Company Quick10K Filing
Quick10K
Schmitt Industries
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$2.37 4 $10
10-Q 2019-08-31 Quarter: 2019-08-31
10-K 2019-05-31 Annual: 2019-05-31
10-Q 2019-02-28 Quarter: 2019-02-28
10-Q 2018-11-30 Quarter: 2018-11-30
10-Q 2018-08-31 Quarter: 2018-08-31
10-K 2018-05-31 Annual: 2018-05-31
10-Q 2018-02-28 Quarter: 2018-02-28
10-Q 2017-11-30 Quarter: 2017-11-30
10-Q 2017-08-31 Quarter: 2017-08-31
10-K 2017-05-31 Annual: 2017-05-31
10-Q 2017-02-28 Quarter: 2017-02-28
10-Q 2016-11-30 Quarter: 2016-11-30
10-Q 2016-08-31 Quarter: 2016-08-31
10-K 2016-05-31 Annual: 2016-05-31
10-Q 2016-02-29 Quarter: 2016-02-29
10-Q 2015-11-30 Quarter: 2015-11-30
10-Q 2015-08-31 Quarter: 2015-08-31
10-K 2015-05-31 Annual: 2015-05-31
10-Q 2015-02-28 Quarter: 2015-02-28
10-Q 2014-11-30 Quarter: 2014-11-30
10-Q 2014-08-31 Quarter: 2014-08-31
10-K 2014-05-31 Annual: 2014-05-31
10-Q 2014-02-28 Quarter: 2014-02-28
10-Q 2013-11-30 Quarter: 2013-11-30
8-K 2019-10-09 Enter Agreement, Regulation FD, Exhibits
8-K 2019-10-08 Earnings, Other Events, Exhibits
8-K 2019-08-23 Officers, Exhibits
8-K 2019-07-31 Earnings, Other Events, Exhibits
8-K 2019-07-30 Enter Agreement, Officers, Exhibits
8-K 2019-07-01 Enter Agreement, Shareholder Rights, Amend Bylaw, Regulation FD, Exhibits
8-K 2019-06-21 Officers, Exhibits
8-K 2019-04-10 Earnings, Exhibits
8-K 2019-01-10 Earnings, Exhibits
8-K 2018-12-18
8-K 2018-11-26 Enter Agreement, Officers, Amend Bylaw, Exhibits
8-K 2018-10-30 Enter Agreement, Exhibits
8-K 2018-10-16 Shareholder Vote
8-K 2018-10-12 Earnings, Exhibits
8-K 2018-09-14 Other Events, Exhibits
8-K 2018-07-18 Earnings, Officers, Exhibits
8-K 2018-04-06 Earnings, Exhibits
8-K 2018-01-05 Officers, Exhibits
KEYS Keysight Technologies 18,081
ZBRA Zebra Technologies 10,719
LII Lennox 9,802
ST Sensata Technologies Holding 7,016
OC Owens Corning 5,990
LECO Lincoln Electric Holdings 5,117
TNC Tennant 1,219
NANO Nanometrics 662
CPST Capstone Systems 49
BTN Ballantyne Strong 47
SMIT 2019-08-31
Part I - Financial Information
Item 1. Financial Statements
Note 1:
Note 2:
Note 3:
Note 4:
Note 5:
Note 6:
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 6. Exhibits
EX-31.1 d801919dex311.htm
EX-31.2 d801919dex312.htm
EX-32.1 d801919dex321.htm

Schmitt Industries Earnings 2019-08-31

SMIT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 d801919d10q.htm 10-Q 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: August 31, 2019

Or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from:                      To:                     

Commission File Number: 000-23996

 

 

SCHMITT INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Oregon   93-1151989

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification Number)

2765 N.W. Nicolai Street

Portland, Oregon 97210

(Address of principal executive offices) (Zip Code)

(503) 227-7908

(Registrant’s telephone number, including area code)

 

 

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

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

None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (check one):

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
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.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of shares of each class of common stock outstanding as of September 30, 2019

 

Common stock, no par value    4,086,406

 

 

 


Table of Contents

SCHMITT INDUSTRIES, INC.

INDEX TO FORM 10-Q

 

     Page  
Part I - FINANCIAL INFORMATION

 

Item 1.  

Consolidated Financial Statements (unaudited):

  
 

Consolidated Balance Sheets

     4  
 

Consolidated Statements of Operations and Comprehensive Income (Loss)

     5  
 

Consolidated Statements of Cash Flows

     6  
 

Consolidated Statement of Changes in Stockholders’ Equity

     7  
 

Notes to Consolidated Interim Financial Statements

     8  
Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     15  
Item 3.  

Quantitative and Qualitative Disclosures About Market Risk

     18  
Item 4.  

Controls and Procedures

     18  
Part II - OTHER INFORMATION

 

Item 6.  

Exhibits

     19  
Signatures

 

Certifications

 

 

Page 2


Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SCHMITT INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

     August 31, 2019     May 31, 2019  
ASSETS

 

Current assets

    

Cash and cash equivalents

   $ 1,592,847     $ 1,411,732  

Restricted cash

     54,895       55,703  

Accounts receivable, net

     2,004,159       1,996,240  

Inventories

     5,019,109       5,019,044  

Prepaid expenses

     155,405       150,975  
  

 

 

   

 

 

 

Total current assets

     8,826,415       8,633,694  
  

 

 

   

 

 

 

Property and equipment, net

     817,478       839,374  
  

 

 

   

 

 

 

Other assets

    

Intangible assets, net

     366,039       392,185  

Operating lease right-of-use assets

     102,767       0  
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 10,112,699     $ 9,865,253  
  

 

 

   

 

 

 
LIABILITIES & STOCKHOLDERS’ EQUITY

 

Current liabilities

    

Accounts payable

   $ 505,496     $ 496,362  

Accrued commissions

     173,491       200,116  

Accrued payroll liabilities

     171,768       239,476  

Customer deposits and prepayments

     197,982       188,236  

Other accrued liabilities

     127,635       218,268  

Income taxes payable

     14,134       491  

Current portion of long-term liabilities

     21,258       20,828  

Current portion of operating lease liabilities

     32,721       0  
  

 

 

   

 

 

 

Total current liabilities

     1,244,485       1,363,777  
  

 

 

   

 

 

 

Long-term liabilities

     23,065       28,543  

Long-term operating lease liabilities

     70,046       0  
  

 

 

   

 

 

 

Total liabilities

     1,337,596       1,392,320  
  

 

 

   

 

 

 

Stockholders’ equity

    

Common stock, no par value, 20,000,000 shares authorized, 4,032,878 shares issued and outstanding at August 31, 2019 and May 31, 2019

     13,317,453       13,245,439  

Accumulated other comprehensive loss

     (467,479     (527,827

Accumulated deficit

     (4,074,871     (4,244,679

Total stockholders’ equity

     8,775,103       8,472,933  
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 10,112,699     $ 9,865,253  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these financial statements.

 

Page 3


Table of Contents

SCHMITT INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

FOR THE THREE MONTHS ENDED AUGUST 31, 2019 AND 2018

 

     Three Months Ended
August 31,
 
     2019     2018  

Net revenue

   $ 3,341,885     $ 3,440,453  

Cost of revenue

     1,781,547       2,100,655  
  

 

 

   

 

 

 

Gross profit

     1,560,338       1,339,798  
  

 

 

   

 

 

 

Operating expenses:

    

General, administration and sales

     1,279,007       1,405,363  

Research and development

     12,167       48,237  
  

 

 

   

 

 

 

Total operating expenses

     1,291,174       1,453,600  
  

 

 

   

 

 

 

Operating income (loss)

     269,164       (113,802

Other income (expense), net

     (83,388     (91,651
  

 

 

   

 

 

 

Income (loss) before income taxes

     185,776       (205,453

Provision for income taxes

     15,968       6,366  
  

 

 

   

 

 

 

Net income (loss)

   $ 169,808     $ (211,819
  

 

 

   

 

 

 

Net income (loss) per common share:

    

Basic

   $ 0.04     $ (0.05
  

 

 

   

 

 

 

Weighted average number of common shares, basic

     4,032,878       3,994,545  
  

 

 

   

 

 

 

Diluted

   $ 0.04     $ (0.05
  

 

 

   

 

 

 

Weighted average number of common shares, diluted

     4,059,279       3,994,545  
  

 

 

   

 

 

 

Comprehensive income (loss)

    

Net income (loss)

   $ 169,808     $ (211,819

Foreign currency translation adjustment

     60,348       79,644  
  

 

 

   

 

 

 

Total comprehensive income (loss)

   $ 230,156     $ (132,175
  

 

 

   

 

 

 

The accompanying notes are an integral part of these financial statements.

 

Page 4


Table of Contents

SCHMITT INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED AUGUST 31, 2019 AND 2018

 

     Three Months Ended
August 31,
 
     2019     2018  

Cash flows relating to operating activities

    

Net income (loss)

   $ 169,808     $ (211,819

Adjustments to reconcile net income (loss) to net cash used in operating activities:

    

Depreciation and amortization

     47,974       47,217  

Gain on disposal of property and equipment

     (12,000     0  

Stock based compensation

     72,014       5,597  

(Increase) decrease in:

    

Accounts receivable

     (22,782     164,312  

Inventories

     (11,863     (434,075

Prepaid expenses

     (5,106     28,447  

Increase (decrease) in:

    

Accounts payable

     11,575       (14,346

Accrued liabilities and customer deposits

     (171,702     11,722  

Income taxes payable

     13,643       479  
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     91,561       (402,466
  

 

 

   

 

 

 

Cash flows relating to investing activities

    

Purchases of property and equipment

     0       (5,250

Proceeds from the sale of property and equipment

     12,000       0  
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     12,000       (5,250
  

 

 

   

 

 

 

Cash flows relating to financing activities

    

Payments on long-term liabilities

     (5,048     0  
  

 

 

   

 

 

 

Net cash used in investing activities

     (5,048     0  
  

 

 

   

 

 

 

Effect of foreign exchange translation on cash

     81,794       97,009  
  

 

 

   

 

 

 

Increase (decrease) in cash, cash equivalents and restricted cash

     180,307       (310,707

Cash, cash equivalents and restricted cash, beginning of period

     1,467,435       2,111,533  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash, end of period

   $ 1,647,742     $ 1,800,826  
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information

    

Cash paid during the period for income taxes

   $ 2,325     $ 5,887  
  

 

 

   

 

 

 

Cash paid during the period for interest

   $ 2,073     $ 263  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these financial statements.

 

Page 5


Table of Contents

SCHMITT INDUSTRIES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED AUGUST 31, 2019 AND 2018

 

     Shares      Amount      Accumulated
other
comprehensive
loss
    Accumulated
deficit
    Total  

Balance, May 31, 2019

     4,032,878      $ 13,245,439      $ (527,827   $ (4,244,679   $ 8,472,933  

Stock-based compensation

     0        72,014        0       0       72,014  

Net income

     0        0        0       169,808       169,808  

Other comprehensive income

     0        0        60,348       0       60,348  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance, August 31, 2019

     4,032,878      $ 13,317,453      $ (467,479   $ (4,074,871   $ 8,775,103  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance, May 31, 2018

     3,994,545      $ 13,085,652      $ (536,307   $ (3,033,689   $ 9,515,656  

Stock-based compensation

     0        5,597        0       0       5,597  

Net loss

     0        0        0       (211,819     (211,819

Other comprehensive income

     0        0        79,644       0       79,644  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance, August 31, 2018

     3,994,545      $ 13,091,249      $ (456,663   $ (3,245,508   $ 9,389,078  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these financial statements.

 

Page 6


Table of Contents

SCHMITT INDUSTRIES, INC.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 1:

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

In the opinion of management, the accompanying unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly its financial position as of August 31, 2019 and its results of operations and its cash flows for the periods presented. The consolidated balance sheet at May 31, 2019 has been derived from the Annual Report on Form 10-K for the fiscal year ended May 31, 2019. The accompanying unaudited financial statements and related notes should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2019. Operating results for the interim periods presented are not necessarily indicative of the results that may be experienced for the fiscal year ending May 31, 2020.

Principles of Consolidation

These consolidated financial statements include those of the Company and its wholly owned subsidiaries: Schmitt Measurement Systems, Inc., Schmitt Europe, Ltd. and Schmitt Industries (Canada) Limited. All significant intercompany accounts and transactions have been eliminated in the preparation of the consolidated financial statements.

Reclassification

Certain amounts in the prior period consolidated balance sheet have been reclassified to conform to the presentation of the current period. These reclassifications had no effect on the statement of operations, comprehensive income (loss) or cash flows.

Revenue Recognition

The Company determines the amount of revenue it recognizes associated with the transfer of each product or service. For sales of products or delivery of monitoring services to all customers, each transaction is evaluated to determine whether there is approval and commitment from both the Company and the customer for the transaction; whether the rights of each party are specifically identified; whether the transaction has commercial substance; whether collectability from the customer is probable at the inception of the contract and whether the transaction amount is defined. If a transaction to sell products or provide monitoring services meets all of the above criteria, revenue is recognized for the sales of product at the time of shipment or for monitoring services at the completion of the month in which monitoring services are provided.

The Company incurs commissions associated with the sales of products, which are accrued and expensed at the time the product is shipped. These amounts are recorded within general, administration and sales expense. The Company also incurs costs related to shipping and handling of its products, the costs of which are expensed as incurred as a component of cost of sales. Shipping and handling fees billed to customers, which are recognized at the time of shipment as a component of net revenues, were $37,228 and $49,240 for the three months ended August 31, 2019 and August 31, 2018, respectively.

Cash, Cash Equivalents and Restricted Cash

The Company generally invests its excess cash in money market funds. The Company’s investment policy also allows for cash to be invested in investment grade highly liquid securities, and the Company considers securities that are highly liquid, readily convertible into cash and have original maturities of less than three months when purchased to be cash equivalents. The Company’s cash consists of demand deposits in large financial institutions. At times, balances may exceed federally insured limits.

Restricted cash consists of an amount received from a customer in December 2017 as part of an on-going contract. The services being provided under this contract are expected to be completed in the second half of Fiscal 2020. Once the services under this contract are complete and acceptance has been provided by the customer, the restrictions on this advance cash payment will be released.

The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within the Consolidated Balance Sheets as of August 31, 2019 and May 31, 2019 to the sum of the same such amounts as shown in the Consolidated Statement of Cash Flows for the three months ended August 31, 2019:

 

Page 7


Table of Contents
     August 31, 2019      May 31, 2019  

Cash and cash equivalents

   $ 1,592,847      $ 1,411,732  

Restricted cash

     54,895        55,703  
  

 

 

    

 

 

 

Total cash, cash equivalents, and restricted cash shown in the Consolidated Statement of Cash Flows

   $ 1,647,742      $ 1,467,435  
  

 

 

    

 

 

 

Accounts Receivable

The Company maintains credit limits for all customers based upon several factors, including but not limited to financial condition and stability, payment history, published credit reports and use of credit references. Management performs various analyses to evaluate accounts receivable balances to ensure recorded amounts reflect estimated net realizable value. This review includes using accounts receivable agings, other operating trends and relevant business conditions, including general economic factors, as they relate to each of the Company’s domestic and international customers. In the event there is doubt about whether a customer account is collectible, a reserve is provided. If these analyses lead management to the conclusion that a customer account is uncollectible, the balance will be directly charged to bad debt expense. The allowance for doubtful accounts was $48,960 and $43,388 as of August 31, 2019 and May 31, 2019, respectively.

Inventories

Inventories are valued at the lower of cost or net realizable value with cost determined on the average cost basis. Costs included in inventories consist of materials, labor and manufacturing overhead, which are related to the purchase or production of inventories. Write-downs, when required, are made to reduce excess inventories to their net realizable values. Such estimates are based on assumptions regarding future demand and market conditions. If actual conditions become less favorable than the assumptions used, an additional inventory write-down may be required. As of August 31, 2019 and May 31, 2019 inventories consisted of:

 

     August 31, 2019      May 31, 2019  

Raw materials

   $ 2,259,759      $ 2,222,245  

Work-in-process

     1,193,955        1,020,683  

Finished goods

     1,565,395        1,776,116  
  

 

 

    

 

 

 
   $ 5,019,109      $ 5,019,044  
  

 

 

    

 

 

 

Property and Equipment

Property and equipment are stated at cost, less depreciation and amortization. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years for furniture, fixtures, and equipment; three years for vehicles; and twenty-five years for buildings and improvements. Expenditures for maintenance and repairs are charged to expense as incurred. As of August 31, 2019 and May 31, 2019, property and equipment consisted of:

 

     August 31, 2019      May 31, 2019  

Land

   $ 299,000      $ 299,000  

Buildings and improvements

     1,814,524        1,814,524  

Furniture, fixtures and equipment

     1,398,613        1,403,755  

Vehicles

     0        44,704  
  

 

 

    

 

 

 
     3,512,137        3,561,983  

Less accumulated depreciation

     (2,694,659      (2,722,609
  

 

 

    

 

 

 
   $ 817,478      $ 839,374  
  

 

 

    

 

 

 

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for most leases previously classified as operating leases. Subsequent amendments have been issued by the FASB to clarify the codification and to correct unintended application of the new guidance. The ASU is required to be applied using a retrospective approach with two disclosure methods permissible. The full retrospective approach requires that the guidance be applied to each lease that existed at the beginning of the earliest comparative period presented. The modified retrospective approach requires that the guidance be applied to each lease that existed as of the beginning of the reporting period in which the entity first applied the standard. In July 2018, the FASB issued ASU No. 2018-11, Leases: Targeted Improvements, which provides an option to apply the guidance prospectively, instead of retrospectively, and allows for other classification provisions.

 

Page 8


Table of Contents

On June 1, 2019, the Company adopted the new standard on June 1, 2019 using the modified retrospective approach and electing the option to not apply the guidance to comparative periods, which continue to be presented under the accounting methods in effect for those periods.

Long-Term Liabilities and Current Portion of Long-Term Liabilities

Long-term liabilities consist of a financing arrangement executed for the purchase of certain property and equipment over a term of 36 months. Future minimum commitments under this agreement for the each of the years ending May 31 are as follows:

 

     Years ending May 31,  

2020

   $ 18,079  

2021

     24,105  

2022

     6,009  
  

 

 

 

Total future minimum payments

     48,193  

Less: amount representing interest

     (3,870
  

 

 

 

Present value of minimum payments of long-term liabilities

   $ 44,323  
  

 

 

 

Current portion of long-term liabilities

     21,258  

Long-term liabilities

     23,065  
  

 

 

 
   $ 44,323  
  

 

 

 

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

NOTE 2:

STOCK OPTIONS AND STOCK-BASED COMPENSATION

Stock-based compensation includes expense charges for all stock-based awards to employees and directors granted under the Company’s stock option plan. Stock-based compensation recognized during the period is based on the portion of the grant date fair value of the stock-based award that will vest during the period, adjusted for expected forfeitures. Compensation cost for all stock-based awards is recognized using the straight-line method. The Company uses the Black-Scholes option pricing model as its method of valuation for stock-based awards. The Black-Scholes option pricing model requires the input of highly subjective assumptions, and other reasonable assumptions could provide differing results. These variables include, but are not limited to:

 

   

Risk-Free Interest Rate. The Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award.

 

   

Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and pre-vesting and post-vesting forfeitures.

 

   

Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock. The volatility factor the Company uses is based on its historical stock prices over the most recent period commensurate with the estimated expected life of the award. These historical periods may exclude portions of time when unusual transactions occurred.

 

   

Expected Dividend Yield. The Company does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of 0.

 

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Expected Forfeitures. The Company uses relevant historical data to estimate pre-vesting option forfeitures. The Company records stock-based compensation only for those awards that are expected to vest.

There were no options granted during the three months ended August 31, 2019.

At August 31, 2019, the Company had a total of 236,666 outstanding stock options (236,666 vested and exercisable and 0 non-vested) with a weighted average exercise price of $2.35. As all options outstanding as of August 31, 2019 were fully vested, the Company estimates that $0 will be recorded as additional stock-based compensation expense during the year ending May 31, 2020.

 

Outstanding Options

     Exercisable Options  

Number of

Shares

   Weighted
Average
Exercise Price
     Weighted
Average
Remaining
Contractual
Life (yrs)
     Number of
Shares
     Weighted
Average
Exercise Price
 

124,166

   $ 1.70        6.4        124,166      $ 1.70  

15,000

     2.53        2.8        15,000        2.53  

62,500

     2.85        3.4        62,500        2.85  

35,000

     3.65        0.7        35,000        3.65  
        

 

 

    

236,666

   $ 2.35        4.6        236,666      $ 2.35  

 

        

 

 

    

Options granted, exercised, canceled and expired under the Company’s stock-based compensation plans during the three months ended August 31, 2019 are summarized as follows:

 

     Three Months Ended
August 31, 2019
 
     Number of
Shares
     Weighted
Average
Exercise Price
 

Options outstanding - beginning of period

     254,166      $ 2.41  

Options granted

     0        0.00  

Options exercised

     0        0.00  

Options forfeited/canceled

     (17,500      3.29  
  

 

 

    

 

 

 

Options outstanding - end of period

     236,666      $ 2.35  
  

 

 

    

 

 

 

Restricted Stock Units

Service-based and market-based restricted stock units are granted to key employees and members of the Company’s Board of Directors. Service-based restricted stock units generally fully vest on the first anniversary date of the award. Market-based restricted stock units are contingent on continued service and vest based on 15-day average closing price of the Company’s common stock equal or exceeding certain targets established by the Compensation Committee of the Board of Directors.

During the three months ended August 31, 2019, 30,528 service-based restricted stock units were granted and were immediately vested on the date of the grants.

Restricted stock unit activity under the Company’s stock-based compensation plans during the three months ended August 31, 2019 is summarized as follows:

 

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     Number of
Units
     Weighted
Average Price
at Time of
Grant
     Aggregate
Intrinsic
Value
 

Non-vested restricted stock units - May 31, 2019

     98,000      $ 2.94     

Restricted stock units granted

     30,528        2.14     

Restricted stock units vested

     (30,528      (2.14   
  

 

 

       

 

 

 

Non-vested restricted stock units - August 31, 2019

     98,000      $ 2.94      $ 105,840  
  

 

 

       

 

 

 

During the three months ending August 31, 2019, total restricted stock unit compensation expense recognized was $72,014 and has been recorded as general, administration and sales expense in the Consolidated Statements of Operations and Comprehensive Loss.

NOTE 3:

WEIGHTED AVERAGE SHARES AND RECONCILIATION

The following table is a reconciliation of the numerators and denominators of the basic and diluted per share computations for income (loss) from continuing operations for the three months ended August 31:

 

     Three Months Ended
August 31,
 
     2019      2018  

Weighted average shares (basic)

     4,032,878        3,994,545  

Effect of dilutive stock options

     26,401        0  
  

 

 

    

 

 

 

Weighted average shares (diluted)

     4,059,279        3,994,545  
  

 

 

    

 

 

 

NOTE 4:

INCOME TAXES

The Company accounts for income taxes using the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management continues to review the level of the valuation allowance on a quarterly basis. There can be no assurance that the Company’s future operations will produce sufficient earnings to allow for the deferred tax asset to be fully utilized. The Company currently maintains a full valuation allowance against net deferred tax assets.

Each year the Company files income tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the taxing authorities. Positions challenged by the taxing authorities may be settled or appealed by the Company. As a result, there is an uncertainty in income taxes recognized in the Company’s financial statements in accordance with ASC Topic 740. The Company applies this guidance by defining criteria that an individual income tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements and provides guidance on measurement, de-recognition, classification, accounting for interest and penalties, accounting in interim periods, disclosure, and transition.

Other long-term liabilities related to tax contingencies were $0 as of both August 31, 2019 and May 31, 2019. Interest and penalties associated with uncertain tax positions are recognized as components of the “Provision for income taxes.” The liability for payment of interest and penalties was $0 as of August 31, 2019 and May 31, 2019.

Several tax years are subject to examination by major tax jurisdictions. In the United States, federal tax years ended May 31, 2016 and after are subject to examination. In the United Kingdom, tax years for the years ended May 31, 2018 and after are subject to examination.

 

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Effective Tax Rate

The effective tax rate for the three months ended August 31, 2019 was 8.6%. The effective tax rate on consolidated net income for the three months ended August 31, 2019 and 2018 differs from the federal statutory tax rate primarily due to changes in the deferred tax valuation allowance and the impact of certain expenses not being deductible for income tax reporting purposes. Management believes the effective tax rate for Fiscal 2020 will be approximately 9.2% due to the items noted above.

NOTE 5:

SEGMENT INFORMATION

The Company has two reportable business segments, Balancer and Measurement. Balancer focuses on dynamic balancing and process control systems for the machine tool industry and Measurement focuses on laser-based test and measurement systems and ultrasonic measurement products. The Company operates in three principal geographic markets: North America, Europe and Asia.

Segment Information

 

     Three Months Ended August 31,  
     2019      2018  
     Balancer      Measurement      Balancer      Measurement  

Net revenue

   $ 2,247,107      $ 1,094,778      $ 2,194,332      $ 1,246,121  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income (loss)

   $ 74,158      $ 195,006      $ (262,501    $ 148,699  
  

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation expense

   $ 12,894      $ 8,934      $ 12,072      $ 8,999  
  

 

 

    

 

 

    

 

 

    

 

 

 

Amortization expense

   $ 0      $ 26,146      $ 0      $ 26,146  
  

 

 

    

 

 

    

 

 

    

 

 

 

Capital expenditures

   $ 0      $ 0      $ 5,250      $ 0  
  

 

 

    

 

 

    

 

 

    

 

 

 

Geographic Information

 

     Three Months Ended August 31,  
     2019      2018  

North America

   $ 2,325,220      $ 2,200,201  

Europe

     428,551        373,463  

Asia

     548,151        824,776  

Other markets

     39,963        42,013  
  

 

 

    

 

 

 

Total net revenue

   $ 3,341,885      $ 3,440,453  
  

 

 

    

 

 

 

 

     Three Months Ended August 31,  
     2019      2018  
     United States      Europe      United States      Europe  

Operating income (loss)

   $ 162,895      $ 106,269      $ (131,190    $ 17,388  
  

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation expense

   $ 21,572      $ 256      $ 21,071      $ 0  
  

 

 

    

 

 

    

 

 

    

 

 

 

Amortization expense

   $ 26,146      $ 0      $ 26,146      $ 0  
  

 

 

    

 

 

    

 

 

    

 

 

 

Capital expenditures

   $ 0      $ 0      $ 5,250      $ 0  
  

 

 

    

 

 

    

 

 

    

 

 

 

(1) “Europe” is defined in the above chart to include results from the European subsidiary, Schmitt Europe Ltd.

(2) “United States” is defined to include remainder of the results not included in the results from the European subsidiary

 

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Segment and Geographic Assets

 

     August 31, 2019      May 31, 2019  

Segment assets to total assets

     

Balancer

   $ 6,003,195      $ 5,805,796  

Measurement

     2,461,762        2,592,022  

Corporate assets

     1,647,742        1,467,435  
  

 

 

    

 

 

 

Total assets

   $ 10,112,699      $ 9,865,253  
  

 

 

    

 

 

 

Geographic assets to long-lived assets

     

United States

   $ 815,656      $ 837,228  

Europe

     1,822        2,146  
  

 

 

    

 

 

 

Total long-lived assets

   $ 817,478      $ 839,374  
  

 

 

    

 

 

 

Geographic assets to total assets

     

United States

   $ 9,133,435      $ 8,578,770  

Europe

     979,264        1,286,483  
  

 

 

    

 

 

 

Total assets

   $ 10,112,699      $ 9,865,253  
  

 

 

    

 

 

 

(1) “Europe” is defined in the above chart to include assets held by the European subsidiary, Schmitt Europe Ltd.

(2) “United States” is defined to include the remainder of the assets not held by the European subsidiary.

NOTE 6:

LEASES

The Company leases certain of its facilities and equipment under operating leases, which are recorded as right-of-use assets and lease liabilities. The Company’s leases generally are month-to-month leases or have terms of 2 to 5 years. The Company currently does not have leases that include options to purchase or provisions that would automatically transfer ownership of the leased property to the Company.

Operating lease expense is recognized on a straight-line basis over the lease term. The Company had no variable lease costs for the three months ended August 31, 2019. For the three months ended August 31, 2019, operating lease expense for the operating lease right-of-use assets was $9,984 and lease expense associated with short-term leases was $10,116.

The Company determines whether a contract is or contains a lease at the inception of the contract. A contract will be deemed to be or contain a lease if the contract conveys the right to control and direct the use of identified property, plant, or equipment for a period of time in exchange for consideration. The Company generally must also have the right to obtain substantially all of the economic benefits from the use of the property or equipment.

Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. To determine the present value of lease payments, the Company uses the rate implicit in the agreement. If the rate implicit in the agreement is not determinable, the Company’s incremental borrowing rate is used. At August 31, 2019, the weighted average remaining lease term for the operating leases was 3.0 years and the weighted average discount rate was 8.2%.

 

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The following table summarizes the maturity of the operating lease liabilities on an undiscounted cash flow basis and provides a reconciliation to the operating lease liabilities recognized on our consolidated balance sheet as of August 31, 2019:

 

     Years ending May 31,  

2020 (excludes the three months ended August 31, 2019)

   $ 29,953  

2021

     35,591  

2022

     19,080  

2023

     19,080  

2024

     15,900  

Thereafter

     0  
  

 

 

 

Total future minimum payments

     119,604  

Less: amount representing interest

     16,837  
  

 

 

 

Present value of minimum payments of operating lease liabilities

   $ 102,767  
  

 

 

 

Current portion of operating lease liabilities

     32,721  

Long term operating lease liabilities

     70,046  
  

 

 

 
   $ 102,767  
  

 

 

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report filed with the SEC on Form 10-Q (the “Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Item 2, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and the future results of Schmitt Industries, Inc. and its consolidated subsidiaries (the “Company”) that are based on management’s current expectations, estimates, projections and assumptions about the Company’s business. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “sees,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including, but not limited to, those discussed in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Report as well as those discussed from time to time in the Company’s other Securities and Exchange Commission filings and reports. In addition, such statements could be affected by general industry and market conditions. Such forward-looking statements speak only as of the date of this Report or, in the case of any document incorporated by reference, the date of that document, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Report. If we update or correct one or more forward-looking statements, investors and others should not conclude that we will make additional updates or corrections with respect to other forward-looking statements.

RESULTS OF OPERATIONS

Schmitt Industries, Inc. (“Schmitt” or the “Company”) designs, manufactures and sells high precision test and measurement products, solutions and services. We provide the products and services through our SBS®, Acuity® and Xact® Product lines, which are reported in two business segments, Balancer and Measurement:

 

   

Balancer (“Balancer”) Segment. The principle product for the Balancer segment is the SBS product line, which designs, manufactures and sells computer-controlled vibration detection, balancing and process control systems for the worldwide machine tool industry, particularly for grinding machines.

 

   

Measurement (“Measurement”) Segment. Through its wholly owned subsidiary, Schmitt Measurement Systems, Inc., the Measurement segment manufacturers and sells products in two core product lines, Acuity and Xact:

 

 

Acuity® sells products, solutions and services that includes laser and white light sensor distance, measurement and dimensional sizing products;

 

 

Xact® product line includes ultrasonic-based remote tank monitoring products and related monitoring revenues for markets in the Internet of Things (“IoT”) environment. The Xact products measure the fill levels of tanks holding propane, diesel and other tank-based liquids and the related monitoring services, which includes transmission of fill data from the tanks via satellite to a secure web site for display.

The accompanying unaudited financial information should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended May 31, 2019.

Highlights of the Quarter Ended August 31, 2019

 

   

Consolidated revenue decreased $98,568, or 2.9%, to $3,341,885 for the three months ended August 31, 2019 from $3,440,453 for three months ended August 31, 2018, attributed to a decrease in Measurement segment revenue.

 

   

Balancer segment revenue increased $52,775, or 2.4%, to $2,247,107 for the three months ended August 31, 2019 as compared to $2,194,332 for the three months ended August 31, 2018, attributed to growth in the North American market.

 

   

Measurement segment revenue decreased $151,343, or 12.1%, to $1,094,778 for the three months ended August 31, 2019 as compared to $1,246,121 for the three months ended August 31, 2018, attributed to a decrease in Xact product revenue. Xact’s services in the “Internet of Things” environment continued to grow with monitoring revenue increasing 16.3% to $367,841 for the three months ended August 31, 2019 as compared to $316,173 for the three months ended August 31, 2018.

 

   

Operating expenses decreased $162,426, or 11.2%, to $1,291,174 for the three months ended August 31, 2019 from $1,453,600 for the three months ended August 31, 2018.

 

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Net income (loss) was $169,808, or $0.04 per fully diluted share, for the three months ended August 31, 2019 as compared to net income (loss) of $(211,819), or $(0.05) per fully diluted share, for the three months ended August 31, 2018.

Critical Accounting Policies

There were no material changes in our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended May 31, 2019, other than the adoption of Accounting Standards Update (ASU) No. 2016-02, “Leases (Topic 842)” which the Company adopted on June 1, 2019. See Note 1 “Leases” for further discussion and disclosures related to the adoption of ASU No. 2016-02.

Discussion of Operating Results

 

     Three Months Ended  
     August 31, 2019     August 31, 2018  

Balancer revenue

   $ 2,247,107        67.2   $ 2,194,332        63.8

Measurement revenue

     1,094,778        32.8     1,246,121        36.2
  

 

 

      

 

 

    

Total net revenue

     3,341,885        100.0     3,440,453        100.0

Cost of revenue

     1,781,547        53.3     2,100,655        61.1
  

 

 

      

 

 

    

Gross profit

     1,560,338        46.7     1,339,798        38.9
  

 

 

      

 

 

    

Operating expenses:

          

General, administration and sales

     1,279,007        38.3     1,405,363        40.8

Research and development

     12,167        0.4     48,237        1.4
  

 

 

      

 

 

    

Total operating expenses

     1,291,174        38.6     1,453,600        42.3
  

 

 

      

 

 

    

Operating income (loss)

     269,164        8.1     (113,802      -3.3

Other income (expense), net

     (83,388      -2.5     (91,651      -2.7
  

 

 

      

 

 

    

Income (loss) before income taxes

     185,776        5.6     (205,453      -6.0

Provision for income taxes

     15,968        0.5     6,366        0.2
  

 

 

      

 

 

    

Net income (loss)

   $ 169,808        5.1   $ (211,819      -6.2
  

 

 

      

 

 

    

Consolidated Revenue – Consolidated revenue decreased $98,568, or 2.9%, to $3,341,885 for the three months ended August 31, 2019 from $3,440,453 for the three months ended August 31, 2018. Growth in the Balancer segment was offset by declines in the Measurement segment.

Balancer segment – The Balancer segment focuses its sales efforts on end-user, rebuilders and original equipment manufacturers of grinding machines within the worldwide machine tool industry, with our primary target geographic markets being North America, Asia and Europe.

Balancer segment revenue increased $52,775, or 2.4%, to $2,247,107 for the three months ended August 31, 2019 compared to $2,194,332 for the three months ended August 31, 2018. Growth in the North American market was offset by declines in the Asian markets.

Revenue by geographic markets for the Balancer segment for the three months ended August 31, 2019 and 2018 were as follows:

 

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     Three Months Ended August 31,  
     2019      2018  

North America

   $ 1,320,138      $ 990,881  

Asia

     518,211        789,586  

Europe

     372,275        371,852  

Other

     36,483        42,013  
  

 

 

    

 

 

 

Total Balancer segment revenue

   $ 2,247,107      $ 2,194,332  
  

 

 

    

 

 

 

Measurement segment – The Measurement segment includes two main product lines: the Acuity product line, which includes laser-based distance measurement and dimensional sizing laser sensors; and the Xact product line, which includes ultrasonic-based remote tank monitoring products and related monitoring revenues for markets in the IoT environment.

Measurement segment revenue decreased $151,343, or 12.1%, to $1,094,778 for the three months ended August 31, 2019 as compared to $1,246,121 in August 31, 2018, primarily attributed to a 58.5% decrease in Xact product revenue. Xact customers intermittently purchase Xact products based on their respective business needs and capital expenditure budgets, causing irregular product revenue over quarterly periods.

Revenue by product line for the Measurement segment for three months ended August 31, 2019 and 2018 were as follows:

 

     Three Months Ended August 31,                
     2019      2018      Variance  

Acuity revenue

   $ 445,893      $ 420,372      $ 25,521        6.1

Xact - product revenue

     211,044        508,826        (297,782      (58.5 %) 

Xact - monitoring revenue

     367,841        316,173        51,668        16.3
  

 

 

    

 

 

    

 

 

    

Total Measurement segment revenue - current product lines

   $ 1,024,778      $ 1,245,371        (220,593      (17.7 %) 

Total Measurement segment revenue - discontinued product lines

     70,000        750        69,250     
  

 

 

    

 

 

    

 

 

    

Total Measurement segment revenue

   $ 1,094,778      $ 1,246,121      $ (151,343      (12.1 %) 
  

 

 

    

 

 

    

 

 

    

Gross Margin – Gross margin for the three months ended August 31, 2019 increased to 46.7% as compared to 38.9% for the three months ended August 31, 2018. The variances in gross margin between the periods presented were primarily influenced by improvements in procurement, favorable product mix shifts and the $70,000 sale of discontinued product line items with no offsetting cost of sales.

Operating Expenses – Operating expenses decreased $162,426, or 11.2%, to $1,291,174 for the three months ended August 31, 2019 from $1,453,600 for the three months ended August 31, 2018. The decrease in operating expenses for the three months ended August 31, 2019 is primarily due to decreases in professional, legal and accounting expenses, sales commissions and research and development expenses. These results also include non-recurring reorganization and legal expenses of $41,984 incurred during the three-month period ended August 31, 2019, that are not expected to be incurred in future periods.

Other Income (Expense) – Other income (expense) consists of interest income, interest expense, foreign currency exchange gain (loss) and other income (expense). Interest income was $4,285 for the three months ended August 31, 2019 as compared to $7,470 for the three months ended August 31, 2018. Fluctuations in interest income are impacted by the levels of our average cash and investment balances and changes in interest rates. Interest expense was $2,073 for the three months ended August 31, 2019 as compared to $263 for the three months ended August 31, 2018.

Foreign currency exchange loss was $85,611 for the three months ended August 31, 2019 as compared to foreign currency exchange loss of $98,872 for the three months ended August 31, 2018. The foreign currency exchange gain and loss fluctuates with the strength of foreign currencies against the U.S. dollar during the respective periods.

Income Taxes – The effective tax rate for the three months ended August 31, 2019 was 8.6%. The effective tax rate for the three months ended August 31, 2018 was (3.1)%. The effective tax rate on consolidated net income for the three months ended August 31, 2019 and 2018 differs from the federal statutory tax rate primarily due to changes in the deferred tax valuation allowance and the impact of certain expenses not being deductible for income tax reporting purposes.

 

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Net Income (Loss) – Net income (loss) was $169,808, or $0.04 per fully diluted share, for the three months ended August 31, 2019 compared to net income (loss) of $(211,819), or $(0.05) per fully diluted share, for the three months ended August 31, 2018.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s working capital increased $312,013 to $7,581,930 as of August 31, 2019 as compared to $7,269,917 as of May 31, 2019.

Cash, cash equivalents and restricted cash increased $180,307 to $1,647,742 as of August 31, 2019 from $1,467,435 as of May 31, 2019. Cash generated by operating activities totaled $91,561 for the three months ended August 31, 2019 as compared to cash used in operating activities of $402,466 for the three months ended August 31, 2018. Net income of $169,808, along with decreases in accrued liabilities and customer deposits, primarily impacted the total cash generated from operating activities for the three months ended August 31, 2019.

At August 31, 2019, the Company had accounts receivable of $2,004,159 as compared to $1,996,240 at May 31, 2019, an increase of $7,919. Inventories increased $65 to $5,019,109 as of August 31, 2019 as compared to $5,019,044 at May 31, 2019. At August 31, 2019, total current liabilities decreased $119,282 to $1,244,485, as compared to $1,363,777 at May 31, 2019. The decrease in current liabilities is primarily due to decreases in accrued payroll liabilities and other accrued liabilities.

We believe that our existing cash and cash equivalents combined with the cash we anticipate generating from operating activities will be sufficient to meet our cash requirements for the foreseeable future. We do not have any significant commitments nor are we aware of any significant events or conditions that are likely to have a material impact on our liquidity or capital resources.

Risk Factors

Please refer to the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2019 for a listing of factors that could cause actual results or events to differ materially from those contained in any forward-looking statements made by or on behalf of the Company.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes from the information previously reported under Item 7A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2019.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of August 31, 2019, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based on the evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Report, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the Company’s Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives, and management necessarily is required to use its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

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Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended August 31, 2019 that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.

 

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PART II - OTHER INFORMATION

Item 6. Exhibits

 

Exhibit    Description
  3.1   

Second Restated Articles of Incorporation of Schmitt Industries, Inc.

[Form 10-K for the fiscal year ended May 31, 1998, Exhibit 3(i)].

  3.2   

Second Restated Bylaws of Schmitt Industries, Inc.

[Form 10-K for the fiscal year ended May 31, 1998, Exhibit 3(ii)].

  4.1    See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation and Bylaws defining the rights of security holders.
31.1    Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2    Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1    Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS    XBRL Instance Document.
101.SCH    XBRL Taxonomy Extension Schema Document.
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB    XBRL Taxonomy Extension Label Linkbase Document.
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document.

 

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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 thereunto duly authorized.

 

     

SCHMITT INDUSTRIES, INC.

(Registrant)

Date:  

  October 8, 2019

   

/s/ Ann M. Ferguson

           Ann M. Ferguson, Chief Financial Officer and Treasurer

 

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