**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-KSB**

**SMITH-MIDLAND      CORPORATION**

|  Delaware                                                                      |                   54-1727060                                |
|-------------------------------------------------------------------------------------|-----------------------------------------------------------------------|
|  (State                or Other Jurisdiction of Incorporation or Organization) |   (I.R.S.                Employer  Identification No.) |
|                                                                                |                                                                  |
| P.O.                Box 300, 5119 Catlett Road,                                     |                                                                       |
| Midland,                Virginia                      | 22728                                                                 |
| (Address                of Principal Executive Offices)                             |  (Zip                Code)                                       |

|  Title                of Each Class                                                      | Name                of Each Exchange on |
|----------------------------------------------------------------------------------------------------|-----------------------------------------|
|                                                                                               | Which                Registered         |
|                                                                                                    |                                    |
| Common                Stock, $.01 par value per share                                              | Boston                Stock Exchange    |
|                                                                                               |                                    |
| Securities                Registered Pursuant to Section 12(g) of the Exchange                Act: |
|                                                                                               |                                    |
| Common                Stock, $.01 par value per share                                              |
| (Title                of Class)                                                                    |
|                                                                                               |
| Preferred                Stock Purchase Rights                                                     |
| (Title                of Class)                                                                    |

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**FORWARD-LOOKING      STATEMENTS**

| ·   | our                significant loss for the year ended December 31,                2006, |
|--------------------|------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | our                high level of indebtedness and ability to satisfy the                same, |
|--------------------|-----------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | the                continued availability of financing in the amounts, at the times,                and on                the terms required, to support our future business and capital                projects, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | the                extent to which we are successful in developing, acquiring, licensing                or                securing patents for proprietary                products, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | changes                in economic conditions specific to any one or more of our markets                (including the availability of public funds and grants for                construction), |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | changes                in general economic conditions, |
|--------------------|--------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | adverse                weather which inhibits the demand for our                products, |
|--------------------|-------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | our                compliance with governmental                regulations, |
|--------------------|-----------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | the                outcome of future litigation, |
|--------------------|--------------------------------------------------|

|   |   |
|--------|--------|

| ·   | on                material construction projects, our ability to produce and install                product                that conforms to contract specifications and in a time frame that                meets                the contract requirements, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | the                cyclical nature of the construction                industry, |
|--------------------|---------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | our                exposure to increased interest expense payments should interest rates                change |
|--------------------|----------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | the                Board of Directors, which is composed of four members, has only one                outside, independent director, |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | the                Company does not have an audit committee; the Board of Directors                functions                in that role, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | the                Company’s Board of Directors does not have a member that qualifies as an                audit committee financial expert as defined in the                regulations, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | the                Company has experienced a high degree of employee turnover,                and |
|--------------------|---------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | the                other factors and information disclosed and discussed in other sections                of                this report. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|

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**PART      I**

| **Item                  1.** | **Description****of                    Business** |
|------------------------------|---------------------------------------------------|

**General**

**Market**

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**Products**

*Easi-Set      Slenderwall*
*Ô*
*      Lightweight Construction Panels*

*Easi-Set      Sierra Wall*

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*Easi-Set      J-J Hooks*
*Ô*
*      Highway Safety Barrier*

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*Easi-Set      Precast Building and Easi-Span*
*Ô*

| ·   | *Communications                Operations*                --                to house fiber optics regenerators, switching stations and microwave                transmission shelters, cellular phone sites, and cable television                repeater                stations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | *Government                Applications*                --                to federal, state and local authorities for uses such as weather                and                pollution monitoring stations; military storage, housing and operations;                park vending enclosures; rest rooms; kiosks; traffic control systems;                school maintenance and athletic storage; airport lighting control                and                transmitter housing; and law enforcement evidence and ammunition                storage. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | *Utilities                Installations*                --                for electrical switching stations and transformer housing, gas control                shelters and valve enclosures, water and sewage pumping stations,                and                storage of contaminated substances or flammable materials which require                spill containment. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | *Commercial                and Industrial Locations*                --                for electrical and mechanical housing, cemetery maintenance storage,                golf                course vending enclosures, mechanical rooms, rest rooms, emergency                generator shelters, gate houses, automobile garages, hazardous materials                storage, food or bottle storage, animal shelters, and range                houses. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Easi-Set      Utility Vault*

*Beach      Prisms*
*TM*

*H2Out*
*TM*

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**Sources      of Supply**

**Licensing**

**Marketing      and Sales**

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**Competition**

**Patents      and Proprietary Information**

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**Government      Regulation**

**Employees**

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| **Item              2.** | **Description                of Property** |
|--------------------------|--------------------------------------------|

**Facilities**

| **Item              3.** | **Legal                Proceedings** |
|--------------------------|--------------------------------------|

| **Item              4.** | **Submission                of Matters to Vote of Security                Holders.** |
|--------------------------|--------------------------------------------------------------------------------------|

----

**PART      II**

| **Item              5.** | **Market                for Common Equity, Related Stockholder Matters, and Small Business                Issuer                Purchases of Equity                Securities.** |
|--------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                            |   | High   |   | Low    |   |
|---------------------------------|--------|--------|--------|--------|--------|
| **2006**                        |   |   |   |   |   |
| First                  Quarter  |   | $      | 3.40   |   | $      | 2.50 |   |
| Second                  Quarter |   | $      | 3.20   |   | $      | 2.22 |   |
| Third                  Quarter  |   | $      | 2.92   |   | $      | 1.21 |   |
| Fourth                  Quarter |   | $      | 2.45   |   | $      | 1.36 |   |
|                            |   |   |   |   |   |   |   |
| **2005**                        |   |   |   |   |   |   |   |
| First                  Quarter  |   | $      | 1.09   |   | $      | 0.91 |   |
| Second                  Quarter |   | $      | 1.84   |   | $      | 0.70 |   |
| Third                  Quarter  |   | $      | 4.00   |   | $      | 1.55 |   |
| Fourth                  Quarter |   | $      | 3.15   |   | $      | 2.15 |   |
|                            |   |   |   |   |   |   |   |

**Dividends**

**Shareholder      Rights Plan **

----

| **Item              6.** | **Management's                Discussion and Analysis or Plan of                Operation** |
|--------------------------|---------------------------------------------------------------------------------------------|

**Overview**

**Results      of Operations**

**Year      ended December 31, 2006 compared to the year ended December 31,      2005**

----

----

----

**Liquidity      and Capital Resources**

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**Significant      Accounting Policies and Estimates**

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**Seasonality**

**Inflation**

**Other      Comments**

----

----

**Recent      Accounting Pronouncements**

*Accounting      for Uncertainty in Income Taxes*
*Accounting      for Income Taxes*

----

| **Item              7.** | **Financial                Statements** |
|--------------------------|-----------------------------------------|

|                                                                                                                                                         |   | Page   |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|
|                                                                                                                                                         |   |   |    |
| Report                  of Independent Registered Public Accountants                                                                                         |   |   | F-3     |   |
|                                                                                                                                                         |   |   |         |   |
| Consolidated                  Balance Sheets as of December 31, 2006 and 2005                                                                                |   |   | F-4-5   |   |
|                                                                                                                                                         |   |   |         |   |
| Consolidated                  Statements of Operations for the years ended December 31, 2006                  and                  2005                      |   |   | F-6     |   |
|                                                                                                                                                         |   |   |         |   |
| Consolidated                  Statements of Changes in Stockholders' Equity for the years ended                  December                  31, 2006 and 2005 |   |   | F-7     |   |
|                                                                                                                                                         |   |   |         |   |
| Consolidated                  Statements of Cash Flows for the years ended December 31, 2006                  and                  2005                      |   |   | F-8-9   |   |
|                                                                                                                                                         |   |   |    |   |
| Summary                  of Significant Accounting Policies                                                                                                  |   |   | F-10-15 |   |
|                                                                                                                                                         |   |   |         |   |
| Notes                  to Consolidated Financial Statements                                                                                                  |   |   | F-16-22 |   |

| **Item                8.** | **Changes                In and Disagreements With Accountants on Accounting and Financial                Disclosure** |
|----------------------------|------------------------------------------------------------------------------------------------------------------------|

| **Item              8A.** | **Controls                and Procedures.** |
|---------------------------|---------------------------------------------|

----

| **Item              8B.** | **Other                Information.** |
|---------------------------|---------------------------------------|

----

**PART      III**

| **Item              9.** | **Directors,                Executive Officers, Promoters and Control Persons; Compliance with                Section                16(a) of the Exchange                Act** |
|--------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                |   |    |   | **Director                  Or Executive** |   |                                                 |
|-------------------------------------|--------|---------|--------|--------------------------------------------|--------|------------------------------------------------------|
| **Name**                            |   | **Age** |   | **Officer                  Since**         |   | **Position**                                         |
|                                |   |    |   |                                       |   |                                                 |
| Rodney                  I. Smith    |   | 68      |   | 1970                                       |   | Chief                  Executive Officer, President, |
|                                |   |    |   |                                       |   | and                  Chairman of the Board of        |
|                                |   |    |   |                                       |   | Directors                                            |
|                                |   |    |   |                                       |   |                                                 |
| Ashley                  B. Smith    |   | 44      |   | 1994                                       |   | Vice                  President of Sales and         |
|                                |   |    |   |                                       |   | Marketing                  and Director              |
|                                |   |    |   |                                       |   |                                                 |
| Wesley                  A. Taylor   |   | 59      |   | 1994                                       |   | Vice                  President of Administration,   |
|                                |   |    |   |                                       |   | Secretary,                  and Director             |
|                                |   |    |   |                                       |   |                                                 |
| Andrew                  G. Kavounis |   | 81      |   | 1995                                       |   | Director                                             |
|                                |   |    |   |                                       |   |                                                 |
| Lawrence                  R. Crews  |   | 38      |   | 2004                                       |   | Chief                  Financial Officer             |
|                                |   |    |   |                                       |   |                                                 |
| Steve                  Ott          |   | 40      |   | 2005                                       |   | Vice                  President of Engineering       |
|                                |   |    |   |                                       |   | Smith-Midland                  Corp. (Virginia)      |

**Background**

**Rodney      I. Smith. **
*Chairman      of the Board of Directors, Chief Executive Officer and      President.*

**Ashley      B. Smith.**
*Vice      President of Sales and Marketing and Director*

**Wesley      A. Taylor. **
*Vice      President of Administration and Director*
***.***
** **

----

**Andrew      Kavounis.**
*Director*

**Lawrence      R. Crews. **
*Chief      Financial Officer*
***.***
** **

**Steve      Ott. **
*Vice      President of Engineering, Smith Midland Corp.(Virginia).*

**Section      16(a) Beneficial Ownership Reporting Compliance**

----

**Code      of Ethics**

**Audit      Committee**

| **Item              10.** | **Executive                Compensation.** |
|---------------------------|--------------------------------------------|

**Summary      Compensation Table**

| Name                  and Principal Position |   | Year   |   | Salary ($)(1) |   | Bonus                  ($)(2) |   | Stock                  Awards ($) |    | Option                  Awards                  ($)(3) |   | Non-Equity                  Incentive                  Plan Compensation ($) |   | Nonqualified                  Deferred                  Compensation Earnings($) |   | All                  Other Compensation ($ |   | Total                  ($) |   |
|----------------------------------------------|--------|--------|--------|--------------------|--------|-------------------------------|--------|-----------------------------------|---------|--------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|--------|-------------------------------------------------|--------|----------------------------|--------|
|                                         |   |   |   |               |   |                          |   |                              |    |                                                   |   |                                                                              |   |                                                                             |   |                                            |   |                       |   |
| Rodney                  I. Smith             |   |   | 2006   |               |   | 99,750                        |   |                              | 16,000  |                                                   |   | —                                                                           |   |                                                                             | 30,400 |                                            |   | —                    |   |   | — |   |   | 347,563                  (4 | ) |   | 493,713 |   |
| President,                  Chief            |   |   | 2005   |               |   | 89,286                        |   |                              | — |                                                   |   | —                                                                           |   |                                                                             | 28,200 |                                            |   | —                    |   |   | — |   |   | 258,000                  (4 | ) |   | 375,486 |   |
| Executive                  Officer           |   |   |   |               |   |                          |   |                              |    |                                                   |   |                                                                              |   |                                                                             |   |                                            |   |                       |   |   |   |   |   |   |   |   |   |   |
| and                  Chairman of the         |   |   |   |               |   |                          |   |                              |    |                                                   |   |                                                                              |   |                                                                             |   |                                            |   |                       |   |   |   |   |   |   |   |   |   |   |
| Board.                                       |   |   |   |               |   |                          |   |                              |    |                                                   |   |                                                                              |   |                                                                             |   |                                            |   |                       |   |   |   |   |   |   |   |   |   |   |
|                                         |   |   |   |               |   |                          |   |                              |    |                                                   |   |                                                                              |   |                                                                             |   |                                            |   |                       |   |   |   |   |   |   |   |   |   |   |
| Ashley                  B. Smith             |   |   | 2006   |               |   | 104,683                       |   |                              | 2,508   |                                                   |   | —                                                                           |   |                                                                             | 10,640 |                                            |   | —                    |   |   | — |   |   | 5,804 |   |   | 123,635 |   |
| VP                  of Sales and             |   |   | 2005   |               |   | 118,089                       |   |                              | 7,277   |                                                   |   | —                                                                           |   |                                                                             | 14,100 |                                            |   | —                    |   |   | — |   |   | — |   |   | 139,466 |   |
| Marketing                  and Director      |   |   |   |               |   |                          |   |                              |    |                                                   |   |                                                                              |   |                                                                             |   |                                            |   |                       |   |   |   |   |   |   |   |   |   |   |
|                                         |   |   |   |               |   |                          |   |                              |    |                                                   |   |                                                                              |   |                                                                             |   |                                            |   |                       |   |   |   |   |   |   |   |   |   |   |
| Wesley                  A. Taylor            |   |   | 2006   |               |   | 100,630                       |   |                              | 3,320   |                                                   |   | —                                                                           |   |                                                                             | 10,640 |                                            |   | —                    |   |   | — |   |   | 5,390 |   |   | 119,980 |   |
| VP                  of Administration,       |   |   | 2005   |               |   | 83,000                        |   |                              | 7,106   |                                                   |   | —                                                                           |   |                                                                             | 14,100 |                                            |   | —                    |   |   | — |   |   | — |   |   | 104,206 |   |
| Secretary,                  Treasurer,       |   |   |   |               |   |                          |   |                              |    |                                                   |   |                                                                              |   |                                                                             |   |                                            |   |                       |   |   |   |   |   |   |   |   |   |   |
| and                  Director                |   |   |   |               |   |                          |   |                              |    |                                                   |   |                                                                              |   |                                                                             |   |                                            |   |                       |   |   |   |   |   |   |   |   |   |   |

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| Dividend                  Yield (per share) |   | $      | 0.00                     |   |
|---------------------------------------------|--------|--------|--------------------------|--------|
| Volatility                                  |   |   | 73                       | %      |
| Risk-free                  Intrest Rate     |   |   | 4.42                     | %      |
| Expected                  Life              |   |   | 6                  years |   |

**Executive      Officer Outstanding Equity Awards At Fiscal Year-End**

| Name                                 |   | Number                  of Securities                  Underlying                  Unexercised Options                  (#) Exercisable |    | Number                  of Securities Underlying Unexercised Options                  (#)Unexercisable |   | Option                   Exerciese                  Price($/Sh) |   | Option                  Expiration                  Date |   |
|--------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|---------|--------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|----------------------------------------------------------|--------|
|                                 |   |                                                                                                                                         |    |                                                                                                   |   |                                                                 |   |                                                     |   |
| Rodney                  I. Smith     |   |                                                                                                                                         | 10,000  |                                                                                                   |   | —                                                              |   |                                                     | 1.00   |   |   | 7/30/08 |   |
|                                 |   |                                                                                                                                         | 10,000  |                                                                                                   |   | —                                                              |   |                                                     | 1.00   |   |   | 8/3/08 |   |
|                                 |   |                                                                                                                                         | 20,000  |                                                                                                   |   | —                                                              |   |                                                     | 0.5625 |   |   | 12/28/09 |   |
|                                 |   |                                                                                                                                         | 20,000  |                                                                                                   |   | —                                                              |   |                                                     | 0.8000 |   |   | 4/22/11 |   |
|                                 |   |                                                                                                                                         | 80,000  |                                                                                                   |   | —                                                              |   |                                                     | 0.8100 |   |   | 5/3/11 |   |
|                                 |   |                                                                                                                                         | 20,000  |                                                                                                   |   | —                                                              |   |                                                     | 1.3900 |   |   | 12/25/11 |   |
|                                 |   |                                                                                                                                         | 20,000  |                                                                                                   |   | —                                                              |   |                                                     | 0.8300 |   |   | 12/16/13 |   |
|                                 |   |                                                                                                                                         | 6,667   |                                                                                                   |   | 13,333                                                               |   |                                                     | 2.52   |   |   | 9/29/15 |   |
|                                 |   |                                                                                                                                         | — |                                                                                                   |   | 20,000                                                               |   |                                                     | 2.25   |   |   | 5/21/16 |   |
| TOTAL                                |   |                                                                                                                                         | 186,667 |                                                                                                   |   | 33,333                                                               |   |                                                     |   |   |   |   |   |
|                                 |   |                                                                                                                                         |    |                                                                                                   |   |                                                                 |   |                                                     |   |   |   |   |   |
| Ashley                  B. Smith     |   |                                                                                                                                         | 4,650   |                                                                                                   |   | —                                                              |   |                                                     | 1.00   |   |   | 6/9/07 |   |
|                                 |   |                                                                                                                                         | 3,000   |                                                                                                   |   | —                                                              |   |                                                     | 1.00   |   |   | 11/4/07 |   |
|                                 |   |                                                                                                                                         | 4,800   |                                                                                                   |   | —                                                              |   |                                                     | 1.00   |   |   | 8/3/08 |   |
|                                 |   |                                                                                                                                         | 7,000   |                                                                                                   |   | —                                                              |   |                                                     | 0.5625 |   |   | 12/28/09 |   |
|                                 |   |                                                                                                                                         | 10,000  |                                                                                                   |   | —                                                              |   |                                                     | 0.8000 |   |   | 4/22/11 |   |
|                                 |   |                                                                                                                                         | 10,000  |                                                                                                   |   | —                                                              |   |                                                     | 1.3900 |   |   | 12/25/11 |   |
|                                 |   |                                                                                                                                         | 10,000  |                                                                                                   |   | —                                                              |   |                                                     | 0.8300 |   |   | 12/16/13 |   |
|                                 |   |                                                                                                                                         | 3,333   |                                                                                                   |   | 6,667                                                                |   |                                                     | 2.52   |   |   | 9/29/15 |   |
|        |   |                                                                                                                                         | — |                                                                                                   |   | 7,000                                                                |   |                                                     | 2.25   |   |   | 5/21/16 |   |
| TOTAL                                |   |                                                                                                                                         | 52,783  |                                                                                                   |   | 13,667                                                               |   |                                                     |   |   |   |   |   |
|                                 |   |                                                                                                                                         |    |                                                                                                   |   |                                                                 |   |                                                     |   |   |   |   |   |
| Wesley                  A. Taylor    |   |                                                                                                                                         | 6,667   |                                                                                                   |   | —                                                              |   |                                                     | 0.8300 |   |   | 12/16/13 |   |
|                                 |   |                                                                                                                                         | 3,333   |                                                                                                   |   | 6,667                                                                |   |                                                     | 2.52   |   |   | 9/29/15 |   |
|                                 |   |                                                                                                                                         | — |                                                                                                   |   | 7,000                                                                |   |                                                     | 2.25   |   |   | 5/21/16 |   |
| TOTAL                                |   |                                                                                                                                         | 10,000  |                                                                                                   |   | 13,667                                                               |   |                                                     |   |   |   |   |   |
|                                 |   |                                                                                                                                         |    |                                                                                                   |   |                                                                 |   |                                                     |   |   |   |   |   |
| TOTAL                                |   |                                                                                                                                         | 249,450 |                                                                                                   |   | 60,667                                                               |   |                                                     |   |   |   |   |   |

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**Compensation      of Directors**

**Director      Compensation Table**

| Name                                  |   | Fees                Earned or Paid in Cash ($) |   | Stock                Awards ($) |   | Option                Awards ($)(1) |   | Non-Equity                Incentive Plan Compensation |    | Nonqualified                Deferred Compensation Earnings |   | All                Other Compensation ($) |   | Total                ($) |    |
|---------------------------------------|--------|------------------------------------------------|--------|---------------------------------|--------|-------------------------------------|--------|-------------------------------------------------------|---------|------------------------------------------------------------|--------|-------------------------------------------|--------|--------------------------|---------|
| Rodney                I. Smith (2)    |   | —                                        |   | —                         |   | 30,400                              |   | —                                               |    | —                                                    |   | —                                   |   | 30,400                   |    |
| Andrew                G. Kavounis (3) |   |                                           | 4,000  |                            |   | —                             |   |                                                  | — |                                                       |   | —                                   |   |                     | — |   |   | — |   |   | 4,000 |   |
| Ashley                B. Smith (4)    |   |                                           | 1,750  |                            |   | —                             |   |                                                  | 10,640  |                                                       |   | —                                   |   |                     | — |   |   | — |   |   | 12,390 |   |
| Wesley                A. Taylor (5)   |   |                                           | 1,750  |                            |   | —                             |   |                                                  | 10,640  |                                                       |   | —                                   |   |                     | — |   |   | — |   |   | 12,390 |   |

| (1)   | Also                disclosed in the “Summary Compensation Table”                above. |
|-----------------|-----------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| (2)   | 220,849                options were outstanding as of December 31, 2006, of which 186,667                were                exercisable as of December 31,                2006. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| (3)   | 4,000                options were outstanding as of December 31, 2006, of which 2,000                were                exercisable as of December 31,                2006. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| (4)   | 66,450                options were outstanding as of December 31, 2006, of which 52,783                were                exercisable as of December 31,                2006. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| (5)   | 23,667                options were outstanding as of December 31, 2006, of which 10,000                were                exercisable as of December 31,                2006. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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| **Item              11.** | **Security                Ownership of Certain Beneficial Owners and Management and Related                Stockholder Matters.** |
|---------------------------|-----------------------------------------------------------------------------------------------------------------------------------|

| **Name                    and Address of****Beneficial                    Owner(1)** |   | **Number                  of Shares****Beneficially****Owned(2)** |    | **Percentage                    of****of Class** |   |
|--------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|---------|-------------------------------------------------------|--------|
|                                                                                 |   |                                                              |    |                                                  |   |
| Rodney                  I. Smith (1)(3)(4)(5)                                        |   |                                                              | 752,465 |                                                  |   | 15.6 |   |
|                                                                                 |   |                                                              |    |                                                  |   |   |   |
| Ashley                  B. Smith (1)(3)(4)(6)                                        |   |                                                              | 150,400 |                                                  |   | 3.2 |   |
|                                                                                 |   |                                                              |    |                                                  |   |   |   |
| Wesley                  A. Taylor (1)(7)                                             |   |                                                              | 35,083  |                                                  |   | * |   |
|                                                                                 |   |                                                              |    |                                                  |   |   |   |
| Andrew                  G. Kavounis (1)(8)                                           |   |                                                              | 2,000   |                                                  |   | * |   |
|                                                                                 |   |                                                              |    |                                                  |   |   |   |
| Lawrence                  R. Crews (1)(9)                                            |   |                                                              | 3,333   |                                                  |   | * |   |
|                                                                                 |   |                                                              |    |                                                  |   |   |   |
| AL                  Frank Asset Management, Inc. (10)                                |   |                                                              | 684,814 |                                                  |   | 14.8 |   |
|                                                                                 |   |                                                              |    |                                                  |   |   |   |
| All                  directors, executive officers and key employees                 |   |                                                              |    |                                                  |   |   |   |
| as                  a group (5 persons)(2)(11)                                       |   |                                                              | 943,281 |                                                  |   | 19.3 |   |

----

| (1) | The                  address for each of Messrs. Rodney I. Smith, Ashley B. Smith, Taylor,                  Kavounis, and Crews is c/o Smith-Midland Corporation, P.O. Box                  300, 5119                  Catlett Road, Midland, Virginia 22728. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Pursuant                    to the rules and regulations of the Securities and Exchange Commission,                    shares of Common Stock that an individual or group has a right                    to acquire                    within 60 days pursuant to the exercise of options or warrants                    are deemed                    to be outstanding for the purposes of computing the percentage                    ownership                    of such individual or group, but are not deemed to be outstanding                    for the                    purpose of computing the percentage ownership of any other person                    shown in                    the table. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Ashley                  B. Smith is the son of Rodney I. Smith. Each of Rodney I. Smith                  and Ashley                  B. Smith disclaims beneficial ownership of the other’s shares of Common                  Stock. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Does                  not include options to purchase 5,000 shares held by Matthew Smith                  and an                  aggregate of 86,489 shares of Common Stock held by Matthew Smith                  and                  Roderick Smith. Matthew Smith and Roderick Smith are sons of Rodney                  I.                  Smith, and brothers of Ashley B. Smith. Also, does not include                  shares held                  by Merry Robin Bachetti, sister of Rodney I. Smith and aunt of                  Ashley B.                  Smith, for which each of Rodney I. Smith and Ashley B. Smith disclaims                  beneficial ownership. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Includes                  50,000 shares of Common Stock held by Hazel Bowling, former wife                  of Rodney                  I. Smith, and mother of Mr. Smith’s children. Mr. Smith disclaims                  beneficial ownership of the shares held by Hazel Smith. Includes                  options                  to purchase 186,667 shares. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Includes                  options to purchase 52,783                  shares. |
|-----|-------------------------------------------------------------------------------|

| (7) | Includes                  options to purchase 10,000                  shares. |
|-----|-------------------------------------------------------------------------------|

----

| (8)                 | Includes                options to purchase 2,000 shares. |
|-------------------------------|-----------------------------------------------------------|

| (9)                 | Includes                options to purchase 3,333 shares. |
|-------------------------------|-----------------------------------------------------------|

| (10)                 | Address                of holder is 32392 Coast Highway, Suite 260, Laguna Beach, CA                92651 |
|--------------------------------|-----------------------------------------------------------------------------------------------------------|

| (11) | Includes                options to purchase 254,783 shares for all directors, executive officers                and key employees as a group. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                      |   | Number                of securities to be                issued upon exercise of                outstanding options, warrants                and rights |    | Weighted                average exercise                price of outstanding                options, warrants                and rights |   | Number                of securities remaining                available for                future issuance under                equity compensation                plans |   |
|---------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|----------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Equity                compensation plans approved by security holders     |   |                                                                                                                                                         | 511,424 |                                                                                                                                         | $      | 1.49                                                                                                                                                                              |   |   | 304,334 |   |
| Equity                compensation plans not approved by security holders |   |                                                                                                                                                         | 0       |                                                                                                                                         | $      | 0                                                                                                                                                                                 |   |   | 0 |   |
| Total                                                                     |   |                                                                                                                                                         | 511,424 |                                                                                                                                         | $      | 1.49                                                                                                                                                                              |   |   | 304,334 |   |

| **Item              12.** | **Certain                Relationships and Related                Transactions.** |
|---------------------------|-----------------------------------------------------------------------------------|

| **Item              13.** | **Exhibits** |
|---------------------------|--------------|

| (1) | The                  following exhibits are filed                  herewith: |
|-----|------------------------------------------------------------------------------|

| Exhibit |   |                                                                                                                                                                                                                                                                                          |
|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  |   | Description                                                                                                                                                                                                                                                                                   |
|    |   |                                                                                                                                                                                                                                                                                          |
| 3.1     |   | Certificate                  of Incorporation, as amended (Incorporated by reference to theCompany’s                  Registration Statement on Form SB-2 (No. 33-89312) declared                  effective                  by the Commission on December 13, 1995).                  |
|    |   |                                                                                                                                                                                                                                                                                               |
| 3.2     |   | Bylaws                  of the Company adopted on January 21, 2003 (Incorporated by reference                  to                  the Company’s Registration Statement on Form 8-A (No. 000-25964) filed                  with                    the Commission on January 24, 2003). |
|    |   |                                                                                                                                                                                                                                                                                          |
| 4.1     |   | Specimen                  Common Stock Certificate (Incorporated by reference to the Company’s                  Registration Statement on Form SB-2 (No. 33-89312) declared effective                  by                  the Commission on December 13,                  1995).       |

----

| 4.2    |   | Rights                  Agreement, dated as of January 21, 2003, between the Company and                   Computershare                  Trust Company, Inc., as rights agent, including the Form of                   Certificate                    of Designations, the Form of Rights Certificate and the Summary                    of                     Rights                    to Purchase Preferred Shares attached thereto as Exhibits A,                    B, and C,                    respectively                      (Incorporated by reference to the Company’s Registration Statement on                      Form 8-A (No. 000-25964) filed with the Commission on January                      24,                      2003). |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.1   |   | Lease                  Agreement, dated January 1, 1995, between the Company and Rodney                  I.                   Smith                  (Incorporated by reference to the Company’s Registration Statement on                  Form                    SB-2 (No. 33-89312) declared effective by the Commission on December                     13,                    1995).                                                                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.2   |   | Collateral                  Assignment of Letters Patent, dated between the Company and Rodney                   I.                  Smith (Incorporated by reference to the Company’s Registration                   Form                    SB-2 (No. 33-89312) declared effective by the Commission on December                    13,                    1995).                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.3   |   | Form                  of License Agreement between the Company and its Licensee (Incorporated                  by                  reference to the Company’s Registration Statement on Form SB-2 (No. 33-                  89312)                  declared effective by the Commission on December 13,                  1995).                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.4   |   | Promissory                  Note from Rodney I. Smith to the Company, dated as of December31,                  1997 (Incorporated by reference to the Company’s Annual Report on Form                  10-KSB                    for the year ended December 31, 1997).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.5   |   | First                  National Bank of New England Loan Agreement, assumed by UPS Capital,dated                  June 25, 1998 (Incorporated by reference to the Company’s Quarterly                  Report                    on Form 10-QSB for the quarter ended June 30, 1998).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.6   |   | First                  National Bank of New England Loan Note, dated June 25, 1998 (Incorporated                  by reference to the Company’s Quarterly Report on Form 10-QSB                  for                  the quarter ended June 30, 1998).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.8   |   | First                  National Bank of New England Commercial Loan Agreement dated December                  20, 1999 (Incorporated by reference to the Company’s Annual Report                  on                  Form 10-KSB for the year ended December 31, 1999).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.9   |   | First                  National Bank of New England Commercial Term Promissory Note datedDecember                  20, 1999 (Incorporated by reference to the Company’s Annual Report                  on                    Form 10-KSB for the year ended December 31,                    1999).                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.10  |   | Employment                  Agreement, dated September 30, 2002, between the Company and Rodney                  I. Smith. (Incorporated by reference to the Company’s Annual Report on                  Form                  10-KSB for the year ended December 31,                  2003).                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.11  |   | 1994                  Stock Option Plan (as amended through October 1, 2002) (Incorporated                  by                  reference                  to the Company’s Registration Statement on Form S-8 (No.: 333-                  102892)                    filed with the Commission on January 31, 2003).                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.12  |   | 2004                  Stock Option Plan (Incorporated by reference to the Company’s Annual Report                  on Form 10-KSB for the year ended December 31,                  2004).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.13  |   | UPS                  Capital Business Credit Loan Note dated December 16, 2004 (Incorporated                  by                  reference to the Company’s Annual Report on Form 10-KSB for the year                  ended                    December 31, 2004).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.14  |   | Commercial                  Loan Agreement, dated June 15, 2006, by and between Smith-Midland                  Corporation, a Virginia corporation and a subsidiary of the Company                  (the                  “Borrower”) and Greater Atlantic Bank (the “Lender”) contemplating a                  single advance term loan in the amount of $365,000 and addendum                  thereto                  (Incorporated                  by reference to the Company’s Current Report on Form 8-K filed with the                  Securities and Exchange Commission on June 21,                  2006).                                                                                                                       |

----

| 10.15  |   | Promissory                  Note, dated June 15, 2006, in the amount of $365,000 issued by                  the                  Borrower                  to the Lender (Incorporated                  by reference to the Company’s Current Report on                  Form 8-K filed with the Securities and Exchange Commission on June                  21,                  2006).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.16  |   | Commercial                  Loan Agreement, dated June 15, 2006, by and between the Borrower                  and                  the Lender contemplating a multiple advance draw loan up to the                  aggregate                  amount                  of $500,000 and addendum thereto                  (Incorporated by reference to the Company’s                  Current Report on Form 8-K filed with the Securities and Exchange                  Commission                  on June 21, 2006).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.17  |   | Commercial                  Loan Agreement, dated June 15, 2006, by and between the Borrower                  and                  the Lender contemplating a revolving multiple advance draw loan                  up to the                  aggregate                  amount of $1,500,000 and addendum thereto                  (Incorporated by reference to                  the Company’s Current Report on Form 8-K filed with the Securities and                  Exchange Commission                  on June 21, 2006).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.18  |   | Promissory                  Note, dated June 15, 2006, in the amount of $1,500,000 issued by                  the                  Borrower                  to the Lender                  (Incorporated by reference to the Company’s Current Report on                  Form 8-K filed with the Securities and Exchange Commission on June                  21,                  2006).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.19  |   | Security                  Agreement, dated June 15, 2006, by and between the Borrower and                  the                  Lender                  securing the Promissory Note in the amount of $365,000                  (Incorporated by reference                  to the Company’s Current Report on Form 8-K filed with the Securities and                  Exchange                  Commission on June 21, 2006).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.20  |   | Security                  Agreement, dated June 15, 2006, by and between the Borrower and                  the                  Lender                  securing any promissory note(s) the Borrower may issue to evidence                  any                  advance(s)                  under the Commercial Loan Agreement by and between Borrower and                  the                  Lender contemplating a multiple advance draw loan up to the aggregate                  amount                  of $500,000                  (Incorporated by reference to the Company’s Current Report onForm                  8-K filed with the Securities and Exchange Commission on June 21,                  2006).                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.21  |   | Security                  Agreement, dated June 15, 2006, by and between the Borrower and                  the                  Lender                  securing the Promissory Note in the amount of $1,500,000                  (Incorporated by reference                  to the Company’s Current Report on Form 8-K filed with the Securities and                  Exchange                  Commission on June 21, 2006).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.22  |   | Form                  of Guaranty, dated June 15, 2006, given by the Company and subsidiaries                  (except                  the Borrower) with respect to each of (i) the Promissory Note in                  theamount                  of $365,000; (ii) any promissory note(s) that the Borrower may                  issue to                  evidence                  any advance(s) under the Commercial Loan Agreement by and between                  the                  Borrower and the Lender contemplating a multiple advance draw loan                  up to                  the                  aggregate amount of $500,000; and (iii) the Promissory Note in                  the amount                  of $1,500,000                  issued by the Borrower to the Lender                  (Incorporated by reference to the Company’s                  Current Report on Form 8-K filed with the Securities and Exchange                  Commission                  on June 21, 2006). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.23  |   | Omnibus                  Modification of Lender Loan Documents Agreement, dated June 15,                  2006                  (Incorporated by reference to the Company’s Current Report on Form 8-K                  filed with                  the Securities and Exchange Commission on June 21,                  2006).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.24  |   | Omnibus                  Modification of UPS Capital Loan Documents Agreement, dated June                  15,                  2006                  (Incorporated by reference to the Company’s Current Report on Form 8-K                  filed with                  the Securities and Exchange Commission on June 21,                  2006).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 14     |   | Code                  of Professional Conduct (Incorporated by reference to the Company’s                  Annual                  Report on Form 10-KSB for the year ended December 31,                  2003).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

----

| 21     |   | List                  of Subsidiaries of the Company (Incorporated by reference to the                  Company’s                  Annual                  Report on Form 10-KSB for the year ended December 31,                  1995). |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                           |
| 23     |   | Consent                  of BDO Seidman, LLP.                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                           |
| 31.1   |   | Certification                  of Chief Executive Officer.                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                           |
| 31.2   |   | Certification                  of Chief Financial Officer.                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                           |
| 32     |   | Certification                  pursuant 18 U.S.C. Section 1350 as adapted pursuant to Section                  906                  of                  the Sarbanes-Oxley Act of 2002.                                                        |
|   |   |                                                                                                                                                                                                                                           |

| **Item14.** | **Principal                  Accountant Fees and                  Services** |
|-------------|------------------------------------------------------------------------------|

|                      |   | 2006   |    | 2005   |   |
|---------------------------|--------|--------|---------|--------|--------|
| Audit                Fees |   | $      | 94,520  |   | $      | 112,305 |   |
| Tax                Fees   |   |   | 26,425  |   |   | 31,565 |   |
| Total                     |   |   | 120,945 |   |   | 143,870 |   |

----

**SIGNATURES**

|                                                                        |                                       |                                                |
|-----------------------------------------------------------------------------|--------------------------------------------|-----------------------------------------------------|
|                                                                        | SMITH-MIDLAND              CORPORATION     |
|                                                                   |                                  |                                           |
| Date: April                2, 2007       | By:                              | /s/              Rodney I.              Smith  |
|                                                                        | Rodney              I. Smith, President    |
|                                                                        | (principal              executive officer) |

|   |                                                                       |                                                  |
|--------|----------------------------------------------------------------------------|-------------------------------------------------------|
|   | By:                                                              | /s/              Lawrence R.              Crews  |
|   | Lawrence              R. Crews, CFO                                        |
|   | (principal                financial and accounting                officer) |

| Name                                    |   | Capacity |   | Date                           |
|-----------------------------------------|--------|----------|--------|--------------------------------|
|                                    |   |     |   |                           |
|                                    |   |     |   |                           |
| /s/                  Rodney I. Smith    |   | Director |   | April                  2, 2007 |
| Rodney                  I. Smith        |   |     |   |                           |
|                                    |   |     |   |                           |
|                                    |   |     |   |                           |
| /s/                  Wesley A. Taylor   |   | Director |   | April                  2, 2007 |
| Wesley                  A. Taylor       |   |     |   |                           |
|                                    |   |     |   |                           |
|                                    |   |     |   |                           |
| /s/                  Ashley B. Smith    |   | Director |   | April                  2, 2007 |
| Ashley                  B. Smith        |   |     |   |                           |
|                                    |   |     |   |                           |
|                                    |   |     |   |                           |
| /s/                  Andrew G. Kavounis |   | Director |   | April                  2, 2007 |
| Andrew                  G. Kavounis     |   |     |   |                           |

----

**Smith-Midland      Corporation**

**and      Subsidiaries**

**Consolidated      Financial Statements**

**Years      Ended December 31, 2006 and 2005**

----

**Smith-Midland      Corporation**

**and        Subsidiaries**

**Contents        **

----

| **Report                  of Independent Registered Public Accountants** |   | F-3     |
|--------------------------------------------------------------------------|--------|---------|
|                                                                     |   |    |
| **Consolidated                  Financial Statements**                   |   |    |
|                                                                     |   |    |
| Balance                  Sheets                                          |   | F-4-5   |
|                                                                     |   |    |
| Statements                  of Operations                                |   | F-6     |
|                                                                     |   |    |
| Statements                  of Stockholders' Equity                      |   | F-7     |
|                                                                     |   |    |
| Statements                  of Cash Flows                                |   | F-8-9   |
|                                                                     |   |    |
| **Summary                  of Significant Accounting Policies**          |   | F-10-15 |
|                                                                     |   |    |
| **Notes                  to Consolidated Financial Statements**          |   | F-16-22 |

----

**Report      of Independent Registered Public Accountants**

----

**Smith-Midland      Corporation**

**and      Subsidiaries**

**Consolidated      Balance Sheets**

----

| ***December                31,***                                      |   | **2006** |           | 2005   |   |
|------------------------------------------------------------------------|--------|----------|----------------|--------|--------|
| **Assets**                (Note 2)                                     |   |     |           |   |   |
|                                                                   |   |     |           |   |   |
| **Current                assets**                                      |   |     |           |   |   |
| Cash                and cash equivalents                               |   | **$**    | **482,690**    |   | $      | 1,003,790 |   |
| Accounts                receivable                                     |   |     |           |   |   |   |   |
| Trade                - billed, (less allowance for doubtful            |   |     |           |   |   |   |   |
| accounts                of **$208,108**and                $239,300)    |   |     | **5,417,475**  |   |   | 4,761,718 |   |
| Trade                - unbilled                                        |   |     | **825,524**    |   |   | 134,075 |   |
| Inventories                                                            |   |     |           |   |   |   |   |
| Raw                materials                                           |   |     | **903,674**    |   |   | 861,872 |   |
| Finished                goods                                          |   |     | **2,213,798**  |   |   | 1,755,388 |   |
| Prepaid                expenses and other assets                       |   |     | **123,710**    |   |   | 144,945 |   |
| Refundable                income taxes (Note 4)                        |   |     | **392,732**    |   |   | - |   |
| Deferred                taxes (Note 4)                                 |   |     | **351,000**    |   |   | 195,000 |   |
|                                                                   |   |     |           |   |   |   |   |
| Total                current assets                                    |   |     | **10,710,603** |   |   | 8,856,788 |   |
|                                                                   |   |     |           |   |   |   |   |
| **Property                and equipment, net**                (Note 1) |   |     | **3,729,537**  |   |   | 3,443,273 |   |
|                                                                   |   |     |           |   |   |   |   |
| **Other                assets**                                        |   |     |           |   |   |   |   |
| Notes                receivable, officer (Note 3)                      |   |     | -              |   |   | 143,730 |   |
| Other                                                                  |   |     | **214,703**    |   |   | 163,603 |   |
|                                                                   |   |     |           |   |   |   |   |
| Total                other assets                                      |   |     | **214,703**    |   |   | 307,333 |   |
|                                                                   |   |     |           |   |   |   |   |
|                                                                   |   | **$**    | **14,654,843** |   | $      | 12,607,394 |   |

*See      accompanying summary of accounting policies*

*and      notes to consolidated financial statements.*

----

**Smith-Midland      Corporation**

**and      Subsidiaries**

**Consolidated      Balance Sheets**

**(continued)      **

----

| ***December                31****,*                                                |   | **2006** |           | 2005   |   |
|------------------------------------------------------------------------------------|--------|----------|----------------|--------|--------|
| **Liabilities                and Stockholders’ Equity**                      |   |     |           |   |   |
|                                                                               |   |     |           |   |   |
| **Current                liabilities**                                             |   |     |           |   |   |
| Accounts                payable - trade                                            |   | **$**    | **2,733,974**  |   | $      | 1,248,751 |   |
| Accrued                income taxes payable (Note 4)                               |   |     | **-**          |   |   | 327,825 |   |
| Accrued                expenses and other liabilities                              |   |     | **1,884,386**  |   |   | 765,447 |   |
| Current                maturities of notes payable (Note 2)                        |   |     | **677,022**    |   |   | 411,635 |   |
| Customer                deposits                                                   |   |     | **614,127**    |   |   | 476,478 |   |
|                                                                               |   |     |           |   |   |   |   |
| Total                current liabilities                                           |   |     | **5,909,509**  |   |   | 3,230,136 |   |
|                                                                               |   |     |           |   |   |   |   |
| **Notes                payable - less current maturities**                (Note 2) |   |     | **3,918,041**  |   |   | 3,829,212 |   |
| Deferred                tax liability (Note 4)                                     |   |     | **221,000**    |   |   | 215,000 |   |
|                                                                               |   |     |           |   |   |   |   |
| Total                liabilities                                                   |   |     | **10,048,550** |   |   | 7,274,348 |   |
|                                                                               |   |     |           |   |   |   |   |
| **Commitments                and contingencies**                (Notes 3, 5 and 7) |   |     |           |   |   |   |   |
|                                                                               |   |     |           |   |   |   |   |
| **Stockholders’                equity**(Note                6)               |   |     |           |   |   |   |   |
| Preferred                stock, $.01 par value; authorized 1,000,000               |   |     |           |   |   |   |   |
| shares,                none outstanding                                            |   |     | **-**          |   |   | - |   |
| Common                stock, $.01 par value; authorized 8,000,000                  |   |     |           |   |   |   |   |
| shares;                4,635,282 and 4,610,191 issued and outstanding              |   |     | **46,346**     |   |   | 46,102 |   |
| Additional                paid-in capital                                          |   |     | **4,415,363**  |   |   | 4,326,548 |   |
| Retained                earnings                                                   |   |     | **246,884**    |   |   | 1,062,696 |   |
|                                                                               |   |     |           |   |   |   |   |
|                                                                               |   |     | **4,708,593**  |   |   | 5,435,346 |   |
| Treasury                stock, at cost, 40,920 shares                              |   |     | **(102,300**   | **)**  |   | (102,300 | ) |
|                                                                               |   |     |           |   |   |   |   |
| Total                stockholders’ equity                                    |   |     | **4,606,293**  |   |   | 5,333,046 |   |
|                                                                               |   |     |           |   |   |   |   |
|                                                                               |   | **$**    | **14,654,843** |   | $      | 12,607,394 |   |

*See      accompanying summary of accounting policies*

*and      notes to consolidated financial statements.*

----

**Smith-Midland        Corporation**

**and        Subsidiaries**

**Consolidated        Statements of Operations **

----

| ***Year                Ended December 31,***                                 |   | **2006** |           | 2005   |   |
|------------------------------------------------------------------------------|--------|----------|----------------|--------|--------|
| **Revenue**                                                                  |   |     |           |   |   |
| Products                sales and leasing                                    |   | **$**    | **22,729,310** |   | $      | 19,609,634 |   |
| Shipping                and installation revenue                             |   |     | **5,505,814**  |   |   | 3,090,085 |   |
| Royalties                                                                    |   |     | **1,127,121**  |   |   | 1,091,199 |   |
|                                                                         |   |     |           |   |   |   |   |
| Total                revenue                                                 |   |     | **29,362,245** |   |   | 23,790,918 |   |
|                                                                         |   |     |           |   |   |   |   |
| **Cost                of goods sold**                                        |   |     | **24,750,514** |   |   | 17,567,149 |   |
|                                                                         |   |     |           |   |   |   |   |
| Gross                profit                                                  |   |     | **4,611,731**  |   |   | 6,223,769 |   |
|                                                                         |   |     |           |   |   |   |   |
| **Operating                expenses**                                        |   |     |           |   |   |   |   |
| General                and administrative expenses                           |   |     | **3,500,544**  |   |   | 2,765,732 |   |
| Selling                expenses                                              |   |     | **1,989,636**  |   |   | 1,481,628 |   |
|                                                                         |   |     |           |   |   |   |   |
| Total                operating expenses                                      |   |     | **5,490,180**  |   |   | 4,247,360 |   |
|                                                                         |   |     |           |   |   |   |   |
| Operating                income (loss)                                       |   |     | **(878,449**   | **)**  |   | 1,976,409 |   |
|                                                                         |   |     |           |   |   |   |   |
| **Other                income (expense)**                                    |   |     |           |   |   |   |   |
| Interest                expense                                              |   |     | **(396,509**   | **)**  |   | (347,495 | ) |
| Interest                income (Note 3)                                      |   |     | **29,200**     |   |   | 33,612 |   |
| Gain                (loss) on sale of assets                                 |   |     | **(10,418**    | **)**  |   | 5,571 |   |
| Other,                net                                                    |   |     | **(3,636**     | **)**  |   | 94,797 |   |
|                                                                         |   |     |           |   |   |   |   |
| Total                other income (expense)                                  |   |     | **(381,363**   | **)**  |   | (213,515 | ) |
|                                                                         |   |     |           |   |   |   |   |
| **Income                (loss) before income tax (benefit) expense**         |   |     | **(1,259,812** | **)**  |   | 1,762,894 |   |
| Income                tax (benefit) expense (Note 4)                         |   |     | **(444,000**   | **)**  |   | 412,000 |   |
|                                                                         |   |     |           |   |   |   |   |
| **Net                (loss) income**                                         |   | **$**    | **(815,812**   | **)**  | $      | 1,350,894 |   |
|                                                                         |   |     |           |   |   |   |   |
| **Basic                earnings (loss) per share**                (Note 8)   |   | **$**    | **(.18**       | **)**  | $      | .30 |   |
| **Diluted                earnings (loss) per share**                (Note 8) |   | **$**    | **(.18**       | **)**  | $      | .29 |   |

*See      accompanying summary of accounting policies*

*and      notes to consolidated financial statements.*

----

**Smith-Midland        Corporation**

**and        Subsidiaries**

**Consolidated        Statements of Stockholders' Equity **

----

|                                          |   |     |       | *Additional* |   | *Retained*    |   |       |          |    |   |
|-----------------------------------------------|--------|----------|------------|--------------|--------|---------------|--------|------------|---------------|---------|--------|
|                                          |   | *Common* |       | *Paid-In*    |   | *Earnings*    |   | *Treasury* |          |    |   |
|                                          |   | *Stock*  |       | *Capital*    |   | *(Deficit)*   |   | *Stock*    |          | *Total* |   |
|                                          |   |     |       |         |   |          |   |       |          |    |   |
| **Balance,**                December 31, 2004 |   | $        | 44,495     |         | $      | 4,189,388     |   | $          | (288,198      | )       | $      | (102,300 | ) | $ | 3,843,385 |   |
|                                          |   |     |       |         |   |          |   |       |          |    |   |   |   |   |   |   |
| Stock                options exercised        |   |     | 1,607      |         |   | 137,160       |   |       | -             |    |   | - |   |   | 138,767 |   |
|                                          |   |     |       |         |   |          |   |       |          |    |   |   |   |   |   |   |
| Net                income                     |   |     | -          |         |   | -             |   |       | 1,350,894     |    |   | - |   |   | 1,350,894 |   |
|                                          |   |     |       |         |   |          |   |       |          |    |   |   |   |   |   |   |
| **Balance,**                December 31, 2005 |   |     | **46,102** |         |   | **4,326,548** |   |       | **1,062,696** |    |   | **(102,300** | **)** |   | **5,333,046** |   |
|                                          |   |     |       |         |   |          |   |       |          |    |   |   |   |   |   |   |
| Stock                options exercised        |   |     | 244        |         |   | 23,180        |   |       | -             |    |   | - |   |   | 23,424 |   |
|                                          |   |     |       |         |   |          |   |       |          |    |   |   |   |   |   |   |
| Stock                option compensation      |   |     | -          |         |   | 65,635        |   |       | -             |    |   | - |   |   | 65,635 |   |
|                                          |   |     |       |         |   |          |   |       |          |    |   |   |   |   |   |   |
| Net                loss                       |   |     | -          |         |   | -             |   |       | (815,812      | )       |   | - |   |   | (815,812 | ) |
|                                          |   |     |       |         |   |          |   |       |          |    |   |   |   |   |   |   |
| **Balance,**                December 31, 2006 |   | **$**    | **46,346** |         | **$**  | **4,415,363** |   | **$**      | **246,884**   |    | **$**  | **(102,300** | **)** | **$** | **4,606,293** |   |

*See      accompanying summary of accounting policies*

*and      notes to consolidated financial statements.*

----

**Smith-Midland        Corporation**

**and        Subsidiaries**

**Consolidated        Statements of Cash Flows **

----

| ***Year                Ended December 31,***                                   |   | **2006**    |            | 2005   |    |
|--------------------------------------------------------------------------------|--------|-------------|-----------------|--------|---------|
| **Cash                Flows From Operating Activities**                        |   |        |            |   |    |
| Cash                received from customers                                    |   | **$**       | **28,152,687**  |   | $       | 23,978,133 |   |
| Cash                paid to suppliers and employees                            |   |        | **(28,032,599** | **)**  |    | (22,496,342 | ) |
| Income                taxes paid, net                                          |   |        | **(427,157**    | **)**  |    | (34,198 | ) |
| Interest                paid                                                   |   |        | **(396,509**    | **)**  |    | (347,495 | ) |
| Other                                                                          |   |        | **691,839**     |   |    | 128,188 |   |
|                                                                           |   |        |            |   |    |   |   |
| Net                cash provided (absorbed) by operating activities            |   |        | **(11,739**     | **)**  |    | 1,228,286 |   |
|                                                                           |   |        |            |   |    |   |   |
| **Cash                Flows From Investing Activities**                        |   |        |            |   |    |   |   |
| Purchases                of property and equipment                             |   |        | **(901,142**    | **)**  |    | (727,968 | ) |
| Proceeds                from sale of fixed assets                              |   |        | **14,142**      |   |    | 47,310 |   |
|                                                                           |   |        |            |   |    |   |   |
| Net                cash absorbed by investing activities                       |   |        | **(887,000**    | **)**  |    | (680,658 | ) |
|                                                                           |   |        |            |   |    |   |   |
| **Cash                Flows From Financing Activities**                        |   |        |            |   |    |   |   |
| Proceeds                from borrowings on Line of Credit, net                 |   |        | **250,000**     |   |    | **-** |   |
| Proceeds                from long-term borrowings                              |   |        | **763,851**     |   |    | 245,495 |   |
| Repayments                of long-term borrowings                              |   |        | **(659,636**    | **)**  |    | (419,675 | ) |
| Repayments                on borrowings - related parties, net                 |   |        | **-**           |   |    | (8,169 | ) |
| Proceeds                from options exercised                                 |   |        | **23,424**      |   |    | 138,767 |   |
|                                                                           |   |        |            |   |    |   |   |
| Net                cash provided (absorbed) by financing activities            |   |        | **377,639**     |   |    | (43,582 | ) |
|                                                                           |   |        |            |   |    |   |   |
| **Net                increase (decrease) in cash**                             |   |        | **(521,100**    | **)**  |    | 504,046 |   |
|                                                                           |   |        |            |   |    |   |   |
| **Cash                and cash equivalents,**                beginning of year |   |        | **1,003,790**   |   |    | 499,744 |   |
|                                                                           |   |        |            |   |    |   |   |
| **Cash                and cash equivalents,**                end of year       |   | **$**       | **482,690**     |   | $       | 1,003,790 |   |
|                                                                           |   |        |            |   |    |   |   |
| **Supplemental                schedule of non-cash investing activities**      |   |        |            |   |    |   |   |
| Bonus                to repay officer note receivable                          |   |  **$** | **143,730**     |   |  $ | 112,864  |   |

**continued...**

----

**Smith-Midland      Corporation**

**and      Subsidiaries**

**Consolidated      Statements of Cash Flows**

**(continued)**

----

| ***Year                Ended December 31,***                                                                                     |   | **2006** |          | 2005   |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|----------|---------------|--------|--------|
| **Reconciliation                of net (loss) income to net cash (absorbed)**                                                    |   |     |          |   |   |
| **provided                by operating activities**                                                                              |   |     |          |   |   |
|                                                                                                                             |   |     |          |   |   |
| Net                (loss) income                                                                                                 |   | **$**    | **(815,812**  | **)**  | $      | 1,350,894 |   |
| Adjustments                to reconcile net (loss) income to net cash (absorbed) provided by                operating activities |   |     |          |   |   |   |   |
| Depreciation                and amortization                                                                                     |   |     | **600,639**   |   |   | 506,061 |   |
| Deferred                taxes                                                                                                    |   |     | **(150,000**  | **)**  |   | 74,000 |   |
| Stock                option compensation expense                                                                                 |   |     | **65,635**    |   |   | - |   |
| Loss                (gain) on sale of fixed assets                                                                               |   |     | **10,418**    |   |   | (5,571 | ) |
| Expenses                (net) related to pay down on officer note receivable                                                     |   |     | **143,730**   |   |   | 112,864 |   |
| (Increase)                decrease in                                                                                            |   |     |          |   |   |   |   |
| Accounts                receivable - billed                                                                                      |   |     | **(655,757**  | **)**  |   | (434,253 | ) |
| Accounts                receivable - unbilled                                                                                    |   |     | **(691,449**  | **)**  |   | 336,738 |   |
| Inventories                                                                                                                      |   |     | **(500,212**  | **)**  |   | (265,475 | ) |
| Prepaid                expenses and other assets                                                                                 |   |     | **72,925**    |   |   | (411,924 | ) |
| Refundable                income taxes                                                                                           |   |     | **(392,732**  | **)**  |   | - |   |
| Increase                (decrease) in                                                                                            |   |     |          |   |   |   |   |
| Accounts                payable - trade                                                                                          |   |     | **1,485,223** |   |   | (694,444 | ) |
| Accrued                expenses and other liabilities                                                                            |   |     | **1,005,829** |   |   | 70,841 |   |
| Accrued                income taxes payable                                                                                      |   |     | **(327,825**  | **)**  |   | 303,825 |   |
| Customer                deposits                                                                                                 |   |     | **137,649**   |   |   | 284,730 |   |
|                                                                                                                             |   |     |          |   |   |   |   |
| Net                cash provided (absorbed) by operating activities                                                              |   | **$**    | **(11,739**   | **)**  | $      | 1,228,286 |   |

*See      accompanying summary of accounting policies*

*and      notes to consolidated financial statements.*

----

**Smith-Midland        Corporation**

**and        Subsidiaries**

**Summary        of Significant Accounting Policies**

----

| **Nature                of Business**             |   | Smith-Midland                Corporation and its wholly owned subsidiaries (the “Company”) develop,                manufacture, license, sell and install precast concrete products                for the                construction, transportation and utilities industries in the Mid-Atlantic,                Northeastern,                and Midwestern regions of the United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|---------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Principles                of****Consolidation** |   | The                accompanying consolidated financial statements include the accounts                of                Smith-Midland Corporation and its wholly owned subsidiaries. The                Company’s                wholly owned subsidiaries consist of Smith-Midland Corporation, a                Virginia                corporation, Smith-Carolina Corporation, a North Carolina corporation,                Easi-Set Industries, Inc., a Virginia corporation, Concrete Safety                Systems, Inc., a Virginia corporation, Midland Advertising and Design,                Inc., doing business as Adventures, a Virginia corporation, and                Smith-Columbia Corporation, a South Carolina corporation. All material                intercompany accounts and transactions have been eliminated in                consolidation. |
|                                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Cash                and Cash Equivalents**      |   | The                Company considers all unrestricted cash and money market accounts                with a                maturity of three months or less as cash and cash                equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Inventories**                                   |   | Inventories                are stated at the lower of cost, using the first-in, first-out (FIFO)                method, or market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Property                and****Equipment**      |   | Property                and equipment is stated at cost. Expenditures for ordinary maintenance                and                repairs are charged to income as incurred. Costs of betterments,                renewals,                and major replacements are capitalized. At the time properties are                retired                or otherwise disposed of, the related cost and allowance for depreciation                are eliminated from the accounts and any gain or loss on disposition                is                reflected in income.                                                                                                                                                                                                                                                                                                          |
|                                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                              |   | Depreciation                is computed using the straight-line method over the following estimated                useful lives:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

|                                           |   | **Years** |   |
|------------------------------------------------|--------|-----------|--------|
|                                           |   |      |   |
| Buildings                                      |   |      | 10-33  |   |
| Trucks                and automotive equipment |   |      | 3-10   |   |
| Shop                machinery and equipment    |   |      | 3-10   |   |
| Land                improvements               |   |      | 10-15  |   |
| Office                equipment                |   |      | 3-10   |   |

----

**Smith-Midland          Corporation**

**and          Subsidiaries**

**Summary            of Significant Accounting Policies**

**(continued)**

----

| **Income                Taxes** |   | Deferred                tax assets and liabilities are recognized for the future tax consequences                attributable to differences between the financial statement carrying                amounts of existing assets and liabilities and their respective tax                bases.                Deferred tax assets and liabilities are measured using enacted tax                rates                expected to apply to taxable income in the years in which those temporary                differences are expected to be recovered or settled. The effect on                deferred tax assets and liabilities of a change in tax rates is recognized                in income in the period that includes the enactment                date. |
|---------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Stock                Options** |   | Effective                January 1, 2006, the Company adopted the fair value recognition provisions                of SFAS No. 123(R) (“SFAS 123R”), “*Share-Based                Payment,*”                using the modified prospective method. SFAS 123R requires stock based                compensation to be measured based on the fair value of the award                on the                date of grant and the corresponding expense to be recognized over                the                period during which an employee is required to provide services in                exchange for the award. The fair value of each stock option award                is                estimated using a Black-Scholes option pricing model based on certain                assumptions including expected term, risk-free interest rate, stock                price                volatility, and dividend yield. The assumption for expected term                is based                on evaluations of historical and expected future employee exercise                behavior. The risk-free interest rate is based on the U.S. Treasury                rates                at the date of grant with maturity dates approximately equal to the                expected term at the grant date. The historical volatility of the                Company’s stock is used as the basis for the volatility assumption. The                Company has never paid cash dividends, and does not currently intend                to                pay cash dividends, and thus assumed a 0% dividend yield. The fair                value                of restricted stock unit grants is based on the closing share price                for                our common stock as quoted on the OTC Bulletin Board Market on the                date of                grant. See Note 6 of Notes to the Consolidated Financial Statements                for                additional information related to stock based compensation. The adoption                of SFAS 123R was not material to the financial                statements. |
|----------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                             |   | During                2005, the Company elected to use the intrinsic value method of accounting                as prescribed by Accounting Principles Board Opinion No. 25, Accounting                for Stock Issued to Employees, and related Interpretations, for stock                options granted to the Company’s employees. This method does not result in                the recognition of compensation expense when employee stock options                are                granted if the exercise price of the option equals or exceeds the                fair                market value of the stock at the date of grant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                             |   | The                Company granted 108,000 stock options during the year ended December                31,                2006, of which 19,500 were also forfeited during 2006. The fair value                of                each option on the date of grant is estimated using the Black-Scholes                option pricing model with the following assumptions: no dividend                yield,                expected volatility of 73%, risk-free interest rate of 4.42% and                expected                lives of six years. The weighted average fair value of options granted                during the year ended December 31, 2006 was $1.52. Substantially                all                options become vested and exercisable ratably over a three-year                period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

----

**Smith-Midland        Corporation**

**and        Subsidiaries**

**Summary          of Significant Accounting Policies**

**(continued)**

----

| **Revenue                Recognition**     |   | The                Company recognizes revenue on the sale of its standard precast concrete                products at shipment date, including revenue derived from any projects                to                be completed under short-term contracts. Installation services for                precast                concrete products, leasing and royalties are recognized as revenue                as they                are earned on an accrual basis. Licensing fees are recognized under                the                accrual method unless collectibility is in doubt, in which event                revenue                is recognized as cash is received.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                       |   | Certain                sales of architectural, soundwall, SlenderwallÔ                and barrier concrete products are recognized upon completion of units                produced under long-term contracts. When necessary, provisions for                estimated losses on these contracts are made in the period in which                such                losses are determined. Changes in job performance, conditions and                contract                settlements, which affect profit, are recognized in the period in                which                the changes occur. Unbilled trade accounts receivable represents                revenue                earned on units produced and not yet billed. Billings in advance                of units                produced are included in customer deposits.                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **Shipping                and Handling**   |   | Amounts                billed to customers are recorded in sales and the costs associated                with                the shipping and handling are recorded as cost of goods                sold.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **Risks                and Uncertainties** |   | The                Company sells products to highway contractors operating under government                funded highway programs and other customers and extends credit based                on an                evaluation of the customer's financial condition, generally without                requiring collateral. Exposure to losses on receivables is principally                dependent on each customer's financial condition. The Company monitors                its                exposure to credit losses and maintains allowances for anticipated                losses.                Management reviews accounts receivable on a monthly basis to determine                the                probability of collection. Any accounts receivable that are deemed                to be                uncollectible along with a general reserve, which is calculated based                upon                the aging category of the receivable, is included in the overall                allowance                for doubtful accounts. Management believes the allowance for doubtful                accounts at December 31, 2006 is adequate. However, actual write-offs                may                exceed the recorded allowance. |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                       |   | Due                to inclement weather, the Company may experience reduced revenues                from                December through February and may realize the substantial part of                its                revenues during the other months of the                year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

----

**Smith-Midland        Corporation**

**and        Subsidiaries**

**Summary          of Significant Accounting Policies**

**(continued)**

----

| **Fair                Value of****Financial                Instruments** |   | The                carrying value for each of the Company’s financial instruments (consisting                of cash, accounts receivable and accounts payable) approximates fair                value                because of the short-term nature of those instruments. The estimated                fair                value of the long-term debt approximates carrying value based on                current                rates offered to the Company for debt of the same                maturities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **Estimates**                                                            |   | The                preparation of financial statements in conformity with generally                accepted                accounting principles requires management to make estimates and                assumptions that affect the reported amounts of assets and liabilities                at                the date of the financial statements and the reported amounts of                revenues                and expenses during the reporting period. Actual results could differ                from                those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **Advertising                Costs**                                     |   | The                Company expenses all advertising costs as incurred. Advertising expense                was approximately $314,000 and $166,000 in 2006 and 2005,                respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **Earnings                (Loss) Per Share**                             |   | Earnings                (loss) per share is based on the weighted average number of shares                of                common stock and dilutive common stock equivalents outstanding. Basic                (loss) earnings per share is computed by dividing income available                to                common shareholders by the weighted average number of common shares                outstanding for the period. Diluted earnings (loss) per share reflects                the                potential dilution of securities that could share in earnings of                an                entity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **Long-Lived                Assets**                                     |   | The                Company reviews the carrying values of its long-lived and identifiable                intangible assets for possible impairment whenever events or changes                in                circumstances indicate that the carrying amount of assets may not                be                recoverable based on undiscounted estimated future operating cash                flows.                When any such impairment exists, the related assets will be written                down                to fair value. No impairment losses have been recorded through December                31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **Recent                Accounting****Pronouncements**                   |   | In                February 2006, FASB issued SFAS No. 155, Accounting for Certain Hybrid                Financial Instruments, which amends SFAS No. 133 and SFAS No. 140,                and                improves the financial reporting of certain hybrid financial instruments                by requiring more consistent accounting that eliminates exemptions                and                simplifies the accounting for those instruments. SFAS No. 155 allows                financial instruments that have embedded derivatives to be accounted                for                as a whole (eliminating the need to bifurcate the derivative from                its                host) if the holder elects to account for the whole instrument on                a fair                value basis. SFAS No. 155 is effective for all financial instruments                acquired or issued after the beginning of an entity’s first fiscal year                that begins after September 15, 2006. We have not issued or acquired                the                hybrid instruments included in the scope of SFAS No. 155 and do not                expect                the adoption of SFAS No. 155 to have a material impact on our financial                condition, results of operations or cash                flows. |

----

**Smith-Midland        Corporation**

**and        Subsidiaries**

**Summary          of Significant Accounting Policies**

**(continued)          **

----

| **Recent                Accounting****Pronouncements****(continued)** |   | In                June 2006, the Financial Accounting Standards Board (“FASB”) issued                Interpretation No. 48 (“FIN 48”), *Accounting                for Uncertainty in Income Taxes*.                FIN 48 prescribes detailed guidance for the financial statement                recognition, measurement and disclosure of uncertain tax positions                recognized in an enterprise’s financial statements in accordance with FASB                Statement No. 109, *Accounting                for Income Taxes*.                Tax positions must meet a more-likely-than-not recognition threshold                at                the effective date to be recognized upon the adoption of FIN 48 and                in                subsequent periods. FIN 48 will be effective for fiscal years beginning                after December 15, 2006 and the provisions of FIN 48 will be applied                to                all tax positions under Statement No. 109 upon initial adoption.                The                cumulative effect of applying the provisions of this interpretation                will                be reported as an adjustment to the opening balance of retained earnings                for that fiscal year. The Company is currently evaluating the potential                effect of FIN 48 but, at this time, does not expect a material impact                on                its consolidated financial statements. |
|-----------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                  |   | In                September 2006, the FASB issued SFAS 157, Fair Value Measures (SFAS                157).                This statement defines fair value, establishes a framework for measuring                fair value, and expands disclosures about fair value measures. This                statement is effective as of the beginning of its first fiscal year                that                begins after November 15, 2007. The Company is currently evaluating                the                potential impact this statement may have on its financial                statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                  |   | In                September 2006, the Securities and Exchange Commission (SEC) issued                Staff                Accounting Bulletin No. 108 (SAB 108). Due to diversity in practice                among                registrants, SAB 108 expresses the SEC staff views regarding the                process                by which misstatements in financials statements are evaluated for                purposes                of determining whether financial statement restatement is necessary.                SAB                108 is effective for fiscal years ending after November 15, 2006,                and                early application is encouraged. The Company does not believe SAB                108 will                have a material impact on its consolidated financials                statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

----

**Smith-Midland        Corporation**

**and        Subsidiaries**

**Summary          of Significant Accounting Policies**

**(continued)**

----

| **Recent                Accounting****Pronouncements****(continued)** |   | In                February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for                Financial Assets and Financial Liabilities”. SFAS No. 159 permits entities                to choose to measure many financial instruments and certain other                items at                fair value that are not currently required to be measured at fair                value.                The objective is to improve financial reporting by providing entities                with                the opportunity to mitigate volatility in reported earnings caused                by                measuring related assets and liabilities differently without having                to                apply complex hedge accounting provisions. SFAS No. 159 also establishes                presentation and disclosure requirements designed to facilitate                comparisons between entities that choose different measurement attributes                for similar types of assets and liabilities. SFAS No. 159 is effective                for                fiscal years beginning after November 15, 2007. The Company has not                yet                determined whether it will elect the fair value option for any of                its                financial instruments. |
|-----------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **Reclassifications**                                                 |   | Certain                immaterial reclassifications have been made in the prior year consolidated                financial statements and notes to conform to the December 31, 2006                presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

----

**Smith-Midland      Corporation**

**and      Subsidiaries**

**Notes      to Consolidated Financial Statements**

----

| **1.** | **Property                and****Equipment** |
|--------|----------------------------------------------|

| * ****December                31,***     |   |  **2006** |           | 2005   |   |
|-----------------------------------------------|--------|----------------|----------------|--------|--------|
|                                          |   |      |           |   |   |
| Land                and land improvements     |   | **$**          | **421,833**    |   | $      | 699,068 |   |
| Buildings                                     |   |           | **2,699,724**  |   |   | 2,518,367 |   |
| Machinery                and equipment        |   |           | **6,404,932**  |   |   | 6,903,789 |   |
| Rental                equipment               |   |           | **634,777**    |   |   | 606,193 |   |
|                                          |   |           |           |   |   |   |   |
|                                          |   |           | **10,161,266** |   |   | 10,727,417 |   |
| Less:                accumulated depreciation |   |           | **6,431,729**  |   |   | 7,284,144 |   |
|                                          |   |           |           |   |   |   |   |
|                                          |   | **$**          | **3,729,537**  |   | $      | 3,443,273 |   |

| **2.** | **Notes                Payable** |
|--------|----------------------------------|

| ***December                31,***                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | **2006** |          | 2005   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|---------------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |     |          |   |   |
| Mortgage                payable to Greater Atlantic Bank, maturing June 2021; with monthly                payments of approximately $36,000 of principal and interest at prime                plus                .5% (8.75% at December 31, 2006); collateralized by principally all                assets                of the Company. This note was assigned on June 15, 2006 from a note                previously held by UPS Capital and discussed below. |   | **$**    | **3,275,333** |   | **$**  | **—** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |     |          |   |   |   |   |
| Mortgage                payable to UPS Capital, maturing June 2021 and assigned to Greater                Atlantic Bank on June 15, 2006.                                                                                                                                                                                                                                                                                                                         |   |     | **—**   |   |   | 3,346,302 |   |

----

**Smith-Midland        Corporation**

**and        Subsidiaries**

**Notes        to Consolidated Financial Statements**

**(continued)        **

----

| **2.** | **Notes                Payable****(continued)** |
|--------|-------------------------------------------------|

| Note                payable to Greater Atlantic Bank, maturing on October 15, 2010; with                monthly payments of approximately $8,400 of principal and interest                at                5-year treasury plus 3.25% (7.95% at December 31, 2006); collateralized                by                a second priority lien on Company assets.                                                |   | **$**  | **323,229**   |   | **$**  | **—** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------|--------|--------|-------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |          |   |   |        |   |
| Note                payable to UPS Capital paid in full on June 15, 2006.                                                                                                                                                                                                                                                                                                                                     |   |   | **—**   |   |   | 334,329     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |          |   |   |        |   |
| The                Company also has a $1,500,000 line of credit with Greater Atlantic                Bank.                The line matures June 15, 2007 and bears interest at the prime rate                (8% at                December 31, 2006); collateralized by a second priority lien on all                accounts receivable, inventory, and certain other assets of the                Company. |   |   | **250,000**   |   |   | **—** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |          |   |   |        |   |
| Installment                notes and capitalized leases, collateralized by certain machinery                and                equipment maturing at various dates, primarily through 2010, with                interest                at 7.25% through 11.07%.                                                                                                                                              |   |   | **746,501**   |   |   | 560,216     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |          |   |   |        |   |
|                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | **4,595,063** |   |   | 4,240,847   |   |
| Less                current maturities                                                                                                                                                                                                                                                                                                                                                                        |   |   | **677,022**   |   |   | 411,635     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |          |   |   |        |   |
|                                                                                                                                                                                                                                                                                                                                                                                                          |   | **$**  | **3,918,041** |   | $      | 3,829,212   |   |

----

**Smith-Midland        Corporation**

**and        Subsidiaries**

**Notes        to Consolidated Financial Statements**

**(continued)        **

----

| **2.** | **Notes Payable****(continued)** |
|--------|----------------------------------|

| ***Year                Ending December 31,*** |   |  **Amount** |          |
|-----------------------------------------------|--------|------------------|---------------|
|                                          |   |        |          |
| 2007                                          |   | $                | 677,022       |   |
| 2008                                          |   |             | 325,768       |   |
| 2009                                          |   |             | 328,022       |   |
| 2010                                          |   |             | 311,408       |   |
| 2011                                          |   |             | 201,173       |   |
| Thereafter                                    |   |             | 2,751,670     |   |
|                                          |   |             |          |   |
|                                          |   | **$**            | **4,595,063** |   |

| **3.** | **Related                Party****Transactions** |
|--------|--------------------------------------------------|

| **4.** | **Income                Taxes** |
|--------|---------------------------------|

| ***Year                Ended December 31,*** |   | **2006** |         | 2005   |   |
|----------------------------------------------|--------|----------|--------------|--------|--------|
|                                         |   |     |         |   |   |
| Current                                      |   | **$**    | **(294,000** | **)**  | $      | 338,000 |   |
|                                         |   |     |         |   |   |   |   |
| Deferred                                     |   |     | **(150,000** | **)**  |   | 74,000 |   |
|                                         |   |     |         |   |   |   |   |
|                                         |   | **$**    | **(444,000** | **)**  | $      | 412,000 |   |

----

**Smith-Midland      Corporation**

**and      Subsidiaries**

**Notes      to Consolidated Financial Statements**

**(continued)      **

----

| **4.** | **Income                Taxes****(continued)** |
|--------|------------------------------------------------|

| ***Year                  Ended December 31,***                                 |   | **2006**   |         | 2005        |   |
|--------------------------------------------------------------------------------|--------|------------|--------------|-------------|--------|
|                                                                           |   | **Amount** |         | **Percent** |   | Amount |   | Percent |   |
|                                                                           |   |       |         |        |   |   |   |   |   |
| Income                  taxes at statutory rate                                |   | **$**      | **(428,000** | **)**       |   | **(34**%)**** |   | $ | 609,000 |   |   | 34% |   |
| Increase                  (decrease) in taxes resulting                  from: |   |       |         |        |   |   |   |   |   |   |   |   |   |
|                                                                                |   |       |         |        |   |   |   |   |   |   |   |   |   |
| Change                  in valuation allowance                                 |   |       | **—**  |        |   | **—** |   |   | (342,000 | ) |   | (19 | ) |
| State                  income taxes,                                           |   |       |         |        |   |   |   |   |   |   |   |   |   |
| net                  of federal benefit                                        |   |       | **(50,000**  | **)**       |   | **(4**)**** |   |   | 91,000 |   |   | 5 |   |
| Other                                                                          |   |       | **34,000**   |        |   | **2** |   |   | 54,000 |   |   | 3 |   |
|                                                                           |   |       |         |        |   |   |   |   |   |   |   |   |   |
|                                                                           |   | **$**      | **(444,000** | **)**       |   | **(36**%)**** |   | $ | 412,000 |   |   | 23% |   |

| ***December                31,***                 |   | **2006** |         | 2005   |   |
|---------------------------------------------------|--------|----------|--------------|--------|--------|
|                                              |   |     |         |   |   |
| Net                operating loss carryforward    |   | **$**    | **40,000**   |   | $      | **—** |   |
| Depreciation                                      |   |     | **(221,000** | **)**  |   | (215,000 | ) |
| Provision                for doubtful accounts    |   |     | **81,000**   |   |   | 91,000 |   |
| Vacation                accrued                   |   |     | **59,000**   |   |   | 60,000 |   |
| Deferred                income                    |   |     | **82,000**   |   |   | 64,000 |   |
| Other                                             |   |     | **89,000**   |   |   | (20,000 | ) |
|                                              |   |     |         |   |   |   |   |
| Net                deferred tax asset (liability) |   |     | **130,000**  |   |   | (20,000 | ) |
|                                              |   |     |         |   |   |   |   |
| Current                portion, net               |   |     | **351,000**  |   |   | 195,000 |   |
| Long-term                portion, net             |   |     | **(221,000** | **)**  |   | (215,000 | ) |
|                                              |   |     |         |   |   |   |   |
|                                              |   | **$**    | **130,000**  |   | $      | (20,000 | ) |

| **5.** | **Employee                Benefit****Plans** |
|--------|----------------------------------------------|

----

**Smith-Midland        Corporation**

**and        Subsidiaries**

**Notes        to Consolidated Financial Statements**

**(continued)        **

----

| **6.** | **Stock                Options** |
|--------|----------------------------------|

|                                      |   |   | WeightedAverage                Exercise Price |   |   | OptionsOutstanding |   |   | Vested                and Exercisable |   |
|-------------------------------------------|--------|--------|-----------------------------------------------|--------|--------|--------------------|--------|--------|---------------------------------------|--------|
| Balance,                December 31, 2004 |   | $      | 1.01                                          |   |   | 533,825            |   |   | 469,825                               |   |
| Granted                                   |   |   | 2.52                                          |   |   | 130,971            |   |   | -                                     |   |
| Forfeited                                 |   |   | 2.55                                          |   |   | (31,000            | )      |   | (23,667                               | )      |
| Exercised                                 |   |   | .86                                           |   |   | (160,643           | )      |   | (160,643                              | )      |
| Vested                                    |   |   | -                                             |   |   | -                  |   |   | 28,337                                |   |
|                                      |   |   |                                          |   |   |               |   |   |                                  |   |
| Balance,                December 31, 2005 |   |   | 1.37                                          |   |   | 473,153            |   |   | 313,852                               |   |
| Granted                                   |   |   | 2.25                                          |   |   | 108,000            |   |   | -                                     |   |
| Forfeited                                 |   |   | 2.33                                          |   |   | (45,305            | )      |   | (5,828                                | )      |
| Exercised                                 |   |   | .96                                           |   |   | (24,424            | )      |   | (24,424                               | )      |
| Vested                                    |   |   | 2.24                                          |   |   | -                  |   |   | 70,549                                |   |
|                                      |   |   |                                          |   |   |               |   |   |                                  |   |
| Balance,                December 31, 2006 |   | $      | 1.49                                          |   |   | 511,424            |   |   | 354,149                               |   |

----

**Smith-Midland        Corporation**

**and        Subsidiaries**

**Notes        to Consolidated Financial Statements**

**(continued)**

----

|                                          |   | Options                  Outstanding |    | Options                  Exercisable   |   |
|-----------------------------------------------|--------|--------------------------------------|---------|----------------------------------------|--------|
|                                          |   |                                 |    | Weighted                  Average      |   |   |   |
|                                          |   | Number                  of           |    | Remaining                  Contractual |   | Number |   |
| Exercise                  Prices              |   | Shares                               |    | Life                  (Years)          |   | of                  Shares |   |
| $.56                                          |   |                                 | 27,000  |                                   |   | 2.99 |   |   | 27,000 |   |
| .80                  -                  .83   |   |                                 | 185,333 |                                   |   | 6.30 |   |   | 185,333 |   |
| 1.00                  -                  1.39 |   |                                 | 103,425 |                                   |   | 2.36 |   |   | 103,425 |   |
| 2.25                                          |   |                                 | 80,500  |                                   |   | 9.39 |   |   | - |   |
| 2.33                                          |   |                                 | 8,000   |                                   |   | 8.87 |   |   | 2,667 |   |
| 2.52                                          |   |                                 | 107,166 |                                   |   | 8.75 |   |   | 35,724 |   |
|                                          |   |                                 | 511,424 |                                   |   |   |   |   | 354,149 |   |

| **7.** | **Commitments****and                Contingencies** |
|--------|-----------------------------------------------------|

----

**Smith-Midland        Corporation**

**and        Subsidiaries**

**Notes        to Consolidated Financial Statements**

**(continued)        **

----

| **8.** | **Earnings                (Loss) Per Share** |
|--------|----------------------------------------------|

| ***Year                ended December 31,***                 |   | **2006** |          | 2005   |   |
|--------------------------------------------------------------|--------|----------|---------------|--------|--------|
| **Basic                earnings (loss)**                     |   |     |          |   |   |
|                                                         |   |     |          |   |   |
| Income                (loss) available to common shareholder |   | **$**    | **(815,812**  | **)**  | $      | 1,350,894 |   |
|                                                         |   |     |          |   |   |   |   |
| Weighted                average shares outstanding           |   |     | **4,621,513** |   |   | 4,480,151 |   |
|                                                         |   |     |          |   |   |   |   |
| Basic                earnings (loss) per share               |   | **$**    | **(.18**      | **)**  | $      | .30 |   |
|                                                         |   |     |          |   |   |   |   |
| **Diluted                earnings per share**                |   |     |          |   |   |   |   |
|                                                         |   |     |          |   |   |   |   |
| Income                (loss) available to common shareholder |   | **$**    | **(815,812**  | **)**  | $      | 1,350,894 |   |
|                                                         |   |     |          |   |   |   |   |
| Weighted                average shares outstanding           |   |     | **4,621,513** |   |   | 4,480,151 |   |
| Dilutive                effect of stock options              |   |     | **—**   |   |   | 115,887 |   |
|                                                         |   |     |          |   |   |   |   |
| Total                weighted average shares outstanding     |   |     | **4,621,513** |   |   | 4,596,028 |   |
|                                                         |   |     |          |   |   |   |   |
| Diluted                earnings per share                    |   | **$**    | **(.18**      | **)**  | $      | .29 |   |

----