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SMG Industries, Inc. Reports $12.2 Million in Revenues for the Second Quarter 2021 and Six-Month Financial Results

Houston, TX - (NewMediaWire) - August 24, 2021 - SMG Industries, Inc. (the “Company”) (OTCQB:SMGI), a growth-oriented transportation services company focused on the domestic infrastructure logistics market, today reported financial results for its second quarter ended June 30, 2021.

Second Quarter Financial Highlights:

·         Revenues increased approximately 63% to $12,243,091 for the 3 months ended June 30, 2021, compared to the three months ended June 30, 2020,

·         Revenues increased approximately 67% to $19,845,419 for the 6 months ended June 30, 2021 compared to the year ago period,

·         Adjusted Gross Margins were $18,918,031, after adjusting for depreciation, and cost of sales included non-cash expense of $2,737,505,

·         Net loss from continuing operations declined to $419,360 for the 3 months ended June 30, 2021, compared to a net loss of $2,976,940 for the 3 months ended June 30, 2020,

·         Total Assets grew to $30,379,183 at June 30, 2021 compared to $27,425,148 at December 31, 2020, and,

·         The Company continues to move forward with its “buy and build” growth strategy seeking to acquire additional owner/operator logistics terminals as well as standalone transportation services companies.

Selected Three Months Ended June 30, 2021 data

Revenues for the quarter ended June 30, 2021 increased to $12,243,091, or 63%, from $7,499,226 for the three months ended June 30, 2020, driven by increased drilling rig relocations, improved customer demand resulting from lessened impacts of the global COVID-19 pandemic and to the establishment of a new Houston terminal.

During the three months ended June 30, 2021, cost of sales was $12,955,028, or 106% of sales, compared to $8,488,095, or 113% of sales for the 2020 period. Cost of sales includes non-cash depreciation expense of $1,319,104 for the three months ended June 30, 2021, and $1,429,692 for the comparable period in 2020.  Adjusted Cost of sales, with non-cash depreciation expenses removed, was $11,635,924, or 95% of sales for the period. The Company believes it will see improvement in its gross margins from anticipated higher future sales volumes, price increases from its services offered and improved economic conditions from COVID pandemic economic recovery.

Selling, general and administrative expenses for the three months ended June 30, 2021 was $1,617,201, or 13.2% of revenues, compared to $941,574, or 12.6% of revenues, for the quarter ended June 30, 2020.  The increased dollar amount and percent of revenue are primarily driven by improved revenue.

Interest expense was $1,321,988 and $1,131,472 for the three months ended June 30, 2021 and 2020, respectively.

The net loss from continuing operations for the quarter ended June 30, 2021 was $419,360 as compared to a net loss of $2,976,940 for the quarter ended June 30, 2020.  The reduction in the net loss was due primarily to the Gain on PPP loan forgiveness of $3,148,100 recorded as Other Income.

Selected Six Months Ended June 30, 2021 data

Revenues for the six months ended June 30, 2021 increased to $19,845,419, or 67%, from $11,859,607 for the six months ended June 30, 2020, driven by the acquisition of 5J on February 27, 2020, increased drilling rig relocations, improved customer demand resulting from lessened impacts of the global COVID-19 pandemic and to the establishment of a new Houston terminal.

During the six months ended June 30, 2021, cost of sales was $21,655,536 or 109% of sales, compared to $13,151,454 or 111% of sales for the comparable 2020 period. Cost of sales includes non-cash depreciation expense of $2,737,505 for the six months June 30, 2021, and $1,972,185 for the comparable period in 2020, the increase in which was driven primarily by the 5J acquisition and the related fair value step up adjustments in the prior year. Adjusted Cost of sales, with non-cash depreciation expenses removed, was $18,918,031, or 95% of sales for the period. The cost of sales exceeding revenues during 2021 and 2020 was the result of lower than required revenues to cover fixed costs within cost of sales.

Selling, general and administrative expenses for the six months ended June 30, 2021 was $3,129,601 or 15.8% of revenues, compared to $3,039,904 in the comparable 2020 period, which included $1,489,417 of 5J acquisition costs. Excluding these costs, selling, general and administrative costs for the six months ended June 30, 2020 were $1,550,487, or 13.0% of revenues. 

Interest expense was $2,570,777 and $1,476,071 for the six months ended June 30, 2021 and 2020, respectively. The increase is a result of the borrowings to fund the 5J acquisition.

We plan to address our net loss and future operating results with a goal to achieve positive cash flow from operations by increasing sales organically or through acquisitions, covering more fixed costs within cost of sales, improving gross margins with anticipated higher pricing and better sales mix adding more higher margin service revenues such as infrastructure logistics including transporting bridge beams, super heavy haul, and reducing general and administrative costs including professional fees.

As of June 30, 2021, our total assets were $30,379,183, comprised of $717,956 in cash and restricted cash, $9,278,980 in accounts receivable, $2,115,303 in other current assets, $13,163,575 in net property and equipment, Right of use assets of $3,482,477 and other assets of $1,017,101. This is an increase in total assets of $2,954,035 over the total assets at December 31, 2020. 

Additional information including the Company’s financial statements, footnotes and management’s discussion and analysis can be found in the second quarter 2021 report filed in the Form 10-Q on August 23, 2021 with the Securities and Exchange Commission.

  

Selected Financial Tables

SMG INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
      
 
   June 30, December 31,
   2021 2020
      
ASSETS   
Current assets:   
 Cash and cash equivalents $                      791  $               263,814
 Restricted cash                  717,165                   715,274
 Accounts receivable, net of allowance for doubtful accounts of $618,454 and $691,098    
  as of June 30, 2021 and December 31, 2020, respectively               9,278,980                4,920,967
 Prepaid expenses and other current assets               2,115,303                1,409,996
 Current assets of discontinued operations                    17,011                   437,787
      
  Total current assets             12,129,250                7,747,838
      
 Property and equipment, net of accumulated depreciation of $8,799,658 and $5,991,572   
  as of June 30, 2021 and December 31, 2020, respectively             13,163,575              16,337,914
 Right of use assets - operating lease               3,482,477                1,270,989
 Other assets               1,017,101                   499,707
 Other assets of discontinued operations, net                  586,780                1,568,700
      
  Total assets  $          30,379,183  $          27,425,148
      
LIABILITIES AND STOCKHOLDERS' DEFICIT   
Current liabilities:   
 Accounts payable  $            3,740,473  $            3,171,086
 Accounts payable - related party                  228,960                   205,444
 Accrued expenses and other liabilities               4,676,175                2,373,057
 Right of use liabilities - operating leases short term                  972,817                   575,517
 Deferred revenue                    30,000                     30,000
 Secured line of credit               5,918,906                4,046,256
 Current portion of unsecured notes payable               1,807,829                2,187,436
 Current portion of secured notes payable, net               5,973,559                4,010,627
 Current portion of convertible note, net                    50,000                     50,000
 Current liabilities of discontinued operations               1,574,636                2,243,037
      
  Total current liabilities             24,973,355              18,892,460
      
Long term liabilities:   
 Convertible note payable, net               3,018,769                2,417,335
 Notes payable - unsecured, net of current portion               1,459,230                1,040,223
 Notes payable - secured, net of current portion             11,427,735              14,038,409
 Right of use liabilities - operating leases, net of current portion               2,759,871                   846,212
 Long term liabilities of discontinued operations                  294,975                1,008,362
      
  Total liabilities             43,933,935              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 June 30, 2021 and December 31, 2020    
  Series B convertible preferred stock - $0.001 par value; 6,000 shares authorized;  no shares issued    
  and outstanding at June 30, 2021 and December 31, 2020, respectively                              -                               -
 Common stock - $0.001 par value; 250,000,000 shares authorized; 21,865,952 and 19,446,258 shares   
  issued and outstanding at June 30, 2021 and December 31, 2020, respectively                    21,867                     19,447
 Additional paid in capital             12,473,582              10,978,254
 Accumulated deficit            (26,050,203)             (21,815,556)
      
  Total stockholders' deficit            (13,554,752)             (10,817,853)
      
  Total liabilities and stockholders' deficit $          30,379,183  $          27,425,148
      
      
The accompanying notes are an integral part of these unaudited consolidated financial statements


SMG INDUSTRIES INC. 
CONSOLIDATED STATEMENTS OF OPERATIONS 
For the three and six months ended June 30, 2021 and 2020 
(unaudited)
             
             
     Three months ended Six months ended 
     June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 
             
 REVENUES  $                    12,243,091  $                      7,499,226  $                    19,845,419  $                    11,859,607 
             
 COST OF REVENUES                        12,955,028                          8,488,095                        21,655,536                        13,151,454 
             
 GROSS LOSS                           (711,937)                           (988,869)                        (1,810,117)                        (1,291,847) 
             
 OPERATING EXPENSES:         
  Selling, general and administrative                          1,617,201                             941,574                          3,129,601                          3,039,904 
             
  Total operating expenses                           1,617,201                             941,574                          3,129,601                          3,039,904 
             
 LOSS FROM OPERATIONS                        (2,329,138)                        (1,930,443)                        (4,939,718)                        (4,331,751) 
             
 OTHER INCOME (EXPENSE)         
  Interest expense, net                        (1,321,988)                        (1,131,472)                        (2,570,777)                        (1,476,071) 
  Gain on PPP loan forgiveness                          3,148,100                                        -                          3,148,100                                        - 
  Other income                               18,902                               74,746                               19,541                               74,746 
  Gain on sale of assets                               64,764                               10,229                             114,926                               10,229 
  Total other income (expense)                          1,909,778                        (1,046,497)                             711,790                        (1,391,096) 
             
 NET LOSS FROM CONTINUING OPERATIONS                           (419,360)                        (2,976,940)                        (4,227,928)                        (5,722,847) 
             
  Income (loss) from discontinued operations                               99,736                           (282,045)                               43,281                           (515,369) 
 NET LOSS                            (319,624)                        (3,258,985)                        (4,184,647)                        (6,238,216) 
             
  Preferred stock dividends                             (25,000)                             (88,973)                             (50,000)                           (131,096) 
             
 NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS  $                       (344,624)  $                    (3,347,958)  $                    (4,234,647)  $                    (6,369,312) 
             
 Net loss per common share         
  Continuing operations  $                             (0.02)  $                             (0.17)  $                             (0.21)  $                             (0.36) 
  Discontinued operations  $                             (0.00)  $                             (0.02)  $                             (0.00)  $                             (0.03) 
  Net loss attributable to common shareholders  $                             (0.02)  $                             (0.19)  $                             (0.21)  $                             (0.39) 
             
 Weighted average common shares outstanding         
  Basic                        20,958,782                        17,380,108                        20,235,320                        16,537,993 
  Diluted                        20,958,782                        17,380,108                        20,235,320                        16,537,993 
             
             
The accompanying notes are an integral part of these unaudited consolidated financial statements 


SMG INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2021 and 2020
(unaudited)
       
    June 30, 2021 June 30, 2020
       
CASH FLOWS FROM OPERATING ACTIVITIES:   
 Net loss from continuing operations $            (4,227,928)  $            (5,722,847)
 Adjustments to reconcile net loss to net    
  cash used in operating activities:   
  Stock based compensation                     33,865                        5,790
  Depreciation and amortization                2,737,505                 1,972,185
  Amortization of deferred financing costs                   566,039                    255,460
  Amortization of right of use assets - operating leases                   267,020                    115,086
  Bad debt expense (recovery)                      (9,980)                      99,523
  (Gain) loss on disposal of assets                  (114,926)                      10,229
  Gain on PPP loan forgiveness               (3,148,100)                                -
  Changes in:   
   Accounts receivable               (4,348,033)                 2,729,138
   Prepaid expenses and other current assets                1,142,846                    827,270
   Other assets                  (794,792)                   (665,032)
   Accounts payable                    973,704                (3,404,727)
   Accounts payable - related party                     58,516                                -
   Accrued expenses and other liabilities                2,253,118                 2,220,726
   Right of use operating lease liabilities                  (167,549)                     (80,925)
 Net cash used in operating activities from continuing operations               (4,778,695)                (1,638,124)
 Net cash used in operating activities from discontinued operations                   608,519                   (581,439)
 Net cash used in operating activities                (4,170,176)                (2,219,563)
       
CASH FLOWS FROM INVESTING ACTIVITIES:   
         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                    (97,026)                   (165,548)
 Net cash used in investing activities from continuing operations                  (132,026)                (6,485,716)
 Net cash used in investing activities                   (132,026)                (6,485,716)
       
CASH FLOWS FROM FINANCING ACTIVITIES:   
    Payment of deferred financing costs                                -                   (239,558)
         Proceeds on secured line of credit, net                1,819,234                 2,898,524
         Proceeds from notes payable                  1,874,002                 5,283,949
         Payments on notes payable                  (830,234)                   (578,063)
         Proceeds from convertible notes payable                1,405,000                 1,350,000
 Net cash provided by financing activities from continuing operations                4,268,002                 8,714,852
 Net cash provided by financing activities from discontinued operations                  (226,932)                    781,437
 Net cash provided by financing activities                 4,041,070                 9,496,289
       
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH                  (261,132)                    791,010
       
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period                    979,088                      29,568
       
CASH,  CASH EQUIVALENTS AND RESTRICTED CASH, end of period  $                717,956  $                820,578
       
Supplemental disclosures:   
     Cash paid for income taxes $                            -  $                            -
     Cash paid for interest   $             1,215,489  $                221,040
       
Noncash investing and financing activities   
 Non-cash consideration paid for business acquisitions $                            -  $             4,378,000
 Non-cash increase in secured notes payable related to acquisition $                            -  $             5,840,622
 Non-cash increase in secured notes payable for settlement of accounts payable $                196,188  $                155,729
 Debt discount from issuance of common stock warrants $                            -  $                  59,439
 Preferred stock dividend $                  50,000  $                131,096
 Expenses paid by related party $                            -  $                  25,279
 Financing of prepaid insurance premiums  $             1,239,367  $                331,065
 Shares issued for deferred financing costs $                            -  $                419,788
 Note receivable for property and equipment $                608,786  $                            -
 Shares issued with debt and beneficial conversion feature on convertible notes payable $             1,463,883  $                            -
 Right of use assets capitalized and operating lease obligation recognized $             2,478,508  $                            -
 Convertible notes payable issued to settle accounts payable $                208,129  $                            -
       
The accompanying notes are an integral part of these unaudited consolidated financial statements

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, hot shot, and drilling rig mobilization services. 5J’s over-dimensional permitted jobs can support up to 500 thousand pound loads which include cargo associated with wind energy, power generation components, bridge beams, compressors, refinery and construction equipment.  SMG Industries, Inc. headquartered in Houston, Texas has facilities in Floresville, Henderson, Odessa, Palestine, and Victoria, Texas.  Read more at www.SMGindustries.com and www.5Jtrucking.net.

Contact:

Matthew Flemming, SMG Industries, Inc. Matt@SMGIndustries (dot com)

SOURCE: SMG Industries, Inc.