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): January 14, 2021

 

SCHMITT INDUSTRIES, INC.

(Exact Name of Registrant as Specified in Its Charter)
     
Oregon 001-38964 93-1151989
(State or Other Jurisdiction
of Incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
     

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 (see General Instruction A.2. below):

 

☐ 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 SMIT  NASDAQ Capital Market
Series A Junior Participating Preferred Stock Purchase Rights N/A

N/A

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

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 January 14, 2021, Schmitt Industries, Inc. (the “Company”) issued a press release entitled “Schmitt Announces Second Quarter 2021 Operating Results” and a press release entitled “Use of Non-GAAP Financial Measures.” A copy of the press release is furnished as Exhibit 99.1 to this report.

 

The information contained in Item 2.02 of 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.

 

Special Note Regarding Forward-Looking Statements

This Form 8-K contains forward-looking statements within the meaning of the federal securities laws, that are, to different degrees, uncertain. Forward-looking statements involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements in this Form 8-K. In addition, please refer to the risk factors contained in our periodic filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended May 31, 2020, available at www.sec.gov, under the caption Risk Factors and elsewhere. We do not undertake any obligation to update any forward-looking statements to reflect new information or events or circumstances occurring after the date of this Form 8-K.

Item 9.01. Financial Statements and Exhibits.

 (d)       Exhibits.

99.1       Press Release of Schmitt Industries, Inc., issued on January 14, 2021, entitled “Schmitt Announces Second Quarter 2021 Operating Results.”

 

 

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.
     
January 14, 2021   By:  

/s/ Philip Bosco

        Name: Philip Bosco
        Title: Chief Financial Officer and Treasurer

 

Exhibit 99.1

IMMEDIATE NEWS RELEASE

Schmitt Announces Second Quarter Fiscal 2021 Operating Results

 

January 14, 2021

 

NASDAQ: SMIT

 

Portland, Oregon – Schmitt Industries, Inc. (NASDAQ: SMIT) (the “Company” or “Schmitt”) today announced its operating results for the fiscal quarter ended November 30, 2020. The operating results for the six months ended November 30, 2020 include first quarter financial results from Schmitt’s July 9, 2020 acquisition of Ample Hills Creamery (“Ample Hills”).

Highlights of the three months and six months ended November 30, 2020

·Consolidated revenues increased $996,610, or 96.5%, to $2,029,712 for the three months ended November 30, 2020, as compared to $1,033,102 for the three months ended November 30, 2019. For the six months ended November 30, 2020, consolidated revenues increased $1,409,318, or 66.2%, to $3,537,197, as compared to $2,127,879 for the six months ended November 30, 2019.
·The company’s newly formed Ice Cream Segment’s first full quarter of operations generated revenues of $1,158,989 for the three months ended November 30, 2020. From the date of the Company’s acquisition of Ample Hills on July 9, 2020 through November 30, 2020, the ice cream segment generated revenue of $1,660,409.
·Measurement Segment revenue decreased $162,379, or 15.7%, to $870,723 for the three months ended November 30, 2020, as compared to $1,033,102 for the three months ended November 30, 2019. Measurement Segment revenue decreased $251,092, or 11.8%, to $1,876,788 for the six months ended November 30, 2020, as compared to $2,127,880 for the six months ended November 30, 2020. The decreases are primarily due to a $33,202, or 9.0%, decline in sales of the Company’s Acuity products for the three months ended and $112,747, or 13.8%, for the six months ended November 30, 2020. Recurring revenue from the Company’s Xact products monitoring services continued to grow, increasing $39,158, or 10.3%, to $420,133 for the three months ended November 30, 2020 and $59,754, or 8.0%, increase to $808,570 for the six months ended November 30, 2020, as compared to the three and six month periods ended November 30, 2019. The increase in Xact product monitoring services was offset by a decrease in Xact product sales of $122,917, or 56.6%, to $94,413 for the three months ended and $120,968, or 28.2%, decrease to $307,406 for the six months ended November 30, 2020.
·Gross margin increased to 47.4% for the three months ended November 30, 2020, as compared to 37.7% for the three months ended November 30,2020. Gross margin increased to 44.4% for the six months ended November 30, 2020 as compared to 40.7% for the six months ended November 30, 2019. The increase in gross margin is due to the start-up of the Ample Hill’s factory and the decline in lower margin Acuity sales.
·Operating expenses increased $2,110,785, or 211.4%, to $3,109,392 for the three months ended November 30, 2020, as compared to $998,607 for the three months ended November 30, 2019. The increase was primarily due to the inclusion of the Ample Hills business along with increased stock compensation, professional fees, and investments in information technology.

 

 

·Net loss from continuing operations was $2,366,469, or ($0.63) per share, for the three months ended November 30, 2020, as compared to a net loss of ($599,058), or ($0.15) per share, for the three months ended November 30, 2019. Net loss from the continuing operations was $2,215,810, or ($0.59) per share, for the six months ended November 30, 2020, as compared to a net loss of ($821,185), or ($0.20) per share for the six months ended November 30, 2019. Excluding the $1,189,512 bargain purchase gain realized as a result of the acquisition of Ample Hills, stock-based compensation, transaction fees and re-organization expenses, and income from discontinued product lines, non-GAAP earnings per share from continuing operations for the three months was $(0.59) and $(0.82) for the six months ended November 30, 2020.
·Adjusted EBITDA decreased $2,120,611, to ($2,132,309), for the three months ended November 30, 2020, as compared to ($11,698) for the three months ended November 30, 2019. For the six months ended November 30, 2020, Adjusted EBITDA decreased $3,199,214 to $3,301,839, as compared to ($102,625).

The Company finished the quarter ended November 30, 2020 with $7,337,469 in cash, as compared to $10,566,531 for the year ended May 31, 2020.

Michael Zapata, Schmitt’s Chairman and Chief Executive Officer, commented, “The second quarter of fiscal year 2021 continued our focus on stabilization and building a strong foundation for our businesses. At Ample Hills Creamery, we are investing in both our assets and our people. We approved a capital project to upgrade our equipment and improve production efficiencies at our iconic Red Hook factory, while also focusing on cost reduction in our purchasing practices. At our 10 retail locations, we’ve implemented new ice cream and cabinet management training whjle supporting and protecting our Amployees. As we move forward, we will continue to focus on building our brand, expanding our wholesale and e-commerce presence, and identifying strong co-pack partners for our Red Hook factory.

“In our SMS Measurement segment, we redesigned our Acuity website and Xact portal for an improved customer service experience while continuing to build our sales pipeline and implementing production process improvements. Despite uncertain economic conditions, our teams have maintained discipline in execution and will continue to do so as we enter the new year.”

Shareholder Rights Plan

As previously disclosed, the Schmitt Board of Directors (“Board”) believes the Section 382 Rights Agreement (“Agreement”) that was implemented in 2019 has served its purpose of preserving the Net Operating Losses (“NOLs”) so they could be used to offset cash taxes for shareholders. Effective January 14, 2021, the Board has approved for the removal of the Agreement, which it believes is in the best interest of shareholders and appropriate corporate governance.

Real Estate Update

Schmitt listed the 28th Street building for sale on December 18, 2020. There is no certainty or timing of the sale of this property.

 

 

Summary data for the three and six months ended November 30, 2020:

      Three months ended November 30,   Change
        2020     2019     $     %
Total net revenue     $    2,029,712   $       1,033,102   $       996,610     96.5%
Gross margin       47.4%     37.7%            
Operating expenses          3,109,393              998,607        2,110,786     211.4%
Net loss from continued operations         (2,366,469)            (599,058)       (1,767,411)     295.0%
Net loss per common share
from continued operations, diluted
    $          (0.63)   $             (0.15)   $          (0.48)     320.0%
                           
      Six months ended November 30,   Change
        2020     2019     $     %
Total net revenue     $    3,537,197   $       2,127,879   $    1,409,318     66.2%
Gross margin       44.4%     40.7%            
Operating expenses          5,338,729           1,705,845        3,632,884     213.0%
Net loss from continued operations         (2,215,810)            (821,185)       (1,394,625)     169.8%
Net loss per common share
from continued operations, diluted
    $          (0.59)   $             (0.20)   $          (0.39)     195.0%

 

Reconciliation of Adjusted EBITDA:

      Three months ended November 30,
        2020     2019
Loss before income taxes from continuing operations   $   (2,364,832)   $        (603,497)
Depreciation and amortization             100,724               41,249
EBITDA from continuing operations     $   (2,264,108)   $        (562,248)
               
Adjusted for:              
Bargain purchase gain              82,103                      -   
Income from discontinued product line             (18,852)              (64,270)
Transaction fees and re-organization expenses                     -                 466,707
Stock-based compensation              68,549               72,014
Unrecoverable Inventory Costs                     -                  76,099
Adjusted EBITDA from continuing operations     $   (2,132,308)   $          (11,698)
               
      Six months ended November 30,
        2020     2019
Loss before income taxes from continuing operations   $   (2,618,840)   $        (829,014)
Depreciation and amortization             187,114               83,277
EBITDA from continuing operations     $   (2,431,726)   $        (745,737)
               
Adjusted for:              
Bargain purchase gain         (1,189,512)                      -   
Income from discontinued product line             (57,139)            (134,270)
Transaction fees and re-organization expenses             125,167              508,681
Stock-based compensation             251,371              192,602
Unrecoverable Inventory Costs                     -                  76,099
Adjusted EBITDA from continuing operations     $   (3,301,839)   $        (102,625)

 

 

Reconciliation of Adjusted Net Loss and Non-GAAP EPS:

      Three months ended November 30,
        2020     2019
Net loss from continuing operations     $   (2,366,469)   $        (599,058)
Adjusted for:              
Bargain purchase gain              82,103                      -   
Income from discontinued product line             (18,852)              (64,270)
Transaction fees and re-organization expenses                     -                 466,707
Stock-based compensation              68,549               72,014
Unrecoverable Inventory Costs                     -                  76,099
Adjusted net loss from continuing operations (Non-GAAP)   $   (2,234,669)   $          (48,508)
Non-GAAP loss per fully diluted share     $          (0.59)   $             (0.01)
               
      Six months ended November 30,
        2020     2019
Net loss from continuing operations     $   (2,215,810)   $        (821,185)
Adjusted for:              
Bargain purchase gain         (1,189,512)                      -   
Income from discontinued product line             (57,139)            (134,270)
Transaction fees and re-organization expenses             125,167              508,681
Stock-based compensation             251,371              192,602
Unrecoverable Inventory Costs                     -                  76,099
Adjusted net loss from continuing operations (Non-GAAP)   $   (3,085,923)   $        (178,073)
Non-GAAP loss per fully diluted share     $          (0.82)   $             (0.04)

 

Use of Non-GAAP Financial Measures by Schmitt Industries

 

This release presents the non-GAAP financial measures “Adjusted EBITDA from continuing operations”, “Adjusted net loss from continuing operations (Non-GAAP)”, and “Non-GAAP loss per fully diluted share.” The most directly comparable measure for these non-GAAP financial measures are net income and basic and diluted net income per share. The Company presents adjusted EBITDA after excluding the bargain purchase gain related to the Ample Hills acquisition, related transaction and re-organization expenses, and stock-based compensation.

 

A discussion of the reasons why management believes that the presentation of non-GAAP financial measures provides useful information to investors regarding Schmitt’s financial condition and results of operations is included as Exhibit 10.5 to Schmitt’s report on Form 8-K filed with the Securities and Exchange Commission on January 15, 2021.

 

 

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. The Company also owns and operates Ample Hills Creamery, a beloved ice cream manufacturer and retailer based in Brooklyn, NY.

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.

For more information contact:

Michael R. Zapata, President and CEO

Philip Bosco, CFO and Treasurer

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