SMG Industries, Inc. Announces Third Quarter 2019 Financial Results

Oilfield Services Company Reports Revenues of $2.06 million for the Third Quarter ended September 30, 2019 a 101% Increase from the Third Quarter 2018

Third Quarter Highlights:

  • Revenue increased 101% to $2,064,516 for the quarter ended September 30, 2019, from $1,026,949 in the same period a year ago, which is up approximately 88%, sequentially from the last quarter,
  • The Company is aggressively moving forward with its build and buy acquisition strategy.

HOUSTON, TX / ACCESSWIRE / November 15, 2019 / SMG Industries, Inc. (the "Company") SMGI, a growth-oriented oilfield services company operating in the Southwest United States and headquartered in Houston, Texas announced today their financial results for the third quarter ended September 30, 2019.

As stated in the Company's Quarterly Report on Form 10-Q filed November 14, 2019 with the Securities and Exchange Commission, the Company's sales for the three months ended September 30, 2019 were $2,064,516, an increase of 101%, from $1,026,949 for the three months ended September 30, 2018. The increase in revenue for the three months ended September 30, 2019 was primarily attributable to additional revenues contributed by the Trinity Services' operations acquired in June 2019, as well as organic growth of MG Cleaners from an expanded customer base and its rental equipment in the Permian Basin.

During the three months ended September 30, 2019, cost of sales increased as a percentage of sales to 78.5% of revenues, or $1,621,841, compared to 56.8% of revenues or $582,922, for the comparable 2018 period. The increase in cost of sales as a percentage of revenues is primarily the result of the net margin mix impacted by the Trinity Services acquisition not present in the year ago period and higher costs in MG Cleaners' parts business. The Company believes going forward it will improve cost of sales as a percentage of sales through increasing sales of its higher margin branded products, developing more profitable frac water work and driving higher utilizations and efficiencies from cross-selling with our recently acquired customers.

For the three months ended September 30, 2019, selling, general and administrative expenses were $815,871, or 39.5% of sales, compared to $667,277 or 64.9% of sales for the three months ended September 30, 2018. This decrease in selling, general and administrative expenses as a percentage of sales in the third quarter of 2019 compared to the third quarter of 2018 was primarily due to higher sales covering more fixed costs within S,G&A partially offset by higher sales costs and wages.

Other expenses, net was $232,979, an increase of $176,535 for the three months ended September 30, 2019 compared to the third quarter in 2018. The increase in other expenses during the three months ended September 30, 2019 resulted from higher interest expense with our revolving line of credit, funding agreements and notes payable, partially offset by a gain on settlement of liabilities compared to the three months ended September 30, 2018.

During the three months ended September 30, 2019, the Company incurred a net loss of $606,175, or $0.04 per basic and diluted earnings per share. For the three months ended September 30, 2018, the Company incurred a net loss of $279,694 or $0.03 per basic and diluted earnings per share. The Company's total outstanding shares of common stock were 14,881,372 as of November 14, 2019.

As of September 30, 2019, our total assets were $7,464,347. This is an increase in total assets of $3,937,900 over the total assets at December 31, 2018 of $3,526,447.

Matt Flemming, Chief Executive Officer of SMG Industries stated, "The June 2019 acquisition of Trinity Services has contributed materially to the increase in the Company's consolidated revenue. Trinity enjoys a great reputation in the East Texas and Louisiana market for construction and building of multi-well pad locations as well as production related well site workover activities in the Haynesville Shale and Cotton Valley plays. Due to this acquisition, we have been able to increase our master service agreements (MSAs) with customers which may also be serviced by our other subsidiaries." Mr. Flemming continued, "We are currently aggressively pursuing additional strategic acquisitions to expand our service offering to customers."

Stephen Christian, SMG's EVP of Operations stated, "We have continued to focus on the Permian Basin in West Texas and the Haynesville shale of East Texas where our existing customers remained fairly active. Increasing strategic sales staff in the Permian Basin at the start of the quarter helped mitigate market activity reductions driven by lower rig counts. Additionally, the Company's cost cutting efforts focused on vendors programs to lower the direct cost of goods. Trinity has been awarded construction bids that will take us into Q1, 2020 where we anticipate customer's new drilling programs will begin to kick off. We are very excited about the expansion possibilities with Trinity and what it offers our other subsidiaries."

Third Quarter 2019 Financial Tables

SMG INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)

September 30, December 31,
2019 2018
ASSETS
Current assets:
Cash and cash equivalents
$ 13,353 $ 1,608
Accounts receivable, net of allowance for doubtful accounts of $147,015 and $25,000
1,967,075 703,959
Inventory
149,413 140,662
Assets held for sale
30,000 42,300
Prepaid expenses and other current assets
136,951 96,871
Total current assets
2,296,792 985,400
Property and equipment, net of accumulated depreciation of $609,753 and $306,155
4,342,037 1,998,009
Other assets
20,386 27,631
Right of use assets - operating lease
311,473 -
Intangible assets, net of accumulated amortization $32,092 and $10,344
307,908 329,656
Goodwill
185,751 185,751
Total assets
$ 7,464,347 $ 3,526,447
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable
$ 1,908,564 $ 968,507
Accounts payable - related party
- 21,000
Accrued expenses and other liabilities
401,317 207,911
Right of use liabilities - operating leases short term
128,969 -
Right of use liabilities - finance leases short term
62,389 -
Deferred revenue
- 39,877
Secured line of credit
1,348,916 593,888
Current portion of note payable - related party
51,932 62,750
Current portion of unsecured notes payable
160,375 131,126
Current portion of secured notes payable, net
1,085,994 328,328
Current portion of capital lease liability
- 53,728
Total current liabilities
5,148,456 2,407,115
Long term liabilities:
Convertible note payable, net
248,306 161,970
Note payable - related party, net of current portion
12,003 46,913
Notes payable - secured, net of current portion
1,343,140 967,846
Right of use liabilities - operating leases, net of current portion
188,504 -
Right of use liabilities - finance leases, net of current portion
27,403 -
Capital lease liability, net of current portion
- 40,552
Total liabilities
6,967,812 3,624,396
Commitments and contingencies
Stockholders' deficit
Preferred stock - $0.001 par value; authorized 1,000,000 shares as of September 30, 2019 and
December 31, 2018; issued and outstanding 2,000 and none at September 30, 2019 and December 31, 2018
2 -
Common stock - $0.001 par value; authorized 25,000,000 shares as of September 30, 2019 and December 31, 2018;
issued and outstanding 14,451,372 and 11,910,690 at September 30, 2019 and December 31, 2018
14,451 11,911
Additional paid in capital
4,456,856 1,567,567
Accumulated deficit
(3,974,774) (1,677,427)
Total stockholders' deficit
496,535 (97,949)
Total liabilities and stockholders' deficit
$ 7,464,347 $ 3,526,447
The accompanying notes are an integral part of these consolidated unaudited financial statements



SMG INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended September 30, 2019 and 2018
(unaudited)

Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
REVENUES
$ 2,064,516 $ 1,026,949 $ 4,911,401 $ 3,192,432
COST OF REVENUES
1,621,841 582,922 3,999,156 1,742,431
GROSS PROFIT
442,675 444,027 912,245 1,450,001
OPERATING EXPENSES:
Selling, general and administrative
815,871 667,277 2,491,317 1,682,259
Total operating expenses
815,871 667,277 2,491,317 1,682,259
LOSS FROM OPERATIONS
(373,196) (223,250) (1,579,072) (232,258)
OTHER INCOME (EXPENSE)
Gain (loss) on settlement of liabilities
31,494 (2,549) (73,764) 9,291
Gain on sales of assets
- 14,000 - 14,000
Interest expense, net
(264,473) (67,895) (644,511) (199,099)
NET LOSS
$ (606,175) $ (279,694) $ (2,297,347) $ (408,066)
Net Loss Per Share
Basic
$ (0.04) $ (0.03) $ (0.17) $ (0.04)
Diluted
$ (0.04) $ (0.03) $ (0.17) $ (0.04)
Weighted average shares outstanding
Basic
14,332,823 10,336,470 13,493,944 9,986,415
Diluted
14,332,823 10,336,470 13,493,944 9,986,415
The accompanying notes are an integral part of these consolidated unaudited financial statements



SMG INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2019 and 2018
(unaudited)

2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$ (2,297,347) $ (408,066)
Adjustments to reconcile net loss to net
cash used in operating activities:
Stock based compensation
239,527 42,012
Depreciation and amortization
338,784 66,933
Amortization of deferred financing costs
204,960 117,972
Amortization of right of use assets - operating leases
129,212 -
Impairment expense
12,300 -
Gain (loss) on settlement of liabilities
87,923 (9,291)
Bad debt expense (recovery)
10,087 10,407
Gain (loss) on disposal of assets
(1,758) (13,386)
Changes in:
Accounts receivable
68,410 (214,588)
Inventory
(8,751) (6,442)
Prepaid expenses and other current assets
14,306 26,504
Other assets
- (32,541)
Accounts payable
586,825 207,911
Accounts payable related party
- (45,585)
Accrued expenses and other liabilities
193,406 78,694
Right of use operating lease liabilities
(123,212) -
Deferred revenue
(39,877) -
Net cash used in operating activities
(585,205) (179,466)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition of Trinity Services LLC
(449,051) -
Proceeds from the sale of property and equipment
- 14,000
Cash paid for purchase of property and equipment
(163,768) (95,869)
Net cash used in investing activities
(612,819) (81,869)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from secured line of credit, net
711,809 134,937
Proceeds from notes payable
- 211,243
Payments on notes payable
- (367,572)
Payments on ROU liabilities - finance leases
(48,376) -
Proceeds from sales of common stock
359,000 -
Proceeds from notes payable, related party
125,239 43,100
Payments on notes payable, related party
(170,967) (67,504)
Payments on capital lease liability
- (24,275)
Payments on MG Cleaners acquisition - related party
(21,000) (29,000)
Proceeds from notes payable
480,000 -
Payments on notes payable
(275,936) -
Proceeds from convertible notes payable
50,000 250,000
Proceeds from sales of common stock, net
- 276,044
Net cash provided by financing activities
1,209,769 426,973
NET CHANGE IN CASH AND CASH EQUIVALENTS
11,745 165,638
CASH AND CASH EQUIVALENTS, beginning of period
1,608 85,570
CASH AND CASH EQUIVALENTS, end of period
$ 13,353 $ 251,208
Supplemental disclosures:
Cash paid for income taxes
$ - $ -
Cash paid for interest
$ 221,140 $ 79,146
Noncash investing and financing activities
Shares issued for equipment purchase
$ - $ 700,000
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
$ 1,800,000 $ -
Intangible assets acquired from issuance of note payable, related party
$ - $ 150,000
Purchase of fixed assets with note payable
$ - $ 41,481
Property and equipment purchased with capital lease
$ - $ 131,718
Settlement of accounts payable with note payable
$ 259,193 $ -
Debt discount from issuance of common stock warrants
$ 165,094 $ 17,476
Expenses paid by related party
$ - $ 8,034
Settlement of accounts payable with common stock issuance
$ 138,016 $ 5,000
Beneficial conversion feature on convertible notes payable
$ 100,000
Settlement of notes payable with common stock issuance
$ 102,274 $ -
Prepaid expenses financed with note payable
$ - $ 75,931
The accompanying notes are an integral part of these consolidated unaudited financial statements



For more information and management's discussion and analysis of its operating results please read the Company's Quarterly Report on Form 10-Q filed November 14, 2019 available at www.SEC.gov.

About SMG Industries, Inc.: SMG Industries is a rapidly growing oilfield services company that operates throughout the Southwest United States. Through its wholly-owned operating subsidiaries, the Company offers an expanding suite of products and services across the market segments of drilling, completions and production. MG Cleaners LLC, serves the drilling market segment with proprietary branded products including detergents, surfactants and degreasers (such as Miracle Blue®) as well equipment and services crews that perform on-site repairs, maintenance and drilling rig wash services. SMG's rental division includes an inventory of over 800 bottom hole assembly (BHA) oil tools such as stabilizers, drill collars, crossovers and bit subs rented to oil companies and their directional drillers. SMG's frac water management division, know as Momentum Water Transfer, focuses in the completion or fracing market segment providing high volume above ground equipment and temporary infrastructure to route water used on location for fracing. SMG's Trinity Services focuses on the drilling market segment related location construction, road and pad development and production workover services. SMG Industries, Inc. headquartered in Houston, Texas has facilities in Carthage, Odessa, Alice and Waskom, Texas. Read more at www.SMGindustries.com and www.MGCleanersllc.com and www.MomentumWTS.com.

Forward-Looking Statements:

This news release contains information that is "forward-looking" in that it describes events and conditions SMGI reasonably expects to occur in the future. Expectations for the future performance of SMGI are dependent upon a number of factors and there can be no assurance that SMGI will achieve the results as contemplated herein. Certain statements contained in this release using the terms "may", "Expects to", "anticipated" and other terms denoting future possibilities, are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks, which are beyond SMGI's ability to predict, or control and which may cause actual results to differ materially from the projections or estimates contained herein. Forward-looking statements in this news release that are subject to risk include the ability to achieve and continue revenue, margins, net income and adjusted EBITDA improvements. It is important that each person reviewing this release understand the significant risks attendant to the operations of SMGI. SMGI disclaims any obligation to update any forward-looking statement made herein.

Contact:

Matthew Flemming, SMG Industries, Inc. +713-821-3153

SOURCE: SMG Industries, Inc.



View source version on accesswire.com:
https://www.accesswire.com/566709/SMG-Industries-Inc-Announces-Third-Quarter-2019-Financial-Results

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