HOUSTON, TX, Nov. 17, 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 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 $36,618,358 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 lower cost interest only terms for the first 12 months and a forty eight month term out of principal and interest thereafter giving the Company substantial savings in its cash flow and 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.
