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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): July 15, 2022

 

 

 

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 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 2.01 Completion of Acquisition or Disposition of Assets.

 

As previously disclosed, on June 2, 2022, Schmitt Industries, Inc. (“Schmitt” or the “Company”) entered into a Real Estate Purchase and Sale Agreement (“Sale Agreement”), whereby Tofte Farms, LLC (“Tofte”) agreed to purchase the 2765 NW Nicolai Street, Portland, Oregon property (the “Property”) of Schmitt for a purchase price of $3,500,000. On July 15, 2022, Schmitt completed the sale of the Property to Tofte for $3,500,000.

 

The foregoing description of the Sale Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the Sale Agreement, a copy of which is filed as Exhibit 10.1 to the Current Report on Form 8-K filed with Securities and Exchange Commission on June 7, 2022, incorporated by reference herein.

 

Item 8.01 Other Events.

 

On July 18, 2022, Schmitt issued a press release in connection with the foregoing. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

Item 9.01Financial Statements and Exhibits.

 

(b) Pro forma financial information.

 

The unaudited pro forma balance sheet of Schmitt, giving effect to the sale of the Property, as of February 28, 2022 and for the nine months then ended is filed as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.

 

(d) Exhibits

 

Exhibit Description
   
99.1 Press release entitled “Schmitt Industries Closes Sale Agreement for Nicolai Street Property”
   
99.2 Unaudited Pro Forma Financial Information
   
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

 

 

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.
     
July 21, 2022   By:  

/s/ Michael R. Zapata

        Name: Michael R. Zapata
        Title: Chief Executive Officer and President

 

 

 

Exhibit 99.1

 

Logo

Description automatically generated

 

IMMEDIATE NEWS RELEASE

 

SCHMITT INDUSTRIES CLOSES SALE AGREEMENT FOR NICOLAI STREET PROPERTY

 

PORTLAND, OR, July 18, 2022 – Schmitt Industries, Inc. (NASDAQ: SMIT) (the “Company” or “Schmitt”) announces that it has closed the Real Estate Purchase and Sale Agreement (the “Sale Agreement”) with Tofte Farms, LLC (“Tofte”) to purchase the 2765 NW Nicolai Street, Portland, Oregon property (the “Property”) of Schmitt for a purchase price of $3,500,000. Net proceeds are estimated to be $3,200,000 for Schmitt.

 

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.

 

Safe Harbor Statement

 

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 more information contact:

Michael R. Zapata, President and CEO

Phillip Bosco, CFO and Treasurer

(503) 227-7908

 

 

 

 

 

 

 

 

   As of February 28, 2022
   Historical As Reported  Transaction Accounting Adjustments    Pro Forma
ASSETS           
Current assets                 
Cash and cash equivalents  $1,999,241   $3,268,537  (a)  $5,267,778 
Accounts receivable, net   936,809          936,809 
Inventories   2,191,844          2,191,844 
Prepaid expenses   30,867          30,867 
Income tax receivable   17,730          17,730 
Total current assets   5,176,491    3,268,537      8,445,028 
Leasehold assets   11,423,035    837,023  (b)   12,260,058 
Property and equipment, net   2,248,500          2,248,500 
Property and equipment held for sale, net   433,410    (433,410) (c)    
Leasehold, utilities, and ERP deposits   829,001          829,001 
Other assets                 
Intangible assets, net   242,088          242,088 
TOTAL ASSETS  $20,352,525   $3,672,150     $24,024,675 
                  
LIABILITIES & STOCKHOLDERS' EQUITY                 
Current liabilities                 
Accounts payable  $555,974   $     $555,974 
Accrued commissions   59,208          59,208 
Accrued payroll liabilities   505,248          505,248 
Accrued liabilities   329,492          329,492 
Customer deposits and prepayments   112,791          112,791 
Other accrued liabilities   424,799          424,799 
Current portion of long-term lease liabilities   1,417,386    140,108  (b)   1,557,494 
Current portion of long-term debt   472,431          472,431 
Total current liabilities   3,877,329    140,108      4,017,437 
Long-term debt   1,527,569          1,527,569 
Long-term leasehold liabilities   10,833,399    696,915  (b)   11,530,314 
Long-term deferred tax liability              
Total liabilities   16,238,297    837,023      17,075,320 
Stockholders' equity                 
Common stock, no par value, 20,000,000 shares authorized, 4,236,821 and 3,818,770 shares issued and outstanding at February 28, 2022, respectively; and 4,204,553 and 3,786,502 shares issued and outstanding at May 31, 2021, respectively   12,318,375          12,318,375 
Accumulated deficit   (8,204,147)   2,835,127  (d)   (5,369,020)
Total stockholders' equity   4,114,228    2,835,127      6,949,355 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $20,352,525   $3,672,150     $24,024,675 

 

(a) Adjustment to reflect cash consideration received in the transaction.     
(b) Adjustment to recognize operating lease right-of-use asset and operating lease liability for leaseback executed as part of the transaction. 
(c) Adjustment to derecognize the net assets sold in the transaction.       
(d) Adjustment to reflect the impact of the gain on sale and transaction costs.    

 

 

 

 

   Year Ended May 31, 2021
   Historical As Reported  Transaction Accounting Adjustments    Pro Forma
Net sales  $7,864,350   $     $7,864,350 
Cost of revenue   4,593,588          4,593,588 
Gross profit   3,270,762          3,270,762 
Operating expenses                 
General, administrative and sales   12,045,174    150,414  (a)   12,195,588 
Impairment of intangible assets   903,422           903,422 
Transaction costs   125,167           125,167 
Research & development   83,130           83,130 
Total operating expenses   13,156,893    150,414      13,307,307 
Operating loss   (9,886,131)   (150,414)     (10,036,545)
Gain on sale of property and equipment               
Bargain purchase gain   1,138,808           1,138,808 
Forgiveness of PPP loans               
Interest income (expense), net   (19,038)          (19,038)
Other income (expense), net   273,023    (17,671) (b)   255,352 
Income (loss) before income taxes   (8,493,338)   (168,085)     (8,661,423)
Income tax provision (benefit) from continuing operations   (403,666)   (46,423) (c)   (450,089)
Net income (loss)  $(8,089,672)  $(121,661)    $(8,211,333)
Net income (loss) per common share:                 
Basic  $(2.15)         $(2.18)
Weighted average number of common shares, basic   3,765,783           3,765,783 
Diluted   (2.15)         $(2.18)
Weighted average number of common shares, diluted   3,765,783           3,765,783 

 

(a) Adjustment to remove historical depreciation expense recognized on disposed assets and add operating lease expense under the leaseback. 
(b) Adjustment to remove historical lease income recognized. 
(c) Adjustment to reflect the tax effect of pro forma adjustments to income (loss) before taxes, at the estimated statutory rate of 27.6%. 

 

 

 

 

   Nine Months Ended February 28, 2022
   Historical As Reported  Transaction Accounting Adjustments  Pro Forma
Net sales  $8,570,053   $     $8,570,053 
Cost of revenue   3,618,925          3,618,925 
Gross profit   4,951,128          4,951,128 
Operating expenses                 
General, administrative and sales   11,604,964    124,075  (a)   11,729,039 
Impairment of intangible assets              
Transaction costs              
Research & development   25,616          25,616 
Total operating expenses   11,630,580    124,075      11,754,655 
Operating loss   (6,679,452)   (124,075)     (6,803,527)
Gain on sale of property and equipment   4,598,095          4,598,095 
Bargain purchase gain              
Forgiveness of PPP loans   2,059,826          2,059,826 
Interest income (expense), net   (37,811)         (37,811)
Other income (expense), net   323,589    (29,098) (b)   294,491 
Income (loss) before income taxes   264,247    (153,173)     111,074 
Income tax provision (benefit) from continuing operations   14,618    (42,305) (c)   (27,687)
Net income (loss)  $249,629   $(110,868)    $138,761 
Net income (loss) per common share:                 
Basic  $0.07          $0.04 
Weighted average number of common shares, basic   3,790,022           3,790,022 
Diluted   0.07          $0.04 
Weighted average number of common shares, diluted   3,813,675           3,813,675 

 

(a) Adjustment to remove historical depreciation expense recognized on disposed assets and add operating lease expense under the leaseback. 
(b) Adjustment to remove historical lease income recognized. 
(c) Adjustment to reflect the tax effect of pro forma adjustments to income (loss) before taxes, at the estimated statutory rate of 27.6%.