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SMG Industries, Inc.

SMG Industries, Inc. Reports Financial Results for Fiscal Year 2020

Transportation Services Company Reports $26.6 million in revenue for 2020, net of discontinued operations, an increase of $26.1 million from 2019

Houston, Texas - (NewMediaWire) - April 19, 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 the full year ended December 31, 2020 and released its 2020 Annual Report on Form 10-K.

Fiscal Year 2020 Highlights

·         Net of Discontinued Operations (MG Cleaners and Trinity Services), Revenues increased to $26.6 million in 2020, or about 5,100% from $508 thousand for the year 2019.

·         Pro forma revenues for 2020, illustrating the Feb. 27, 2020 acquisition of 5J for the full year 2020, (net of discontinued operations), was $34.2 million.

·         Selling, General and Administrative expenses were 19.8% of sales for 2020.

·         Net loss from continuing operations for 2020 was $14.1 million, which included acquisition expenses of the transportation services business and one-time, non-operational write downs and impairment expenses associated with the oil and gas focused services and assets held for sale.

·         Total Assets grew to approximately $27.4 million in 2020 from $6.4 million in 2019.

The Company made significant strides in its announced transformation to transportation services from an upstream oil and gas focused services company during the fiscal year 2020. SMGI acquired 5J Trucking and 5J Oilfield Services, sold its MG Cleaners subsidiary in December 2020, and positioned its other upstream oil and gas divisions, such as Trinity Services, for divestiture or sale. The Company’s pivot and focus last year to transportation services was in response to volatile oil prices and the global COVID pandemic effects on economic activity.

The discontinued operations of MG Cleaners and Trinity Services removed approximately $4.3 million in annual revenues from our results in 2020. See footnote 9 in our Company’s Annual Report on Form 10-k for more information and for the 2020 pro forma revenues presentation.

Mr. Jeffrey Martini, CEO of SMG, stated, “In the face of challenges including negative oil prices, industry volatility, and economic activity reductions caused by the COVID pandemic in 2020, the Company made strategic pivots in its business focus to reduce its exposure in upstream oil and gas concentration and focus more in transportation services including infrastructure.  Currently, we believe the Company will continue to expand its service offerings in transportation organically and through acquisition with our Buy & Build strategy continuing to acquire market share of the estimated $700 billion US transportation industry.” Mr. Martini continued, “With the 5J acquisition, the Company’s total assets have grown to approximately $27.4 million, currently representing more than 100 tractors and semis, about 250 multi-axle trailers, 10 cranes, and 25 forklifts that serve more than 200 customers. Our 5J Transportation Group is particularly excited about the possible infrastructure investments proposed by the U.S. government and industry that could represent additional activity in wind energy, power transformers, compressors and bridge beams that we haul for customers.”

Further information is available, including management’s discussion and analysis of the financial results and disclosures, in the Company’s 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, hot shot 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, Henderson, Odessa, Palestine, Tomball, and Victoria, Texas. Read more at www.SMGIndustries.com.

Contact:

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

Source:  SMG Industries, Inc.

SMG INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
 
   December 31, December 31,
   2020 2019
      
ASSETS   
Current assets:   
 Cash and cash equivalents $               263,814  $                 29,568
 Restricted cash                  715,274                               -
 Accounts receivable, net of allowance for doubtful accounts of $691,098 and $42,182   
  as of December 31, 2020 and 2019, respectively               4,920,967                               -
 Prepaid expenses and other current assets               1,409,996                   102,567
 Current assets of discontinued operations                  437,787                1,572,127
      
  Total current assets               7,747,838                1,704,262
      
 Property and equipment, net of accumulated depreciation of $5,991,572 and $451,195   
  as of December 31, 2020 and 2019, respectively             16,337,914                1,311,991
 Right of use assets - operating lease               1,270,989                     46,882
 Other assets                  499,707                       2,620
 Other assets of discontinued operations, net               1,568,700                3,365,629
      
  Total assets  $          27,425,148  $            6,431,384
      
LIABILITIES AND STOCKHOLDERS' DEFICIT   
Current liabilities:   
 Accounts payable  $            3,171,086  $               603,129
 Accounts payable - related party                  205,444                               -
 Accrued expenses and other liabilities               2,373,057                   258,543
 Right of use liabilities - operating leases short term                  575,517                     29,313
 Deferred revenue                    30,000                     30,000
 Secured line of credit               4,046,256                     10,204
 Current portion of unsecured notes payable               2,187,436                     76,374
 Current portion of secured notes payable, net               4,010,627                   717,504
 Current portion of convertible note, net                    50,000                               -
 Current liabilities of discontinued operations               2,243,037                4,042,055
      
  Total current liabilities             18,892,460                5,767,122
      
Long term liabilities:   
 Convertible note payable, net               2,417,335                   260,926
 Notes payable - unsecured, net of current portion               1,040,223                               -
 Notes payable - secured, net of current portion             14,038,409                   727,701
 Right of use liabilities - operating leases, net of current portion                  846,212                     17,569
 Long term liabilities of discontinued operations               1,008,362                   579,514
      
  Total liabilities             38,243,001                7,352,832
      
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 December 31, 2020 and 2019   
  Series B convertible preferred stock - $0.001 par value; 6,000 shares authorized;  no shares issued    
  and outstanding at December 31, 2020 and  2019, respectively                              -                               -
 Common stock - $0.001 par value; 250,000,000 shares authorized; 19,446,258 and 14,881,372  shares   
  issued and outstanding at December 31, 2020 and 2019, respectively                    19,447                     14,881
 Additional paid in capital             10,978,254                4,756,194
 Accumulated deficit            (21,815,556)               (5,692,525)
      
  Total stockholders' deficit            (10,817,853)                  (921,448)
      
  Total liabilities and stockholders' deficit $          27,425,148  $            6,431,384
      
The accompanying notes are an integral part of these consolidated financial statements


SMG INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2020 and 2019
         
      December 31, 2020 December 31, 2019
         
 REVENUES   $                    26,665,719  $                         508,659
         
 COST OF REVENUES                         29,477,208                             967,305
         
 GROSS PROFIT                         (2,811,489)                           (458,646)
         
 OPERATING EXPENSES:     
  Selling, general and administrative                           5,267,186                          1,707,982
  Impairment expense                           1,084,671                             565,466
  Acquisition costs                           1,485,829                               70,945
         
  Total operating expenses                            7,837,686                          2,344,393
         
 LOSS FROM OPERATIONS                     (10,649,175)                        (2,803,039)
         
 OTHER INCOME (EXPENSE)     
  Interest expense, net                         (3,801,020)                           (573,028)
  Other income                                74,587                               14,159
  Other expense                              (30,000)                                        -
  Gain (loss) on settlement of notes payable                              (14,204)                           (101,251)
  Gain on sale of assets                              220,315                                 3,669
  Gain on extinguishment of debt                                94,339                                        -
  Total other income (expense)                         (3,455,983)                           (656,451)
         
 NET LOSS FROM CONTINUING OPERATIONS                       (14,105,158)                        (3,459,490)
         
  Gain on disposal of discontinued operations                              572,741                                        -
  Loss from discontinued operations                         (2,336,573)                           (524,868)
 NET LOSS                        (15,868,990)                        (3,984,358)
         
  Preferred stock dividends                            (254,041)                             (30,740)
         
 NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS   $                  (16,123,031)  $                    (4,015,098)
         
 Net loss per common share     
  Continuing operations   $                             (0.80)  $                             (0.25)
  Discontinued operations   $                             (0.10)  $                             (0.04)
  Net loss attributable to common shareholders   $                             (0.90)  $                             (0.29)
         
 Weighted average common shares outstanding     
  Basic                         17,860,452                        13,824,474
  Diluted                         17,860,452                        13,824,474
         
         
The accompanying notes are an integral part of these consolidated  financial statements
         


SMG INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2020 and 2019
       
 
    December 31, 2020 December 31, 2019
       
CASH FLOWS FROM OPERATING ACTIVITIES:   
 Net loss from continuing operations $          (14,105,158)  $            (3,459,490)
 Adjustments to reconcile net loss to net    
  cash used in operating activities:   
  Stock based compensation                     66,566                    246,099
  Depreciation and amortization                4,901,689                    240,318
  Amortization of deferred financing costs                   609,396                    516,956
  Amortization of right of use assets - operating leases                   286,790                    305,903
  Impairment expense                1,084,671                    565,466
  Bad debt expense                   474,708                      52,737
  Loss on settlement of liabilities                     21,407                      69,512
  Gain on disposal of assets                  (220,315)                       (3,669)
  Gain extinguishment of debt                    (94,339)                              -  
  Changes in:   
    Accounts receivable                2,782,038                      29,716
    Prepaid expenses and other current assets                   558,182                     (77,568)
    Accounts payable                (2,158,362)                    936,797
    Accounts payable - related party                   130,444                              -  
    Accrued expenses and other liabilities                2,067,828                    198,506
    Right of use operating lease liabilities                  (136,050)                   (305,903)
    Deferred revenue                             -                        30,000
 Net cash used in operating activities from continuing operations               (3,730,505)                   (654,620)
 Net cash used in operating activities from discontinued operations                  (242,162)                    340,317
 Net cash used in operating activities                (3,972,667)                   (314,303)
       
CASH FLOWS FROM INVESTING ACTIVITIES:   
         Cash paid for acquisition of 5J Entities, net               (6,320,168)                              -  
         Cash paid for acquisition of Trinity Services, LLC                               -                   (500,000)
         Cash paid for disposal of MG Cleaners, LLC                    (75,000)                                -
         Cash received from sale of property and equipment                       4,200                              -  
         Cash paid for purchase of property and equipment                  (404,200)                     (28,107)
 Net cash used in investing activities from continuing operations               (6,795,168)                   (528,107)
 Net cash used in investing activities from discontinued operations                    (42,368)                     (15,325)
 Net cash used in investing activities                (6,837,536)                   (543,432)
       
CASH FLOWS FROM FINANCING ACTIVITIES:   
  Payment of deferred financing costs                  (223,558)                              -  
         Proceeds from secured line of credit, net                4,156,238                              -  
         Payments on secured line of credit, net                             -                       (33,015)
         Proceeds from notes payable                  5,584,048                 1,180,000
         Payments on notes payable               (1,385,535)                   (819,105)
         Proceeds from sales of common stock                               -                    359,000
         Proceeds from convertible notes payable                3,144,295                      50,000
         Payments in MG Cleaners acquisition - related party                               -                     (21,000)
 Net cash provided by financing activities from continuing operations              11,275,488                    715,880
 Net cash provided by financing activities from discontinued operations                   484,235                    170,130
 Net cash provided by financing activities               11,759,723                    886,010
       
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH                   949,520                      28,275
       
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period                      29,568                        1,293
       
CASH,  CASH EQUIVALENTS AND RESTRICTED CASH, end of period  $                979,088  $                  29,568
       
Supplemental disclosures:   
     Cash paid for income taxes $                            -  $                            -
     Cash paid for interest   $             1,979,483  $                221,140
       
Noncash investing and financing activities   
     Capitalization of ROU assets and liabilities - finance $                            -  $                            -
     Capitalization of ROU assets and liabilities - operating $                            -  $                352,785
     Non-cash consideration paid for business acquisitions $             4,380,000  $             1,939,000
     Non-cash consideration paid for increase in secured notes payable $             5,840,622  $                          -  
     Non-cash consideration paid for prepaids from debt financing $                331,065  $                          -  
     Non-cash consideration increase in convertible notes payable $                225,000  $                          -  
 Intangible assets acquired from issuance of note payable, related party   $                            -  $                          -  
 Debt discount from issuance of common stock warrants   $                  59,439  $                214,090
 Preferred stock dividend   $                254,041  $                  30,740
 Expenses paid by related party   $                  69,516  $                            -
 Settlement of accounts payable and accrued interest with common stock issuance   $                  66,000  $                144,016
 Settlement of notes payable with common stock issuance   $                            -  $                            -
 Settlement of accounts payable with note payable   $                            -  $                123,818
 Prepaid expenses financed with note payable   $                100,997  $                234,914
 Equipment received in exchange for settlement of notes receivable   $                223,200  $                            -
 Shares issued for deferred financing costs   $                419,788  $                          -  
     Note payable for property and equipment $             1,353,500  $                          -  
 Beneficial conversion feature on convertible notes payable   $             1,057,710  $                          -  
 Capitalized accrued interest   $                            -  $                    4,559
       
       
The accompanying notes are an integral part of these consolidated  financial statements