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

Rhea-AI Summary

SMG Industries, Inc. (OTCQB:SMGI) reported a staggering revenue increase to $26.6 million for the fiscal year 2020, a rise of approximately 5,100% from $508 thousand in 2019, following the acquisition of 5J Trucking. The company's total assets surged to $27.4 million from $6.4 million in the prior year. Despite these gains, SMGI recorded a net loss from continuing operations of $14.1 million due to acquisition expenses and impairments. The strategic pivot to transportation services aligns with a broader focus following the challenges of volatile oil prices and the COVID-19 pandemic.

Positive

• Revenue increased to $26.6 million in 2020, up 5,100% from 2019.
• Pro forma revenues for 2020 were $34.2 million after the acquisition of 5J.
• Total assets rose to approximately $27.4 million in 2020 from $6.4 million in 2019.
• Successful acquisition of 5J Trucking, enhancing service capacity.

Negative

• Net loss from continuing operations was $14.1 million due to acquisition costs and impairments.
• Discontinued operations reduced annual revenues by approximately $4.3 million.

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

HOUSTON, TX, April 19, 2021 (GLOBE NEWSWIRE) -- via NewMediaWire -- 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

FAQ

What were SMGI's total revenues for 2020?

SMGI reported total revenues of $26.6 million for 2020.

How did SMGI's revenue for 2020 compare to 2019?

SMGI's revenue increased by approximately 5,100% from $508 thousand in 2019.

What was the net loss for SMGI in 2020?

The net loss from continuing operations for SMGI in 2020 was $14.1 million.

What were SMGI's total assets at the end of 2020?

SMGI's total assets grew to approximately $27.4 million at the end of 2020.

What strategic changes did SMGI make in 2020?

SMGI shifted focus from upstream oil and gas services to transportation services, acquiring 5J Trucking.