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SMG Industries, Inc. Reports Financial Results for its First Quarter 2021

Transportation Services Company Reports $7.6 million in Revenues for First Quarter 2021, an Increase of 74% from Q1 2020

Houston, TX - (NewMediaWire) - May 25, 2021 - SMG Industries, Inc. (the “Company”) (OTCQB:SMGI), a growth-oriented transportation services company focused on the domestic infrastructure market, today reported financial results for its first quarter 2021 and the release of its 2021 first quarter report on Form 10-Q.

First Quarter 2021 Highlights

·         Net of discontinued operations (MG Cleaners and Trinity Services), revenues increased to $7,602,328 for the quarter ending March 31, 2021, an increase of 74% from $4,360,381 for the first quarter in 2020 driven by the acquisition of 5J on February 27, 2020, increased drilling rig relocations and improved customer demand resulting from lessened impacts of the global COVID-19 pandemic and its economic effects in the markets we serve.

·         Selling, general and administrative expenses were approximately 19.9% of sales for Q1, 2021.

·         Net loss from continuing operations for Q1, 2021 was $3,808,568, which included non-cash expenses of $1,706,170 of which $1,418,401 was depreciation expense.

·         Total assets grew to $27,242,213.

·         Two owner/operator trucking companies leased onto our platform and generated an immediate revenue impact, growing our geographic footprint.

·         SMGI expects to be well positioned for federal domestic infrastructure spending programs presently being legislated.

The Company is a growth-oriented Transportation Services company focused on the domestic logistics market.  Our primary business objective is to grow our operations and create value for our shareholders through organic growth and strategic acquisitions. SMGI has implemented a “Buy & Build” growth strategy of acquiring middle market transportation companies and generating organic growth post-acquisition when possible, by removing business constraints and strategic cross-selling of services benefiting us with higher equipment utilization and market share. Management believes our business focus and equipment fleet position us to be a significant participant in the domestic United States infrastructure market.

Our operating subsidiaries provide a range of Transportation Services such as:

·Transporting infrastructure components including bridge beams and power generation transformers

·Transporting wind energy components 

·Heavy haul of production equipment, heat exchangers, coolers, construction equipment, refinery components 

·Super heavy haul over-dimensional permit-required loads up to 500 thousand pounds for engineered projects

·Transportation of midstream compressors

·Flatbed freight

·Crane services used to set equipment on compressor stations, pipeline infrastructure and load drilling rig components

·Drilling rig relocation for drilling contractors and oil and gas operators

·Freight brokerage

In connection with our focus to expand our Transportation Services business and exit certain up-stream oil and gas industrial-related businesses, the financial results of the following businesses have been classified as discontinued operations on our consolidated financial statements:

·MG Cleaners LLC

·Trinity Services LLC 

The discontinued operations of MG Cleaners and Trinity Services removed revenues and expenses from our reported results of continuing operations. See footnote 10 in our Company’s Quarterly Report on Form 10-Q for more information. 

Mr. Jeffrey Martini, CEO of SMG, stated, “During the first quarter, we continued to see sequential revenue improvements across substantially all our lines of business. Gross margins improved sequentially but were still negative primarily due to the recognition of $1.4 million in depreciation expenses and insufficient scale to cover various fixed costs within cost of sales. March 2021 revenues of $3.1 million were the highest since March 2020, the beginning of the COVID-19 pandemic.  Challenges remained in the first quarter period, caused by the February inclement weather experienced in Texas and general economic activity still recovering from the COVID-19 pandemic. We expect to further expand on our diversification efforts by establishing 5J Brokerage LLC and substantially expanded flatbed capacity through the first and into the second quarters of this year.”  Mr. Martini continued, “SMGI saw gains in price and volumes and beneficial sales mix, during the first quarter of 2021 and currently believes this trend will continue through the year. We believe the market is ripe for strategic acquisitions and continue to evaluate potential accretive deals which could expand utilization of our existing assets including more than 100 tractors and semis, about 250 multi-axle trailers, 10 cranes, and 25 forklifts serving hundreds of customers. We continue to position ourselves as a transportation services player in the domestic infrastructure logistics business and believe U.S. government domestic infrastructure investments represent additional opportunities in wind energy, power transformers, compressors and bridge beams that we haul for customers.”

Further information is available, including financial statements, footnotes and management’s discussion and analysis of the financial results, in the Company’s Quarterly Report on Form 10-Q filed May 24, 2021, and December 31, 2020 Annual Report on Form 10-K filed April 19, 2021.

About SMG Industries, Inc.:  SMG Industries is a growth-oriented transportation services company focused on the domestic infrastructure logistics market.  Through several of the Company’s wholly-owned subsidiaries branded as the “5J Transportation Group,” it offers heavy haul, super heavy haul, flatbed, brokerage, and drilling rig mobilization services. 5J’s dimensional permitted jobs can support up to 500-thousand-pound loads which include cargo associated with wind energy, power generation components, bridge beams, compressors, and refinery and construction equipment.  SMG Industries, Inc. headquartered in Houston, Texas has facilities in Floresville, Hempstead, Henderson, Houston, Odessa, Palestine, and Victoria, Texas. Read more at

SMG Industries, Inc. Consolidated First Quarter 2021 Financial Statements 

   March 31, December 31,
   2021 2020
Current assets:   
 Cash and cash equivalents $               353,418  $               263,814
 Restricted cash                  716,474                   715,274
 Accounts receivable, net of allowance for doubtful accounts of $672,210 and $691,098    
  as of March 31, 2021 and December 31, 2020, respectively               6,324,912                4,920,967
 Prepaid expenses and other current assets               1,355,262                1,409,996
 Current assets of discontinued operations                  138,821                   437,787
  Total current assets               8,888,887                7,747,838
 Property and equipment, net of accumulated depreciation of $6,882,957 and $5,991,572   
  as of March 31, 2021 and December 31, 2020, respectively             14,912,382              16,337,914
 Right of use assets - operating lease               1,182,400                1,270,989
 Other assets                  744,075                   499,707
 Other assets of discontinued operations, net               1,514,469                1,568,700
  Total assets  $          27,242,213  $          27,425,148
Current liabilities:   
 Accounts payable  $            2,940,421  $            3,171,086
 Accounts payable - related party                  110,526                   205,444
 Accrued expenses and other liabilities               3,836,219                2,373,057
 Right of use liabilities - operating leases short term                  608,097                   575,517
 Deferred revenue                    30,000                     30,000
 Secured line of credit               3,718,730                4,046,256
 Current portion of unsecured notes payable               4,449,569                2,187,436
 Current portion of secured notes payable, net               5,224,918                4,010,627
 Current portion of convertible note, net                    50,000                     50,000
 Current liabilities of discontinued operations               1,943,319                2,243,037
  Total current liabilities             22,911,799              18,892,460
Long term liabilities:   
 Convertible note payable, net               2,691,321                2,417,335
 Notes payable - unsecured, net of current portion               1,831,844                1,040,223
 Notes payable - secured, net of current portion             12,518,185              14,038,409
 Right of use liabilities - operating leases, net of current portion                  793,944                   846,212
 Long term liabilities of discontinued operations               1,009,972                1,008,362
  Total liabilities             41,757,065              38,243,001
Commitments and contingencies    
Stockholders' deficit   
 Preferred stock 1,000,000 shares authorized:   
  Series A preferred stock - $0.001 par value; 2,000 shares authorized; 2,000 shares issued                             2                              2
  and outstanding  at March 31, 2021 and December 31, 2020    
  Series B convertible preferred stock - $0.001 par value; 6,000 shares authorized;  no shares issued    
  and outstanding at March 31, 2021 and December 31, 2020, respectively                              -                               -
 Common stock - $0.001 par value; 250,000,000 shares authorized; 19,839,365 and 19,446,258 shares   
  issued and outstanding at March 31, 2021 and December 31, 2020, respectively                    19,840                     19,447
 Additional paid in capital             11,170,885              10,978,254
 Accumulated deficit            (25,705,579)             (21,815,556)
  Total stockholders' deficit            (14,514,852)             (10,817,853)
  Total liabilities and stockholders' deficit $          27,242,213  $          27,425,148

For the three months ended March 31, 2021 and 2020 
      March 31, 2021 March 31, 2020 
 REVENUES   $                      7,602,328  $                      4,360,381 
 COST OF REVENUES                           8,700,508                          4,663,359 
 GROSS PROFIT                         (1,098,180)                           (302,978) 
  Selling, general and administrative                           1,511,900                          2,098,330 
  Impairment expense                                         -                                        - 
  Acquisition costs                                     500                                        - 
  Total operating expenses                            1,512,400                          2,098,330 
 LOSS FROM OPERATIONS                         (2,610,580)                        (2,401,308) 
  Interest expense, net                         (1,248,789)                           (344,599) 
  Other income                                     639                                        - 
  Other expense                                         -                                        - 
  Gain (loss) on settlement of notes payable                                         -                                        - 
  Gain on sale of assets                                50,162                                        - 
  Gain on extinguishment of debt                                         -                                        - 
  Total other income (expense)                         (1,197,988)                           (344,599) 
 NET LOSS FROM CONTINUING OPERATIONS                         (3,808,568)                        (2,745,907) 
  Loss from discontinued operations                              (56,455)                           (233,324) 
 NET LOSS                          (3,865,023)                        (2,979,231) 
  Preferred stock dividends                              (25,000)                             (42,123) 
 NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS   $                    (3,890,023)  $                    (3,021,354) 
 Net loss per common share      
  Continuing operations   $                             (0.20)  $                             (0.18) 
  Discontinued operations   $                             (0.00)  $                             (0.01) 
  Net loss attributable to common shareholders   $                             (0.20)  $                             (0.19) 
 Weighted average common shares outstanding      
  Basic                         19,516,258                        15,686,520 
  Diluted                         19,516,258                        15,686,520 

For the three months ended March 31, 2021 and 2020
    March 31, 2021 March 31, 2020
 Net loss from continuing operations $            (3,808,568)  $            (2,745,907)
 Adjustments to reconcile net loss to net    
  cash used in operating activities:   
  Stock based compensation                     17,973                        2,895
  Depreciation and amortization                1,418,401                    542,493
  Amortization of deferred financing costs                   245,722                      80,954
  Amortization of right of use assets - operating leases                     88,589                      33,786
  Bad debt recovery                    (14,353)                       (1,167)
  (Gain) loss on disposal of assets                    (50,162)                      10,229
  Gain extinguishment of debt                               -                                -
  Changes in:   
   Accounts receivable               (1,389,592)                   (146,198)
   Prepaid expenses and other current assets                1,251,779                    744,766
   Other assets                  (585,574)                   (732,042)
   Accounts payable                   (118,594)                (2,194,972)
   Accounts payable - related party                    (59,918)                                -
   Accrued expenses and other liabilities                1,438,162                 2,470,255
   Right of use operating lease liabilities                    (19,688)                     (11,807)
   Deferred revenue                               -                                -
 Net cash used in operating activities from continuing operations               (1,585,823)                (1,946,715)
 Net cash used in operating activities from discontinued operations                   530,013                   (599,754)
 Net cash used in operating activities                (1,055,810)                (2,546,469)
         Cash paid for acquisition of 5J Entities, net                               -                (6,320,168)
         Cash paid for disposal of MG Cleaners, LLC                    (35,000)                                -
         Cash paid for purchase of property and equipment                               -                     (84,878)
 Net cash used in investing activities from continuing operations                    (35,000)                (6,405,046)
 Net cash used in investing activities from discontinued operations                               -                                -
 Net cash used in investing activities                     (35,000)                (6,405,046)
  Payment of deferred financing costs                                -                   (239,558)
         Proceeds from secured line of credit, net                               -                 5,719,410
         Payments on secured line of credit, net                  (354,214)                                -
         Proceeds from notes payable                  1,874,002                 1,952,248
         Payments on notes payable                  (338,001)                   (139,842)
         Proceeds from convertible notes payable                   150,000                 1,350,000
 Net cash provided by financing activities from continuing operations                1,331,787                 8,642,258
 Net cash provided by financing activities from discontinued operations                  (150,173)                    799,754
 Net cash provided by financing activities                 1,181,614                 9,442,012
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH                     90,804                    490,497
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period                    979,088                      29,568
CASH,  CASH EQUIVALENTS AND RESTRICTED CASH, end of period  $             1,069,892  $                520,065
Supplemental disclosures:   
     Cash paid for income taxes $                            -  $                            -
     Cash paid for interest   $                528,909  $                            -
Noncash investing and financing activities   
     Non-cash consideration paid for business acquisitions $                            -  $             4,378,000
     Non-cash consideration paid for increase in secured notes payable $                            -  $             5,840,622
     Non-cash consideration paid for prepaids from debt financing $                            -  $                331,065
 Debt discount from issuance of common stock warrants   $                            -  $                  59,439
 Preferred stock dividend   $                  25,000  $                  42,123
 Expenses paid by related party   $                            -  $                  25,279
 Prepaid expenses financed with note payable   $             1,179,752  $                            -
 Shares issued for deferred financing costs   $                            -  $                419,788
 Note receivable for property and equipment $                  17,293  $                            -
 Beneficial conversion feature on convertible notes payable   $                175,051  $                            -
 Non cash increase in convertible debt for AP payments   $                112,071  $                            -

Contact: Matthew Flemming, SMG Industries, Inc. +1-713-821-3153

SOURCE:  SMG Industries, Inc.