SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1997
Commission File Number 1-13752
SMITH-MIDLAND CORPORATION
-------------------------
(Name of Small Business Issuer in its Charter)
Delaware 54-1727060
- ------------------------------- ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Route 28, P.O. Box 300, Midland, Virginia 22728
(Address of Principal Executive Offices) (Zip Code)
(540) 439-3266
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Exchange Act:
Name of Each Exchange on
Title of Each Class Which Registered
- ------------------- ------------------------
Common Stock, $.01 par value per share Boston Stock Exchange
Redeemable Common Stock Purchase Warrants Boston Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.01 par value per share
--------------------------------------
(Title of Class)
Redeemable Common Stock Purchase Warrants
-----------------------------------------
(Title of Class)
<PAGE>
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
The Issuer's net sales and revenues for its most recent fiscal year are
$12,005,000.
The aggregate market value of the shares of Common Stock, held by
non-affiliates, based upon the average of the closing bid and asked prices for
such stock on March 26, 1998, was approximately $3,879,000. As of March 26,
1998, the Company had outstanding 3,044,798 shares of Common Stock, $.01 par
value per share.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-KSB
Annual Report in which
Document Document is Incorporated
- -------- ------------------------
Definitive Proxy Statement for the Part III
Registrant's Annual Meeting of Stockholders
for the fiscal year ended December 31, 1997,
to be filed pursuant to Regulation 14A.
-ii-
<PAGE>
PART I
Item 1. Business
General
Smith-Midland Corporation (the "Company") invents, develops,
manufactures, markets, leases, licenses, sells, and installs a broad array of
precast concrete products for use primarily in the construction, transportation
and utilities industries. The Company's customers are primarily general
contractors and federal, state and local transportation authorities located in
the Mid-Atlantic and Northeastern regions of the United States. The Company's
operating strategy has involved producing innovative and proprietary products,
including Slenderwall(TM), a patent-pending, lightweight, energy efficient
concrete and steel exterior wall panel for use in building construction; J-J
Hooks(TM) Highway Safety Barrier, a patented, positive-connected highway safety
barrier; Sierra Wall, a sound barrier primarily for roadside use; and
Easi-Set(R) transportable concrete buildings, also patented. In addition, the
Company produces other generic highway sound barriers, utility vaults, farm
products such as cattleguards, and water and feed troughs, and custom order
precast concrete products with various architectural surfaces.
The Company completed an initial public offering ("IPO") of its Common
Stock in December 1995, from which the Company received net proceeds of
approximately $2,600,000. In January 1996, the underwriters of the IPO executed
their overallotment option in full, from which the Company received an
additional $396,000 of net proceeds.
Market
The Company's market primarily consists of general contractors
performing public and private construction contracts, including the construction
of residential housing; commercial buildings; public and private roads and
highways; airports; municipal utilities; and federal, state, and local
transportation authorities, primarily located in the Mid-Atlantic and
Northeastern states. The Company also licenses its proprietary products to
precast concrete manufacturers nationwide and in Puerto Rico, Canada, Belgium,
and Spain. The Company, in conjunction with the establishment of its
Slenderwall(TM) exterior cladding system, intends to expand the market in which
it currently competes. The Company believes that the annual market for exterior
cladding in the Mid-Atlantic and Northeast region is approximately $500 million
and that the nationwide annual market for exterior cladding products exceeds $2
billion.
The precast concrete products market is affected by the cyclical nature
of the construction industry. In addition, the demand for construction varies
depending upon weather conditions, the availability of financing at reasonable
interest rates, overall fluctuations in the national and regional economies,
past overbuilding, labor relations in the construction industry, and the
availability of material and energy supplies. A substantial portion of the
Company's business is derived from local, state, and federal building projects,
which are further dependent upon budgets and, in many cases, voter-approved
bonds.
3
<PAGE>
Products
Precast concrete products are cast and set at a manufacturing facility
and delivered to a site for installation, as contrasted to ready-mix concrete,
which is produced in a "batch plant," put into a mixer truck where it is mixed
thoroughly and delivered to a construction site to be poured and set at the
site. Precast concrete products are used primarily as parts of buildings or
highway structures, and may be used architecturally, as in a decorative wall of
a building, or structurally. Structural uses include building walls, frames,
floors, or roofs. The Company currently manufactures and sells a wide variety of
products for use in the construction, transportation and utility industries.
Slenderwall(TM) Lightweight Construction Panels
Each Slenderwall(TM) system is a prefabricated, energy-efficient,
lightweight exterior cladding system that is offered as a cost-effective
alternative to the traditional, piecemeal construction of the exterior walls of
buildings. The Company's Slenderwall(TM) system combines the essential
components of a wall system into a single unit ready for interior dry wall
mounting immediately upon installation. The base design of each Slenderwall(TM)
panel consists of a galvanized or stainless steel stud frame with an exterior
sheath of approximately two-inch thick, steel-reinforced, high-density, precast
concrete, with various available architectural surfaces. The exterior concrete
sheath is attached to the interior frame by strategically placed epoxy coated
steel connectors that suspend the exterior concrete approximately one-half inch
away from the steel frame.
Slenderwall(TM) panels are approximately one-half the weight of brick
walls of equivalent size, permanence and durability. This lighter weight
translates into reduced construction costs resulting from less onerous
structural and foundation requirements as well as lower shipping costs.
Additional savings result from Slenderwall's(TM) reduced installation time and
ease of erection, and from the use of smaller cranes for installation.
The Company custom designs and manufactures each Slenderwall(TM)
exterior cladding system. The exterior of the Slenderwall(TM) systems can be
produced in a variety of attractive architectural finishes, such as concrete,
exposed stone, granite or thin brick. Management has received a positive
reaction to Slenderwall(TM) systems in the marketplace for use in new
construction and replacement projects because it is a cost-effective, efficient,
and attractive wall system. As of March 25, 1998 the Company has a backlog for
Slenerwall(TM) systems totaling approximately $2,343,000.
Easi-Set(R) Sierra Wall
The Easi-Set(R) Sierra Wall (the "Sierra Wall") combines the strength
and durability of precast concrete with a variety of finishes to provide an
effective and attractive sound and sight barrier for use around residential,
industrial, and commercial properties and alongside highways. With additional
reinforcement, the Sierra Wall can also be used as a retaining wall to retain
earth in both highway and residential construction. The Sierra Wall is typically
constructed of four inch thick, steel-reinforced concrete panels that are
securely joined at an integral column by a tongue and groove connection system.
This tongue and groove connection system makes the Sierra Wall easy to install
and move if boundaries change or highways are relocated after the completion of
a project.
4
<PAGE>
The Company custom designs and manufactures each Sierra Wall to conform
to the specifications provided by the contractor. The width, height, strength,
and exterior finish of each wall varies depending on the terrain and
application. In addition, the Company offers increased noise abatement benefits
through the use of DuriSol(R), an optional, durable and patented
sound-absorbing, material that can be cast onto the exterior of the Sierra Wall.
In January 1996, the Company entered into a licensing agreement with DuriSol,
Inc. of Ontario, Canada, ("DuriSol") permitting the Company to utilize the
DuriSol(R) sound-absorbing technology until January 20, 1999.
Under the Company's licensing agreement with DuriSol, the Company has
an exclusive license to use DuriSol(R) in Virginia and a right of first refusal
for any new proprietary products developed by DuriSol. The Company pays a
royalty to DuriSol equal to $.25 per square foot of product manufactured using
DuriSol(R).
The Sierra Wall is used for residential purposes, such as privacy walls
between homes, security walls or windbreaks, and for industrial or commercial
purposes, such as to screen and protect shopping centers, industrial operations,
institutions or highways. The variety of available finishes enables the Company
to blend the Sierra Wall with local architecture, creating an attractive as well
as functional barrier.
Easi-Set(R) J-J Hooks(TM) Highway Safety Barrier
The Easi-Set(R) J-J Hooks(TM) highway safety barrier (the "J-J
Hooks(TM) Barrier") is a patented, positively connected, safety barrier that the
Company sells, rents, delivers, installs and licenses for use on roadways to
separate lanes of traffic, either temporarily for construction purposes or
permanently for traffic control. Barriers are deemed to be positively connected
when the connectors on each end of the barrier sections are interlocked with one
another without the use of a separate locking device. The primary advantage of a
positive connection is that a barrier with such a connection can withstand
vehicle crashes at higher speeds without separating. The Federal Highway
Administration (the "FHWA") now recommends that states use only positively
connected barriers.
The proprietary quality of the J-J Hooks(TM) Barrier is the design of
its positive connection. Protruding from each end of a J-J Hooks(TM) Barrier
section is a fabricated bent steel connector, rolled in toward the end of the
barrier (it resembles the letter "J" when viewed from directly above). The
connector protruding from each end of the barrier is rolled identically so that
when one end of a barrier faces the end of another, the resulting "hooks" face
each other. To connect one section of a J-J Hooks(TM) Barrier to another, a
contractor merely positions the hook of an elevated section of the barrier above
the hook of a set section and lowers the elevated section into place. The
positive connection is automatically engaged.
The Company believes that the J-J Hooks(TM) Barrier connection design
is superior to those of earlier highway safety barriers that were positively
connected through the "eye and pin" technique. Barriers incorporating this
technique have eyes or rings protruding from each end of the barrier, which must
5
<PAGE>
be aligned during the setting process. Once set, a crew inserts pins through the
eyes and bolts the barrier sections together. Compared to this technique, the
J-J Hooks(TM) Barrier is easier and faster to install, and remove, requires a
smaller crew and eliminates the need for loose hardware to make the connection.
In November 1990, the FHWA approved the J-J Hooks(TM) Barrier for use
on federally-aided highway projects following the successful completion of crash
testing based on National Cooperative Highway Research Program criteria. The J-J
Hooks(TM) Barrier has also been approved for use in state funded projects by 32
states, plus Washington, D.C. and Puerto Rico. The Company is in various stages
of the application process in 17 states and believes that approval in most of
the states will be granted; however no assurance can be given that approval will
be received from any or all of the remaining states or that such approval will
result in the J.J. Hooks(TM) Barrier being used in such states. In addition, the
J-J Hooks(TM) Barrier has been approved by the appropriate authorities for use
in the countries of Spain, Belgium, Germany and Chile.
Easi-Set(R) Precast Building and Easi-Span(TM)
The Easi-Set(R) Precast Building is a transportable, prefabricated,
single-story, concrete utility building designed to be adaptable to a variety of
uses ranging from housing communications operations, traffic control systems,
mechanical and electrical stations, to inventory or supply storage, restroom
facilities or kiosks. The Easi-Set(R) Precast Building is available in a variety
of exterior finishes and in five standard sizes, or it can be custom sized. The
roof and floor of each Easi-Set(R) Precast Building are manufactured using the
Company's patented post-tensioned system, which helps seal the buildings against
moisture. As a freestanding unit, the Easi-Set(R) Precast Building requires no
poured foundations or footings and can be easily installed within a few hours.
After installation the building can be moved, if desired, and reinstalled in a
new location.
The Company recently introduced Easi-Span(TM), a line of expandable
precast concrete buildings. Easi-Span(TM) is identical to and incorporates the
technology of the Easi-Set(R) Precast Building, but is available in larger sizes
and, through its modular construction, can be combined in varied configurations
to permit expansion capabilities.
The Company has sold its Easi-Set(R) Precast Building and Easi-Span(TM)
for the following uses:
o Communications Operations -- to house fiber optics
regenerators, switching stations and microwave transmission
shelters, cellular phone sites, and cable television repeater
stations.
o Government Applications -- to federal, state and local
authorities for uses such as weather and pollution monitoring
stations; military storage, housing and operations; park
vending enclosures; rest rooms; kiosks; traffic control
systems; school maintenance and athletic storage; airport
lighting control and transmitter housing; and law enforcement
evidence and ammunition storage.
6
<PAGE>
o Utilities Installations -- for electrical switching stations
and transformer housing, gas control shelters and valve
enclosures, water and sewage pumping stations, and storage of
contaminated substances or flammable materials which require
spill containment.
o Commercial and Industrial Locations -- for electrical and
mechanical housing, cemetery maintenance storage, golf course
vending enclosures, mechanical rooms, restrooms, emergency
generator shelters, gate houses, automobile garages, hazardous
materials storage, food or bottle storage, animal shelters,
and range houses.
Easi-Set(R) Utility Vault
The Company produces a line of precast concrete underground utility
vaults ranging in size from 36 to 702 cubic feet. Each Easi-Set(R) utility vault
normally comes with a manhole opening on the top for ingress and egress and
openings around the perimeter, in accordance with the customer's specifications,
to access water and gas pipes, electrical power lines, telecommunications
cables, or other such media of transfer. The utility vaults may be used to house
equipment such as cable, telephone or traffic signal equipment, and for
underground storage. The Company also manufactures custom-built utility vaults
for special needs.
Sources of Supply
All of the raw materials necessary for the manufacture of the Company's
products are available from multiple sources. To date, the Company has not
experienced significant delays in obtaining materials and believes that it will
continue to be able to obtain required materials from a number of suppliers at
commercially reasonable prices.
Licensing
The Company presently grants licenses, through it's wholly-owned
subsidiary Easi-Set Industries, for the manufacturing and distribution rights of
certain proprietary products, such as the J-J Hooks(TM) Barrier and Easi-Set(R)
Precast Building, and certain non-proprietary products, such as the Company's
cattleguards, and water and feed troughs. Generally, licenses are granted for
defined geographic regions, and depending on the size, character and location of
the territory granted, the Company receives an initial one-time license
acquisition and training fee ranging from approximately $20,000 to $50,000.
License royalties vary depending on the product licensed, but the range is
typically between 4% to 6% of the sales of the licensed product. In addition,
Easi-Set(R) Precast Building licensees normally pay the Company a flat monthly
fee for co-op advertising and promotion programs through which the Company
produces and distributes advertising materials and promotes the licensed
products.
The Company has entered into 22 licensing agreements in the United
States, and has established at least one licensee in each of Puerto Rico,
Canada, Belgium and Spain and sub-licensees in Portugal and Chile.
7
<PAGE>
The Company is currently negotiating several new license arrangements
and, although no assurance can be given, expects to increase its licensing
activities. In addition, the Company is developing a licensing program for its
Slenderwall(TM) exterior cladding system.
Marketing and Sales
The Company uses an in-house sales force and, to a lesser extent,
independent sales representatives to market its precast concrete products
through trade show attendance, sales presentations, advertisements in trade
publications, and direct mail to end users.
The Company has also established a cooperative advertising program in
which the Company and its licensees combine resources to promote certain precast
concrete products. Licensees pay a flat monthly fee and the Company pays any
additional amounts required to advertise the products across the country.
Although the Company advertises nationally, the Company's marketing efforts are
concentrated on the region within a 250 mile radius from its facilities, which
includes most of Virginia, Delaware, Maryland, North Carolina, South Carolina,
and parts of Pennsylvania, New York, New Jersey and West Virginia.
The Company's sales result primarily from the submission of estimates
or proposals to general contractors who then include the estimates in their
overall bids to various government agencies, and other end users that solicit
construction contracts through a competitive bidding process. In general, these
contractors solicit and obtain their construction contracts by submitting the
most attractive bid to the party desiring the construction. The Company's role
in the bidding process is to provide estimates to the contractors desiring to
include the Company's products or services in the contractor's bid. If a
contractor who accepts the Company's bid is selected to perform the
construction, the Company provides the agreed upon products or services. In many
instances, the Company provides estimates to more than one of the contractors
bidding on a single project. The Company occasionally negotiates with and sells
directly to end users.
Competition
The precast concrete industry is highly competitive and consists of a
few large companies and many small to mid-size companies, several of which have
substantially greater financial and other resources than the Company.
Nationally, the precast concrete market is dominated by several large companies.
However, due to the weight and costs of delivery of precast concrete products,
competition in the industry tends to be limited by geographical location and
distance from the construction site and is fragmented with numerous
manufacturers in a large local area.
The Company believes that the principal competitive factors for its
products are price, durability, ease of use and installation, speed of
manufacture and delivery time, ability to customize, FHWA and state approval,
and customer service. The Company believes that its plants in both Midland,
Virginia and Reidsville, North Carolina compete favorably with respect to each
of these factors in the Northeast and Mid-Atlantic regions of the United States.
Finally, the Company believes it offers a broad range of products that are
unique and technologically superior to competitive products.
8
<PAGE>
Patents and Proprietary Information
The Company holds U.S. and Canadian patents for the J-J Hooks(TM)
Barrier and the Easi-Set(R) Precast Building, and a U.S. patent for the
Slenderwall(TM) exterior cladding system. The European patent for J-J Hooks(TM)
Barrier was allowed in December 1997 and has been registered in eleven European
countries. The earliest of the issued patents considered material to the
Company's business expires in 2001 with a new patent pending. The Company also
owns two U.S. registered trademark and licenses the rights to another:
Easi-Set(R), Smith Cattleguard(R) and DuriSol(R), respectively. The Company
licenses the technology used in DuriSol(R) products pursuant to an agreement
that expires on January 20, 1999.
While the Company intends to vigorously enforce its patent rights
against infringement by third parties, no assurance can be given that the
patents or the Company's patent rights will be enforceable or provide the
Company with meaningful protection from competitors or that its patent
applications will be allowed. Even if a competitor's products were to infringe
patents held by the Company, enforcing the patent rights in an enforcement
action would be very costly, and would divert funds and resources that otherwise
could be used in the Company's operations. No assurance can be given that the
Company would be successful in enforcing such rights, that the Company's
products or processes do not infringe the patent or intellectual property rights
of a third party, or that if the Company is not successful in a suit involving
patents or other intellectual property rights of a third party, that a license
for such technology would be available on commercially reasonable terms, if at
all.
Government Regulation
The Company frequently supplies products and services pursuant to
agreements with general contractors who have entered into contracts with federal
or state governmental agencies. The successful completion of the Company's
obligations under such contracts is often subject to the satisfactory inspection
or approval of such products and services by a representative of the contracting
agency. Although the Company endeavors to satisfy the requirements of each such
contract to which it is a party, no assurance can be given that the necessary
approval of its products and services will be granted on a timely basis or at
all and that the Company will receive any payments due to it. Any failure to
obtain such approval and payment may have a material adverse effect on the
Company's business.
The Company's operations are subject to extensive and stringent
governmental regulations including regulations related to the Occupational
Safety and Health Act (OSHA) and environmental protection. The Company believes
that it is substantially in compliance with all applicable regulations. The cost
of maintaining such compliance is not considered by the Company to be
significant.
The Company's employees in its manufacturing division operate
complicated machinery that may cause substantial injury or death upon
malfunction or improper operation. The Company's manufacturing facilities are
subject to the workplace safety rules and regulations of OSHA. The Company
believes that it is in compliance with the requirements of OSHA.
During the normal course of its operations, the Company uses and
disposes of materials, such as solvents and lubricants used in equipment
maintenance, that are classified as hazardous by government agencies that
regulate environmental quality. The Company attempts to minimize the generation
9
<PAGE>
of such waste as much as possible, and to recycle such waste where possible.
Remaining wastes are disposed of in permitted disposal sites in accordance with
applicable regulations.
A Phase I Environmental Site Assessment of the Company's Midland
facility was completed in January, 1997. Only two minor recommendations were
made as a result of the survey. These were addressed and corrected.
In the event that the Company is unable to comply with the OSHA or
environmental requirements, the Company could be subject to substantial
sanctions, including restrictions on its business operations, monetary liability
and criminal sanctions, any of which could have a material adverse effect upon
the Company's business.
Employees
As of March 20, 1998, the Company had 140 full-time and 3 part-time
employees, 121 of which are located at the Company's Midland facility, and 22 of
which are located at the Company's facility located in Reidsville, North
Carolina. Of the 143 employees, nine are executive officers or managers, eight
are responsible for sales and marketing, 113 are in manufacturing, and thirteen
are administrative personnel. None of the Company's employees is represented by
labor organizations and the Company is not aware of any activities seeking such
organization. The Company considers its relationships with its employees to be
satisfactory.
Item 2. Description of Properties
Facilities
The Company operates two manufacturing facilities. The primary
manufacturing operations are conducted in a 28,000 square foot manufacturing
plant on approximately 22 acres of land in Midland, Virginia, of which
approximately 19 acres are owned by the Company and three acres are leased from
Rodney I. Smith, the Company's President, at an annual rental rate of $6,000.
This area houses two concrete mixers, and one concrete blender. The plant also
includes an environmentally controlled casting area, two batch plants, a form
fabrication shop, a welding and metal fabrication facility, a carpentry shop,
and a quality control center. In addition, the Company conducts outdoor concrete
pouring and curing operations. The Company's Midland facility also includes a
large storage yard for inventory and stored materials.
In addition, the Company carries out administration, research and
development, sales and marketing, and licensing operating in a 4,500 square foot
office building located on its Midland property. The Company also owns 19 acres
of undeveloped industrial property in Midland, not adjacent to the manufacturing
facility.
The Company's second manufacturing facility is located in Reidsville,
North Carolina on five acres of owned land and includes an 8,000 square foot
manufacturing plant and administrative offices.
10
<PAGE>
The Company believes that its present facilities are adequate for its
current needs, however, the Company currently performs a portion of its concrete
pouring and curing processses on uncovered, outdoor manufacturing areas. This
processing is adversely affected by wet and cold weather. Management is going to
bring these operations under roof in 1998, thereby increasing efficiency.
Item 3. Legal Proceedings
In late 1995, the Company filed four separate informal claims totaling
approximately $502,000 for damages and costs incurred as a result of
specification, policy and operating changes to contracts primarily instituted by
the State of Maryland, including the then newly issued "Noise Barrier Acceptance
Criteria," all of which were undertaken after the award of the contracts and
after unit production in accordance with the contracts was virtually complete.
In 1996, the Company filed additional claims against the State of Maryland
related to the same contracts in the amount of $578,500 which brought the amount
of the total claims to $1,080,500. In early 1996, the Company received several
counterclaims from the State of Maryland. All amounts due to each party are
currently in dispute. The Company has considered the counterclaims in estimating
the recoverability of its claims and certain trade accounts receivable at
December 31, 1997. (See footnote six in the accompanying consolidated financial
statements).
The Company is not presently involved in any other litigation of a
material nature.
Item 4. Submission of Matters to Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended December 31, 1997, through the
solicitation of proxies or otherwise.
11
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock has traded on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") under the symbol "SMID"
and on the Boston Stock Exchange ("BSE") under the symbol "SMC" since December
13, 1995. As of March 26, 1998, there were approximately 52 record holders of
the Company's Common Stock. Management believes there are approximately 750
beneficial owners of the Company's Common Stock.
The following table sets forth the high and low sale prices for the
Company's Common Stock as reported by NASDAQ for the periods indicated. Such
quotations represent interdealer quotations without adjustment for retail
markups, markdowns or commissions and may not represent actual transactions.
Sale
High Low
---- ---
1996
First Quarter $6 17/32 $4 19/32
Second Quarter $6 5/8 $5 1/4
Third Quarter $6 5/8 $3 1/8
Fourth Quarter $3 5/8 $1
1997
First Quarter $2 1/8 $1
Second Quarter $1 3/8 $ 11/16
Third Quarter $1 15/32 $ 9/16
Fourth Quarter $1 3/16 $ 3/4
1998
First Quarter (through March 26, 1998) $1 19/32 $ 3/4
The Company is currently being reviewed for compliance with the Nasdaq
SmallCap Market eligibility requirements. As of December 31, 1997 the Company
was in compliance with all current applicable requirements and the Company
believes that it will continue to meet all the current requirements.
Dividends
The Company has not paid dividends on its Common Stock since its
inception and has no intention of paying any dividends to its stockholders in
the foreseeable future. The Company currently intends to reinvest earnings, if
any, in the development and expansion of its business. The declaration of
dividends in the future will be at the election of the Board of Directors and
will depend upon the earnings, capital requirements and financial position of
the Company, general economic conditions and other pertinent factors. The
Company's current loan agreement with Riggs Bank, N.A. prohibits the payment of
dividends to stockholders without the bank's prior written consent, except for
dividends paid in shares of the Company's Common Stock.
12
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Company (including the Notes thereto)
included elsewhere in this report.
General
The Company generates revenues primarily from the sale, shipping,
licensing, leasing and installation of precast concrete products for the
construction, utility and farming industries. The Company's operating strategy
has involved producing innovative and proprietary products, including
Slenderwall(TM), a patent-pending, lightweight, energy efficient concrete and
steel exterior wall panel for use in building construction; J-J Hooks(TM)
Highway Safety Barrier, a patented, positive-connected highway safety barrier;
Sierra Wall, a sound barrier primarily for roadside use; and transportable
concrete buildings. In addition, the Company produces utility vaults, farm
products such as cattleguards, and water and food troughs, and custom order
precast concrete products with various architectural surfaces.
Results of Operations
Year ended December 31, 1997 compared to the year ended December 31,
1996
The Company's operations for 1997 resulted in a profit of $263,803, or
$0.09 per share, representing an increase in profits of $562,268 when compared
to a loss in 1996 of $(298,465), or $(0.10) per share.
For 1997, the Company had total revenue of $12,004,897 compared to
total revenue of $11,410,510 in 1996, an increase of $594,387, or 5.2%. Total
product sales decreased slightly to $10,102,121 in 1997, compared to $10,146,925
in 1996. Shipping and installation revenue increased to $1,902,776 in 1997 from
$1,263,585 in 1996, an increase of $639,191, or 50.6%, primarily attributed to
an increase in highway sound barrier installation contracts.
Royalty revenue increased $23,456 or 9.8% from $238,801 in 1996 to
$262,257 in 1997. The increase was principally attributed to an increase in
royalty fees earned on production of Easi-Set(R) precast buildings.
Total cost of goods sold for 1997 was $9,090,998 compared to $8,525,266
in 1996, an increase of $565,732. Total cost of goods sold as a percentage of
total revenue increased from 74.7% in 1996 to 75.7% in 1997. The percentage
increase was primarily attributed to a sales mix shift in 1997 towards less
profitable highway sound barrier products.
13
<PAGE>
General and administrative expenses decreased $440,215 to $1,915,510 in
1997 from $2,355,725 in 1996. The decrease was primarily the result of expenses
incurred in 1996 relating to increased compensation, professional fees
associated with being a publicly traded company in December, 1995, staff time
and professional fees incurred in connection with filing of claims with the
State of Maryland relating to contract disputes, increased expenditures related
to the licensing activities conducted by Easi-Set Industries, Inc., and
increased costs related to the introduction of the Slenderwall(TM) systems.
Profitability initiatives begun in 1996 to lower overall expenses also
contributed to the decrease. Selling and marketing expenses in 1997 remained
relatively flat with the prior year.
Interest expense and loan fees decreased to $372,118 in 1997 from
$468,820 in 1996, a decrease of $96,702, or 20.6%. The decrease was primarily
due to a reduction in both the weighted average interest rates paid and the
retirement of debt.
As a result of cumulative net operating loss carryforwards of
approximately $2,124,000 available to the Company as of January 1, 1997, no
income tax expense was recorded for 1997.
Liquidity and Capital Resources
During 1997, the Company increased net cash provided by operations over
the prior year by $954,889, to net cash provided of $526,004 in 1997 compared to
the absorption of net cash of $428,885 in 1996. The increase in net cash
provided by operations during 1997 was primarily attributed to increases in net
income, trade payables and customer deposits. The net increase in cash provided
by operations was partially offset by increases in accounts receivable.
Capital spending increased to $524,232 in 1997, from $371,785 in 1996
as the Company implemented programs to improve manufacturing efficiencies as
well as overall plant capacity and yard storage capacity.
As a result of the Company's debt burden, the Company is especially
sensitive to changes in the prevailing interest rates. Increases in such
interest rates may materially and adversely affect the Company's ability to
finance its operations either by increasing the Company's cost to service its
current debt, or by creating a more burdensome refinancing environment.
Management intends to refinance this debt as it becomes due. The Company
currently has an outstanding letter of intent with a bank for the placement of a
20 year commercial mortgage and equipment loan, the proceeds of which will be
used in part, to repay the Company's existing debt with Myers' Trust and Riggs
Bank. The letter of intent also includes a line-of-credit and mortgage for plant
expansion and new equipment financing. In addition, the Company has agreed in
principle with the Trustee for the Myers' Trust debt, of which $623,252 was
outstanding at December 31, 1997, to extend the due dates from dates ranging
from July 26, 1997 through November 26, 1997 to June 26, 1998. The Company has
also received an extension to July 8th from Riggs Bank for a note payable, of
which $935,000 was outstanding at December 31, 1997.
14
<PAGE>
The Company's cash flow from operations is affected by production
schedules set by contractors, which generally provide for payment 45 to 75 days
after the products are produced. This payment schedule has resulted in liquidity
problems for the Company because it must bear the cost of production for its
products before it receives payment. Although no assurance can be given, the
Company believes that anticipated cash flow from operations and existing credit
facilities will be sufficient to finance the Company's operations for at least
the next 12 months. In the event cash flow from operations and existing credit
facilities are not adequate to support operations, the Company is currently
investigating alternative sources of short-term financing.
The Company has formed a team to address the affect of the year 2000 on
the Company's systems and operations. The Company expects that costs incurred in
the preparation for the year 2000 will not have a significant impact on the
Company's cash flow or results of operations. The Company plans to be fully Y2K
compliant by the fourth quarter of 1998.
Seasonality
The Company performs a portion of its concrete pouring and curing processes on
uncovered, outdoor manufacturing areas. During the winter months, cold or
adverse weather causes a slowdown or cessation of these outdoor production
activities, thereby severely reducing the Company's production capacity.
Management intends to bring these operations under cover in 1998. In addition,
the Company services the construction industry primarily in areas of the United
States where construction activity is inhibited by adverse weather during the
winter. As a result, the Company experiences reduced revenues from December
through March and realizes the substantial part of its revenues during the other
months of the year. The Company typically experiences lower profits, or losses,
during the winter months, and must have sufficient working capital to fund its
operations at a reduced level until the spring construction season. The failure
to generate or obtain sufficient working capital during the winter may have a
material adverse effect on the Company.
Inflation
To date, management believes that the Company's operations have not
been materially affected by inflation.
Recent Accounting Pronouncements
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS 128 provides
a different method for calculating earnings per share than was previously used
in accordance with APB 15, "Earnings per Share." SFAS 128 provides for the
calculation of Basic and Diluted earnings per share. Basic earnings per share
includes no dilution and is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution of securities
that could share in earnings of an entity, similar to fully diluted earnings per
share. Adoption of this Statement did not have a material impact on the
financial statements of the Company.
15
<PAGE>
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income," which establishes standards for reporting
and display of comprehensive income and its components (revenues, espenses,
gains and losses) in a full set of general purpose financial statements. SFAS
130 is effective for financial statement periods beginning after December 31,
1997.
In June 1997, the Financial Accounting Standards Board issued SFAS No
131, "Disclosure about Segments of an Enterprise and Related Information," which
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise." SFAS 131 establishes standards for the way that public companies
report information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in interim
financial statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas and major
customers. SFAS 131 defines operating segments as components of a company about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and in
assessing performance.
SFAS 131 is effective for financial statements for periods beginning
after December 15, 1997 and requires comparative information for earlier years
to be restated. Management has determined that financial statement disclosure
will not be affected by implementation of this standard due to the fact that the
Company has only one operating segment.
16
<PAGE>
<TABLE>
Item 7. Financial Statements
The following financial statements are filed as part of this report:
Page
----
<S> <C>
Report of Independent Certified Public Accountants...................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996 ........................... F-3
Consolidated Statements of Operations for the years ended December 31,
1997 and 1996 ............................................................. F-5
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1997 and 1996 ............................................................. F-6
Consolidated Statements of Cash Flows for the years ended December 31,
1997 and 1996 ..................................................................... F-7
Summary of Significant Accounting Policies.............................................. F-9
Notes to Consolidated Financial Statements ............................................. F-12
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
Not Applicable.
</TABLE>
17
<PAGE>
PART III
Items 9 to 12 are incorporated herein by reference to the Company's
definitive Proxy Statement to be filed with the Securities and Exchange
Commission.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits.
(1) The following exhibits are filed herewith:
Exhibit
No. Title
- ------- -----
10a Agreement by Roderic H. Slaton, Trustee of the Myers Trust, to
extend the due dates of the four Myers Trust Notes, dated April
2, 1998.
10b Third Amendment to Loan Agreement by and among Riggs Bank N.A.,
the Company and all of the Company's subsidiaries, dated as of
March 8, 1998.
10c Promissory Note from Rodney I. Smith to the Company, dated as of
December 31, 1997.
27 Financial Data Schedule
(2) The following exhibits were filed as part of the Company's
Quarterly Report on Form 10-QSB for the quarter ended September
30, 1996 and are incorporated herein by reference:
Exhibit
No. Title
- ------- -----
10a Loan Agreement by and among Riggs Bank N.A., the Company and all
of the Company's subsidiaries, dated as of July 22, 1996.
10b Promissory Note from the Company and all of its subsidiaries to
Riggs Bank N.A., dated as of July 22, 1996.
10c Amended and Restated Promissory Note from the Company and all of
its subsidiaries to Riggs Bank N.A., dated as of September 1996.
10d Promissory Note from Rodney I. Smith to the Company, dated as of
January 2, 1996.
(3) The following exhibits were filed as part of the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995 and
are incorporated herein by reference.
18
<PAGE>
Exhibit
No. Title
- ------- -----
10a License Agreement by and between the Company and DuriSol, Inc.,
dated January 22, 1996.
10c Purchase Agreement by and between the Company and the Federal
Aviation Administration, dated September 28, 1995.
21 List of Subsidiaries of the Company.
(4) The following exhibits were filed as part of the Company's Form
SB-2 Registration Statement (No. 33-89312) declared effective by
the Commission on December 13, 1995 and are incorporated herein
by reference:
Exhibit
No. Title
- ------- -----
3a Certificate of Incorporation, as amended.
3b Bylaws, as amended.
4b Specimen Common Stock Certificate.
4c Form of Public Warrant Agreement, including Specimen Redeemable
Common Stock Purchase Warrant.
4d Form of Warrant Agreement between the Company, Network 1
Financial Securities Inc. and First Hanover Securities, Inc.,
including Form of Underwriter's Warrant Certificate.
10a Employment Agreement between the Company and Rodney I. Smith.
10d Note between the Company and Fauquier National Bank, dated
January 10, 1992.
10e Loan Agreement, as amended, and Guarantee between the Company and
Security Bank, dated January 10, 1992.
10j Loan Agreement between the Company and the State Bank of
Remington, dated July 2, 1993.
10p One of four identical Collateral Note and Security Agreements
between the Company and the Myers Family Trust, dated February
26, 1993.
10q Deed of Trust between the Company and the Trustees of the Myers
Family Trusts, dated February 26, 1993.
19
<PAGE>
10r Lease Agreement between the Company and Rodney I. Smith.
10t Collateral Assignment of Letters Patent between the Company and
Rodney I. Smith.
10u Form of License Agreement between the Company and its Licensee.
10w 1994 Stock Option Plan.
10x Promissory Note Issued by Rodney I. Smith to the Company in
January, 1995.
10y Form of Financial Advisory and Investment Banking Agreement
between the Company, Network 1 Financial Securities Inc. and
First Hanover Securities, Inc.
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during 1997.
20
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SMITH-MIDLAND CORPORATION
Date: April 14, 1998 By: /s/ Rodney I. Smith
-------------------------------------
Rodney I. Smith, President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Name Capacity Date
- ---- -------- ----
<S> <C>
/s/ Rodney I. Smith Chairman of the Board, April 1, 1998
- -------------------------------- Chief Executive Officer
Rodney I. Smith and President (principal
executive officer)
/s/ Robert V. McElhinney Vice President of Finance April 1, 1998
- -------------------------------- (principal finance and
Robert V. McElhinney accounting officer)
/s/ Wes Taylor Vice President of April 1, 1998
- -------------------------------- Administration and
Wes Taylor Director
/s/ Ashley Smith Vice President of Sales and April 1, 1998
- -------------------------------- Marketing and Director
Ashley Smith
/s/ Andrew Kavounis Director April 1, 1998
- --------------------------------
Andrew Kavounis
/s/ Bernard R. Patriacca Director April 1, 1998
- --------------------------------
Bernard R. Patriacca
</TABLE>
21
<PAGE>
Smith-Midland Corporation
and Subsidiaries
<PAGE>
Smith-Midland Corporation
and Subsidiaries
Consolidated Financial Statements
Years Ended December 31, 1997 and 1996
Contents
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants F - 2
Consolidated Financial Statements
Balance Sheets F - 3
Statements of Operations F - 5
Statements of Stockholders' Equity F - 6
Statements of Cash Flows F - 7
Summary of Significant Accounting Policies F - 9
Notes to Financial Statements F - 12
F-1
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors
Smith-Midland Corporation
Midland, Virginia
We have audited the accompanying consolidated balance sheets of Smith-Midland
Corporation and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Smith-Midland
Corporation and subsidiaries at December 31, 1997 and 1996, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
BDO Seidman, LLP
Richmond, Virginia
March 27, 1998
F-2
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
December 31, 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Current assets
Cash $ 288,310 $ 438,079
Accounts receivable (Notes 2 and 6)
Trade - billed, (less allowance for doubtful
accounts of $231,000 - 1997 and $334,000 - 1996) 3,254,993 2,705,325
Trade - unbilled 410,158 113,299
Inventories (Note 2)
Raw materials 486,583 440,225
Finished goods 942,427 1,090,815
Prepaid expenses and other assets 69,801 92,383
- -------------------------------------------------------------------------------------------------------------------
Total current assets 5,452,272 4,880,126
- -------------------------------------------------------------------------------------------------------------------
Property and equipment, net (Notes 1 and 2) 1,531,062 1,380,871
- -------------------------------------------------------------------------------------------------------------------
Other assets
Cash - restricted (Notes 2 and 6) 196,977 194,617
Note receivable, officer (Notes 3 and 7) 632,472 659,000
Other 79,443 80,260
- -------------------------------------------------------------------------------------------------------------------
Total other assets 908,892 933,877
- -------------------------------------------------------------------------------------------------------------------
$7,892,226 $7,194,874
- -------------------------------------------------------------------------------------------------------------------
F-3
<PAGE>
- --------------------------------------------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
December 31, 1997 1996
- -------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of notes payable (Note 2) $2,199,228 $2,066,253
Accounts payable - trade 1,744,127 1,439,934
Accrued expenses and other liabilities (Note 6) 570,693 515,479
Customer deposits 450,474 200,623
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 4,964,522 4,222,289
Notes payable - less current maturities (Note 2) 759,440 1,068,124
Notes payable - related parties (Note 3) 115,598 115,598
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 5,839,560 5,406,011
- -------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 5 and 6)
- -------------------------------------------------------------------------------------------------------------------
Stockholders' equity (Note 7)
Preferred stock, $.01 par value; authorized
1,000,000 shares, none outstanding - -
Common stock, $.01 par value; authorized
8,000,000 shares; 3,085,718 issued,
3,044,798 outstanding 30,857 30,857
Additional capital 3,450,085 3,450,085
Retained deficit (1,325,976) (1,589,779)
- -------------------------------------------------------------------------------------------------------------------
2,154,966 1,891,163
Treasury stock, at cost, 40,920 shares (Note 7) (102,300) (102,300)
- -------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 2,052,666 1,788,863
- -------------------------------------------------------------------------------------------------------------------
$7,892,226 $7,194,874
- -------------------------------------------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and notes to consolidated financial statements.
F-4
<PAGE>
- --------------------------------------------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Consolidated Statements of Operations
<CAPTION>
Year Ended December 31, 1997 1996
- -------------------------------------------------------------------------------------------------------------------
Revenue $12,004,897 $11,410,510
Cost of goods sold 9,090,998 8,525,266
- -------------------------------------------------------------------------------------------------------------------
Gross profit 2,913,899 2,885,244
- -------------------------------------------------------------------------------------------------------------------
Operating expenses
General and administrative expenses 1,915,510 2,355,725
Selling expenses 680,489 672,430
- -------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,595,999 3,028,155
- -------------------------------------------------------------------------------------------------------------------
Operating income (loss) 317,900 (142,911)
- -------------------------------------------------------------------------------------------------------------------
Other income (expense)
Royalties 262,257 238,801
Interest expense and loan fees (372,118) (468,820)
Interest income 45,795 68,326
Gain on disposal of fixed assets - 14,517
Other, net 9,969 (8,378)
- -------------------------------------------------------------------------------------------------------------------
Total other income (expense) (54,097) (155,554)
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 263,803 $ (298,465)
- -------------------------------------------------------------------------------------------------------------------
Basic and diluted income (loss) per share $ .09 $ (.10)
- -------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 3,044,798 3,071,595
- -------------------------------------------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and notes to consolidated financial statements.
F-5
<PAGE>
- --------------------------------------------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Consolidated Statements of Stockholders' Equity
<CAPTION>
Additional Retained
Common Paid-In Earnings Treasury
Stock Capital ( Deficit ) Stock Total
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 $29,357 $3,055,252 $(1,291,314) $ - $1,793,295
Issuance of 150,000 shares
of common stock and warrants
(net of expenses of $143,667)
(Note 7) 1,500 394,833 - - 396,333
Purchase of 40,920 shares
of treasury stock (Note 7) - - - (102,300) (102,300)
Net loss - - (298,465) - (298,465)
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 30,857 3,450,085 (1,589,779) (102,300) 1,788,863
Net income - - 263,803 263,803
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 $30,857 $3,450,085 $(1,325,976) $(102,300) $2,052,666
- -------------------------------------------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and notes to consolidated financial statements.
F-6
<PAGE>
- --------------------------------------------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
Year Ended December 31, 1997 1996
- -------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
Cash received from customers $11,670,478 $ 11,641,847
Cash paid to suppliers and employees (10,876,160) (11,634,441)
Interest paid (372,118) (453,939)
Other 103,804 17,648
- -------------------------------------------------------------------------------------------------------------------
Net cash provided (absorbed) by operating activities 526,004 (428,885)
- -------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Purchases of property and equipment (524,232) (371,785)
Proceeds from sale of property and equipment - 14,517
Repayments (advances) on officer note receivable 26,528 (53,526)
- -------------------------------------------------------------------------------------------------------------------
Net cash absorbed by investing activities (497,704) (410,794)
- -------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Proceeds from borrowings 192,565 1,543,606
Repayments of borrowings (368,274) (1,404,498)
Repayments on borrowings - related
parties, net - (1,155)
Proceeds from issuance of common stock, net - 396,333
- -------------------------------------------------------------------------------------------------------------------
Net cash provided (absorbed) by financing activities (175,709) 534,286
- -------------------------------------------------------------------------------------------------------------------
Increase in cash - restricted (2,360) (194,617)
- -------------------------------------------------------------------------------------------------------------------
Net decrease in cash (149,769) (500,010)
Cash, beginning of year 438,079 938,089
- -------------------------------------------------------------------------------------------------------------------
Cash, end of year $ 288,310 $ 438,079
- -------------------------------------------------------------------------------------------------------------------
continued...
F-7
<PAGE>
- --------------------------------------------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Consolidated Statements of Cash Flows
(continued)
<CAPTION>
Year Ended December 31, 1997 1996
- -------------------------------------------------------------------------------------------------------------------
Reconciliation of net income (loss) to net cash
provided (absorbed) by operating activities
Net income (loss) $263,803 $(298,465)
Adjustments to reconcile net income (loss) to net
cash provided (absorbed) by operating activities
Depreciation and amortization 374,041 421,200
Interest on officer's note paid with stock - (42,300)
Gain on disposal of fixed assets - (14,517)
Decrease (increase) in other assets 817 (4,157)
(Increase) decrease in
Accounts receivable - billed (549,668) (145,529)
Accounts receivable - unbilled (296,859) (11,426)
Inventories 102,030 (304,896)
Prepaid expenses and other assets 22,582 67,107
Increase (decrease) in
Accounts payable - trade 304,193 (163,392)
Accrued expenses and other liabilities 55,214 (82,001)
Customer deposits 249,851 149,491
- -------------------------------------------------------------------------------------------------------------------
Net cash provided (absorbed) by operating activities $526,004 $(428,885)
- -------------------------------------------------------------------------------------------------------------------
Supplemental Schedule of Investing and Financing Activities
Cash paid for interest $381,232 $ 453,939
Treasury stock received in exchange for amount
due from officer note receivable $ - $(102,300)
- -------------------------------------------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and notes to consolidated financial statements.
F-8
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Summary of Significant Accounting Policies
Nature of Business The Company develops, manufactures, licenses, sells and
installs precast concrete products for the
construction, transportation and utilities industries
primarily in the Mid-Atlantic region.
Principles of The accompanying consolidated financial statements
Consolidation include the accounts of Smith- Midland Corporation and
its wholly-owned subsidiaries (the "Company"). All
material intercompany accounts and transactions have
been eliminated in consolidation.
Inventories Inventories are stated at the lower of cost, using the
first-in, first-out (FIFO) method, or market.
Property and Equipment Property and equipment is stated at cost. Expenditures
for ordinary maintenance and repairs are charged to
income as incurred. Costs of betterments, renewals, and
major replacements are capitalized. At the time
properties are retired or otherwise disposed of, the
related cost and allowance for depreciation are
eliminated from the accounts and any gain or loss on
disposition is reflected in income.
Depreciation is computed using the straight-line method
over the following estimated useful lives:
Years
Buildings 10-33
Trucks and automotive equipment 3-10
Shop machinery and equipment 3-10
Land improvements 10-15
Office equipment 3-10
Income Taxes The Company utilizes the asset and liability method of
accounting for income taxes. Under the asset and
liability method, 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. Deferred
tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the
years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is
recognized in income in the period that includes the
enactment date.
F-9
<PAGE>
- --------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Summary of Significant Accounting Policies
(continued)
Revenue Recognition The Company recognizes revenue on the sale of its
standard precast concrete products at shipment date,
including revenue derived from any projects to be
completed under short-term contracts. Installation
services for precast concrete products, leasing and
royalties are recognized as revenue as they are earned
on an accrual basis. Licensing fees are recognized
under the accrual method unless collectibility is in
doubt, in which event revenue is recognized as cash is
received.
Certain sales of Soundwall and Slenderwall concrete
products are recognized upon completion of units
produced under long-term contracts. Provisions for
estimated losses on these contracts are made in the
period in which such losses are determined. Changes in
job performance, conditions and contract settlements
which affect profit are recognized in the period in
which the changes occur. An amount equal to contract
costs attributable to claims is included in revenues
when realization is probable and the amount can be
reliably estimated. Unbilled trade accounts receivable
represents revenue earned on units produced and not yet
billed.
Risks and The Company sells products to highway contractors
Uncertainties 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. Exposure to
losses on receivables is principally dependent on each
customer's financial condition. The Company monitors
its exposure to credit losses and maintains allowances
for anticipated losses.
Due to inclement weather, the Company experiences
reduced revenues from December through February and
realizes the substantial part of its revenues during
the other months of the year.
Fair Value The estimated fair value of financial instruments
of Financial approximate their carrying amounts as of December 31,
Instruments 1997 and 1996. The estimated fair value of long term
debt is based on current rates offered the Company for
debt of the same maturities.
Estimates The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
at the date of the financial statements and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from
those estimates.
F-10
<PAGE>
- --------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Summary of Significant Accounting Policies
(continued)
Earnings (Loss) For the year ended December 31, 1997, the Company
per share adopted Statement of Financial Accounting Standards No.
128 (SFAS 128), "Earnings Per Share". SFAS 128 is
effective for financial statements issued for periods
ending after December 15, 1997 and requires restatement
of all prior period EPS data presented. SFAS 128
provides for the calculation of basic and diluted
earnings per share. Basic earnings per share is
computed by dividing income available to common
shareholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per
share reflects the potential dilution of securities
that could share in earnings of an entity. The
application of this statement had no effect on prior
period EPS.
Long-Lived Assets Effective January 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 121
(SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and For Long-Lived Assets to Be
Disposed Of." SFAS 121 requires that long-lived assets
and certain intangibles to be held and used by an
entity be reviewed for impairment when events or
changes in circumstances indicate that the carrying
amount may not be recoverable. In addition, SFAS 121
requires long-lived assets and certain intangibles to
be disposed of to be reported at the lower of carrying
amount of fair value less costs to sell. The Company
reviews the carrying values of its long-lived and
identifiable intangible assets for possible impairment
whenever events or changes in circumstances indicate
that the carrying amount of assets may not be
recoverable based on undiscounted estimated future
operating cash flows. As of December 31, 1997, the
Company has determined no impairment has occurred.
Recent Accounting In June 1997, the Financial Accounting Standards Board
Pronouncements issued SFAS No. 130, "Reporting Comprehensive Income,"
which establishes standards for reporting and display
of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general
purpose financial statements. SFAS 130 is effective for
financial statement periods beginning after December
15, 1997.
In June 1997, the Financial Accounting Standards Board
issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information ", (SFAS 131) which
supersedes SFAS No. 14, Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes
standards for the way that public companies report
information about operating segments in annual
financial statements and requires reporting of selected
information about operating segments in interim
financial statements issued to the public. It also
establishes standards for disclosures regarding
products and services, geographic areas and major
customers. SFAS 131 defines operating segments as
components of a company about which separate financial
information is available that is evaluated regularly by
the chief operating decision maker in deciding how to
allocate resources and in assessing performance.
SFAS 131 is effective for financial statements for
periods beginning after December 15, 1997 and requires
comparative information for earlier years to be
restated. Management has determined that future
financial statements disclosures will not be affected
by implementation of this standard due to the fact that
the Company has only one operating segment.
F-11
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Notes to Financial Statements
1. Property and Property and equipment consist of the following:
Equipment
December 31, 1997 1996
----------------------------------------------------------------------------------------------
<S> <C>
Land and land improvements $ 435,110 $ 349,513
Buildings 955,386 945,805
Machinery and equipment 4,772,713 4,389,745
Rental equipment 39,240 39,240
Construction in progress 68,612 1,558
----------------------------------------------------------------------------------------------
6,271,061 5,725,861
Less: accumulated depreciation 4,739,999 4,344,990
----------------------------------------------------------------------------------------------
$1,531,062 $1,380,871
----------------------------------------------------------------------------------------------
2. Notes Payable Notes payable consist of the following:
<CAPTION>
December 31, 1997 1996
---------------------------------------------------------------------------------------------
Note payable to Riggs Bank, maturing July 8, 1998
with monthly principal payments of $2,000 plus
interest, at a rate of prime plus
1.5%, 11.25% at December 31, 1997;
collateralized by accounts receivable. $935,000 $800,000
Note payable to John Schied, maturing May 21,
1998; with monthly payments of $1,169 of
principal and interest, at a rate of 10%;
collateralized by certain vehicles. 5,699 18,451
F-12
- --------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Notes to Financial Statements
(continued)
<CAPTION>
2. Notes Payable December 31, 1997 1996
(continued) ----------------------------------------------------------------------------------------------
Note payable to Security Bank maturing
July 13, 1999; monthly payments of
$4,280 of principal and interest, at
a rate of prime plus 3%; 12.75% at
December 31, 1997; collateralized by
a first deed of trust on certain
land. $ 83,115 $117,091
Note payable to Midland Loan Service
maturing March 1, 1999; with varying
monthly payments of principal and
interest at a rate of 14%;
collateralized by plant buildings. 103,918 118,049
Note payable to State Bank of
Remington, maturing December 22,
2000; with monthly payments of
$5,788 of principal and interest, at
a rate of 10.75%; collateralized by
equipment and vehicles. 180,300 225,000
Note payable to State Bank of
Remington, maturing February 11,
1999; with monthly payments of
interest at a rate of 6.85%;
collateralized by a certificate of
deposit. 185,689 180,300
Note payable to State Bank of Remington
maturing November 1, 2001; with
monthly payments of $293 of
principal and interest, at a rate of
8%; collateralized by certain vehicles. 11,787 -
F-13
- --------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Notes to Financial Statements
(continued)
<CAPTION>
2. Notes Payable December 31, 1997 1996
(continued) ----------------------------------------------------------------------------------------------
Notes payable to Myers' trusts, each of
four maturing June 26, 1998; with
monthly payments of $3,241 of
principal and interest at a rate of
12%; collateralized by a third deed
of trust on land, inventory and
accounts receivable. $623,252 $718,650
Notes payable to Branch Banking and
Trust maturing November 5, 1998;
with monthly payments of $2,000 of
principal and interest at a rate of
8%; collateralized by accounts
receivable, inventory and equipment
of Smith-Carolina Corporation. 83,064 98,273
Note payable to Obrey Messick, maturing
May 31, 2001; with monthly payments
of $1,461 of principal and interest,
at a rate of 10%; collateralized by
equipment. 50,559 62,383
Notes payable to Obrey Messick,
maturing December 1, 2002; with
monthly payments of $582 of
principal and interest at a rate of
10%; collateralized by equipment. 27,383 -
Notes payable to Calvin Showalter,
maturing June 28, 1997; with monthly
payments of $1,268 of principal and
interest at a rate of 10%;
collateralized by equipment. - 8,588
Notes payable to State Bank of
Remington, maturing June 21, 1998;
with varying monthly payments of
principal and interest at a rate of
9.26%; collateralized by machinery. 17,574 36,941
F-14
<PAGE>
- --------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Notes to Financial Statements
(continued)
<CAPTION>
2. Notes Payable December 31, 1997 1996
(continued) ----------------------------------------------------------------------------------------------
Notes payable to Orix Leasing, maturing
July 2002, with monthly payments of
$1,640 of principal and interest at
13%; collateralized by equipment. $ 82,815 $ -
Notes payable to Poland Brothers Farm,
maturing August 2009, with monthly
payments of $598 of principal and
interest at a rate of 10.00%;
collateralized by land. 49,268 -
Notes payable to United Leasing,
maturing June 29, 1999, with monthly
payments of $2,987 of principal and
interest at a rate of 21.7%;
collateralized by equipment. 39,974 61,668
Notes payable to United Leasing,
maturing October 4, 2000, with
monthly payments of $9,039 of
principal and interest at a rate of
19.7%; collateralized by equipment,
machinery, and a second deed of
trust on land. 209,502 256,879
Installment notes and capitalized
leases collateralized by certain
machinery, equipment and stock
maturing at various dates, primarily
June 1998 and July 2001, with
interest rates primarily at 10% and
11.5%. 135,440 166,077
Unsecured notes payable maturing at
various dates, primarily May 1998,
with interest rates primarily at
11.5% and 10%. 134,329 266,027
----------------------------------------------------------------------------------------------
2,958,668 3,134,377
Less current maturities 2,199,228 2,066,253
----------------------------------------------------------------------------------------------
$ 759,440 $1,068,124
----------------------------------------------------------------------------------------------
</TABLE>
F-15
<PAGE>
- --------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Notes to Financial Statements
(continued)
2. Notes Payable The Company has a substantial portion of its debt due
(continued) contractually within the next fiscal year. Management
has shown the ability to refinance and/or extend its
debt in prior years, and intends to extend and/or
refinance certain debt as it becomes due in 1998. The
Company currently has an outstanding letter of intent
with a bank for the placement of a 20 year term loan
which proceeds will be used in part, to repay its
existing debt with Riggs Bank and the Myers' Trust. The
letter of intent also includes a line-of-credit and
mortgage for plant expansion. The Company also has
received a commitment letter from another bank, subject
to certain terms, for a $1.5 million line of credit
secured by eligible accounts receivable. Management
believes it will be able to secure a new borrowing
arrangement in the near future. Substantially all notes
payable have been personally guaranteed by the
Company's President and majority stockholder.
The aggregate amounts of notes payable maturing in each
of the next five years and thereafter are as follows:
---------------------------------------------
Year Ending December 31, Amount
1998 $2,199,228
1999 491,813
2000 157,731
2001 67,290
2002 and thereafter 42,606
---------------------------------------------
$2,958,668
3. Related Party The Company currently leases three and a half acres of
Transactions its Midland, Virginia property from its President, on a
month-to-month basis, as additional storage space for
the Company's finished work product. The lease terms
call for minimum annual rent of $6,000.
Notes payable - related parties are unsecured, with no
fixed maturity date (but no earlier than January 1,
1999) and bear interest at 10%. Total interest expense
on these notes was $11,500 and $13,000 for the years
ended December 31, 1997 and 1996, respectively.
F-16
<PAGE>
- --------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Notes to Financial Statements
(continued)
3. Related Party The Company had an unsecured note receivable from its
Transactions President and majority stockholder with a seven year
(continued) term bearing interest at 6%. During 1996, $102,300 of
the note was reduced for the Company's purchase of
40,920 common shares from the stockholder (see Note 7).
On Decemeber 31, 1997 the terms of the note were
changed to call the annual payments of $45,948
beginning on December 31, 1998, and continuing through
maturity on December 31, 2002. Total interest income on
this note was approximately $39,500 and $42,300 for the
years ended December 31, 1997 and 1996, respectively.
As of December 31, 1997 and 1996, the Company was the
beneficiary of individual life insurance policies on
the life of the President with a total cash surrender
value of approximately $139,000 and $135,000,
respectively. Borrowings of approximately $117,500 were
outstanding against the cash surrender value at
December 31, 1997 and 1996, respectively.
4. Income Taxes 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:
<TABLE>
<CAPTION>
<S> <C>
Year ended December 31, 1997 1996
--------------------------------------------------------------------------------------------------
Amount Percent Amount Percent
--------------------------------------------------------------------------------------------------
Income taxes at statutory rate $ 89,700 34% $ (101,500) 34%
Increase (decrease) in taxes resulting from:
Utilization of net operating loss carryforward (97,800) (37)
Increase in valuation allowance 81,700 (27)
Other 8,100 3 19,800 (7)
--------------------------------------------------------------------------------------------------
$ - -% $ - -%
--------------------------------------------------------------------------------------------------
Deferred tax assets (liabilities) are as follows:
<CAPTION>
December 31, 1997 1996
---------------------------------------------------------------------
<S> <C>
Depreciation $ (4,400) $ (92,900)
Allowance for doubtful accounts 92,500 133,600
Vacation accrued 68,300 54,600
Operating loss carryforwards 753,000 790,500
---------------------------------------------------------------------
Net deferred tax asset 909,400 885,800
Deferred tax asset valuation allowance (909,400) (885,800)
---------------------------------------------------------------------
$ - $ -
---------------------------------------------------------------------
</TABLE>
At December 31, 1997, the Company had approximately
$1,900,000 of cumulative net operating loss
carryforwards with expiration dates through December
31, 2011.
5. Employee Benefit The Company has a 401(k) retirement plan (the "Plan")
Plans covering substantially all employees. Participants may
contribute up to 10% of their compensation to the Plan.
The Company contributes 25% of the participant's
contribution, up to 1% of the participant's
compensation, as a matching contribution. Total
contributions for the years ended December 31, 1997 and
1996 were $3,908 and $3,750, respectively.
Also, the Company has a profit sharing plan which
provides for employee bonuses based upon the Company's
results of operations. No payments were made during the
years ended December 31, 1997 and 1996.
F-17
<PAGE>
- --------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Notes to Financial Statements
(continued)
6. Commitments a) The Company has an employment agreement with its
and President which expires December 31, 1999 pursuant to
Contingencies which he will be paid an annual salary of $175,000. The
President is also entitled to receive benefits offered
to the Company's other employees, and certain severance
benefits if the Company terminates the employment
agreement without cause. In addition, the employment
agreement precludes the President from disclosing
confidential information and from competing with the
Company during each year of his employment and, for at
least one year thereafter.
b) On August 5, 1994, the Board of Directors and
Stockholders of the Company adopted the 1994 Stock
Option Plan (the "1994 Plan") which allows the Company
to grant options to employees, officers, directors and
consultants to purchase shares of the Company's Common
Stock. The aggregate number of shares of Stock for
which options may be granted shall not exceed 280,000
shares. Options issued under the 1994 Plan may be
either "incentive stock options" within the meaning of
Section 422A of the United States Internal Revenue Code
of 1986, as amended, or non-qualified options.
Incentive stock options may be granted only to
employees of the Company, while non-qualified options
may be issued to non-employee directors, consultants,
and others, as well as to employees of the Company.
F-18
<PAGE>
- --------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Notes to Financial Statements
(continued)
6. Commitments The 1994 Plan is administered by disinterested members
and (as defined by Section 16b-3 of the Exchange Act) of
Contingencies the Board of Directors. These disinterested members of
(continued) the Board determine those individuals who shall receive
options, the time period during which the options may
be partially or fully exercised, the number of shares
of Common Stock that may be purchased under each
option, and the option price. The per share exercise
price of the Common Stock subject to options granted
pursuant to the 1994 Plan may not be less than the fair
market value of the Common Stock on the date the option
is granted, except that in the case of a grant to any
person who owns, directly or indirectly, at the time of
the granting of an incentive stock option, 10% or more
of the total combined voting power of all classes of
stock of the Company (a "10% Stockholder") shall not be
eligible to receive any incentive stock options under
the 1994 Plan unless the option price is at least 110%
of the fair market value of the Common Stock subject to
the option, determined on the date of grant.
Non-qualified options are not subject to this
limitation. In a prior year the Company granted options
to purchase 20,000 shares under the 1994 Plan at an
exercise price of $3.60 per share which was equal to
the price per share of Common Stock sold in the
Company's initial public offering. The options vested
upon the effective date of the Company's initial public
offering. During the year ended December 31, 1997 the
Company granted employees options to purchase 18,450
shares of common stock at an excise price of $1.00 per
share. These options vest over a period of nine years.
No options have been exercised or cancelled through
December 31, 1997.
c) In late 1995, the Company filed four separate informal
claims totalling $502,000 for damages and costs
incurred as a result of specification, policy and
operating changes to contracts primarily instituted by
the state of Maryland, including the newly issued
"Noise Barrier Acceptance Criteria", which occurred
after the award of the contracts and after unit
production in accordance with the contracts was
virtually complete. These claims were increased to
approximately $1,081,000 at December 31, 1996.
F-19
<PAGE>
- --------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Notes to Financial Statements
(continued)
6. Commitments Specifically, the state of Maryland adjusted its noise
and barrier acceptance criteria over a period of several
Contingencies months during 1995 with the latest version dated
(continued) October 13, 1995. According to the Company, these
changes were significantly different than contract
provisions and historical acceptance criteria upon
which the jobs were bid and for which the Company was
contracted. The Company incurred significant costs to
rework panels and in certain instances construct new
panels to comply with the new standards. Additionally,
the Company lost production time and revenue on other
contracts due to the time devoted to address the
criteria changes. The Company has continued to pursue
collection on the claims filed and has hired an
attorney who specializes in this area. According to the
Company's attorney, there is substantial likelihood the
State Highway Administration (SHA) will compensate the
prime contractors for SHA's improper actions, and the
Company will receive additional compensation.
Approximately $270,000 of the total contract claims is
included in trade accounts receivable at December 31,
1997.
d) The company owes prior benefit plan participants
approximately $205,000 and $211,000 at December 31,
1997 and 1996, respectively, related to the Company's
terminated retirement plan, which is included in
accrued expenses and other liabilities. At December 31,
1997, the Company had a certificate of deposit with a
balance of approximately $197,000, which has also been
pledged as collateral on a $180,300 loan, to fund the
plan obligation with all interest earned allocated to
the participants.
e) The Company is self insured for heath care claims for
eligible active employees. The Company carries stop
loss insurance which limits the amount for individual
claims and total claims in any one year. The Company
provides a liability for estimated claims incurred but
not reported.
F-20
<PAGE>
- --------------------------------------------------------------------------------
Smith-Midland Corporation
and Subsidiaries
Notes to Financial Statements
(continued)
7. Stockholders' In December 1995, the Company completed an initial
Equity public offering ("IPO") of 1,000,000 shares of common
stock, $.01 par value per share (the "Common Stock"),
and 1,000,000 Redeemable Common Stock Purchase Warrants
(the "Warrants"), at a purchase price of $3.60 per
share of Common Stock and Warrant sold together. The
Company realized net proceeds from the IPO of
approximately $2,618,000. In January 1996, the Company
completed an overallotment of an additional 150,000
shares of Common Stock and 150,000 Warrants for net
proceeds of approximately $396,000. No value was
assigned to the warrants as the amount would be
nominal.
In October 1996, the Company entered into an agreement
with Rodney I. Smith, the Company's President, to
accept the Company's common stock in exchange for
principal and interest payments due on the President's
note payable to the Company. The transaction resulted
in the transfer of 40,920 shares of common stock,
accounted for as treasury stock, using the cost method,
in exchange for a $43,200 interest payment and a
$60,000 principal curtailment. The shares of common
stock were valued at the market value existing at the
date of the agreement.
F-21
<PAGE>
EXHIBIT INDEX
Exhibit
No. Title
- ------- -----
10a Agreement by Roderic H. Slaton, Trustee of the Myers Trust, to
extend the due dates of the four Myers Trust Notes, dated
April 2, 1998.
10b Third Amendment to Loan Agreement by and among Riggs Bank
N.A., the Company and all of the Company's subsidiaries, dated
as of March 8, 1998.
10c Promissory Note from Rodney I. Smith to the Company, dated as
of December 31, 1997.
27 Financial Data Schedule
EXHIBIT 10a
April 2, 1998
Smith-Midland Corporation
Attn: Bob McElhinney
PO Box 300
Midland, VA 22728
Re: Myers Trust Notes
Dear Bob:
This letter is to confirm our understanding that the notes' (four) due
dates have been by agreement extended to June 26, 1998. However, this is the
last extension.
Thank you.
Very Sincerely,
/s/ Roderic H. Slayton
Roderic H. Slayton
EXHIBIT 10b
THIRD AMENDMENT TO LOAN AGREEMENT
This Third Amendment to Loan Agreement ("Amendment") is dated March
______, 1998 and is effective as of March 8, 1998, by and between SMITH-MIDLAND
CORPORATION, a Virginia corporation, SMITH-MIDLAND CORPORATION, a Delaware
corporation, EASI-SET INDUSTRIES, INC., a Virginia corporation, SMITH-CAROLINA
CORPORATION, a North Carolina Corporation, CONCRETE SAFETY SYSTEMS, INC., a
Virginia corporation, MIDLAND ADVERTISING AND DESIGN, INC., a Virginia
corporation (collectively, "Borrower"), and RIGGS BANK N.A., a national banking
association ("Lender").
R E C I T A L S
This Amendment is made with reference to the following facts:
A. Borrower is indebted to Lender in the original principal sum of Nine
Hundred Fifty Thousand and No/100 Dollars ($950,000.00) (the "Loan"), which
indebtedness is evidenced by that certain Promissory Note, dated July 22, 1996
executed by Borrower, as maker, to the order of Lender (together with any prior
amendments, a First Amendment dated August 15, 1997, a Second Amendment dated
December 30, 1997, and a Third Amendment of even date herewith, the "Promissory
Note")
B. Repayment of the Promissory Note is secured by that certain
Commercial Security Agreement, dated July 22, 1996, and an additional Commercial
Security Agreements dated December 30, 1997, (the "Security Agreements").
C. Advances of moneys under the Loan are governed by the terms and
conditions of that certain Loan Agreement, dated July 22, 1996, between Borrower
and Lender (together with any prior amendments, a First Amendment dated August
15, 1997, and a Second Amendment dated December 30, 1997 the "Agreement").
D. Borrower has requested that Lender extend the maturity date of the
Promissory Note until July 8, 1998, and Lender has so extended the maturity
date, upon and subject to the terms and conditions set forth in that certain
Third Amendment to Promissory Note of even date herewith.
E. Borrower and Lender desire to amend the Agreement as set forth
herein.
F. Terms defined in the Agreement and not otherwise defined herein
shall have the meanings set forth in the Agreement.
NOW, THEREFORE, in consideration of the foregoing, Borrower and Lender hereby
agree as follows:
1. As a condition precedent to the effectiveness of this Amendment and
the extension of the maturity date, Rodney Smith, as Guarantor, shall consent to
this Third Amendment to Loan Agreement and to the Third Amended Promissory Note.
2. Borrower affirms that the Security Agreements continue in force and
effect.
3. Borrower hereby agrees that Lender may, at its sole discretion,
require a collateral audit to be performed by a third party at the expense of
Borrower.
4. Borrower agrees to pay all costs and expenses of Lender incident to
the preparation hereof and the consummation of the transactions specified
herein, including without limitation, fees and expenses of Lender's in-house
legal counsel of $300.
5. Borrower hereby reaffirms the Agreement as amended hereby and agrees
that in all respects except as explicitly modified by the terms of this
Amendment that the Agreement shall remain in full force and effect.
6. In consideration of the Amendment contained herein, Borrower
represents, warrants and agrees that (i) there are no claims, defenses or
set-offs with respect to the Agreement, any Loan or any Note, or with respect to
the indebtedness evidenced or secured thereby or with respect to the collection
or enforcement of any of them or with respect to the collateral, (and to the
extent any claim, set-off or defense exists they are each hereby waived and
relinquished in their entirety), (ii) no Event of Default, as defined in the
Agreement, the Note or any other Loan Document, and no event which with the
lapse of time or the giving of notice or both would constitute such an Event of
Default, has occurred; (iii) Lender has made no representations or commitments,
oral or written, or undertaken any obligations other than as expressly set forth
in the Agreement, the Loan Documents and this Amendment, (iv) except as
otherwise previously disclosed in writing to the Lender, each of the
representations and warranties contained in the Agreement are true and correct
as of the date hereof and shall be deemed to be restated and remade as of the
date of this Amendment as if set out herein in their entirety; and (v) the
making, delivery and performance by the Borrower of this Amendment and all
instruments, documents and notes executed contemporaneously herewith, have been
duly authorized by all necessary corporate action, and constitute the valid and
binding obligations of the Borrower enforceable in accordance with their terms.
7. All capitalized terms not otherwise defined in this Amendment shall
have the meanings ascribed thereto in the Agreement. Each and every of the terms
and provisions of this Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, successors, personal
representatives and assigns.
BORROWER EXPRESSLY REPRESENTS AND WARRANTS TO LENDER THAT IT (A) HAS
READ EACH AND EVERY PROVISION OF THIS INSTRUMENT; (B) HAS BEEN GIVEN THE
OPPORTUNITY TO HAVE THIS INSTRUMENT REVIEWED BY COMPETENT LEGAL COUNSEL OF ITS
OWN CHOOSING; AND (C) UNDERSTANDS, AGREES TO AND ACCEPTS THE PROVISIONS HEREOF.
[CONTINUED ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed as of the day
first above written.
Attest: BORROWER:
SMITH-MIDLAND CORPORATION (Virginia)
By: _______________________ By: ____________________________ (SEAL)
Name: ___________________________
Title: ___________________________
SMITH-MIDLAND CORPORATION (Delaware)
By: _______________________ By: ____________________________ (SEAL)
Name: ___________________________
Title: ___________________________
EASI-SET INDUSTRIES, INC.
By: _______________________ By: ____________________________ (SEAL)
Name: ___________________________
Title: ___________________________
SMITH-CAROLINA CORPORATION
By: _______________________ By: ____________________________ (SEAL)
Name: ___________________________
Title: ___________________________
CONCRETE SAFETY SYSTEMS
By: _______________________ By: ____________________________ (SEAL)
Name: ___________________________
Title: ___________________________
MIDLAND ADVERTISING & DESIGN, INC.
By: _______________________ By: ____________________________ (SEAL)
Name: ___________________________
Title: ___________________________
LENDER:
RIGGS BANK N.A.
By: _______________________ By: ____________________________ (SEAL)
Name: ___________________________
Title: ___________________________
THIRD AMENDMENT TO PROMISSORY NOTE
This Third Amendment To Promissory Note (this "Amendment") is dated
March ______, 1998 and is effective as of March 8, 1998, by and between
SMITH-MIDLAND CORPORATION, a Virginia corporation, SMITH-MIDLAND CORPORATION, a
Delaware corporation, EASI-SET INDUSTRIES, INC., a Virginia corporation,
SMITH-CAROLINA CORPORATION, a North Carolina Corporation, CONCRETE SAFETY
SYSTEMS, INC., a Virginia corporation, MIDLAND ADVERTISING AND DESIGN, INC., a
Virginia corporation (collectively, "Borrower"), and RIGGS BANK N.A., a national
banking association ("Holder").
R E C I T A L S
This Amendment is made with reference to the following facts:
A. Borrower is indebted to Holder in the original principal sum of Nine
Hundred Fifty Thousand and No/100 Dollars ($950,000.00) (the "Loan"), which
indebtedness is evidenced by that certain Promissory Note, dated July 22, 1996
executed by Borrower, as maker, to the order of Holder (together with any prior
amendments, a First Amendment dated August 15, 1997, and a Second Amendment
dated December 30, 1997, the "Promissory Note")
B. Repayment of the Promissory Note is secured by that certain
Commercial Security Agreement, dated July 22, 1996 (together with any prior
amendments), and an additional Commercial Security Agreement dated December 30,
1997 (the "Security Agreement").
C. Advances of moneys under the Loan are governed by the terms and
conditions of that certain Loan Agreement, dated July 22, 1996, between Borrower
and Holder (together with any prior amendments, a First Amendment dated August
15, 1997, a Second Amendment dated December 30,. 1997, and a Third Amendment of
even date herewith, the "Loan Agreement").
D. Borrower has requested that Holder extend the maturity date of the
Promissory Note until July 8, 1998, and Holder is willing so to extend the
maturity date, upon and subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, Borrower and Holder
hereby agree as follows:
1. The Promissory Note is hereby amended to provide that the maturity
date thereof shall be July 8, 1998.
2. The Promissory Note is hereby further amended to provide that in
addition to the regular monthly payments of interest, Borrower shall pay monthly
principal payments, payable on the last business day of each month, commencing
April 30, 1998, in the amount of $2,000.00 per month. In addition, Borrower
hereby agrees to make a principal curtailment of $7,500.00 upon execution of
this Amendment.
3. An executed copy of this Third Amendment shall be affixed to the
Promissory Note.
4. All of the terms, covenants and conditions of the Promissory Note
shall continue in full force and effect as modified herein. This Amendment is
not intended to be, and shall not constitute, a substitution or novation of the
Promissory Note or of any of the instruments securing the repayment of the
Promissory Note.
5. Borrower hereby renews its covenant and agreement to pay the
indebtedness evidenced by the Promissory Note in accordance with the terms and
provisions thereof, as modified by this Amendment. Borrower further renews its
covenant and agreement to perform, comply with and be bound by each and every of
the other terms and provisions of the Promissory Note, as modified by this
Amendment, and each and every of the terms and provisions of the Security
Agreement. Borrower hereby reaffirms all of the representations and warranties
made to the Holder at the time the Loan was made and declares the same to be
true and correct as of such date and as of the date hereof.
6. Borrower represents, warrants and agrees that (i) there are no
claims, defenses or set-offs with respect to the Promissory Note, as amended by
the terms of this Amendment, or with respect to the Security Agreement, or with
respect to the indebtedness evidenced or secured thereby or with respect to the
collection or enforcement of any of the same (ii) no event of default has
occurred and is continuing under the Loan Documents, (iii) no claim, set-off or
defense exists for the benefit of Borrower against Holder in connection with the
Loan or under the Loan Documents (and to the extent any claim, set-off or
defense exists they are each hereby waived and relinquished in their entirety),
(iv) Holder has made no representations or commitments, oral or written, or
undertaken any obligations other than as expressly set forth in the Loan
Documents and this Amendment, and (v) each and every of the provisions of the
Promissory Note, as modified by the terms of this Amendment, and each and every
of the provisions of the Security Agreement and the other Loan Documents are,
and shall remain in full force and effect and lawful and binding obligations of
Borrower, duly authorized by all necessary corporate action, and enforceable in
accordance with their respective terms.
7. Each and every of the terms and provisions of this Amendment shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, successors, personal representatives and assigns. This
Amendment shall be governed by and construed in accordance with the laws of the
Commonwealth of Virginia, without reference to its conflict of laws principles.
As used herein, the singular shall include the plural and vice versa, and
masculine, feminine, and neuter pronouns shall be fully interchangeable, where
the context so requires.
BORROWER EXPRESSLY REPRESENTS AND WARRANTS TO HOLDER THAT IT (A) HAS
READ EACH AND EVERY PROVISION OF THIS INSTRUMENT; (B) HAS BEEN GIVEN THE
OPPORTUNITY TO HAVE THIS INSTRUMENT REVIEWED BY COMPETENT LEGAL COUNSEL OF ITS
OWN CHOOSING; AND (C) UNDERSTANDS, AGREES TO AND ACCEPTS THE PROVISIONS HEREOF.
This Amendment may be executed in multiple counterparts, no one of
which needs to be executed by all the parties hereto, which together shall
constitute a single instrument and, regardless of whether it is executed by all
parties, shall be binding upon all parties who have executed a counterpart.
[continued on next page]
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed as of the
day first above written.
Attest: BORROWER:
SMITH-MIDLAND CORPORATION (Virginia)
By: _______________________ By: ____________________________ (SEAL)
Name: ___________________________
Title: ___________________________
SMITH-MIDLAND CORPORATION (Delaware)
By: _______________________ By: ____________________________ (SEAL)
Name: ___________________________
Title: ___________________________
EASI-SET INDUSTRIES, INC.
By: _______________________ By: ____________________________ (SEAL)
Name: ___________________________
Title: ___________________________
SMITH-CAROLINA CORPORATION
By: _______________________ By: ____________________________ (SEAL)
Name: ___________________________
Title: ___________________________
CONCRETE SAFETY SYSTEMS
By: _______________________ By: ____________________________ (SEAL)
Name: ___________________________
Title: ___________________________
MIDLAND ADVERTISING & DESIGN, INC.
By: _______________________ By: ____________________________ (SEAL)
Name: ___________________________
Title: ___________________________
HOLDER:
RIGGS BANK N.A.
By: _______________________ By: ____________________________ (SEAL)
Name: ___________________________
Title: ___________________________
UNCONDITIONAL GUARANTY
This Unconditional Guaranty (this "Guaranty"), dated August 15, 1997
and effective as of July 8, 1997 is made by RODNEY I. SMITH (whether one or
more, the "Guarantor") to and for the benefit of RIGGS BANK N.A.
("Lender"), a national banking association.
R E C I T A L S
This Guaranty is made with reference to the following facts:
A. Borrower is indebted to Lender in the principal sum of Nine Hundred
Fifty Thousand and No/100 Dollars ($950,000.00) (the "Loan"), which indebtedness
is evidenced by that certain Promissory Note, dated July 22, 1996 executed by
Borrower, as maker, to the order of Lender (together with any prior amendments
and an amendment of even date herewith, the "Promissory Note")
B. Repayment of the Promissory Note is secured by that certain
Commercial Security Agreement, dated July 22, 1996 (together with any prior
amendments, the "Security Agreement").
C. Advances of moneys under the Loan are governed by the terms and
conditions of that certain Loan Agreement, dated July 22, 1996, between Borrower
and Lender (together with any prior amendments and an amendment of even date
herewith, the "Loan Agreement").
D. Borrower has requested that Lender extend the maturity date of the
Promissory Note until November 8, 1997, and Lender has so extended the maturity
date, upon and subject to the terms and conditions set forth in that certain
Amendment to Promissory Note and Amendment to Loan Agreement, each of even date
herewith.
E. Lender is unwilling to extend the maturity date of the Promissory
Note unless the Guarantor executes and delivers this Guaranty.
In order to induce Lender to extend and continue to extend credit, to
make and continue to make loans and advances and/or to forbear from exercising
any rights Lender may have to require repayment of or security for any such
loans and advances heretofore made by Lender, to SMITH-MIDLAND CORPORATION, a
Virginia corporation, SMITH-MIDLAND CORPORATION, a Delaware corporation,
EASI-SET INDUSTRIES, INC., a Virginia corporation, SMITH-CAROLINA CORPORATION, a
North Carolina Corporation, CONCRETE SAFETY SYSTEMS, INC., a Virginia
corporation, and MIDLAND ADVERTISING AND DESIGN, INC., a Virginia corporation
(the "Borrower(s)"), the Guarantor:
(1) Guaranty of Payment. Unconditionally and absolutely guarantees the
punctual payment when due (whether at stated maturity, by acceleration of
maturity or otherwise) of all obligations of the Borrower(s) arising under the
Promissory Note, the Loan Agreement and the Security Agreement, and any other
documents and instruments executed by the Borrower(s) pursuant thereto, and all
renewals, extensions and modifications thereof, such obligations and the
interest thereon and all other sums payable with respect thereto being referred
to herein as the "Indebtedness" and all documents and instruments executed by
the Borrower(s) or any of them in connection therewith being referred to as the
"Loan Documents." This is a guaranty of payment and not of collection and shall
be binding upon the Guarantor irrespective of the genuineness, validity or
enforceability of any underlying obligations of the Borrower(s) or any of them
or the existence, validity, enforceability or perfection of any security
therefor, it being the intention of the Guarantor that this Guaranty be absolute
and unconditional in all events and not dischargeable or affected by any
circumstances which may constitute a legal or equitable discharge. This Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment of the Indebtedness or any part thereof is rescinded or must
otherwise be returned by Lender upon the insolvency, bankruptcy or
reorganization of any Borrower or Guarantor, or otherwise, all as though such
payment had not been made.
(2) Waivers by Guarantor. Waives diligence, presentment, protest,
notice of dishonor, demand for payment, extension of time of payment, notice of
acceptance of this Guaranty, non-payment at maturity and indulgences and notices
of every kind, and consent to any and all forbearances and extensions of the
time of payment of the Indebtedness, and to any and all changes in the terms,
agreements and conditions of the Indebtedness or any part thereof hereafter made
or granted, and to any and all substitutions and exchanges or releases of all or
any part of any collateral security given therefor and any and all releases of
any other party who is or may be liable upon any of the Indebtedness.
(3) No Subrogation. Agrees that no payment by any Guarantor pursuant to
any provision of this Guaranty or other satisfaction of Guarantor's obligations
under this Guaranty shall entitle Guarantor, by subrogation to the rights of
Lender, by right of contribution or indemnity or under any agreement or
otherwise, to any payment by the Borrower(s) or by any other party obligated to
Lender for payment of the Indebtedness or out of the assets of the Borrower(s)
or any such other party, except after payment in full of the Indebtedness.
(4) No Waiver By Lender; Remedies Cumulative. Agrees that no delay on
the part of Lender in the exercise of any rights hereunder or failure to
exercise the same shall operate as a waiver of such rights, and that no notice
to or demand on the maker of any promissory note shall be deemed to be a waiver
of the obligation of the Guarantor or of the right of Lender to take further
action without notice or demand as provided herein. Each right, power, and
remedy of Lender against Borrower(s) or Guarantor arising hereunder or pursuant
to any of the Loan Documents or by law shall be cumulative and concurrent. The
exercise of any right, power or remedy or the failure or forbearance in the
exercise thereof against Borrower(s) or Guarantor shall not preclude or require
the exercise of any other right, power or remedy.
(5) No Suit or Claim Required. Agrees that it shall not be necessary
for Lender, to enforce this contract of Guaranty, to first institute suit
against the Borrower(s) or any of them to recover the amount of the Indebtedness
or any part thereof. Lender shall not be obligated to file any claim relating to
the Indebtedness in the event that the Borrower(s) or any of them become subject
to a bankruptcy, reorganization or similar proceeding, and the failure of Lender
so to file shall not affect the Guarantor's obligations hereunder.
(6) Expenses and Attorneys' Fees. Agrees that the Guarantor will
reimburse Lender for all costs and expenses incurred by Lender (including
reasonable attorneys' fees) in enforcing any rights under this Guaranty,
collecting any of the Indebtedness or protecting or realizing on any collateral
therefor. Attorneys' fees shall include, in the case of a staff attorney
employed by Lender, the cost to Lender of the services of such attorney, on an
hourly basis, as determined by Lender.
(7) Representations of Guarantor. Represents and warrants and shall be
deemed to represent and warrant on each day that any of the Indebtedness is
outstanding that (a) all statements and information heretofore or hereafter
provided by the Guarantor in connection with this Guaranty or the Indebtedness
are and will be true and correct in all material respects and do not and will
not omit to state any material fact, (b) Guarantor, if a corporation, is duly
organized and validly existing as such under the laws of its jurisdiction of
incorporation or organization, (c) Guarantor has full power and authority to
execute, deliver and perform this Guaranty and this Guaranty constitutes the
legal, valid and binding obligation of Guarantor enforceable against Guarantor
in accordance with its terms, (d) except as otherwise disclosed to Lender in
writing, there is no suit, action, proceeding or investigation pending in which
an adverse decision could materially adversely affect the financial condition of
Guarantor, and (e) Guarantor has made its own credit analysis with respect to
the Borrower(s) and the Indebtedness and has not relied on Lender for any
information with respect thereto.
(8) Acceleration of Maturity. Agrees that upon (a) a breach by
Guarantor of any of its agreements, representations and warranties hereunder,
(b) a denial by Guarantor of its liability hereunder, (c) a failure by Guarantor
to pay or perform when due any other obligations of Guarantor to Lender, (d) the
death, declaration of legal incompetence, dissolution, termination of existence,
change of ownership or control, insolvency, business failure or appointment of a
receiver of any part of the property of, commencement of any bankruptcy or
insolvency proceeding by or against, assignment for the benefit of creditors by,
default under a material obligation by or issuance of an attachment, levy or
execution against the property of, Guarantor, or (e) occurrence of a change in
the operations, prospects, business or financial condition of Guarantor which
change, in the sole judgment of the Bank, is materially adverse, all of the
Indebtedness, regardless of its terms, shall be deemed for purposes of this
Guaranty to have become matured and the Guarantor, at the election of Lender,
shall promptly pay to Lender all of the Indebtedness.
(9) Subordination. Agrees (a) that all of the present and future
indebtedness of the Borrower(s) or any of them to the Guarantor shall be and
hereby is subordinated to, assigned and transferred to Lender and pledged and
made security for the payment of the Indebtedness, (b) that the Guarantor
contemporaneously herewith and from time to time hereafter shall on request
execute such further endorsement's, assignments or other proper transfers as
Lender may request further to evidence the assignment hereby agreed to and made,
and (c) that Guarantor hereby appoints Lender and each of its Vice Presidents
Guarantor's attorney to demand and enforce payment in any way of said
indebtedness, to prove all claims, receive all interest or dividends and take
all other action, either in the name of Lender or of Guarantor, with respect to
said indebtedness in any liquidation or any proceedings whatsoever affecting the
Borrower(s) or any of them or their respective properties under any bankruptcy
or other laws, now or hereafter in effect for the relief of debtors, and in
general to do any act or take any action in regard to said indebtedness which
Guarantor might otherwise do.
(10) Set Off. Agrees that, without limiting any other right of Lender,
whenever Lender has the right to declare any of the Indebtedness to be
immediately due and payable (whether or not it has so declared), Lender and any
branch or affiliate acting on its behalf is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final,
but excluding any third party funds held in escrow or in trust by Guarantor,
which funds have been identified to Lender as such escrow or trust funds) at any
time held and other indebtedness at any time owing by Lender or any branch or
affiliate of Lender acting on its behalf to or for the credit or the account of
Guarantor against any and all of the obligations of the Guarantor now or
hereafter existing under this Guaranty, irrespective of whether or not Lender
shall have made any demand under this Guaranty and although such obligations may
be unmatured. Lender agrees promptly to notify Guarantor after any such set-off
and application, provided, that, the failure to give such notice shall not
affect the validity of such set-off and application. Although Lender may in its
discretion take any act to confirm, indicate, or otherwise evidence a set-off,
such act shall not be deemed to be necessary for an effective set-off. The
rights of Lender under this paragraph are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which Lender
may have.
(11) Property in Possession of Lender. Agrees that Lender shall have a
lien on and a continuing security interest in all instruments, documents,
securities, cash, property and the proceeds of any of the foregoing, owned by
the Guarantor or in which the Guarantor has an interest, which now or hereafter
are at any time in possession or control of Lender or in transit by mail or
carrier to or from Lender or in the possession of any third party acting on
behalf of Lender, without regard to whether Lender received the same in pledge,
for safekeeping, as agent for collection or transmission or otherwise or whether
Lender had conditionally released the same, all of which shall at all times
constitute additional security for the Indebtedness and the obligations of the
Guarantor hereunder.
(12) Books and Records, etc. Agrees that the books and records of
Lender or any schedule, certificate or statement provided for in any agreement
between Lender and the Borrower(s) or any of them showing the amount owed by the
Borrower(s) or any of them to Lender from time to time or the rate of interest
on such amount shall be admissible in any action or proceeding against Guarantor
hereunder and shall be binding upon the Guarantor to the same extent as upon the
Borrower(s) or any of them pursuant to any of the Loan Documents.
(13) Financial Information. Agrees to provide Lender with such
financial statements and other information with respect to the financial
condition of Guarantor as Lender may from time to time request and notify Lender
promptly of any substantial change in such financial condition or the
commencement of any material litigation by or against Guarantor.
(14) Successors and Assigns. Agrees that this Guaranty shall inure to
the benefit of and may be enforced by Lender, its successors and assigns and any
assignee from Lender of the Indebtedness or any part thereof, and shall be
binding upon and enforceable upon the Guarantor and the successors, personal
representatives and assigns of the Guarantor including (a) any successor person,
association, partnership or corporation acquiring all or a substantial part of
the assets of Guarantor, (b) any successor partnership created by reason of the
admission of a new partner or the dissolution of an existing partnership by
reason of the death, resignation or other withdrawal of a partner, and (c) any
corporation into which Guarantor shall have been merged, consolidated,
reorganized or otherwise absorbed.
(15) Governing Law; Jurisdiction. Agrees that this Guaranty shall be
deemed to be a contract under the laws of the District of Columbia (except for
the conflict of law provisions thereof) and shall be governed by, and construed
in accordance with, the laws of such jurisdiction, except to the extent that the
rights and remedies of Lender with respect to collateral located in any other
jurisdiction are governed by the laws of such jurisdiction and except that in
any legal proceeding in any other jurisdiction, Lender shall be entitled to the
benefit of all legal remedies available under the laws of such jurisdiction.
Wherever possible each provision of this Guaranty shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Guaranty shall be prohibited by or invalid under such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Guaranty. If any action arising out of this Guaranty is commenced by
Lender in any District of Columbia court, or Federal court located in the
District of Columbia, Guarantor hereby consents to the jurisdiction of any such
court in any such action and to the laying of venue in the District of Columbia.
Any process in any such action shall be duly served upon Guarantor if mailed by
registered mail, postage prepaid, to Guarantor at its last known residence or
business address as shown by the records of Lender or otherwise served in
accordance with law. The pleading of any statute of limitations and any right of
Guarantor to TRIAL BY JURY in any suit, action or proceeding in connection
herewith are hereby expressly WAIVED.
(16) Other Guarantors. Agrees that unless the context in which used
clearly indicates otherwise, "Guarantor" shall mean the guarantors hereunder or
any one of them, and the use of any gender shall be applicable to all genders.
The obligations of such guarantors hereunder, if there be more than one, are and
shall be joint and several. The obligations and liabilities of Guarantor
hereunder shall not be reduced or limited by reason of any similar or dissimilar
guaranty executed in favor of Lender by any other person or entity, and this
Guaranty shall be enforceable against Guarantor without regard to such other
guaranty or guaranties.
(17) Counterparts. Agrees that this Guaranty may be executed in
multiple counterparts, no one of which needs to be executed by all the
guarantors hereunder, which together shall constitute a single instrument and,
regardless of whether all guarantors have executed a counterpart hereof, shall
be binding on all guarantors who have executed a counterpart.
IN WITNESS WHEREOF, the Guarantor has executed this instrument the day
and year first above written.
Witness: GUARANTOR:
_____________________________ __________________________________(SEAL)
RODNEY I. SMITH
EXHIBIT 10c
PROMISSORY NOTE
$ 632,472.00 December 31, 1997
- ------------ -----------------
FOR VALUE RECEIVED, Rodney I. Smith promises to pay to the order of
Smith-Midland Corporation, a Delaware corporation with its principal place of
business at Route 28, P.O. Box 300, Midland, Virginia on or before December 31,
2002, the principle sum of Six Hundred Thirty-Two Thousand, Four Hundred and
Seventy-Two Dollars ($632,472.00) together with interest at the rate of 6%
simple interest per annum. Payments shall be paid annually in the amount of
$45,948.00 beginning on December 31, 1998. Payments will be allocated to the
payment of interest first and then to payment of principle.
The proceeds of this note are to be used exclusively to payoff the full
remaining balance of $632,472.00 of the of the note dated January 2, 1996
between Rodney I. Smith and Smith-Midland Corporation.
Signed as of the date first written above.
/s/ Rodney I. Smith
-------------------------
Rodney I. Smith
Agree and Acknowledged
Smith-Midland Corporation
By: /s/ Robert V. McElhinney
--------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 288,310
<SECURITIES> 0
<RECEIVABLES> 3,896,455
<ALLOWANCES> 231,304
<INVENTORY> 1,429,010
<CURRENT-ASSETS> 5,452,272
<PP&E> 6,271,061
<DEPRECIATION> 4,739,999
<TOTAL-ASSETS> 7,892,226
<CURRENT-LIABILITIES> 4,964,522
<BONDS> 875,038
0
0
<COMMON> 30,857
<OTHER-SE> 2,021,809
<TOTAL-LIABILITY-AND-EQUITY> 7,892,226
<SALES> 10,102,121
<TOTAL-REVENUES> 12,004,897
<CGS> 7,774,626
<TOTAL-COSTS> 9,090,998
<OTHER-EXPENSES> 2,595,999
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 372,118
<INCOME-PRETAX> 263,803
<INCOME-TAX> 0
<INCOME-CONTINUING> 263,803
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 263,803
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
