What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-04-17 compared with 2022-03-31 · 234 added, 227 removed, 652 unchanged (41% of the section changed)

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this report, an evaluation was carried out by certain members of the Company’s management, with the participation of the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Securities and Exchange Commission’s (SEC) Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of December 31, 2022.

Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the CEO and the CFO, to allow timely decisions regarding required disclosures.

Due to a material weakness in internal control over financial reporting described below, management concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2022.

Notwithstanding the existence of this material weakness, management believes that the consolidated financial statements in this annual report filed on Form 10-K present, in all material respects, the Company’s financial condition as reported, in conformity with United States Generally Accepted Accounting Principles (“GAAP”).

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

This process includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.

1 unchanged sentence

Also, projections of any evaluation of the internal control over financial reporting to future periods are subject to risk that the internal control may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

The Chief Executive Officer and Chief Financial Officer of the Company assessed the effectiveness of our internal control over financial reporting based on the framework in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) as of December 31, 2021, and concluded that its controls were effective as of such date.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.

Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the Securities and Exchange Commission rules that permit the Company to provide only management’s report in this annual report.

Disclosure controls and procedures

We carried out our evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended.

Based on our evaluation, our principal executive officer and chief financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective.

Management has completed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

As a result of this assessment, management has concluded controls were not effective due to an identified material weakness in internal control over financial reporting.

A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The Company identified a material weakness in the methodology initially used to estimate the allowance for doubtful accounts related to the fourth quarter 2022.

As a result of this material weakness, the Company’s management has concluded that, as of December 31, 2022 the Company’s internal control over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework (2013) issued by the COSO.

Management communicated the results of its assessment to the Audit Committee of the Board of Directors.

As a “smaller reporting company”, the Company is exempt from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002.

As a result, the Company’s independent registered public accounting firm has not audited or issued an attestation report with respect to the effectiveness of our internal control over financial reporting as of December 31, 2022.

Remediation Efforts

Management is committed to the remediation of the material weakness described above.

To address the material weakness associated with the estimation of the allowance for doubtful accounts, management has revised its methodology applied for the fourth quarter.

Further, the methodology for calculating the allowance has been further revised in 2023 in consideration of ASU No.

2016-13, “ Measurement of Credit Losses on Financial Instruments.

” Refer to Recently Adopted Accounting Pronouncement in the Financial Statements of the Company set forth herein, for additional information.

Changes in Internal Control over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

Other than as described above, there were no other changes in the Company’s internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(f) and 15d-15(f) of the Exchange Act during the quarter ended December 31, 2022 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Other Information

4 unchanged sentences

Officer Since

Former Chairman of the Board of Directors

Chairman of the Board of Directors, Chief Executive Officer, and President

1 unchanged sentence

Richard Gerhardt

Former Chief Financial Officer, Secretary, and Treasurer

Stephanie Poe

Chief Financial Officer, Secretary, and Treasurer

The following is a brief summary of the background of each Director and executive officer of the Company:

Former Chairman of the Board of Directors.

Smith co-founded the Company in 1960 and became its President and Chief Executive Officer in 1965.

He served as President until 2012 and Chief Executive Officer until May 2018.

He had served on the Board of Directors and has been its Chairman since 1970.

Smith is the principal developer and inventor of the Company’s proprietary and patented products.

He is the past President of the National Precast Concrete Association.

Smith has served on the Board of Trustees of Bridgewater College in Bridgewater, Virginia since 1986.

Smith retired as Chairman and as a member of the Board of Directors in January 2022.

Chairman of the Board of Directors, Chief Executive Officer, and President.

4 unchanged sentences

Smith holds a Bachelor of Science degree in Business Administration from Bridgewater College.

Smith is the son of Mr.

The Company believes that Mr.

Smith’s education, experience in the precast concrete industry and business experience gives him the qualifications and skills necessary to serve in the capacity as a director.

Smith’s education, experience in the precast concrete industry and business experience gives him the qualifications and skills necessary to serve in the capacity as a director of the Company.

Taylor served as Vice President of Administration of the Company from 1989 until January 2017 and has served as a Director since 1994.

1 unchanged sentence

The Company believes that Mr.

Taylor’s education, business experience and his extensive experience in the precast concrete industry gives him the qualifications and skills necessary to serve in the capacity as a director.

Taylor’s education, business experience and his extensive experience in the precast concrete industry gives him the qualifications and skills necessary to serve in the capacity as a director of the Company.

James Russell Bruner.

11 unchanged sentences

Gerhardt has served as a member of the Board of Directors of the Company since 2016.

He is currently President of Sales Services International, Inc., a consulting firm, and Chief Sales Officer for IMEX Global Solutions, Inc., a logistics company, since April 2020, and is also serving as a Fauquier County, Virginia Supervisor for the Cedar Run Magisterial District since January 2016.

He is currently President of Sales Services International, Inc., a consulting firm, and Chief Sales Officer for IMEX Global Solutions, Inc., a logistics company, since April 2020, and is serving as a Fauquier County, Virginia Supervisor for the Cedar Run Magisterial District since January 2016.

From 2003 to 2014, Mr.

5 unchanged sentences

Gerhardt's current and past business-related experience provides him with the knowledge and skills necessary to serve in the capacity as a director of the Company.

Chief Financial Officer, Secretary, and Treasurer.

Krick has served as Chief Financial Officer of the Company since January 2018.

Former Chief Financial Officer, Secretary, and Treasurer.

Krick served as Chief Financial Officer of the Company from January 2018 through December 31, 2022.

Prior to becoming the Chief Financial Officer, Mr.

2 unchanged sentences

Krick worked in public accounting focusing on tax and business consulting.

Krick serves on the Board of Directors for the Precast/Prestressed Concrete Institute, and as the Vice Chair for the Precast/Prestressed Concrete Institute Mid-Atlantic Chapter.

Krick served on the Board of Directors for the Precast/Prestressed Concrete Institute, and as the Vice Chair for the Precast/Prestressed Concrete Institute Mid-Atlantic Chapter.

Krick is a Certified Public Accountant and holds a Bachelor of Business Administration degree in Accounting from James Madison University.

Stephanie Poe.

Chief Financial Officer, Secretary, and Treasurer.

Stephanie Poe has served as Chief Financial Officer, Secretary, and Treasurer of the Company since January 2023.

Prior to becoming the Chief Financial Officer, Secretary, and Treasurer, Ms.

Poe served as the Controller for the Company since January 2022 and the Accounting Manager for the Company since November 2017.

Prior to joining the Company, Ms.

Poe worked at Ernst & Young as part of their tax practice.

Poe is a Certified Public Accountant and holds a Bachelor of Science degree in Accounting from Appalachian State University and a Master of Science degree in Accounting from George Mason University.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires executive officers and Directors and persons who beneficially own more than ten percent (10%) of the Company’s Common Stock (“Reporting Persons”) to file initial reports of ownership and subsequent reports when there are changes in ownership with the Securities and Exchange Commission and any national securities exchange on which the Company’s securities are registered.

Based solely upon our review of the copies of all Forms 3, 4 and 5 and amendments to these forms that have been filed with the Securities and Exchange Commission, we believe that all Reporting Persons complied on a timely basis with all filing requirements applicable to them with respect to our fiscal year ended December 31, 2022, except that each of Wesley A.

Taylor, Richard Gerhardt and Adam J.

Krick filed one late Form 4 with respect to shares of the Company’s Common Stock withheld to pay tax on vested restricted stock.

Code of Ethics

The Company adopted a code of ethics that applies to the Chief Executive Officer, Chief Financial Officer, Controller and persons performing similar functions.

The Company adopted a code of ethics that applies to the Chief Executive Officer, Chief Financial Officer, Accounting Manager and persons performing similar functions.

The Board of Directors approved the code of ethics at their meeting on June 3, 2020.

11 unchanged sentences

Chief Executive Officer and President (3)(4)

Chief Financial Officer (5)(6)

Former Chief Financial Officer (5)(6)

(1) Represents salaries paid in 2022 and 2021 for services provided by each named executive officer serving in the capacity listed.

(2) Represents amounts paid for annual performance-based bonus related to operations for the prior year.

“Stock Awards” for 2021 include 5,000 restricted shares granted in October 2021 pursuant to the Company’s 2016 Equity Incentive Plan (the “Equity Plan”), of which 1,667 shares vested in full immediately on the grant date, 1,667 shares vest one year following the grant date, and the remaining 1,666 vest two years following the grant date.

(3) “Stock Awards” for 2021 include 5,000 restricted shares granted in October 2021 pursuant to the Company's 2016 Equity Incentive Plan (the “Equity Plan”), of which 1,667 shares vested in full immediately on the grant date, 1,667 shares vested one year following the grant date, and the remaining 1,666 vest two years following the grant date.

“Stock Awards” also include the value of performance-based restricted stock awarded based on the aggregate grant date fair value of the awards.

3 unchanged sentences

The value of the common stock shares at the grant dates were $275,446.

”Stock Awards” for 2020 include 10,000 restricted shares granted in December 2020 pursuant to the Equity Plan, of which 3,333 shares vested in full immediately on the grant date, 3,333 shares vested one year following the grant date, and the remaining 3,334 vest two years following the grant date.

The value of the common stock shares at the grant date was $89,800.

(4) “All Other Compensation” includes Company matching contributions to the 401(k) plan in the amounts of $12,200 and $11,600 for the years 2022 and 2021, respectively.

“Stock Awards” for 2021 include 3,000 restricted shares granted in October 2021 pursuant to the Equity Plan, of which 1,000 shares vested in full immediately on the grant date, 1,000 shares vest one year following the grant date, and the remaining 1,000 vest two years following the grant date.

(5) “Stock Awards” for 2021 include 3,000 restricted shares granted in October 2021 pursuant to the Company’s Equity Plan, of which 1,000 shares vested in full immediately on the grant date, 1,000 shares vested one year following the grant date, and the remaining 1,000 vest two years following the grant date.

“Stock Awards” also include the value of performance-based restricted stock awarded based on the aggregate grant date fair value of the awards.

With respect to a restricted stock award granted in April 2021 pursuant to the Equity Plan, we had estimated that the target level of shares would vest over a three-year cycle based on the stock price at date of grant $11.72 per share, as reflected in the fair value above.

The amounts in this column do not necessarily correspond to the actual value that will be realized by the named executive officer.

The level of award (minimum, target or maximum) and final vesting is based on the Company’s aggregate level of stated parameters over the entirety of the three-year cycle.

The amounts in this column did not necessarily correspond to the actual value that would be realized by the named executive officer.

The level of award (minimum, target or maximum) and final vesting was based on the Company’s aggregate level of stated parameters over the entirety of the three-year cycle.

The value of the common stock shares at the grant dates were $135,667.

“Stock Awards” for 2020 include 6,000 restricted shares granted in December 2020 pursuant to the Equity Plan, of which 2,000 shares vested in full immediately on the grant date, 2,000 shares vested one year following the grant date, and the remaining 2,000 vest two years following the grant date.

The value of the common stock shares at the grant date was $53,880.

All unvested units were forfeited on December 31, 2022 upon Mr.

Krick’s resignation.

(6) “All Other Compensation” includes Company matching contributions to the 401(k) plan in the amounts of $7,404 and $7,108 for the years 2022 and 2021, respectively.

12 unchanged sentences

The number of shares and their respective values in this chart reflect the total remaining shares to vest over the three-year retention of employment period based on the stock price at December 31, 2022 of $20.50.

The number of shares and their respective values in this chart reflect the total over the three-year performance period pursuant to the Equity Plan based on the stock price at December 31, 2021 of $47.00.

The level of award (minimum, target or maximum) and final vesting is based on the Company’s levels of revenue growth, EBITDA margin, free cash flow, as well as Board discretion and retention of employment, in respect to the fiscal 2021 grants.

The award was based on the target level for the fiscal 2021 grants.

Actual number of shares vested may differ, and the awards are spread over the three-year vesting period of the plan, not just one, as implied by the chart.

With respect to a grant of performance based restricted stock in 2021, the number of shares and their respective values in this chart reflect the total over the three-year performance period pursuant to the Equity Plan based on the stock price at December 31, 2022 of $20.50.

The level of award (minimum, target, or maximum) and final vesting is based on the Company’s levels of revenue growth, EBITDA margin, free cash flow, as well as Board discretion and retention of employment.

The award was based on the target level.

Actual number of shares vested may differ, and the award is spread over the three-year vesting period of the plan, not just one, as implied by the chart.

All unvested units were forfeited on December 31, 2022 upon Mr.

Krick’s resignation

Compensation of Directors

All non-executive officer Directors receive $3,000 per meeting as compensation for their services as Directors, with an additional $3,000 annual fee for service as the chair of the Audit Committee, $3,000 annual fee for service as the chair of the Compensation Committee, and $6,000 annual fee for service as the Chairman of the Board.

All non-executive officer Directors receive $3,000 per meeting as compensation for their services as Directors, with an additional $3,000 annual fee for service as the chair of the Audit Committee and $3,000 annual fee for service as the chair of the Compensation Committee.

The Company does not pay any additional compensation to directors who are members of our management or are employed by the Company, but the Company reimburses all directors for out-of-pocket expenses incurred in connection with attending Board and committee meetings or otherwise in their capacity as directors.

8 unchanged sentences

Richard Gerhardt

“Stock Awards” for 2021 include restricted shares granted in October 2021 pursuant to the Equity Plan, of which 1/3 shares vested in full immediately on the grant date, 1/3 vest one year following the grant date, and the remaining 1/3 vest two years following the grant date.

“Stock Awards” also include the value of performance-based restricted stock awarded based on the aggregate grant date fair value of the awards.

The amounts in this column do not necessarily correspond to the actual value that will be realized by the named Board member.

The level of award (minimum, target or maximum) and final vesting is based on the Company’s aggregate level of stated parameters over the entirety of the three-year cycle.

Does not include an annual royalty fee of $99,000 paid to Mr.

Smith, pursuant to an employment agreement, payable as consideration for his assignment to the Company of all of his rights, title, and interest in certain patents.

(1) All compensation for Ashley B.

34 unchanged sentences

Smith is also subject to non-competition and non-solicitation restrictions during the Employment Period and for a period of two years thereafter.

The Company has entered into a Change of Control Severance Agreement (the “Severance Agreement”), dated as of October 20, 2021, with Adam J.

Krick, the Company’s Chief Financial Officer, Secretary and Treasurer.

The Severance Agreement provides that, in the event of departure of Mr.

Krick, upon Mr.

Krick’s last day of employment with the Company (the “Termination Date”), Mr.

Krick shall receive his accrued but unpaid Base Pay and vacation along with reimbursement for valid business expenses and any vested Employee Benefits, regardless of whether Mr.

Krick signs a release of claims against the Company (a “Release”).

In addition, if Mr.

Krick sustains a Qualifying Termination (the Company terminates Mr.

Krick without Cause or Mr.

Krick leaves the Company for Good Reason (generally, for material diminution in Mr.

Krick’s Base Pay, or position, authority, duties or responsibilities, relocation of Mr.

Krick’s principal place of business to a location more than 30 miles from Mr.

Krick’s principal place of business or material breach by the Company of the Severance Agreement)) and executes and delivers a Release to the Company, the Company shall provide Mr.

Krick with cash payments equal to one year of Base Pay, payable in substantially equal monthly installments over the twelve (12) month period following the Termination Date.

For a twelve (12) month period, the Company shall also continue to provide Mr.

Krick with Employee Benefits that are reasonably equivalent (and at the same cost to Mr.

Krick) to the Employee Benefits provided to Mr.

Krick immediately prior to the Termination Date and Mr.

Krick shall be entitled to receive a single lump sum cash payment equal to the average of his prior three (3) year annual cash bonuses.

In addition, if Mr.

Krick’s Qualifying Termination occurs within 24 months following a Change in Control, as of the effective date of the Release, all of Mr.

Krick’s (i) outstanding and unvested stock options shall become fully vested and exercisable and (ii) outstanding and unvested time-based restricted stock units shall become fully vested.

Krick is also subject to non-competition and non-solicitation restrictions during his employment with the Company and for a period of one year after the Termination Date.

The Company entered into a Change of Control Severance Agreement dated as of October 20, 2021, with Adam J.

Krick, the Company’s former Chief Financial Officer, Secretary and Treasurer.

In view of the voluntary resignation of Mr.

Krick on Decmeber 31, 2022, no severance payment was due under this agreement

Krick is subject to non-competition and non-solicitation restrictions with the Company and for a period of one year after his resignation date.

The Company has an employment agreement with its former Chief Executive Officer and former Chairman of the Board, Rodney I.

Smith ceased providing services as Chief Executive Officer in May 2018, he received his salary, pursuant to the terms of the agreement, through September 2019.

The agreement also provides for an annual royalty fee of $99,000 payable as consideration for his assignment to the Company of all of his rights, title and interest in certain patents.

Smith ceased providing services as Chief Executive Officer in May 2018.

The agreement provides for an annual royalty fee of $99,000 payable as consideration for his assignment to the Company of all of Mr.

Smith’s rights, title and interest in certain patents.

Payment of the royalty continues for as long as the Company is using the inventions underlying the patents.

5 unchanged sentences

Number of Shares

Owned (1) (3)

Smith (2)(4)(5)

2 unchanged sentences

James Russell Bruner (2)(6)

Stephanie Poe (2)(7)

Thompson Davis & Co., Inc.

6 unchanged sentences

Taylor, Richard Gerhardt, James Russell Bruner, and Adam J.

Krick is c/o Smith-Midland Corporation, P.O.

Krick and Ms.

Stephanie Poe is c/o Smith-Midland Corporation, P.O.

Box 300, 5119 Catlett Road, Midland, Virginia 22728.

(3) Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of Common Stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table.

(4) Ashley B.

Smith is the son of Rodney I.

4 unchanged sentences

(6) Includes 667 unvested restricted shares granted pursuant to the Equity Plan, subject to a three-year vesting period from the grant date, subject to continued services as a director.

Includes 4,000 unvested restricted shares granted pursuant to the Equity Plan, subject to a three-year vesting period from the grant date, subject to continued services as an executive officer.

(7) Includes 166 unvested restricted shares granted pursuant to the Equity Plan, subject to a three-year vesting period from the grant date, subject to continued serves as an executive officer.

Krick resigned from the Company effective December 31, 2022.

(9) Address of holder is 15 S.

17 unchanged sentences

The Committee has the authority to determine the type of award, as well as the amount, terms and conditions of each award, under the Equity Plan subject to the limitations and other provisions of the Equity Plan.

An aggregate of 400,000 shares of the Company’s common stock, par value $.01 per share, were authorized for issuance under the Equity Plan, subject to adjustment for stock splits, dividends, distributions, recapitalizations and other similar transactions or events, of which amount 69,043 remains available for issuance.

An aggregate of 400,000 shares of the Company's common stock, par value $.01 per share, were authorized for issuance under the Equity Plan, subject to adjustment for stock splits, dividends, distributions, recapitalizations and other similar transactions or events, of which amount 93,713 remains available for issuance at December 31, 2022.

If any shares subject to an award are forfeited, expire, or otherwise terminate without issuance of such shares, such shares shall, to the extent of such forfeiture, expiration, or termination, again be available for issuance under the Equity Plan.

5 unchanged sentences

On an ongoing basis, the Company reviews all “related party transactions” (those transactions that are required to be disclosed by SEC Regulation S-K, Item 404), if any, for potential conflicts of interest and all such transactions must be approved by the Board of Directors.

In November 2021 the Board of Directors approved the agreement to purchase real property from Rodney I.

Smith, the Company’s former Chairman of the Board, in the amount of $295,000, supported by an independent third-party valuation assessment.

No transactions for the year ended December 31, 2022 meet the criteria for disclosure.

Principal Accountant Fees and Services

The aggregate fees billed for each of the past two fiscal years for professional services rendered by BDO USA, LLP, the principal accountant for the audit of the Company;

On April 4, 2022, the Audit Committee (the “Audit Committee”) of the Board of Directors of the Company, approved the engagement of Dixon Hughes Goodman LLP (“DHG”) as the Company’s independent registered public accounting firm for the Company’s fiscal year ending December 31, 2022, and dismissed BDO USA, LLP (“BDO”) as the Company’s independent registered public accounting firm.

On June 1, 2022, the Company was informed by DHG, that it merged with BKD, LLP (“BKD”) effective June 1, 2022 in a merger of equals.

FORVIS, LLP was the surviving firm.

As a result of the merger, DHG effectively ceased being the Company’s independent registered public accounting firm and FORVIS, LLP, as the successor to DHG following the merger, became the Company’s independent registered public accounting firm.

The aggregate fees billed for each of the past two fiscal years for professional services rendered by FORVIS, LLP;

Richmond, VA;

PCAOB Firm ID # 686 , the principal accountant for the audit of the Company for the year ended December 31, 2022, and BDO;

Richmond, VA;

PCAOB Firm ID #243, the principal accountant for the audit of the Company for the year ended December 31, 2021;

for assurance and related services related to the audit;

2 unchanged sentences

Fees charged as audit fees are for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Forms 10-K and 10-Q’s or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.

The Audit Committee has established pre-approval policies and procedures with respect to the engagement of BDO USA, LLP and such policies and procedures do not include the delegation of the responsibilities of the Audit Committee to management.

The Audit Committee has established pre-approval policies and procedures with respect to the engagement of FORVIS, LLP and BDO USA, LLP and such policies and procedures do not include the delegation of the responsibilities of the Audit Committee to management.

Audit-Related Fees

31 unchanged sentences

Smith (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on November 17, 2020).

Severance Agreement, dated as of October 20, 2021, between the Company and Adam J.

Krick (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 26, 2021).

Smith-Midland Corporation Long-Term Incentive Plan (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 15, 2021).

7 unchanged sentences

List of Subsidiaries of the Company (Incorporated by reference to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 1995).

Consent of FORVIS, LLP

Consent of BDO USA, LLP.

12 unchanged sentences

SMITH-MIDLAND CORPORATION

March 31, 2022

April 17, 2023

/s/ Ashley B.

1 unchanged sentence

(Principal Executive Officer)

March 31, 2022

April 17, 2023

/s/ Stephanie Poe

Stephanie Poe

Chief Financial Officer

2 unchanged sentences

/s/ Ashley B.

March 31, 2022

April 17, 2023

/s/ Wesley A.

March 31, 2022

April 17, 2023

/s/ James Russell Bruner

March 31, 2022

April 17, 2023

James Russell Bruner

/s/ Richard Gerhardt

March 31, 2022

April 17, 2023

Richard Gerhardt

Smith-Midland Corporation and Subsidiaries

Smith-Midland Corporation

and Subsidiaries

Consolidated Financial Statements

2 unchanged sentences

and Subsidiaries

Report of Independent Registered Public Accounting Firm (BDO USA, LLP;

Richmond, VA;

PCAOB ID# 243 )

Reports of Independent Registered Public Accounting Firms ( FORVIS, LLP , Richmond, VA, PCAOB ID#:

686 and BDO USA, LLP, Richmond, VA, PCAOB ID#:243)

Consolidated Financial Statements

6 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors

Smith-Midland Corporation

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Smith-Midland Corporation (the "Company") as of December 31, 2022, the related consolidated statements of income, stockholders’ equity, and cash flows for year ended December 31, 2022, the summary of significant accounting policies, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the Audit Committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Doubtful Accounts

As of December 31, 2022, the Company’s allowance for doubtful accounts was approximately $781 thousand.

The determination of the allowance for doubtful accounts has been identified by the Company as a critical accounting policy.

As further described in the Company’s Summary of Significant Accounting Policies, exposure to losses on receivables, arising from the Company’s operations, are principally dependent on each customer’s financial condition and the Company monitors its exposure to credit losses and maintains allowances for anticipated losses.

The Company reviews accounts receivable on a regular basis to determine the probability of collection.

In performing its evaluation, the Company analyzes the payment history and its significant past due accounts, subsequent cash collections, comparative accounts receivable aging statistics, and other customer-specific considerations existing and known as of the time of the analysis.

Based on this information, along with other related factors, the Company develops an estimate of the uncollectible amounts included in accounts receivable.

We identified the Company’s estimate of the allowance for doubtful accounts as a critical audit matter.

The principal considerations for that determination were the degree of subjectivity and judgement required to audit management’s estimate, which incorporates historical experience, current economic conditions, and specific customer considerations, such as receivables that are outstanding for longer periods of time as a result of ongoing projects or possible disputes.

Also included in our principal considerations for determining this as a critical audit matter was the identified material weakness over management’s methodology of the allowance for doubtful accounts, specifically the consideration over aged receivables outstanding, which impacted the nature, timing, and extent of our audit procedures.

The primary procedures we performed to address this critical audit matter included the following:

Obtained an understanding of management’s allowance for doubtful accounts methodology.

Performed a retrospective review of historical write-offs and recalculated the mathematical accuracy of management’s calculation of the allowance for doubtful accounts.

Inspected current and historical financial results, including the aging of accounts receivable in the current year compared to the average historical aging from prior years.

Evaluated the reasonableness of the allowance on specific accounts receivable balances, including those outstanding for longer periods of time as a result of ongoing projects or possible disputes, by testing a sample of collections subsequent to yearend, inspecting customer correspondence, performing inquiries of management and obtaining corroborating evidence.

/s/ FORVIS, LLP

We have served as the Company’s auditor since 2022.

Richmond, Virginia

April 17, 2023

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

2 unchanged sentences

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Smith-Midland Corporation and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years then ended, summary of significant accounting policies, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended , in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheet of Smith-Midland Corporation and subsidiaries (the “Company”) as of December 31, 2021, the related consolidated statements of income, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

2 unchanged sentences

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

1 unchanged sentence

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Accounts Receivable

As described in the Summary of Significant Accounting Policies to the consolidated financial statements, the Company’s consolidated accounts receivable balance at December 31, 2021 was $10.0 million, inclusive of contract retainage receivables of $1.1 million, and net of an allowance for doubtful accounts of $0.4 million.

Management performs an evaluation quarterly as to the adequacy of the allowance for doubtful accounts for accounts receivable, analyzing payment history of accounts past due, subsequent cash collections, aging of accounts receivable balances, and other customer specific considerations such as known disputes.

Based on these factors along with others, management records an estimate of uncollectable amounts.

Developing a reasonable estimate involves significant judgement by management.

We identified the valuation of accounts receivable as a critical audit matter.

The principle considerations for our determination that this is a critical audit matter are (i) that the allowance for doubtful accounts involves significant judgement and subjectivity since the estimate relies on a variety of factors including historical experience, current economic factors and current customer specific conditions;

(ii) relates to accounts receivable balances that can remain outstanding under contract retainage provisions for extended periods of time;

and (iii) the Company may also be acting as a subcontractor to a prime contractor, which can result in potential delays in the awareness of disputes that may affect collection.

Auditing these elements involved especially challenging, subjective, and complex auditor judgment to properly assess the collectability of accounts receivable balances and to determine the extent of audit effort required to address this matter.

The primary procedures we performed to address this critical audit matter included:

Evaluating management’s allowance for doubtful accounts methodology through performing a retrospective review of historical write-offs and significantly aged accounts receivable balances as of December 31, 2021.

Testing a sample of overdue accounts receivable balances and contract retention amounts over a defined dollar value, evaluating the need for an allowance for doubtful accounts based on procedures including independent confirmations, collections occurring subsequent to year-end, review of contract retention provisions and appropriate application to invoicing, inspection of customer correspondence, inquiries of financial management, and inquiries of project specific personnel for potential known disputes.

/s/BDO USA, LLP

We have served as the Company’s auditor since 1996.

We served as the Company's auditor from 1996 to April 4, 2022.

Richmond, Virginia

March 31, 2022

Smith-Midland Corporation and Subsidiaries

Smith-Midland Corporation

and Subsidiaries

Consolidated Balance Sheets

1 unchanged sentence

Current assets

Investment securities, available-for-sale, at fair value

Accounts receivable, net

10 unchanged sentences

See accompanying summary of significant accounting policies and notes to consolidated financial statements.

Smith-Midland Corporation and Subsidiaries

Smith-Midland Corporation

and Subsidiaries

Consolidated Balance Sheets

13 unchanged sentences

Deferred revenue

Deferred buy-back lease obligation

Operating lease liabilities

15 unchanged sentences

See accompanying summary of significant accounting policies and notes to consolidated financial statements.

Smith-Midland Corporation and Subsidiaries

Smith-Midland Corporation

and Subsidiaries

Consolidated Statements of Income

21 unchanged sentences

See accompanying summary of significant accounting policies and notes to consolidated financial statements.

Smith-Midland Corporation and Subsidiaries

Smith-Midland Corporation

and Subsidiaries

Consolidated Statements of Stockholders' Equity

(in thousands, except share data)

Treasury Stock

Balance, December 31, 2020

2 unchanged sentences

Balance, December 31, 2021

Restricted stock issued

Vesting of restricted stock

Restricted stock forfeited

Balance, December 31, 2022

See accompanying summary of significant accounting policies and notes to consolidated financial statements.

Smith-Midland Corporation and Subsidiaries

Smith-Midland Corporation

and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

Reconciliation of net income to net cash provided by operating activities

Reconciliation of net income to net cash provided by (used in) operating activities

Net income (loss)

4 unchanged sentences

(Gain) loss on sale of investment securities

Unrealized (gain) loss on investment securities available for sale

Allowance for doubtful accounts

15 unchanged sentences

Net cash provided by (used in) operating activities

Smith-Midland Corporation and Subsidiaries

Smith-Midland Corporation

and Subsidiaries

Consolidated Statements of Cash Flows

9 unchanged sentences

Repayments of long-term borrowings

Dividends paid on common stock

Capitalized Loan Costs

Net cash provided by (used in) financing activities

7 unchanged sentences

See accompanying summary of significant accounting policies and notes to consolidated financial statements.

Smith-Midland Corporation and Subsidiaries

Smith-Midland Corporation

and Subsidiaries

Summary of Significant Accounting Policies

7 unchanged sentences

The Company has not experienced any losses related to these balances.

Investments in marketable securities are classified as available-for-sale and are stated at market value.

Inventories are stated at the lower of cost, using the first-in, first-out (FIFO) method, or net realizable value.

2 unchanged sentences

Property and equipment is stated at cost.

Expenditures for ordinary maintenance and repairs are charged to income as incurred.

Expenditures for ordinary maintenance and repairs are expensed as incurred.

Costs of improvements, renewals, and major replacements are capitalized.

23 unchanged sentences

Under Topic 606, the Company recognizes revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services provided.

Revenue associated with contracts with customers for customized product is recognized over time as the Company’s performance creates or enhances customer controlled assets or creates or enhances an asset with no alternative use, which the Company has an enforceable right to receive compensation as defined under the contract for performance completed.

Revenue associated with contracts with customers for customized products is recognized over time as the Company's performance creates or enhances customer-controlled assets or creates or enhances an asset with no alternative use, which the Company has an enforceable right to receive compensation as defined under the contract for performance completed.

To determine the amount of revenue to recognize over time, the Company recognizes revenue over the contract terms based on the output method.

2 unchanged sentences

The Company also matches the costs associated with the units produced.

If a contract is projected to result in a loss, the entire contract loss is recognized in the period when the loss was first determined and the amount of the loss updated in subsequent reporting periods.

If a contract is projected to result in a loss, the entire contract loss is recognized in the period when the loss was first determined and the amount of the loss is updated in subsequent reporting periods.

Revenue recognition also includes an amount related to a contract asset or contract liability.

2 unchanged sentences

Changes in the job performance, job conditions, and final contract settlements are factors that influence management’s assessment of total contract value and therefore, profit and revenue recognition.

A portion of the work the Company performs requires financial assurances in the form of performance and payment bonds or letters of credit at the time of execution of the contract.

A portion of the work the Company performs requires financial assurances in the form of performance and payment bonds at the time of execution of the contract.

Some contracts include retention provisions of up to 10%, which are generally withheld from each progress payment as retainage until the contract work has been completed and approved.

3 unchanged sentences

The timing of when we bill our customers is generally dependent upon advance billing terms, milestone billings based on the completion of certain phases of the work, or when services are provided or products are shipped.

Projects with performance obligations recognized over time that have costs and estimated earnings recognized to date in excess of cumulative billings, are reported on our Condensed Consolidated Balance Sheets as “Accounts receivable trade - unbilled” (contract assets).

Projects with performance obligations recognized over time that have cumulative billings in excess of costs and estimate earnings recognized to date, are reported on our Condensed Consolidated Balance Sheets as “Customer deposits” (contract liabilities).

Projects with performance obligations recognized over time that have costs and estimated earnings recognized to date in excess of cumulative billings are reported on our Consolidated Balance Sheets as "Accounts receivable trade - unbilled" (contract assets).

Projects with performance obligations recognized over time that have cumulative billings in excess of costs and estimate earnings recognized to date, are reported on our Consolidated Balance Sheets as "Customer deposits" (contract liabilities).

For the year ended December 31, 2022, the Company recognized $ 983 of revenue related to contract liabilities reported as of December 31, 2021.

Any uncollected billed amounts for our performance obligations recognized over time, including contract retentions, are recorded within accounts receivable trade - billed.

At December 31, 2022 and December 31, 2021, accounts receivable included contract retentions (in thousands) of approximately $ 932 and $ 1,139 , respectively, which are considered contract assets.

Our billed and unbilled revenue may be exposed to potential credit risk if our customers should encounter financial difficulties, and we maintain reserves for specifically-identified potential uncollectible receivables.

It is expected that substantially all of the outstanding retainage balance outstanding as of December 31, 2022 will be collected within one year.

Our billed and unbilled revenue may be exposed to potential credit risk if our customers should encounter financial difficulties, and we maintain reserves for potentially uncollectible receivables.

At December 31, 2022 and December 31, 2021, our allowances for doubtful accounts (in thousands) were $ 781 and $ 437 , respectively.

1 unchanged sentence

The Company entered into a buy-back agreement with one specific customer.

Under this agreement, the Company guaranteed to buy-back product at a predetermined price at the end of the long-term project, subject to the condition of the product.

Although the Company received payment in full when the product was produced, we are required to account for these transactions as operating leases.

The amount of sale proceeds equal to the buy-back obligation, included in “Deferred buy-back lease obligation” in the liabilities section of the consolidated balance sheet, is deferred until the buy-back is exercised.

The remaining sale proceeds are deferred in the same account and recognized on a straight-line basis over the usage period, such usage period commencing on delivery to the job-site and ending at the time the buy-back is exercised.

The Company capitalizes the cost of the product on the consolidated balance sheet shown in “Deferred buy-back lease asset, net”, and depreciates the value, less residual value, to cost of leasing revenue in “Cost of goods sold” over the estimated useful life of the asset.

In the case the customer requests the Company to cancel the buy-back option and retains ownership of the product and the Company accepts, the guarantee buy-back liability and any deferred revenue balances related to the product will be settled to revenue, and the net book value of the asset will be expensed to cost of leasing revenue.

Otherwise, the Company will purchase the product back in the amount equal to the buy-back guarantee, settle any remaining deferred balances, in excess of the buy-back payment, to leasing revenue, and reclassify the net book value of the purchased product to "Inventories" or "Property and equipment, net" depending on the intended use.

Under this agreement, the Company guaranteed to buy-back barrier at a predetermined price at the end of the long-term project, subject to the condition of the product.

Although the Company received payment in full when the product was produced, we were required to account for these transactions as operating leases.

The amount of sale proceeds equal to the buy-back obligation, included in "Deferred buy-back lease obligation" in the liabilities section of the consolidated balance sheet, was deferred until the buy-back was executed.

The remaining sale proceeds were deferred in the same account and recognized on a straight-line basis over the usage period, such usage period commencing on delivery to the job-site and ending at the time the buy-back was executed.

The Company capitalized the cost of the product on the consolidated balance sheet shown in "Deferred buy-back lease asset, net", and depreciated the value, less residual value, to cost of leasing revenue in "Cost of goods sold" over the estimated useful life of the asset.

Pursuant to an amendment entered into by the Company with the customer on April 13, 2022, the Company agreed to purchase barrier back in the amount equal to the buy-back guarantee.

Accordingly, the Company settled any remaining deferred balances, in excess of the buy-back payment, to leasing revenue, and reclassified the net book value of the purchased product to "Property and equipment, net".

The revenue is being recognized in accordance with Topic 842, Leases .

Commitments for additional information regarding the amendment.

Barrier Rentals - Lease Income

3 unchanged sentences

The Company licenses certain products to other precast companies to produce the Company's products to engineering specifications under the licensing agreements.

The agreements are typically for five year terms and require royalty payments from 4% to 6% of total sales of licensed products, which are paid on a monthly basis.

The agreements are typically for five-year terms and require royalty payments from 4% to 6% of total sales of licensed products, which are paid every month.

The revenues from licensing agreements are recognized in the month earned, in accordance with Topic 606-10-55-65.

27 unchanged sentences

Concentration of Risk

Major Customers

Two customers accounted for 23 % of revenues during fiscal year 2021, and one customer accounted for 25 % of revenues during fiscal year 2020.

One customer had balances that comprised 17 % and 27 % of trade accounts receivable at December 31, 2021 and 2020, respectively.

Major Suppliers

No vendor accounted for more than 10 % of purchases during fiscal year 2021 and 2020.

Historically, various customers have comprised greater than 10 % of revenue during a given quarter or year.

These customers are typically not the same quarter to quarter or year to year.

The Company views revenue details by jobs, and not by customers.

In the event a customer were to go out of business during a project, it is likely that the owner of the project would assign a new contractor to the job, and the Company would complete its scope of work.

Therefore, the Company believes that it does not have a short-term vulnerability of severe impact to operations.

In cases where customers are less than 10% of revenue, the Company assesses if there is a near term severe impact.

The Company has determined that no customer, if lost, would result in a near term severe impact to the Company’s operations.

Sales and Use Taxes

17 unchanged sentences

Fair Value of Financial Instruments

The carrying value for each of the Company’s financial instruments approximates fair value because of the short-term nature of those instruments.

The estimated fair value of the long-term debt approximates carrying value based on current rates offered to the Company for debt of similar maturities.

The carrying value for each of the Company’s financial instruments except for long-term debt approximates fair value because of the short-term nature of those instruments.

The Company's long-term debt has a carrying value of $6,365 based on the fixed rates applicable to the related loans compared to a fair market value of approximately $6,535.

The preparation of financial statements in conformity with U.S.

generally accepted accounting (U.S.

GAAP) principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

generally accepted accounting principles (U.S.

GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Actual results could differ from those estimates.

10 unchanged sentences

No impairment losses have been recorded during the two years ended December 31, 2022.

Recently Issued Accounting Pronouncement

Recently Adopted Accounting Pronouncement

The FASB issued ASU No.

2 unchanged sentences

The pronouncement is effective for smaller reporting companies for fiscal years beginning after December 15, 2022.

The Company is currently evaluating the impact of this standard, including subsequent amendments, on the consolidated financial statements and related disclosures.

We adopted this standard, and all related amendments, effective January 1, 2023, on a modified retrospective basis.

We are finalizing our evaluation of the impact that the adoption of this accounting guidance will have on the consolidated financial statements.

SMITH-MIDLAND CORPORATION

3 unchanged sentences

Land and land improvements

$ 7,105 $ 3,764

Buildings and improvements

Machinery and equipment

14,394 13,952

Rental equipment

37,156 32,541

accumulated depreciation and amortization

( 15,230 ) ( 13,939 )

$ 21,926 $ 18,602

Depreciation expense and amortization (in thousands) was approximately $ 2,892 and $ 2,671 for the years ended December 31, 2022 and 2021, respectively.

1 unchanged sentence

Notes payable consist of the following (in thousands):

Note payable to Summit Community Bank (the “Bank”), which matured on September 2021;

Note payable to Summit Community Bank (the "Bank"), maturing February 2037 ;

with monthly payments of approximately $ 21 of principal and interest fixed at 4.09 %;

collateralized by the Company’s property, plant, and buildings.

net of $24 of deferred loan costs;

collateralized by the related real property.

Note payable to the Bank, maturing October 2029;

with monthly payments of approximately $22 of principal and interest fixed at 3.64% under a Promissory Notes Rate Conversion Agreement;

net of $18 and $21 of deferred loan costs;

collateralized by all assets of Smith-Carolina Corporation and guaranteed by the Company.

1 unchanged sentence

with monthly payments of approximately $ 27 of principal and interest fixed at 3.99 %;

collateralized by the Company’s property, plant, and buildings.

net of $25 and $29 of deferred loan costs;

net of collateralized by the Company’s property, plant, and buildings.

Installment notes, collateralized by certain machinery and equipment maturing at various dates;

3 unchanged sentences

The line-of-credit is collateralized by a first lien position on the Company's accounts receivable and inventory and a second lien position on all other business assets.

Total Notes Payable Outstanding

Less current maturities

The total notes payable balance is offset by debt issuance costs associated with securing the loans summarized above and are amortized over the term of the related loan.

The total unamortized costs as of December 31, 2022 is $ 68 .

In addition to the notes payable discussed above, on April 16, 2020, the Company obtained a loan, evidenced by a promissory note, under the Paycheck Protection Program (the "PPP") from the Bank in the amount of $ 2,692 .

3 unchanged sentences

On July 9, 2021, the Company received loan forgiveness for the full amount of the loan of $ 2,692 .

Smith-Midland Corporation and Subsidiaries

Smith-Midland Corporation

and Subsidiaries

Notes to Consolidated Financial Statements

Subsequent to December 31, 2021, on February 10, 2022, the Company completed the financing for its prior acquisition of certain real property in Midland, VA totaling approximately 29.8 acres with a note payable to the Bank in the amount of $ 2,805 .

The loan is collateralized by a first lien position on the related real property.

The interest rate is fixed at 4.09% per annum, with principal and interest payments payable monthly over 180 months in the amount of $ 21 , with the balance due on the maturity date.

The loan matures on February 10, 2037 .

The Company's notes payable includes certain restrictive covenants, which require the Company to maintain minimum levels of tangible net worth, places limits on annual capital expenditures, and limits on the payment of cash dividends.

2 unchanged sentences

Year Ending December 31,

The amounts listed in the table above do not include the note payable financed on February 10, 2022.

RELATED PARTY TRANSACTIONS

The Company previously leased a portion of its Midland, Virginia property from its former Chairman of the Board, Rodney I.

Smith, on a month-to-month basis, as additional storage space for the Company’s finished work product.

The lease agreement called for monthly rents of $ 2 .

During 2021 and 2020, the Company paid rents totaling $ 22 and $ 24 , respectively.

In November 2021 the Company entered into an agreement pursuant to which it purchased the property for $ 295 , which the purchase price was supported by an independent third-party valuation assessment.

The Company has an employment agreement with its former CEO and Chairman of the Board, Rodney I.

The Company has an employment agreement with its former Chief Executive Officer and Chairman of the Board, Rodney I.

Smith received his salary, pursuant to the terms of the agreement, through September 2021.

1 unchanged sentence

Payment of the royalty continues for as long as the Company is using the inventions underlying the patents.

Smith also received compensation from the Company for his services as a Director and Chairman of the Board.

Smith-Midland Corporation and Subsidiaries

Smith also received compensation from the Company for his services as a Director and Chairman of the Board, until his resignation in January 2022.

Smith-Midland Corporation

and Subsidiaries

Notes to Consolidated Financial Statements

9 unchanged sentences

PPP Loan Forgiveness

Smith-Midland Corporation and Subsidiaries

Smith-Midland Corporation

and Subsidiaries

Notes to Consolidated Financial Statements

15 unchanged sentences

Gross deferred tax liabilities

Valuation allowance

Net deferred tax liability

As of December 31, 2021 and 2020, the Company had approximately $ 2,361 and $ 2,611 , respectively, of state NOL’s available to offset future state taxable income.

The state NOL’s begin expiring at various times between 2028 and 2037.

In assessing the need for a valuation allowance, management must determine that there will be sufficient taxable income to realize deferred tax assets.

Based upon the historical and anticipated future positive earnings, management has determined that the deferred tax assets are realizable.

As of December 31, 2022 and 2021, the Company had approximately $ 2,395 and $ 2,361 , respectively, of state net operating losses (NOLs) available to offset future state taxable income.

The state NOLs begin expiring at various times between 2028 and 2037.

EMPLOYEE BENEFIT PLANS

3 unchanged sentences

Total match contributions (in thousands) by the Company for the years ended December 31, 2022 and 2021 were approximately $ 225 and $ 211 , respectively.

Smith-Midland Corporation and Subsidiaries

Smith-Midland Corporation

and Subsidiaries

Notes to Consolidated Financial Statements

11 unchanged sentences

Non-vested, December 31, 2022

The actual number of performance-based shares of common stock of the Company, if any, to be earned by the award recipients is determined over a three year performance measurement period based on measures that include Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) margin, revenue growth, and free cash flow.

The EBITDA margin and revenue growth performance targets have been set for each of the Minimum, Target, and Maximum levels.

The actual performance amount received is determined by the Compensation Committee and may be adjusted for items determined to be unusual in nature or infrequent in occurrence.

A smaller portion is also earned based on Board discretion and continued service.

The stock compensation cost is recognized over the requisite performance/service period using the straight-line method and can be periodically adjusted for the probable number of shares to be awarded.

Awards are being amortized to expense ratably, based upon the vesting schedule.

1 unchanged sentence

There was $ 316 of unrecognized compensation cost related to the non-vested restricted stock as of December 31, 2022.

Smith-Midland Corporation and Subsidiaries

Notes to Consolidated Financial Statements

FAIR VALUE DISCLOSURES

The Company applies the guidance that is codified under ASC 820-10 related to assets and liabilities recognized or disclosed in the financial statements at fair value on a recurring basis.

ASC 820-10 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

The provisions of ASC 820-10 only apply to the Company’s investment securities, which are carried at fair value.

ASC 820-10 clarifies that fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability.

As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

ASC 820-10 requires valuation techniques to measure fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs.

These inputs are prioritized as follows:

Fair Value Hierarchy

Inputs to Fair Value Methodology

Quoted prices in active markets for identical assets or liabilities

Quoted prices for similar assets or liabilities;

quoted markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the financial instrument;

inputs other than quoted prices that are observable for the asset or liability;

or inputs that are derived principally from, or corroborated by, observable market information

Pricing models, discounted cash flow methodologies, or similar techniques and at least one significant model assumption is unobservable or when the estimation of fair value requires significant management judgment

The Company categorizes a financial instrument in the fair value hierarchy based on the lowest level of input that is significant to its fair value measurement.

As of December 31, 2021

Quoted Market Prices in Active Markets

Internal Models with Significant Observable

Market Parameters

Internal Models

with Significant Unobservable

Market Parameters

Total Fair Value

Financial Statements

As of December 31, 2020

Quoted Market Prices in Active Markets

Internal Models with Significant Observable

Market Parameters

Internal Models

with Significant Unobservable

Market Parameters

Total Fair Value

Financial Statements

Smith-Midland Corporation and Subsidiaries

Smith-Midland Corporation

and Subsidiaries

Notes to Consolidated Financial Statements

COMMITMENTS AND CONTINGENCIES

On April 13, 2022, the Company and its customer entered into an amendment to the buy-back agreement described in ‘Revenue Recognition-Sale to Customer with a Buy-Back Guarantee - Lease Income’.

Pursuant to the amendment, the Company agreed to purchase all of the barrier subject to the buy-back agreement, 210,000 linear feet, as well as approximately an additional 115,000 linear feet.

The total estimated purchase price is $ 5,000 , representing the barrier, associated loading, freight, and yarding.

In accordance with ASC 842 Leases, a portion of the total $ 5,000 buy-back was previously recorded as a deferred buy-back obligation on the Consolidated Balance Sheets.

The deferred buy-back lease asset and obligation are reduced as the Company picks up the original 210,000 linear feet.

Costs in excess of the original deferred buy-back obligation will be capitalized for as incurred.

The Company is party to legal proceedings and disputes which may arise in the ordinary course of business.

13 unchanged sentences

There was no restricted stock excluded from the diluted earnings per share calculation for the years ended December 31, 2022 and December 31, 2021.

SUBSEQUENT EVENTS

On February 10, 2022, the Company completed the financing for its prior acquisition of certain real property in Midland, VA totaling approximately 29.8 acres with a note payable to the Bank in the amount of $2,805.

The loan is collateralized by a first lien position on the related real property.

The interest rate is fixed at 4.09% per annum, with principal and interest payments payable monthly over 180 months in the amount of $21, with the balance due on the maturity date.

The loan matures on February 10, 2037.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures