SMITH MIDLAND CORP
10QSB, 1996-05-20
CONCRETE PRODUCTS, EXCEPT BLOCK & BRICK
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB



            QUARTERLY REPORT FILED PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934



For the quarter year ended                                Commission File Number
     March  31, 1996                                              1-13752
     ---------------                                              -------



                            SMITH-MIDLAND CORPORATION
                            -------------------------
                             (Name of Small Business
                       Issuer As Specified In Its Charter)



            Delaware                                           54-1727060
            --------                                           ----------
(State or Other Jurisdiction of                             (I.R.S. Employer
 Incorporation or Organization)                           Identification Number)

                 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)



         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
                            ------             -----
         As of May 17, 1996,  the Company had  outstanding  3,085,718  shares of
Common Stock, $.01 par value per share.






                            SMITH-MIDLAND CORPORATION

                                      INDEX
<TABLE>
<CAPTION>

PART I.  FINANCIAL INFORMATION                                                        PAGE NUMBER

         Item 1.  Financial Statements
<S>                                                                                      <C>
                           Consolidated Balance Sheets;                                   1
                           March 31, 1996 (Unaudited)
                           and December 31, 1995 (Unaudited)

                           Consolidated Statements of                                     2
                           Operations (Unaudited); Three
                           months ended March 31, 1996 and 1995

                           Consolidated Statements of Cash Flows                          3
                           (Unaudited); Three  months ended
                           March 31, 1996 and 1995

                           Notes to Consolidated Financial                                4
                           Statements (Unaudited)

         Item 2.  Management's Discussion and                                             7
                           Analysis of Financial
                           Condition and Results of
                           Operations

PART II.  OTHER INFORMATION

         Item 1.  Legal Proceedings                                                     11

         Item 2.  Changes in Securities                                                 11

         Item 3.  Defaults Upon Senior Securities                                       11

         Item 4.  Submission of Matters to a Vote of
                           Security Holders                                             11

         Item 5.           Other Information                                            11

         Item 6.  Exhibits and Reports on Form 8-K                                      11

         Signatures                                                                     12

</TABLE>






                         PART I - FINANCIAL INFORMATION
Item 1.  FINANCIAL STATEMENTS

                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                   MARCH 31,           DECEMBER 31,
                  ASSETS                                                             1996                  1995
                  ------                                                        --------------         ------------
<S>                                                                             <C>                    <C>       
Current assets:
   Cash and cash equivalents                                                    $    580,601           $  938,089
   Accounts receivable
     Trade - billed, less allowances for doubtful accounts of
       $249,783 and $231,367                                                       2,858,186           2,559,796
     Trade - unbilled                                                                219,643             101,873
   Inventories
     Raw materials482,772                                                            482,939
     Finished goods                                                                  727,796             743,205
   Prepaid expenses and other assets                                                 118,455             159,490
                                                                                  ----------          ----------
     Total current assets                                                          4,987,453           4,985,392
                                                                                   ---------           ---------

Property and equipment, net                                                        1,393,869           1,430,286
                                                                                   ---------           ---------

Other assets:
   Note receivable, officer                                                          667,598             665,474
   Other                                                                              91,169              76,103
                                                                                  ----------          ----------
     Total other assets                                                              758,767             741,577
                                                                                    --------         -----------
       TOTAL ASSETS                                                               $7,140,089          $7,157,255
                                                                                  ==========          ==========


                  LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current maturities of notes payable                                            $1,053,395          $1,274,544
   Accounts payable -- trade                                                       1,696,493           1,603,325
   Accrued expenses and other liabilities                                            540,395             597,480
   Customer deposits                                                                 339,492              51,132
                                                                                  ----------         -----------
     Total current liabilities                                                     3,629,775           3,526,481
                                                                                   ---------           ---------
Notes payable -- less current maturities                                           1,785,507           1,720,726
Notes payable -- related parties                                                     116,753             116,753
                                                                                  ----------          ----------
     TOTAL LIABILITIES                                                             5,532,035           5,363,960
                                                                                   ---------           ---------

Stockholders' equity:
   Preferred stock, $.01 par value, authorized 1,000,000 shares,
     none outstanding                                                                      -                   -
   Common stock, $.01 par value, authorized 8,000,000 shares,
     issued and outstanding 3,085,718 and 2,935,718                                   30,857              29,357
   Additional capital                                                              3,450,085           3,055,252
   Retained earnings (deficit)                                                    (1,872,888)         (1,291,314)
                                                                                 -----------          -----------
     TOTAL STOCKHOLDERS' EQUITY                                                    1,608,054           1,793,295
                                                                                 -----------        ------------
       TOTAL LIABILITIES AND STOCKHOLDERS'  EQUITY                                $7,140,089          $7,157,255
                                                                                  ==========          ==========


              The accompanying  notes are an integral part of these consolidated financial statements.
</TABLE>


                                       -1-





                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                   THREE MONTHS ENDED
                                                                                        MARCH 31,

                                                                                     1996            1995
                                                                                ------------     --------
<S>                                                                             <C>               <C>        
Revenue:
     Net sales                                                                  $  1,890,779      $ 2,342,564
     Shipping and installation income                                                215,642          313,186
                                                                                ------------     ------------

         Total revenue                                                             2,106,421        2,655,750
                                                                                ------------     ------------

Cost of goods sold:
     Cost of goods sold -- sales                                                  1,576,303         1,663,759
     Shipping and installation expense                                              175,616           248,392
                                                                                -----------      ------------

         Total cost of goods sold                                                 1,751,919         1,912,151
                                                                                -----------      ------------

Gross profit                                                                        354,502           743,599
                                                                                -----------      ------------

Operating expenses:
     General and administrative expenses                                            731,133           657,600
     Selling expenses                                                               150,973           118,425
                                                                                 ----------      ------------

     Total operating expenses                                                       882,106           776,025
                                                                                -----------      ------------

Operating income (loss)                                                            (527,604)          (32,426)
                                                                                -----------      ------------

Other income (expense):
     Royalties                                                                       57,699            36,736
     Interest expense                                                              (108,163)         (111,558)
     Interest income                                                                 28,110             9,458
     Other                                                                          (31,616)          (36,234)
                                                                                -------------    -------------

         Total other income (expense)                                               (53,970)         (101,598)
                                                                                -------------    ------------

Income (loss) before income taxes                                                  (581,574)         (134,024)
Income tax expense (benefit)                                                              --               --
                                                                                ---------------- --------------

         Net income (loss)                                                      $  (581,574)     $   (134,024)
                                                                                ============     =============

Net income (loss) per share                                                     $      (.19)     $       (.07)
                                                                                ==============   =============

Weighted average common shares outstanding                                        3,057,696         1,792,858
                                                                                ==============   =============


               The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                       -2-





                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                       THREE MONTHS ENDED
                                                                                           MARCH 31,
                                                                                     1996                1995
                                                                                 -----------         --------

<S>                                                                               <C>                <C>       
Cash flows from operating activities:
     Cash received from customers                                                 $2,036,320         $2,578,938
     Cash paid to suppliers and employees                                         (2,475,915)        (2,532,564)
     Interest paid                                                                  (108,163)           (96,081)
     Other                                                                            (3,506)           (26,776)
                                                                               -------------        -----------

       Net cash provided (absorbed) by operating activities                         (551,264)           (76,483)
                                                                                  ----------        -----------

Cash flows from investing activities:
     Purchases of property and equipment                                             (44,065)           (32,478)
     Increase in officer note receivable                                              (2,124)           (25,671)
                                                                                  ----------       ------------

       Net cash (absorbed) by investing activities                                   (46,189)           (58,149)
                                                                                   ---------         ----------

Cash flows from financing activities:
     Proceeds from bank borrowings                                                        --                  --
     Repayments of bank borrowings                                                  (156,368)           (73,524)
     Proceeds from issuance of common stock                                          396,333                  --
     Proceeds (repayments) on borrowings -
       related parties, net                                                                --            (2,979)
                                                                                 ------------        ----------

       Net cash provided (absorbed) by financing activities                           239,965           (76,503)
                                                                                 ------------         ---------

Net increase (decrease) in cash                                                     (357,488)          (211,135)

Cash at beginning of period                                                          938,089            320,514
                                                                                ------------          ---------

Cash at end of period                                                           $    580,601       $    109,379
                                                                                ============       ============

Reconciliation  of  net  income   (loss)  to  net  cash  provided  by  operating
     activities:

Net income (loss)                                                               $   (581,574)      $   (134,024)
Adjustments to reconcile net income (loss) to net cash
     provided  (absorbed) by operating activities:
       Depreciation and amortization                                                  80,482            130,043
       Decrease (increase) in other assets                                           (15,066)           (25,486)
       Decrease(increase) in:
         Accounts receivable - billed                                               (298,390)          (122,868)
         Accounts receivable - unbilled                                             (117,770)            18,862
         Inventories                                                                  15,576           (163,032)
         Prepaid expenses and other assets                                            41,035            (58,829)
       Increase (decrease) in:
         Accounts payable - trade                                                     93,168            339,182
         Accrued expenses and other liabilities                                      (57,085)           (50,789)
         Customer deposits                                                           288,360             (9,542)
                                                                                   ------------       ---------

Net cash provided (absorbed) by operating activities                              $ (551,264)        $   76,483
                                                                                    ===========        =========

            The  accompanying  notes are an integral part of these  consolidated financial statements.
</TABLE>

                                       -3-





                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                 MARCH 31, 1996

BASIS OF PRESENTATION

     As permitted by the rules of the  Securities and Exchange  Commission  (the
"Commission")  applicable to quarterly  reports on Form 10-QSB,  these notes are
condensed  and do not contain all  disclosures  required by  generally  accepted
accounting  principles.  Reference should be made to the consolidated  financial
statements  and related notes  included in the  Company's  Annual Report on Form
10-KSB, for the year ended December 31, 1995.

     In the opinion of management  of the Company,  the  accompanying  financial
statements  reflect  all  adjustments  which were of a normal  recurring  nature
necessary for a fair presentation of the Company's results of operations for the
three months ended March 31, 1996 and March 31, 1995.

     The results disclosed in the consolidated  statements of operations are not
necessarily indicative of the results to be expected for any future periods.

PRINCIPLES OF CONSOLIDATION

     The accompanying  consolidated financial statements include the accounts of
Smith-Midland  Corporation  and its  wholly  owned  subsidiaries,  Smith-Midland
Corporation,  a Virginia  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 & Design,
Inc.,  a  Virginia  corporation.   All  significant  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  depreciated  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.


                                       -4-






                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


     Depreciation is computed using the straight-line  method over the following
estimated useful lives:

<TABLE>
<CAPTION>
                                                                                          Years
                                                                                          -----
<S>                                                                                       <C>  
       Buildings........................................................................  10-33
       Trucks and automotive equipment..................................................   3-10
       Shop machinery and equipment.....................................................   3-10
       Land improvements................................................................  10-30
       Office equipment.................................................................   3-10
</TABLE>

INCOME TAXES

     The  provision  for  income  taxes  is based on  earnings  reported  in the
financial statements.  A deferred income tax asset or liability is determined by
applying  currently  enacted tax laws and rates to the expected  reversal of the
cumulative  temporary  differences  between  the  carrying  value of assets  and
liabilities for financial statement and income tax purposes. Deferred income tax
expense is measured by the change in the deferred  income tax asset or liability
during the year.

     Effective  January 1, 1993, the Company  adopted SFAS 109  "Accounting  for
Income  Taxes." The  adoption of SFAS 109 did not have a material  effect on the
consolidated  financial  statements  as the  deferred  tax asset  related to the
Company's net operating loss carry forward has been reserved in its entirety. No
provision for income taxes has been made for the three month periods ended March
31, 1996 and 1995 as the Company does not expect to incur income tax expense for
the full year.

REVENUE RECOGNITION

     The  Company  primarily  recognizes  revenue  on the  sale  of its  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  SlenderwallTM  concrete
products  are  recognized  upon  completion  of  production  and  customer  site
inspections. Provisions for estimated losses on contracts are made in the period
in which such losses are determined.


                                       -5-






ESTIMATES

The  preparation  of these  financial  statements  requires  management  to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liability at the date of the financial  statements  and the reported  amounts of
revenues and expenses. Actual results could differ from those estimates.

INCOME PER SHARE

     Income per share is calculated based on net income and the weighted average
number of shares of common stock outstanding during the period.

COMMON STOCK OFFERING

     In December 1995, the Company  completed an initial 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.


                                       -6-





ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

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.

     The  results  for the  quarter  ended  March 31,  1996 are not  necessarily
indicative of the results of the Company's  operations  that may be expected for
the year ending December 31, 1996.

     THREE MONTHS ENDED MARCH 31, 1996  COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1995

     For the three months ended March 31, 1996, the Company had total revenue of
approximately  $2,106,000 compared to total revenue of approximately  $2,656,000
for the three months ended March 31, 1995, a decrease of approximately $550,000,
or  21%.  Total  product  sales  decreased  from  approximately   $2,343,000  to
$1,891,000,  a decrease of approximately  $452,000 or 19%. The decrease in total
product sales was primarily  attributed to the severe winter weather experienced
in the  Mid-Atlantic  region  during  the 1996  period  which  delivered  record
snowfall  which  affected  the  Company's   production  (see   "Seasonality  and
Inflation") In addition, the 1996 sales were adversely affected by the Company's
continued  modification  and preparation of selected areas of its  manufacturing
facility  for  the  production  of  Slenderwall(TM)  systems  (the  "Slenderwall
Transition").  During  the  Slenderwall  Transition,  which  began in 1995,  the
Company was unable to produce the same volume of products as during the previous
period.  Management  initiated  the  Slenderwall  Transition  as a result of the
positive reaction to Slenderwall(TM) systems in the marketplace, the anticipated
demand for  Slenderwall(TM)  systems,  and the higher profit margins the Company
expects to realize on sales of  Slenderwall(TM)  systems in 1996 and beyond.  Of
the Company's  approximate  $3,100,000  backlog of purchase orders as of May 13,
1996,  approximately  $2,100,000  was for  the  manufacture  of  Slenderwall(TM)
systems. Shipping and installation revenue decreased from approximately $313,000
to $216,000,  a decrease of approximately  $97,000 or 31%, due to a lower volume
of installation services and deliveries.

     Total  cost of  goods  sold for the  three  months  ended  March  31,  1996
decreased by approximately  $160,000 to $1,752,000 from $1,912,000 for the three
months ended March 31, 1995, a decrease of approximately 8%. Total cost of goods
sold as a percentage of total revenue  increased from  approximately 72% for the
three months ended March 31, 1995 to

                                       -7-





approximately  83% for the three  months  ended March 31,  1996,  primarily as a
result of the adverse winter weather during the 1996 period which  significantly
reduced the level of sales to cover the fixed  portion of cost of goods sold. In
the future,  although no assurance  can be given,  management  expects the total
cost of goods sold as a percentage of total revenue to trend  downward as higher
profit  margin  products,  primarily  Slenderwall(TM)  systems,  become a larger
percentage of the mix of products sold.

     For the three  months  ended  March 31,  1996,  the  Company's  general and
administrative  expenses increased by approximately $73,000, or 11% to $731,000,
or 36% of total revenue,  from $658,000,  or 25% of total revenue, for the three
months ended March 31, 1995.  The increase is primarily  the result of increased
insurance and worker's  compensation  expenses,  increased fees for professional
services, a portion of which is non-recurring, increased expenditures related to
the licensing activities  conducted by Easi-Set,  and increased costs related to
the introduction of the Slenderwall(TM)  systems and the Slenderwall Transition.
Selling  expenses  for the three  months  ended  March  31,  1996  increased  to
approximately  $151,000 from  approximately  $118,000 for the three months ended
March 31, 1995 an increase of approximately  33,000, or 28%, primarily resulting
from an increase in advertising and promotion.

     The Company's  operating loss for the three months ended March 31, 1996 was
$528,000,  compared to an operating loss of $32,000,  for the three months ended
March 31,  1995,  an  increased  loss of  $496,000.  This  increase in the first
quarter   operating  loss  was  primarily   attributed  to  the  severe  weather
experienced in the 1996 quarter,  coupled with marketing and production start-up
costs incurred in connection  with the  Slenderwall  Transition.  In the future,
although no assurance can be given,  management believes that profit margins and
operating income will increase as sales of Slenderwall(TM)  wall panels become a
larger percentage of revenues.

     Royalty income increased by approximately  $21,000 or 57%, from $37,000 for
the three  months  ended  March 31, 1995 to  approximately  $58,000 for the same
period in 1996. The increase was a result of a general increase in the number of
licensees  throughout  1995 and continuing  into 1996,  who generated  increased
royalty revenue, specifically with increase in royalties generated from the sale
by  licensees of J-J  Hooks(TM)  Barriers.  Although no assurance  can be given,
management  expects  royalty  income to grow during the year ended  December 31,
1996 due to an  increased  sales  staff and the efforts of the Company to obtain
additional  licensees and implement a licensing program for its  Slenderwall(TM)
wall panel product.

     Interest  expense was  approximately  $108,000  for the three  months ended
March 31, 1996,  compared to  approximately  $112,000 for the three months ended
March 31, 1995.  This $4,000  decrease,  or 4%, was primarily due to a decreased
level of debt  outstanding  during the 1996 quarter.  Interest income of $28,000
for the 1996 period  represented a $19,000  increase (211%) over interest income
of $9,000 for the 1995 quarter due to investment of IPO proceeds during the 1996
quarter. The Company incurred total other expenses of approximately  $32,000 for
the  three  months  ended  March  31,  1996,   compared  to  other  expenses  of
approximately $36,000 for

                                       -8-





the three months ended March 31, 1995, a decrease of approximately $4,000, which
resulted primarily from reduced fees and miscellaneous charges.

The Company  experienced a net loss for the three months ended March 31, 1996 of
approximately  $582,000 compared to a net loss of approximately $134,000 for the
same quarter in 1995. This increase in net loss of approximately is $448,000 was
primarily  attributed to the unusually  severe  winter  weather  during the 1996
period, which reduced revenue, coupled with increased general and administrative
expenses and marketing costs during the Slenderwall Transition.

LIQUIDITY AND CAPITAL RESOURCES

     In December 1995, the Company  completed an initial 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
"Redeemable  Warrants"),  at a purchase price of $3.60 per share of Common Stock
and Redeemable 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
Redeemable Warrants for net proceeds of approximately $369,000.

     The Company has financed its capital expenditures,  operating  requirements
and growth to date primarily through the IPO, bank and other borrowings, and the
sale of stock to and loans from its principal stockholders.

     In late 1995,  the Company filed four separate  informal  claims  totalling
approximately   $592,000  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,"  all of which were  undertaken  after the award of the  contracts and
after unit production in accordance  with the contracts was virtually  complete.
In early 1996 the Company  received  several  counterclaims  from the  Company's
customers  who were  involved in the disputed  State of Maryland  contracts.  In
connection with these disputed contracts, several involved parties have withheld
payment on  accounts  receivable  to the  Company.  This  increase  in  accounts
receivable  due to the  Maryland  claims  and  related  disputes  has  adversely
affected the Company's cash flow.

     For the three months ended March 31, 1996, cash of  approximately  $551,000
was absorbed by operating  activities.  The  substantial use of cash during this
period was from an increase of accounts  receivable  totalling  approximately of
$416,000.  In  addition,  the  Company  used cash of  approximately  $46,000 for
investing activities,  primarily as a result of the purchase of and additions to
property and equipment.  Cash totalling  approximately  $240,000 was provided to
the  Company  by  financing  activities,  the major  source of which was the IPO
overallotment proceeds.


                                       -9-





     The Company had approximately $1,053,000 of indebtedness at March 31, 1996,
due during the next 12 months.  This  indebtedness  is generally  secured by the
assets of the  Company and is  personally  guaranteed  by Rodney I.  Smith,  the
Company's President.

     Management  intends to extend or  refinance  this debt as it  becomes  due.
However,  no assurance  can be given that the Company will be  successful in its
efforts  to extend  or  refinance  its  current  indebtedness,  or that if it is
successful in those efforts, that such extension or refinancing will be on terms
favorable to the Company.  If the Company is not able to extend or refinance the
indebtedness, the Company may be subject to having its assets foreclosed upon by
certain  lenders.  As of May 17,  1996,  the  Company  had not  paid a  $400,000
personal  note that  matured on April 30, 1996.  Management  is  negotiating  an
extension  of that  note,  but no  assurances  can be made as to the  ability to
successfully  extend the  maturity  date.  The note is secured by the  Company's
accounts receivable.

     As a result of the  Company's  substantial  debt  burden,  the  Company  is
especially  sensitive to changes in the prevailing  interest  rates,  which have
risen substantially in 1995.  Fluctuations 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, if interest rates should increase.


SEASONALITY AND INFLATION

     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.  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.

     Management believes that the Company's  operations have not been materially
affected by inflation.












                                      -10-





                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.

                  In 1996, the Company's former Chief Financial  Officer filed a
request for arbitration under the rules of the American Arbitration  Association
("AAA Rules")  seeking damages of  approximately  $250,000 based upon a claim of
wrongful termination under his employment  agreement.  The dispute was presented
to an arbitrator  who heard the case pursuant to AAA Rules.  The  arbitrator has
heard all of the  evidence  and is expected to render his decision in June 1996.
No assurance  can be given  regarding the outcome of the  arbitration.  Refer to
"Item 3, Legal  Proceedings" in the Company's  Annual Report for the fiscal year
ended December 31, 1995, filed on Form 10-KSB, on April 15, 1996.

ITEM 2.  CHANGES IN SECURITIES.  None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.  None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.  None.

ITEM 5.  OTHER INFORMATION.  None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.  None



                                      -11-





                                   SIGNATURES


     In accordance  with the  requirements  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:  May 17, 1996                     By:/s/ Rodney I. Smith
                                           ---------------------------
                                           Rodney I. Smith
                                           Chairman of the Board,
                                           Chief Executive Officer and President
                                           (principal executive officer)


Date:  May 17, 1996                     By:/s/ Scott J. Friberg
                                           ---------------------------
                                           Scott J. Friberg
                                           Chief Financial Officer
                                           (principal financial officer)

Date: May 17, 1996                      By:/s/ Annette M. Somerford
                                           ---------------------------
                                           Annette M. Somerford
                                           Controller
                                           (principal accounting officer)



                                      -12-


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<FISCAL-YEAR-END>                              DEC-31-1996
<PERIOD-END>                                   MAR-31-1996
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<SECURITIES>                                   0
<RECEIVABLES>                                  2,858,186
<ALLOWANCES>                                   249,783
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                          0
                                    0
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