What changed in this filing

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Item 9A. Controls and Procedures

2024-05-23 compared with 2023-04-17 · 294 added, 239 removed, 647 unchanged (45% of the section changed)

3 unchanged sentences

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”).

Due to the material weaknesses 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, 2023.

Notwithstanding the existence of these material weaknesses, 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

7 unchanged sentences

Management has completed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, 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.

As a result of this assessment, management has concluded controls were not effective due to two identified material weaknesses 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.

At December 31, 2023, the following material weaknesses existed:

Allowance for Credit Losses –As previously reported, the Company identified a material weakness related to the review of its allowances that continued to exist as of December 31, 2023.

Specifically, the Company did not design and maintain the adequate management review controls related to the review over the determination of expected credit losses.

Journal Entries –The Company did not design and maintain effective processes and controls to ensure all journal entries are properly reviewed and approved prior to posting to the general ledger.

Additionally, the Company did not maintain proper segregation of duties within its general ledger system as it relates to logical access to post and approve manual journal entries.

As a result of these material weaknesses, the Company’s management has concluded that, as of December 31, 2023 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.

2 unchanged sentences

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.

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

To address the material weakness associated with the review of the allowance for credit losses, management has designed and implemented enhanced control activities that includes detailed documentation of matters considered while preparing and reviewing the allowance for credit losses.

While management believes they have effectively designed and implemented an enhanced review control, the material weakness will not be considered remediated until the control operates for a sufficient period of time and management has concluded, through testing, that the control is operating effectively.

To address the material weakness associated with the review and posting of journal entries, management is actively exploring potential functionality available with the Company’s general ledger system, as well as the need for monitoring controls to effectively mitigate the risk.

Changes in Internal Control over Financial Reporting

1 unchanged sentence

Other Information

During the fiscal fourth quarter of 2023, none of our directors and officers (as defined in Rule 16a-1(f) of the Exchange Act of 1934) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” each as defined in Item 408 of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

5 unchanged sentences

James Russell Bruner

Director, Vice President of Sales & Marketing, and President of Concrete Safety Systems

Read Van de Water

Richard Gerhardt

Former Chief Financial Officer, Secretary, and Treasurer

Stephanie Poe

2 unchanged sentences

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

Smith has served as Chairman of the Board of Directors since January 2022, Chief Executive Officer of the Company since May 2018, President of the Company since 2012, and as a Director since 1994.

Smith has served as Chairman of the Board of Directors since January 2023, Chief Executive Officer of the Company since 2018, President of the Company since 2012, and as a Director since 1994.

Smith was Vice President of the Company from 1990 to 2011.

4 unchanged sentences

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.

Taylor holds a Bachelor of Arts degree from Northwestern State University.

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 of the Company.

James Russell Bruner.

Bruner has served as a member of the Board of Directors of the Company since December 2018.

Bruner has served as Chairman of Maersk Line, Limited (“Maersk Line”) since November 2016 and was President and Chief Executive Officer of Maersk Line from January 2014 to November 2017.

Bruner has served as a member of the Board of Directors of the Company since 2018.

Bruner has served as Chairman of Maersk Line, Limited (“Maersk Line”) since November 2016 and was President and Chief Executive Officer of Maersk Line from 2014 to 2017.

Maersk Line owns and operates a fleet of container and tanker ships that are under the flag of the United States.

6 unchanged sentences

Bruner'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.

Director, Vice President of Sales & Marketing, and President of Concrete Safety Systems .

Smith has served as a member of the Board of Directors of the Company since December 2023.

Smith is the Vice President of Sales & Marketing of the Company and the President of Concrete Safety Systems, the barrier rental division of Smith-Midland.

He has served in these roles since 2008 and 2015, respectively.

Prior to his appointment as a member of the Board of Directors, Mr.

Smith served as an Advisor to the Board.

He is active in the local community, serving as a member of the Board of Directors for Leadership Fauquier and as a Fauquier County Planning Commissioner.

Smith is a past president and current board member of the Precast Concrete Association of Virginia.

He has a bachelor’s degree in Business Administration from Bridgewater College.

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 of the Company.

Read Van de Water.

Van de Water has served as a member of the Board of Directors of the Company since December 2023.

She has served as Senior Vice President of External Affairs Safran USA since 2011.

Safran USA is an international high-technology aerospace, defense, and space company.

Van de Water served as Chairman of the Board for the National Mediation Board from 2005 to 2009 and was a board member from 2003 to 2009.

Van de Water served as the Assistant Secretary for Aviation & International Affairs for the U.S.

Department of Transportation from 2001 to 2003 and as Legislative Counsel of International Trade and Health Care for The Business Roundtable from 1997 to 2001.

Van de Water received her J.D.

from The Georgetown University Law Center.

She is also a graduate of Elliot School of International Affairs at George Washington University, and The University of the South:

The Company believes that Ms.

Van de Water’s current and past business-related experience provides her with the knowledge and skills necessary to serve in the capacity as a director of the Company.

Richard Gerhardt.

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 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.

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.

Krick served as the Accounting Manager for the Company since 2014.

Prior to joining the Company, Mr.

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

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.

2 unchanged sentences

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.

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

Prior to joining the Company, Ms.

1 unchanged sentence

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

4 unchanged sentences

The code of ethics is also posted on the Company's website at www.smithmidland.com on the home page.

Insider Trading Policy

The Company has adopted an insider trading policy and related procedures governing the purchase, sale or other disposition of the Company’s securities by the Company and its directors, officers and employees, which are designed to promote compliance with insider trading laws, rules and regulations and applicable listing standards.

In addition, the insider trading policy prohibits short sales of the Company’s stock, certain forms of hedging or monetizing transactions, holding the Company’s stock in a margin account, or pledging the Company’s stock as collateral for a loan without prior advance approval from our Chief Executive Officer (no such advance approvals were granted to directors or named executives officers in 2023).

Audit Committee

The Company created an Audit Committee in August 2018.

The Audit Committee consists of James Russell Bruner, Richard Gerhardt, and Wesley A.

Taylor, the three independent board members.

The Company created an Audit Committee in 2018.

The Audit Committee consists of James Russell Bruner, Read Van de Water, and Richard Gerhardt, the three independent board members.

James Russell Bruner is an audit committee financial expert.

Changes To the Procedures by Which Security Holders May Recommend Nominees to the Company’s Board of Directors

On October 25, 2023, the Board adopted Amended and Restated By-laws (“By-laws”), which, among other things:

update and expand the By-laws to comply with the procedure and disclosure requirements applicable to nominations of directors by stockholders under Rule 14a-19 of the Exchange Act, and include changes in response to certain amendments to the General Corporation Law of the State of Delaware;

update and expand the requirements for the provision of background information and representations about stockholder director nominees to the Company including (i) completing a director’s questionnaire for any stockholder director nominee, and (ii) providing a written representation and agreement that such nominee is not and will not become a party to a voting arrangement relating to the Company that has not been disclosed to the Company and is not and will not become a party to any compensation, reimbursement or indemnification agreement in connection with such nominee’s service as a director other than as disclosed to the Company;

update and expand the procedure and requirements for inclusion of stockholder director nominees in the Company’s proxy statement, such as (i) the details to be included in the stockholder notice regarding the stockholder giving notice and any beneficial owner of such stockholder, (ii) the details to be included in the stockholder notice regarding the nominee for director, (iii) a requirement for updating and supplementing the stockholder notice so that the information provided is current and accurate, (iv) inclusion of such other information as the Company or the Board requires, (v) compliance by the stockholder giving notice with all requirements of the Exchange Act, and (vi) a requirement that the stockholder giving notice (or representative thereof) appear at the stockholder meeting;

change the timing for timely notice to stockholders for the annual meeting.

To be timely, a stockholder’s notice shall be delivered to the Company not earlier than the one hundred and twentieth (120th) day and not later than the ninetieth (90th) day prior to the first anniversary of the preceding year’s annual meeting;

provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder must be delivered not earlier the one hundred and twentieth (120th) day prior to the date of such annual meeting and not later than the later of the ninetieth (90th) day prior to the date of such annual meeting or if the public announcement of the date of such annual meeting is less than one hundred (100) days prior to the date of such annual meeting, the tenth (10th) day following the date on which the public announcement of the date of such annual meeting is first made by the Company.

Executive Compensation

2 unchanged sentences

Chief Executive Officer and President (3)

Former Chief Financial Officer (5)(6)

Stephanie Poe

Chief Financial Officer, Secretary, and Treasurer (4)

Represents salaries paid in 2023 and 2022 for services provided by each named executive officer serving in the capacity listed.

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

(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.

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

”All Other Compensation” includes Company matching contributions to the 401(k) plan in the amounts of $11,982 and $12,200 for the years 2023 and 2022, respectively.

(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.

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.

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.

”All Other Compensation” includes Company matching contributions to the 401(k) plan in the amounts of $6,292 for the year 2023.

Outstanding Equity Awards At Fiscal Year-End

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Market or Payout Value of Unearned Shares, Units or Other Rights that have not Vested

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.

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

Stephanie Poe

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 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.

Effective for 2024, all non-executive officer Directors receive, per annum, $40,000 in cash compensation and $15,000 in stock compensation for their services as Directors.

The Company does not pay any additional compensation to directors who are members of 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.

Fiscal 2023 Director Compensation

6 unchanged sentences

James Russell Bruner

Read Van de Water (3)

Richard Gerhardt

(1) All compensation for Ashley B.

All compensation for Mr.

Smith is reported in Item 11.

Executive Compensation.

Smith is employed by the Company.

No additional compensation paid related to his position as a director.

No compensation paid to Ms.

Van de Water as she was appointed as a director after 2023 meetings were held.

Employment Contracts and Termination of Employment and Change in Control Arrangements.

2 unchanged sentences

Smith serves as the Chief Executive Officer and President of the Company.

The Employment Agreement is for a term of three years commencing on November 11, 2020 (the “Effective Date”) through and including November 10, 2023 (the “Employment Period”), subject to early termination as provided therein.

The Employment Agreement was initially for a term of three years commencing on November 11, 2020 (the “Effective Date”) through and including November 10, 2023 (the “Employment Period”).

Commencing on the first anniversary of the Effective Date, and on each annual anniversary thereafter (such date and each annual anniversary thereof shall be hereinafter referred to as the “Renewal Date”), unless previously terminated, the Employment Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 180 days prior to the Renewal Date the Company shall give notice to Mr.

1 unchanged sentence

Smith shall give notice to the Company, that the Employment Period shall not be so extended.

The Employment Agreement provides for an initial base salary (“Base Salary”) of $300,000 per year, with an increase of no less than 3% per annum, based on advice provided by a compensation consultant in 2019.

The Employment Agreement provided for an initial base salary (“Base Salary”) of $300,000 per year, with an increase of no less than 3% per annum, based on advice provided by a compensation consultant in 2019.

Smith’s Base Salary shall be reviewed annually by the Compensation Committee of the Board of Directors (the “Compensation Committee”) pursuant to its normal performance review policies for senior executives and may be increased but not decreased.

22 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 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.

The Company entered into a Change of Control Severance Agreement, dated as of January 8, 2024, with Stephanie Poe, the Company’s Chief Financial Officer, Secretary and Treasurer.

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

Poe, upon Ms.

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

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

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

In addition, if Ms.

Poe sustains a Qualifying Termination (the Company terminates Ms.

Poe without Cause or Ms.

Poe leaves the Company for Good Reason (generally, for material diminution in Ms.

Poe’s Base Pay, or position, authority, duties or responsibilities, relocation of Ms.

Poe’s principal place of business to a location more than 30 miles from Ms.

Poe’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 Ms.

Poe 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 Ms.

Poe with Employee Benefits that are reasonably equivalent (and at the same cost to Ms.

Poe) to the Employee Benefits provided to Ms.

Poe immediately prior to the Termination Date and Ms.

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

In addition, if Ms.

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

Poe’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.

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

The Company has an 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.

2 unchanged sentences

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 is currently being compensated with respect to royalty payments in accordance with the employment agreement.

Smith is currently being compensated with respect to royalty payments in accordance with the agreement.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee is an officer or employee of the Company or has or had at any time any relationship with the Company that requires disclosure under Item 404 of Regulation S-K, except that Wesley A.

Taylor, who resigned from the Board of Directors in 2023, was Vice President of Administration of the Company from 1989 until January 2017.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth, as of March 13, 2023, certain information concerning ownership of the Company’s Common Stock by (i) each person known by the Company to own of record or be the beneficial owner of more than five percent (5%) of the Company’s Common Stock, (ii) named executive officers and Directors, and (iii) all Directors and Executive Officers as a group.

The following table sets forth, as of April 29, 2024, certain information concerning ownership of the Company’s Common Stock by (i) each person known by the Company to own of record or be the beneficial owner of more than five percent (5%) of the Company’s Common Stock, (ii) named executive officers and Directors, and (iii) all Directors and Executive Officers as a group.

Except as otherwise indicated, the stockholders listed in the table have sole voting and investment powers with respect to the shares indicated.

1 unchanged sentence

Owned (1) (3)

Smith (2)(4)(5)

Taylor (2)(6)

Richard Gerhardt (2)(6)

James Russell Bruner (2)

Read Van de Water (2)

Richard Gerhardt (2)

Stephanie Poe (2)

5 unchanged sentences

Smith, Ashley B.

Smith, Wesley A.

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

Krick and Ms.

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

Smith, James Russell Bruner, Matthew I.

Smith, Richard Gerhardt, and Mss.

Read Van de Water and Stephanie Poe is c/o Smith-Midland Corporation, P.O.

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

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.

Smith and Matthew I.

Smith are brothers and the sons of Rodney I.

Each of Rodney I.

Smith and Ashley B.

Smith, Ashley B.

Smith, and Matthew I.

Smith disclaims beneficial ownership of the other’s shares of Common Stock.

(5) Includes 1,666 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.

(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.

(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.

5th Street, Richmond, VA 23219.

Based on the Form 13-F filed with the Securities and Exchange Commission on February 14, 2022 by Thompson Davis & Co., Inc.

(10) Includes 3,833 unvested restricted shares granted pursuant to the Company's 2016 Equity Incentive Plan.

Address of holder is 9030 Stony Point Pkwy, Ste 100, Richmond, VA 23235.

Based on the Form 13-D filed with the Securities and Exchange Commission on March 7, 2024 by Thompson Davis & Co., Inc.

EQUITY COMPENSATION PLAN INFORMATION

1 unchanged sentence

Plan Category

(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights

(a) Number of securities to be issued upon exercise of outstanding options, warrants

(b) Weighted average exercise price of outstanding options, warrants and rights

(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(1)

(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column

Equity compensation plans approved by security holders

12 unchanged sentences

James Russell Bruner, Mr.

Richard Gerhardt, and Mr.

Richard Gerhardt, and Ms.

Read Van de Water.

The test utilized by the Company for the determination of independence is that under the NASDAQ listing standards.

2 unchanged sentences

Principal Accountant Fees and Services

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;

On August 23, 2023, the Audit Committee (the “Audit Committee”) of the Board of Directors of the Company, approved the engagement of BDO USA, P.C.

(“BDO”) as the Company’s independent registered public accounting firm for the Company’s fiscal year ending December 31, 2023.

The aggregate fees billed for each of the past two fiscal years for professional services rendered by BDO USA, P.C.;

Richmond, VA, the principal accountant for the audit of the Company for the year ended December 31, 2023 and FORVIS, LLP;

Richmond, VA, the principal accountant for the audit of the Company for the year ended December 31, 2022;

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 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.

The Audit Committee has established pre-approval policies and procedures with respect to the engagement of the Company’s independent accountants and audit and permissible non-audit services, provided by the independent accountants.

Such policies and procedures do not include the delegation of the responsibilities of the Audit Committee to management.

All of the services provided by BDO and FORVIS described below (in thousands) for 2023 and 2022, respectively, were pre-approved by the Audit Committee.

Audit-Related Fees

6 unchanged sentences

33-89312) declared effective by the Commission on December 13, 1995).

Bylaws (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 16, 2018).

Bylaws (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 31, 2023).

Specimen Common Stock Certificate (Incorporated by reference to the Company’s Registration Statement on Form SB-2 (No.

33-89312) declared effective by the Commission on December 13, 1995).

Collateral Assignment of Letters Patent, dated between the Company and Rodney I.

Smith (Incorporated by reference to the Company’s Registration Form SB-2 (No.

33-89312) declared effective by the Commission on December 13, 1995).

Employment Agreement, dated September 30, 2002, between the Company and Rodney I.

3 unchanged sentences

Smith (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008).

Commitment Letter, dated October 1, 2022, for the renewal of the equipment line of credit in the amount of $1,500,000 with Summit Community Bank (Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 3, 2022).

Commercial Line of Credit Agreement and Note, dated October 1, 2022, for the renewal of the line of credit in the amount of $5,000,000 with Summit Community Bank (Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 3, 2022).

Commitment Letter, dated November 27, 2023, for the renewal of the equipment line of credit in the amount of $1,500,000 with Summit Community Bank (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 2023).

Commercial Line of Credit Agreement and Note, dated October 1, 2023, for the renewal of the line of credit in the amount of $5,000,000 with Summit Community Bank (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 2023).

Promissory Note, dated October 11, 2019, in the amount of $2,228,000 issued by the Company to Summit Community Bank (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 17, 2019).

18 unchanged sentences

Commercial Real Estate Deed of Trust, dated February 10, 2022, issued by the Company in favor of Summit Community Bank (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 16, 2022).

Severance Agreement, dated January 8, 2024, between the Company and Stephanie Poe (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 25, 2024).

Company Insider Trading Policy.

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 BDO USA, P.C.

Consent of FORVIS, LLP.

Consent of BDO USA, LLP.

Certification of Chief Executive Officer.

2 unchanged sentences

Section 1350 as adapted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Company Clawback Policy.

XBRL Instance Document.

7 unchanged sentences

SMITH-MIDLAND CORPORATION

April 17, 2023

/s/ Ashley B.

1 unchanged sentence

(Principal Executive Officer)

April 17, 2023

/s/ Stephanie Poe

4 unchanged sentences

/s/ Ashley B.

April 17, 2023

/s/ Wesley A.

April 17, 2023

/s/ James Russell Bruner

April 17, 2023

James Russell Bruner

/s/ Matthew I.

Matthew Smith

/s/ Read Van de Water

Read Van de Water

/s/ Richard Gerhardt

April 17, 2023

Richard Gerhardt

5 unchanged sentences

and Subsidiaries

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

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

Reports of Independent Registered Public Accounting Firms (BDO USA, P.C., Richmond, VA, PCAOB ID#:243 and FORVIS, LLP , Richmond, VA, PCAOB ID#:

Consolidated Financial Statements

3 unchanged sentences

Consolidated Statements of Cash Flows

Summary of Significant Accounting Policies

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors

Shareholders and Board of Directors

Smith-Midland Corporation

Midland, Virginia

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.

We have audited the accompanying consolidated balance sheet of Smith-Midland Corporation (the “Company”) as of December 31, 2023, 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, 2023, 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

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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.

Such procedures included 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.

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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

(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 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 separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses of Accounts Receivable – Trade Billed

As described in Note 2 to the consolidated financial statements, the Company recognized an allowance for credit losses of $0.8 million for its consolidated accounts receivable trade - billed as of December 31, 2023.

The Company estimates expected credit losses by analyzing prior collection history with its customers, the related aging of past due balances, historical trends or past events, and forecasts of future economic conditions.

We identified the estimation of the allowance for credit losses of accounts receivable – trade billed as a critical audit matter.

The principal considerations for our determination are that the allowance for credit losses involves significant judgement in assessing certain inputs and assumptions, including historical experience and current customer specific conditions.

In addition, the Company identified a material weakness in its review of the estimate of the allowance for credit losses, which impacted the extent of our procedures.

Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters.

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

Testing the collectability of certain past due accounts receivable balances by obtaining and assessing the underlying support for the collectability of such amounts, including collections occurring subsequent to year-end, review of contract retention provisions and their application to invoicing, inspection of customer correspondence, and inquiries of financial management.

Performing a retrospective review over the allowance in prior periods as compared to actual write-offs.

/s/ BDO USA, P.C.

We have served as the Company’s auditor since 2023.

Richmond, Virginia

April 17, 2023

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

To the Shareholders and the Board of Directors

Smith-Midland Corporation

Midland, Virginia

Opinion on the Consolidated Financial Statements

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

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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 audits 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.

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.

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

Our audits 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 audits provide a reasonable basis for our opinion.

/s/BDO USA, LLP

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

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

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

/s/ FORVIS, LLP

We served as the Company’s auditor from 2022 to 2023.

Richmond, Virginia

March 31, 2022

April 17, 2023

Smith-Midland Corporation

1 unchanged sentence

Consolidated Balance Sheets

(in thousands, except share data)

(in thousands, except share and per share data)

Current assets

Accounts receivable, net

Trade - billed (less allowance for doubtful accounts of $ 781 and $ 437 ), including contract retentions

Trade - billed (less allowances of $ 806 and $ 781 ), including contract retentions

Trade - unbilled

6 unchanged sentences

Property and equipment, net

Deferred buy-back lease asset, net

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

See accompanying notes to consolidated financial statements.

Smith-Midland Corporation

1 unchanged sentence

Consolidated Balance Sheets

(in thousands, except share data)

(in thousands, except share and per share data)

LIABILITIES AND STOCKHOLDERS' EQUITY

5 unchanged sentences

Accrued income tax

Deferred buy-back lease obligation

Operating lease liabilities

7 unchanged sentences

Total liabilities

Commitments and contingencies

Commitments and contingencies (Note 9)

Stockholders’ equity

9 unchanged sentences

Total liabilities and stockholders' equity

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

See accompanying notes to consolidated financial statements.

Smith-Midland Corporation

8 unchanged sentences

Total revenue

Cost of goods sold

Cost of sales

General and administrative expenses

6 unchanged sentences

Gain on sale of assets

Gain on forgiveness of PPP loan

Other income, net

Total other income (expense), net

2 unchanged sentences

Basic and diluted earnings per share

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

See accompanying notes to consolidated financial statements.

Smith-Midland Corporation

4 unchanged sentences

Balance, December 31, 2021

Restricted stock issued

Vesting of restricted stock

Forfeiture of restricted stock

Balance, December 31, 2022

Adjustment for Adoption of ASU 2016-13

Vesting of restricted stock

Restricted stock forfeited

Issuance of restricted stock

Balance, December 31, 2023

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

See accompanying notes to consolidated financial statements.

Smith-Midland Corporation

2 unchanged sentences

(in thousands)

Year Ended December 31,

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

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Depreciation and amortization

Gain on forgiveness of PPP loan

(Gain) loss on sale of fixed assets

(Gain) loss on sale of investment securities

Allowance for doubtful accounts

Allowance for credit losses and doubtful accounts

Stock compensation

Inventory Reserve

Deferred taxes

13 unchanged sentences

Net cash provided by (used in) operating activities

See accompanying notes to consolidated financial statements.

Smith-Midland Corporation

3 unchanged sentences

Cash flows from investing activities

Purchases of investment securities available-for-sale

Sale of investment securities available-for-sale

Purchases of property and equipment

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Cash payments for income taxes

Non-cash transaction - PPP loan forgiveness

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

Capital expenditures in accounts payable

See accompanying notes to consolidated financial statements.

Smith-Midland Corporation

and Subsidiaries

Summary of Significant Accounting Policies

Notes to Consolidated Financial Statements

NATURE OF BUSINESS

Smith-Midland Corporation and its wholly-owned subsidiaries (the “Company”) develop, manufacture, license, sell and install precast concrete products and systems for the construction, transportation and utilities industries in the Mid-Atlantic, Northeastern, Midwestern and Southeastern regions of the United States.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

18 unchanged sentences

Office equipment

Smith-Midland Corporation

and Subsidiaries

Notes to Consolidated Financial Statements

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

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The fair value of each restricted stock grant is estimated to be the sales price of the common stock at the close of business on the day of the grant.

In addition, the Company accounts for forfeitures of awards as they occur.

Revenue Recognition

Product Sales - Over Time

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.

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 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.

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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.

Smith-Midland Corporation

and Subsidiaries

Notes to Consolidated Financial Statements

Product Sales - Point in Time

For certain product sales that do not meet the over time criteria, under Topic 606 the Company recognizes revenue when the product has been shipped to the destination in accordance with the terms outlined in the contract where a present obligation to pay exists and the customers have gained control of the product.

For certain product sales, that do not meet the over time criteria, the Company recognizes revenue when the product has been shipped to the destination in accordance with the terms outlined in the contract where a present obligation to pay exists and the customers have gained control of the product.

Accounts Receivable and Contract Balances

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.

The Company’s Accounts receivable trade – billed (in thousands), arising from Topic 606 is $ 13,685 , $ 13,702 , and $ 7,649 as of December 31, 2023, December 31, 2022, and December 31, 2021, respectively.

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).

The Company’s Accounts receivable trade – unbilled (i.e.

contract assets) balances (in thousands) are as follows:

Year Ended December 31,

Accounts receivable trade – unbilled, beginning of the period

Accounts receivable trade – unbilled, end of the period

Amounts invoiced in the period from amounts included at the beginning of the period

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.

The Company’s Customer deposits (i.e.

contract liabilities) balances (in thousands) are as follows:

Year Ended December 31,

Customer deposits, beginning of the period

Customer deposits, end of the period

Revenue recognized in the period from amounts included at the beginning of the period

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.

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.

At December 31, 2023, December 31, 2022, and December 31, 2021 accounts receivable included contract retentions (in thousands) of approximately $ 1,310 , $ 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 an allowance for estimated expected credit losses.

A considerable amount of judgment is required when determining expected credit losses.

Estimates of such expected losses are recorded based on historical losses experienced by the Company, current macro- and micro-economic conditions, and expected macro- and micro-economic conditions.

Additional reserves are accumulated when we believe a specific customer may not be able to meet its financial obligations due to deterioration in financial condition or credit rating.

Factors relevant to our assessment include our prior collection history with our customers, the related aging of past due balances, projections of credit losses based on historical trends or past events, and forecasts of future economic conditions.

At December 31, 2023 and December 31, 2022, total allowances for credit losses and doubtful accounts were $ 806 and $ 781 , respectively.

The rollforward of our allowance for credit losses (in thousands) for the year ended December 31, 2023, was as follows:

Balance at December 31, 2022

Cumulative Effect of Adoption of ASU 2016-13

Provision for Expected Credit Losses

Balance at December 31, 2023

Sale to Customer with a Buy-Back Guarantee - Lease Income

2 unchanged sentences

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 amount of sale proceeds equal to the buy-back obligation 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.

The Company capitalized the cost of the product on the consolidated balance sheet, and depreciated the value, less residual value, to cost of leasing revenue in “Cost of sales” over the estimated useful life of the asset.

The deferred revenue and deferred costs related to the buy-back agreement were fully amortized as of December 31, 2022 and, therefore, the accounting as described has no impact for the year ended December 31, 2023.

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.

The revenue was recognized in accordance with Topic 842, Leases .

Commitments and Contingencies for additional information regarding the amendment.

Barrier Rentals - Lease Income

Leasing fees are paid by customers at the beginning of the lease agreement and are recorded as deferred revenue.

The deferred revenue is then recognized each month as lease income for the duration of the lease, in accordance with Topic 842, Leases .

Leasing fees are paid by customers at the beginning of the lease agreement.

We record amounts billed to customers in excess of recognizable revenue, as deferred revenue on the balance sheet.

Revenue is recognized on a straight-line basis each month as lease income for the duration of the lease, in accordance with Topic 842, Leases .

Royalty Income

1 unchanged sentence

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.

The revenues from licensing agreements are recognized in the month earned.

Smith-Midland Corporation

and Subsidiaries

Notes to Consolidated Financial Statements

Shipping and Installation

33 unchanged sentences

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

For the year ended December 31, 2023, the Company derived 14 % of its revenue from one customer.

For the year ended December 31, 2022, no customer represented more than 10 % of the Company’s revenue.

As of December 31, 2023, two customers’ outstanding receivable balance each equaled 10 % of the total outstanding receivable balance.

As of December 31, 2022, no customer’s outstanding receivable balance exceeded 10 % of the total outstanding receivable balance.

Sales and Use Taxes

The Company excludes sales taxes as part of revenue, and includes use taxes on construction materials reported in cost of goods sold.

The Company excludes sales taxes as part of revenue, and includes use taxes on construction materials reported in cost of sales.

Segment Reporting

1 unchanged sentence

The Company currently operates in one operating and reportable business segment for financial reporting purposes.

Smith-Midland Corporation

and Subsidiaries

Notes to Consolidated Financial Statements

Risks and Uncertainties

On January 30, 2020, the World Health Organization ("WHO") announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the "COVID-19 outbreak") and on March 11, 2020, the WHO classified the COVID-19 outbreak as a pandemic.

Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce.

Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2022.

The Company sells products to highway contractors operating under government funded highway programs and other customers and extends credit based on an evaluation of the customer’s financial condition, generally without requiring collateral.

4 unchanged sentences

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

Management believes the allowance for doubtful accounts at December 31, 2022 is adequate.

Management believes the allowance for credit losses at December 31, 2023 is adequate.

However, actual write-offs may exceed the recorded allowance.

1 unchanged sentence

Fair Value of Financial Instruments

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 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 fair value of the Company’s long-term debt agreements were considered Level 2 liabilities.

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

13 unchanged sentences

No impairment losses have been recorded during the two years ended December 31, 2023.

Recently Adopted Accounting Pronouncement

Recent Accounting Pronouncements

The FASB issued ASU No.

1 unchanged sentence

GAAP with a methodology that reflects estimates of expected credit losses over their contractual life that are recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts..

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

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.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures, to require the disclosure of segment expenses if they are (i) significant to the segment, (ii) regularly provided to the chief operating decision maker (“CODM”), and (iii) included in each reported measure of a segment’s profit or loss.

Public entities will be required to provide this disclosure quarterly.

In addition, this ASU requires an annual disclosure of the CODM’s title and a description of how the CODM uses the segment’s profit/loss measure to assess segment performance and to allocate resources.

This guidance is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024, with early adoption permitted, and is required to be applied retrospectively to all prior periods presented in the financial statements.

The Company is evaluating the impact of the standard on its financial statements and related disclosures.

In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, Improvements to Income Tax Disclosures.

The guidance is intended to improve income tax disclosure requirements by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation and (ii) the disaggregation of income taxes paid by jurisdiction.

The guidance makes several other changes to the income tax disclosure requirements.

This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted, and is required to be applied prospectively with the option of retrospective application.

The Company is evaluating the impact of the standard on its financial statements and related disclosures.

Smith-Midland Corporation

and Subsidiaries

Notes to Consolidated Financial Statements

PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following (in thousands):

Land and land improvements

2 unchanged sentences

Rental equipment

Total property and equipment

accumulated depreciation and amortization

Property and equipment, net of accumulated depreciation and amortization

Depreciation expense and amortization (in thousands) was approximately $ 2,378 and $ 2,892 for the years ended December 31, 2023 and 2022, respectively.

3 unchanged sentences

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

net of $24 of deferred loan costs;

net of $ 22 and $ 24 of deferred loan costs, respectively;

collateralized by the related real property.

1 unchanged sentence

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;

net of $ 16 and $ 18 of deferred loan costs, respectively;

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 %;

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

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

net of $ 22 and $ 25 of deferred loan costs, respectively;

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

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

with monthly payments varying from $ 0.9 to $ 3.4 with annual interest rates between 2.90 % and 3.99 %.

A revolving line-of-credit evidenced by promissory note with the Bank, with the available amount of $5,000, maturing October 1, 2023, with interest only payments and an initial rate of 3.50% adjustable monthly (3.50% at December 31, 2022).

A revolving line of credit evidenced by promissory note with the Bank, with the available amount of $ 5,000 , maturing October 1, 2024 , which carries a variable interest rate of prime, and a floor of 3.50% and an initial rate of 8.50 % adjustable monthly (8.50% at December 31, 2023).

The amount available is based on the lower of the maximum $ 5,000 or eligible inventory and accounts receivable balances at the financial statement date.

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.

Key provisions of the line of credit require the Company (i) to obtain bank approval for capital expenditures in excess of $5,000 during the term of the loan and (ii) to obtain bank approval prior to its funding of any acquisition.

The line of credit is collateralized by a first lien position on the Company's accounts receivable, inventory, and equipment.

A guidance line of credit to purchase business equipment in an amount up to $ 1,500 , maturing October 1, 2024 , with an interest rate of at the Wall Street Journal prime rate plus 0.50% with a floor of 3.50% per annum.

The line of credit is collateralized by a first lien position on all equipment purchased under the line.

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 .

The PPP provides for loans to qualifying businesses, the proceeds of which may only be used for payroll costs, rent, utilities, mortgage interest, and interest on other pre-existing indebtedness.

The interest rate per the promissory note, dated April 16, 2020 and executed by the Company in favor of the Bank, was fixed at 1.00 % per annum, with principal and interest payments starting thirty (30) days after the amount of forgiveness is determined under section 1106 of the CARES Act.

The proceeds of the loan were required to be utilized pursuant to the requirements of the PPP, and all or a portion of the loan could be forgiven in accordance with the PPP applicable rules, regulations, and guidelines.

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

Notes Payable-less current maturities

The total notes payable balance is offset by debt issuance costs associated with securing the loans summarized above and are amortized straight line over the term of the related loan, which approximates the effective interest rate method.

The total unamortized costs (in thousands) as of December 31, 2023 is $ 60 and $ 68 as of December 31, 2022.

Under the loan covenants with the Bank, the Company is limited to annual capital expenditures of (in thousands) $ 5,000 and must maintain tangible net worth of $ 10,000 .

Smith-Midland Corporation

8 unchanged sentences

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

Smith has ceased providing executive officer services pursuant to such agreement, the agreement provides for an annual royalty fee of $ 99 payable as consideration for his assignment to the Company of all of his rights, title and interest in certain patents.

Smith has ceased providing executive officer services pursuant to such agreement, the agreement provides for an annual royalty fee of $ 99 thousand payable as consideration for his assignment to the Company of all of his 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.

4 unchanged sentences

Income tax expense is comprised of the following (in thousands):

Income tax expense

The provision for income taxes differs from the amount determined by applying the federal statutory tax rate to pre-tax income as a result of the following (in thousands):

3 unchanged sentences

Stock compensation

Deferred true-ups

Provision-to-return

CARES Act Benefit

PPP Loan Forgiveness

Income tax expense

Smith-Midland Corporation

4 unchanged sentences

Net operating loss carryforwards

Allowance for doubtful accounts

Allowance for credit losses and doubtful accounts

Accrued vacation

Deferred buy-back asset

Deferred income

Deferred revenue

Equity Compensation

Right-of-use asset

1 unchanged sentence

Deferred tax liabilities:

Deferred buy-back obligation

Prepaid expenses

6 unchanged sentences

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.

As of December 31, 2023 and 2022, the Company had approximately $ 5,061 and $ 4,217 (in thousands), 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.

8 unchanged sentences

STOCK COMPENSATION

On October 13, 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan, which allows the Company to grant up to 400,000 shares of restricted common stock of the Company to employees, officers, directors and consultants.

The grants may be in the form of restricted or performance shares of common stock of the Company.

2 unchanged sentences

The Company assumes no forfeitures as they are granted to key executives and board members.

Restricted stock activity during the years ended December 31, 2021 and 2022 is as follows:

Restricted stock activity during the years ended December 31, 2023 is as follows:

Number of Shares

2 unchanged sentences

Non-vested, December 31, 2023

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.

In 2021, the Compensation Committee and Board of Directors approved a Long-Term Incentive Plan with respect to the grant of stock pursuant to the 2016 Equity Incentive Plan.

The final equity amount earned is based on continued service through the three-year performance period ending on December 31, 2023, Board discretion, and performance results.

The actual number of performance-based shares of common stock of the Company, if any, earned by the award recipients is determined 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.

As of the date of these financial statements, the final awarded amount has not been determined, however the stock compensation cost was recognized over the requisite performance/service period using the straight-line method and based on the probable number of shares to be awarded

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

Stock compensation (in thousands) for the years ended December 31, 2022 and 2021 were approximately $ 505 and $ 531 , respectively, based upon the value at the date of grant.

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

Stock compensation expense (in thousands) for the years ended December 31, 2023 and 2022 was approximately $ 375 and $ 505 , respectively, based upon the value at the date of grant.

The Company recognized tax benefits (in thousands) of $ 9 and $ 53 related to stock compensation expense for the years ended December 31, 2023 and 2022, respectively.

The fair value of the shares vested (in thousands) for the years ended December 31, 2023 and 2022 was $ 221 and $ 570 , respectively, based upon the value at the date of vesting.

There was $ 34 thousand of unrecognized compensation cost related to the non-vested restricted stock as of December 31, 2023 and will be recognized ratably over a 21 month period.

All non-vested restricted vests and is earned based on continued service of the award recipients.

Smith-Midland Corporation

5 unchanged sentences

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 deferred buy-back lease asset and obligation were fully reduced as the Company picked up the original 210,000 linear feet throughout 2022.

As of December 31, 2023, the Company has picked up all barrier related to this purchase agreement and does not expect to incur any additional costs related to this purchase.

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

3 unchanged sentences

Basic earnings per share

Income available to common shareholder

Income available to common shareholders

Weighted average shares outstanding

1 unchanged sentence

Diluted earnings per share

Income available to common shareholder

Income available to common shareholders

Weighted average shares outstanding

2 unchanged sentences

Diluted earnings per share

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

There was no restricted stock or other common stock equivalents excluded from the diluted earnings per share calculation for the years ended December 31, 2023 and December 31, 2022.

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