Unless otherwise noted, references in this Current Report on Form 8-K to “SMGI”, the “Company”, “we”, “our” or “us” means SMG Indium Resources Ltd., a Delaware corporation, the registrant, and, unless the context otherwise requires, together with its wholly-owned subsidiary, MG Cleaners LLC, a Texas limited liability company. The Company’s web site address is www.smg-indium.com. This web site and information contained on, or that can be accessed through, the web site are not part of this report.

Special Note Regarding Forward-Looking Statements

There are statements in this Current Report on Form 8-K that are not historical facts. These “forward-looking statements” can be identified by use of terminology such as “anticipate,” “believe,” “estimate,” “expect,” “hope,” “intend,” “may,” “plan,” “positioned,” “project,” “propose,” “should,” “strategy,” “will,” or any similar expressions. You should be aware that these forward-looking statements are subject to risks and uncertainties that are beyond our control. For a discussion of these risks, you should read this entire Current Report on Form 8-K carefully, especially the risks discussed under the section entitled “Risk Factors.” Although we believe that our assumptions underlying such forward-looking statements are reasonable, we do not guarantee our future performance, and our actual results may differ materially from those contemplated by these forward-looking statements. Our assumptions used for the purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances, including the development, acceptance and sales of our products and our ability to raise additional funding sufficient to implement our strategy. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. In light of these numerous risks and uncertainties, we cannot provide any assurance that the results and events contemplated by our forward-looking statements contained in this Current Report on Form 8-K will in fact transpire. These forward-looking statements are not guarantees of future performance. You are cautioned to not place undue reliance on these forward-looking statements, which speak only as of their dates. We do not undertake any obligation to update or revise any forward-looking statements.

ITEM 1.01          ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

Acquisition of MG Cleaners, LLC

On September 19, 2017 (“ Closing Date ”), we entered into an Agreement and Plan of Share Exchange dated as of such date (the “ Exchange Agreement ”) with MG Cleaners LLC, a Texas limited liability company (“ MG ”) and all of the members of MG (the “ MG Members ”). On the Closing Date, pursuant to the Exchange Agreement, we acquired one hundred percent (100%) of the issued and outstanding membership interests of MG (“ MG Membership Interests ”) from the MG Members pursuant to which MG became our wholly owned subsidiary (“ Acquisition ”). In accordance with the terms of the Exchange Agreement, and in connection with the completion of the Acquisition, on the Closing Date we issued 4,578,276 shares of our common stock, par value $0.001 per share, and agreed to pay $300,000 in cash ($250,000 at closing) to the MG Members in exchange for all of the issued and outstanding MG Membership Interests. Additionally, on the Closing Date we issued 350,000 restricted shares of our common stock to certain officers and directors of the Company that resigned in connection with the Acquisition pursuant to our 2008 Long-Term Compensation Plan.

In connection with the terms of the Acquisition, all of our Officers and Directors prior to the completion of the Acquisition resigned on the Closing Date and new Officers and Directors were appointed. The names and biographies of our new Officers and Directors are set forth in Section 2.01 below.

All shares of our common stock issued in connection with the Acquisition are restricted securities, as defined in paragraph (a) of Rule 144 under the Securities Act of 1933, as amended (the “ Securities Act ”). Such shares were issued pursuant to an exemption from the registration requirements of the Securities Act, under Section 4(a)(2) of the Securities Act and the rules and regulations promulgated thereunder.

For a further discussion of the Acquisition and its effects on our business, please see the information contained in Item 2.01 below on this Current Report on Form 8-K.

ITEM 2.01          COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS

See Item 1.01 above.  On the Closing Date and pursuant to the terms and conditions of the Exchange Agreement, we consummated the Acquisition, and MG became the Company’s wholly owned subsidiary. More specifically, pursuant to and in connection with the Exchange Agreement:

As a result, on the Closing Date, beneficial ownership of the Company’s common stock was as follows:

A discussion of the beneficial ownership of the Company’s Directors, Officers and principal stockholders is set forth below in the section entitled “Item 4.—Security Ownership of Certain Beneficial Owners and Management ” beginning on page 23 of this Current Report on Form 8-K and is incorporated herein by reference.

As a consequence of our acquisition of MG, we intend to conduct the business described under the Section of this Current Report on Form 8-K under the heading “Item 1.—Business—” as our sole business.

Upon the closing of the Acquisition the following persons held the following positions with our Company:

Change Resulting from the Acquisition

Following the Acquisition, the Company intends to conduct the business described under the Section of this Current Report on Form 8-K under the heading “Item 1.—Business” as its sole business.

Change in Directors Serving on our Board

In connection with the Acquisition, the number of Directors serving on the Company’s Board of Directors (the “Board”) increased from three (3) Directors to four (4) Directors and Matthew Flemming, John Boylan, Steven Paulson and Michael Gilbert were appointed concurrent with the closing of the Acquisition.

All directors hold office for one (1) year terms until the election and qualification of their successors. Officers are appointed by the Board and serve at the discretion of the Board.

Reference is made to the disclosures set forth below in Item 5.02 of this Current Report on Form 8-K, which disclosures are incorporated herein by reference.  Additionally, information with respect to each of our directors may be found in the section entitled “Directors and Executive Officers” beginning on page 24 of this Current Report on Form 8-K.

Change in Control and Shell Company Status

As a result of the Acquisition, the Company experienced a change in control and ceased to be a “shell” company as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Accounting Treatment

The Acquisition will be accounted for as a “reverse merger” and recapitalization since, immediately following the completion of the transaction, the MG Members will have effective control of SMGI. For accounting purposes, MG will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction will be treated as a recapitalization of MG. Accordingly, MG’s assets, liabilities and results of operations will become the historical financial statements of the registrant, and the Company’s assets, liabilities and results of operations will be consolidated with SMGI effective as of the date of the closing of the Merger. No step-up in basis or intangible assets or goodwill will be recorded in this transaction.  

FORM 10 INFORMATION

The following describes the business of SMG Indium Resources Ltd., a Delaware corporation. Because the business operations of MG became the sole business operations of SMG Indium Resources Ltd. upon the consummation of the Acquisition, unless the context indicates otherwise, the words “we,” “us” “our” or the “Company” refer to MG before the closing of the Acquisition or to SMG Indium Resources LTD. and MG as a combined company after the closing of the Acquisition.

Our Corporate History and Background

We were incorporated under the laws of the State of Delaware on January 7, 2008. From inception through December 31, 2014, our primary business purpose was to stockpile indium, a specialty metal that is used as a raw material in a wide variety of consumer electronics manufacturing applications. As of December 31, 2014, we sold all of the indium from our stockpile. As a result, at such time we were no longer in the business of purchasing and selling indium. In December 2015, our Board of Directors approved a cash distribution to our stockholders in the amount of $1.75 per share (or approximately $3.05 million). The distribution was classified as a return of capital for tax purposes. The aggregate cash distribution was recorded against additional paid in capital for accounting purposes. During the third quarter of 2015, our Board of Directors approved a program to repurchase up to $650,000 worth of our shares of common stock. In connection therewith, we repurchased 139,070 shares of our common stock in September 2015 for approximately $200,000, or $1.40 per share. After completion of the share repurchase program and immediately prior to the Acquisition, we had 1,744,569 shares issued and outstanding.

On September 19, 2017, pursuant to the Exchange Agreement described above in Item 1.01, we acquired one hundred percent of the issued and outstanding membership interests of MG (“MG Membership Interests”) pursuant to which MG became our wholly-owned subsidiary. In connection with the Acquisition, we issued 4,578,276 shares and agreed to pay $300,000 in cash to the MG Members, payable with $250,000 at closing and the remaining $50,000 paid to the MG Members upon the completion of the Company’s sale of a minimum of $500,000 of its securities in a private offering to investors.

Upon completion of the closing of the Acquisition, our business operations will be those of our wholly-owned subsidiary, MG Cleaners.

The Business of MG Cleaners LLC

General

MG Cleaners was organized as a limited liability company in Texas in 2005. In 2010, Stephen Christian, acquired MG Cleaners from its prior owner and has served as its Managing Member and President since. Mr. Christian was a former Rig Supervisor for Nabors Drilling (“Nabors”) from 2004 until 2010. Nabors Industries (NYSE: NBR), the parent company of Nabors Drilling, owns and operates the nation's largest land-based drilling rig fleet and is one of our larger customers.

We are an emerging growth oilfield service company focused on the drilling rig operator market segment in the domestic United States pursuant to which we offer the following products and services: (i) product sales for the oilfield industry focused on drilling rig wash, oilfield cleaning, industrial cleaning, fleet and equipment cleaning; (ii) equipment sales for the oilfield industry including, industrial pressure washers; (iii) parts sales for our installed base on equipment, including water guns, hoses and fittings, and (iv) service crews for the oilfield industry related to rig wash and repairing drilling rigs on location.

Industry Overview

On June 30, 2017, the North American Rig Count, as measured by Baker Hughes, stood at 1,129, up 122% from 507 on June 30, 2016. Rig Counts are a measurement of oilfield activity particularly relevant to us as we sell products to drilling rig operator customers. As a result of favorable operating economics for oil and gas companies, there is a high concentration of rigs and oilfield activity in Texas relative to other areas in the domestic United States. On June 30, 2017, Texas and the adjacent New Mexico (Permian and Delaware basins) had 521 rigs operating, representing about 46% of the entire North American rigs concentrated in these West Texas basins, an increase of 217 rigs, or 140%, from a year earlier.

MG Cleaner’s Products and Services

Proprietary Products

Our branded products have proprietary formulations that perform in specific applications. These products include soaps, surfactants and degreasers which are environmentally friendly and sold primarily to drilling rig operators, exploration and production companies, and distribution and supply companies serving this market segment.

Our branded products have proprietary formulations that have been sold direct via our sales force and through distribution supply companies for over ten years. Miracle Blue™, a powerful degreaser, Luma Brite™, an aluminum brightener and descaler, and Wicked Green™, an enviro-friendly emulsifier used in oil remediation jobs, that is bio-degradable, are some of the Company’s top selling products. In total, we currently offer 12 branded and proprietary products used by industry leading drilling contractors in the domestic United States including Nabors, UTI-Patterson, and Cactus Drilling. MG’s products are sold throughout Texas using direct sales employees in the East Texas market (based in Carthage, Texas) and distributors/suppliers in the West Texas Permian and Delaware basins (based in Midland, Texas).

Equipment and Parts Sales

Additionally, through long-standing relationships with manufacturers, we sell equipment and related parts, to our customers which strategically promote our future product sales. We currently offer a full line of Mi-T-M Corporation industrial and oilfield pressure washers along with compressors, heaters, water pumps and combination units. We also sell spare parts to customers who have purchased equipment, which include water guns, hoses and fittings.

Service Crews

MG’s service crews consist of Company employees who perform cleaning and repair for drilling rig operator customers typically invoicing on a day-rate basis. Other customers prefer to purchase equipment and perform their own maintenance on their equipment, using a variety of our cleaning products. In other examples, customers prefer to outsource cleaning and repair services where our service crews become strategic to MG’s business solving customer problems and using our products during service. Select, MG customers include drilling rig operators such as Nabors, UTI-Patterson, Cactus Drilling; oil companies such as Chesapeake and Chevron; and other oilfield service companies.

Our Strategy

Continued Development of Texas business. Currently, almost half of the rigs in North America are located in Texas due to favorable economics in Texas’ resource basins, such as the Permian Basin, relative to other parts of the United States. We believe developing a direct sales presence in West Texas, based out of Midland, Texas, to complement our existing distribution channels for that market area will allow us to further penetrate that market. In West Texas, the Company has enjoyed good market penetration via distribution and supply companies. We believe that high activity levels in West Texas’ Permian and Delaware basins should allow for growth with new direct sales. In July 2017, we hired a strategic level employee, from Midland, Texas, experienced with many of our customers, to support and grow our presence in that market. Currently, the Company has a sales force in East Texas servicing Haynesville Shale, Woodbine, Cotton Valley and other oil & gas resource plays in the area.

Sell New Products and Additional Services to Existing Customers. We have over 50 customers, many of which are leading companies in their field, and several with whom we are party to a Master Service Agreement (MSA) that can allow us to develop a competitive advantage. We believe we can further monetize our relationships with our customers by bringing other products to them that we develop or acquire when there is a demand.

Acquire Complementary Oilfield Service Companies. Our management team has prior experience acquiring owner/operated companies. The Company believes this acquisition strategy can be an attractive way to grow more quickly than organic growth allows. In our experience, operating companies that want to be acquired often have complementary non-overlapping customers that could have a positive strategic impact to our future.

Maintaining High Quality Service . Our success and history has been built on a reputation of high-quality service. We try to ingrain this philosophy in our Company culture and employee attitudes. The oilfield service business is demanding and keeping a 24/7 service policy is a priority that we intend to continue to focus on and maintain.

Leverage Access to Public Company Markets . We believe that the public capital markets can facilitate funding access for our long-term growth initiatives, including making strategic acquisitions, however, there can be no assurance that we will identify acquisition targets or if we do identify acquisition targets that we will be able to acquire them on terms acceptable to us. Additionally, there can be no assurance that we will be able to access the public capital markets to facilitate funding for our long-term growth initiatives, or if funding is available that it will be on terms acceptable to us.

Sales. The Company’s sales plan includes continuing to support its East Texas direct sales presence and establishing a direct sales force in West Texas to complement the distribution and supply channels already present in that area. This will be led by a recently hired strategic employee who has a significant number of customer and sales contacts. We also have meaningful sales through distributors and supply firms that benefit from their customers’ requests for our products. Any demand for the Company’s products outside the state of Texas are typically fulfilled through a distribution supply channel.

Manufacturing. The Company manufacturers its products in its facility in Carthage, Texas. Raw materials are procured by the Company and the proprietary formulas for our brands are utilized throughout the process. Mixing tanks and other process equipment are used to make the products. The final product is then stored in large gravity-fed containers onsite or in transportation quantities such as totes or gallons. Third party shipping and distribution companies are currently utilized for certain shipments of product to West Texas. We may install manufacturing capabilities in our Midland, Texas facility as activity increases in that market area.

Marketing Plan. The Company’s marketing plan focuses around supporting its product brands such as Miracle Blue™, Luma Brite™, and Wicked Green™, as well as supporting its direct sales force. MG will participate in industry trade shows, sponsorships and community events that allow its products to be featured. Social media, including LinkedIn, will be utilized to facilitate discussion groups focused around these product cleaning applications. The Company’s web site is also undergoing a revision to create higher relevance for our target market customers and promote testimonials of our products and equipment. For our service crews, the marketing plan is to increase crew counts so as to increase availability and service hours.

Market Segment Description. The Company views the oilfield services market in three principal segments: Drilling, Completions and Production. MG’s position in the market is to focus on the Drilling segment. In our opinion, the Drilling market is very elastic resulting in its segment being the first to recover on industry up-cycles.

Market Activity. In a given unconventional well typically drilled in Texas, the completion and fracturing costs can be two to three times the cost of drilling. Therefore, a trend has developed over the last couple of years referred to as ‘fraclog’ illustrating the number of Drilled Uncompleted Wells (DUCs). When industry economics improve, the Company believes that the Completions market segment could become much more attractive. Today, however, MG believes the Drilling market segment is where we should focus our resources and attention. The Production market segment has been relatively steady, compared to Drilling and Completion, as wells already online maintaining positive economics can maintain operations and continued production.

The Company currently believes the price of oil and gas may stay at present levels for several years therefore, we believe its focus and positioning on the drilling market segment is critical to the Company’s future profitability.

Management . The Company’s Chief Executive Officer, Matthew Flemming, is located in Houston, Texas. Mr. Flemming was the CEO of HII Technologies (“HII”) when it was a small public company with approximately $300,000 in cash, no debt and plans to enter the oilfield services business through an initial platform acquisition. HII had no revenues prior to its first acquisition in September 2012, when it acquired AES Water Solutions for approximately $2.3 million in cash, a seller note and stock. Following this initial acquisition, HII conducted two more acquisitions as well as two additional subsidiary startups in the power and safety segments of the oilfield services business. By December 2014, HII consolidated revenues had grown to $4.2 million for that month. Falling rig counts, industry activity and oil & gas prices created an industry down-turn by 2015. HII defaulted on its EBITDA covenants with its senior lenders and ultimately filed a voluntary chapter 11 petition with US Bankruptcy court in Houston, Texas in September 2015. On April 15, 2016, HII emerged from bankruptcy protection.

Mr. Flemming has been a CEO and CFO for twenty years in high growth capital intensive businesses with ten years’ experience in a public company environment. He has significant relationships in the oilfield market place that help provide access to products and company acquisition targets.

Stephen Christian has been the President of MG Cleaners, LLC since October 2010, when he acquired MG Cleaners’ membership interests and will continue to have operational responsibility for MG, our wholly-owned subsidiary. Prior to MG, Stephen was employed by the largest drilling rig operator in the United States, known as Nabors Drilling, a subsidiary of Nabors Industries (NYSE:NBR), as a Rig Manager from 2004 to 2010. Over the six years he was employed by Nabors, Mr. Christian developed a strong reputation with Nabors’ employees and industry partners. He purchased MG Cleaners in 2010 and has operated the business as its President since its acquisition. The Company believes Mr. Christian’s industry relationships and reputation will continue to assist its growth .

Geographic Diversification

All of our operations are based in Texas. Most of our products and all of our service work is conducted in Texas. Our products are sold outside of Texas through several long-standing relationships with distributors.

Competition

The markets in which we operate are highly competitive. We provide services and sell our products in the State of Texas. Our competitors include many large and small oilfield service companies. In addition, the business segments in which we compete are highly fragmented. We believe that the principal competitive factors in the markets we serve are reputation for service and technical expertise, equipment and personnel capacity, work force competency, efficiency, safety record and price. Our branded products compete against other cleaning products, surfactants and degreasers, some of which are branded retail and some industrial. Because of our dealer status with certain equipment, we do not frequently compete for equipment sales on selected items. With our service crews, we compete with the human resources that drilling rig operators and oil companies employ. These firms may have their own service personnel in which case we may not get awarded that service job. While we seek to be competitive in our pricing, we believe many of our customers elect to work with us based on safety, performance and quality of our crews, equipment and services. We seek to differentiate ourselves from our competitors by delivering the highest-quality services, experienced personnel and equipment possible, coupled with superior execution and operating efficiency in a safe working environment. Many of our competitors have greater financial and personnel resources than we do.

Cyclical Nature of Industry

We operate in a highly cyclical industry. The key factor driving demand for our services is the level of drilling activity by E&P companies, which in turn depends largely on current and anticipated future crude oil and natural gas prices and production depletion rates. Global supply and demand for oil and the domestic supply and demand for natural gas are critical in assessing industry outlook. Demand for oil and natural gas is cyclical and subject to large, rapid fluctuations. Producers tend to increase capital expenditures in response to increases in oil and natural gas prices, which generally results in greater revenues and profits for oilfield service companies such as ours. Increased capital expenditures also ultimately lead to greater production, which historically has resulted in increased supplies and reduced prices, which in turn tend to reduce activity levels for oilfield services. For these reasons, the results of our operations may fluctuate from quarter to quarter and year to year. These fluctuations may distort comparisons of results across periods.

Dependence on One or a Few Major Customers

The Company serves several major drilling companies and independent oil & gas companies that are active in our core areas of operations.

As of June 30, 2017, two customers comprised more than 10% of our accounts receivable balance at approximately 37.8% and 20.2%, respectively. During the six-month period ended June 30, 2017, three customers represented more than 10% of our revenues at 30.7%, 16.4% and 14.6%, respectively, and no other customer represented more than 10% of our revenues during this period.

As of December 31, 2016, four customers comprised more than 10% of our accounts receivable balance at approximately 30%, 19%, 11% and 11%, respectively. Revenues from these four customers represented 23%, 12%, 7% and 6%, respectively, for the year ended December 31, 2016.

Seasonality

Weather conditions affect the demand for, and prices of, oil and natural gas and, as a result, demand for our services. Demand for oil and natural gas is typically higher in the fourth and first quarters resulting in higher prices. Due to these seasonal fluctuations, results of operations for individual quarterly periods may not be indicative of the results that may be realized on an annual basis.

Raw Materials

The Company purchases a wide variety of raw materials, parts and components that are made by other manufacturers and suppliers for our use. The Company is not dependent on any single source of supply for those parts, supplies or materials. We do not foresee significant price fluctuations in our raw material costs.

Intellectual Property

We do not have any patents on our current products and do not intend to file any patents on such products. We protect our trademarks and may from time to time file for registration of those trademarks.

We currently protect our trade secrets and in-house intellectual property through contractual arrangements, including confidentiality, non-competition and non-disclosure agreements with employees, and will continue to use such contractual arrangements in the future to help protect our proprietary intellectual property.

Government Regulation

We are not currently subject to any direct regulation by any government agency, other than regulations generally applicable to businesses.

General business regulations include the packaging, labeling, distribution, advertising and sale of our chemical products, such as those we sell, are subject to regulation by one or more federal agencies, principally the Federal Trade Commission, or FTC, and to a lesser extent the Consumer Product Safety Commission.

Federal agencies, primarily the FTC, have a variety of procedures and enforcement remedies available to them, including the following:

In addition, certain state agencies have similar authority. These federal and state agencies have in the past used these remedies in regulating participants in the industry, including the imposition by federal agencies of civil penalties. We cannot assure you that the regulatory environment in which we operate will not change or that such regulatory environment, or any specific action taken against us, will not result in a material adverse effect on our operations.

We cannot predict the nature of any future laws, regulations, interpretations, or applications, nor can we determine what effect such additional regulation, when and if it occurs, would have on our business in the future. Such additional regulation could require, however, any or all of the actions listed below, which could have a material adverse effect on our operations:

Property

Our principal executive office is located at 710 N. Post Oak Road, Suite 400, Houston, Texas, where we lease approximately 700 square feet of office space on a month to month basis at a rate of $500 per month. We also have offices located in Carthage, Texas and Midland, Texas. Our Carthage facility is comprised of a 2,500 square foot building and one acre of property that is leased for $2,500 per month. The Carthage lease is on a month to month basis and is used for our operations throughout East Texas. Effective July 15, 2017, we leased a facility in Midland, Texas for a three year period ending July 15, 2020 at a rate of $3,000 per month. The Midland, Texas facility is comprised of approximately 2,400 square feet of space and a shared yard with several acres of storage area used for our operations in West Texas including the Permian Basin.

Currently, we believe that our facilities are adequate for our present and future needs.

Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of our business.  We are not currently a party to any material legal proceedings.

Employees

As of June 30, 2017, we had 17 employees of whom 2 were administrative, 3 were in sales and marketing and 12 were in service or operations. In addition, we may employ independent contractors from time to time. Our employees are not represented by a labor union, and we believe our relations with our employees are satisfactory. Our independent contractors are either paid day rates or hourly commensurate with the job. Employees and independent contractors are required to execute agreements with us that set forth terms of engagement and contain customary confidentiality and non-competition provisions.

Risks Related to Our Business

We depend on several significant customers, and a loss of one or more significant customers could adversely affect our results of operations.

Our customers consist primarily of drilling rig operators and oil and natural gas companies. During the six months ended June 30, 2017, three of our customers accounted for approximately 61% of our total gross revenues. During fiscal year 2016, two of our customers accounted for approximately 35% of our total gross revenues, with one customer accounting for 23% and another accounting for 12%. No other customers exceeded 10% of revenues during 2016. These customers do not have any ongoing commitment to purchase our services.  While additional customers have been sourced since December 31, 2016, significant customer concentration still exists.  The loss of or a sustained decrease in demand by these customers could result in a substantial loss of revenues and could have a material adverse effect on our results of operations.  In addition, should these large customers default in their obligations to pay, our results of operations and cash flows could be adversely affected.

Our business depends on domestic (United States) spending by the crude oil and natural gas industry which has suffered significant negative price volatility since July 2014, and such volatility may continue; our business has been, and may in the future be, adversely affected by industry and financial market conditions that are beyond our control.

We depend on our customers’ ability and willingness to make operating and capital expenditures to explore, develop and produce crude oil and natural gas in the United States. Customers’ expectations for future crude oil and natural gas prices, as well as the availability of capital for operating and capital expenditures, may cause them to curtail spending, thereby reducing demand for our services and equipment. Major declines in oil and natural gas prices from July 2014 (when WTI prices were at approximately $100 per barrel) through 2015 resulted in substantial declines in capital spending and drilling programs across the industry in which we operate. As a result of the declines in oil and natural gas prices, most exploration and production companies shut down or substantially reduced drilling programs. Any significant decline in oil and natural gas prices or a significant decline in the North American rig count could have a material adverse effect on our business.

Industry conditions and specifically the market price for crude oil and natural gas are influenced by numerous domestic and global factors over which the Company has no control, such as the supply of and demand for oil and natural gas, domestic and worldwide economic conditions, weather conditions, political instability in oil and natural gas producing countries, and merger and divestiture activity among oil and natural gas producers. The volatility of the oil and natural gas industry and the consequent impact on commodity prices as well as exploration and production activity could adversely impact the level of drilling and activity by some of our customers. Where declining prices lead to reduced exploration and development activities in the Company’s market areas, the reduction in exploration and development activities also may have a negative long-term impact on the Company’s business. Continued decline in oil and natural gas prices may result in increased pressure from our customers to make pricing concessions in the future and may impact our borrowing arrangements with our principal bank. 

There has also been significant political pressures for the United States economy to reduce its dependence on crude oil and natural gas due to the perceived impacts on climate change. These activities may make oil and gas investment and production   less attractive.

Higher oil and gas prices do not necessarily result in increased drilling activity because our customers’ expectation of future prices also drives demand for drilling services. Oil and gas prices, as well as demand for the Company’s services, also depend upon other factors that are beyond the Company’s control, including the following:

Ongoing volatility and uncertainty in the domestic and global economic and political environments have caused the oilfield services industry to experience volatility in terms of demand. While our management is generally optimistic for the continuing development of the onshore North American oil and gas industry, there are a number of political and economic pressures negatively impacting the economics of continuing production from some existing wells, future drilling operations, and the willingness of banks and investors to provide capital to participants in the oil and gas industry. These cuts in spending will continue to curtail drilling programs as well as discretionary spending on well services, and will continue to result in a reduction in the demand for the Company’s services, the rates and equipment utilization can be charged. In addition, certain of the Company’s customers could become unable to pay their suppliers, including the Company. Any of these conditions or events could adversely affect our operating results.

New cleaning technologies and products may render our products and services obsolete.

As technology continues to develop, our clients and our competitors may develop or discover new cleaning technologies that are superior to, or more cost effective than, the cleaning products and services we provide. In the event that any such technologies are developed, and we are unable to adapt to such new products or services, our business could be materially adversely effected.

We are dependent on third-parties to procure the chemicals required to manufacture our products.

We do not manufacture the chemicals that are required to manufacture our products and we rely on third-parties to supply such chemical products to us. In the event that there is a shortage in the supply of chemicals that are required to manufacture our products and we are unable to acquire any such chemicals from another source, our sales and results of operations will be materially adversely effected.

The loss of one or more key members of our management team, or our failure to attract, integrate and retain other highly qualified personnel in the future, could harm our business.

Our success is largely dependent on the skills, experience and efforts of our people.  We currently depend on the continued services and performance of the key members of our management team, including Matthew Flemming, our Chief Executive Officer, and Stephen Christian, President of MG Cleaners, LLC, our operating subsidiary. The loss of key personnel could disrupt our operations and have an adverse effect on our ability to grow our business if we are unable to replace them.

We operate in a highly competitive environment, which could adversely affect our sales and pricing.

We operate in a highly competitive environment. We expect competition to intensify in the future. We compete on the basis of our brands and branding, customer service, quality and price. There can be no assurance that we will be able to compete successfully with other companies. Thus, revenues could be reduced due to aggressive pricing pursued by competitors.  Many of our competitors are entities that are more established, larger and have greater financial and personnel resources than we do.  If we do not compete successfully, our business and results of operations will be materially adversely affected.

The line of credit with Crestmark Bank contains restrictive covenants which limit management’s discretion to operate MG’s business and is secured by all of MG’s assets.

In order to obtain the line of credit from Crestmark Bank, MG, our wholly-owned subsidiary, agreed to certain covenants that place certain restrictions on MG, among other things, MG’s ability to incur additional indebtedness, to create liens or other encumbrances, and to sell or otherwise dispose of MG’s assets.  Any failure to comply with the covenants included in the Crestmark Bank loan agreements could result in an event of default, which could trigger an acceleration of the related debt.  If MG were unable to repay the debt upon any such acceleration, Crestmark Bank could seek to foreclose on MG’s assets in an effort to seek repayment under the loans.  If Crestmark Bank were successful, we would be unable to conduct our business as it is presently conducted and our ability to generate revenues and fund our ongoing operations would be materially adversely affected.

The interest rate on a significant portion of our indebtedness varies with the market rate of interest.  An increase in the interest rate could have a material adverse effect on our results of operations.

The interest on the line of credit and term loan from Crestmark Bank is payable monthly and is at a rate per annum equal to the prime plus 7.50%, per annum (provided that at no time shall be less than 11.5%). The interest under the Crestmark Credit Facility will fluctuate over time, and if the prime rate significantly increases, our interest expense will increase.  This could have a material adverse effect on our results of operations.  

We may need additional financing to further our business plans.

We may require additional funds to finance our business development projects.  We may not be successful in raising additional financing as and when needed. If we are unable to obtain additional financing in sufficient amounts or on acceptable terms, our operating results and prospects could be adversely affected.

We may not realize all of the anticipated benefits of our acquisitions, joint ventures or divestitures, or these benefits may take longer to realize than expected.

Our business strategy includes growth through the acquisitions of other businesses in the areas of drilling, completions or production business segments.  We may not be able to continue to identify attractive acquisition opportunities or successfully acquire those opportunities that are identified.  There is always the possibility that even if there is success in integrating our current or future acquisitions into the existing operations, we may not derive the benefits, such as administrative or operational synergy or earnings obtained, that were expected from such acquisitions, which may result in the commitment of capital resources without the expected returns on the capital.  The competition for acquisition opportunities may increase which in turn would increase our cost of making further acquisitions or causing us to curb our activities of making additional acquisitions.

In pursuing our business strategy, from time to time we evaluate targets and enter into agreements regarding possible acquisitions, divestitures and joint ventures. To be successful, we conduct due diligence to identify valuation issues and potential loss contingencies, negotiate transaction terms, complete transactions and manage post-closing matters such as the integration of acquired businesses. Our due diligence reviews are subject to the completeness and accuracy of disclosures made by third parties. We may incur unanticipated costs or expenses following a completed acquisition, including post-closing asset impairment charges, expenses associated with eliminating duplicate facilities, litigation, and other liabilities.

The risks associated with our future acquisitions also include the following:

We believe that we have sufficient resources to integrate these acquisitions successfully, such integration involves a number of significant risks, including management’s diversion of attention and resources.  There can be no assurance as to the extent to which the anticipated benefits of these acquisitions will be realized, if at all, or that significant time and cost beyond that anticipated will not be required with the integration of new acquisitions to the existing business.  If we are unable to accomplish the integration and management successfully, or achieve a substantial portion of the anticipated benefits of these acquisitions within the time frames anticipated by management and within budget, it could have a material adverse effect on our business.

Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and attention. They may also delay the realization of the benefits we anticipate when we enter into a transaction.  Failure to implement our acquisition strategy, including successfully integrating acquired businesses, could have an adverse effect on our business, financial condition and results of operations.

We are vulnerable to the potential difficulties associated with rapid growth

We believe that our future success depends on our ability to manage the rapid growth that we expect to experience organically and through acquisitions.  Our anticipated growth will place additional demands and responsibilities on our management to maintain existing customers and attract new customers, recruit, retain and effectively manage employees, as well as expand operations and integrate customer support and financial control systems.  The following could present difficulties:

If we are unable to manage our expected future growth, our business could be materially adversely effected.

The loss of Master Service Agreements with certain of our key customers could adversely impact our financial condition and results of operations.

Although the Master Service Agreements (MSA’s) that we have with certain of our key customers do not require them to purchase any minimum amount of product or services from us, if we are unable to maintain the MSA’s, our financial condition and results of operations could be adversely effected. We cannot assure you that our existing MSA’s will continue or be extended or renewed and that existing customers will continue to use our products and services at current levels or that we will be successful in obtaining new MSA’s.

Compliance with climate change legislation or initiatives could negatively impact our business.

The U.S. Congress has considered legislation to mandate reductions of greenhouse gas emissions and certain states have already implemented, or may be in the process of implementing, similar legislation. Additionally, the U.S. Supreme Court has held in its decisions that carbon dioxide can be regulated as an “air pollutant” under the Clean Air Act, which could result in future regulations even if the U.S. Congress does not adopt new legislation regarding emissions. At this time, it is not possible to predict how legislation or new federal or state government mandates regarding the emission of greenhouse gases could impact our business; however, any such future laws or regulations could require us or our customers to devote potentially material amounts of capital or other resources in order to comply with such regulations. These expenditures could have a material adverse impact on our financial condition, results of operations, or cash flows.

Changes in accounting guidance could have an adverse effect on our results of operations, as reported in our financial statements.

Our consolidated financial statements are prepared in accordance with GAAP, which is periodically revised and/or expanded. Accordingly, from time to time we are required to adopt new or revised accounting guidance and related interpretations issued by recognized authoritative bodies, including the Financial Accounting Standards Board and the SEC. Market conditions have prompted these organizations to issue new guidance that further interprets or seeks to revise accounting pronouncements related to various transactions as well as to issue new guidance expanding disclosures. An assessment of proposed standards is not provided, as such proposals are subject to change through the exposure process and, therefore, their effects on our financial statements cannot be meaningfully assessed. It is possible that future accounting guidance we are required to adopt could change the current accounting treatment that we apply to our consolidated financial statements and that such changes could have an adverse effect on our results of operations, as reported in our consolidated financial statements.

Unexpected events, including natural disasters, may increase our cost of doing business or disrupt our operations.

The occurrence of one or more unexpected events, including fires, tornadoes, tsunamis, hurricanes, earthquakes, floods and other forms of severe weather in the United States or in other countries in which our suppliers may be located could adversely affect our operations and financial performance. Natural disasters, pandemic illness, equipment failures, power outages or other unexpected events could result in physical damage to and complete or partial closure of one or more of our offices and disrupt our ability to deliver our products and services. Existing insurance arrangements may not provide protection for all of the costs that may arise from such events.

Failure to obtain and retain skilled technical personnel could impede our operations.

We require skilled personnel to operate and provide technical services and support for our business. Competition for the personnel required for our businesses intensifies as activity increases. In periods of high utilization it may become more difficult to find and retain qualified individuals. This could increase our costs or have other adverse effects on our operations.

Our operations are subject to inherent risks, some of which are beyond our control. These risks may not be fully covered under our insurance policies.

Our operations are subject to hazards inherent in the oil and natural gas industry, such as, but not limited to, accidents, blowouts, explosions, fires and oil spills. These conditions can cause:

The Company maintains insurance coverage that we believe to be customary in the industry against these hazards. However, we do not have insurance against all foreseeable risks, either because insurance is not available or because of the high premium costs. As such, not all of our property is insured. The occurrence of an event not fully insured against, or the failure of an insurer to meet its insurance obligations, could result in substantial losses. In addition, we may not be able to maintain adequate insurance in the future at reasonable rates. Insurance may not be available to cover any or all of the risks to which we are subject, or, even if available, it may be inadequate, or insurance premiums or other costs could rise significantly in the future so as to make such insurance prohibitively expensive. It is likely that, in our insurance renewals, our premiums and deductibles will be higher, and certain insurance coverage either will be unavailable or considerably more expensive than it has been in the recent past. In addition, our insurance is subject to coverage limits. The occurrence of a significant event or adverse claim in excess of the insurance coverage that we maintain or that is not covered by insurance could have a material adverse effect on our financial condition and results of operations.

Risks Related to Our Securities

There is a limited trading market for our shares.  You may not be able to sell your shares if you need money.

Our common stock is traded on the OTC Pink Market, an inter-dealer automated quotation system for equity securities.  During the three months preceding filing of this report, the average daily trading volume of our common stock was less than 1,000 shares traded per day, on average, and currently is thinly traded.  As of September 19, 2017, we had 164 record holders of our common stock (not including an indeterminate number of stockholders whose shares are held by brokers in “street name”).  There has been limited trading activity in our stock, and when it has traded, the price has fluctuated widely.  We consider our common stock to be “thinly traded” and any last reported sale prices may not be a true market-based valuation of the common stock.  Stockholders may experience difficulty selling their shares if they choose to do so because of the illiquid market and limited public float for our common stock.

We are subject to the penny stock rules and these rules may adversely affect trading in our common stock.

Our common stock is a “low-priced” security under rules promulgated under the Securities Exchange Act of 1934.  In accordance with these rules, broker-dealers participating in transactions in low-priced securities must first deliver a risk disclosure document which describes the risks associated with such stocks, the broker-dealer’s duties in selling the stock, the customer’s rights and remedies and certain market and other information.  Furthermore, the broker-dealer must make a suitability determination approving the customer for low-priced stock transactions based on the customer’s financial situation, investment experience and objectives.  Broker-dealers must also disclose these restrictions in writing to the customer, obtain specific written consent from the customer, and provide monthly account statements to the customer. The effect of these restrictions probably decreases the willingness of broker-dealers to make a market in our common stock, decreases liquidity of our common stock and increases transaction costs for sales and purchases of our common stock as compared to other securities.

Transfers of our securities may be restricted by virtue of state securities “blue sky” laws which prohibit trading absent compliance with individual state laws. These restrictions may make it difficult or impossible to sell shares in those states.

Transfers of our common stock may be restricted under the securities or securities regulations laws promulgated by various states and foreign jurisdictions, commonly referred to as “blue sky” laws. Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions. Because the securities registered hereunder have not been registered for resale under the blue sky laws of any state, the holders of such shares and persons who desire to purchase them should be aware that there may be significant state blue sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. These restrictions may prohibit the secondary trading of our common stock. Investors should consider the secondary market for our securities to be a limited one.

Our Officers, Directors and significant shareholders collectively own a substantial portion of our outstanding common stock, and as long as they do, they may be able to control the outcome of stockholder voting.

Our Officers, Directors and significant shareholders are collectively the beneficial owners of approximately 59.2% of the outstanding shares of our common stock as of the date of this report.  As long as our Officers, Directors and significant shareholders collectively own a significant percentage of our common stock, our other shareholders may generally be unable to affect or change the management or the direction of our company without the support of our Officers, Directors and significant shareholders.  As a result, some investors may be unwilling to purchase our common stock.  If the demand for our common stock is reduced because our Officers, Directors and significant shareholders have significant influence over our company, the price of our common stock could be materially depressed.  The Officers, Directors and significant shareholders will be able to exert significant influence over the outcome of all corporate actions requiring stockholder approval, including the election of Directors, amendments to our certificate of incorporation and approval of significant corporate transactions.

We have the ability to issue additional shares of our common stock and shares of preferred stock without asking for stockholder approval, which could cause your investment to be diluted.

Our Certificate of Incorporation authorizes the Board of Directors to issue up to 25,000,000 shares of common stock and up to 1,000,000 shares of preferred stock.  The power of the Board of Directors to issue shares of common stock, preferred stock or warrants or options to purchase shares of common stock or preferred stock is generally not subject to stockholder approval.  Accordingly, any additional issuance of our common stock, or preferred stock that may be convertible into common stock, may have the effect of diluting your investment.

By issuing preferred stock, we may be able to delay, defer or prevent a change of control.

Our Certificate of Incorporation permits us to issue, without approval from our shareholders, a total of 1,000,000 shares of preferred stock.  Our Board of Directors can determine the rights, preferences, privileges and restrictions granted to, or imposed upon, the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series.  It is possible that our Board of Directors, in determining the rights, preferences and privileges to be granted when the preferred stock is issued, may include provisions that have the effect of delaying, deferring or preventing a change in control, discouraging bids for our common stock at a premium over the market price, or that adversely affect the market price of and the voting and other rights of the holders of our common stock.

Our stock price is volatile.

The trading price of our common stock has been and continues to be subject to fluctuations.  The stock price may fluctuate in response to a number of events and factors, such as quarterly variations in operating results, the operating and stock performance of other companies that investors may deem as comparable and news reports relating to trends in the marketplace, among other factors.  Significant volatility in the market price of our common stock may arise due to factors such as:

As long as there is only a limited public market for our common stock, the sale of a significant number of shares of our common stock at any particular time could be difficult to achieve at the market prices prevailing immediately before such shares are offered, and could cause a severe decline in the price of our common stock.

There are limitations in connection with the availability of quotes and order information on the OTC Markets.

Trades and quotations on the OTC Markets involve a manual process and the market information for such securities cannot be guaranteed. In addition, quote information, or even firm quotes, may not be available.  The manual execution process may delay order processing and intervening price fluctuations may result in the failure of a limit order to execute or the execution of a market order at a significantly different price.  Execution of trades, execution reporting and the delivery of legal trade confirmation may be delayed significantly.  Consequently, one may not be able to sell shares of our common stock at the optimum trading prices.

There are delays in order communication on the OTC Markets.

Electronic processing of orders is not available for securities traded on the OTC Marketplace and high order volume and communication risks may prevent or delay the execution of one's OTC Marketplace trading orders.  This lack of automated order processing may affect the timeliness of order execution reporting and the availability of firm quotes for shares of our common stock.  Heavy market volume may lead to a delay in the processing of OTC Marketplace security orders for shares of our common stock, due to the manual nature of the market.  Consequently, one may not able to sell shares of our common stock at the optimum trading prices.

There is a risk of market fraud on the OTC Marketplace.

OTC Marketplace securities are frequent targets of fraud or market manipulation. Not only because of their generally low price, but also because the OTC Pink Market reporting requirements for these securities are less stringent than for listed or NASDAQ traded securities, and no exchange requirements are imposed.  Dealers may dominate the market and set prices that are not based on competitive forces. Individuals or groups may create fraudulent markets and control the sudden, sharp increase of price and trading volume and the equally sudden collapse of the market price for shares of our common stock.

There is a limitation in connection with the editing and canceling of orders on the OTC Markets.

Orders for OTC Pink Market securities may be canceled or edited like orders for other securities. All requests to change or cancel an order must be submitted to, received and processed by the OTC Markets.  Due to the manual order processing involved in handling OTC Markets trades, order processing and reporting may be delayed, and one may not be able to cancel or edit one's order. Consequently, one may not be able to sell its shares of our common stock at the optimum trading prices.

Increased dealer compensation could adversely affect our stock price.

The dealer's spread (the difference between the bid and ask prices) may be large and may result in substantial losses to the seller of shares of our Common Stock on the OTC Markets if the stock must be sold immediately.  Further, purchasers of shares of our Common Stock may incur an immediate "paper" loss due to the price spread.  Moreover, dealers trading on the OTC Markets may not have a bid price for shares of our Common Stock on the OTC Markets.  Due to the foregoing, demand for shares of our Common Stock on the OTC Markets may be decreased or eliminated.