SMITH MIDLAND CORP
10QSB, 1998-11-19
CONCRETE PRODUCTS, EXCEPT BLOCK & BRICK
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                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB


                  Quarterly Report under Section 13 or 15(d) of
                       the Securities Exchange Act of 1934



For the quarterly period ended                           Commission File Number
     September 30, 1998                                          1-13752 



                            SMITH-MIDLAND CORPORATION
                          (Exact Name of Small Business
                       Issuer as Specified in Its Charter)



         Delaware                                             54-1727060
(State of Incorporation)                             (I.R.S. Employer I.D. No.)


                 Route 28, P.O. Box 300, Midland, Virginia 22728
                    (Address of Principal Executive Offices)

                                 (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 November 19, 1998, the Company had outstanding  3,044,798  shares
of Common Stock, $.01 par value per share.


<PAGE>
<TABLE>
                                   SMITH-MIDLAND CORPORATION

                                             INDEX

<S> <C>
PART I.  FINANCIAL INFORMATION                                                     PAGE NUMBER

         Item 1.  Financial Statements

                           Consolidated Balance Sheets (Unaudited);                       3
                           September 30, 1998 and December 31, 1997

                           Consolidated Statements of Operations                          4
                           (Unaudited); Three months ended
                           September 30, 1998  and 1997

                           Consolidated Statements of Operations                          5
                           (Unaudited); Nine months ended
                           September 30, 1998  and 1997
 
                           Consolidated Statements of Cash Flows                          6
                           (Unaudited); Nine months ended
                           September 30, 1998 and 1997

                           Notes to Consolidated Financial Statements (Unaudited)         7

         Item 2. Management's Discussion and Analysis of Financial                       10
                  Condition and Results of Operations

PART II.  OTHER INFORMATION

         Item 1.  Legal Proceedings                                                      15

         Item 2.  Changes in Securities and Use of Proceeds                              15

         Item 3.  Defaults Upon Senior Securities                                        15

         Item 4.  Submission of Matters to a Vote of Security Holders                    15

         Item 5.  Other Information                                                      15

         Item 6.  Exhibits and Reports on Form 8-K                                       15

         Signatures                                                                      16
</TABLE>





<PAGE>
<TABLE>
                                          PART I - Financial Information
Item 1.    Financial Statements

                                    SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                                            Consolidated Balance Sheets
                                                    (Unaudited)
<CAPTION>
                                                                                  September 30,       December 31,
         Assets                                                                        1998               1997      
Current assets:                                                                   -----------         -----------
<S>                                                                               <C>                 <C>        
   Cash and cash equivalents                                                      $   288,218         $   288,310
   Accounts receivable:
     Trade - billed, less allowances for doubtful accounts of
       $266,577 and $231,304                                                        3,611,233           3,254,993
     Trade - unbilled                                                                 378,141             410,158
   Inventories:
     Raw materials                                                                    540,078             486,583
     Finished goods                                                                   992,923             942,427
   Prepaid expenses and other assets                                                  100,155              69,801
                                                                                  -----------         -----------
        Total current assets                                                        5,910,748           5,452,272
                                                                                  -----------         -----------

Property and equipment, net                                                         1,998,747           1,531,062
                                                                                  -----------         -----------

Other assets:
   Cash - restricted                                                                  615,266             196,977
   Note receivable, officer                                                           656,348             632,472
   Other                                                                              219,096              79,443
                                                                                  -----------         -----------
     Total other assets                                                             1,490,710             908,892
       Total Assets                                                               $ 9,400,205         $ 7,892,226
                                                                                  ===========         ===========

         Liabilities and Stockholders' Equity
Current liabilities:
   Current maturities of notes payable                                            $   102,004         $ 2,199,228
   Accounts payable - trade                                                         1,703,615           1,744,127
   Accrued expenses and other liabilities                                             335,404             570,693
   Customer deposits                                                                  427,417             450,474
                                                                                  -----------         -----------
     Total current liabilities                                                      2,568,440           4,964,522
Notes payable - less current maturities                                             4,463,685             759,440
Notes payable - related parties                                                       104,686             115,598
                                                                                  -----------         -----------
     Total Liabilities                                                              7,136,811           5,839,560
                                                                                  -----------         -----------

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 3,044,798 and 3,044,798                                    30,857              30,857
   Additional capital                                                               3,450,085           3,450,085
   Treasury Stock                                                                    (102,300)           (102,300)
    Retained earnings (deficit)                                                    (1,115,248)         (1,325,976)
     Total Stockholders' Equity                                                     2,263,394           2,052,666
                                                                                  -----------         -----------
       Total Liabilities and Stockholders'  Equity                                $ 9,400,205         $ 7,892,226
                                                                                  ===========         ===========

              The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                        3
<PAGE>
<TABLE>
                                     SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                                        Consolidated Statements of Operations
                                                     (Unaudited)


<CAPTION>
                                                                                     Three Months Ended
                                                                                         September 30,
                                                                                  1998                   1997    
                                                                              -----------             -----------

<S>                                                                           <C>                     <C>        
Revenue                                                                       $ 3,968,174             $ 3,464,094

Cost of goods sold                                                              2,880,029               2,646,871
                                                                              -----------             -----------

Gross profit                                                                    1,088,145                 817,223
                                                                              -----------             -----------

Operating expenses:
     General and administrative expenses                                          663,181                 493,812
     Selling expenses                                                             176,490                 210,346
                                                                              -----------             -----------

     Total operating expenses                                                     839,671                 704,158
                                                                              -----------             -----------

Operating income                                                                  248,474                 113,065
                                                                              -----------             -----------

Other income (expense):
     Royalties                                                                     78,691                  84,420
     Interest expense                                                            (135,056)                (74,843)
     Interest income                                                               27,504                  10,610
     Other                                                                        (54,871)                  5,314
                                                                              -----------             -----------
         Total other income (expense)                                             (83,732)                 25,501

Income (loss) before income taxes                                                 164,742                 138,566
Income tax expense (benefit)                                                         --                      --   
                                                                              -----------             -----------

         Net income (loss)                                                    $   164,742             $   138,566
                                                                              ===========             ===========

Net income (loss) per share                                                   $       .05             $       .05
                                                                              ===========             ===========

Weighted average common shares outstanding                                      3,044,798               3,044,798
                                                                              ===========             ===========


              The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                        4
<PAGE>
<TABLE>
                                    SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                                       Consolidated Statements of Operations
                                                     (Unaudited)


<CAPTION>
                                                                                       Nine Months Ended
                                                                              September 30,          September 30,
                                                                                  1998                    1997    
                                                                              ------------            ------------

<S>                                                                           <C>                     <C>         
Revenue                                                                       $ 10,552,785            $  9,082,397

Cost of goods sold                                                               7,928,331               6,796,708
                                                                              ------------            ------------

Gross profit                                                                     2,624,454               2,285,689
                                                                              ------------            ------------

Operating expenses:
     General and administrative expenses                                         1,631,230               1,547,899
     Selling expenses                                                              497,774                 502,218
                                                                              ------------            ------------

     Total operating expenses                                                    2,129,004               2,050,117
                                                                              ------------            ------------

Operating income                                                                   495,450                 235,572
                                                                              ------------            ------------

Other income (expense):
     Royalties                                                                     141,136                 164,584
     Interest expense                                                             (429,420)               (272,076)
     Interest income                                                                54,502                  37,063
     Other                                                                         (50,940)                 16,458
                                                                              ------------            ------------
         Total other income (expense)                                             (284,722)                (53,971)

Income before income taxes                                                         210,728                 181,601
Income tax expense (benefit)                                                          --                      --   
                                                                              ------------            ------------

         Net income                                                           $    210,728            $    181,601
                                                                              ============            ============

Net income (loss) per share                                                   $        .07            $        .06
                                                                              ============            ============

Weighted average common shares outstanding                                       3,044,798               3,044,798
                                                                              ============            ============


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

                                                        5
<PAGE>
<TABLE>
                                    SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                                       Consolidated Statements of Cash Flows
                                                    (Unaudited)
                                                                                        Nine Months Ended
                                                                                          September 30,
                                                                                   1998                   1997   
                                                                              ------------            ------------
Cash flows from operating activities:
<S>                                                                           <C>                     <C>         
     Cash received from customers                                             $ 10,346,641            $  8,490,347
     Cash paid to suppliers and employees                                      (10,367,663)             (7,915,408)
     Interest paid                                                                (429,420)               (272,076)
     Other
                                                                                   (20,314)                 21,461
                                                                              ------------            ------------
       Net cash provided (absorbed) by operating activities                       (470,756)                324,324
                                                                              ------------            ------------

Cash flows from investing activities:
     Purchases of property and equipment                                          (707,156)               (412,459)
     Decrease (increase) in officer note receivable                                   --                     4,500
        Decrease (increase) in related party receivables                           (10,912)                   --
        Decrease (increase) in restricted cash                                    (418,289)
Net cash absorbed by investing activities                                       (1,136,357)               (407,959)
                                                                              ------------            ------------

Cash flows from financing activities:
     Proceeds from bank borrowings                                               4,094,392                 177,359
     Repayments of bank borrowings                                              (2,487,371)               (266,983)
       Net cash provided (absorbed) by financing activities                      1,607,021                 (89,624)
                                                                              ------------            ------------

Net increase (decrease) in cash and cash equivalents                                   (92)               (173,259)

Cash and cash equivalents at beginning of period                                   288,310                 438,079
                                                                              ------------            ------------

Cash and cash equivalents at end of period                                    $    288,218            $    264,820
                                                                              ============            ============

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

Net income                                                                    $    210,728               $ 181,601
Adjustments to reconcile net income to net cash
     provided  (absorbed) by operating activities:
       Depreciation and amortization                                               239,471                 305,665
       Decrease (increase) in:
         Accounts receivable - billed                                             (356,240)               (615,907)
         Accounts receivable - unbilled                                             32,017                (455,654)
         Inventories(103,991)                                                      218,659
         Prepaid expenses and other assets                                        (193,883)                 18,624
       Increase (decrease) in:
         Accounts payable - trade                                                  (40,512)                260,092
         Accrued expenses and other liabilities                                   (235,289)                 96,317
         Customer deposits                                                         (23,057)                314,927
                                                                              ------------            ------------
Net cash provided (absorbed) by operating activities                          $   (470,756)              $ 324,324
                                                                              ============            ============


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

                                                        6
<PAGE>
                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                               September 30, 1998
                                   (Unaudited)


Basis of Presentation

     As  permitted  by the  rules  of the  Securities  and  Exchange  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 Smith-Midland  Corporation's  Annual Report on
Form 10-KSB for the year ended December 31, 1997.

     In  the  opinion  of  the  management  of  Smith-Midland  Corporation  (the
"Company"),  the accompanying  financial statements reflect all adjustments of a
normal  recurring  nature which were  necessary for a fair  presentation  of the
Company's  results of  operations  for the three- and  nine-month  periods ended
September 30, 1998 and 1997.

     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 Company's  accompanying  consolidated  financial statements include the
accounts of Smith-Midland  Corporation,  a Delaware 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
inter-company accounts and transactions have been eliminated in consolidation.

Reclassifications

       Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the 1998 presentation.

Inventories

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

                                       7
<PAGE>
                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Unaudited

Property and Equipment

     Property and equipment, net 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.

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..........................................  10-30
       Office equipment...........................................   3-10

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.

     No provision  for income taxes has been made for the three- and  nine-month
periods  ended  September  30, 1998 and 1997,  as the Company does not expect to
incur  income tax expense for 1998 and did not incur  income tax expense  during
1997.

Revenue Recognition

The Company  primarily  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  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.

                                       8
<PAGE>
                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Unaudited)


Estimates

     The preparation of these financial  statements  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. Actual results could differ from those estimates.

Earnings (Loss) Per Share

     Basic earnings (loss) per share is computed by dividing income available to
common  stockholders by the weighted average number of common shares outstanding
for the period.  Diluted  earnings  per share  reflects the  potential  dilutive
effect of securities that could share in earnings of an entity. At September 30,
1998, there was no material dilutive effect on earnings (loss) per share.



                                       9
<PAGE>
tem 2.    Management's Discussion and Analysis of Financial Condition
                            and Results of Operations


General

     The Company generates revenues primarily from the sale, licensing, leasing,
shipping 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  SlenderwallTM,  a
patent-pending,  lightweight,  energy efficient concrete and steel exterior wall
panel for use in building  construction;  J-J HooksTM 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 feed  troughs,  and custom order  precast  concrete
products with various architectural surfaces.

     This Form 10-QSB contains  forward-looking  statements  which involve risks
and  uncertainties.  The Company's actual results may differ  significantly from
the results discussed in the forward-looking  statements and the results for the
three and nine months ended September 30, 1998 are not necessarily indicative of
the results for the Company's  operations for the year ending December 31, 1998.
Factors  that might  cause such a  difference  include,  but are not limited to,
product  demand,  the impact of competitive  products and pricing,  capacity and
supply  constraints or difficulties,  general business and economic  conditions,
the effect of the Company's  accounting policies and other risks detailed in the
Company's Annual Report on Form 10-KSB and other filings with the Securities and
Exchange Commission.


Results of Operations

     Three months ended  September  30, 1998  compared to the three months ended
September 30, 1997

     For the three  months  ended  September  30,  1998,  the  Company had total
revenue of  $3,968,174  compared to total  revenue of  $3,464,094  for the three
months ended September 30, 1997, an increase of $504,080,  or 15%. Total product
sales were  $3,365,303 for the three months ended September 30, 1998 compared to
$2,735,079  for the same period in 1997,  an increase of  $630,224,  or 23%. The
increase  was  primarily  due to increased  SlenderwallTM  sales during the 1998
period,  as compared to the 1997 period.  Shipping and installation  revenue was
$602,871 for the three months ended September 30, 1998 and $729,015 for the same
period in 1997,  a decrease of $126,144,  or 17%. The decrease was  attributable
primarily to lower installation  activity during the three-month period in 1998,
compared to the same period in 1997.

     Total cost of goods sold for the three months ended  September 30, 1998 was
$2,880,029,  an increase of $233,158, or 9% from $2,646,871 for the three months
ended  September  30,  1997.  The increase was due to a 15% increase in revenue,
partially  offset by a decrease in cost of goods sold as a percentage  of sales.

                                       10
<PAGE>

Total cost of goods sold, as a percentage of total  revenue,  decreased to 72.6%
for the three months ended  September 30, 1998,  from 76.4% for the three months
ended  September 30, 1997  primarily  due to normal  variations in the Company's
operations and product mix.

     For the three months ended  September 30, 1998,  the Company's  general and
administrative  expenses increased $169,369 to $663,181 from $493,812 during the
same period in 1997.  The 34%  increase is primarily  attributed  to the cost of
increasing the allowance for doubtful accounts and personnel recruitment fees.

     Selling  expenses for the three months ended  September 30, 1998  decreased
$33,856 to $176,490 from $210,346 for the three months ended September 30, 1997,
resulting primarily from decreased advertising expenses during the 1998 period.

     The  Company's  operating  income for the three months ended  September 30,
1998 was $248,474  compared to operating income of $113,065 for the three months
ended September 30, 1997, an increase of $135,409, or 120%.
The increased operating income resulted primarily from
increased  gross profit  which was offset to some extent by increased  operating
expenses as discussed above.

     Royalty  income  totaled  $78,691 for the three months ended  September 30,
1998,  compared to $84,420 for the same three  months in 1997.  The  decrease of
$5,729, or 7%, was primarily due to a decrease in product sales by the Company's
licensees.

     Interest  expense was $135,056 for the three  months  ended  September  30,
1998,  compared to $74,843 for the three months ended  September  30, 1997.  The
increase of  $60,213,  or 80%,  was  primarily  due to the higher  level of debt
outstanding during the 1998 period.

     The net income was $164,742 for the three months ended  September 30, 1998,
compared  to net income of $138,566  for the same period in 1997.  The basic and
diluted  net  income  per share for the  current  three  month  period  was $.05
compared $.05 per share for the three months ended September 30, 1997.

                                       11
<PAGE>

     Nine months  ended  September  30, 1998  compared to the nine months  ended
September 30, 1997

     For the nine months ended September 30, 1998, the Company had total revenue
of $10,552,785 compared to total revenue of $9,082,397 for the nine months ended
September 30, 1997, an increase of $1,470,388,  or 16%. Total product sales were
$9,076,218 for the nine months ended September 30, 1998,  compared to $7,685,982
for the same period in 1997,  an increase of  $1,390,236,  or 18%.  The increase
resulted  primarily from increased  Slenderwall(TM),  barrier and  miscellaneous
architectural  product sales during the 1998 period.  Shipping and  installation
revenue  was  $1,476,567  for the  nine  months  ended  September  30,  1998 and
$1,396,415  for the same period in 1997,  an  increase  of  $80,152,  or 6%. The
increase is attributable to higher shipping activity and increased  installation
revenue in the 1998 period, as compared to the 1997 period.

     Total cost of goods sold for the nine months ended  September  30, 1998 was
$7,928,331,  an increase of  $1,131,623,  or 17%, from  $6,796,708  for the nine
months ended  September  30, 1997.  The  increase  was  primarily  the result of
increased revenue and the related cost of production.  Total cost of goods sold,
as a  percentage  of total  revenue,  increased  modestly  to 75.1% for the nine
months ended  September 30, 1998, from 74.8% for the nine months ended September
30, 1997  primarily due to normal  variations in the  Company's  operations  and
product mix.

     For the nine months ended  September 30, 1998,  the  Company's  general and
administrative expenses increased $83,331, or 5%, to $1,631,230, from $1,547,899
during the same period in 1997.  The increase was  attributed  to increased  use
tax, provisions for doubtful accounts and personnel recruitment expense,  offset
somewhat by decreased professional fees.

     Selling  expenses for the nine months ended  September  30, 1998  decreased
$4,444,  or less than 1%, to $497,774  from  $502,218  for the nine months ended
September 30, 1997. The decrease was due to decreased  advertising expense which
was partially  offset by increased  bidding  expenses  during the 1998 period as
compared to the 1997 period.

     The Company's operating income for the nine months ended September 30, 1998
was $495,450, compared to operating income of $235,572 for the nine months ended
September 30, 1997,  an increase of $259,878,  or 110%.  The improved  operating
income  resulted  primarily from increased  gross profit offset,  in part, by an
increase in operating expenses as discussed above.

     Royalty  income  totaled  $141,136 for the nine months ended  September 30,
1998,  compared to $164,584  for the same nine months in 1997.  The  decrease of
$23,448,  or 14%, was largely due to a credit given for a reduction in the scope
of a licensing  contract and the  resulting  reversal of  previously  recognized
royalty income of approximately $15,500.

       Interest  expense was $429,420 for the nine months  ended  September  30,
1998,  compared to $272,076 for the nine months ended  September  30, 1997.  The
increase of  $157,344,  or 58%,  was  primarily  due to  interest,  lease buyout
amounts  and  miscellaneous   fees  associated  with  the  early  retirement  of
approximately  27  notes  and  capital  leases  as  part of the  Company's  debt
restructuring in September 1998 (see "Liquidity and Capital Resources").


                                       12
<PAGE>

     Net income was  $210,728  for the nine months  ended  September  30,  1998,
compared to net income of $181,601  for the same period in 1997.  Net income per
share for the  current  nine month  period was $.07  compared  to net income per
share of $.06 for the nine months ended September 30, 1997.


     Liquidity and Capital Resources

     The Company has financed its capital expenditures,  operating  requirements
and growth to date primarily with proceeds from  operations,  its initial public
offering  and  bank  and  other  borrowings.   The  Company  had  $4,670,375  of
indebtedness  at  September  30,  1998,  of  which  approximately  $102,000  was
scheduled to mature within twelve months.

     In June 1998 the Company successfully restructured substantially all of its
then  outstanding  debt into one $4,000,000 note with The First National Bank of
New England ("FNB"), headquartered in Hartford,  Connecticut. The Company closed
on this loan on June 25, 1998. The Company  obtained a twenty three year term on
this note at 1.5% above prime, secured by equipment and real estate. The term of
the note  dramatically  improved  the  Company's  current  debt  ratio  and debt
service. Current debt decreased from $2,199,228 at December 31, 1997 to $102,004
at September 30, 1998. In addition to paying off existing debt of  approximately
$2.9 million, the Company received  approximately  $832,000 in restricted funds,
to be used only for plant expansion and new equipment. The loan is guaranteed in
part by the U.S. Department of Agriculture Rural Business-Cooperative  Service's
loan  guarantee.  Under the terms of the note,  the Company's  unfinanced  fixed
asset  expenditures are limited to $300,000 per year for a five year period.  In
addition FNB will permit chattel mortgages on purchased  equipment not to exceed
$200,000 on an annual basis.  The Company was also granted a $500,000  operating
line of credit by FNB. This commercial  revolving  promissory note terminates on
May 1, 1999 and carries a variable rate of 1% above prime.  This line is used to
meet day to day operating needs.


     Other Comments

     The Company has not completed its assessment of the effect of the year 2000
on the Company's data processing systems and operations, but the Company expects
that the 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 is  currently  planning  to send  questionnaires  to its  suppliers  and
customers  to ensure  that  they are  taking  steps to be year  2000  compliant.
However,  if the Company and third  parties upon which it relies,  are unable to
address this issue in a timely manner,  it could result in a material  financial
risk to the Company.  In order to assure this does not occur,  the Company plans
to devote all resources  required to resolve any significant year 2000 issues in
a timely manner.

     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 reducing the Company's  production  capacity.  However, The
Company is in the process of building an  additional  manufacturing  facility at
its Midland,  Virginia  location which will bring these  operations  indoors and

                                       13
<PAGE>

significantly  increase  annual  manufacturing  capacity.   Completion  of  this
facility is  anticipated  for early 1999,  although there can be no assurance of
such  timing.  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  traditionally
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.  However, as of the date of
this  filing,   the  Company's  backlog  is  approximately   $5.3  million,   of
approximately  which $2.2 million represents firm contracts for  Slenderwall(TM)
and architectural pre-cast concrete products.

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



                                       14
<PAGE>
                           PART II - Other Information


Item 1.  Legal Proceedings.  None.


Item 2.  Changes in Securities and Use of Proceeds.  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.

                  A. The following Exhibit is filed herewith:

                        Exhibit No.                  Title
                        -----------                  -----

                            27                 Financial Data Schedule

                  B. Report on Form 8-K.   None.




                                       15
<PAGE>
                                   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: November 19, 1998                   By: /s/ Rodney I. Smith   
                                          ----------------------------------
                                          Rodney I. Smith
                                          Chairman of the Board,
                                          Chief Executive Officer and President
                                          (principal executive officer)


Date: November 19, 1998                   By: /s/ Theodore D. Pennington
                                          ----------------------------------
                                          Theodore D. Pennington
                                          Vice President, Finance and
                                          Chief Financial Officer
                                          (principal financial officer)



                                       16

<TABLE> <S> <C>

<ARTICLE>                     5
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-END>                               SEP-30-1998
<CASH>                                     288,218
<SECURITIES>                               0
<RECEIVABLES>                              3,877,810
<ALLOWANCES>                               266,577
<INVENTORY>                                1,633,001
<CURRENT-ASSETS>                           5,910,748
<PP&E>                                     1,998,747
<DEPRECIATION>                             239,471
<TOTAL-ASSETS>                             9,400,205
<CURRENT-LIABILITIES>                      2,568,440
<BONDS>                                    0
                      0
                                0
<COMMON>                                   30,857
<OTHER-SE>                                 2,232,537
<TOTAL-LIABILITY-AND-EQUITY>               9,400,205
<SALES>                                    10,552,785
<TOTAL-REVENUES>                           10,697,483
<CGS>                                      7,928,331
<TOTAL-COSTS>                              10,057,335
<OTHER-EXPENSES>                           0
<LOSS-PROVISION>                           0
<INTEREST-EXPENSE>                         429,420
<INCOME-PRETAX>                            210,728
<INCOME-TAX>                               0
<INCOME-CONTINUING>                        210,728
<DISCONTINUED>                             0
<EXTRAORDINARY>                            0
<CHANGES>                                  0
<NET-INCOME>                               210,728
<EPS-PRIMARY>                              .06
<EPS-DILUTED>                              .06
        

</TABLE>



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