SMG Industries Inc.: M&A transaction — SMG Industries acquires Barnhart Transportation for $26M cash plus equity; appoints new CEO/CFO

On July 7, 2023, the Company, 5J Trucking, LLC, 5J Oilfield Services, LLC, 5J Specialized LLC, 5J Transportation LLC, 5J Logistics Services LLC, 5J Driveaway LLC and, upon the consummation of the Acquisition, the Barnhart Companies (collectively, the “Borrowers”) entered into a Credit Agreement (the “Term Loan Credit Agreement”) among the Borrowers, the other loan parties party thereto from time to time, the lenders party thereto from time to time and Great Rock Capital Partners Management, LLC (“Great Rock”), as the administrative agent. The Term Loan Credit Agreement provides for a $31.7 million term loan (the “Term Loan”).

Also on July 7, 2023, the Borrowers entered into a Credit Agreement (the “ABL Credit Agreement” and, collectively with the Term Loan Credit Agreement, the “Credit Agreements”) among the Borrowers, the other loan parties party thereto from time to time, the lenders party thereto from time to time and JPMorgan Chase Bank, N.A. (“JPMorgan”), as the administrative agent. The ABL Credit Agreement provides for a $25.0 million revolving credit agreement.

the Company increased the size of the Board from seven directors to nine directors and elected Bryan and Tim, effective immediately, to fill the vacancies created by the increase in the size of the Board.

Effective July 7, 2023, the Board appointed Bryan, age 45, as Chief Executive Officer and Tim, age 47, as Chief Financial Officer of the Company.

Mr. Flemming will continue as chair of the Board and will transition to the role of Business Development Officer.

Effective July 7, 2023, the Board appointed Bryan, age 45, as Chief Executive Officer and Tim, age 47, as Chief Financial Officer of the Company.

the Company increased the size of the Board from seven directors to nine directors and elected Bryan and Tim, effective immediately, to fill the vacancies created by the increase in the size of the Board.

the Company’s stockholders previously approved an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to increase the number of authorized shares of Common Stock from 250,000,000 to 500,000,000 (the “Charter Amendment”). The Charter Amendment became effective on July 6, 2023 upon filing of a Certificate of Amendment of the Certificate of Incorporation with the Secretary of State of Delaware.

On July 6, 2023, the Company also filed a Certificate of Designation of Preferences, Rights and Limitations of 5% Series C Convertible Preferred Stock with the Secretary of State of Delaware, effective as of the time of filing.

for Legend, which became a direct and wholly owned subsidiary of Skyline Holding. The Company paid a purchase price (the “Purchase Price”) for the Acquisition consisting of (i) $26.0 million in cash, subject to customary net working capital, cash, indebtedness, and transaction expense adjustments, less (A) $3.0 million for the Indemnification Escrow Amount (as

On July 7, 2023, the Company entered into a securities purchase agreement (the “SPA”) with Steven H. Madden, a director and the Company’s Chief Transition Officer. The SPA provides for the sale of up to an aggregate of 1,500 shares (“Shares”) of Series C Preferred Stock, at a price of $10,000 per share. Mr. Madden purchased 500 Shares for aggregate gross proceeds to the Company of $5.0 million (the “Private Placement”), while the remaining 1,000 Shares may be issued and sold in one or more subsequent closings on or before August 31, 2023.

On July 7, 2023, SMG Industries Inc. (the “Company”) entered into a transaction agreement (the “Transaction Agreement”) with Bryan S. Barnhart (“Bryan”), Timothy W. Barnhart (“Tim”), Timothy W. Barnhart, as Trustee of the Timothy W. Barnhart 2017 Irrevocable Trust (the “Trust,” and collectively with Bryan and Tim, the “Sellers”) and certain affiliates, pursuant to which the Company agreed to acquire (the “Acquisition”) from the Sellers, either directly or by merger, all of the membership interests of: (i) Barnhart Fleet Maintenance, LLC, a Pennsylvania limited liability company (“Fleet”), (ii) Barnhart Transportation, LLC, a Pennsylvania limited liability company (“Transportation”), (iii) Lake Shore Global Solutions LLC, a Pennsylvania limited liability company (“Global”), (iv) Lake Shore Logistics, LLC, a Pennsylvania limited liability company (“Logistics”), (v) Legend Equipment Leasing, LLC, a Pennsylvania limited liability company (“Legend”), and (vi) Route 20 Tank Wash LLC, a Penns