Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - SMG Industries Inc. | tm2029317d1_8k.htm |
Exhibit 99.1
SMG Industries, Inc. Reports 2020 Second Quarter and Six-Month Financial Results
HOUSTON, TX, Aug. 17, 2020 (GLOBE NEWSWIRE) -- via NEWMEDIAWIRE -- SMG Industries, Inc. (the “Company”) (OTCQB:SMGI), a growth-oriented transportation services and industrial services business operating in the Southwest United States, today reported financial results for its second quarter and six month period ended June 30, 2020.
Second Quarter Financial Highlights:
• Revenues increased approximately 671% to $8,439,366 for the 3 months ended June 30, 2020, compared to the three months ended June 30, 2019,
• Net loss was $3,258,985 for the 3 months ended June 30, 2020, compared to a net loss of $980,910 for the 3 months ended June 30, 2019,
• Total Assets grew 408% to $32,717,859 in the second quarter ended June 30, 2020 compared to $6,431,384 at year ended 2019, and,
• The Company continues to move forward with its “buy and build” growth strategy seeking to acquire additional transportation and industrial services companies that are immediately accretive.
Mr. Matt Flemming, Chief Executive Officer of SMG, stated, “While the Company generated substantial increase in its revenues of over 600% during the second quarter 2020, resulting from the February 27, 2020 acquisition of 5J, the second quarter was significantly affected by the COVID-19 pandemic, declining oil prices and lower economic activity during the period, partially offset by the Company’s shift in focus to transportation services including the heavy haul trucking business.” Mr. Flemming continued, “The Company currently anticipates improved results in the third quarter 2020 based on customer feedback, its diversification further into the heavy haul trucking, the establishment of a super heavy haul division and the benefits from the business realignment into two segments of Transportation Services and Industries Services.”
Selected Three Months Ended June 30, 2020 data
Sales for the three months ended June 30, 2020 were $8,439,366, an increase of approximately 671%, from $1,094,181 for the three months ended June 30, 2019. The increase in revenues for the three months ended June 30, 2020 was primarily attributable to the additional revenues of the 5J acquisition, not present in the year ago comparable period.
During the three months ended June 30, 2020, cost of sales increased as a percentage of sales to 110% of revenues, or $9,310,712, compared to 82% of revenues or $896,600 for the comparable 2019 period. The increase in cost of sales as a percentage of revenues is primarily the result of the increased non-cash depreciation cost added from the asset heavy 5J acquisition not present in the year ago comparable period. Non-cash depreciation expense within cost of sales was approximately
$1,540,000.
For the three months ended June 30, 2020, selling, general and administrative expenses were $1,271,366, or 15% of sales representing an increase of $446,552 from $824,814 or 75% of sales for the three months ended June 30, 2019. This decrease in selling, general and administrative expenses in the second quarter of 2020 over the second quarter of 2019 was primarily due to higher sales covering more fixed cost within selling, general and administration expenses, partially offset by higher insurance expenses, professional fees and bad debt expense of $100,690 during second quarter ended June 30, 2020.
During the three months ended June 30, 2020, we incurred a net loss attributable to common shareholders of $3,347,958 or $0.19 per basic and diluted earnings per share. For the three months ended June 30, 2019, we incurred a net loss attributable to common shareholders of $980,910 or $0.07 per basic and diluted earnings per share. The net loss in the three months ended June 30, 2020, resulted primarily from higher cost of revenues and resulting in a loss from operations as well as higher interest expenses, compared to the three-month period ended June 30, 2019. The basic weighted average number of shares of common stock outstanding was 17,380,108 and 13,935,281 for the three months ended June 30, 2020 and 2019, respectively.
Selected Six Months Ended June 30, 2020 data
Sales for the six months ended June 30, 2020 were $14,415,766, an increase of 406%, from $2,846,885 for the six months ended June 30, 2019. The increase in revenue for the six months ended June 30, 2020 is primarily attributable to the additional revenues of the 5J acquisition, not present in the year ago comparable period.
During the six months ended June 30, 2020 we incurred a net loss of $6,238,216, or $0.39 per basic and diluted earnings per share. For the six months ended June 30, 2019 we incurred a net loss of $1,691,172 or $0.13 per basic and diluted earnings per share. The net loss in the six month period ended June 30, 2020 resulted primarily from higher cost of revenue resulting in loss from operations as well as higher interest expenses including higher non-cash expenses of depreciation and amortization of debt discount, compared to six month period ended June 30, 2019.
As of June 30, 2020, our total assets were $32,635,683, comprised of $954,016 in cash and restricted cash, $6,011,962 in accounts receivable, $192,077 in inventory, other current assets of $681,437, $21,604,795 in net property and equipment, and $126,244 in net intangible assets. This is an increase in total assets of $26,204,299 over the total assets at December 31, 2019 of $6,431,384.
Our net increase in cash for the six months ended June 30, 2020 was $923,662, as compared to a net cash increase of $110,438 in the six months ended June 30, 2019.
At June 30, 2020 and December 31, 2019, we had cash and cash equivalents of $954,016 and $112,046, respectively. Based on the company’s recent acquisition of 5J, current revenue trends, customer feedback, anticipated gross margin improvement from cost cutting measures implemented, along with anticipated new growth from cross selling our customers, we believe cash flow is likely to improve during the remainder of 2020. Currently, the Company is pursuing additional and potentially accretive acquisitions in 2020 targeting Transportation and Industrial Services.
Additional information including the Company’s financial statements, footnotes and management’s discussion and analysis can be found in the second quarter 2020 report filed in the Form 10-Q on August 14, 2020.
SMG INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
| June 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 552,759 | $ | 30,354 | ||||
| Restricted cash | 401,257 | - | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $254,038 and $254,483 as of June 30, 2020 and December 31, 2019, respectively | 6,011,962 | 1,172,697 | ||||||
| Cost in excess of billings | - | 71,185 | ||||||
| Inventory | 192,077 | 129,959 | ||||||
| Prepaid expenses and other current assets | 1,522,248 | 300,067 | ||||||
| Total current assets | 8,680,303 | 1,704,262 | ||||||
| Property and equipment, net of accumulated depreciation of $3,115,775 and $957,703 as of June 30, 2020 and December 31, 2019, respectively | 21,604,795 | 4,309,913 | ||||||
| Other assets | 681,437 | 19,809 | ||||||
| Right of use assets - operating lease | 1,625,080 | 266,158 | ||||||
| Intangible assets, net of accumulated amortization $23,756 and $18,758 as of June 30, 2020 and December 31, 2019, respectively | 126,244 | 131,242 | ||||||
| Total assets | $ | 32,717,859 | $ | 6,431,384 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 2,945,079 | $ | 2,129,475 | ||||
| Accrued expenses and other liabilities | 2,938,930 | 591,619 | ||||||
| Right of use liabilities - operating leases short term | 452,362 | 113,479 | ||||||
| Right of use liabilities - finance leases short term | 12,800 | 47,382 | ||||||
| Deferred revenue | 30,000 | 36,379 | ||||||
| Secured line of credit | 3,032,756 | 845,036 | ||||||
| Current portion of note payable - related party | - | 98 | ||||||
| Current portion of unsecured notes payable | 1,925,450 | 310,879 | ||||||
| Current portion of secured notes payable, net | 4,479,813 | 1,692,775 | ||||||
| Current portion of convertible note, net | 50,000 | - | ||||||
| Total current liabilities | 15,867,190 | 5,767,122 | ||||||
| Long term liabilities: | ||||||||
| Convertible note payable, net | 1,226,856 | 260,926 | ||||||
| Notes payable - unsecured, net of current portion | 2,026,286 | - | ||||||
| Notes payable - secured, net of current portion | 14,790,354 | 1,135,790 | ||||||
| Right of use liabilities - operating leases, net of current portion | 1,216,879 | 164,679 | ||||||
| Right of use liabilities - finance leases, net of current portion | 18,037 | 24,315 | ||||||
| Total liabilities | 35,145,602 | 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 and no shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively | 2 | 2 | ||||||
| Series B convertible preferred stock - $0.001 par value; 6,000 shares authorized; 6,000 and no shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively | 6 | - | ||||||
| Common stock - $0.001 par value; authorized 25,000,000 shares as of June 30, 2020 and December 31, 2019; issued and outstanding 17,380,108 and 14,881,372 at June 30, 2020 and December 31, 2019, respectively | 17,380 | 14,881 | ||||||
| Additional paid in capital | 9,616,706 | 4,756,194 | ||||||
| Accumulated deficit | (12,061,837 | ) | (5,692,525 | ) | ||||
| Total stockholders' deficit | (2,427,743 | ) | (921,448 | ) | ||||
| Total liabilities and stockholders' deficit | $ | 32,717,859 | $ | 6,431,384 | ||||
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, 2020 and 2019
(unaudited)
| Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||
| June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||
| REVENUES | $ | 8,439,366 | $ | 1,094,181 | $ | 14,415,766 | $ | 2,846,885 | ||||||||
| COST OF REVENUES | 9,310,712 | 896,600 | 15,321,348 | 2,377,315 | ||||||||||||
| GROSS PROFIT | (871,346 | ) | 197,581 | (905,582 | ) | 469,570 | ||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Selling, general and administrative | 1,271,366 | 824,814 | 3,769,270 | 1,663,438 | ||||||||||||
| Total operating expenses | 1,271,366 | 824,814 | 3,769,270 | 1,663,438 | ||||||||||||
| LOSS FROM OPERATIONS | (2,142,712 | ) | (627,233 | ) | (4,674,852 | ) | (1,193,868 | ) | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest expense, net | (1,212,248 | ) | (236,411 | ) | (1,659,339 | ) | (380,038 | ) | ||||||||
| Other income | 94,746 | - | 94,746 | - | ||||||||||||
| Other expense | (9,000 | ) | - | (9,000 | ) | - | ||||||||||
| Loss on settlement of liabilities | - | (105,258 | ) | - | (105,258 | ) | ||||||||||
| Gain (loss) on sale of assets | 10,229 | (12,008 | ) | 10,229 | (12,008 | ) | ||||||||||
| Total other income (expense) | (1,116,273 | ) | (353,677 | ) | (1,563,364 | ) | (497,304 | ) | ||||||||
| NET LOSS | (3,258,985 | ) | (980,910 | ) | (6,238,216 | ) | (1,691,172 | ) | ||||||||
| Preferred stock dividends | (88,973 | ) | - | (131,096 | ) | - | ||||||||||
| NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (3,347,958 | ) | $ | (980,910 | ) | $ | (6,369,312 | ) | $ | (1,691,172 | ) | ||||
| Net loss per common share | ||||||||||||||||
| Basic | $ | (0.19 | ) | $ | (0.07 | ) | $ | (0.39 | ) | $ | (0.13 | ) | ||||
| Diluted | $ | (0.19 | ) | $ | (0.07 | ) | $ | (0.39 | ) | $ | (0.13 | ) | ||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic | 17,380,108 | 13,935,281 | 16,537,993 | 13,068,921 | ||||||||||||
| Diluted | 17,380,108 | 13,935,281 | 16,537,993 | 13,068,921 | ||||||||||||
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, 2020 and 2019
(unaudited)
| June 30, | June 30, | |||||||
| 2020 | 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (6,238,216 | ) | $ | (1,691,172 | ) | ||
| Adjustments to reconcile net loss to net | ||||||||
| cash used in operating activities: | ||||||||
| Stock based compensation | 5,790 | 72,869 | ||||||
| Depreciation and amortization | 2,167,924 | 172,400 | ||||||
| Amortization of deferred financing costs | 333,188 | 192,608 | ||||||
| Amortization of right of use assets - operating leases | 151,975 | 82,120 | ||||||
| Impairment expense | - | 12,300 | ||||||
| Loss on settlement of liabilities | - | 105,258 | ||||||
| Gain (loss) on disposal of assets | 10,229 | (12,008 | ) | |||||
| Changes in: | ||||||||
| Accounts receivable | 3,409,633 | (133,847 | ) | |||||
| Inventory | (62,118 | ) | 1,136 | |||||
| Prepaid expenses and other current assets | 310,980 | (62,597 | ) | |||||
| Other assets | - | 10,038 | ||||||
| Accounts payable | (4,268,889 | ) | 713,437 | |||||
| Accounts payable related party | - | 61,173 | ||||||
| Accrued expenses and other liabilities | 2,154,861 | 151,022 | ||||||
| Right of use operating lease liabilities | (119,814 | ) | (80,120 | ) | ||||
| Deferred revenue | (6,379 | ) | (39,877 | ) | ||||
| Net cash used in operating activities | (2,150,836 | ) | (445,260 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Cash paid for acquisition of 5J Entities, net | (6,320,168 | ) | - | |||||
| Cash paid for acquisition of Trinity Services, LLC | - | (449,051 | ) | |||||
| Cash paid for purchase of property and equipment | (101,623 | ) | (116,682 | ) | ||||
| Net cash used in investing activities | (6,421,791 | ) | (565,733 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Payment of deferred financing costs | (239,558 | ) | - | |||||
| Proceeds from secured line of credit, net | 2,373,315 | 772,367 | ||||||
| Proceeds from notes payable | 7,231,710 | 280,000 | ||||||
| Payments on notes payable | (1,152,941 | ) | (267,473 | ) | ||||
| Payments on ROU liabilities - finance leases | (40,860 | ) | (30,681 | ) | ||||
| Proceeds from sales of common stock | - | 359,000 | ||||||
| Proceeds from notes payable, related party | 10,400 | 125,239 | ||||||
| Payments on notes payable, related party | (35,777 | ) | (146,021 | ) | ||||
| Proceeds from convertible notes payable | 1,350,000 | 50,000 | ||||||
| Payments in MG Cleaners acquisition - related party | - | (21,000 | ) | |||||
| Net cash provided by financing activities | 9,496,289 | 1,121,431 | ||||||
| NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 923,662 | 110,438 | ||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | 30,354 | 1,608 | ||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | $ | 954,016 | $ | 112,046 | ||||
| Supplemental disclosures: | ||||||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Cash paid for interest | $ | 221,140 | $ | 188,204 | ||||
| Noncash investing and financing activities | ||||||||
| Capitalization of ROU assets and liabilities - finance | $ | - | $ | 43,888 | ||||
| Capitalization of ROU assets and liabilities - operating | $ | - | $ | 352,785 | ||||
| Non-cash consideration paid for business acquisition | $ | 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 | $ | - | ||||
| Non-cash consideration paid for secured notes payable | $ | 155,729 | $ | - | ||||
| Intangible assets acquired from issuance of note payable, related party | $ | - | $ | 1,800,000 | ||||
| Debt discount from issuance of common stock warrants | $ | 59,439 | $ | 165,094 | ||||
| Preferred stock dividend | $ | 131,096 | $ | - | ||||
| Expenses paid by related party | $ | 25,279 | ||||||
| Settlement of accounts payable with common stock issuance | $ | - | $ | 8,572 | ||||
| Settlement of notes payable with common stock issuance | $ | - | $ | 102,274 | ||||
| Shares issued for deferred financing costs | $ | 419,788 | $ | - |
The accompanying notes are an integral part of these unaudited consolidated financial statements
SMG Industries, Inc.
Reconciliation of EBITDA (a non-GAAP measure)
| Pro forma* | ||||||||
| Consolidated | Consolidated | |||||||
| 1st Quarter 2020 | 2nd Quarter 2020 | |||||||
| Results | Results | |||||||
| NET LOSS | $ | (2,830,745 | ) | $ | (3,258,986 | ) | ||
| EBITDA adjustments | ||||||||
| Interest | $ | 581,203 | $ | 1,005,112 | ||||
| Taxes | $ | 19,591 | $ | (189,480 | ) | |||
| Depreciation & Amortization | $ | 1,629,386 | $ | 1,681,312 | ||||
| Non-Cash Stock Awards | $ | 2,895 | $ | 2,895 | ||||
| Other one time or non operating expenses Acquisition costs | $ | 1,490,358 | $ | (941 | ) | |||
| Finance Fees | $ | 10,000 | $ | - | ||||
| Legal Fees Related to | $ | 12,500 | $ | - | ||||
| Acquisition | ||||||||
| Other Legal Fees & | $ | 4,500 | $ | 19,335 | ||||
| Acquisition costs | ||||||||
| Other Interest charges | $ | 6,195 | $ | 96,659 | ||||
| Adjusted EBITDA | $ | 925,884 | $ | (644,094 | ) | |||
*Pro forma illustrates acquisition of 5J occuring Jan 1 2020 not actual date of Feb 27, 2020
About SMG Industries, Inc.: SMG Industries is a growth-oriented transportation and industrial services company that operates throughout the Southwest United States. Through its Transportation Services segment, the Company’s wholly-owned subsidiaries 5J Trucking, 5J OFS and 5J Specialized (together “5J”) 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 wind energy, power generation components, bridge beams, compressors, refinery and construction equipment. The Company’s Industrial Services segment has two wholly owned subsidiaries MG Cleaners and Trinity Services offering industrial strength proprietary branded products including detergents, surfactants and degreasers (such as Miracle Blue® ), cleaning equipment and services and repair crews. Trinity Services offers construction services including multi-well pads, lease roads and pit closures. SMG Industries, Inc. headquartered in Houston, Texas has facilities in Carthage, Floresville, Odessa, Palestine, and Waskom, Texas. Read more at www.SMGindustries.com and www.MGCleanersllc.com and www.5Jtrucking.net.
Contact:
Matthew Flemming, SMG Industries, Inc. +713-821-3153