8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): April 14, 2020

 

 

SCHMITT INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Oregon   001-38964   93-1151989

(State or other jurisdiction

of incorporation or organization)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification Number)

2765 N.W. Nicolai Street

Portland, Oregon 97210-1818

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (503) 227-7908

Not Applicable

Former name or former address, if changed since last report

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of 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))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock – no par value

Series A Junior Participating Preferred Stock Purchase Rights

  SMIT   NASDAQ Capital Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

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 2.02 Results of Operations and Financial Condition.

On April 14, 2020, Schmitt Industries, Inc. issued a press release entitled “Schmitt Announces Third Quarter 2020 Operating Results.” A copy of the press release is furnished as Exhibit 99.1 to this report.

The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

99.1 Press release entitled “Schmitt Announces Third Quarter 2020 Operating Results.”

Forward Looking Statements

This document may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors. A complete discussion of the risks and uncertainties that may affect Schmitt’s business, including the business of its subsidiary, is included in “Risk Factors” in the Company’s most recent Annual Report on Form 10-K as filed by the Company with the Securities and Exchange Commission.

For further information regarding risks and uncertainties associated with the Company’s business, please refer to Schmitt’s SEC filings, including, but not limited to, its Forms 10-K, 10-Q and 8-K.

The forward-looking statements in this release speak only as of the date on which they were made, and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release, or for changes to this document made by wire services or internet service providers.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    SCHMITT INDUSTRIES, INC.
April 15, 2020     By:  

/s/ Jamie Schmidt

      Name: Jamie Schmidt
      Title: Chief Financial Officer and Treasurer
EX-99.1

Exhibit 99.1

 

 

LOGO

IMMEDIATE NEWS RELEASE

Schmitt Announces Third Quarter 2020 Operating Results

 

April 14, 2020    NASDAQ: SMIT

Portland, Oregon – Schmitt Industries, Inc. (NASDAQ: SMIT) (the “Company” or “Schmitt”) today announced its operating results for the third quarter of Fiscal 2020.

Highlights of the three and nine months ended February 29, 2020:

 

   

Company revenue decreased 2.3% and 8.6% for the three and nine months ended February 29, 2020, respectively, as compared to the three and nine months ended February 28, 2019. The decrease is primarily due to a 14.4% decrease in Acuity product revenue for the three months ended February 29, 2019, and to a 34.9% decrease in Xact product revenue and a 14.9% decrease in Acuity product revenue for the nine months ended February 29, 2020. Xact’s monitoring revenue continued to grow, increasing 11.5% and 13.5% to $391,678 and $1,140,494, respectively, for the three months and nine months ended February 29, 2020.

 

   

Gross margin increased to 55.1% and 45.6% for the three and nine months ended February 29, 2020, respectively. The increase was primarily due to an inventory reserve adjustment in Q3 FY19, better pricing from vendors and improved pricing in the Xact business line for the three months ended February 29, 2020, and primarily due to a favorable product mix shift for the nine months ended February 29, 2020.

 

   

Operating expenses increased 24.5% and 15.7% for the three and nine months ended February 29, 2020, respectively. The increase was primarily due to stock-based compensation recognized as a result of vesting of market-based RSUs for the three and nine months ended February 29, 2020.

 

   

Adjusted EBITDA was $1,612 and $(101,011) for the three and nine months ended February 29, 2020, respectively, as compared to $(30,764) and $(348,437) for the three and nine months ended February 28, 2019, respectively.

 

   

Net loss from continuing operations per fully diluted share was $(0.06) and $(0.29) for the three and nine months ended February 29, 2020. Excluding expenses not expected to be incurred in future periods, including unrecoverable inventory costs, non-GAAP EPS was $(0.02) and $(0.11) for the three and nine months ended February 28, 2020, respectively.

Michael Zapata, Schmitt’s CEO and Chairman, commented, “This past quarter is indicative of the team’s focus on transitioning into Schmitt 2.0. Given the recent global developments, we are fortunate to have successfully consummated the SBS transaction last fall, which gives us a strong balance sheet and cash to be opportunistic in a difficult environment.”

“In the face of many unknowns and the unprecedented circumstances of COVID-19 pandemic we are dealing with, I believe we are also positioned well with a management team that has experience operating and making decisions in uncertain environments. As we continue forward in these uncertain times, I want to thank our team as they remain focused on long-term goals with an ability to remain flexible and adaptive. This will pass and I’m confident we will be stronger once we emerge from this environment.”

 

CORPORATE OFFICE: 2765 NW NICOLAI ST. • PORTLAND, OREGON 97210 • 503/227-7908 • FAX 503/223-1258


LOGO

 

COVID-19 Update

Schmitt has implemented COVID-19 response and business continuity plans to protect its employees and their families, to safeguard continuity of Schmitt operations, and to ensure full support to its customers and partners. For the time being, the Company has implemented new safety guidelines that maximize interpersonal space to protect employees working on location, while all other employees who can telecommute work remotely.

The Company is highly focused on retaining its workforce and leadership during these extraordinary times and will continue to evaluate the business environment and outlook to ensure preservation of enterprise value under a wide range of circumstances.

De-listing and Deregistration Update

Schmitt continues to evaluate a shareholder value opportunity in regard to the previously announced intent to delist. There can be no assurance that the Company will enter into an agreement relating to the transaction or as to the timing or the terms of such opportunity thereof or what impact of such opportunity would be on the trading of the Company’s common stock. To the extent that the Company elects to proceed with delisting, it will provide shareholders and NASDAQ ten days notice of any intent to file a Form 25.

Share Repurchases

On December 3, 2019, the Company announced that its Board of Directors authorized a share repurchase plan to buy up to $2 million of its Common Stock. Since the announcement, the Company has repurchased approximately 10% of its shares through both a private transaction for 365,490 shares at $3.25 per share and 46,932 shares at an average price of $3.10 per share, which was done in accordance with a 10b5-1 plan. At this time, the plan has been suspended pending the evaluation of the shareholder value opportunity discussed above. Due to the private transaction remaining outside of the $2m repurchase plan, $1.85 million remains available on the repurchase plan once resumed.

Summary data for the three months ended February 29 and 28, 2020 and 2019:

 

     Three Months Ended
February 29 and 28,
              
     2020     2019     Change ($)      Change (%)  

Total net revenue

   $ 1,094,967     $ 1,120,545     $ (25,578      (2.3 %) 

Gross margin

     55.1     37.1     

Operating expenses

   $ 1,035,322     $ 831,602     $ 203,720        24.5

Net loss from continuing operations

   $ (240,277   $ (423,963   $ 183,686        (43.3 %) 

Net loss per fully diluted share from continuing operations

   $ (0.06   $ (0.11   $ 0.04        (41.2 %) 

Summary data for the nine months ended February 29 and 28, 2020 and 2019:

 

     Nine Months Ended
February 29 and 28,
              
     2020     2019     Change ($)      Change (%)  

Total net revenue

   $ 3,222,846     $ 3,524,666     $ (301,820      (8.6 %) 

Gross margin

     45.6     39.0     

Operating expenses

   $ 2,818,187     $ 2,435,661     $ 382,526        15.7

Net loss from continuing operations

   $ (1,138,481   $ (1,058,660   $ (79,821      7.5

Net loss per fully diluted share from continuing operations

   $ (0.29   $ (0.26   $ (0.02      7.6

 

CORPORATE OFFICE: 2765 NW NICOLAI ST. • PORTLAND, OREGON 97210 • 503/227-7908 • FAX 503/223-1258


LOGO

 

Reconciliation of Adjusted EBITDA:

 

     Three Months Ended
February 29, 2020
     Nine Months Ended
February 29, 2020
 

Loss before income taxes from continuing operations

   $ (244,483    $ (1,150,516

Depreciation and amortization

     37,803        121,080  
  

 

 

    

 

 

 

EBITDA from continuing operations

   $ (206,680    $ (1,029,436
  

 

 

    

 

 

 

Adjusted for:

     

Stock-based compensation

     134,122        326,724  

Non-recurring expenses

     93,249        601,929  

Software write-down & recoveries

     (19,079      57,942  

Non-recurring loss from discontinued product line

     —          (134,269

Unrecoverable inventory costs

     —          76,099  
  

 

 

    

 

 

 

Adjusted EBITDA from continuing operations

   $ 1,612      $ (101,011
  

 

 

    

 

 

 

 

     Three Months Ended
February 28, 2019
     Nine Months Ended
February 28, 2019
 

Loss before income taxes from continuing operations

   $ (421,774    $ (1,052,244

Depreciation and amortization

     42,118        131,097  
  

 

 

    

 

 

 

EBITDA from continuing operations

   $ (379,656    $ (921,147
  

 

 

    

 

 

 

Adjusted for:

     

Stock-based compensation

     (3,309      5,679  

Inventory reserve adjustment

     116,131        116,131  

Non-recurring expenses

     236,070        450,900  
  

 

 

    

 

 

 

Adjusted EBITDA from continuing operations

   $ (30,764    $ (348,437
  

 

 

    

 

 

 

Reconciliation of Adjusted Net Income and Non-GAAP EPS:

 

     Three Months Ended
February 29, 2020
     Nine Months Ended
February 29, 2020
 

Net loss from continuing operations

   $ (240,277    $ (1,138,481

Adjusted for:

     

Stock-based compensation

     134,122        326,724  

Non-recurring expenses

     93,249        601,929  

Software write-down & recoveries

     (19,079      57,942  

Non-recurring loss from discontinued product line

     —          (134,269

Unrecoverable inventory costs

     —          76,099  

Tax effect of adjustments*

     (52,073      (232,106
  

 

 

    

 

 

 

Adjusted net loss from continuing operations (non-GAAP)

   $ (84,058    $ (442,162
  

 

 

    

 

 

 

Non-GAAP (loss) per fully diluted share

   $ (0.02    $ (0.11
  

 

 

    

 

 

 

 

*

Assumes a marginal effective tax rate of 25%

 

CORPORATE OFFICE: 2765 NW NICOLAI ST. • PORTLAND, OREGON 97210 • 503/227-7908 • FAX 503/223-1258


LOGO

 

About Schmitt Industries

Schmitt Industries, Inc., founded in 1987, designs, manufactures and sells high precision test and measurement products, solutions and services through its Acuity® and Xact® product lines. Acuity provides laser and white light sensor distance measurement and dimensional sizing products, and our Xact line provides ultrasonic-based remote tank monitoring products and related monitoring revenues for markets in the Internet of Things environment.

FORWARD-LOOKING STATEMENTS

This document may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors. A complete discussion of the risks and uncertainties that may affect Schmitt’s business, including the business of its subsidiary, is included in “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and its Quarterly Report on Form 10-Q as filed by the Company with the Securities and Exchange Commission.

For further information regarding risks and uncertainties associated with the Company’s business, please refer to Schmitt’s SEC filings, including, but not limited to, its Forms 10-K, 10-Q and 8-K.

The forward-looking statements in this release speak only as of the date on which they were made, and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release, or for changes to this document made by wire services or internet service providers.

 

For more information contact:   

Michael R. Zapata, President and CEO

Jamie Schmidt, CFO and Treasurer

(503) 227-7908 or visit our web site at www.schmitt-ind.com

 

CORPORATE OFFICE: 2765 NW NICOLAI ST. • PORTLAND, OREGON 97210 • 503/227-7908 • FAX 503/223-1258


SCHMITT INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

     February 29, 2020      May 31, 2019  
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 10,544,255      $ 1,467,435  

Restricted cash

     420,000        —    

Accounts receivable, net

     645,691        631,126  

Inventories

     1,057,084        1,241,132  

Prepaid expenses

     91,376        101,617  

Current assets held for sale

     —          5,192,384  
  

 

 

    

 

 

 

Total current assets

     12,758,406        8,633,694  
  

 

 

    

 

 

 

Property and equipment, net

     659,263        753,407  
  

 

 

    

 

 

 

Other assets

     

Intangible assets, net

     313,748        392,185  

Noncurrent assets held for sale

     —          85,967  
  

 

 

    

 

 

 

TOTAL ASSETS

   $ 13,731,417      $ 9,865,253  
  

 

 

    

 

 

 
LIABILITIES & STOCKHOLDERS’ EQUITY      

Current liabilities

     

Accounts payable

   $ 277,825      $ 102,566  

Accrued commissions

     54,317        71,663  

Accrued payroll liabilities

     51,981        112,351  

Customer deposits and prepayments

     104,578        78,376  

Other accrued liabilities

     620,687        128,353  

Income taxes payable

     62,788        491  

Current portion of long-term liabilities

     —          20,828  

Current liabilities held for sale

     —          849,149  
  

 

 

    

 

 

 

Total current liabilities

     1,172,176        1,363,777  
  

 

 

    

 

 

 

Long-term liabilities

     —          28,543  
  

 

 

    

 

 

 

Total liabilities

     1,172,176        1,392,320  
  

 

 

    

 

 

 

Stockholders’ equity

     

Common stock, no par value, 20,000,000 shares authorized, 3,783,485 shares issued and outstanding at February 29, 2020 and 4,032,878 shares issued and outstanding at May 31, 2019

     12,247,264        13,245,439  

Accumulated other comprehensive loss

     —          (527,827

Retained earnings (accumulated deficit)

     311,977        (4,244,679
  

 

 

    

 

 

 

Total stockholders’ equity

     12,559,241        8,472,933  
  

 

 

    

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 13,731,417      $ 9,865,253  
  

 

 

    

 

 

 


SCHMITT INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS AND NINE MONTHS ENDED FEBRUARY 29 AND 28, 2020 AND 2019

(UNAUDITED)

 

     Three Months Ended
February 29 and 28,
    Nine Months Ended
February 29 and 28,
 
     2020     2019     2020     2019  

Net revenue

   $ 1,094,967     $ 1,120,545     $ 3,222,846     $ 3,524,666  

Cost of revenue

     491,346       705,259       1,752,116       2,148,567  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     603,621       415,286       1,470,730       1,376,099  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

General, administration and sales

     1,011,414       826,105       2,785,816       2,382,756  

Research and development

     23,908       5,497       32,371       52,905  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     1,035,322       831,602       2,818,187       2,435,661  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss)

     (431,701     (416,316     (1,347,457     (1,059,562

Other income, net

     187,218       (5,458     196,941       7,318  
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) before income taxes

     (244,483     (421,774     (1,150,516     (1,052,244

Provision for income taxes

     (4,206     2,189       (12,035     6,416  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) from continuing operations

     (240,277   $ (423,963   $ (1,138,481   $ (1,058,660
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from discontinued operations, including gain on sale, net of tax

     109,107       (51,226     5,695,137       116,382  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (131,170   $ (475,189   $ 4,556,656     $ (942,278
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) per common share from continuing operations:

        

Basic

   $ (0.06   $ (0.11   $ (0.29   $ (0.26
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of common shares, basic

     3,858,287       4,000,990       3,992,664       3,996,670  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ (0.06   $ (0.11   $ (0.29   $ (0.26
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of common shares, diluted

     3,858,287       4,000,990       3,992,664       3,996,670  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share from discontinued operations:

        

Basic

   $ 0.03     $ (0.01   $ 1.43     $ 0.03  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of common shares, basic

     3,858,287       4,000,990       3,992,664       3,996,670  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.03     $ (0.01   $ 1.43     $ 0.03  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of common shares, diluted

     3,858,287       4,000,990       3,992,664       3,996,670  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common share:

        

Basic

   $ (0.03   $ (0.12   $ 1.14     $ (0.24
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of common shares, basic

     3,858,287       4,000,990       3,992,664       3,996,670  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ (0.03   $ (0.12   $ 1.14     $ (0.24
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of common shares, diluted

     3,858,287       4,000,990       3,992,664       3,996,670  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

        

Net income (loss)

   $ (131,170   $ (475,189   $ 4,556,656     $ (942,278

Foreign currency translation adjustment

     —         (47,256     527,827       26,481  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

   $ (131,170   $ (522,445   $ 5,084,483     $ (915,797