UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 30, 2021 (
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction | (Commission | (IRS Employer | ||
| of incorporation) | File Number) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
(
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation to the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth
company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| ITEM 5.02 | DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANAGEMENTS OF CERTAIN OFFICERS |
On August 24, 2021, the Company’s board of directors appointed Mr. Allen R. Parrott to serve as Chief Financial Officer of the Company and Mr. Steven Madden to serve as Chief Transition Officer of the Company.
Mr. Parrott served as the Chief Financial Officer of GreenPath Logistics from December 2020 to August 2021. GreenPath is a company that owns and operates a fleet of 125 natural gas-powered tractors where Mr. Parrott led the creation of the ground transportation green fleet from inception to $20,000,000 in annual revenues. From August 2019 through December 2020, Mr. Parrott was the Chief Financial Officer of CIG Logistics, a technology driven logistics company. From April 2018 through August 2019, Mr. Parrott was the Chief Financial Officer and Executive Vice President of Central Freight Lines, a less than truckload company that generated approximately $300 million in revenue per year during Mr. Parrott’s tenure. From January 2016 through April 2018, Mr. Parrott was the Corporate Controller of Crane Worldwide Logistics, a global freight management and contract logistics services company. Prior to 2016, Mr. Parrott served as a controller, finance director and accounting manager for various global public and privately owned enterprises including CEVA Logistics, Hewlett Packard, Compaq Computer Corporation and Keystone International in several different industries including logistics, transportation, technology and manufacturing. Mr. Parrott earned a Bachelor of Science in Finance from the University of Houston, Clear Lake in 1989.
Mr. Madden has assembled and grown a portfolio of companies over the past 30 years and serve as Chairman and CEO of Apex Heritage Group. Mr. Madden and his management teams have globally built, acquired, merged, and sold businesses, real estate and investments in and around the industrial, automotive, aerospace and energy industries. His experience and expertise include manufacturing, engineering, distribution, service companies and top-grading management teams. Mr. Madden has also served on a variety of non-profit boards in the role of Chairman, President, Long Range Planning Chair and Educational Chair for organizations including international commerce and industry associations, recreational clubs, youth sports associations, continuing educational groups, churches, and Vanderbilt University. Mr. Madden graduated from Vanderbilt University with a B.S. in 1991 and also attended the University of Innsbruck, Austria.
Additionally, on August 23, 2021, Mr. Jeffrey Martini resigned his contract roles as Chief Executive Officer and Chief Financial Officer of the Company, completing his service of strategy-setting, cost optimization and revenue growth. Mr. Martini will continue to assist the Company in an advisory capacity to effectuate an orderly transition of duties over the coming weeks. His resignation is not a result of any disagreement with the Company as to its operations, policies or practices.
| ITEM 7.01. | REGULATION FD DISCLOSURE |
The press release attached as Exhibit 99.1, is incorporated by reference into this Item 7.01 in satisfaction of the public disclosure requirements of Regulation FD. This information is “furnished” and not “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, or otherwise subject to the liabilities of that section. It may be incorporated by reference in another filing under the Securities and Exchange Act of 1934 or the Securities Act of 1933 only if, and to the extent that, such subsequent filing specifically references the information incorporated by reference herein.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
| (d) | Exhibit 99.1 | Press release dated August 24, 2021 |
| 104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: August 30, 2021 | SMG Industries Inc. | |
| By: | /s/ Allen R. Parrott | |
| Name: | Allen R. Parrott | |
| Title: | Chief Financial Officer | |
Exhibit 99.1
SMG Industries, Inc. Reports 2021 $12.2 Million Revenue Second Quarter and Six-Month Financial Results
HOUSTON, TX. August 24, 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 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 and outstanding at June 30, 2021 and December 31, 2020 | 2 | 2 | ||||||
| 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.com
SOURCE: SMG Industries, Inc.
Cover |
Aug. 23, 2021 |
|---|---|
| Cover [Abstract] | |
| Document Type | 8-K |
| Amendment Flag | false |
| Document Period End Date | Aug. 23, 2021 |
| Entity File Number | 000-54391 |
| Entity Registrant Name | SMG INDUSTRIES INC. |
| Entity Central Index Key | 0001426506 |
| Entity Tax Identification Number | 51-0662991 |
| Entity Incorporation, State or Country Code | DE |
| Entity Address, Address Line One | 710 N. Post Oak Road |
| Entity Address, Address Line Two | Suite 315 |
| Entity Address, City or Town | Houston |
| Entity Address, State or Province | TX |
| Entity Address, Postal Zip Code | 77024 |
| City Area Code | 713 |
| Local Phone Number | 821-3153 |
| Written Communications | false |
| Soliciting Material | false |
| Pre-commencement Tender Offer | false |
| Pre-commencement Issuer Tender Offer | false |
| Entity Emerging Growth Company | false |