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CORRESP
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filename1.htm

    ATTORNEYS
    AT LAW

        March
        31, 2020

        VIA
        EDGAR

        Securities
        and Exchange Commission

        Division
        of Corporation Finance

        Office
        of Real Estate & Construction

        Washington,
        D.C. 20549

        Attention:
        Ruari Regan

    Michael
                                         J. FitzGerald*

        Eoin
        L. Kreditor*

        Eric
        P. Francisconi

        Lynne
        Bolduc

        George
        Vausher, LLM, CPA‡

        Eric
        D. Dean

        John
        C. Clough

        David
        M. Lawrence

        Natalie
        N. FitzGerald

        Jodi
        M. Wirth

        Brook
        John Changala

        Josephine
        Rachelle Aranda

        John
        M. Marston†

        Deborah
        M. Rosenthal†

        Maria
        M. Rullo†

        Larry
        S. Zeman†

    Re:
    Harbor
    Custom Development, Inc.

    Draft
    Registration Statement on Form S-1

    Submitted
    January 27, 2020

    CIK
    No. 0001784567

Dear Mr.
Regan:

We
have received your comment letter dated February 21, 2020 (the “Comment Letter”) regarding the Draft Registration
Statement on Form S-1 filed on January 27, 2020 (the “Registration Statement”) on behalf of Harbor Custom
Development, Inc. (the “Company”). We have prepared the following responses describing the general action(s)
taken in the Registration Statement on Form S-1 (the “Amendment”) regarding each comment in the Comment Letter.
The following numbers are coordinated to the comment numbers in the Comment Letter.

Summary
Financial Data

Other
Financial Data, page 6

1.
Staff Comment: We note your discussion of EBITDA margin and adjusted EBITDA margin, which appear to be non-GAAP presentations.
Please explain to us what these measures represent, how they are calculated and how your disclosure provides all of the information
required by Item 10(e) of Regulation S-K. Additionally, please revise to reflect the measures consistently throughout the document.

Response:
We have restated our financial statements for the year ended December 31, 2018, and have included in this Amendment our financial
statements for the year ended December 31, 2019. All references to adjusted EBITDA have been removed.

Capitalization,
page 42

2.
Staff Comment: Please revise your disclosure to clarify that the amounts shown in the capitalization
table are presented in thousands of dollars.

Response:
                                         The table has been revised to state that it is “Presented in Thousands of Dollars”

2
Park Plaza, Suite 850 ˖ Irvine, CA 92614 | Tel: 949-788-8900 ˖ Fax: 949-788-8980 ˖ www.fyklaw.com

*Professional
Corporation ˖ †Of Counsel ˖ ‡Certified Specialist in Estate Planning, Trust & Probate Law, and in
Taxation Law, State Bar of California

    March
                                         31, 2020

Page 2 of 8

Dilution,
page 43

3.
Staff Comment: Please tell us how you calculated net tangible book value of negative $4,160,900 as of September 30, 2019.

Response:
The financial statements for the third quarter ended September 30, 2019 are no longer required to be presented in this Amendment.
This Amendment includes updated financial statements, to include the financial statements for the year ended December 31, 2019.
In response to the comment, an incorrect calculation was used in the third quarter financial statements. The correct calculation
is total assets of $32,213,800 less intangible assets of $171,600 (deferred tax asset) or $32,042,20.

Management’s
Discussion and Analysis of Financial Condition and Results of Operations, page 48

4.
Staff Comment: Please expand your discussion of your results of operations to address the reasons for the increases in your revenues
and cost of sales for each period presented.

Response:
The Revenues section has been amended to include a discussion regarding the increase in revenues from 2018 to 2019, which was
due to our sales in 2018 being from smaller developments with fewer units. We were focused on building the infrastructure on two
residential subdivisions, including: (i) Settler’s Field, a 51 unit subdivision, which was not completed in 2018 and thus
there were no sales; and (ii) Valley View Estates, a 49 lot subdivision, which was completed in and had one sale in the fourth
quarter of 2018. In 2019, 42 units were sold in both of the Settler’s Field and Valley View Estates projects, as well as
the sale of 61 finished lots to a national builder.

The
Cost of Sales section was also amended to include a discussion of the decrease in gross margins from 2019, which was a result
of Settler’s Field and Valley View Estates, our two principal subdivisions, generating slightly lower margins than the few
homes that were sold in 2018. Each project has margins unique to the subdivision based on the cost of the land, development cost,
and product type sold.

5.
Staff Comment: Please expand your discussion of your material indebtedness to describe the material terms of such indebtedness
including material financial covenants. We note the risk factor on page 30.

Response:
A discussion of material indebtedness was included to disclose that, as of December 31, 2019, we had real estate loans (excluding
debt discount) of $24,474,000, equipment loans of $3,476,800 and finance leases of $520,700. As of December 31, 2018, we had real
estate loans of $18,828,500, equipment loans of $997,400 and finance leases of $705,600. The increase is due to construction loans
on new lots under development and purchasing more construction equipment to increase our capacity to develop lots as quickly as
possible. All construction loans are secured by related property and equipment loans by the related equipment. See footnotes 6
and 7 to the Audited Financial Statements for terms and interest rates.

2
Park Plaza, Suite 850 ˖ Irvine, CA 92614 | Tel: 949-788-8900 ˖ Fax: 949-788-8980 ˖ www.fyklaw.com

*Professional
Corporation ˖ †Of Counsel ˖ ‡Certified Specialist in Estate Planning, Trust & Probate Law, and in
Taxation Law, State Bar of California

    March
                                         31, 2020

Page 3 of 8

Gross
Margin, page 50

6.
Staff Comment: We note from your disclosure on page 51 that your gross margin percentage was 3.35% and 6.01% for the nine months
ended September 30, 2019 and for the nine months ended September 30, 2018, respectively, excluding interest on cost of sales.
These gross margin percentages do not agree with the percentages as presented in the adjusted homebuilding gross margin table.
Please revise or explain this discrepancy.

Response:
We have updated our financial statements in this Amendment and have included the numbers from our financial statements for the
year ended December 31, 2018 and December 31, 2019. There is no more discrepancy.

7.
Staff Comment: Please expand discussion to include adjusted homebuilding gross margin for all the financial statement periods
presented in the filing.

Response:
We have restated our financial statements for the year ended December 31, 2018, and have included in this Amendment our financial
statements for the year ended December 31, 2019. There are no more references to adjusted homebuilding gross margin; this has
been changed to “EBITDA margin.”

Revenues
for Real Estate and Construction Materials, page 62

8.
Staff Comment: Please expand your presentation to include revenues from contracts with customers by product category for all financial
statement periods presented in the filing.

Response:
We have restated our financial statements for the year ended December 31, 2018, and have included in this Amendment our financial
statements for the year ended December 31, 2019. Revenues from contracts with customers by product category are in all financial
statement periods presented in the filing.

Our
Business, page 67

9.
Staff Comment: Please describe clearly your infrastructure development activities for subdivisions including the use of your $4,000,000
in heavy equipment.

Response:
We have amended the “Our Business” section to disclose that we now have over $5,000,000 in heavy equipment, allowing
us to create a diverse range of residential communities and improved lots in a cost-effective manner. The heavy equipment is used
for land clearing; public and private road improvements; installation of wet utilities such as sewer, water, and storm sewer lines;
and construction of dry utility lines for power, gas, phone, and cable service providers.

2
Park Plaza, Suite 850 ˖ Irvine, CA 92614 | Tel: 949-788-8900 ˖ Fax: 949-788-8980 ˖ www.fyklaw.com

*Professional
Corporation ˖ †Of Counsel ˖ ‡Certified Specialist in Estate Planning, Trust & Probate Law, and in
Taxation Law, State Bar of California

    March
                                         31, 2020

Page 4 of 8

10.
Staff Comment: We note the references in this section to owning and controlling five Western Washington residential communities.
We also note the communities referenced in the cover artwork. Please describe each of your material properties clearly including
the nature of your ownership.

Response:
We have revised the Registration Statement to include descriptions of the five communities referenced in the artwork, including
the four currently owned residential communities that are noted based in Kitsap County: Valley View Estates a 49 lot subdivision;
Settler’s Field, a 51 lot subdivision; Port Washington Park, a 36 lot subdivision; Soundview Estates, a 240 lot subdivision;
and one community located in Pierce County: Saylor View Estates, a 10 lot subdivision. All four residential communities in Kitsap
County, Washington are 100% owned by us, and we have a 51% ownership interest in Saylor View Estates.

11.
Staff Comment: It appears you sell finished lots and finished homes. Please clarify the proportion of your business that involves
home construction versus sales of finished and unfinished lots, including the number of homes and the number of lots you have
historically sold per year. Clarify how the houses are built and by whom. To the extent you use subcontractors in construction
please describe your relationships with such subcontractors.

Response:
We have included an additional section in the “Our Business” section of the Registration Statement to describe our
Home and Finished Lot Sales from 2017 through 2019, and how the houses are built by utilizing subcontractors. We sold three homes
in 2017, four homes in 2018, and had no finished lot sales in either year. In 2019, we sold 45 homes and 61 finished lots. The
61 finished lots represented 24% of our 2019 revenue. We are a general contractor and supervise the construction of our homes
utilizing subcontractors. Our subcontractors are licensed and bonded and are paid for their completed work by the tenth day of
the month for their invoices submitted by the 25th day of the previous month.

Materials,
page 76

12.
Staff Comment: Please describe your material supply arrangements, including your relationships with your principal suppliers.

Response:
The Registration Statement has been updated to include additional details about our material suppliers. Our material suppliers
are sub-contractors that are licensed, bonded, and insured. Each sub-contractor provides a bid for the work required and is awarded
a contract based on price, reputation, and ability to meet our time frames. Our material suppliers provide us credit terms for
materials used in the construction of our homes. Our suppliers credit terms range from a 30 to 60-day payment cycle following
their delivery or installation of a product or service.

2
Park Plaza, Suite 850 ˖ Irvine, CA 92614 | Tel: 949-788-8900 ˖ Fax: 949-788-8980 ˖ www.fyklaw.com

*Professional
Corporation ˖ †Of Counsel ˖ ‡Certified Specialist in Estate Planning, Trust & Probate Law, and in
Taxation Law, State Bar of California

    March
                                         31, 2020

Page 5 of 8

Executive
Compensation, page 84

13.
Staff Comment: Please disclose all compensation earned by executives in each fiscal year, including the portions of the salaries
not taken by them. Also, clarify whether the amounts not taken remain outstanding, are loans to the company or otherwise constitute
ongoing obligations of the company. We also note your statement that the Summary Compensation Table reflects compensation “to
be paid to our named executive officers for fiscal year 2019.” Given that the fiscal year 2019 is complete, please revise
to clarify that the Summary Compensation Table reflects the compensation paid for the fiscal year 2019.

Response:
We have revised our Summary Compensation Table to reflect the compensation paid for the fiscal years 2018 and 2019. We have also
amended the table to specify that that Sterling Griffin only took a portion of his salary, the remaining balance of which was
waived, and any outstanding balance is not an ongoing obligation of the Company. Anita Fritz was hired later in 2019, where her
actual pay was $75,326, and her annual salary is $85,000.

Certain
Relationships and Related Party Transactions, page 89

14.
Staff Comment: We note in Footnote 14 to the financial statements for the Years Ended December 31, 2018 and 2017, that the company
transferred land and a mining bond to an investment company owned by the majority shareholder of the company in 2019. We also
note that the company entered into a construction loan with Olympic Views, LLC of which the majority shareholder owns a 50% interest
and 50% owned by another shareholder on April 19, 2019. Please revise to include the disclosure required by Item 404 of Regulation
S-K regarding these transactions including the identity of the majority shareholder or advise us why the disclosure is not required.

Response:
The Certain Relationships and Related Party Transactions section has been amended to include (i) the construction loan with Olympic
Views, LLC, and (ii) the land and related mining bond with a book value of $495,000, and the details related thereto. Further,
the description is revised to include the disclosure that Sterling Griffin, our CEO, is the majority shareholder referenced in
the aforementioned transactions.

Notes
to Consolidated financial statements

1.
Nature of Operations and Summary of Significant Accounting Policies, page F-6

15.
Staff Comment: Please revise and expand your principles of consolidation disclosure to clarify the consolidation policy that is
being followed as required by ASC 810-10-50-1.

Response:
We have restated our financial statements for the year ended December 31, 2018 and have included in this Amendment our financial
statements for the year ended December 31, 2019. The footnote has been revised to meet ASC 810-10-50-1.

2
Park Plaza, Suite 850 ˖ Irvine, CA 92614 | Tel: 949-788-8900 ˖ Fax: 949-788-8980 ˖ www.fyklaw.com

*Professional
Corporation ˖ †Of Counsel ˖ ‡Certified Specialist in Estate Planning, Trust & Probate Law, and in
Taxation Law, State Bar of California

    March
                                         31, 2020

Page 6 of 8

14.
Subsequent Events, page F-21

16.
Staff Comment: We note that you disclose real estate revenues through the year ending December 31, 2019 as a subsequent event
and is repeated in your notes to your interim financial statements on page F-42. Please remove this disclosure or explain to us
why this disclosure is appropriate and cite the applicable guidance in your response.

Response:
We have restated our financial statements for the year ended December 31, 2018, and have included in this Amendment our financial
statements for the year ended December 31, 2019. The Subsequent Events section in our financial statements no longer includes
a disclosure of real estate revenues through the year ending December 31, 2019.

11.
Leases, page F-38

17.
Staff Comment: We note from your table on p