Item
1.01. Entry into a Material Definitive Agreement
Underwriting
Agreement
On
October 4, 2021, Harbor Custom Development, Inc., a Washington corporation (the “Company”), entered into an underwriting
agreement (the “Underwriting Agreement”) with ThinkEquity LLC (the “Underwriter”), pursuant to which the Company
agreed to sell to the Underwriter in a firm commitment underwritten public offering (the “Offering”) 2,400,000 shares of
8.0% Series A Cumulative Convertible Preferred Stock (“Series A Preferred Shares”) and 12,000,000 warrants (the “Warrants”)
to purchase common stock at $2.97 per share. In addition, the Company granted the Underwriter an over-allotment option to purchase up
to an additional 360,000 Series A Preferred Shares and 1,800,000 Warrants. On October 5, 2021, the Underwriter exercised the over-allotment
option with respect to 1,800,000 Warrants.
The
Offering was made pursuant to registration statements on Form S-1 (File Nos. 333-259465 and 333-260040) (collectively, the “Registration
Statements”), filed with the Securities and Exchange Commission (the “Commission”). ThinkEquity acted as sole book-running
manager for the Offering.
The
net proceeds to the Company from the Offering, after deducting the underwriting discount and the Underwriter’s fees and expenses
were $33,076,740. The Company anticipates using the net proceeds from the Offering primarily for land acquisition, construction, and
development and working capital.
Under
the terms of the Underwriting Agreement, the Company agreed to pay the Underwriter an underwriting discount of 7.0% of the gross proceeds
received by the Company in the Offering.
The
Underwriting Agreement contains customary representations and warranties that the parties made to, and solely for the benefit of, the
other party in the context of all of the terms and conditions of that agreement and in the context of the specific relationship between
the parties. The provisions of the Underwriting Agreement, including the representations and warranties contained therein, are not for
the benefit of any party other than the parties to such agreement and are not intended as documents for the investors and the public
to obtain factual information about the current state of affairs of the parties to those documents and agreements. Rather, investors
and the public should look to other disclosures contained in the Company’s filings with the Commission.
In
connection with the Offering, on August 13, 2021, the Company filed with the Secretary of State of Washington an Amendment to its Certificate
of Designation of 8.0% Series A Cumulative Convertible Preferred Stock, increasing the total authorized Series A Preferred Shares from
2,000,000 to 5,000,000 shares (the “Amendment to the Certificate of Designation”).
The
foregoing summary of the terms of the Underwriting Agreement and the Amendment to the Certificate of Designation is subject to and qualified
in its entirety by reference to the form of such documents, copies of which are filed as exhibits to this Current Report on Form 8-K,
and as Exhibit 3.7 to the Registration Statements, respectively and incorporated herein by reference.
Warrant
Agency Agreement
In
connection with the Offering, the Company and Mountain Share Transfer, Inc. entered into a Warrant Agency Agreement on October 7, 2021
(the “Warrant Agreement”). The Warrant Agreement sets forth the terms of the warrants (the “Warrants”) sold in
the Offering and appointed Mountain Share Transfer, Inc. to act as warrant agent for the Warrants.
The
foregoing description of the Warrant Agreement is qualified in its entirety by reference to the Warrant Agreement, a copy of which is
attached hereto as Exhibit 4.1 and is hereby incorporated by reference into this Item 1.01.