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. Dollar amounts are in thousands, except for per share amounts.

The Company generates revenues primarily from the sale, leasing, licensing, shipping and installation of precast concrete products and systems for the construction, utility and farming industries. The Company's operating strategy has involved producing and marketing innovative and proprietary products, including SlenderWall™, a patent pending, lightweight, energy efficient concrete and steel exterior wall panel for use in building construction; J-J Hooks® Barrier, a patented positive-connected highway safety barrier; Sierra Wall™, a patented sound barrier primarily for roadside use; transportable concrete buildings; and SoftSound™, a highway sound attenuation system. In addition, the Company produces utility vaults; farm products such as cattleguards; and custom order precast concrete products with various architectural surfaces.






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As a part of the construction industry, the Company's sales and net income may vary greatly from quarter to quarter over a given year. Because of the cyclical nature of the construction industry, many factors outside of the Company's control, such as weather and project delays, affect the Company's production schedule, possibly causing a momentary slowdown in sales and net income. As a result of these factors, the Company is not always able to earn a profit for each period, therefore, please read Management's Discussion and Analysis of Financial Condition and Results of Operations and the accompanying financial statements with these factors in mind.

On January 30, 2020, the World Health Organization ("WHO") announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the "COVID-19 outbreak") and the risks to the international community as the virus spread globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company's financial condition, liquidity, and future results of operations. The Company had previously experienced an adverse impact to its business by a reduction in revenues in 2020 from that of 2019, a reduction in backlog during 2020 from that in 2019, lower production volumes, employee absences during 2020 and 2021, and bidding restrictions within certain key states such as Maryland and North Carolina. The Company is currently experiencing minor delays in receipt of materials through its supply chain. The Company may be further negatively impacted in the following respects:

a) by the potential inability of customers of the Company to pay amounts owed to the Company for products or services already provided should their businesses suffer setbacks; this risk is heightened by the relatively long lag time experienced by the Company in collecting accounts receivable (see "Liquidity and Capital Resources" below);

b) by potential supply side issues should our vendors experience hardships, and have to reduce or terminate operations, due to the COVID-19 outbreak, impacting the Company's sourcing of materials;

c) by increased adverse effects on our workforce due to contracting or taking care of a relative who has contracted COVID-19, or have been quarantined by a medical professional; in this respect, our workforce had been impacted at all locations in prior years, but this impact has substantially diminished in the current reporting year, but no assurance can be provided as to future impacts, particularly in view of potential new coronavirus outbreaks;

d) in the event that any of the three states in which we have facilities provide for the quarantine of our manufacturing employees, our production manufacturing will be significantly affected;

e) in the event that any of the states in which we sell our products and services may eliminate, cancel, or delay projects due to monetary limitations resulting from the COVID-19 outbreak; in this respect, the Company had previously seen a reduction in bidding activity;

f) the reduction of state infrastructure budgets due to the reduction in funding through the gas tax, or other funding sources;

g) the increase in the overall loan defaults, which in turn impacts the banking sector's ability to fund projects in which the Company's products may be utilized; and

h) in the event that economic hardships force the Company to default on loan payments, our loans may be called and our ability to borrow under our bank line of credit could cease;

Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Although the Company experienced a loss in the first quarter of 2020 and reduced revenues for the year 2020 as compared to 2019, as well as experiencing factors described above, given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to ultimately estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for future years.

The discussions below, including without limitation with respect to liquidity, are subject to the future effects of the COVID-19 outbreak. In this respect, should the outbreak cause serious economic harm in our areas of operation, our revenue expectations are unlikely to be fulfilled.






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Overview

Overall, the Company's financial bottom line performance was lower in 2022 when compared to 2021. The Company had net income for 2022 of $800 compared to net income of $7,570 for 2021. Sales decreased by $511 to $50,131 in 2022 from $50,642 in 2021. The decrease in sales is mainly from a decrease in barrier rentals and, to a lesser extent, a decrease in soundwall sales. The decrease in barrier rentals is attributed to a decrease in barrier rentals from short-term special barrier rental projects. Despite the decrease in total barrier rentals, barrier rental revenue from the core rental fleet increased 11% for the year ended December 31, 2022 from the year ended December 31, 2021. The decrease in soundwall sales was due to delays in approvals of customer drawings and therefore delays in production. Royalty income and shipping and installation revenue also increased in 2022 as compared to 2021. The increase in cost of goods sold as a percentage of revenue, not including royalties, for 2022 compared to 2021 is due to increased material and labor costs. Additionally, there were more short-term special barrier rental projects that occurred throughout 2021 than 2022, which carry higher margins than product sales. Operating expenses for 2022 increased over 2021 mainly due to increased selling costs associated with additional sales personnel and an increase in bad debt expense. Fourth quarter 2022 revenues were $14,487 compared to $10,017 in the fourth quarter 2021. The increase in revenue for the fourth quarter 2022 as compared to the fourth quarter 2021 was primarily due to an increase in barrier sales and an increase in shipping and installation. As of March 13, 2023, the Company's sales backlog was approximately $52.4 million, as compared to approximately $29.0 million around the same time in the prior year. The Company anticipates greater sales volumes throughout 2023, although no assurance can be provided. The Company continues to increase marketing and sales efforts towards SlenderWall sales and barrier rentals, in line with long-term strategic objectives.





Results of Operations

Year ended December 31, 2022 compared to the year ended December 31, 2021

For the year ended December 31, 2022, the Company had total revenue of $50,131 compared to total revenue of $50,642 for the year ended December 31, 2021, a decrease of $511 or 1%. Revenue includes product sales, barrier rentals, royalty income, and shipping and installation revenues. Product sales are further divided into soundwall, architectural and SlenderWall™ panels, miscellaneous wall panels, highway barriers, Easi-Set®/Easi-Span® buildings, utility products, and miscellaneous precast products. The following table summarizes the revenue by type and a comparison for the years ended December 31, 2022 and 2021 (in thousands):





Revenue by Type (Disaggregated Revenue)     2022         2021        Change      % Change
Product Sales:
Soundwall Sales                           $  4,128     $  8,025     $ (3,897 )         (49 )%
Architectural Sales                          4,269        4,932         (663 )         (13 )%
SlenderWall Sales                            1,489        1,795         (306 )         (17 )%
Miscellaneous Wall Sales                     3,475        2,352        1,123            48 %
Barrier Sales                                6,717        4,686        2,031            43 %
Easi-Set and Easi-Span Building Sales        4,089        3,036        1,053            35 %
Utility Sales                                2,023        2,468         (445 )         (18 )%
Miscellaneous Sales                          1,631        1,206          425            35 %
Total Product Sales                         27,821       28,500         (679 )          (2 )%
Barrier Rentals                              6,545        9,925       (3,380 )         (34 )%
Royalty Income                               2,498        2,216          282            13 %
Shipping and Installation Revenue           13,267       10,001        3,266            33 %
Total Service Revenue                       22,310       22,142          168             1 %
Total Revenue                             $ 50,131     $ 50,642     $   (511 )          (1 )%

The revenue items: soundwall sales, architectural panel sales, SlenderWall sales, miscellaneous wall sales, miscellaneous sales, barrier rentals, and royalty income are recognized as revenue over time. The revenue items: barrier sales, Easi-Set and Easi-Span building sales, utility sales, and shipping and installation revenue are recognized as revenue at a point in time.






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Soundwall Sales - Soundwall panel sales decreased by 49% in 2022 compared to 2021 primarily due to decreased production during 2022 at all facilities. Production for several projects concluded towards the end of 2021 at all facilities. Additionally, the Company experienced delays in customer drawing approvals throughout 2022 causing delays in production. The Company expects soundwall panel sales to be similar in 2023 as compared to 2022, although no assurance can be provided.

Architectural Sales - Architectural panel sales decreased by 13% in 2022 compared to 2021. The Company was awarded a large architectural project, which began production in the fourth quarter of 2020 and the majority of production occurred in 2021. Architectural sales are expected to decrease during 2023, as compared to 2022, with an anticipated shift to more SlenderWall sales, although no assurance can be provided.

SlenderWall Sales - SlenderWall panel sales decreased by 17% in 2022 compared to 2021. The decrease is mainly attributable to one large project, which started production in the second quarter of 2021 and concluded in the second quarter of 2022. Currently, the Company has the largest quantity of bids out for the SlenderWall product in history and expects to be awarded multiple projects in the near future. The Company continues to focus sales initiatives on SlenderWall, but no assurance can be given as to the success of this endeavor.

Miscellaneous Wall Sales - Miscellaneous wall sales can be highly customized precast concrete products or retaining and lagging panels that do not fit other product categories. Miscellaneous wall sales increased by 48% in 2022 when compared to 2021 due to the increased amount of retaining wall projects in production. Miscellaneous sales are expected to trend similar in 2023, as compared to 2022, although no assurance can be provided.

Barrier Sales - Barrier sales increased by 43% in 2022 when compared to 2021. The main reason for the increase is due to large barrier projects in North Carolina and South Carolina. The Company continues to focus on shifting barrier sales to barrier rentals in the Delaware to Virginia region. Barrier sales are expected to trend lower in 2023 than previous years as the Company continues to shift from barrier sales to barrier rentals.

Easi-Set® and Easi-Span® Building Sales - The Easi-Set® Buildings program includes Easi-Set®, plant assembled and Easi-Span®, site assembled, and an extensive line of pre-engineered restrooms. Building sales increased by 35% in 2022 as compared to 2021 due to increased sales at all locations. Building and restroom sales are expected to continue to trend similar during 2023 as compared to 2022, although no assurance can be provided.

Utility Sales - Utility products are mainly comprised of underground utility vaults used in infrastructure construction. Utility product sales decreased by 18% in 2022 compared to 2021. The Company continues to competitively bid on utility projects to gain market share and has recently won multiple data center projects increasing the sales volume of dry utility vaults. Utility sales are expected to trend similar during 2023 as compared to 2022, although no assurance can be provided.

Miscellaneous Product Sales - Miscellaneous products are products that are produced or sold that do not meet the criteria defined for other revenue categories. Examples would include precast concrete slabs, blocks or small add-on items. For 2022, miscellaneous product sales increased by 35% when compared to 2021. The change is mainly attributed to specialty products produced at the South Carolina plant throughout 2022. Miscellaneous product sales are expected to trend lower during 2023 as compared to 2022, although no assurance can be provided.






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Barrier Rentals - Barrier rentals decreased by 34% in 2022 as compared to 2021. While both 2022 and 2021 barrier rentals included short-term special projects, 2022 had less rental revenue from short-term special barrier projects. As indicated above, the Company is continuing to shift its focus to barrier rentals compared to barrier sales with the significant increase in the rental fleet that occurred during 2022. Barrier rental revenue, excluding revenue from special barrier projects, is expected to trend higher in 2023 as compared to barrier rental revenue, excluding revenue from special barrier projects, in 2022, although no assurance can be given.

Royalty Income - Royalties increased by 13% in 2022 as compared to 2021. The increase in royalties is mainly due to the increase in barrier royalties during 2022 compared to 2021. Infrastructure spending continues to drive royalties, and the Company anticipates 2023 royalties to increase compared to 2022, although no assurance can be given.

Shipping and Installation - Shipping revenue results from shipping our products to the customers' final destination and is recognized when the shipping services take place. Installation activities include installation of our products at the customers' construction site. Installation revenue results when attaching architectural wall panels to a building, installing an Easi-Set® building at a customers' site, setting highway barrier, or setting any of our other precast products at a site specific to the requirements of the owner. Shipping and installation revenues increased by 33% for 2022 when compared to 2021. The increase is mainly attributed to the increase in shipping and installation of SlenderWall and architectural panels. This is associated with the increased production of SlenderWall and architectural panels that occurred in the third and fourth quarters of 2021.

Cost of Goods Sold - Total cost of goods sold for the year ended December 31, 2022 was $40,662, an increase of $4,440, or 12%, from $36,222 for the year ended December 31, 2021. Total cost of goods sold as a percentage of total revenue, not including royalties, increased to 85% for the year ended December 31, 2022 from 75% for the year ended December 31, 2021. The increase in cost of goods sold as a percentage of revenue, not including royalties, is mainly due to the decrease in short-term special barrier rental projects, which carry higher margins than standard barrier rental projects due to the complexity and risk of the projects. Further, cost of goods sold for the year ended December 31, 2022 increased, as compared to the same period in 2021, due to inflationary impacts on material and labor costs.

General and Administrative Expenses - For the year ended December 31, 2022, the Company's general and administrative expenses increased by $135, or 2%, to $5,551 from $5,416 during the same period in 2021. The increase is mainly attributed to an increase in bad debt expense driven by the increase in accounts receivable. The increase was partially offset by a decrease in salaries and wages. General and administrative expense as a percentage of total revenue was 11% for the years ended December 31, 2022 and 2021.

Selling Expenses - Selling expenses for the year ended December 31, 2022 increased by $228, or 8%, to $3,064 from $2,836 for the year ended December 31, 2021. Selling expenses increased during 2022 due to additional salespersons hired and increased advertising expenses. The Company expects selling expenses to increase in future periods with the plan for additional sales associates and increased advertising spending aligning with the strategy to increase SlenderWall sales and barrier rentals.

Operating Income - The Company had operating income for the year ended December 31, 2022 of $854 compared to operating income of $6,168 for the year ended December 31, 2021, a decrease of $5,314, or 86%. The decrease in operating income was mainly due to the decrease in gross profit associated with the decrease in total revenue deriving from barrier rentals. Operating results for 2022 were also adversely impacted by rising costs of material and labor due to inflation.

Interest Expense - Interest expense was $260 for the year ended December 31, 2022 compared to $190 for the year ended December 31, 2021. The increase of $70, or 37%, was due primarily to the increased level of indebtedness from the financing that occurred in the first quarter of 2022 for the real property acquired in the fourth quarter 2021.

Income Tax Expense - The Company had income tax expense of $145 for the year ended December 31, 2022 compared to income tax expense of $1,524 for the year ended December 31, 2021. The Company had an effective rate of 15.4% for the year ended December 31, 2022 compared to an effective rate of 16.8% for the same period in 2021. The decrease in the effective tax rate is attributed to current year tax credits and a decrease in the Company's state tax liability.

Net Income - The Company had net income of $800 for the year ended December 31, 2022, compared to net income of $7,570 for the same period in 2021. Net income in 2021 included a gain of $2,692 for forgiveness of a Paycheck Protection Program loan. The basic and diluted earnings per share was $0.15 for 2022 compared to basic and diluted earnings per share of $1.45 for the year ended December 31, 2021. There were 5,233 basic and 5,253 diluted weighted average shares outstanding in 2022, and 5,205 basic and 5,232 diluted weighted average shares outstanding in 2021.






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Liquidity and Capital Resources

The Company financed its capital expenditures requirements for 2022 with cash balances on hand and notes payable to a bank. The Company had $6,416 of debt obligations at December 31, 2022, of which $626 is scheduled to mature within twelve months. During the twelve months ended December 31, 2022, the Company made repayments of outstanding debt in the amount $581 and received $2,805 in proceeds of borrowings related to the financing that occurred in the first quarter of 2022 for the real property acquired during the fourth quarter of 2021.

The Company has a mortgage note payable to Summit Community Bank (the "Bank") for the construction of its North Carolina facility. The note carries a ten year term at a fixed interest rate of 3.64% annually per the Promissory Note Rate Conversion Agreement, with monthly payments of $22, and is secured by all of the assets of Smith-Carolina and a guarantee by the Company. The balance of the note payable at December 31, 2022 was $1,609.

On March 27, 2020, the Company completed the refinancing of existing loans with a note payable to the Bank in the amount of $2,701. A portion of the funds in the amount of $678 were secured for improvements to an existing five acre parcel for additional storage at the Midland, Virginia plant. The loan is collateralized by a first lien position on the Virginia property, building, and assets. The refinance also released the lien on the Smith-Columbia plant in Hopkins, South Carolina (Columbia). The interest rate per the Promissory Note is fixed at 3.99% per annum, with principal and interest payments payable monthly over 120 months in the amount of $27. The loan matures on March 27, 2030. The balance of the note payable at December 31, 2022 was $2,064.

On February 10, 2022, the Company completed the financing for its prior acquisition of certain real property in Midland, VA totaling approximately 29.8 acres with a note payable to the Bank in the amount of $2,805. The loan is collateralized by a first lien position on the related real property. The interest rate is fixed at 4.09% per annum, with principal and interest payments payable monthly over 180 months for $21. The loan matures on February 10, 2037. The balance of the note payable on December 31, 2022 was $2,692.

The Company additionally has two smaller installment loans with annual interest rates of 2.90% and 3.99%, maturing in 2025, with balances totaling $51.

Under the loan covenants with the Bank, the Company is limited to annual capital expenditures of $5,000 and must maintain tangible net worth of $10,000. The Company received a special exception to the capital expenditure covenant from the Bank to purchase barrier during 2022 for $5,000 (see Note 7, Commitments and Contingencies, of the Financial Statements). The Company is in compliance with all covenants pursuant to the loan agreements as of December 31, 2022.

In addition to the notes payable discussed above, the Company has a $5,000 line of credit with the Bank with no balance outstanding as of December 31, 2022. The line of credit is evidenced by a commercial revolving promissory note, which carries a variable interest rate of prime, with a floor of 3.50%, and matures on October 1, 2023. The loan is collateralized by a first lien position on the Company's accounts receivable and inventory and a second lien position on all other business assets. Key provisions of the line of credit require the Company (i) to obtain bank approval for capital expenditures in excess of $5,000 during the term of the loan and (ii) to obtain bank approval prior to its funding of any acquisition. On October 1, 2022, the Company received a Commitment Letter from the Bank to provide a guidance line of credit specifically to purchase business equipment in an amount up to $1,500. The commitment provides for the purchase of equipment for which a note payable will be executed with a term not to exceed five years with an interest rate at the Wall Street Journal prime rate plus 0.50% with a floor of 3.50% per annum. The loan is collateralized by a first lien position on all equipment purchased under the line. The commitment for the guidance line of credit matures on October 1, 2023. As of December 31, 2022, the Company had not purchased any equipment pursuant to the $1,500 commitment.






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At December 31, 2022, the Company had cash totaling $6,726 compared to cash totaling $13,492 at December 31, 2021. The decrease in cash is primarily the result of higher accounts receivable at December 31, 2022 than at December 31, 2021 and from investing activities which used $2,631 in cash primarily for the purchase of rental barrier, manufacturing equipment, and a vehicle. Financing activities provided $2,199 in cash in 2022 mainly from the financing of real property purchased in the fourth quarter of 2021.

Capital spending, including financed additions, decreased from $5,367 in 2021 to $5,264 in 2022. Capital expenditures in 2022 were primarily related to spending for the buy-back of barrier for the barrier rental fleet. The Company anticipates capital spending for 2023 to be approximately $5,000, which includes a new batch plant system, completion of yard development, completion of the barrier buy-back, and miscellaneous manufacturing equipment. Anticipated capital expenditures excludes acquisitions and plant expansions.

The Company's notes payable are financed at fixed rates of interest. This leaves the Company almost impervious to fluctuating interest rates. Increases in such rates will only affect the interest paid by the Company if new debt is obtained, or the available line of credit is drawn upon, with a variable interest rate.

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 and with some contracts, retainage may be held until the entire project is completed. This payment schedule could result in liquidity problems for the Company because it must bear the cost of production for its products before it receives payment. The Company's days sales outstanding (DSO) in 2022 and 2021 were 99 and 91 days, respectively. Although no assurances can be given, the Company believes that its current cash resources, anticipated cash flow from operations, and the availability under the line of credit will be sufficient to finance the Company's operations for at least the next 12 months.

The Company's accounts receivable balances, net of allowance for doubtful accounts, at December 31, 2022 was $16,223, compared to $10,013 at December 31, 202. The increase is primarily the result of turnover of the accounts receivable position throughout the later part of 2022 until the first quarter of 2023. The Company expects accounts receivable balances to trend downwards, beginning in the second quarter of 2023, with increased collection efforts as a result of the fulfillment of the accounts receivable position, although no assurance can be provided.

The Company's inventory at December 31, 2022 was $3,818 and at December 31, 2021 was $2,845, an increase of $974. The annual inventory turns for 2022 and 2021 were 14.1 and 15.4, respectively. Finished goods inventory slightly increased for 2022 as compared to 2021.





Critical Accounting Policies

The Company's significant accounting policies are more fully described in its Summary of Accounting Policies to the Company's consolidated financial statements. The preparation of financial statements in conformity with accounting principles generally accepted within the United States of America requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying financial statements and related notes. In preparing these consolidated financial statements, management has made its best estimates and judgments of certain amounts included in the consolidated financial statements, giving due consideration to materiality. The Company does not believe there is a great likelihood that materially different amounts would be reported related to the accounting policies described below, however, application of these accounting policies involves the exercise of judgment and the use of assumptions as to future uncertainties and as a result, actual results could differ from these estimates.

The Company evaluates the adequacy of its allowance for doubtful accounts at the end of each quarter. In performing this evaluation, the Company analyzes the payment history of its significant past due accounts, subsequent cash collections on these accounts, comparative accounts receivable aging statistics, and other customer specific considerations existing and known as of the time of the analysis. Based on this information, along with other related factors, the Company develops what it considers to be a reasonable estimate of the uncollectible amounts included in accounts receivable. This estimate involves significant judgment by the management of the Company. Actual uncollectible amounts may differ from the Company's estimate.

The Company recognizes revenue on the sale of its standard precast concrete products, and the associated shipping and installation revenue, at shipment date, including revenue derived from any projects to be completed under short-term contracts. Leasing and royalties are recognized as revenue over time. Certain sales of soundwall, SlenderWall, and other architectural concrete products are recognized over time because as the Company's performance creates or enhances customer controlled assets or creates or enhances an asset with no alternative use, and the Company has an enforceable right to receive compensation. Over time product contracts are estimated based on the number of units produced (output method) during the period multiplied by the unit rate stated in the contract. As the output method is driven by units produced, the Company recognizes revenues based on the value transferred to the customer relative to the remaining value to be transferred. The Company also matches the costs associated with the units produced. If a contract is projected to result in a loss, the entire contract loss is recognized in the period when the loss was first determined and the amount of the loss updated in subsequent reporting periods. Revenue recognition also includes an amount related to a contract asset or contract liability. If the recognized revenue is greater than the amount billed to the customer, a contract asset is recorded in accounts receivable trade - unbilled. Conversely, if the amount billed to the customer is greater than the recognized revenue, a contract liability is recorded in customer deposits. Changes in the job performance, job conditions and final contract settlements are factors that influence management's assessment of total contract value and therefore, profit and revenue recognition.






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Seasonality

The Company services the construction industry primarily in areas of the United States where construction activity may be inhibited by adverse weather during the winter. As a result, the Company may experience reduced revenues from December through February and realize the substantial part of its revenues during the other months of the year. The Company may experience lower profits, or losses, during the winter months, and as such, 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

Management believes that the Company's operations were affected by inflation in 2022 and 2021, particularly in the purchases of certain raw materials such as cement, aggregates, and steel, and with labor costs. The Company believes that raw material pricing and labor costs will increase in 2023, although no assurance can be given regarding future pricing or costs.





Backlog

As of March 13, 2023, the Company's sales backlog was approximately $52.4 million as compared to approximately $29.0 million at approximately the same time in 2022. It is estimated that most of the projects in the sales backlog will be produced within 12 months, but a few will be produced over multiple years. The increase in backlog was due to an increase in orders for products to be produced at all three manufacturing facilities, as well as an increase in the barrier rental backlog, as compared to the prior year. The Company expects the backlog to increase with continued bidding on large infrastructure and SlenderWall/architectural projects, although no assurance can be given.

The risk exists that recessionary economic conditions and the coronavirus outbreak may adversely affect the Company more than it has experienced to date. To mitigate these economic and other risks, the Company has a broader product offering than most competitors and has historically been a leader in innovation and new product development in the industry. The Company is continuing this strategy through the development, marketing and sales efforts for its new products.

The Company continues to evaluate both production and administrative processes, and has streamlined many of these processes through lean activities. During 2022 and 2021, the Company, through lean activities, continued to see positive effects in production and office areas. The lean business philosophy is a long-term, customer focused approach to continuous improvement by eliminating waste and providing value. It is management's intention to continue on the lean journey while implementing a lean culture throughout the Company to help reach our goals for 2023. The Company's lean efforts are aimed to increase quality to the customer, significantly reduce defects, while increasing production capacity and sales volume. In order to meet these goals, substantial improvements through lean tools and lean thinking are being implemented company wide.

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