SMG Industries, Inc. Reports Financial Results for Fiscal Year 2018

Oilfield Services Company Reports 79% Increase in Annual Revenues of $4.42 million

HOUSTON, TX / ACCESSWIRE / April 1, 2019 / SMG Industries, Inc. (the “Company”) (OTCQB: SMGI), a growth-oriented oilfield services company operating in the Southwest United States today reported financial results for the full year ended December 31, 2018.

Fiscal 2018 Highlights

  • Revenue increased 79% to $4,422,436 in 2018, from $2,465,897 for the year 2017
  • Gross Profit increased 62% to $1,653,061 from $1,019,987 year over year
  • Gross Margin for the fiscal year 2018 was 37.4%
  • Net loss for 2018 of $1,143,379 includes acquisition expenses and other one-time costs compared to 2017 Net Loss of $731,080
  • Total Assets grew to $3,526,447 in 2018 from $855,413 in 2017
  • Acquired over 800 bottom hole assembly tools (SMG Oil Tools acquisition) in October 2018
  • Acquired Momentum Water Transfer Services, a frac water business, in December 2018
  • Expanded direct sales in the Permian Basin of West Texas and service footprint in the Eagle Ford shale of South Texas to meet market activity and customer demands

The Company’s fourth quarter 2018 revenues of $1,230,005 represents a sequential increase of approximately 18% from the Company’s third quarter 2018. Fiscal year 2018 annual revenues increased 79% to $4,422,436 in 2018 compared to fiscal 2017.

Gross margin for 2018 was $1,653,061, or 37.4% of revenues, compared to $1,019,987, or 41.4% in fiscal 2017. Gross margin contribution increased by $633,074 year over year, however, as a percentage of sales it declined resulting from one-time expenses in the fourth quarter 2018 associated with the deal costs of the oil tools rental inventory and frac water businesses acquired. Net Loss for 2018 was $1,143,379, which includes acquisition cost of $98,505 (of which $39,600 is shown in cost of goods sold), stock compensation charges of $81,657, non-cash depreciation expenses of $94,943, amortization of deferred financing costs of $178,267, impairment expense of $22,907 and interest expenses of $310,030. This compares to a Net Loss of $731,080 in 2017.

The Company currently anticipates additional growth for fiscal year 2019 resulting from the full year contribution of its recent December 2018 acquisition of Momentum Water Transfer Services along with its other business lines.

Mr. Matthew Flemming, CEO of SMG, stated “SMG Industries continued to execute its ‘buy and build’ strategy in 2018. The Company has roughly doubled sales of MG Cleaners in 2018 compared to its fiscal 2017 which was acquired in September 2017. Additionally, SMG commercialized the RigHands™ and SMG Oil Tools product lines acquired during 2018 and anticipates expanding the footprint for its frac water business recently acquired. Currently, we see the possibility of additional accretive acquisitions in 2019 as we execute our strategy of acquiring and growing oilfield services businesses, diversifying across drilling, completions and production market segments of the oilfield services industry and strategically cross-selling our acquired customer bases.”

Operational Update:

Mr. Stephen Christian, EVP of Operations for SMG Industries, stated “The domestic rig count is currently 1,006 as of March 2019, which is up over 149% from its May 2016 low. Currently, we believe this will provide an active market in 2019, similar to 2018, for the Company’s downhole oil tools rentals and MG Cleaners’ products and services to drilling contractors such as Nabors, Patterson and Helmerich & Payne.”
Mr. Christian continued, “In the completions market segment, according to the EIA, the year ended 2018, drilled and uncompleted wells (DUCs or ‘Fraclog’) totaled a record 5,802 located in the Permian Basin, Eagle Ford and Haynesville shale areas alone. We currently anticipate good growth with Momentum Water Transfer, our recently acquired frac water business given the fraclog in the completions market in 2019 and our geographic expansion.”

Management’s discussion and analysis of the financial results, disclosures and other relevant information is available on the Company’s Annual Report on Form 10-K filed April 1, 2019.

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 service 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 Industries, Inc. headquartered in Houston, Texas has facilities in Carthage, Odessa and Alice, Texas. Read more at www.SMGindustries.com and www.MGCleanersllc.com and www.MomentumWTS.com.

Contact:

Matthew Flemming, SMG Industries, Inc. +1-713-821-3153

SMG INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2018 2017
ASSETS
Current assets:
Cash and cash equivalents $ 1,608 $ 85,570
Accounts receivable, net of allowance for doubtful accounts of $25,000 and $10,695 703,959 441,359
Inventory 140,662 142,053
Assets held for sale 42,300 42,300
Prepaid expenses and other current assets 96,871 25,352
Total current assets 985,400 736,634
Property, equipment and rental assets, net of accumulated depreciation of $306,155 and $300,155
as of December 31, 2018 and 2017, respectively 1,998,009 118,779
Intangible assets, net of accumulated amortization $10,344 as of December 31, 2018 329,656
Other assets 27,631
Goodwill 185,751
Total assets $ 3,526,447 $ 855,413
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable $ 968,507 $ 395,423
Accounts payable – related party 21,000 95,585
Accrued expenses and other liabilities 207,911 69,578
Deferred revenue 39,877
Secured line of credit 593,888 353,975
Current portion of note payable – related party 62,750
Current portion of unsecured notes payable 131,126
Current portion of secured notes payable, net 328,328 264,615
Current portion of capital lease liability 53,728
Total current liabilities 2,407,115 1,179,176
Long term liabilities:
Convertible note payable, net 161,970
Note payable – related party, net of current portion 46,913
Notes payable – secured, net of current portion 967,846 258,361
Capital lease liability, net of current portion 40,552
Total liabilities 3,624,396 1,437,537
Commitments and contingencies
Stockholders’ deficit
Preferred stock – $0.001 par value; authorized 1,000,000 shares as of December 31, 2018 and
December 31, 2017; issued and outstanding none at December 31, 2018 and 2017
Common stock – $0.001 par value; authorized 25,000,000 shares as of December 31, 2018 and 2017;
issued and outstanding 11,910,690 and 8,865,190 at December 31, 2018 and 2017 11,911 8,865
Additional paid in capital 1,567,567 (56,940)
Accumulated deficit (1,677,427) (534,049)
Total stockholders’ deficit (97,949) (582,124)
Total liabilities and stockholders’ deficit $ 3,526,447 $ 855,413
The accompanying notes are an integral part of these consolidated financial statements
SMG INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2018 and 2017
December 31, 2018 December 31, 2017
REVENUES $ 4,422,436 $ 2,465,897
COST OF REVENUES 2,769,375 1,445,910
GROSS PROFIT 1,653,061 1,019,987
OPERATING EXPENSES:
Selling, general and administrative 2,434,819 1,188,494
Impairment expense 27,366
Bad debt (recovery) expense 22,907 (10,439)
(Gain) loss on asset disposal (21,071) 18,473
Acquisition cost 58,905 378,807
Total operating expenses 2,495,560 1,602,701
LOSS FROM OPERATIONS (842,499) (582,714)
OTHER INCOME (EXPENSE)
Gain (loss) on settlement of liabilities 9,151 7,118
Interest expense, net (310,030) (155,484)
NET LOSS $ (1,143,378) $ (731,080)
Net Income Per Share
Basic $ (0.11) $ (0.21)
Diluted $ (0.11) $ (0.21)
Weighted average shares outstanding
Basic 10,364,775 3,423,150
Diluted 10,364,775 3,423,150
The accompanying notes are an integral part of these consolidated financial statements

SMG INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2018 and 2017
2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,143,378) $ (731,080)
Adjustments to reconcile net income to net
cash used in operating activities:
Share based payments 81,657 211,320
Depreciation and amortization 105,287 72,161
Amortization of deferred financing costs 178,267 63,482
Gain on settlement of liabilities (9,151) (7,118)
Bad debt expense (recovery) 22,907 (10,439)
Impairment expense 27,366
Loss on disposal of equipment (13,386) 18,473
Changes in:
Accounts receivable (240,822) (144,996)
Inventory 1,391 (131,105)
Prepaid expenses and other current assets (5,992) 24,959
Other assets (35,631)
Accounts payable 551,849 230,951
Accounts payable related party (45,585) 45,585
Accrued expenses and other liabilities 128,333 (86,215)
Deferred revenue 39,877
Net cash provided by (used in) operating activities (384,377) (416,656)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition of Momentum Water Transfer Services LLC (300,000)
Cash received in reverse acquisition 21,164
Cash received from sale of assets 14,000
Cash paid for purchase of property and equipment (116,564) (38,247)
Net cash used in investing activities (402,564) (17,083)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from secured line of credit, net 239,913 181,734
Proceeds from notes payable 546,243 346,150
Payments on notes payable (494,411) (299,780)
Proceeds on notes payable, related party 53,200
Payments on notes payable, related party (101,571)
Proceeds on convertible notes payable 250,000
Payments on capital lease liability (37,438)
Payments on MG Cleaners acquisition – related party (29,000)
Proceeds from member contributions 110,081
Payments for member distributions (192,507)
Proceeds from sale of member interest 3,170
Proceeds from sales of common stock 276,043 348,000
Net cash provided by (used in) financing activities 702,979 496,848
NET CHANGE IN CASH AND CASH EQUIVALENTS (83,962) 63,109
CASH AND CASH EQUIVALENTS, beginning of period 85,570 22,461
CASH AND CASH EQUIVALENTS, end of period $ 1,608 $ 85,570
Supplemental disclosures:
Cash paid for income taxes $ – $ –
Cash paid for interest $ 119,438 $ 101,375
Noncash investing and financing activities
Purchase of intangible assets with note payable, related party $ 150,000 $ –
Purchase of fixed asset with notes payable $ 41,481 $ 11,248
Capital lease additions $ 131,718 $ –
Prepaid expenses financed with notes payable $ 65,527 $ –
Expenses paid by related party $ 8,034 $ –
Stock issued for accounts payable $ 12,000 $ –
Non-cash consideration paid for business acquisition $ 1,095,460 $ –
Common shares issued for purchase of fixed assets $ 700,000 $ 5,000
Beneficial conversion feature on convertible notes payable $ 100,000 $ –
Debt discount from issuance of common stock warrants $ 220,813 $ –
Payments on notes payable from secured line of credit proceeds $ – $ 96,512
Payments on accrued liabilities from secured line of credit proceeds $ – $ 75,729
Recapitalization of MG Cleaners, LLC $ – $ 310
Reclassification of assets held for sale $ – $ 42,300
The accompanying notes are an integral part of these consolidated financial statements

SOURCE: SMG Industries, Inc.

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