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CORRECTION: SMG Industries, Inc. Reports 2021 $14.77 Million Revenue Third Quarter and $34.61 Million for the Nine Month Financial Results

Houston, Texas – (NewMediaWire) – November 17, 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 third quarter ended September 30, 2021.

Third Quarter Financial Highlights:

·         Revenues increased approximately 117% to $14,772,939 for the 3 months ended September 30, 2021, compared to the three months ended September 30, 2020,

·         Revenues increased approximately 85% to $34,618,358 for the 9 months ended September 30, 2021 compared to the year ago period,

·         Adjusted Gross Margins for the nine months ended September 30, 2021, was $1,745,470, after adjusting for depreciation, a non-cash expense within cost of sales of $4,074,738,

·         Net loss from continuing operations was $3,928,964 for the 3 months ended September 30, 2021, compared to a net loss of $3,975,802 for the 3 months ended September 30, 2020,

·         Total Assets grew to $31,326,756 at September 30, 2021 compared to $27,425,148 at December 31, 2020,

·         A $6,400,000 first tranche of senior debt refinancing was funded on September 7, 2021, with the final tranche funded of $6,340,000 (for a total of $12,740,000) on November 1, 2021, lowering interest expense and payments,

·         The Company continues to move forward with its infrastructure growth platform of bridge beam and over-dimensional heavy haul, as well as its “buy and build” growth strategy seeking to acquire additional owner/operator logistics terminals as well as standalone transportation services companies.

Selected financial report highlights:

Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020

Revenues for the quarter ended September 30, 2021 increased to $14,772,939 from $6,810,714 for the three months ended September 30, 2020, an increase of 117%, driven by increased drilling rig relocations, improved customer demand resulting from lessened impacts of the global COVID-19 pandemic and the establishment of a new East Houston terminal generating additional flat bed transportation revenues.

During the three months ended September 30, 2021, cost of sales increased to $15,292,090, or 104% of sales, compared to $8,674,357, or 127% of sales for the 2020 period. Cost of sales includes non-cash depreciation expense of $1,337,233 and a refundable tax credit reducing labor costs of $836,971 for the three months ended September 30, 2021, and $1,461,979 for the comparable period in 2020. 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, higher labor costs and increased third party contract services utilized to address rapidly increasing customer demand, partially offset by improved pricing during the period. The Company believes it can improve gross margins through additional sales volumes from infrastructure logistics market growth and increased in oilfield rig move activity given current hydrocarbon price improvements, continued market recovery post-COVID pandemic with more activity, better utilization of our equipment inventory, lessening costs of third party contract services and continued increases in our pricing.

Selling, general and administrative expenses for the three months ended September 30, 2021 was $1,455,253, or 9.9% of revenues, compared to $1,000,032, or 14.7% of revenues, for the quarter ended September 30, 2020. The increased amount of SG&A was reflecting of the 109% increase in sales and related costs and included a benefit of $129,949 related to refundable employee retention tax credits during the three months ended September 30, 2021. As a percentage of revenue, the improvement in SG&A is primarily the result of higher revenues absorbing additional fixed costs.  

Interest expense, net was $2,059,908 and $1,087,535 for the three months ended September 30, 2021 and 2020, respectively. The increase in interest expense in the third quarter of 2021 was the result of additional borrowings from convertible notes payable and its related expense.

The net loss from continuing operations for the quarter ended September 30, 2021 was $3,928,964 as compared to a net loss of $3,975,802 for the quarter ended September 30, 2020.  The net loss in the third quarter of 2021 compared to the previous period was due primarily to slightly higher loss from continuing operations, significantly higher interest expense, partially offset by the gain on PPP loan forgiveness of $105,000.

Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020

Revenues for the nine months ended September 30, 2021 increased to $34,618,358 from $18,670,321 for the nine months ended September 30, 2020, an increase of 85%, driven by the acquisition of 5J on February 27, 2020, not fully realized in the comparable period, increased drilling rig activity given higher hydrocarbon prices, improved customer demand resulting from lessened impacts of the global COVID-19 pandemic and to the establishment of a new East Houston terminal generating additional flat bed transportation revenues.

During the nine months ended September 30, 2021, cost of sales increased to $36,947,626 or 107% of sales, compared to $21,825,811 or 117% of sales for the 2020 period. Cost of sales includes non-cash depreciation expense of $4,074,738 and a refundable tax credit reducing labor costs of $836,971 for the nine months September 30, 2021, and $3,434,164 for the comparable nine month period in 2020, the increase of which was primarily the result of the 5J acquisition and its related fair value step up adjustments in the prior year. 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. The Company believes it can improve gross margins through additional sales volumes from infrastructure logistics market growth and increased in oilfield rig move activity given current hydrocarbon price improvements, continued market recovery post-COVID pandemic with more activity, better utilization of our equipment inventory, lessening costs of third-party contract services and continued increases in our pricing.

Selling, general and administrative expenses for the nine months ended September 30, 2021 was $4,584,854 or 13.2% of revenues, compared to $2,554,107, or 13.7% of revenues. Selling general and administrative expenses as a percentage of revenues was basically unchanged compared to the previous period. Selling general and administrative expenses primarily includes personnel costs, facilities expenses, insurances and professional fees, and included a benefit of $129,949 related to refundable employee retention tax credits during the three months ended September 30, 2021.

Interest expense, net was $4,630,685 and $2,563,606 for the nine months ended September 30, 2021 and 2020, respectively. The increase in interest expense was a result of the increased convertible note borrowings to fund the 5J acquisition and note financing.

The net loss from continuing operations for the nine months ended September 30, 2021 was $8,156,892 as compared to a net loss of $9,698,649 for the nine months ended September 30, 2020. The reduction in the net loss was due primarily to the gain on PPP loan forgiveness of $3,253,100, partially offset by higher cost of sales, selling general and administrative expenses and interest expense.

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

SMG Industries, Inc.’s CFO, Mr. Allen R. Parrott, stated, “We are pleased to report this 117% quarterly revenue growth compared to the third quarter of 2020. We believe the recent improved mix of heavy haul freight and utilization of assets on higher volumes should have additional positive impact on margins for SMG Industries. The Company is also very pleased to conclude the refinancing of more expense senior secured acquisition debt from February 2020 with new lenders that offer interest only terms for the first 12 months and a forty eight month term out of principal and interest thereafter given the company substantial savings of cash flow in fixed charge payments.” 

Additional information including the Company’s financial statements, footnotes and management’s discussion and analysis can be found in the third quarter 2021 report filed in the Form 10-Q on November 15, 2021 with the Securities and Exchange Commission.

Selected Financial Tables

SMG INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

 
 
 
 
 
 

 

 
 
 
September 30,
 
December 31,

 
 
 
2021
 
2020

 
 
 
 
 
 

ASSETS
 
 
 

Current assets:
 
 
 

 
Cash and cash equivalents
 $               225,139
 
 $               263,814

 
Restricted cash
                  717,165
 
                  715,274

 
Accounts receivable, net of allowance for doubtful accounts of $796,784 and $691,098 
 
 
 

 
 
as of September 30, 2021 and December 31, 2020, respectively
             11,269,533
 
               4,920,967

 
Prepaid expenses and other current assets
               2,991,762
 
               1,409,996

 
Current assets of discontinued operations
                    17,435
 
                  437,787

 
 
 
 
 
 

 
 
Total current assets
             15,221,034
 
               7,747,838

 
 
 
 
 
 

 
Property and equipment, net of accumulated depreciation of $10,136,891 and $5,991,572
 
 
 

 
 
as of September 30, 2021 and December 31, 2020, respectively
             11,953,176
 
             16,337,914

 
Right of use assets – operating lease
               3,310,099
 
               1,270,989

 
Other assets
                  840,947
 
                  499,707

 
Other assets of discontinued operations, net
                      1,500
 
               1,568,700

 
 
 
 
 
 

 
 
Total assets 
 $          31,326,756
 
 $          27,425,148

 
 
 
 
 
 

LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
 
 

Current liabilities:
 
 
 

 
Accounts payable 
 $            4,491,278
 
 $            3,171,086

 
Accounts payable – related party
                  275,569
 
                  205,444

 
Accrued expenses and other liabilities
               4,603,280
 
               2,373,057

 
Right of use liabilities – operating leases short term
               1,054,836
 
                  575,517

 
Deferred revenue
                    30,000
 
                    30,000

 
Secured line of credit
               7,005,211
 
               4,046,256

 
Current portion of unsecured notes payable
               2,425,258
 
               2,187,436

 
Current portion of secured notes payable, net
               7,914,180
 
               4,010,627

 
Current portion of convertible note, net
                              –
 
                    50,000

 
Current liabilities of discontinued operations
               1,102,308
 
               2,243,037

 
 
 
 
 
 

 
 
Total current liabilities
             28,901,920
 
             18,892,460

 
 
 
 
 
 

Long term liabilities:
 
 
 

 
Convertible note payable, net
               3,495,262
 
               2,417,335

 
Notes payable – unsecured, net of current portion
               1,351,640
 
               1,040,223

 
Notes payable – secured, net of current portion
               9,433,339
 
             14,038,409

 
Right of use liabilities – operating leases, net of current portion
               2,568,072
 
                  846,212

 
Long term liabilities of discontinued operations
                  178,129
 
               1,008,362

 
 
 
 
 
 

 
 
Total liabilities
             45,928,362
 
             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 September 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  September 30, 2021 and December 31, 2020, respectively
                              –
 
                              –

 
Common stock – $0.001 par value; 250,000,000 shares authorized; 25,725,310 and 19,446,258 shares
 
 
 

 
 
issued and outstanding at September 30, 2021 and December 31, 2020, respectively
                    25,726
 
                    19,447

 
Additional paid in capital
             15,059,907
 
             10,978,254

 
Accumulated deficit
            (29,687,241)
 
            (21,815,556)

 
 
 
 
 
 

 
 
Total stockholders’ deficit
            (14,601,606)
 
            (10,817,853)

 
 
 
 
 
 

 
 
Total liabilities and stockholders’ deficit
 $          31,326,756
 
 $          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 nine months ended September 30, 2021 and 2020
 

(unaudited)

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
Three months ended
 
Nine months ended
 

 
 
 
 
 
September 30, 2021
 
September 30, 2020
 
September 30, 2021
 
September 30, 2020
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
REVENUES
 
 $                    14,772,939
 
 $                      6,810,714
 
 $                    34,618,358
 
 $                    18,670,321
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
COST OF REVENUES
 
                       15,292,090
 
                         8,674,357
 
                       36,947,626
 
                       21,825,811
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
GROSS PROFIT
 
                          (519,151)
 
                       (1,863,643)
 
                       (2,329,268)
 
                       (3,155,490)
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 

 
 
Selling, general and administrative
 
                         1,455,253
 
                         1,000,032
 
                         4,584,854
 
                         2,554,107
 

 
 
Acquisition costs
 
                                       –
 
                                       –
 
                                       –
 
                         1,485,829
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Total operating expenses 
 
                         1,455,253
 
                         1,000,032
 
                         4,584,854
 
                         4,039,936
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
LOSS FROM OPERATIONS
 
                       (1,974,404)
 
                       (2,863,675)
 
                       (6,914,122)
 
                       (7,195,426)
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
OTHER INCOME (EXPENSE)
 
 
 
 
 
 
 
 
 

 
 
Interest expense, net
 
                       (2,059,908)
 
                       (1,087,535)
 
                       (4,630,685)
 
                       (2,563,606)
 

 
 
Gain on PPP loan forgiveness
 
                            105,000
 
                                       –
 
                         3,253,100
 
                                       –
 

 
 
Other income
 
                                   348
 
                                 (159)
 
                              19,889
 
                              74,587
 

 
 
Gain (loss) on settlement of notes payable
 
                                       –
 
                            (14,204)
 
                                       –
 
                            (14,204)
 

 
 
Gain on sale of assets
 
                                       –
 
                            (10,229)
 
                            114,926
 
                                       –
 

 
 
Total other income (expense)
 
                       (1,954,560)
 
                       (1,112,127)
 
                       (1,242,770)
 
                       (2,503,223)
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
NET LOSS FROM CONTINUING OPERATIONS
 
                       (3,928,964)
 
                       (3,975,802)
 
                       (8,156,892)
 
                       (9,698,649)
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Income (loss) from discontinued operations
 
                            316,926
 
                          (420,254)
 
                            360,207
 
                          (935,623)
 

 
NET LOSS 
 
                       (3,612,038)
 
                       (4,396,056)
 
                       (7,796,685)
 
                     (10,634,272)
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Preferred stock dividends
 
                            (25,000)
 
                            (97,945)
 
                            (75,000)
 
                          (229,041)
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
 
 $                    (3,637,038)
 
 $                    (4,494,001)
 
 $                    (7,871,685)
 
 $                  (10,863,313)
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
Net loss per common share
 
 
 
 
 
 
 
 
 

 
 
Continuing operations
 
 $                             (0.17)
 
 $                             (0.22)
 
 $                             (0.39)
 
 $                             (0.58)
 

 
 
Discontinued operations
 
 $                               0.01
 
 $                             (0.02)
 
 $                               0.02
 
 $                             (0.05)
 

 
 
Net loss attributable to common shareholders
 
 $                             (0.16)
 
 $                             (0.24)
 
 $                             (0.37)
 
 $                             (0.63)
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
Weighted average common shares outstanding
 
 
 
 
 
 
 
 
 

 
 
Basic
 
                       23,214,370
 
                       17,380,108
 
                       21,234,310
 
                       17,223,571
 

 
 
Diluted
 
                       23,214,370
 
                       17,380,108
 
                       21,234,310
 
                       17,223,571
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these unaudited consolidated financial statements
 

 
 
 
 
 
 
 
 
 
 
 
 
 

SMG INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2021 and 2020

(unaudited)

 
 
 
 
 
 
 

 
 
 
 
September 30, 2021
 
September 30, 2020

 
 
 
 
 
 
 

CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 

 
Net loss from continuing operations
 $            (8,156,892)
 
 $            (9,698,649)

 
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 

 
 
Stock based compensation
                     51,144
 
                     72,136

 
 
Depreciation and amortization
                4,074,738
 
                3,434,164

 
 
Amortization of deferred financing costs
                1,096,867
 
                   375,680

 
 
Amortization of right of use assets – operating leases
                   439,398
 
                   200,039

 
 
Bad debt expense (recovery)
                   159,612
 
                   247,558

 
 
Loss on settlement of liabilities
                               –
 
                     21,407

 
 
(Gain) loss on disposal of assets
                  (114,926)
 
                    (47,052)

 
 
Gain on PPP loan forgiveness
               (3,253,100)
 
                               –

 
 
Changes in:
 
 
 

 
 
 
Accounts receivable
               (6,508,178)
 
                2,530,715

 
 
 
Inventory
                               –
 
                               –

 
 
 
Prepaid expenses and other current assets
                2,193,864
 
                   858,112

 
 
 
Other assets
                  (306,029)
 
                  (560,131)

 
 
 
Accounts payable 
                2,454,235
 
               (2,852,030)

 
 
 
Accounts payable – related party
                   105,125
 
                               –

 
 
 
Accrued expenses and other liabilities
                2,155,223
 
                2,278,250

 
 
 
Right of use operating lease liabilities
                  (277,329)
 
                    (47,038)

 
Net cash used in operating activities from continuing operations
               (5,886,248)
 
               (3,186,839)

 
Net cash used in operating activities from discontinued operations
                   568,518
 
                  (466,153)

 
Net cash used in operating activities 
               (5,317,730)
 
               (3,652,992)

 
 
 
 
 
 
 

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)
 
                  (174,004)

 
Net cash used in investing activities from continuing operations
                  (132,026)
 
               (6,494,172)

 
Net cash used in investing activities from discontinued operations
                               –
 
                               –

 
Net cash used in investing activities 
                  (132,026)
 
               (6,494,172)

 
 
 
 
 
 
 

CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 

 
 
Payment of deferred financing costs
                    (20,623)
 
                  (239,558)

 
        Proceeds on secured line of credit, net
                2,880,180
 
                3,256,101

 
        Proceeds from notes payable
 
 
                8,274,002
 
                5,574,048

 
        Payments on notes payable
               (8,698,655)
 
               (1,100,704)

 
        Payments on convertible notes payable
                    (50,000)
 
                               –

 
        Proceeds from convertible notes payable
                3,255,000
 
                2,644,295

 
Net cash provided by financing activities from continuing operations
                5,639,904
 
              10,134,182

 
Net cash provided by financing activities from discontinued operations
                  (226,932)
 
                   666,150

 
Net cash provided by financing activities 
                5,412,972
 
              10,800,332

 
 
 
 
 
 
 

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
                    (36,784)
 
                   653,168

 
 
 
 
 
 
 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period 
                   979,088
 
                     29,568

 
 
 
 
 
 
 

CASH,  CASH EQUIVALENTS AND RESTRICTED CASH, end of period 
 $                942,304
 
 $                682,736

 
 
 
 
 
 
 

Supplemental disclosures:
 
 
 

 
    Cash paid for income taxes
 $                            –
 
 $                            –

 
    Cash paid for interest
 
 
 $             3,934,717
 
 $             1,445,639

 
 
 
 
 
 
 

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 consideration paid for increase in secured notes payable
 $                203,009
 
 $                            –

 
Non-cash consideration paid for prepaids from debt financing
 
 
 
 
 $                331,065

 
Preferred stock dividend
 
 
 $                  75,000
 
 $                  59,439

 
Note payable for property and equipment
 
 
 
 
 $             1,414,021

 
Prepaid expenses financed with note payable
 
 
 $             3,253,678
 
 $                331,065

 
Debt discount from issuance of common stock warrants
 
 
 $                            –
 
 $                  59,439

 
    Note receivable for property and equipment
 $                521,952
 
 $                            –

 
Beneficial conversion feature on convertible notes payable
 
 
 $             4,036,788
 
 $                            –

 
Right of use assets capitalized
 
 
 $             2,478,508
 
 $                            –

 
Non cash increase in convertible debt for AP payments
 
 
 $                931,034
 
 $                            –

 
Expenses paid by related party
 
 
 $                            –
 
 $                  25,279

 
Settlement of accounts payable and accrued interest with common stock issuance
 
 
 $                            –
 
 $                  66,000

 
Shares issued for deferred financing costs
 
 
 $                            –
 
 $                419,788

 
Shares issued and beneficial conversion feature on convertible notes payable
 
 
 $                            –
 
 $                895,967

 
 
 
 
 
 
 

 
 
 
 
 
 
 

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.com

SOURCE: SMG Industries, Inc.

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The post CORRECTION: SMG Industries, Inc. Reports 2021 $14.77 Million Revenue Third Quarter and $34.61 Million for the Nine Month Financial Results first appeared on Smallcaps Daily.

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