided $5.9 million gross profit dollars at a gross margin of 57.0% that did not recur in the third quarter 2022.

Operating Expenses

Our operating expenses increased by 36.2% to $4.5 million for the three months ended September 30, 2022, as compared to $3.3 million for the three months ended September 30, 2021. The increase in total operating expenses is primarily attributable to a bad debt expense of $0.9 million relating to notes and interest receivables from the sale of Winding Lanes developed lots in March 2022 and $0.5 million in pre-acquisition due diligence costs associated with the cancelation of the Westry Village project, partially offset by a reduction in 2022 incentive bonus compensation of $0.6 million. Individually less significant increases in payroll expenses, marketing and advertising, right of use expense for a new corporate office, and depreciation expense, partially offset by a decrease in stock compensation also contributed to the change over the prior year period.

Other Income (Expense)

Other income (expense) was $(0.4) million for the three months ended September 30, 2022 as compared to $(0.1) million for the three months ended September 30, 2021. This change is primarily due to $(0.6) million of interest expense incurred for the three months ended September 30, 2022, offset by $0.2 million of interest income incurred. The interest expense increased due to borrowings on the revolving line of credit loan we entered into on March 7, 2022.

Net Income (Loss)

Our net income (loss) decreased by 192.1% to $(3.4) million for the three months ended September 30, 2022 as compared to $3.7 million for the three months ended September 30, 2021. The decrease in net income was primarily attributable to a decrease in revenue and gross margins, and increases in cost of sales and operating expenses in the third quarter of 2022 as explained above.

Nine Months Ended September 30, 2022 as Compared to the Nine Months Ended September 30, 2021

The following table sets forth the summary statements of operations for the nine months ended September 30, 2022 and 2021.

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	2022		2021
Sales	$	50,616,000	$	46,017,200
Cost of sales	(46,055,400)		(34,938,300)
Gross profit	4,560,600		11,078,900
Operating expenses	(12,017,200)		(7,639,700)
Other income (expense)	$	(759,800)	$	(210,600)
Income tax benefit	1,937,800		—
Net income (loss)	$	(6,278,600)	$	3,228,600

Sales

Our sales increased by 10.0% to $50.6 million for the nine months ended September 30, 2022 as compared to $46.0 million for the nine months ended September 30, 2021. Sales increased in 2022 due to the increases in home sales of $11.5 million, fee build revenue of $3.6 million, and developed lot sales of $1.3 million, partially offset by a decrease in entitled land sales of $11.9 million. The home sales largely increased due to continued expansion into a new geographic location with $15.1 million of homes sold in Texas. The decrease in entitled land sales was due to two large entitled land sales to Lennar, which occurred in 2021 and did not reoccur in 2022.

Gross Profit

Our overall gross profit decreased by 58.8% to $4.6 million for the nine months ended September 30, 2022 as compared to $11.1 million for the nine months ended September 30, 2021. Gross margin was 9.0% for the nine months ended September 30, 2022 compared to 24.1% for the nine months ended September 30, 2021. The $(6.5) million decrease in gross profit was primarily due to decreases in entitled land gross profit of $(4.5) million and fee build gross profit of $(3.8) million, which was partially offset by an increase in home sales gross profit of $2.4 million. The 15.1% decrease in gross margin was primarily driven by significant cost overruns with our fee build projects resulting in a 56.1% gross margin decline. The fee build gross margin decline was partially offset by gross margin increases from homes, developed lots, and entitled land sales.

For the nine months ended September 30, 2022 and 2021, gross margins on land sales were 48.5% and 42.0%, developed lot sales were 10.3% and 2.9%, homes closed were 16.7% and 13.3%, and fee build was (40.7)% and 15.4%, respectively.

Operating Expenses

Our operating expenses increased by 57.3% to $12.0 million for the nine months ended September 30, 2022 as compared to $7.6 million for the nine months ended September 30, 2021. The increase in total operating expenses is primarily attributable to the following:

1)Payroll expenses increased by $1.2 million due to increase in staff from the investment we made in our public company infrastructure and to support our future growth plan;

2)We incurred a bad debt expense of $0.9 million associated with the Winding Lane notes and interest receivable from the sale of developed lots in March 2022;

3)We incurred $0.5 million in pre-acquisition due diligence costs associated with the Westry Village project that we decided not to purchase;

4)Professional fees increased by $0.5 million primarily driven by establishing and maintaining public company infrastructure and oversight;

5)We incurred additional right of use expense of $0.3 million from leasing an office space in Tacoma, Washington for our new corporate headquarters;

6)We incurred additional depreciation expense of $0.2 million related to furniture, fixtures, and leasehold improvements for the new corporate office and equipment additions; and

7)Advertising and marketing increased by $0.2 million as a result of increased marketing activities to promote our company and real estate projects.

Other Income (Expense)

Other expense increased for the nine months ended September 30, 2022 to $0.8 million as compared to $0.2 million for the nine months ended September 30, 2021. This is primarily due to $1.0 million of interest expense incurred for the nine

28

months ended September 30, 2022, offset by interest income of $0.4 million. The interest expense increased due to the revolving line of credit loan we entered into on March 7, 2022.

Net Income (Loss)

Our net income (loss) decreased by 294.5% to a net loss of $(6.3) million for the nine months ended September 30, 2022 as compared to net income of $3.2 million for the nine months ended September 30, 2021. The decrease in net income was primarily attributable to a decrease in gross margins and increased operating expenses as explained above.

Liquidity and Capital Resources

Overview

Our principal uses of capital were operating expenses, land purchases, land development, single and multi-family construction, the payment of routine liabilities, payments on construction loans and related party construction loans, financing fees for the revolving line of credit and construction loans, and repurchase of company equity securities. We used funds generated by operations and available borrowings to meet our short-term working capital requirements. We remain focused on generating positive margins in land acquisitions and development operations and home construction operations in order to maintain a strong balance sheet and keep us poised for growth.

We employ both debt and equity as part of our ongoing financing strategy to provide us with the financial flexibility to access capital on the best terms available. In that regard, we employ prudent leverage levels to finance the acquisition and development of our lots and construction of our homes, townhomes, and apartments. Our existing indebtedness is recourse to us and we anticipate that future indebtedness will likewise be recourse.

Our management considers a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of our assets, and the ability of particular assets, and our company as a whole, to generate cash flow to cover the expected debt service costs. Our governing documents do not contain a limitation on the amount of debt we may incur and our board of directors may change our target debt levels at any time without the approval of our shareholders.

We intend to finance future acquisitions and developments with the most advantageous source of capital available to us at the time of the transaction, which may include a combination of common and preferred equity, secured and unsecured corporate level debt, property level debt and mortgage financing, and other public, private, or bank debt.

Real Estate Assets

Our real estate assets increased to $179.9 million as of September 30, 2022 from $122.1 million as of December 31, 2021. This increase was due to an increase in development and construction activities for houses, townhomes, and apartments.

Liabilities

Liabilities increased to $139.3 million as of September 30, 2022 from $70.0 million as of December 31, 2021. This increase is primarily attributable to the following:

1.An increase in our construction loans, net of related party loans of $43.8 million to fund the development of land and construction of houses, townhomes, and apartments;

2.A new revolving credit facility was entered into with BankUnited from which we have borrowed $24.0 million net of debt discount to fund our general working capital needs; and

3.Accounts payable and accrued expenses increased by $2.7 million, primarily driven by an increase in trade accounts payable due to an increase of real estate projects in process.

Unrestricted Cash Balance

As of September 30, 2022, our unrestricted cash balance was $13.7 million compared to $25.6 million as of December 31, 2021.

29

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2022 was $68.2 million as compared to $79.6 million for the nine months ended September 30, 2021. The decrease in cash used is primarily attributable to a decrease in real estate assets of $26.6 million and a decrease in contract assets of $6.9 million, partially offset by a decrease in net income of $9.5 million, an increase in notes receivable of $8.5 million, and an increase in accounts receivable of $4.4 million.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2022 was $1.6 million as compared to net cash used of $0.3 million for the nine months ended September 30, 2021. During the nine months ended September 30, 2022, $1.8 million was used for the furniture, fixtures, and leasehold improvements of the new corporate office and purchase of equipment compared to $0.4 million used for the acquisition of new equipment for the nine months ended September 30, 2021. These purchases were partially offset by the proceeds from the sale of equipment.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2022 was $57.9 million as compared to net cash provided of $82.9 million for the nine months ended September 30, 2021. This decrease was primarily caused by net proceeds from a common stock offering of $25.1 million and net proceeds from a preferred stock offering of $28.7 million in 2021 that did not recur in the 2022 comparable period, a decrease in cash received from related party construction loans, net of payments of $10.9 million, and an increase in cash used for 2022 preferred dividends of $5.3 million. This decrease was partially offset by net cash provided by the revolving line of credit loan of $24.8 million in 2022 and an increase in cash provided by construction loans, net of payments of $19.7 million.

Cash Resources

Although the expected revenue growth and control of expenses leads management to believe that it is probable that our cash resources will be sufficient to meet cash requirements through the fiscal year ending December 31, 2022, we may require additional funding to finance the growth of our current and expected future operations as well as to achieve our strategic objectives. There can be no assurance that financing will be available in amounts or terms acceptable to us, if at all. In that event, we would be required to change our growth strategy and seek funding on that basis, though there is no guarantee we will be able to do so.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

Inflation

Our operations can be adversely impacted by inflation, primarily from higher land, financing, labor, material, and construction costs. In addition, inflation can lead to higher mortgage rates which can significantly affect the affordability of mortgage financing to homebuyers. While we attempt to pass on cost increases to customers through increased prices, when weak housing market conditions exist, we may be unable to offset cost increases with higher selling prices.

Critical Accounting Policies

Our consolidated financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates, assumptions, judgments, and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues, and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk, and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note 1 of our consolidated financial statements.

30

Implications of Being an Emerging Growth Company

We are an “emerging growth company” as defined in the JOBS Act and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” These provisions include:

•a requirement to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in a public offering registration statement;

•an exemption to provide fewer than five years of selected financial data in a public offering registration statement;

•an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act (“SOX”) in the assessment of the emerging growth company’s internal control over financial reporting;

•an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies; and

•an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit partner rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer.

We have elected to adopt the reduced disclosure requirements available to emerging growth companies. As a result of this election, the information that we provide in this Report may be different than the information you may receive from other public companies in which you hold equity interests.

We will cease to be an “emerging growth company” upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of our initial public offering (December 31, 2025), (ii) the first fiscal year after our annual gross revenues are $1.235 billion or more, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities or (iv) as of the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We borrow from lenders using financial instruments such as term loans, notes payable, and a revolving credit facility. We utilize both fixed and variable interest rates in these financing operations. Interest incurred from our term loans and notes payables is calculated primarily using a fixed rate, whereas interest incurred from our revolving credit facility is calculated using a variable rate. We do not have the obligation to prepay these prior to maturity, and, as a result, interest rate risk and changes in fair market value should not have a significant impact on our fixed-rate debt.

We are exposed to market risks related to fluctuations in interest rates on our outstanding revolving line of credit and construction loan relating to Meadowscape apartments. The interest rate for our variable rate indebtedness as of September 30, 2022 was equal to the daily simple secured overnight financing rate (SOFR) plus an applicable margin of 4.75% for the line of credit and equal to the SOFR one month rate plus an applicable margin of 7.25% for the construction loan. At September 30, 2022, the daily SOFR was 2.98% and one month SOFR was 2.47%. A hypothetical 100 basis point increase in the interest rate on our variable rate indebtedness would increase our annual interest cost by approximately $0.2 million for the line of credit and $0.1 million for the construction loan, respectively. Based on this, we do not believe that the future interest rate risks related to our existing indebtedness will have a material adverse impact on our financial position, results of operations, or liquidity.

At September 30, 2022, we had outstanding fixed-rate borrowings net of debt discount and financing fees of approximately $88.6 million and outstanding variable-rate borrowings net of debt discount and financing fees of approximately $32.6 million.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision of our Chief Executive Officer and President and Chief Financial Officer performed an evaluation (the “Evaluation”) of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Report. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide a reasonable level of assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated

31

and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based on the evaluation, our Chief Executive Officer and President and Chief Financial Officer concluded that our disclosure controls and procedures are operating effectively.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

We are not party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, prospects, financial condition, liquidity, or results of operation. However, we may from time to time after the date of this Report become subject to claims and litigation arising in the ordinary course of business. One or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which such claim or litigation is resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention, and may materially adversely affect our reputation, even if favorably resolved.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Sales of Unregistered Securities

None.

(b) Use of Proceeds from Sales of Securities

None.

(c) Repurchases of Our Equity Securities

2020 Restricted Stock Plan

The following table sets forth the shares of our common stock we acquired during the quarter as a result of the surrender of shares by employees to satisfy tax withholding obligations in connection with the vesting of restricted shares of common stock awarded under our 2020 Restricted Stock Plan.

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Program	Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs
July 1, 2022 - July 31, 2022	—	$	—	—	$	—
August 1, 2022 - August 31, 2022	1,483	1.40		1,483	—
September 1, 2022 - September 30, 2022	124	1.14		124	—
Total	1,607	—		1,607	—

(1) Represents shares surrendered to us by employees to satisfy tax withholding obligations arising in connection with the vesting of 5,417 shares of common stock awarded under our 2020 Restricted Stock Plan.

32

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

We failed to meet a financial covenant of the Loan Agreement with BankUnited, N.A. (the “Lender”), dated March 7, 2022 (the “Loan”). Under the Loan, we covenanted that we would not allow our Interest Coverage Ratio as of the last day of each fiscal quarter to be less than 2.50. The Interest Coverage Ratio is defined as the ratio of EBITDA for the trailing four quarters to Interest Expense for the trailing four quarters. We had an Interest Coverage Ratio of 1.4 on September 30, 2022. Under the Loan, a failure to maintain the required Interest Coverage Ratio financial covenant is defined as an “Event of Default.” For such Event of Default, the Lender may accelerate all amounts due under the Loan. The Lender has informed us that the Lender is sending the Loan to its restructuring department for potential restructuring, and, to date, has not provided us with a Notice of Default or Lender’s intention to accelerate payment of any amounts due under the Loan.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

Exhibit No.	Description	Form	Exhibit	Filing Date	Filed Herewith
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		31.1		X
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		31.2		X
32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		32		X
101. INS	XBRL Instance Document
101. SCH	XBRL Taxonomy Extension Schema Document
101. CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101. DEF	XBRL Taxonomy Extension definition Linkbase Document
101. LAB	XBRL Taxonomy Extension Label Linkbase Document
101. PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

33

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused

this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	HARBOR CUSTOM DEVELOPMENT, INC.
Date: November 14, 2022	By	/s/ Sterling Griffin
		Sterling Griffin Chief Executive Officer and President (Principal Executive Officer)
Date: November 14, 2022	By	/s/ Lance Brown
		Lance Brown Chief Financial Officer (Principal Financial and Accounting Officer)

34

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER ANDPRESIDENT

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Sterling Griffin, certify that:

1.I have reviewed this report on Form 10-Q of Harbor Custom Development, Inc. (the registrant);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to me by others, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s current fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;

5.I have disclosed, based on my most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions);

a.All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Dated: November 14, 2022	/s/ Sterling Griffin
	Sterling Griffin
	Chief Executive Officer and President (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lance Brown, certify that:

1.I have reviewed this report on Form 10-Q of Harbor Custom Development, Inc. (the registrant);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to me by others, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s current fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;

5.I have disclosed, based on my most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions);

a.All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Dated: November 14, 2022	/s/ Lance Brown
	Lance Brown
	Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32

Exhibit 32

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Harbor Custom Development, Inc., a Washington corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The quarterly report on Form 10-Q for the quarter ended September 30, 2022 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 14, 2022	/s/ Sterling Griffin
	Sterling Griffin
	Chief Executive Officer and President (Principal Executive Officer)

Dated: November 14, 2022	/s/ Lance Brown
	Lance Brown
	Chief Financial Officer (Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to Harbor Custom Development, Inc. and will be retained by Harbor Custom Development, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover - shares	9 Months Ended
	Sep. 30, 2022	Nov. 09, 2022
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2022
Document Transition Report	false
Entity File Number	001-39266
Entity Registrant Name	HARBOR CUSTOM DEVELOPMENT, INC.
Entity Incorporation, State or Country Code	WA
Entity Tax Identification Number	46-4827436
Entity Address, Address Line One	1201 Pacific Avenue, Suite 1200
Entity Address, City or Town	Tacoma
Entity Address, State or Province	WA
Entity Address, Postal Zip Code	98402
City Area Code	253
Local Phone Number	649-0636
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		14,376,372
Entity Central Index Key	0001784567
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Amendment Flag	false
Common Stock
Document Information [Line Items]
Title of 12(b) Security	Common Stock
Trading Symbol	HCDI
Security Exchange Name	NASDAQ
Series A Cumulative Convertible Preferred Stock
Document Information [Line Items]
Title of 12(b) Security	Series A Cumulative Convertible Preferred Stock
Trading Symbol	HCDIP
Security Exchange Name	NASDAQ
Warrants
Document Information [Line Items]
Title of 12(b) Security	Warrants
Trading Symbol	HCDIW
Security Exchange Name	NASDAQ
Warrants
Document Information [Line Items]
Title of 12(b) Security	Warrants
Trading Symbol	HCDIZ
Security Exchange Name	NASDAQ

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2022	Dec. 31, 2021
ASSETS
Cash	$ 13,707,900	$ 25,629,200
Restricted Cash	597,600	597,600
Accounts Receivable, net	5,503,900	1,113,500
Contract Assets, net	0	2,167,200
Notes Receivable, net	9,754,200	2,000,000
Prepaid Expense and Other Assets	2,911,900	2,778,100
Real Estate	179,932,800	122,136,100
Property, Plant and Equipment, net	10,069,200	9,199,700
Right of Use Assets	2,323,400	3,429,700
Deferred Tax Asset	2,586,800	649,000
TOTAL ASSETS	227,387,700	169,700,100
LIABILITIES
Accounts Payable and Accrued Expenses	13,340,300	10,662,800
Dividends Payable	634,700	670,900
Contract Liabilities	896,700	0
Deferred Revenue	63,900	44,800
Note Payable - D&O Insurance	537,500	903,800
Revolving Line of Credit Loan, net of Unamortized Debt Discount of $0.8 million and $0, respectively	24,011,400	0
Equipment Loans	4,296,100	5,268,500
Finance Leases	188,000	543,400
Construction Loans, net of Unamortized Debt Discount of $2.4 million and $4.4 million, respectively	83,263,500	34,957,100
Construction Loans - Related Party, net of Unamortized Debt Discount of $0.01 million and $1.1 million, respectively	8,926,100	13,426,600
Right of Use Liabilities	3,168,000	3,484,400
TOTAL LIABILITIES	139,326,200	69,962,300
COMMITMENTS AND CONTINGENCIES - SEE NOTE 12
STOCKHOLDERS’ EQUITY
Preferred Stock, no par value per share, 10,000,000 shares authorized and 3,799,799 issued and outstanding at September 30, 2022 and 4,016,955 issued and outstanding at December 31, 2021	62,912,100	66,507,500
Common Stock, no par value per share, 50,000,000 shares authorized and 14,352,365 issued and outstanding at September 30, 2022 and 13,155,342 issued and outstanding at December 31, 2021	35,704,700	32,122,700
Additional Paid In Capital	1,224,600	752,700
Retained Earnings (Accumulated Deficit)	(11,779,900)	1,646,500
Stockholders’ Equity	88,061,500	101,029,400
Non-Controlling Interest	0	(1,291,600)
TOTAL STOCKHOLDERS’ EQUITY	88,061,500	99,737,800
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 227,387,700	$ 169,700,100

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Revolving line of credit loan, net of debt discount	$ 800	$ 0
Debt discount	2,400	4,400
Debt discount	$ 10	$ 1,100
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	3,799,799	4,016,955
Preferred stock, shares outstanding (in shares)	3,799,799	4,016,955
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares, issued (in shares)	14,352,365	13,155,342
Common stock outstanding (in shares)	14,352,365	13,155,342

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Statement [Abstract]
Sales	$ 11,748,500	$ 18,010,600	$ 50,616,000	$ 46,017,200
Cost of Sales	11,310,800	10,866,200	46,055,400	34,938,300
Gross Profit	437,700	7,144,400	4,560,600	11,078,900
Operating Expenses	4,523,800	3,322,100	12,017,200	7,639,700
Operating Income (Loss)	(4,086,100)	3,822,300	(7,456,600)	3,439,200
Other Income (Expense)
Interest Expense	(565,800)	(115,100)	(1,046,800)	(298,500)
Interest Income	163,900	0	378,900	0
Loss on Sale of Equipment	(12,600)	0	(118,100)	(35,900)
Other Income	18,000	1,200	26,200	123,800
Total Other (Expense)	(396,500)	(113,900)	(759,800)	(210,600)
Income (Loss) Before Income Tax	(4,482,600)	3,708,400	(8,216,400)	3,228,600
Income Tax (Benefit)	(1,067,800)	0	(1,937,800)	0
Net Income (Loss)	(3,414,800)	3,708,400	(6,278,600)	3,228,600
Net Loss Attributable to Non-controlling interests	0	0	(600)	(1,700)
Preferred Dividends	(1,903,700)	(631,400)	(5,856,200)	(771,500)
Net Income (Loss) Attributable to Common Stockholders, basic	$ (5,318,500)	$ 3,077,000	$ (12,134,200)	$ 2,458,800
Earnings (Loss) Per Share - Basic (in dollars per share)	$ (0.37)	$ 0.21	$ (0.88)	$ 0.17
Earnings (Loss) Per Share - Diluted (in dollars per share)	$ (0.37)	$ 0.17	$ (0.88)	$ 0.17
Weighted Average Common Shares Outstanding - Basic (in shares)	14,350,899	14,898,594	13,862,865	14,350,143
Weighted Average Common Shares Outstanding - Diluted (in shares)	14,350,899	22,063,584	13,862,865	14,522,663

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)	$ (6,278,600)	$ 3,228,600
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation	1,022,200	783,500
Amortization of right of use assets	440,300	252,200
Loss on sale of equipment	119,800	35,900
Provision for loss on contract	421,400	0
Impairment loss on notes and related interest receivable	898,400	0
Stock compensation	473,800	416,100
Forgiveness on PPP loan	0	(10,000)
Amortization of revolver issuance costs	320,100	0
Net change in assets and liabilities:
Accounts receivable	(4,390,400)	(26,600)
Contract assets	2,167,200	(4,762,400)
Notes receivable	(8,524,600)	0
Prepaid expenses and other assets	(261,700)	820,300
Real estate	(56,179,400)	(82,755,400)
Deferred tax asset	(1,937,800)	0
Accounts payable and accrued expenses	2,677,600	3,175,800
Contract liabilities	475,300	390,900
Deferred revenue	19,100	(874,600)
Payments on right of use liability, net of incentives	349,600	(241,600)
NET CASH USED IN OPERATING ACTIVITIES	(68,187,700)	(79,567,300)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(1,808,000)	(378,100)
Proceeds on the sale of equipment	194,400	69,500
NET CASH USED IN INVESTING ACTIVITIES	(1,613,600)	(308,600)
CASH FLOWS FROM FINANCING ACTIVITIES
Construction loans	65,240,900	39,560,800
Payments on construction loans	(16,080,500)	(10,092,500)
Financing fees construction loans	(2,304,000)	(1,476,900)
Related party construction loans	8,576,500	15,500,000
Payments on related party construction loans	(13,220,500)	(9,197,200)
Financing fees related party construction loans	(23,600)	(1,983,900)
Revolving line of credit loan, net of payments	24,788,900	0
Financing fees revolving line of credit loan	(1,097,700)	0
Note payable D&O insurance	590,100	0
Payments on note payable D&O insurance	(956,400)	(867,600)
Payments on equipment loans	(1,655,300)	(1,430,500)
Payments on financing leases	(70,700)	(289,000)
Payments on PPP loan	0	(9,300)
Net proceeds from issuance of common stock	0	25,101,000
Net proceeds from issuance of preferred stock	0	28,661,000
Preferred dividends	(5,892,400)	(560,900)
Repurchase of common stock	(437,700)	0
Proceeds from exercise of stock options	8,600	18,000
Proceeds from exercise of warrants	413,800	0
Deferred offering cost	0	(68,300)
NET CASH PROVIDED BY FINANCING ACTIVITIES	57,880,000	82,864,700
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH	(11,921,300)	2,988,800
CASH AND RESTRICTED CASH AT BEGINNING OF YEAR	26,226,800	2,396,500
CASH AND RESTRICTED CASH AT END OF PERIOD	14,305,500	5,385,300
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid	5,350,400	2,165,300
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Termination of leases	52,100	0
Amortization of debt discount capitalized	1,617,300	2,338,000
Financing of fixed assets additions	110,000	1,566,800
Conversion of finance lease to equipment loan	394,800	0
Cancellation of finance leases	0	99,100
New right of use obligations	0	166,800
Conversion of preferred to common stock	3,595,400	0
Dividends declared but not paid	$ 634,600	$ 210,600

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited) - USD ($)	Total	Stockholders' Equity (Deficit)	Common Stock	Preferred Stock	Additional Paid in Capital	Retained Earnings (Accumulated Deficit)	Non-Controlling Interest
Beginning balance, shares (in shares) at Dec. 31, 2020			5,636,548	0
Beginning balance, value at Dec. 31, 2020	$ 6,414,700	$ 7,704,600	$ 11,956,900	$ 0	$ 234,800	$ (4,487,100)	$ (1,289,900)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net proceeds from issuance of stock (in shares)			9,200,000
Net proceeds from issuance of stock	25,101,000	25,101,000	$ 25,101,000
Exercise of Stock Options(in shares)			45,046
Exercise of Stock Options	18,000	18,000			18,000
Stock Compensation Expense (in shares)			8,500
Stock Compensation Expense	115,100	115,100			115,100
Net Income (Loss)	(1,549,200)	(1,549,800)				(1,549,800)	600
Ending balance, shares (in shares) at Mar. 31, 2021			14,890,094	0
Ending balance, value at Mar. 31, 2021	30,099,600	31,388,900	$ 37,057,900	$ 0	367,900	(6,036,900)	(1,289,300)
Beginning balance, shares (in shares) at Dec. 31, 2020			5,636,548	0
Beginning balance, value at Dec. 31, 2020	6,414,700	7,704,600	$ 11,956,900	$ 0	234,800	(4,487,100)	(1,289,900)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income (Loss)	3,228,600
Ending balance, shares (in shares) at Sep. 30, 2021			14,922,094	1,260,555
Ending balance, value at Sep. 30, 2021	63,067,900	64,359,500	$ 37,057,900	$ 28,661,000	668,900	(2,028,300)	(1,291,600)
Beginning balance, shares (in shares) at Mar. 31, 2021			14,890,094	0
Beginning balance, value at Mar. 31, 2021	30,099,600	31,388,900	$ 37,057,900	$ 0	367,900	(6,036,900)	(1,289,300)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net proceeds from issuance of stock (in shares)				1,260,555
Net proceeds from issuance of stock	28,661,000	28,661,000		$ 28,661,000
Preferred Dividends	(140,100)	(140,100)				(140,100)
Stock Compensation Expense (in shares)			8,500
Stock Compensation Expense	115,800	115,800			115,800
Net Income (Loss)	1,069,400	1,071,700				1,071,700	(2,300)
Ending balance, shares (in shares) at Jun. 30, 2021			14,898,594	1,260,555
Ending balance, value at Jun. 30, 2021	59,805,700	61,097,300	$ 37,057,900	$ 28,661,000	483,700	(5,105,300)	(1,291,600)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Preferred Dividends	(631,400)	(631,400)				(631,400)
Stock Compensation Expense (in shares)			23,500
Stock Compensation Expense	185,200	185,200			185,200
Net Income (Loss)	3,708,400	3,708,400				3,708,400
Ending balance, shares (in shares) at Sep. 30, 2021			14,922,094	1,260,555
Ending balance, value at Sep. 30, 2021	63,067,900	64,359,500	$ 37,057,900	$ 28,661,000	668,900	(2,028,300)	(1,291,600)
Beginning balance, shares (in shares) at Dec. 31, 2021			13,155,342	4,016,955
Beginning balance, value at Dec. 31, 2021	99,737,800	101,029,400	$ 32,122,700	$ 66,507,500	752,700	1,646,500	(1,291,600)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Preferred Dividends	(2,012,500)	(2,012,500)				(2,012,500)
Exercise of Stock Options(in shares)			21,623
Exercise of Stock Options	8,600	8,600	$ 10,500		(1,900)
Stock Compensation Expense (in shares)			60,214
Stock Compensation Expense	242,400	242,400			242,400
Dissolution of Non-Controlling Interest	0	(1,292,100)				(1,292,100)	1,292,100
Net Income (Loss)	1,645,300	1,645,800				1,645,800	(500)
Ending balance, shares (in shares) at Mar. 31, 2022			13,237,179	4,016,955
Ending balance, value at Mar. 31, 2022	99,621,600	99,621,600	$ 32,133,200	$ 66,507,500	993,200	(12,300)	0
Beginning balance, shares (in shares) at Dec. 31, 2021			13,155,342	4,016,955
Beginning balance, value at Dec. 31, 2021	$ 99,737,800	101,029,400	$ 32,122,700	$ 66,507,500	752,700	1,646,500	(1,291,600)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of Stock Options(in shares)	21,623
Exercise of Stock Options	$ 10,000.00
Net Income (Loss)	(6,278,600)
Ending balance, shares (in shares) at Sep. 30, 2022			14,352,365	3,799,799
Ending balance, value at Sep. 30, 2022	88,061,500	88,061,500	$ 35,704,700	$ 62,912,100	1,224,600	(11,779,900)	0
Beginning balance, shares (in shares) at Mar. 31, 2022			13,237,179	4,016,955
Beginning balance, value at Mar. 31, 2022	99,621,600	99,621,600	$ 32,133,200	$ 66,507,500	993,200	(12,300)	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Preferred Dividends	(1,940,000)	(1,940,000)				(1,940,000)
Stock Compensation Expense (in shares)			17,500
Stock Compensation Expense	112,300	112,300			112,300
Conversion of Preferred stock (in shares)			1,206,515	(217,156)
Conversion of Preferred stock	0	0	$ 3,595,400	$ (3,595,400)
Exercise of Warrants (in shares)			139,295
Exercise of Warrants	413,800	413,800	$ 413,800
Share Repurchase (in shares)			(251,934)
Share Repurchase	(437,700)	(437,700)	$ (437,700)
Net Income (Loss)	(4,509,100)	(4,509,100)				(4,509,100)
Ending balance, shares (in shares) at Jun. 30, 2022			14,348,555	3,799,799
Ending balance, value at Jun. 30, 2022	93,260,900	93,260,900	$ 35,704,700	$ 62,912,100	1,105,500	(6,461,400)	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Preferred Dividends	(1,903,700)	(1,903,700)				(1,903,700)
Stock Compensation Expense (in shares)			3,810
Stock Compensation Expense	119,100	119,100			119,100
Net Income (Loss)	(3,414,800)	(3,414,800)				(3,414,800)
Ending balance, shares (in shares) at Sep. 30, 2022			14,352,365	3,799,799
Ending balance, value at Sep. 30, 2022	$ 88,061,500	$ 88,061,500	$ 35,704,700	$ 62,912,100	$ 1,224,600	$ (11,779,900)	$ 0

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

The Company’s principal business activity involves acquiring raw land and developed lots for the purpose of building and selling single family and multi-family dwellings in Washington, California, Texas, and Florida. It utilizes its heavy equipment resources to develop an inventory of developed lots and provide development infrastructure construction, on a contract basis, for other home builders.

On August 1, 2019, the Company changed its name from Harbor Custom Homes, Inc. to Harbor Custom Development, Inc.

The Company became an effective filer with the SEC and started trading on The Nasdaq Stock Market LLC ("Nasdaq”) on August 28, 2020.

Principles of Consolidation

The condensed consolidated financial statements include the following subsidiaries of Harbor Custom Development, Inc. as of the reporting period ending dates as follow:

Names	Dates of Formation	Attributable Interest
		September 30, 2022		December 31, 2021
Saylor View Estates, LLC*	March 30, 2014	N/A		51	%
Harbor Materials, LLC**	July 5, 2018	N/A		N/A
Belfair Apartments, LLC	December 3, 2019	100	%	100	%
Pacific Ridge CMS, LLC	May 24, 2021	100	%	100	%
Tanglewilde, LLC	June 25, 2021	100	%	100	%
HCDI FL CONDO LLC	July 30, 2021	100	%	100	%
HCDI Mira, LLC	August 31, 2021	100	%	100	%
HCDI Bridgeview, LLC	October 28, 2021	100	%	100	%
HCDI Wyndstone, LLC	September 15, 2021	100	%	100	%
HCDI Semiahmoo, LLC	December 17, 2021	100	%	100	%
Mills Crossing, LLC	July 21, 2022	100	%	N/A
Broadmoor Ventures, LLC	August 24, 2022	100	%	N/A

*Saylor View Estates, LLC was voluntarily dissolved with the State of Washington as of January 20, 2022.

**Harbor Materials, LLC was voluntarily dissolved with the State of Washington as of January 29, 2021.

As of September 30, 2022 and December 31, 2021, the aggregate non-controlling interest was $0 and $(1.3) million, respectively.

Basis of Presentation

The unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021. The accompanying unaudited condensed consolidated financial statements include all adjustments that are of a normal recurring nature and necessary for the fair presentation of the results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for the full year.

All numbers in the financial statements are rounded to the nearest $100, except for Earnings (Loss) per Share (“EPS”) data, and numbers in the notes to the financial statements are rounded to the nearest million.

Reclassification

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

Use of Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used.

Stock-Based Compensation

Effective November 19, 2018, the Company’s Board of Directors and stockholders approved and adopted the 2018 Incentive and Non-Statutory Stock Option Plan (the “2018 Plan”). The 2018 Plan allows the Administrator (as defined in the 2018 Plan), currently the Board of Directors, to determine the issuance of incentive stock options and non-qualified stock options to eligible employees and outside directors and consultants of the Company. The Company reserved 675,676 shares of common stock for issuance under the 2018 Plan. On June 1, 2022, the stockholders of the Company voted to approve an amendment to the 2018 Plan to increase, by 2,000,000, the authorized number of shares of common stock reserved for issuance as options under the 2018 Plan.

Effective December 3, 2020, the Company’s Board of Directors and stockholders approved and adopted the 2020 Restricted Stock Plan (the “2020 Plan”). The 2020 Plan allows the Administrator, currently the Compensation Committee to determine the issuance of restricted stock to eligible officers, directors, and key employees. The Company reserved 700,000 shares of common stock for issuance under the 2020 Plan. On June 1, 2022, the stockholders of the Company voted to approve an amendment to the 2020 Plan to increase, by 2,000,000, the authorized number of shares of common stock available for awards under the 2020 Plan.

The Company accounts for stock-based compensation in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 718, “Compensation – Stock Compensation” (“ASC 718”) which establishes financial accounting and reporting standards for stock-based employee and non-employee compensation. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument.

The Company recognizes all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date.

Options and warrants are valued using a Black-Scholes option pricing model. Grants of share-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the share-based payment. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. The Company accounts for forfeitures of stock options as they occur. When forfeitures occur, the unvested portion of the previously recognized compensation cost is reversed in the period of the forfeiture.

Stock-based compensation expenses are included in operating expenses in the condensed consolidated statement of operations.

For the nine months ended September 30, 2022 and 2021 when computing fair value of share-based payments, the Company has considered the following range of assumptions:

	September 30, 2022	September 30, 2021
Risk-free interest rate	1.73% - 3.54%	0.23% - 1.11%
Exercise price	$1.12 - $3.00	$2.76 - $5.00
Expected life of grants in years	3.93 - 6.51	2.50 - 6.50
Expected volatility of underlying stock	42.34% - 48.13%	42.63% - 56.13%
Dividends	—	—

The expected term is computed using the “simplified” method as permitted under the provisions of FASB ASC Topic 718-10-S99. The Company uses the simplified method to calculate the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The share price is the public trading price at the time of grant. Expected volatility is based on the historical stock price volatility of comparable companies’ common stock as the stock does not have sufficient historical trading activity. Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods.

Repurchase of Equity Securities

Share repurchases are recorded to common stock at the value of the cash consideration paid, as the Company's common stock has no par value. These shares are being repurchased for the purpose of constructive retirement. See Note 15. Stockholder's Equity for additional information on the share repurchase program.

Earnings (Loss) Per Share

EPS is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to topic 260-10-45 of the FASB ASC. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16, basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the numerator may have to adjust for any dividends and income or loss associated with potentially dilutive securities that are assumed to have resulted in the issuance of shares of common stock and the denominator may have to adjust to include the number of additional shares of common stock that would have been outstanding if the dilutive potential shares of common stock had been issued during the period to reflect the potential dilution that could occur from shares of common stock issuable through a contingent shares issuance arrangement, stock options, warrants, RSUs, or convertible preferred stock. For purposes of determining diluted earnings per common share, the treasury stock method is used for stock options, warrants, and RSUs, and the if-converted method is used for convertible preferred stock as prescribed in FASB ASC Topic 260.

The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income (loss) attributable to common stockholders per share of common stock for the three and nine months ended September 30, 2022 and 2021.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator:
Net income (loss) attributable to common stockholders	$	(5,318,500)	$	3,077,000	$	(12,134,200)	$	2,458,800
Effect of dilutive securities:	—		631,400		—		—
Diluted net income (loss)	$	(5,318,500)	$	3,708,400	$	(12,134,200)	$	2,458,800
Denominator:
Weighted average common shares outstanding - basic	14,350,899		14,898,594		13,862,865		14,350,143
Dilutive securities (a):
Restricted Stock Awards	—		—		—		288
Options	—		141,987		—		152,565
Warrants	—		19,359		—		19,667
Convertible Preferred Stock	—		7,003,644		—		—
Weighted average common shares outstanding and assumed conversion – diluted	14,350,899		22,063,584		13,862,865		14,522,663
Basic net earnings (loss) per common share	$	(0.37)	$	0.21	$	(0.88)	$	0.17
Diluted net earnings (loss) per common share	$	(0.37)	$	0.17	$	(0.88)	$	0.17
(a) - Outstanding anti-dilutive securities excluded:
Unvested restricted stock awards	274,583		62,500		274,583		62,500
Stock options	800,925		298,333		800,925		298,333
Warrants to purchase common stock	18,447,564		4,664,335		18,447,564		4,664,335
Convertible preferred stock*	3,799,799		—		3,799,799		1,260,555
Warrants to purchase convertible preferred stock*	12,000		12,000		12,000		12,000

*Preferred stock and warrants to purchase convertible preferred stock are convertible into common stock on a 5.556 to 1 ratio.

Fair Value of Financial Instruments

For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amount of the Company’s short-term financial instruments approximates fair value due to the relatively short period to maturity for these instruments.

Cash and Cash Equivalents

The Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents. There were no cash equivalents as of September 30, 2022 and December 31, 2021.

Restricted Cash

On August 10, 2021, the Company entered into a Letter of Credit (“LOC”) agreement with WaFd Bank in the amount of $0.6 million. The Company signed a lease on October 5, 2021 for a new office space. The landlord of the property, University Street Properties I, LLC, is the beneficiary of the LOC. The amount of funds that cover this LOC were moved by WaFd Bank to a controlled account on August 13, 2021. (See Note 10. Letter of Credit.)

Accounts Receivable

Accounts receivables are reported at the amount the Company expects to collect from outstanding balances. The Company provides for an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information, and existing economic conditions. The Company determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management. The allowance for doubtful accounts was $0 as of September 30, 2022 and December 31, 2021.

Notes Receivable

Notes receivables are recorded at amounts due to the Company according to the contractual terms of the loan agreement. The Company's notes receivables are for the sale of real estate properties or financing the development of the properties prior to acquisition and are each secured by the underlying improved real estate properties.

The Company reviews notes receivable for impairment whenever events or circumstances indicate that the note may not be fully recoverable. Impairment is present when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. If management determines an amount to be uncollectible, impairment is measured based on the estimated uncollectible amount less the fair value of the underlying collateral. Impairment is recognized with a valuation allowance against the note receivable with a corresponding charge to bad debt expense under operating expenses. The valuation allowance was $0.8 million for notes receivable and $0.1 million for related interest receivables as of September 30, 2022. No impairment loss was recognized as of December 31, 2021. (See Note 3. Notes Receivable.)

Property and Equipment and Depreciation

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repair charges are expensed as incurred. Depreciation is computed by the straight-line method (after considering their respective estimated residual values) over the estimated useful lives:

Construction Equipment	5-10 years
Leasehold Improvements	The lesser of 10 years or the remaining life of the lease
Furniture and Fixtures	5 years
Computers	3 years
Vehicles	10 years

Real Estate Assets

Real estate assets are recorded at cost, except when real estate assets are acquired that meet the definition of a business combination in accordance with FASB ASC Topic 805, “Business Combinations,” where acquired assets are recorded at fair value. Interest, property taxes, insurance, and other incremental costs (including salaries) directly related to a project are capitalized during the construction period of major facilities and land improvements. The capitalization period begins when activities to develop the parcel commence and ends when the asset constructed is completed. The capitalized costs are recorded as part of the asset to which they relate and are expensed when the underlying asset is sold.

The Company capitalized interest from related party borrowings of $0.3 million and $0.2 million for the three months ended September 30, 2022 and 2021, respectively. The Company capitalized interest from related party borrowings of $0.9 million and $0.6 million for the nine months ended September 30, 2022 and 2021, respectively. The Company capitalized interest from third-party borrowings of $1.5 million and $0.3 million for the three months ended September 30, 2022 and 2021, respectively. The Company capitalized interest from third-party borrowings of $3.4 million and $0.8 million for the nine months ended September 30, 2022 and 2021, respectively.

A property is classified as “held for sale” when all of the following criteria for a plan of sale have been met:

(1) Management, having the authority to approve the action, commits to a plan to sell the property;

(2) The property is available for immediate sale in its present condition, subject only to terms that are usual and customary;

(3) An active program to locate a buyer and other actions required to complete the plan to sell have been initiated;

(4) The sale of the property is probable and is expected to be completed within one year of the contract date;

(5) The property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and

(6) Actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

In addition to the annual assessment of potential triggering events in accordance with FASB ASC Topic 360, the Company applies a fair value-based impairment test to the net book value of assets on an annual basis and on an interim basis if certain events or circumstances indicate that an impairment loss may have occurred.

As of September 30, 2022 and December 31, 2021, the Company did not identify any triggering events that would require further investigation under ASC 360.

Revenue and Cost Recognition

FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.

In accordance with ASC 606, revenue is recognized when a customer obtains control of the promised good or service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. The provision of ASC 606 includes a five-step process by which the Company determines revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which the Company expects to be entitled in exchange for those goods or services.

ASC 606 requires the Company to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, performance obligations are satisfied.

A detailed breakdown of the five-step process for revenue recognitions is as follows:

Homes, Developed Lots, and Entitled Land

1. Identify the contract with a customer.

The Company signs an agreement with a buyer to purchase the parcel of entitled land, developed lots that have completed infrastructure, or completed homes.

2. Identify the performance obligations in the contract.

Performance obligations of the Company include delivering entitled land, developed lots, and completed homes to the customer, which are required to meet certain specifications outlined in the contract.

3. Determine the transaction price.

The transaction price is fixed and specified in the contract. Any subsequent change orders or price changes are required to be approved by both parties.

4. Allocation of the transaction price to performance obligations in the contract.

The parcel, lots, and homes are separate performance obligations for which the specific price is in the contract.

5. Recognize revenue when (or as) the entity satisfies a performance obligation.

The Company recognizes revenue when title is transferred. The Company does not have any further material performance obligations once title is transferred.

Fee Build

1. Identify the contract with a customer.

The Company signs an agreement with a customer to construct the required infrastructure so that houses can be developed on the lots.

2. Identify the performance obligations in the contract.

Performance obligations of the Company include delivering developed lots which are required to meet certain specifications that are outlined in the contract.

3. Determine the transaction price.

The transaction price is fixed and specified in the contract. Any subsequent change orders or price changes are required to be approved by both parties.

4. Allocation of the transaction price to performance obligations in the contract.

The nature of the industry involves a number of uncertainties that can affect the current state of the contract. Variable considerations are the estimates made due to a contract modification in the contractual service. Change orders, claims, extras, or back charges are common in contractual services activity as a form of variable consideration. If there is going to be a contract modification, judgment by management will need to be made to determine if the variable consideration is enforceable. The following factors are considered in determining if the variable consideration is enforceable:

1.The customer’s written approval of the scope of the change order;

2.Current contract language that indicates clear and enforceable entitlement relating to the change order;

3.Separate documentation for the change order costs that are identifiable and reasonable; and

4.The Company’s experience in negotiating change orders, especially as it relates to the specific type of contract and change order being evaluated.

Once the Company receives a contract, it generates a budget of projected costs for the contract based on the contract price. If the scope of the contract during the contractual period needs to be modified, the Company files a change order. The Company does not continue to perform services until the change modification is agreed upon with documentation by both the Company and the customer. There are few times that claims, extras, or back charges are included in the contract.

If there are multiple performance obligations to the contract, the costs must be allocated appropriately and consistently to each performance obligation. In the Company’s experience, usually only one performance obligation is stated per contract. If there are multiple services provided for one customer, the Company has a policy of splitting out the services over multiple contracts.

5. Recognize revenue when (or as) the entity satisfies a performance obligation.

The Company uses the total costs incurred on the project relative to the total expected costs to satisfy the performance obligation. The input method involves measuring the resources consumed, labor hours expended, costs incurred, time lapsed, or machine hours used relative to the total expected inputs to the satisfaction of the performance obligation. Costs incurred prior to actual contract (i.e., design, engineering, procurement of material, etc.) should not be recognized as the Company does not have control of the good/service provided. When the estimate on a contract indicates a loss or claims against costs incurred reduce the likelihood of recoverability of such costs, the Company records the entire estimated loss in the period the loss becomes known. Project contracts typically provide for a schedule of billings or invoices to the customer based on the Company’s job to date percentage of completion of specific tasks inherent in the fulfillment of its performance obligation(s). The schedules for such billings usually do not precisely match the schedule on which costs are incurred. As a result, contract revenue recognized in the statement of operations can and usually does differ from amounts that can be billed or invoiced to the customer at any point during the contract. Amounts by which cumulative contract revenue recognized on a contract as of a given date exceed cumulative billings and unbilled receivables to the customer under the contract are reflected as a current contract asset in the Company’s balance sheet. Amounts by which cumulative billings to the customer under a contract as of a given date exceed cumulative contract revenue recognized on the contract would be reflected as a current contract liability in the Company’s balance sheet. (See Note 17. Uncompleted Contracts.)

Revenues from contracts with customers are summarized by category as follows for the three and nine months ended September 30, 2022 and 2021:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Homes	$	4,693,900	$	3,762,000	$	25,758,100	$	13,947,900
Developed Lots	—		770,000		9,080,000		7,770,000
Entitled Land	3,400,000		10,440,000		7,880,000		19,750,000
Fee Build	3,623,500		2,871,300		7,825,300		4,219,500
Multifamily	27,200		—		27,200		—
Construction Materials	3,900		167,300		45,400		329,800
Total Revenue	$	11,748,500	$	18,010,600	$	50,616,000	$	46,017,200

Disaggregation of Revenue from Contracts with Customers:

The following table disaggregates the Company’s revenue based on the type of sale or service and the timing of satisfaction of performance obligations for the three and nine months ended September 30, 2022 and 2021:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Performance obligations satisfied at a point in time	$	8,125,000	$	15,139,300	$	42,790,700	$	41,797,700
Performance obligations satisfied over time	3,623,500		2,871,300		7,825,300		4,219,500
Total Revenue	$	11,748,500	$	18,010,600	$	50,616,000	$	46,017,200

Cost of Sales

Land acquisition costs are allocated to each lot based on the size of the lot in relation to the size of the total project. Development costs and capitalized interest are allocated to lots sold based on the same criteria.

Fee build costs are charged to cost of sales as incurred. See the revenue recognition criteria above.

Costs relating to the handling of recycled construction materials and converting items into usable construction materials for resale are charged to cost of sales as incurred.

Income Taxes

Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss, credit carryforwards, and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. Management applies the criteria established under FASB ASC Topic 740, Income Taxes, to determine whether any valuation allowances are needed each year.

The Company recognizes a tax benefit for an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities based on the technical merits of the position. There are no uncertain tax positions as of September 30, 2022 and December 31, 2021.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA includes a 15% Corporate Alternative Minimum Tax (“Corporate AMT”) for tax years beginning after December 31, 2022. The Company does not expect the Corporate AMT to have a material impact on its consolidated financial statements. Additionally, the IRA imposes a 1% excise tax on net repurchases of stock by certain publicly traded corporations. The excise tax is imposed on the value of the net stock repurchased or treated as repurchased. The new law will apply to stock repurchases occurring after December 31, 2022.

Recent Accounting Pronouncements

On June 16, 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurements of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets. This update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and

other financial instruments held by financial institutions and other organizations. The underlying premise of the update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. Pursuant to ASU No. 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2022 for small reporting companies, non-SEC filers, and all other companies. The Company has not yet adopted ASU 2016-13 and will continue to evaluate any impact from this accounting standard on its notes receivables.

On March 12, 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASC 848 contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments in this update are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, for which an entity has applied certain optional expedients that are retained through the end of the hedging relationship. The Company continues to evaluate the impact of the guidance and may apply elections as applicable.

On May 3, 2021, the FASB released ASU No. 2021-04, Compensation – Earning Per Share (Topic 260), Debt - Modifications and Extinguishments (subtopic 470-50), Compensation - Stock Compensation (Topic 718), Contracts in Entity’s Own Equity (Subtopic 815-40), Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The FASB issued this update to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example warrants) that remain equity classified after modification or exchange. The standard is effective for fiscal years beginning after December 15, 2021. The Company adopted ASU 2021-04 on January 1, 2022, however the adoption did not have an impact on the Company’s Financial Statements.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is present when the sum of estimated undiscounted future cash flow expected to result from use of the assets is less than carrying value. If impairment is present, the carrying value of the impaired asset is reduced to its fair value. Fair value is determined based on discounted cash flow or appraised values, depending on the nature of the assets. As of September 30, 2022 and December 31, 2021, there were no impairment losses recognized for long-lived assets.

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CONCENTRATIONS

9 Months Ended

Sep. 30, 2022

Risks and Uncertainties [Abstract]

CONCENTRATIONS

CONCENTRATIONS

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 $12.7 million and $24.5 million as of September 30, 2022 and December 31, 2021, respectively.

Revenue Concentrations

Homes

For the three months ended September 30, 2022, three customers each represented 32%, 33%, and 34% of the home revenue, respectively. For the three months ended September 30, 2021, five customers each represented 19% of the home revenue.

There were no concentrations in relation to the homes revenue segment for the nine months ended September 30, 2022 and 2021.

Developed Lots

There were no concentrations in relation to the developed lots segment for the three months ended September 30, 2022. For the three months ended September 30, 2021, three customers each represented 38%, 38%, and 24% of the developed lots revenue, respectively.

For the nine months ended September 30, 2022, two customers represented 62% and 26%, respectively, of the developed lots revenue segment. Lennar Northwest, Inc. represented 90% of the developed lots revenue for the nine months ended September 30, 2021.

Entitled Land

For the three months ended September 30, 2022, 1031 Services, Inc. represented 100% of the entitled land revenue.

For the three months ended September 30, 2021, Lennar Northwest, Inc. represented 100% of the entitled land revenue.

Two customers represented 57% and 43% of the entitled land revenue for the nine months ended September 30, 2022. Lennar Northwest, Inc., represented 100% for the nine months ended September 30, 2021.

Fee Build

Lennar Northwest, Inc. represented 100% of fee build revenue for the three and nine months ended September 30, 2022 and 2021.

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NOTES RECEIVABLE

9 Months Ended

Sep. 30, 2022

Receivables [Abstract]

NOTES RECEIVABLE

NOTES RECEIVABLE

As of September 30, 2022, the total principal balance of notes receivable amounted to $9.8 million. These notes arose as financing by the Company for the sale of real estate properties or financing the development of the properties prior to acquisition. These notes are secured by the underlying improved real estate properties and accrue interest at annual rates ranging from 5% to 9%. All payments of principal and interest are due in full between March 30, 2023 and December 20, 2024. The outstanding balance of the notes amounted to $9.8 million and $2.0 million at September 30, 2022 and December 31, 2021, respectively. Interest income was $0.2 million and $0 for the three months ended September 30, 2022 and 2021, respectively. Interest income was $0.4 million and $0 for the nine months ended September 30, 2022 and 2021, respectively.

In March 2022, the Company entered into a promissory note with Rocklin Winding Lane 22, LLC for $4.8 million ("the note") for the sale of developed lots. In the third quarter of 2022, Rocklin Winding Lane 22, LLC defaulted on the note due to a missed interest payment on June 30, 2022. As a result, the Company issued a letter of default in August 2022 and began foreclosure proceedings on the underlying real estate asset in October 2022. Pursuant to the subordination agreement, the underlying real estate asset has a $1.0 million senior loan to a third party that is prioritized over the note. The Company has performed an impairment analysis by reviewing the difference between the carrying amount of the note and the estimated fair value of the collateralized properties and determined that the note is not fully collectible. As of September 30, 2022, the Company recorded a valuation allowance against the note and related bad debt expense within operating expenses of $0.8 million.

The details of notes receivables, net of a valuation allowance are as follows:

	September 30, 2022		December 31, 2021
Broadmoor Commons LLC	$	942,100	$	500,000
Modern Homestead LLC	1,500,000		1,500,000
Rocklin Winding Lane 22, LLC	4,032,100		—
Noffke Horizon View, LLC	3,280,000		—
Total Notes Receivable	$	9,754,200	$	2,000,000

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PROPERTY AND EQUIPMENT

9 Months Ended

Sep. 30, 2022

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

Property and equipment stated at cost, less accumulated depreciation and amortization, consisted of the following:

	September 30, 2022		December 31, 2021
Machinery and Equipment	$	10,613,100	$	10,577,600
Vehicles	104,000		71,800
Furniture and Fixtures	695,600		420,300
Leasehold Improvements	1,471,300		81,200
Total Fixed Assets	12,884,000		11,150,900
Less Accumulated Depreciation	(2,814,800)		(1,951,200)
Fixed Assets, Net	$	10,069,200	$	9,199,700

Depreciation expense was $0.4 million and $0.3 million for the three months ended September 30, 2022 and 2021, respectively.

Depreciation expense was $1.0 million and $0.8 million for the nine months ended September 30, 2022 and 2021, respectively.

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REAL ESTATE

9 Months Ended

Sep. 30, 2022

Real Estate [Abstract]

REAL ESTATE

REAL ESTATE

Real Estate consisted of the following components:

	September 30, 2022		December 31, 2021
Land Held for Development	$	47,311,900	$	73,524,400
Construction in Progress	101,894,900		43,362,700
Held for Sale	30,726,000		5,249,000
Total Real Estate	$	179,932,800	$	122,136,100

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES

9 Months Ended

Sep. 30, 2022

Payables and Accruals [Abstract]

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued liabilities consisted of the following:

	September 30, 2022		December 31, 2021
Trade Accounts Payable	$	10,853,600	$	5,558,400
Income Tax Payable	—		2,415,900
Accrued Compensation, Bonuses, and Benefits	671,900		1,071,700
Accrued Quarry Reclamation Costs	154,600		500,000
Retainage Payable	1,029,200		445,800
Other Accruals	631,000		671,000
Total Accounts Payable and Accrued Expenses	$	13,340,300	$	10,662,800

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REVOLVING LINE OF CREDIT

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

REVOLVING LINE OF CREDIT

REVOLVING LINE OF CREDITOn March 7, 2022, the Company entered into a senior secured revolving credit facility (“the credit facility”) with BankUnited, N.A. (the "Lender") for $25.0 million. The credit facility has a two year term, with a maturity date of March 7, 2024. The unpaid principal bears interest at a fluctuating rate of interest per annum equal to the daily simple secured overnight financing rate (SOFR) plus the applicable margin of 4.75%. The credit facility is used to fund the Company’s general working capital needs and interest is expensed as incurred. For the three and nine months ended September 30, 2022, the Company capitalized debt issuance costs of $0 and $1.1 million, respectively. These costs are recorded as debt discount and amortized ratably over the life of the loan. The credit facility is collateralized by all of the Company's assets wherein the Lender is granted a junior priority interest in all collateralized Company assets that Lender has previously identified as a permitted lien or other encumbrance that the Company regularly incurs through its ordinary

course of business; in all other Company assets, Lender maintains a first priority security interest. The credit facility also contains specific financial covenants. As of September 30, 2022, the Company was in compliance with these covenants except for its minimum interest coverage ratio requirement. The Company is actively engaged with the Lender to come to terms on a restructured financing arrangement, potentially including revised financial covenants for future periods. The discussions are on-going and there has been no formal revised agreement as of the date hereof. Interest expense was $0.5 million and $0 for the three months ended September 30, 2022 and 2021, respectively. Interest expense was $0.9 million and $0 for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, the revolving line of credit loan balance was $24.8 million and the unamortized debt discount balance was $0.8 million.

EQUIPMENT LOANS

Equipment loans consists of the following:

	September 30, 2022		December 31, 2021
Various notes payable to banks and financial institutions with interest rates varying from 0% to 13.89%, collateralized by equipment with monthly payments ranging from $400 to $11,600 through 2025:	$	4,296,100	$	5,268,500
Book value of collateralized equipment:	6,944,800		7,229,000

Future equipment loan maturities at September 30, 2022 are as follows:

Year Ending December 31,

2022 (three months)	$	502,600
2023	1,896,800
2024	1,673,200
2025	223,500
Total	$	4,296,100

Interest expense was $0.04 million and $0.05 million for the three months ended September 30, 2022 and 2021, respectively.

Interest expense was $0.1 million and $0.1 million for the nine months ended September 30, 2022 and 2021, respectively.

LETTER OF CREDITThe Company entered into a letter of credit agreement with WaFd Bank of $0.6 million on August 10, 2021. The letter of credit expires February 1, 2032. The interest rate of the letter of credit is Prime plus 1%. The letter of credit has been established for the purpose of collateralizing the Company’s new Tacoma office lease obligations with the landlord which is the beneficiary of the letter of credit. (See Note 1. Restricted Cash.)

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EQUIPMENT LOANS

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

EQUIPMENT LOANS

REVOLVING LINE OF CREDITOn March 7, 2022, the Company entered into a senior secured revolving credit facility (“the credit facility”) with BankUnited, N.A. (the "Lender") for $25.0 million. The credit facility has a two year term, with a maturity date of March 7, 2024. The unpaid principal bears interest at a fluctuating rate of interest per annum equal to the daily simple secured overnight financing rate (SOFR) plus the applicable margin of 4.75%. The credit facility is used to fund the Company’s general working capital needs and interest is expensed as incurred. For the three and nine months ended September 30, 2022, the Company capitalized debt issuance costs of $0 and $1.1 million, respectively. These costs are recorded as debt discount and amortized ratably over the life of the loan. The credit facility is collateralized by all of the Company's assets wherein the Lender is granted a junior priority interest in all collateralized Company assets that Lender has previously identified as a permitted lien or other encumbrance that the Company regularly incurs through its ordinary

course of business; in all other Company assets, Lender maintains a first priority security interest. The credit facility also contains specific financial covenants. As of September 30, 2022, the Company was in compliance with these covenants except for its minimum interest coverage ratio requirement. The Company is actively engaged with the Lender to come to terms on a restructured financing arrangement, potentially including revised financial covenants for future periods. The discussions are on-going and there has been no formal revised agreement as of the date hereof. Interest expense was $0.5 million and $0 for the three months ended September 30, 2022 and 2021, respectively. Interest expense was $0.9 million and $0 for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, the revolving line of credit loan balance was $24.8 million and the unamortized debt discount balance was $0.8 million.

EQUIPMENT LOANS

Equipment loans consists of the following:

	September 30, 2022		December 31, 2021
Various notes payable to banks and financial institutions with interest rates varying from 0% to 13.89%, collateralized by equipment with monthly payments ranging from $400 to $11,600 through 2025:	$	4,296,100	$	5,268,500
Book value of collateralized equipment:	6,944,800		7,229,000

Future equipment loan maturities at September 30, 2022 are as follows:

Year Ending December 31,

2022 (three months)	$	502,600
2023	1,896,800
2024	1,673,200
2025	223,500
Total	$	4,296,100

Interest expense was $0.04 million and $0.05 million for the three months ended September 30, 2022 and 2021, respectively.

Interest expense was $0.1 million and $0.1 million for the nine months ended September 30, 2022 and 2021, respectively.

LETTER OF CREDITThe Company entered into a letter of credit agreement with WaFd Bank of $0.6 million on August 10, 2021. The letter of credit expires February 1, 2032. The interest rate of the letter of credit is Prime plus 1%. The letter of credit has been established for the purpose of collateralizing the Company’s new Tacoma office lease obligations with the landlord which is the beneficiary of the letter of credit. (See Note 1. Restricted Cash.)

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CONSTRUCTION LOANS	9 Months Ended
	Sep. 30, 2022
Short-term Debt [Abstract]
CONSTRUCTION LOANS	CONSTRUCTION LOANSThe Company has various construction loans with private individuals and finance companies. The loans are collateralized by specific construction projects. Most loans are generally on one to two year terms but will be refinanced if the project is not completed within one to two years and will be due upon the completion of the project. Interest accrues on the loans and is included with the payoff of the loan. Interest ranges from 5% to 10%. Interest expense and amortization of debt discount are capitalized when incurred and expensed as cost of goods sold when the corresponding property is sold. The loan balances related to third party lenders as of September 30, 2022 and December 31, 2021 were $85.6 million and $39.4 million, respectively. The unamortized debt discounts related to these construction loans as of September 30, 2022 and December 31, 2021 were $2.4 million and $4.4 million, respectively. The book value of collateralized real estate as of September 30, 2022 and December 31, 2021 was $165.9 million and $122.1 million, respectively.NOTE PAYABLE DIRECTORS & OFFICERS INSURANCEThe Company purchased Directors & Officers (D&O) insurance on August 28, 2022 for $0.6 million. A down payment of $0.1 million was made and the remaining balance was financed over 11 months. The interest rate on the loan is 4.75%. The loan balance as of September 30, 2022 and December 31, 2021 was $0.5 million and $0.9 million, respectively.

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LETTER OF CREDIT

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

LETTER OF CREDIT

REVOLVING LINE OF CREDITOn March 7, 2022, the Company entered into a senior secured revolving credit facility (“the credit facility”) with BankUnited, N.A. (the "Lender") for $25.0 million. The credit facility has a two year term, with a maturity date of March 7, 2024. The unpaid principal bears interest at a fluctuating rate of interest per annum equal to the daily simple secured overnight financing rate (SOFR) plus the applicable margin of 4.75%. The credit facility is used to fund the Company’s general working capital needs and interest is expensed as incurred. For the three and nine months ended September 30, 2022, the Company capitalized debt issuance costs of $0 and $1.1 million, respectively. These costs are recorded as debt discount and amortized ratably over the life of the loan. The credit facility is collateralized by all of the Company's assets wherein the Lender is granted a junior priority interest in all collateralized Company assets that Lender has previously identified as a permitted lien or other encumbrance that the Company regularly incurs through its ordinary

course of business; in all other Company assets, Lender maintains a first priority security interest. The credit facility also contains specific financial covenants. As of September 30, 2022, the Company was in compliance with these covenants except for its minimum interest coverage ratio requirement. The Company is actively engaged with the Lender to come to terms on a restructured financing arrangement, potentially including revised financial covenants for future periods. The discussions are on-going and there has been no formal revised agreement as of the date hereof. Interest expense was $0.5 million and $0 for the three months ended September 30, 2022 and 2021, respectively. Interest expense was $0.9 million and $0 for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, the revolving line of credit loan balance was $24.8 million and the unamortized debt discount balance was $0.8 million.

EQUIPMENT LOANS

Equipment loans consists of the following:

	September 30, 2022		December 31, 2021
Various notes payable to banks and financial institutions with interest rates varying from 0% to 13.89%, collateralized by equipment with monthly payments ranging from $400 to $11,600 through 2025:	$	4,296,100	$	5,268,500
Book value of collateralized equipment:	6,944,800		7,229,000

Future equipment loan maturities at September 30, 2022 are as follows:

Year Ending December 31,

2022 (three months)	$	502,600
2023	1,896,800
2024	1,673,200
2025	223,500
Total	$	4,296,100

Interest expense was $0.04 million and $0.05 million for the three months ended September 30, 2022 and 2021, respectively.

Interest expense was $0.1 million and $0.1 million for the nine months ended September 30, 2022 and 2021, respectively.

LETTER OF CREDITThe Company entered into a letter of credit agreement with WaFd Bank of $0.6 million on August 10, 2021. The letter of credit expires February 1, 2032. The interest rate of the letter of credit is Prime plus 1%. The letter of credit has been established for the purpose of collateralizing the Company’s new Tacoma office lease obligations with the landlord which is the beneficiary of the letter of credit. (See Note 1. Restricted Cash.)

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NOTE PAYABLE DIRECTORS & OFFICERS INSURANCE	9 Months Ended
	Sep. 30, 2022
Debt Disclosure [Abstract]
NOTE PAYABLE DIRECTORS & OFFICERS INSURANCE	CONSTRUCTION LOANSThe Company has various construction loans with private individuals and finance companies. The loans are collateralized by specific construction projects. Most loans are generally on one to two year terms but will be refinanced if the project is not completed within one to two years and will be due upon the completion of the project. Interest accrues on the loans and is included with the payoff of the loan. Interest ranges from 5% to 10%. Interest expense and amortization of debt discount are capitalized when incurred and expensed as cost of goods sold when the corresponding property is sold. The loan balances related to third party lenders as of September 30, 2022 and December 31, 2021 were $85.6 million and $39.4 million, respectively. The unamortized debt discounts related to these construction loans as of September 30, 2022 and December 31, 2021 were $2.4 million and $4.4 million, respectively. The book value of collateralized real estate as of September 30, 2022 and December 31, 2021 was $165.9 million and $122.1 million, respectively.NOTE PAYABLE DIRECTORS & OFFICERS INSURANCEThe Company purchased Directors & Officers (D&O) insurance on August 28, 2022 for $0.6 million. A down payment of $0.1 million was made and the remaining balance was financed over 11 months. The interest rate on the loan is 4.75%. The loan balance as of September 30, 2022 and December 31, 2021 was $0.5 million and $0.9 million, respectively.

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

From time to time, the Company is subject to compliance audits by federal, state, and local authorities relating to a variety of regulations including wage and hour laws, taxes, and workers’ compensation. There are no significant or pending litigation or regulatory proceedings known at this time.

On June 15, 2020, the Company entered into a purchase and sale agreement to acquire property for the construction of 33 townhomes located in East Bremerton, Washington for $2.0 million. Closing is expected to take place in Q4 2022.

On December 2, 2021, the Company entered into a purchase and sale agreement for the acquisition of 438 acres in Blaine, Washington for $13.5 million. Closing is expected to take place in Q4 2023.

On April 21, 2022, the Company entered into a purchase and sale agreement for the purchase of 4.81 acres in Port Orchard, Washington for $2.6 million. Closing is expected to take place in Q4 2022.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2022

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

Notes Payable

The Company entered into construction loans with Sound Equity, LLC of which Robb Kenyon, a former director and minority shareholder, is a partner. These loans were originated between April 2019 and June 2021; the loans generally have a 12 to 18 month maturity, including those that have been extended. The interest rates range between 7.99% and 9.99%. As of September 30, 2022, and December 31, 2021, the outstanding loan balances were $8.9 million and $14.5 million, respectively. For the three months ended September 30, 2022 and 2021, the Company capitalized loan fees of $0.01 million and $0, respectively. For the nine months ended September 30, 2022 and 2021, the Company capitalized loan fees of $0.02 million and $0.6 million, respectively. These fees are recorded as debt discount and amortized over the life of the loan. The amortization is capitalized to real estate. As of September 30, 2022 and December 31, 2021, there were $0.01 million and $0.2 million of remaining debt discounts, respectively. The interest is capitalized to real estate as incurred. During the three months ended September 30, 2022 and 2021, the Company incurred interest of $0.3 million and $0.2 million, respectively. During the nine months ended September 30, 2022 and 2021, the Company incurred interest of $0.9 million and $0.6 million, respectively.

Robb Kenyon resigned as a director of the Company on July 8, 2021.

Due to Related Party

The Company utilizes a quarry to process waste materials from the completion of raw land into sellable/buildable lots. The materials produced by the quarry and sold by the Company to others are subject to a 25% commission payable to SGRE, LLC, which is 100% owned by the Company’s Chief Executive Officer and President. The commission expense is recorded in operating expenses. On September 30, 2022 and December 31, 2021, the commission payable was $0 and $0.01 million, respectively. The commission expense for the three months ended September 30, 2022 and 2021, was $0.01 million and $0.02 million, respectively. The commission expense for the nine months ended September 30, 2022 and 2021, was $0.04 million and $0.1 million, respectively.

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INCOME TAX	9 Months Ended
	Sep. 30, 2022
Income Tax Disclosure [Abstract]
INCOME TAX	INCOME TAXThe Company’s effective tax rate for the nine months ended September 30, 2022 was a benefit of 23.6%, compared to 0% for the nine months ended September 30, 2021. The Company calculated the effective tax rate for the nine months ended September 30, 2022 based on the actual effective tax rate for the year-to-date period compared to the estimate of the annual effective tax rate for the nine months ended September 30, 2021. The increase in the effective tax rate for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 is driven by the release of the valuation allowance at December 31, 2021 and nondeductible incentive stock options.

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STOCKHOLDERS’ EQUITY

9 Months Ended

Sep. 30, 2022

Equity [Abstract]

STOCKHOLDERS’ EQUITY

STOCKHOLDERS’ EQUITY

Common Stock

The Company is authorized to issue 50,000,000 shares of common stock, at no par value per share. At September 30, 2022, the Company has 14,352,365 shares of common stock issued and outstanding.

Each share of common stock has one vote per share for all purposes. Common stock does not provide any preemptive, subscription, or conversion rights and there are no redemption or sinking fund provisions or rights. Common stockholders are not entitled to cumulative voting for purposes of electing members to the Board of Directors.

Preferred Stock

At September 30, 2022, the Company is authorized to issue 10,000,000 shares of preferred stock, no par value per share. As of September 30, 2022, the Company has 3,799,799 shares of Series A Cumulative Convertible Preferred Stock (“Series A Preferred Shares”) issued and outstanding. The holders of the Series A Preferred Shares are entitled to receive dividends at $2.00 per share per annum which are paid monthly in arrears starting June 30, 2021. Beginning on June 9, 2024, the Company may, at its option, redeem the Series A Preferred Shares, in whole or in part, by paying $25.00 per share, plus any accrued and unpaid dividends to but not including the date of redemption. To the extent declared by the Board of Directors, dividends will be payable not later than 20 days after the end of each calendar month. Dividends on the Series A Preferred Shares will accumulate whether or not the Company has earnings, whether or not there are funds legally available for the payment of such dividends, and whether or not such dividends are declared by the Board of Directors.

Conversion at Option of Holder. Each Series A Preferred Share, together with accrued but unpaid dividends, is convertible into 5.556 shares of common stock (subject to adjustment) at any time at the option of the holder.

Dividends

Preferred Stock. The holders of the Series A Preferred Shares are entitled to receive dividends in the amount of $2.00 per share per annum, which is equivalent to 8% of the $25.00 liquidation preference per share. The Company has accrued dividends of $0.6 million as of September 30, 2022 which were paid on October 17, 2022.

Common Stock. The declaration of any future cash dividends is at the discretion of the board of directors and depends upon the Company’s earnings, if any, capital requirements and financial position, general economic conditions, and other pertinent conditions. It is the Company’s present intention not to pay any cash dividends on the Company’s common stock in the foreseeable future, but rather to reinvest earnings, if any, in business operations.

Repurchase of Equity Securities

On May 10, 2022, the Board of Directors approved a stock repurchase program authorizing the repurchase of up to $5.0 million worth of shares of common stock. The amount of the repurchase program represented approximately 15% of the outstanding shares of the Company’s common stock valued at the closing price on May 10, 2022. During the nine months ended September 30, 2022, the Company repurchased 251,934 shares of common stock under this repurchase program at an average price of $1.76 per share for a total of $0.4 million.

(A) Options

The following is a summary of the Company’s option activity:

	Options	Weighted Average Exercise Price
Outstanding – January 1, 2022	463,251	$	2.82
Exercisable – January 1, 2022	343,724	$	2.77
Granted	392,000	$	1.19
Exercised	(21,623)	$	0.40
Forfeited/Cancelled	(32,703)	$	1.90
Outstanding – September 30, 2022	800,925	$	2.05
Exercisable – September 30, 2022	383,049	$	2.76

	Options Outstanding				Options Exercisable
Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$0.40 - $6.50	800,925	8.28	$	2.05	383,049	$	2.76

During the nine months ended September 30, 2022, the Company issued 392,000 options to employees. The options have an exercise price between $1.12 and $2.09 per share, a term of ten years, and vest over one or three years. The options have an aggregated fair value of approximately $0.2 million that was calculated using the Black-Scholes option-pricing model based on the assumptions discussed above in Note 1 under Stock-Based Compensation.

During the nine months ended September 30, 2022, the Company had 21,623 options exercised by former employees. These options were exercised at $0.40 per share for a total of $0.01 million.

The Company recognized share-based compensation net of forfeitures related to options of $0.02 million and $0.1 million for the three months ended September 30, 2022 and 2021, respectively.

The Company recognized share-based compensation net of forfeitures related to options of $0.1 million and $0.2 million for the nine months ended September 30, 2022 and 2021, respectively.

On September 30, 2022, unrecognized share-based compensation was $0.3 million.

The intrinsic value for outstanding and exercisable options as of September 30, 2022 was $0.1 million and $0.1 million.

(B) Warrants

The following is a summary of the Company’s common stock warrant activity:

	Warrants	Weighted Average Exercise Price
Outstanding – January 1, 2022	18,486,859	$	3.46
Exercisable – January 1, 2022	18,486,859	$	3.46
Granted	100,000	$	3.00
Exercised	(139,295)	$	2.97
Forfeited/Cancelled	—	$	—
Outstanding – September 30, 2022	18,447,564	$	3.47
Exercisable – September 30, 2022	18,372,564	$	3.47

	Warrants Outstanding				Warrants Exercisable
Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$0.40 - $7.50	18,447,564	3.93	$	3.47	18,372,564	$	3.47

During the nine months ended September 30, 2022, the Company issued 100,000 warrants in connection with investor relation services being performed. The warrants have an exercise price of $3.00 per share, a term of five years, and vest over three years. The fair value of these warrants is $0.1 million as of September 30, 2022.

The intrinsic value for outstanding and exercisable warrants as of September 30, 2022 was $0.01 million and $0.01 million, respectively.

The following is a summary of the Company’s preferred stock warrant activity:

	Warrants	Weighted Average Exercise Price
Outstanding – January 1, 2022	12,000	$	24.97
Exercisable – January 1, 2022	12,000	$	24.97
Granted	—	$	—
Exercised	—	$	—
Forfeited/Cancelled	—	$	—
Outstanding – September 30, 2022	12,000	$	24.97
Exercisable – September 30, 2022	12,000	$	24.97

		Warrants Outstanding				Warrants Exercisable
Exercise Price		Number Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$	24.97	12,000	3.69	$	24.97	12,000	$	24.97

The intrinsic value for outstanding and exercisable preferred warrants as of September 30, 2022 was $0.

(C) Restricted Stock Plan

The following is a summary of the Company’s restricted stock activity:

	Restricted Stock	Weighted Average Fair Value
Non Vested Balance - January 1, 2022	145,000	$	2.45
Granted	231,100	$	1.96
Vested	101,517	$	2.66
Forfeited/Cancelled	—	$	—
Non Vested Balance - September 30, 2022	274,583	$	1.96

The Company periodically grants restricted stock awards to the Board of Directors and certain employees pursuant to the 2020 Plan. These typically are awarded by the Compensation Committee at one time and from time to time, to vest over one to three years, unless otherwise determined by the Compensation Committee.

The Company recognized $0.05 million and $0.1 million of share-based compensation during the three months ended September 30, 2022 and 2021, respectively.

The Company recognized $0.4 million and $0.2 million of share-based compensation during the nine months ended September 30, 2022 and 2021, respectively.

On September 30, 2022, there was $0.4 million of unrecognized compensation related to non-vested restricted stock.

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SEGMENTS

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

SEGMENTS

SEGMENTS

In accordance with FASB ASC Topic 280, Segment Reporting, an operating segment is defined as a component of an enterprise for which discrete financial information is available and reviewed regularly by the chief operating decision maker (“CODM”), or decision making group, to evaluate performance and make operating decisions.

The Company identified its CODM group as its three executive officers, the Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer. In determining the reportable segments, the CODM group considers similar economics and characteristics including product types, construction processes, customer type, regulatory environments, and underlying demand and supply.

The Company’s business is organized into five material reportable segments which aggregate 99.9% of revenue for the nine months ended September 30, 2022:

1) Homes

2) Developed lots

3) Entitled land

4) Multi-family

5) Fee Build

The reporting segments follow the same accounting policies used in the preparation of the Company’s condensed consolidated financial statements. The following represents revenue, cost of goods sold, and gross profit (loss) information for the Company’s reportable segments for the three and nine months ended September 30, 2022 and 2021:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue by segment
Homes	$	4,693,900	$	3,929,300	$	25,758,100	$	14,277,700
Developed lots	—		770,000		9,080,000		7,770,000
Entitled land	3,400,000		10,440,000		7,880,000		19,750,000
Multi-family	27,200		—		27,200		—
Fee Build	3,623,500		2,871,300		7,825,300		4,219,500
Other	3,900		—		45,400		—
	$	11,748,500	$	18,010,600	$	50,616,000	$	46,017,200
Cost of goods sold by segment
Homes	$	3,805,000	$	3,498,000	$	21,461,100	$	12,378,200
Developed lots	87,300		495,400		8,144,300		7,541,700
Entitled land	3,347,900		4,492,600		4,060,800		11,449,400
Multi-family	25,100		—		27,300		—
Fee Build	3,791,200		2,380,200		11,010,600		3,569,000
Other	254,300		—		1,351,300		—
	$	11,310,800	$	10,866,200	$	46,055,400	$	34,938,300
Gross profit (loss) by segment
Homes	$	888,900	$	431,300	$	4,297,000	$	1,899,500
Developed lots	(87,300)		274,600		935,700		228,300
Entitled land	52,100		5,947,400		3,819,200		8,300,600
Multi-family	2,100		—		(100)		—
Fee Build	(167,700)		491,100		(3,185,300)		650,500
Other	(250,400)		—		(1,305,900)		—
	$	437,700	$	7,144,400	$	4,560,600	$	11,078,900

The following represents total assets for the Company’s reportable segments at September 30, 2022 and December 31, 2021:

	September 30, 2022		December 31, 2021
Homes	$	27,009,200	$	36,615,600
Developed lots	42,983,800		8,219,500
Entitled land	9,911,500		28,157,800
Multi-family	111,291,300		47,679,400
Fee Build	5,768,500		3,325,300
Unallocated (Shared)	30,423,400		45,702,500
Total Assets	$	227,387,700	$	169,700,100

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UNCOMPLETED CONTRACTS

9 Months Ended

Sep. 30, 2022

Contractors [Abstract]

UNCOMPLETED CONTRACTS

UNCOMPLETED CONTRACTS

Costs, estimated earnings, and billings on uncompleted contracts are summarized as follows at September 30, 2022 and December 31, 2021:

	September 30, 2022		December 31, 2021
Costs incurred on uncompleted contracts	$	16,580,500	$	5,991,300
Estimated earnings (loss)	(1,944,600)		811,600
Costs and estimated earnings on uncompleted contracts	14,635,900		6,802,900
Billings to date	15,111,200		4,635,700
Costs and estimated earnings in excess of billings on uncompleted contracts	—		2,167,200
Billings in excess of costs and estimated earnings on uncompleted contracts	(475,300)		—
Provision for loss on contract	(421,400)		—
Contract Assets (Liabilities), net	$	(896,700)	$	2,167,200

At September 30, 2022, the contract liability of $0.9 million consists of a net loss of $1.9 million and provision for loss on contract of $0.4 million, partially offset by costs in excess of billings of $1.4 million. The uncollected billings as of September 30, 2022 were $5.5 million. At December 31, 2021, the contract asset of $2.2 million consisted of estimated earnings of $0.8 million and costs in excess of billings of $1.4 million. The uncollected billings as of December 31, 2021 were $1.0 million.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2022

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

On October 10, 2022, the board of directors of the Company declared a monthly cash dividend on the Company’s Series A Preferred Shares of $0.167 per share. The cash dividend is payable on November 20, 2022 to stockholders of record on October 31, 2022.

On October 20, 2022, the Company entered into a purchase and sale agreement for the sale of 56.63 acres in Punta Gorda, Florida for $7.3 million. Closing is expected to take place in Q4 2022.

On November 10, 2022, the board of directors of the Company declared a monthly cash dividend on the Company’s Series A Preferred Shares of $0.167 per share. The cash dividend is payable on December 20, 2022 to stockholders of record on November 30, 2022.

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021. The accompanying unaudited condensed consolidated financial statements include all adjustments that are of a normal recurring nature and necessary for the fair presentation of the results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for the full year.

All numbers in the financial statements are rounded to the nearest $100, except for Earnings (Loss) per Share (“EPS”) data, and numbers in the notes to the financial statements are rounded to the nearest million.

Reclassification

Reclassification

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

Use of Estimates

Use of Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used.

Stock-Based Compensation

Stock-Based Compensation

Effective November 19, 2018, the Company’s Board of Directors and stockholders approved and adopted the 2018 Incentive and Non-Statutory Stock Option Plan (the “2018 Plan”). The 2018 Plan allows the Administrator (as defined in the 2018 Plan), currently the Board of Directors, to determine the issuance of incentive stock options and non-qualified stock options to eligible employees and outside directors and consultants of the Company. The Company reserved 675,676 shares of common stock for issuance under the 2018 Plan. On June 1, 2022, the stockholders of the Company voted to approve an amendment to the 2018 Plan to increase, by 2,000,000, the authorized number of shares of common stock reserved for issuance as options under the 2018 Plan.

Effective December 3, 2020, the Company’s Board of Directors and stockholders approved and adopted the 2020 Restricted Stock Plan (the “2020 Plan”). The 2020 Plan allows the Administrator, currently the Compensation Committee to determine the issuance of restricted stock to eligible officers, directors, and key employees. The Company reserved 700,000 shares of common stock for issuance under the 2020 Plan. On June 1, 2022, the stockholders of the Company voted to approve an amendment to the 2020 Plan to increase, by 2,000,000, the authorized number of shares of common stock available for awards under the 2020 Plan.

The Company accounts for stock-based compensation in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 718, “Compensation – Stock Compensation” (“ASC 718”) which establishes financial accounting and reporting standards for stock-based employee and non-employee compensation. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument.

The Company recognizes all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date.

Options and warrants are valued using a Black-Scholes option pricing model. Grants of share-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the share-based payment. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. The Company accounts for forfeitures of stock options as they occur. When forfeitures occur, the unvested portion of the previously recognized compensation cost is reversed in the period of the forfeiture.

Stock-based compensation expenses are included in operating expenses in the condensed consolidated statement of operations.

For the nine months ended September 30, 2022 and 2021 when computing fair value of share-based payments, the Company has considered the following range of assumptions:

	September 30, 2022	September 30, 2021
Risk-free interest rate	1.73% - 3.54%	0.23% - 1.11%
Exercise price	$1.12 - $3.00	$2.76 - $5.00
Expected life of grants in years	3.93 - 6.51	2.50 - 6.50
Expected volatility of underlying stock	42.34% - 48.13%	42.63% - 56.13%
Dividends	—	—

The expected term is computed using the “simplified” method as permitted under the provisions of FASB ASC Topic 718-10-S99. The Company uses the simplified method to calculate the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The share price is the public trading price at the time of grant. Expected volatility is based on the historical stock price volatility of comparable companies’ common stock as the stock does not have sufficient historical trading activity. Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods.

Repurchase of Equity Securities

Share repurchases are recorded to common stock at the value of the cash consideration paid, as the Company's common stock has no par value. These shares are being repurchased for the purpose of constructive retirement. See Note 15. Stockholder's Equity for additional information on the share repurchase program.

Earnings (Loss) Per Share

Earnings (Loss) Per Share

EPS is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to topic 260-10-45 of the FASB ASC. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16, basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the numerator may have to adjust for any dividends and income or loss associated with potentially dilutive securities that are assumed to have resulted in the issuance of shares of common stock and the denominator may have to adjust to include the number of additional shares of common stock that would have been outstanding if the dilutive potential shares of common stock had been issued during the period to reflect the potential dilution that could occur from shares of common stock issuable through a contingent shares issuance arrangement, stock options, warrants, RSUs, or convertible preferred stock. For purposes of determining diluted earnings per common share, the treasury stock method is used for stock options, warrants, and RSUs, and the if-converted method is used for convertible preferred stock as prescribed in FASB ASC Topic 260.

The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income (loss) attributable to common stockholders per share of common stock for the three and nine months ended September 30, 2022 and 2021.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator:
Net income (loss) attributable to common stockholders	$	(5,318,500)	$	3,077,000	$	(12,134,200)	$	2,458,800
Effect of dilutive securities:	—		631,400		—		—
Diluted net income (loss)	$	(5,318,500)	$	3,708,400	$	(12,134,200)	$	2,458,800
Denominator:
Weighted average common shares outstanding - basic	14,350,899		14,898,594		13,862,865		14,350,143
Dilutive securities (a):
Restricted Stock Awards	—		—		—		288
Options	—		141,987		—		152,565
Warrants	—		19,359		—		19,667
Convertible Preferred Stock	—		7,003,644		—		—
Weighted average common shares outstanding and assumed conversion – diluted	14,350,899		22,063,584		13,862,865		14,522,663
Basic net earnings (loss) per common share	$	(0.37)	$	0.21	$	(0.88)	$	0.17
Diluted net earnings (loss) per common share	$	(0.37)	$	0.17	$	(0.88)	$	0.17
(a) - Outstanding anti-dilutive securities excluded:
Unvested restricted stock awards	274,583		62,500		274,583		62,500
Stock options	800,925		298,333		800,925		298,333
Warrants to purchase common stock	18,447,564		4,664,335		18,447,564		4,664,335
Convertible preferred stock*	3,799,799		—		3,799,799		1,260,555
Warrants to purchase convertible preferred stock*	12,000		12,000		12,000		12,000

*Preferred stock and warrants to purchase convertible preferred stock are convertible into common stock on a 5.556 to 1 ratio.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amount of the Company’s short-term financial instruments approximates fair value due to the relatively short period to maturity for these instruments.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents. There were no cash equivalents as of September 30, 2022 and December 31, 2021.

Restricted Cash

Restricted CashOn August 10, 2021, the Company entered into a Letter of Credit (“LOC”) agreement with WaFd Bank in the amount of $0.6 million. The Company signed a lease on October 5, 2021 for a new office space. The landlord of the property, University Street Properties I, LLC, is the beneficiary of the LOC. The amount of funds that cover this LOC were moved by WaFd Bank to a controlled account on August 13, 2021.

Accounts Receivable

Accounts ReceivableAccounts receivables are reported at the amount the Company expects to collect from outstanding balances. The Company provides for an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information, and existing economic conditions. The Company determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management.

Notes Receivable

Notes Receivable

Notes receivables are recorded at amounts due to the Company according to the contractual terms of the loan agreement. The Company's notes receivables are for the sale of real estate properties or financing the development of the properties prior to acquisition and are each secured by the underlying improved real estate properties.

The Company reviews notes receivable for impairment whenever events or circumstances indicate that the note may not be fully recoverable. Impairment is present when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. If management determines an amount to be uncollectible, impairment is measured based on the estimated uncollectible amount less the fair value of the underlying collateral. Impairment is recognized with a valuation allowance against the note receivable with a corresponding charge to bad debt expense under operating expenses.

Property and Equipment and Depreciation

Property and Equipment and Depreciation

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repair charges are expensed as incurred. Depreciation is computed by the straight-line method (after considering their respective estimated residual values) over the estimated useful lives:

Construction Equipment	5-10 years
Leasehold Improvements	The lesser of 10 years or the remaining life of the lease
Furniture and Fixtures	5 years
Computers	3 years
Vehicles	10 years

Real Estate Assets

Real Estate Assets

Real estate assets are recorded at cost, except when real estate assets are acquired that meet the definition of a business combination in accordance with FASB ASC Topic 805, “Business Combinations,” where acquired assets are recorded at fair value. Interest, property taxes, insurance, and other incremental costs (including salaries) directly related to a project are capitalized during the construction period of major facilities and land improvements. The capitalization period begins when activities to develop the parcel commence and ends when the asset constructed is completed. The capitalized costs are recorded as part of the asset to which they relate and are expensed when the underlying asset is sold.

The Company capitalized interest from related party borrowings of $0.3 million and $0.2 million for the three months ended September 30, 2022 and 2021, respectively. The Company capitalized interest from related party borrowings of $0.9 million and $0.6 million for the nine months ended September 30, 2022 and 2021, respectively. The Company capitalized interest from third-party borrowings of $1.5 million and $0.3 million for the three months ended September 30, 2022 and 2021, respectively. The Company capitalized interest from third-party borrowings of $3.4 million and $0.8 million for the nine months ended September 30, 2022 and 2021, respectively.

A property is classified as “held for sale” when all of the following criteria for a plan of sale have been met:

(1) Management, having the authority to approve the action, commits to a plan to sell the property;

(2) The property is available for immediate sale in its present condition, subject only to terms that are usual and customary;

(3) An active program to locate a buyer and other actions required to complete the plan to sell have been initiated;

(4) The sale of the property is probable and is expected to be completed within one year of the contract date;

(5) The property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and

(6) Actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

In addition to the annual assessment of potential triggering events in accordance with FASB ASC Topic 360, the Company applies a fair value-based impairment test to the net book value of assets on an annual basis and on an interim basis if certain events or circumstances indicate that an impairment loss may have occurred.

Revenue and Cost Recognition

Revenue and Cost Recognition

FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.

In accordance with ASC 606, revenue is recognized when a customer obtains control of the promised good or service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. The provision of ASC 606 includes a five-step process by which the Company determines revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which the Company expects to be entitled in exchange for those goods or services.

ASC 606 requires the Company to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, performance obligations are satisfied.

A detailed breakdown of the five-step process for revenue recognitions is as follows:

Homes, Developed Lots, and Entitled Land

1. Identify the contract with a customer.

The Company signs an agreement with a buyer to purchase the parcel of entitled land, developed lots that have completed infrastructure, or completed homes.

2. Identify the performance obligations in the contract.

Performance obligations of the Company include delivering entitled land, developed lots, and completed homes to the customer, which are required to meet certain specifications outlined in the contract.

3. Determine the transaction price.

The transaction price is fixed and specified in the contract. Any subsequent change orders or price changes are required to be approved by both parties.

4. Allocation of the transaction price to performance obligations in the contract.

The parcel, lots, and homes are separate performance obligations for which the specific price is in the contract.

5. Recognize revenue when (or as) the entity satisfies a performance obligation.

The Company recognizes revenue when title is transferred. The Company does not have any further material performance obligations once title is transferred.

Fee Build

1. Identify the contract with a customer.

The Company signs an agreement with a customer to construct the required infrastructure so that houses can be developed on the lots.

2. Identify the performance obligations in the contract.

Performance obligations of the Company include delivering developed lots which are required to meet certain specifications that are outlined in the contract.

3. Determine the transaction price.

The transaction price is fixed and specified in the contract. Any subsequent change orders or price changes are required to be approved by both parties.

4. Allocation of the transaction price to performance obligations in the contract.

The nature of the industry involves a number of uncertainties that can affect the current state of the contract. Variable considerations are the estimates made due to a contract modification in the contractual service. Change orders, claims, extras, or back charges are common in contractual services activity as a form of variable consideration. If there is going to be a contract modification, judgment by management will need to be made to determine if the variable consideration is enforceable. The following factors are considered in determining if the variable consideration is enforceable:

1.The customer’s written approval of the scope of the change order;

2.Current contract language that indicates clear and enforceable entitlement relating to the change order;

3.Separate documentation for the change order costs that are identifiable and reasonable; and

4.The Company’s experience in negotiating change orders, especially as it relates to the specific type of contract and change order being evaluated.

Once the Company receives a contract, it generates a budget of projected costs for the contract based on the contract price. If the scope of the contract during the contractual period needs to be modified, the Company files a change order. The Company does not continue to perform services until the change modification is agreed upon with documentation by both the Company and the customer. There are few times that claims, extras, or back charges are included in the contract.

If there are multiple performance obligations to the contract, the costs must be allocated appropriately and consistently to each performance obligation. In the Company’s experience, usually only one performance obligation is stated per contract. If there are multiple services provided for one customer, the Company has a policy of splitting out the services over multiple contracts.

5. Recognize revenue when (or as) the entity satisfies a performance obligation.

The Company uses the total costs incurred on the project relative to the total expected costs to satisfy the performance obligation. The input method involves measuring the resources consumed, labor hours expended, costs incurred, time lapsed, or machine hours used relative to the total expected inputs to the satisfaction of the performance obligation. Costs incurred prior to actual contract (i.e., design, engineering, procurement of material, etc.) should not be recognized as the Company does not have control of the good/service provided. When the estimate on a contract indicates a loss or claims against costs incurred reduce the likelihood of recoverability of such costs, the Company records the entire estimated loss in the period the loss becomes known. Project contracts typically provide for a schedule of billings or invoices to the customer based on the Company’s job to date percentage of completion of specific tasks inherent in the fulfillment of its performance obligation(s). The schedules for such billings usually do not precisely match the schedule on which costs are incurred. As a result, contract revenue recognized in the statement of operations can and usually does differ from amounts that can be billed or invoiced to the customer at any point during the contract. Amounts by which cumulative contract revenue recognized on a contract as of a given date exceed cumulative billings and unbilled receivables to the customer under the contract are reflected as a current contract asset in the Company’s balance sheet. Amounts by which cumulative billings to the customer under a contract as of a given date exceed cumulative contract revenue recognized on the contract would be reflected as a current contract liability in the Company’s balance sheet. (See Note 17. Uncompleted Contracts.)

Cost of Sales

Cost of Sales

Land acquisition costs are allocated to each lot based on the size of the lot in relation to the size of the total project. Development costs and capitalized interest are allocated to lots sold based on the same criteria.

Fee build costs are charged to cost of sales as incurred. See the revenue recognition criteria above.

Costs relating to the handling of recycled construction materials and converting items into usable construction materials for resale are charged to cost of sales as incurred.

Income Taxes

Income Taxes

Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss, credit carryforwards, and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. Management applies the criteria established under FASB ASC Topic 740, Income Taxes, to determine whether any valuation allowances are needed each year.

The Company recognizes a tax benefit for an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities based on the technical merits of the position. There are no uncertain tax positions as of September 30, 2022 and December 31, 2021.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA includes a 15% Corporate Alternative Minimum Tax (“Corporate AMT”) for tax years beginning after December 31, 2022. The Company does not expect the Corporate AMT to have a material impact on its consolidated financial statements. Additionally, the IRA imposes a 1% excise tax on net repurchases of stock by certain publicly traded corporations. The excise tax is imposed on the value of the net stock repurchased or treated as repurchased. The new law will apply to stock repurchases occurring after December 31, 2022.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

On June 16, 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurements of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets. This update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and

other financial instruments held by financial institutions and other organizations. The underlying premise of the update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. Pursuant to ASU No. 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2022 for small reporting companies, non-SEC filers, and all other companies. The Company has not yet adopted ASU 2016-13 and will continue to evaluate any impact from this accounting standard on its notes receivables.

On March 12, 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASC 848 contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments in this update are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, for which an entity has applied certain optional expedients that are retained through the end of the hedging relationship. The Company continues to evaluate the impact of the guidance and may apply elections as applicable.

On May 3, 2021, the FASB released ASU No. 2021-04, Compensation – Earning Per Share (Topic 260), Debt - Modifications and Extinguishments (subtopic 470-50), Compensation - Stock Compensation (Topic 718), Contracts in Entity’s Own Equity (Subtopic 815-40), Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The FASB issued this update to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example warrants) that remain equity classified after modification or exchange. The standard is effective for fiscal years beginning after December 15, 2021. The Company adopted ASU 2021-04 on January 1, 2022, however the adoption did not have an impact on the Company’s Financial Statements.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is present when the sum of estimated undiscounted future cash flow expected to result from use of the assets is less than carrying value. If impairment is present, the carrying value of the impaired asset is reduced to its fair value. Fair value is determined based on discounted cash flow or appraised values, depending on the nature of the assets. As of September 30, 2022 and December 31, 2021, there were no impairment losses recognized for long-lived assets.

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Statement of Subsidiaries

The condensed consolidated financial statements include the following subsidiaries of Harbor Custom Development, Inc. as of the reporting period ending dates as follow:

Names	Dates of Formation	Attributable Interest
		September 30, 2022		December 31, 2021
Saylor View Estates, LLC*	March 30, 2014	N/A		51	%
Harbor Materials, LLC**	July 5, 2018	N/A		N/A
Belfair Apartments, LLC	December 3, 2019	100	%	100	%
Pacific Ridge CMS, LLC	May 24, 2021	100	%	100	%
Tanglewilde, LLC	June 25, 2021	100	%	100	%
HCDI FL CONDO LLC	July 30, 2021	100	%	100	%
HCDI Mira, LLC	August 31, 2021	100	%	100	%
HCDI Bridgeview, LLC	October 28, 2021	100	%	100	%
HCDI Wyndstone, LLC	September 15, 2021	100	%	100	%
HCDI Semiahmoo, LLC	December 17, 2021	100	%	100	%
Mills Crossing, LLC	July 21, 2022	100	%	N/A
Broadmoor Ventures, LLC	August 24, 2022	100	%	N/A

*Saylor View Estates, LLC was voluntarily dissolved with the State of Washington as of January 20, 2022.

**Harbor Materials, LLC was voluntarily dissolved with the State of Washington as of January 29, 2021.

Schedule of Share-based Compensation Arrangements by Share-based Payment Award

For the nine months ended September 30, 2022 and 2021 when computing fair value of share-based payments, the Company has considered the following range of assumptions:

	September 30, 2022	September 30, 2021
Risk-free interest rate	1.73% - 3.54%	0.23% - 1.11%
Exercise price	$1.12 - $3.00	$2.76 - $5.00
Expected life of grants in years	3.93 - 6.51	2.50 - 6.50
Expected volatility of underlying stock	42.34% - 48.13%	42.63% - 56.13%
Dividends	—	—

Schedule of Net Income (Loss) Per Share

The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income (loss) attributable to common stockholders per share of common stock for the three and nine months ended September 30, 2022 and 2021.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator:
Net income (loss) attributable to common stockholders	$	(5,318,500)	$	3,077,000	$	(12,134,200)	$	2,458,800
Effect of dilutive securities:	—		631,400		—		—
Diluted net income (loss)	$	(5,318,500)	$	3,708,400	$	(12,134,200)	$	2,458,800
Denominator:
Weighted average common shares outstanding - basic	14,350,899		14,898,594		13,862,865		14,350,143
Dilutive securities (a):
Restricted Stock Awards	—		—		—		288
Options	—		141,987		—		152,565
Warrants	—		19,359		—		19,667
Convertible Preferred Stock	—		7,003,644		—		—
Weighted average common shares outstanding and assumed conversion – diluted	14,350,899		22,063,584		13,862,865		14,522,663
Basic net earnings (loss) per common share	$	(0.37)	$	0.21	$	(0.88)	$	0.17
Diluted net earnings (loss) per common share	$	(0.37)	$	0.17	$	(0.88)	$	0.17
(a) - Outstanding anti-dilutive securities excluded:
Unvested restricted stock awards	274,583		62,500		274,583		62,500
Stock options	800,925		298,333		800,925		298,333
Warrants to purchase common stock	18,447,564		4,664,335		18,447,564		4,664,335
Convertible preferred stock*	3,799,799		—		3,799,799		1,260,555
Warrants to purchase convertible preferred stock*	12,000		12,000		12,000		12,000

*Preferred stock and warrants to purchase convertible preferred stock are convertible into common stock on a 5.556 to 1 ratio.

Schedule of Property and Equipment Estimated Useful Lives

Depreciation is computed by the straight-line method (after considering their respective estimated residual values) over the estimated useful lives:

Construction Equipment	5-10 years
Leasehold Improvements	The lesser of 10 years or the remaining life of the lease
Furniture and Fixtures	5 years
Computers	3 years
Vehicles	10 years

Property and equipment stated at cost, less accumulated depreciation and amortization, consisted of the following:

	September 30, 2022		December 31, 2021
Machinery and Equipment	$	10,613,100	$	10,577,600
Vehicles	104,000		71,800
Furniture and Fixtures	695,600		420,300
Leasehold Improvements	1,471,300		81,200
Total Fixed Assets	12,884,000		11,150,900
Less Accumulated Depreciation	(2,814,800)		(1,951,200)
Fixed Assets, Net	$	10,069,200	$	9,199,700

Schedule of Revenue From Contracts With Customers

Revenues from contracts with customers are summarized by category as follows for the three and nine months ended September 30, 2022 and 2021:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Homes	$	4,693,900	$	3,762,000	$	25,758,100	$	13,947,900
Developed Lots	—		770,000		9,080,000		7,770,000
Entitled Land	3,400,000		10,440,000		7,880,000		19,750,000
Fee Build	3,623,500		2,871,300		7,825,300		4,219,500
Multifamily	27,200		—		27,200		—
Construction Materials	3,900		167,300		45,400		329,800
Total Revenue	$	11,748,500	$	18,010,600	$	50,616,000	$	46,017,200

The following table disaggregates the Company’s revenue based on the type of sale or service and the timing of satisfaction of performance obligations for the three and nine months ended September 30, 2022 and 2021:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Performance obligations satisfied at a point in time	$	8,125,000	$	15,139,300	$	42,790,700	$	41,797,700
Performance obligations satisfied over time	3,623,500		2,871,300		7,825,300		4,219,500
Total Revenue	$	11,748,500	$	18,010,600	$	50,616,000	$	46,017,200

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NOTES RECEIVABLE (Tables)

9 Months Ended

Sep. 30, 2022

Receivables [Abstract]

Schedule of Financing Receivable Face Amount and Interest Rate

The details of notes receivables, net of a valuation allowance are as follows:

	September 30, 2022		December 31, 2021
Broadmoor Commons LLC	$	942,100	$	500,000
Modern Homestead LLC	1,500,000		1,500,000
Rocklin Winding Lane 22, LLC	4,032,100		—
Noffke Horizon View, LLC	3,280,000		—
Total Notes Receivable	$	9,754,200	$	2,000,000

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PROPERTY AND EQUIPMENT (Tables)

9 Months Ended

Sep. 30, 2022

Property, Plant and Equipment [Abstract]

Schedule of Property, Plant and Equipment

Depreciation is computed by the straight-line method (after considering their respective estimated residual values) over the estimated useful lives:

Construction Equipment	5-10 years
Leasehold Improvements	The lesser of 10 years or the remaining life of the lease
Furniture and Fixtures	5 years
Computers	3 years
Vehicles	10 years

Property and equipment stated at cost, less accumulated depreciation and amortization, consisted of the following:

	September 30, 2022		December 31, 2021
Machinery and Equipment	$	10,613,100	$	10,577,600
Vehicles	104,000		71,800
Furniture and Fixtures	695,600		420,300
Leasehold Improvements	1,471,300		81,200
Total Fixed Assets	12,884,000		11,150,900
Less Accumulated Depreciation	(2,814,800)		(1,951,200)
Fixed Assets, Net	$	10,069,200	$	9,199,700

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REAL ESTATE (Tables)

9 Months Ended

Sep. 30, 2022

Real Estate [Abstract]

Schedule Of Real Estate Assets

Real Estate consisted of the following components:

	September 30, 2022		December 31, 2021
Land Held for Development	$	47,311,900	$	73,524,400
Construction in Progress	101,894,900		43,362,700
Held for Sale	30,726,000		5,249,000
Total Real Estate	$	179,932,800	$	122,136,100

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)

9 Months Ended

Sep. 30, 2022

Payables and Accruals [Abstract]

Schedule of Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following:

	September 30, 2022		December 31, 2021
Trade Accounts Payable	$	10,853,600	$	5,558,400
Income Tax Payable	—		2,415,900
Accrued Compensation, Bonuses, and Benefits	671,900		1,071,700
Accrued Quarry Reclamation Costs	154,600		500,000
Retainage Payable	1,029,200		445,800
Other Accruals	631,000		671,000
Total Accounts Payable and Accrued Expenses	$	13,340,300	$	10,662,800

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EQUIPMENT LOANS (Tables)

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Schedule of Equipment Loans

Equipment loans consists of the following:

	September 30, 2022		December 31, 2021
Various notes payable to banks and financial institutions with interest rates varying from 0% to 13.89%, collateralized by equipment with monthly payments ranging from $400 to $11,600 through 2025:	$	4,296,100	$	5,268,500
Book value of collateralized equipment:	6,944,800		7,229,000

Schedule of Future Equipment Loan Maturities

Future equipment loan maturities at September 30, 2022 are as follows:

Year Ending December 31,

2022 (three months)	$	502,600
2023	1,896,800
2024	1,673,200
2025	223,500
Total	$	4,296,100

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STOCKHOLDERS’ EQUITY (Tables)

9 Months Ended

Sep. 30, 2022

Equity [Abstract]

Schedule of Share-based Payment Arrangement, Option, Activity

The following is a summary of the Company’s option activity:

	Options	Weighted Average Exercise Price
Outstanding – January 1, 2022	463,251	$	2.82
Exercisable – January 1, 2022	343,724	$	2.77
Granted	392,000	$	1.19
Exercised	(21,623)	$	0.40
Forfeited/Cancelled	(32,703)	$	1.90
Outstanding – September 30, 2022	800,925	$	2.05
Exercisable – September 30, 2022	383,049	$	2.76

Schedule of Share-based Payment Arrangement, Option, Exercise Price Range

	Options Outstanding				Options Exercisable
Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$0.40 - $6.50	800,925	8.28	$	2.05	383,049	$	2.76

Schedule of Share-based Payment Arrangement, Activity

The following is a summary of the Company’s common stock warrant activity:

	Warrants	Weighted Average Exercise Price
Outstanding – January 1, 2022	18,486,859	$	3.46
Exercisable – January 1, 2022	18,486,859	$	3.46
Granted	100,000	$	3.00
Exercised	(139,295)	$	2.97
Forfeited/Cancelled	—	$	—
Outstanding – September 30, 2022	18,447,564	$	3.47
Exercisable – September 30, 2022	18,372,564	$	3.47

	Warrants Outstanding				Warrants Exercisable
Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$0.40 - $7.50	18,447,564	3.93	$	3.47	18,372,564	$	3.47

The following is a summary of the Company’s preferred stock warrant activity:

	Warrants	Weighted Average Exercise Price
Outstanding – January 1, 2022	12,000	$	24.97
Exercisable – January 1, 2022	12,000	$	24.97
Granted	—	$	—
Exercised	—	$	—
Forfeited/Cancelled	—	$	—
Outstanding – September 30, 2022	12,000	$	24.97
Exercisable – September 30, 2022	12,000	$	24.97

		Warrants Outstanding				Warrants Exercisable
Exercise Price		Number Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$	24.97	12,000	3.69	$	24.97	12,000	$	24.97

Schedule of Restricted Stock Shares Activity

The following is a summary of the Company’s restricted stock activity:

	Restricted Stock	Weighted Average Fair Value
Non Vested Balance - January 1, 2022	145,000	$	2.45
Granted	231,100	$	1.96
Vested	101,517	$	2.66
Forfeited/Cancelled	—	$	—
Non Vested Balance - September 30, 2022	274,583	$	1.96

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SEGMENTS (Tables)

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

The following represents revenue, cost of goods sold, and gross profit (loss) information for the Company’s reportable segments for the three and nine months ended September 30, 2022 and 2021:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue by segment
Homes	$	4,693,900	$	3,929,300	$	25,758,100	$	14,277,700
Developed lots	—		770,000		9,080,000		7,770,000
Entitled land	3,400,000		10,440,000		7,880,000		19,750,000
Multi-family	27,200		—		27,200		—
Fee Build	3,623,500		2,871,300		7,825,300		4,219,500
Other	3,900		—		45,400		—
	$	11,748,500	$	18,010,600	$	50,616,000	$	46,017,200
Cost of goods sold by segment
Homes	$	3,805,000	$	3,498,000	$	21,461,100	$	12,378,200
Developed lots	87,300		495,400		8,144,300		7,541,700
Entitled land	3,347,900		4,492,600		4,060,800		11,449,400
Multi-family	25,100		—		27,300		—
Fee Build	3,791,200		2,380,200		11,010,600		3,569,000
Other	254,300		—		1,351,300		—
	$	11,310,800	$	10,866,200	$	46,055,400	$	34,938,300
Gross profit (loss) by segment
Homes	$	888,900	$	431,300	$	4,297,000	$	1,899,500
Developed lots	(87,300)		274,600		935,700		228,300
Entitled land	52,100		5,947,400		3,819,200		8,300,600
Multi-family	2,100		—		(100)		—
Fee Build	(167,700)		491,100		(3,185,300)		650,500
Other	(250,400)		—		(1,305,900)		—
	$	437,700	$	7,144,400	$	4,560,600	$	11,078,900

The following represents total assets for the Company’s reportable segments at September 30, 2022 and December 31, 2021:

	September 30, 2022		December 31, 2021
Homes	$	27,009,200	$	36,615,600
Developed lots	42,983,800		8,219,500
Entitled land	9,911,500		28,157,800
Multi-family	111,291,300		47,679,400
Fee Build	5,768,500		3,325,300
Unallocated (Shared)	30,423,400		45,702,500
Total Assets	$	227,387,700	$	169,700,100

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UNCOMPLETED CONTRACTS (Tables)

9 Months Ended

Sep. 30, 2022

Contractors [Abstract]

Schedule of Contract with Customer, Contract Asset, Contract Liability, and Receivable

Costs, estimated earnings, and billings on uncompleted contracts are summarized as follows at September 30, 2022 and December 31, 2021:

	September 30, 2022		December 31, 2021
Costs incurred on uncompleted contracts	$	16,580,500	$	5,991,300
Estimated earnings (loss)	(1,944,600)		811,600
Costs and estimated earnings on uncompleted contracts	14,635,900		6,802,900
Billings to date	15,111,200		4,635,700
Costs and estimated earnings in excess of billings on uncompleted contracts	—		2,167,200
Billings in excess of costs and estimated earnings on uncompleted contracts	(475,300)		—
Provision for loss on contract	(421,400)		—
Contract Assets (Liabilities), net	$	(896,700)	$	2,167,200

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - SCHEDULE OF STATEMENT OF SUBSIDIARIES (Details)	Sep. 30, 2022	Dec. 31, 2021
Saylor View Estates, LLC
Noncontrolling Interest [Line Items]
Attributable Interest		51.00%
Belfair Apartments, LLC
Noncontrolling Interest [Line Items]
Attributable Interest	100.00%	100.00%
Pacific Ridge CMS, LLC
Noncontrolling Interest [Line Items]
Attributable Interest	100.00%	100.00%
Tanglewilde, LLC
Noncontrolling Interest [Line Items]
Attributable Interest	100.00%	100.00%
HCDI FL CONDO LLC
Noncontrolling Interest [Line Items]
Attributable Interest	100.00%	100.00%
HCDI Mira, LLC
Noncontrolling Interest [Line Items]
Attributable Interest	100.00%	100.00%
HCDI Bridgeview, LLC
Noncontrolling Interest [Line Items]
Attributable Interest	100.00%	100.00%
HCDI Wyndstone, LLC
Noncontrolling Interest [Line Items]
Attributable Interest	100.00%	100.00%
HCDI Semiahmoo, LLC
Noncontrolling Interest [Line Items]
Attributable Interest	100.00%	100.00%
Mills Crossing, LLC
Noncontrolling Interest [Line Items]
Attributable Interest	100.00%
Broadmoor Ventures, LLC
Noncontrolling Interest [Line Items]
Attributable Interest	100.00%

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - NARRATIVE (Details) - USD ($)		3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 01, 2022	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021	Jun. 30, 2022	Mar. 31, 2022	Aug. 10, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Dec. 03, 2020	Nov. 19, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stockholders' equity		$ 88,061,500	$ 63,067,900	$ 88,061,500	$ 63,067,900	$ 99,737,800	$ 93,260,900	$ 99,621,600		$ 59,805,700	$ 30,099,600	$ 6,414,700
Cash equivalents		0		0		0
Restricted cash									$ 600,000
Accounts receivable, allowance for credit loss		0		0		0
Financing receivable impairment loss		800,000		800,000		0
Interest receivable		100,000		100,000
Unrecognized tax		0		0		0
Impairment, long-lived asset				0		0
Third Party
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Interest costs capitalized		1,500,000	300,000	3,400,000	800,000
Affiliated Entity | Construction Loan | Sound Equity, LLC
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Interest costs capitalized		300,000	200,000	900,000	600,000
2018 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock for issuance of reserved shares (in shares)														675,676
Authorized number of shares of common stock (in shares)	2,000,000
2020 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock for issuance of reserved shares (in shares)													700,000
Authorized number of shares of common stock (in shares)	2,000,000
Non-Controlling Interest
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stockholders' equity		$ 0	$ (1,291,600)	$ 0	$ (1,291,600)	$ (1,291,600)	$ 0	$ 0		$ (1,291,600)	$ (1,289,300)	$ (1,289,900)

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - SCHEDULE OF FAIR VALUE ASSUMPTIONS OF SHARE-BASED PAYMENTS (Details) - $ / shares	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate, minimum	1.73%	0.23%
Risk-free interest rate, maximum	3.54%	1.11%
Expected volatility of underlying stock, minimum	42.34%	42.63%
Expected volatility of underlying stock, maximum	48.13%	56.13%
Dividends	0.00%	0.00%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price	$ 1.12	$ 2.76
Expected life of grants in years	3 years 11 months 4 days	2 years 6 months
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price	$ 3.00	$ 5.00
Expected life of grants in years	6 years 6 months 3 days	6 years 6 months

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - SCHEDULE OF NET INCOME (LOSS) PER SHARE (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2022 USD ($) $ / shares shares	Sep. 30, 2021 USD ($) $ / shares shares	Sep. 30, 2022 USD ($) $ / shares shares	Sep. 30, 2021 USD ($) $ / shares shares
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net income (loss) attributable to common stockholders | $	$ (5,318,500)	$ 3,077,000	$ (12,134,200)	$ 2,458,800
Effect of dilutive securities: | $	0	631,400	0	0
Net Income (Loss) Attributable to Common Stockholders, diluted | $	$ (5,318,500)	$ 3,708,400	$ (12,134,200)	$ 2,458,800
Weighted average common shares outstanding - basic (in shares)	14,350,899	14,898,594	13,862,865	14,350,143
Weighted average common shares outstanding and assumed conversion – diluted (in shares)	14,350,899	22,063,584	13,862,865	14,522,663
Basic net earnings (loss) per common share (in dollars per share) | $ / shares	$ (0.37)	$ 0.21	$ (0.88)	$ 0.17
Diluted net earnings (loss) per common share (in dollars per share) | $ / shares	$ (0.37)	$ 0.17	$ (0.88)	$ 0.17
Preferred stock convertible into common shares	5.556		5.556
Restricted Stock
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Dilutive securities (in shares)	0	0	0	288
Options
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Dilutive securities (in shares)	0	141,987	0	152,565
Outstanding anti-dilutive securities excluded (in shares)	800,925	298,333	800,925	298,333
Warrants
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Dilutive securities (in shares)	0	19,359	0	19,667
Convertible Preferred Stock
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Dilutive securities (in shares)	0	7,003,644	0	0
Outstanding anti-dilutive securities excluded (in shares)	3,799,799	0	3,799,799	1,260,555
Unvested restricted stock awards
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Outstanding anti-dilutive securities excluded (in shares)	274,583	62,500	274,583	62,500
Warrants to purchase common stock
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Outstanding anti-dilutive securities excluded (in shares)	18,447,564	4,664,335	18,447,564	4,664,335
Warrants to purchase convertible preferred stock
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Outstanding anti-dilutive securities excluded (in shares)	12,000	12,000	12,000	12,000

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - SCHEDULE OF PROPERTY AND EQUIPMENT ESTIMATED USEFUL LIVES (Details)	9 Months Ended
	Sep. 30, 2022
Construction Equipment | Minimum
Property, Plant and Equipment [Line Items]
Useful life	5 years
Construction Equipment | Maximum
Property, Plant and Equipment [Line Items]
Useful life	10 years
Leasehold Improvements
Property, Plant and Equipment [Line Items]
Useful life	10 years
Furniture and Fixtures
Property, Plant and Equipment [Line Items]
Useful life	5 years
Computers
Property, Plant and Equipment [Line Items]
Useful life	3 years
Vehicles
Property, Plant and Equipment [Line Items]
Useful life	10 years

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - DISAGGREGATION OF REVENUE FROM CONTRACTS WITH CUSTOMERS (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disaggregation of Revenue [Line Items]
Total Revenue	$ 11,748,500	$ 18,010,600	$ 50,616,000	$ 46,017,200
Performance obligations satisfied at a point in time
Disaggregation of Revenue [Line Items]
Total Revenue	8,125,000	15,139,300	42,790,700	41,797,700
Performance obligations satisfied over time
Disaggregation of Revenue [Line Items]
Total Revenue	3,623,500	2,871,300	7,825,300	4,219,500
Homes
Disaggregation of Revenue [Line Items]
Total Revenue	4,693,900	3,762,000	25,758,100	13,947,900
Developed Lots
Disaggregation of Revenue [Line Items]
Total Revenue	0	770,000	9,080,000	7,770,000
Entitled land
Disaggregation of Revenue [Line Items]
Total Revenue	3,400,000	10,440,000	7,880,000	19,750,000
Fee Build
Disaggregation of Revenue [Line Items]
Total Revenue	3,623,500	2,871,300	7,825,300	4,219,500
Multifamily
Disaggregation of Revenue [Line Items]
Total Revenue	27,200	0	27,200	0
Construction Materials
Disaggregation of Revenue [Line Items]
Total Revenue	$ 3,900	$ 167,300	$ 45,400	$ 329,800

XML

CONCENTRATIONS (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Risks and Uncertainties [Abstract]
Cash, uninsured amount	$ 12.7		$ 12.7		$ 24.5
Customer Concentration Risk | Revenue from Contract with Customer Benchmark | Customer One | Homes
Concentration Risk [Line Items]
Concentration risk (in percent)	32.00%	19.00%
Customer Concentration Risk | Revenue from Contract with Customer Benchmark | Customer One | Developed Lots
Concentration Risk [Line Items]
Concentration risk (in percent)		38.00%	62.00%
Customer Concentration Risk | Revenue from Contract with Customer Benchmark | Customer One | Entitled land
Concentration Risk [Line Items]
Concentration risk (in percent)			57.00%
Customer Concentration Risk | Revenue from Contract with Customer Benchmark | Customer Two | Homes
Concentration Risk [Line Items]
Concentration risk (in percent)	33.00%	19.00%
Customer Concentration Risk | Revenue from Contract with Customer Benchmark | Customer Two | Developed Lots
Concentration Risk [Line Items]
Concentration risk (in percent)		38.00%	26.00%
Customer Concentration Risk | Revenue from Contract with Customer Benchmark | Customer Two | Entitled land
Concentration Risk [Line Items]
Concentration risk (in percent)			43.00%
Customer Concentration Risk | Revenue from Contract with Customer Benchmark | Customer Three | Homes
Concentration Risk [Line Items]
Concentration risk (in percent)	34.00%	19.00%
Customer Concentration Risk | Revenue from Contract with Customer Benchmark | Customer Three | Developed Lots
Concentration Risk [Line Items]
Concentration risk (in percent)		24.00%
Customer Concentration Risk | Revenue from Contract with Customer Benchmark | Customer Four | Homes
Concentration Risk [Line Items]
Concentration risk (in percent)		19.00%
Customer Concentration Risk | Revenue from Contract with Customer Benchmark | Customer Five | Homes
Concentration Risk [Line Items]
Concentration risk (in percent)		19.00%
Customer Concentration Risk | Revenue from Contract with Customer Benchmark | Lennar Northwest Inc | Developed Lots
Concentration Risk [Line Items]
Concentration risk (in percent)				90.00%
Customer Concentration Risk | Revenue from Contract with Customer Benchmark | Lennar Northwest Inc | Entitled land
Concentration Risk [Line Items]
Concentration risk (in percent)		100.00%		100.00%
Customer Concentration Risk | Revenue from Contract with Customer Benchmark | Lennar Northwest Inc | Fee Build
Concentration Risk [Line Items]
Concentration risk (in percent)	100.00%	100.00%	100.00%	100.00%
Customer Concentration Risk | Revenue from Contract with Customer Benchmark | Services Inc | Entitled land
Concentration Risk [Line Items]
Concentration risk (in percent)	100.00%

XML

NOTES RECEIVABLE - NARRATIVE (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Mar. 31, 2022	Dec. 31, 2021
Loans and Leases Receivable Disclosure [Line Items]
Financing receivable, face amount	$ 9,800,000		$ 9,800,000
Financing receivable outstanding	9,754,200		9,754,200			$ 2,000,000
Interest income	200,000	$ 0	400,000	$ 0
Financing receivable impairment loss	800,000		800,000			$ 0
Rocklin Winding Lane
Loans and Leases Receivable Disclosure [Line Items]
Financing receivable, face amount					$ 4,800,000
Financing receivable impairment loss	800,000		$ 800,000
Minimum
Loans and Leases Receivable Disclosure [Line Items]
Financing receivable, interest rate			5.00%
Maximum
Loans and Leases Receivable Disclosure [Line Items]
Financing receivable, interest rate			9.00%
Rocklin Winding Lane | Loans Payable
Loans and Leases Receivable Disclosure [Line Items]
Long-term debt	$ 1,000,000		$ 1,000,000

XML

NOTES RECEIVABLE - FACE AMOUNT AND INTEREST RATE (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Loans and Leases Receivable Disclosure [Line Items]
Total Notes Receivable	$ 9,754,200	$ 2,000,000
Broadmoor Commons LLC
Loans and Leases Receivable Disclosure [Line Items]
Total Notes Receivable	942,100	500,000
Modern Homestead LLC
Loans and Leases Receivable Disclosure [Line Items]
Total Notes Receivable	1,500,000	1,500,000
Rocklin Winding Lane 22, LLC
Loans and Leases Receivable Disclosure [Line Items]
Total Notes Receivable	4,032,100	0
Noffke Horizon View, LLC
Loans and Leases Receivable Disclosure [Line Items]
Total Notes Receivable	$ 3,280,000	$ 0

XML

PROPERTY AND EQUIPMENT - SCHEDULE OF PROPERTY AND EQUIPMENT (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Property, Plant and Equipment [Line Items]
Total Fixed Assets	$ 12,884,000	$ 11,150,900
Less Accumulated Depreciation	(2,814,800)	(1,951,200)
Fixed Assets, Net	10,069,200	9,199,700
Machinery and Equipment
Property, Plant and Equipment [Line Items]
Total Fixed Assets	10,613,100	10,577,600
Vehicles
Property, Plant and Equipment [Line Items]
Total Fixed Assets	104,000	71,800
Furniture and Fixtures
Property, Plant and Equipment [Line Items]
Total Fixed Assets	695,600	420,300
Leasehold Improvements
Property, Plant and Equipment [Line Items]
Total Fixed Assets	$ 1,471,300	$ 81,200

XML

PROPERTY AND EQUIPMENT - NARRATIVE (Details ) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 400,000	$ 300,000	$ 1,022,200	$ 783,500

XML

REAL ESTATE (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Real Estate [Abstract]
Land Held for Development	$ 47,311,900	$ 73,524,400
Construction in Progress	101,894,900	43,362,700
Held for Sale	30,726,000	5,249,000
Total Real Estate	$ 179,932,800	$ 122,136,100

XML

ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Payables and Accruals [Abstract]
Trade Accounts Payable	$ 10,853,600	$ 5,558,400
Income Tax Payable	0	2,415,900
Accrued Compensation, Bonuses, and Benefits	671,900	1,071,700
Accrued Quarry Reclamation Costs	154,600	500,000
Retainage Payable	1,029,200	445,800
Other Accruals	631,000	671,000
Total Accounts Payable and Accrued Expenses	$ 13,340,300	$ 10,662,800

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REVOLVING LINE OF CREDIT (Details) - USD ($)		3 Months Ended		9 Months Ended
	Mar. 07, 2022	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Line of Credit Facility [Line Items]
Long-term line of credit		$ 24,011,400		$ 24,011,400		$ 0
Revolving line of credit loan, net of debt discount		800,000		800,000		$ 0
Revolving Credit Facility | Line of Credit
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity	$ 25,000,000
Debt instrument, term (in years)	2 years
Capitalized debt issuance costs		0		1,100,000
Incurred interest expense		500,000	$ 0	900,000	$ 0
Long-term line of credit		$ 24,800,000		$ 24,800,000
Revolving Credit Facility | Line of Credit | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate
Line of Credit Facility [Line Items]
Basis spread on variable rate	4.75%

XML

EQUIPMENT LOANS - SCHEDULE OF EQUIPMENT LOANS (Details) - Notes Payable to Banks - USD ($)	9 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Various notes payable to banks and financial institutions with interest rates varying from 0% to 13.89%, collateralized by equipment with monthly payments ranging from $400 to $11,600 through 2025:	$ 4,296,100	$ 5,268,500
Book value of collateralized equipment:	$ 6,944,800	$ 7,229,000
Minimum
Debt Instrument [Line Items]
Debt instrument, interest rate (in percent)	0.00%
Debt instrument, periodic payment	$ 400
Maximum
Debt Instrument [Line Items]
Debt instrument, interest rate (in percent)	13.89%
Debt instrument, periodic payment	$ 11,600

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EQUIPMENT LOANS - SCHEDULE OF FUTURE EQUIPMENT LOAN MATURITIES (Details) - Notes Payable to Banks - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Debt Instrument [Line Items]
2022 (three months)	$ 502,600		$ 502,600
2023	1,896,800		1,896,800
2024	1,673,200		1,673,200
2025	223,500		223,500
Total	4,296,100		4,296,100		$ 5,268,500
Incurred interest expense	$ 40,000.00	$ 50,000.00	$ 100,000	$ 100,000

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CONSTRUCTION LOANS (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Short-term Debt [Line Items]
Debt discount	$ 2.4	$ 4.4
Construction Loan Payable
Short-term Debt [Line Items]
Short-term debt	85.6	39.4
Book value of collateralized equipment:	$ 165.9	$ 122.1
Construction Loan Payable | Minimum
Short-term Debt [Line Items]
Debt instrument, term (in years)	1 year
Debt instrument, interest rate (in percent)	5.00%
Construction Loan Payable | Maximum
Short-term Debt [Line Items]
Debt instrument, term (in years)	2 years
Debt instrument, interest rate (in percent)	10.00%

XML

LETTER OF CREDIT (Details) - Line of Credit - Letter of Credit	Aug. 10, 2021 USD ($)
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity	$ 600,000
Prime Rate
Line of Credit Facility [Line Items]
Basis spread on variable rate	1.00%

XML

NOTE PAYABLE DIRECTORS & OFFICERS INSURANCE (Details) - USD ($)	Aug. 28, 2022	Sep. 30, 2022	Dec. 31, 2021
Short-term Debt [Line Items]
Notes payable		$ 537,500	$ 903,800
Notes Payable, Other Payables
Short-term Debt [Line Items]
D&O insurance, face vale	$ 600,000
D&O insurance expense	$ 100,000
Debt instrument, term (in years)	11 months
Debt interest rate	4.75%

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COMMITMENTS AND CONTINGENCIES (Details) - Purchase and Sale Agreement - Forecast $ in Millions	3 Months Ended
	Dec. 31, 2022 USD ($) a home	Dec. 31, 2023 USD ($) a
East Bremerton, Washington
Other Commitments [Line Items]
Number of town homes | home	33
Other commitment	$ 2.0
Blaine, Washington
Other Commitments [Line Items]
Other commitment		$ 13.5
Area of land | a		438
Port Orchard, Washington
Other Commitments [Line Items]
Other commitment	$ 2.6
Area of land | a	4.81

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RELATED PARTY TRANSACTIONS (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Related Party Transaction [Line Items]
Due to related parties	$ 8,926,100		$ 8,926,100		$ 13,426,600
Affiliated Entity | Construction Loan | Sound Equity, LLC
Related Party Transaction [Line Items]
Due to related parties	8,900,000		8,900,000		14,500,000
Expenses from transactions with related party	10,000.00	$ 0	20,000.00	$ 600,000
Remaining debt discount	10,000.00		10,000.00		200,000
Interest costs capitalized	300,000	200,000	$ 900,000	600,000
Affiliated Entity | Construction Loan | Sound Equity, LLC | Minimum
Related Party Transaction [Line Items]
Payment terms			12 months
Related party transaction, interest rate			7.99%
Affiliated Entity | Construction Loan | Sound Equity, LLC | Maximum
Related Party Transaction [Line Items]
Payment terms			18 months
Related party transaction, interest rate			9.99%
Management | Due To SGRE, LLC
Related Party Transaction [Line Items]
Due to related parties	0		$ 0		$ 10,000.00
Expenses from transactions with related party	$ 10,000.00	$ 20,000.00	$ 40,000.00	$ 100,000
Percentage of commission payable	25.00%		25.00%
Management | Due To SGRE, LLC | SGRE, LLC
Related Party Transaction [Line Items]
Related party, ownership percentage	100.00%		100.00%

XML

INCOME TAX (Details)	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Income Tax Disclosure [Abstract]
Effective tax rate	23.60%	0.00%

XML

STOCKHOLDERS’ EQUITY - NARRATIVE (Details)	3 Months Ended	9 Months Ended	12 Months Ended
	Jun. 30, 2022 USD ($)	Sep. 30, 2022 USD ($) vote $ / shares shares	Dec. 31, 2021 USD ($) $ / shares shares	May 10, 2022 USD ($)
Class of Stock [Line Items]
Common stock, shares authorized (in shares)		50,000,000	50,000,000
Common stock, par value (in dollars per share) | $ / shares		$ 0
Common stock, shares, issued (in shares)		14,352,365	13,155,342
Common stock outstanding (in shares)		14,352,365	13,155,342
Common stock, voting rights | vote		1
Preferred stock, shares authorized (in shares)		10,000,000	10,000,000
Preferred stock, shares issued (in shares)		3,799,799	4,016,955
Preferred stock, shares outstanding (in shares)		3,799,799	4,016,955
Preferred stock accrued dividend | $		$ 634,700	$ 670,900
Share Repurchase | $	$ 437,700
Maximum
Class of Stock [Line Items]
Preferred stock, dividend terms		20 days
Series A Preferred Stock
Class of Stock [Line Items]
Preferred stock, shares issued (in shares)		3,799,799
Preferred stock, shares outstanding (in shares)		3,799,799
Preferred stock, dividend rate (in dollars per share) | $ / shares			$ 2.00
Preferred stock, dividend rate, percentage		8.00%
Preferred stock, liquidation preference per share (in dollars per share) | $ / shares		$ 25.00
Preferred Stock, convertible, shares issuable (in shares)		5.556
Common Stock
Class of Stock [Line Items]
Stock repurchase program, authorized amount | $				$ 5,000,000
Stock repurchase program, amount of shares authorized to be repurchased, percentage				15.00%
Share Repurchase (in shares)		251,934
Average price (in dollars per share) | $ / shares		$ 1.76
Share Repurchase | $		$ 400,000

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STOCKHOLDERS’ EQUITY - SCHEDULE OF STOCK OPTIONS ACTIVITY (Details) - $ / shares	9 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Options
Outstanding, beginning balance (in shares)	463,251
Granted (in shares)	392,000
Exercised (in shares)	(21,623)
Forfeited/Cancelled (in shares)	(32,703)
Outstanding, ending balance (in shares)	800,925
Exercisable (in shares)	383,049	343,724
Weighted Average Exercise Price
Outstanding, beginning balance (in dollars per share)	$ 2.82
Granted (in dollars per share)	1.19
Exercised (in dollars per share)	0.40
Forfeited/Cancelled (in dollars per share)	1.90
Outstanding, ending balance (in dollars per share)	2.05
Exercisable (in dollars per share)	$ 2.76	$ 2.77

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STOCKHOLDERS’ EQUITY - SCHEDULE OF STOCK OPTIONS OUTSTANDING AND EXERCISABLE (Details)	9 Months Ended
	Sep. 30, 2022 $ / shares shares
Equity [Abstract]
Exercise price range, lower range limit (in dollars per share)	$ 0.40
Exercise price range, upper range limit (in dollars per share)	$ 6.50
Number of option outstanding (in shares) | shares	800,925
Weighted average remaining contractual life (in years)	8 years 3 months 10 days
Weighted average exercise price (in dollars per share)	$ 2.05
Number of option exercisable (in shares) | shares	383,049
Options exercisable, weighted average exercise price (in dollars per share)	$ 2.76

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STOCKHOLDERS’ EQUITY - OPTIONS NARRATIVE (Details) - USD ($)	3 Months Ended				9 Months Ended
	Sep. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Mar. 31, 2021	Sep. 30, 2022	Sep. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)					392,000
Granted (in dollars per share)					$ 1.19
Share-based compensation arrangement by share-based payment award, options, granted in period, fair value					$ 200,000
Exercise of stock options (in shares)					21,623
Exercised (in dollars per share)					$ 0.40
Exercise of Stock Options		$ 8,600		$ 18,000	$ 10,000.00
Option, cost not yet recognized, amount	$ 300,000				300,000
Share-based compensation arrangement by share-based payment award, options, outstanding, intrinsic value	100,000				100,000
Share-based compensation arrangement by share-based payment award, options, exercisable, intrinsic value	100,000				$ 100,000
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in dollars per share)					$ 1.12
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in dollars per share)					$ 2.09
Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)					392,000
Expiration period (in years)					10 years
Share-based payment arrangement, expense	$ 20,000.00		$ 100,000		$ 100,000	$ 200,000
Options | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, award vesting period					1 year
Options | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, award vesting period					3 years

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STOCKHOLDERS’ EQUITY - SCHEDULE OF WARRANTS ACTIVITY (Details) - $ / shares	9 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Common Stock Warrant
Warrants
Outstanding, beginning balance (in shares)	18,486,859
Granted (in shares)	100,000
Exercised (in shares)	(139,295)
Forfeited/Cancelled (in shares)	0
Outstanding, ending balance (in shares)	18,447,564
Exercisable (in shares)	18,372,564	18,486,859
Weighted Average Fair Value
Outstanding, beginning balance (in dollars per share)	$ 3.46
Granted (in dollars per share)	3.00
Exercised (in dollars per share)	2.97
Forfeited/Cancelled (in dollars per share)	0
Outstanding, ending balance (in dollars per share)	3.47
Exercisable (in dollars per share)	$ 3.47	$ 3.46
Preferred Stock Warrant
Warrants
Outstanding, beginning balance (in shares)	12,000
Granted (in shares)	0
Exercised (in shares)	0
Forfeited/Cancelled (in shares)	0
Outstanding, ending balance (in shares)	12,000
Exercisable (in shares)	12,000	12,000
Weighted Average Fair Value
Outstanding, beginning balance (in dollars per share)	$ 24.97
Granted (in dollars per share)	0
Exercised (in dollars per share)	0
Forfeited/Cancelled (in dollars per share)	0
Outstanding, ending balance (in dollars per share)	24.97
Exercisable (in dollars per share)	$ 24.97	$ 24.97

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STOCKHOLDERS’ EQUITY - SCHEDULE OF WARRANTS OUTSTANDING AND EXERCISABLE (Details)	9 Months Ended
	Sep. 30, 2022 $ / shares shares
Common Stock Warrant
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price range, lower range limit (in dollars per share)	$ 0.40
Exercise price range, upper range limit (in dollars per share)	$ 7.50
Outstanding (in shares) | shares	18,447,564
Weighted average remaining contractual term, outstanding	3 years 11 months 4 days
Weighted average exercise price, outstanding (in dollars per share)	$ 3.47
Exercisable (in shares) | shares	18,372,564
Exercisable, weighted average exercise price (in dollars per share)	$ 3.47
Preferred Stock Warrant
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price range, upper range limit (in dollars per share)	$ 24.97
Outstanding (in shares) | shares	12,000
Weighted average remaining contractual term, outstanding	3 years 8 months 8 days
Weighted average exercise price, outstanding (in dollars per share)	$ 24.97
Exercisable (in shares) | shares	12,000
Exercisable, weighted average exercise price (in dollars per share)	$ 24.97

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STOCKHOLDERS’ EQUITY - WARRANTS NARRATIVE (Details)	9 Months Ended
	Sep. 30, 2022 USD ($) $ / shares shares
Common Stock Warrant
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Class of warrant or right, outstanding (in shares) | shares	100,000
Class of warrant or right, exercise price of warrants or rights (in dollars per share) | $ / shares	$ 3.00
Warrants and rights outstanding, term	5 years
Warrants and rights outstanding, vesting term	3 years
Warrants and rights outstanding	$ 100,000
Common Stock Warrant
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate intrinsic value, outstanding	10,000.00
Aggregate intrinsic value, exercisable	10,000.00
Preferred Stock Warrant
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate intrinsic value, outstanding	0
Aggregate intrinsic value, exercisable	$ 0

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STOCKHOLDERS’ EQUITY - SCHEDULE OF RESTRICTED STOCK UNIT ACTIVITY (Details) - Restricted Stock	9 Months Ended
	Sep. 30, 2022 $ / shares shares
Restricted Stock
Outstanding, beginning balance (in shares) | shares	145,000
Granted (in shares) | shares	231,100
Vested (in shares) | shares	101,517
Forfeited/Cancelled (in shares) | shares	0
Outstanding, ending balance (in shares) | shares	274,583
Weighted Average Fair Value
Outstanding, beginning balance (in dollars per share) | $ / shares	$ 2.45
Granted (in dollars per share) | $ / shares	1.96
Vested (in dollars per share) | $ / shares	2.66
Forfeited/Cancelled (in dollars per share) | $ / shares	0
Outstanding, ending balance (in dollars per share) | $ / shares	$ 1.96

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STOCKHOLDERS’ EQUITY - RESTRICTED STOCK PLAN NARRATIVE (Details) - Restricted Stock - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based payment arrangement, expense	$ 50	$ 100	$ 400	$ 200
Share-based payment arrangement, nonvested award, cost not yet recognized, amount	$ 400		$ 400
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, award vesting period			1 year
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, award vesting period			3 years

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SEGMENTS - SCHEDULE OF COMPANY’S REPORTABLE SEGMENT (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($) officer segment	Sep. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)
Segment Reporting [Abstract]
Number of executive officers | officer			3
Number of reportable segments | segment			5
Segment Reporting Information [Line Items]
Total Revenue	$ 11,748,500	$ 18,010,600	$ 50,616,000	$ 46,017,200
Cost of goods sold by segment	11,310,800	10,866,200	46,055,400	34,938,300
Gross profit (loss) by segment	437,700	7,144,400	4,560,600	11,078,900
TOTAL ASSETS	227,387,700		227,387,700		$ 169,700,100
Homes
Segment Reporting Information [Line Items]
Total Revenue	4,693,900	3,929,300	25,758,100	14,277,700
Cost of goods sold by segment	3,805,000	3,498,000	21,461,100	12,378,200
Gross profit (loss) by segment	888,900	431,300	4,297,000	1,899,500
TOTAL ASSETS	27,009,200		27,009,200		36,615,600
Developed lots
Segment Reporting Information [Line Items]
Total Revenue	0	770,000	9,080,000	7,770,000
Cost of goods sold by segment	87,300	495,400	8,144,300	7,541,700
Gross profit (loss) by segment	(87,300)	274,600	935,700	228,300
TOTAL ASSETS	42,983,800		42,983,800		8,219,500
Entitled land
Segment Reporting Information [Line Items]
Total Revenue	3,400,000	10,440,000	7,880,000	19,750,000
Cost of goods sold by segment	3,347,900	4,492,600	4,060,800	11,449,400
Gross profit (loss) by segment	52,100	5,947,400	3,819,200	8,300,600
TOTAL ASSETS	9,911,500		9,911,500		28,157,800
Multi-family
Segment Reporting Information [Line Items]
Total Revenue	27,200	0	27,200	0
Cost of goods sold by segment	25,100	0	27,300	0
Gross profit (loss) by segment	2,100	0	(100)	0
TOTAL ASSETS	111,291,300		111,291,300		47,679,400
Fee Build
Segment Reporting Information [Line Items]
Total Revenue	3,623,500	2,871,300	7,825,300	4,219,500
Cost of goods sold by segment	3,791,200	2,380,200	11,010,600	3,569,000
Gross profit (loss) by segment	(167,700)	491,100	(3,185,300)	650,500
TOTAL ASSETS	5,768,500		5,768,500		3,325,300
Other
Segment Reporting Information [Line Items]
Total Revenue	3,900	0	45,400	0
Cost of goods sold by segment	254,300	0	1,351,300	0
Gross profit (loss) by segment	(250,400)	$ 0	(1,305,900)	$ 0
Unallocated (Shared)
Segment Reporting Information [Line Items]
TOTAL ASSETS	$ 30,423,400		$ 30,423,400		$ 45,702,500

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UNCOMPLETED CONTRACTS - SUMMARY OF COST, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Contractors [Abstract]
Costs incurred on uncompleted contracts	$ 16,580,500	$ 5,991,300
Estimated earnings (loss)	(1,944,600)	811,600
Costs and estimated earnings on uncompleted contracts	14,635,900	6,802,900
Billings to date	15,111,200	4,635,700
Costs and estimated earnings in excess of billings on uncompleted contracts	0	2,167,200
Billings in excess of costs and estimated earnings on uncompleted contracts	(475,300)	0
Provision for loss on contract	(421,400)	0
Contract Assets, net	0	2,167,200
Contract (Liabilities) net	$ (896,700)	$ 0

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UNCOMPLETED CONTRACTS - NARRATIVE (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Contractors [Abstract]
Contract liabilities	$ 896,700	$ 0
Estimated earnings (loss)	(1,944,600)	811,600
Provision for loss on contract	421,400	0
Uncollected billings	5,500,000	1,000,000
Contract assets, net	0	2,167,200
Costs in excess of billings	$ 1,400,000	$ 1,400,000

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SUBSEQUENT EVENTS (Details) $ / shares in Units, $ in Millions	Nov. 10, 2022 $ / shares	Oct. 10, 2022 $ / shares	Dec. 31, 2022 USD ($) a
Punta Gorda, Florida | Purchase and Sale Agreement | Forecast
Subsequent Event [Line Items]
Area of land | a			56.63
Other commitment | $			$ 7.3
Series A Cumulative Convertible Preferred Stock | Subsequent Event
Subsequent Event [Line Items]
Dividends per share, declared (in dollars per share) | $ / shares	$ 0.167	$ 0.167