SMG Industries, Inc. Reports $12.2 Million in Revenues for the Second Quarter 2021 and Six-Month Financial Results

Rhea-AI Summary

SMG Industries (OTCQB:SMGI) reported a strong second quarter in 2021, with revenues soaring approximately 63% to $12,243,091, and a remarkable 67% increase over the six months to $19,845,419. The net loss from continuing operations significantly declined to $419,360 from $2,976,940 in the same quarter last year, largely driven by a $3,148,100 gain from PPP loan forgiveness. Total assets rose to $30,379,183 as of June 30, 2021. The Company remains focused on its growth strategy through acquisitions, aiming to enhance profitability and offset fixed costs.

Positive

• Revenues increased 63% to $12,243,091 for Q2 2021.
• Net loss from continuing operations reduced to $419,360 from $2,976,940 a year ago.
• Total assets grew to $30,379,183, representing a $2,954,035 increase since December 31, 2020.
• Company plans to enhance profitability through acquisitions and increased sales.

Negative

• Cost of sales exceeded revenues, recorded at 106% of sales for the quarter.
• Interest expense increased to $1,321,988 compared to $1,131,472 in Q2 2020.

HOUSTON, TX, Aug. 24, 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 second quarter ended June 30, 2021.

Second Quarter Financial Highlights:

·         Revenues increased approximately 63% to $12,243,091 for the 3 months ended June 30, 2021, compared to the three months ended June 30, 2020,

·         Revenues increased approximately 67% to $19,845,419 for the 6 months ended June 30, 2021 compared to the year ago period,

·         Adjusted Gross Margins were $18,918,031, after adjusting for depreciation, and cost of sales included non-cash expense of $2,737,505,

·         Net loss from continuing operations declined to $419,360 for the 3 months ended June 30, 2021, compared to a net loss of $2,976,940 for the 3 months ended June 30, 2020,

·         Total Assets grew to $30,379,183 at June 30, 2021 compared to $27,425,148 at December 31, 2020, and,

·         The Company continues to move forward with its “buy and build” growth strategy seeking to acquire additional owner/operator logistics terminals as well as standalone transportation services companies.

Selected Three Months Ended June 30, 2021 data

Revenues for the quarter ended June 30, 2021 increased to $12,243,091, or 63%, from $7,499,226 for the three months ended June 30, 2020, driven by increased drilling rig relocations, improved customer demand resulting from lessened impacts of the global COVID-19 pandemic and to the establishment of a new Houston terminal.

During the three months ended June 30, 2021, cost of sales was $12,955,028, or 106% of sales, compared to $8,488,095, or 113% of sales for the 2020 period. Cost of sales includes non-cash depreciation expense of $1,319,104 for the three months ended June 30, 2021, and $1,429,692 for the comparable period in 2020.  Adjusted Cost of sales, with non-cash depreciation expenses removed, was $11,635,924, or 95% of sales for the period. The Company believes it will see improvement in its gross margins from anticipated higher future sales volumes, price increases from its services offered and improved economic conditions from COVID pandemic economic recovery.

Selling, general and administrative expenses for the three months ended June 30, 2021 was $1,617,201, or 13.2% of revenues, compared to $941,574, or 12.6% of revenues, for the quarter ended June 30, 2020.  The increased dollar amount and percent of revenue are primarily driven by improved revenue.

Interest expense was $1,321,988 and $1,131,472 for the three months ended June 30, 2021 and 2020, respectively.

The net loss from continuing operations for the quarter ended June 30, 2021 was $419,360 as compared to a net loss of $2,976,940 for the quarter ended June 30, 2020.  The reduction in the net loss was due primarily to the Gain on PPP loan forgiveness of $3,148,100 recorded as Other Income.

Selected Six Months Ended June 30, 2021 data

Revenues for the six months ended June 30, 2021 increased to $19,845,419, or 67%, from $11,859,607 for the six months ended June 30, 2020, driven by the acquisition of 5J on February 27, 2020, increased drilling rig relocations, improved customer demand resulting from lessened impacts of the global COVID-19 pandemic and to the establishment of a new Houston terminal.

During the six months ended June 30, 2021, cost of sales was $21,655,536 or 109% of sales, compared to $13,151,454 or 111% of sales for the comparable 2020 period. Cost of sales includes non-cash depreciation expense of $2,737,505 for the six months June 30, 2021, and $1,972,185 for the comparable period in 2020, the increase in which was driven primarily by the 5J acquisition and the related fair value step up adjustments in the prior year. Adjusted Cost of sales, with non-cash depreciation expenses removed, was $18,918,031, or 95% of sales for the period. 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.

Selling, general and administrative expenses for the six months ended June 30, 2021 was $3,129,601 or 15.8% of revenues, compared to $3,039,904 in the comparable 2020 period, which included $1,489,417 of 5J acquisition costs. Excluding these costs, selling, general and administrative costs for the six months ended June 30, 2020 were $1,550,487, or 13.0% of revenues. 

Interest expense was $2,570,777 and $1,476,071 for the six months ended June 30, 2021 and 2020, respectively. The increase is a result of the borrowings to fund the 5J acquisition.

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

As of June 30, 2021, our total assets were $30,379,183, comprised of $717,956 in cash and restricted cash, $9,278,980 in accounts receivable, $2,115,303 in other current assets, $13,163,575 in net property and equipment, Right of use assets of $3,482,477 and other assets of $1,017,101. This is an increase in total assets of $2,954,035 over the total assets at December 31, 2020. 

Additional information including the Company’s financial statements, footnotes and management’s discussion and analysis can be found in the second quarter 2021 report filed in the Form 10-Q on August 23, 2021 with the Securities and Exchange Commission.

  

Selected Financial Tables

SMG INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
			June 30,		December 31,
			2021		2020
ASSETS
Current assets:
	Cash and cash equivalents		$                      791		$               263,814
	Restricted cash		717,165		715,274
	Accounts receivable, net of allowance for doubtful accounts of $618,454 and $691,098
		as of June 30, 2021 and December 31, 2020, respectively	9,278,980		4,920,967
	Prepaid expenses and other current assets		2,115,303		1,409,996
	Current assets of discontinued operations		17,011		437,787
		Total current assets	12,129,250		7,747,838
	Property and equipment, net of accumulated depreciation of $8,799,658 and $5,991,572
		as of June 30, 2021 and December 31, 2020, respectively	13,163,575		16,337,914
	Right of use assets - operating lease		3,482,477		1,270,989
	Other assets		1,017,101		499,707
	Other assets of discontinued operations, net		586,780		1,568,700
		Total assets	$          30,379,183		$          27,425,148
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
	Accounts payable		$            3,740,473		$            3,171,086
	Accounts payable - related party		228,960		205,444
	Accrued expenses and other liabilities		4,676,175		2,373,057
	Right of use liabilities - operating leases short term		972,817		575,517
	Deferred revenue		30,000		30,000
	Secured line of credit		5,918,906		4,046,256
	Current portion of unsecured notes payable		1,807,829		2,187,436
	Current portion of secured notes payable, net		5,973,559		4,010,627
	Current portion of convertible note, net		50,000		50,000
	Current liabilities of discontinued operations		1,574,636		2,243,037
		Total current liabilities	24,973,355		18,892,460
Long term liabilities:
	Convertible note payable, net		3,018,769		2,417,335
	Notes payable - unsecured, net of current portion		1,459,230		1,040,223
	Notes payable - secured, net of current portion		11,427,735		14,038,409
	Right of use liabilities - operating leases, net of current portion		2,759,871		846,212
	Long term liabilities of discontinued operations		294,975		1,008,362
		Total liabilities	43,933,935		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 June 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 June 30, 2021 and December 31, 2020, respectively	-		-
	Common stock - $0.001 par value; 250,000,000 shares authorized; 21,865,952 and 19,446,258 shares
		issued and outstanding at June 30, 2021 and December 31, 2020, respectively	21,867		19,447
	Additional paid in capital		12,473,582		10,978,254
	Accumulated deficit		(26,050,203)		(21,815,556)
		Total stockholders' deficit	(13,554,752)		(10,817,853)
		Total liabilities and stockholders' deficit	$          30,379,183		$          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 six months ended June 30, 2021 and 2020
(unaudited)
					Three months ended				Six months ended
					June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	REVENUES				$                    12,243,091		$                      7,499,226		$                    19,845,419		$                    11,859,607
	COST OF REVENUES				12,955,028		8,488,095		21,655,536		13,151,454
	GROSS LOSS				(711,937)		(988,869)		(1,810,117)		(1,291,847)
	OPERATING EXPENSES:
		Selling, general and administrative			1,617,201		941,574		3,129,601		3,039,904
		Total operating expenses			1,617,201		941,574		3,129,601		3,039,904
	LOSS FROM OPERATIONS				(2,329,138)		(1,930,443)		(4,939,718)		(4,331,751)
	OTHER INCOME (EXPENSE)
		Interest expense, net			(1,321,988)		(1,131,472)		(2,570,777)		(1,476,071)
		Gain on PPP loan forgiveness			3,148,100		-		3,148,100		-
		Other income			18,902		74,746		19,541		74,746
		Gain on sale of assets			64,764		10,229		114,926		10,229
		Total other income (expense)			1,909,778		(1,046,497)		711,790		(1,391,096)
	NET LOSS FROM CONTINUING OPERATIONS				(419,360)		(2,976,940)		(4,227,928)		(5,722,847)
		Income (loss) from discontinued operations			99,736		(282,045)		43,281		(515,369)
	NET LOSS				(319,624)		(3,258,985)		(4,184,647)		(6,238,216)
		Preferred stock dividends			(25,000)		(88,973)		(50,000)		(131,096)
	NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS				$                       (344,624)		$                    (3,347,958)		$                    (4,234,647)		$                    (6,369,312)
	Net loss per common share
		Continuing operations			$                             (0.02)		$                             (0.17)		$                             (0.21)		$                             (0.36)
		Discontinued operations			$                             (0.00)		$                             (0.02)		$                             (0.00)		$                             (0.03)
		Net loss attributable to common shareholders			$                             (0.02)		$                             (0.19)		$                             (0.21)		$                             (0.39)
	Weighted average common shares outstanding
		Basic			20,958,782		17,380,108		20,235,320		16,537,993
		Diluted			20,958,782		17,380,108		20,235,320		16,537,993
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, 2021 and 2020
(unaudited)
				June 30, 2021		June 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss from continuing operations			$            (4,227,928)		$            (5,722,847)
	Adjustments to reconcile net loss to net
		cash used in operating activities:
		Stock based compensation		33,865		5,790
		Depreciation and amortization		2,737,505		1,972,185
		Amortization of deferred financing costs		566,039		255,460
		Amortization of right of use assets - operating leases		267,020		115,086
		Bad debt expense (recovery)		(9,980)		99,523
		(Gain) loss on disposal of assets		(114,926)		10,229
		Gain on PPP loan forgiveness		(3,148,100)		-
		Changes in:
			Accounts receivable	(4,348,033)		2,729,138
			Prepaid expenses and other current assets	1,142,846		827,270
			Other assets	(794,792)		(665,032)
			Accounts payable	973,704		(3,404,727)
			Accounts payable - related party	58,516		-
			Accrued expenses and other liabilities	2,253,118		2,220,726
			Right of use operating lease liabilities	(167,549)		(80,925)
	Net cash used in operating activities from continuing operations			(4,778,695)		(1,638,124)
	Net cash used in operating activities from discontinued operations			608,519		(581,439)
	Net cash used in operating activities			(4,170,176)		(2,219,563)
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)		(165,548)
	Net cash used in investing activities from continuing operations			(132,026)		(6,485,716)
	Net cash used in investing activities			(132,026)		(6,485,716)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Payment of deferred financing costs			-		(239,558)
	Proceeds on secured line of credit, net			1,819,234		2,898,524
	Proceeds from notes payable			1,874,002		5,283,949
	Payments on notes payable			(830,234)		(578,063)
	Proceeds from convertible notes payable			1,405,000		1,350,000
	Net cash provided by financing activities from continuing operations			4,268,002		8,714,852
	Net cash provided by financing activities from discontinued operations			(226,932)		781,437
	Net cash provided by financing activities			4,041,070		9,496,289
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH				(261,132)		791,010
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period				979,088		29,568
CASH,  CASH EQUIVALENTS AND RESTRICTED CASH, end of period				$                717,956		$                820,578
Supplemental disclosures:
	Cash paid for income taxes			$                            -		$                            -
	Cash paid for interest			$             1,215,489		$                221,040
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 increase in secured notes payable for settlement of accounts payable			$                196,188		$                155,729
	Debt discount from issuance of common stock warrants			$                            -		$                  59,439
	Preferred stock dividend			$                  50,000		$                131,096
	Expenses paid by related party			$                            -		$                  25,279
	Financing of prepaid insurance premiums			$             1,239,367		$                331,065
	Shares issued for deferred financing costs			$                            -		$                419,788
	Note receivable for property and equipment			$                608,786		$                            -
	Shares issued with debt and beneficial conversion feature on convertible notes payable			$             1,463,883		$                            -
	Right of use assets capitalized and operating lease obligation recognized			$             2,478,508		$                            -
	Convertible notes payable issued to settle accounts payable			$                208,129		$                            -
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 (dot com)

SOURCE: SMG Industries, Inc.

FAQ

What were SMG Industries' revenues in Q2 2021?

SMG Industries reported revenues of $12,243,091 for Q2 2021, a 63% increase from the previous year.

How much did SMG Industries' net loss decrease in Q2 2021?

The net loss from continuing operations decreased to $419,360 in Q2 2021, down from $2,976,940 in Q2 2020.

What is the total asset value for SMG Industries as of June 30, 2021?

As of June 30, 2021, SMG Industries reported total assets of $30,379,183.

What is the primary growth strategy for SMG Industries?

SMG Industries is focused on a 'buy and build' growth strategy, seeking to acquire logistics terminals and transportation services companies.