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
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SMG INDUSTRIES INC.
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CONSOLIDATED BALANCE SHEETS
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| 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 | |||||
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SMG INDUSTRIES INC.
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CONSOLIDATED STATEMENTS OF OPERATIONS
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For the years ended December 31, 2018 and 2017
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| 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 | |||||||||
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SMG INDUSTRIES INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the years ended December 31, 2018 and 2017
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| 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.