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Schmitt Announces Fiscal 2021 Operating Results

August 31, 2021 GMT

PORTLAND, Ore., Aug. 31, 2021 /PRNewswire/ -- Schmitt Industries, Inc. (NASDAQ: SMIT) (the “Company” or “Schmitt”) today announced its operating results for the fiscal year ended May 31, 2021.

For the year ended May 31, 2021 (“Fiscal 2021”), the Company reported revenue from continuing operations of $7,864,350, an increase of 87.7% from $4,189,924 in Fiscal 2020. The increase in revenue was driven by the Company’s new Ice Cream Segment. No revenues for the Ice Cream Segment are included in Fiscal 2020 due to the acquisition occurring subsequent to Fiscal 2020 year end.

Gross margins decreased to 41.6% for Fiscal 2021 from 46.6% in Fiscal 2020. The decrease primarily due to lower gross margins in the newly acquired Ice Cream Segment and increased material costs for the Measurement Segment due to market effects of the COVID-19 pandemic.

Operating expenses for Fiscal 2021 increased to $13,156,893, as compared to $4,130,470 for Fiscal 2020. This increase was primarily due to the inclusion of the Ice Cream Segment, which accounted for 71.5% of total operating expenses. Operating expenses also included the impairment of indefinite-lived assets of $903,422 and an increase of professional fees totaling $279,673, or 19.5%, to $1,714,708 in Fiscal 2021 as compared to $1,435,035 in Fiscal 2020.

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Net loss from continuing operations was ($8,089,672), or ($2.15) per fully diluted share, for Fiscal 2021 as compared to a net loss of ($1,842,304), or ($0.47) per fully diluted share, for 2020.

The Company finished the year ended May 31, 2021 with $4,032,690 in cash, as compared to $10,146,531 for Fiscal 2020.

Michael Zapata, Chairman and CEO, commented, “Fiscal year 2021 was a year of investments for Schmitt. Through our Ample Hills purchase and subsequent investments in the foundation of the business, to our SMS team focusing on business development and expanding our IoT offerings, our teams have been concentrating on short and long-term objectives we can influence.”

“For Ample Hills, the operating loss was in line with our expectations when we purchased the company in July of 2021. We anticipated the cost that would be required to both carry the company through a restrained retail environment while investing in the foundation of the business. We invested $3.1 million in non-recurring cash outflows for Fiscal 2021, including the acquisition of Ample Hills, capital improvements for the Ice Cream segment, ERP implementation costs and stock repurchases. Although we anticipate some continued overhang from the global pandemic, we are pleased with the progress and excited for the continuing growth from the team’s efforts.”

“For our Measurement Segment, our Portland based team continues to expand our offering bases and invest in our customer’s while focusing on business development. While some of our legacy customers have been more impacted through constrained CAPEX, we are seeing some growth in new customers.”

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“As we look ahead, we are focusing on our cash positions to continue to further invest in our businesses.”

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.

Schmitt Industries, Inc.

Consolidated Balance Sheets












Fiscal Year Ended May 31,



2021


2020

ASSETS





Current assets









Cash and cash equivalents


$

4,032,690



$

10,146,531


Restricted cash






420,000


Accounts receivable, net



1,154,645




574,926


Inventories



1,553,310




1,059,357


Prepaid expenses



198,345




60,674


Income taxes receivable



18,057





Total current assets



6,957,047




12,261,488











Leasehold assets



10,448,486





Property and equipment, net



2,824,017




652,136


Property and equipment held for sale, net



174,847





Leasehold, utilities, and ERP deposits



431,808





Other assets









Intangible assets, net



337,725




287,602


TOTAL ASSETS


$

21,173,930



$

13,201,226











LIABILITIES & STOCKHOLDERS' EQUITY









Current liabilities









Accounts payable


$

583,750



$

267,660


Accrued commissions



60,614




41,450


Accrued payroll liabilities



527,608




86,372


Accrued liabilities



465,146




265,349


Customer deposits and prepayments



93,364




12,239


Other accrued liabilities



694,590




587,492


Income taxes payable






47,462


Current portion of long-term lease liabilities



1,042,331





Current portion of long-term debt



541,691





Total current liabilities



4,009,094




1,308,024











Long-term debt



3,253,389





Long-term leasehold liabilities



10,141,864





Total liabilities



17,404,347




1,308,024











Stockholders' equity









Common stock, no par value, 20,000,000 shares authorized, 4,204,553 and
3,786,502 shares issued and outstanding at May 31, 2021, respectively; and
4,202,605 and 3,784,554 shares issued and outstanding at May 31, 2020,
respectively



12,223,359




12,257,306


Accumulated deficit



(8,453,776)




(364,104)


Total stockholders' equity



3,769,583




11,893,202


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$

21,173,930



$

13,201,226



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

Schmitt Industries, Inc.

Consolidated Statements of Operations and Comprehensive (Loss) Income












Fiscal Year Ended May 31,



2021


2020

Net sales


$

7,864,350



$

4,189,924


Cost of revenue



4,593,588




2,239,376


Gross profit



3,270,762




1,950,548


Operating expenses:









General, administrative and sales



12,045,174




4,061,621


Impairment of intangible assets



903,422





Transaction costs



125,167





Research and development



83,130




68,849


Total operating expenses



13,156,893




4,130,470


Operating loss



(9,886,131)




(2,179,922)


Bargain purchase gain



1,138,808





Interest expense



(19,038)





Other income, net



273,023




322,980


Loss before income taxes



(8,493,338)




(1,856,942)


Income tax benefit from continuing operations



(403,666)




(14,638)


Net loss from continuing operations



(8,089,672)




(1,842,304)


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






5,722,879


Net (loss) income


$

(8,089,672)



$

3,880,575




















Net loss per common share from continuing operations:









Basic


$

(2.15)



$

(0.47)


Weighted-average number of common shares, basic



3,765,783




3,939,833


Diluted


$

(2.15)



$

(0.47)


Weighted-average number of common shares, diluted



3,765,783




3,939,833











Net income per common share from discontinued operations:









Basic


$



$

1.45


Weighted-average number of common shares, basic



3,765,783




3,939,833


Diluted


$



$

1.45


Weighted-average number of common shares, diluted



3,765,783




3,939,833











Net (loss) income per common share:









Basic


$

(2.15)



$

0.98


Weighted-average number of common shares, basic



3,765,783




3,939,833


Diluted


$

(2.15)



$

0.98


Weighted-average number of common shares, diluted



3,765,783




3,939,833











Comprehensive (loss) income









Net (loss) income


$

(8,089,672)



$

3,880,575


Total comprehensive (loss) income


$

(8,089,672)



$

3,880,575



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

Consolidated Summary Data for the Three Months and Fiscal Year Ended May 31, 2021 and May 31, 2020


Three Months Ended, May 31,




Change



2021




2020




$



%

Revenue, net

$

2,658,709



$

967,708



$

1,691,001



174.7%

Gross margin


32.7%




49.7%








Operating expenses

$

4,482,514



$

1,312,283



$

3,151,154



236.7%

Net loss from continuing operations

$

(3,454,065)



$

(703,823)



$

(2,737,671)



389.0%

Net loss per common shares from continued operations,
diluted

$

(0.92)



$

(0.18)



$

(0.73)



(405.5%)


Fiscal Year Ended, May 31,



Change


2021



2020




$



%

Revenue, net

$

7,864,350



$

4,189,924



$

3,674,426



87.7%

Gross margin


41.6%




46.6








Operating expenses

$

13,156,893



$

4,130,470



$

9,026,423



218.5%

Net loss from continuing operations

$

(8,089,672)



$

(1,842,304)



$

(6,253,812)



(339.5%)

Net loss per common shares from continued operations,
diluted

$

(2.15)



$

(0.47)



$

(1.68)



(357.4%)

Segment Summary Data for the Three Months and Fiscal Year Ended May 31, 2021 and May 31, 2020
Measurement Segment


Three Months Ended, May 31,



Change


2021



2020



$



%

Revenue, net

$

897,412



$

967,078



$

(69,666)



(7.2%)

Gross margin


24.9%




49.6%








Operating expenses

$

917,493



$

1,312,283



$

34,718



2.61%

Net loss from continuing operations

$

(465,203)



$

(703,823)



$

238,527



33.9%

Net loss per common shares from continued operations,
diluted

$

(0.12)



$

(0.18)



$

0.06



33.3%
















Fiscal Year Ended, May 31,



Change


2021



2020



$



%

Revenue, net

$

3,820,914



$

4,189,924



$

(369,010)



8.8%

Gross margin

$

44.0%




46.6%




2.6%




Operating expenses

$

3,745,446




4,130,470



$

385,024



9.3%

Net loss from continuing operations

$

(1,789,814)



$

(1,842,304)



$

52,492



2.11%

Net loss per common shares from continued operations,
diluted

$

(0.48)



$

(0.47)



$

-



-















Ice Cream Segment


Three Months Ended, May 31,


Change



2021



2020



$



%

Revenue, net

$

1,761,297



$

-


$

1,761,297



100.0%

Gross margin


36.7%




-



36.1%




Operating expenses

$

3,565,021



$

-


$

3,174,236



100.0%

Net loss from continuing operations

$

(2,988,862)



$

-


$

(2,996,384)



100.0%

Net loss per common shares from continued operations,
diluted

$

(0.79)



$

-


$

(0.79)



100.0%















Fiscal Year Ended, May 31,


Change



2021



2020



$



%

Revenue, net

$

4,043,436



$

-


$

4,043,436



100.0%

Gross margin


39.4%




-



39.4%




Operating expenses

$

9,411,447



$

-


$

9,411,447



100.0%

Net loss from continuing operations

$

(6,299,858)



$

-


$

(6,299,858)



100.0%

Net loss per common shares from continued operations,
diluted

$

(1.67)



$

-


$

(1.67)



100.0%

Consolidated Reconciliation of Adjusted EBITDA for the Three Months and Fiscal Year Ended May 31, 2021 and May 31, 2020



Three Months Ended May 31,



2021



2020









Loss before income taxes from continuing operations


$

3,453,064



$

(706,426)

Depreciation and amortization



241,491




40,057

EBITDA from continuing operations


$

(3,211,573)



$

(666,369)

Adjusted for:








Bargain purchase gain



48,427




-

Impairment of intangible assets



903,422




-

Stock-based compensation



103,052




27,324

Income from discontinued product line



10,206




(33,210)

Reorganization, legal, and transaction fees



-




240,233

Unrecoverable inventory costs



-




-

Software write-downs and recoveries



-




(40,469)

Adjusted EBITDA from continuing operations


$

(2,146,466)



$

(472,491)



Fiscal Year Ended May 31,



2021


2020









Loss before income taxes from continuing operations


$

(8,493,338)



$

(1,856,942)

Depreciation and amortization



549,223




161,137

EBITDA from continuing operations


$

(7,944,115)



$

(1,695,805)

Adjusted for:








Bargain purchase gain



(1,138,808)




-

Impairment of intangible assets



903,422




-

Stock-based compensation



266,545




354,048

Income from discontinued product line



(46,934)




(167,479)

Reorganization, legal, and transaction fees



125,167




842,162

Unrecoverable inventory costs



-




76,099

Software write-downs and recoveries



-




17,473

Adjusted EBITDA from continuing operations


$

(7,834,723)



$

(573,502)

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


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SOURCE Schmitt Industries, Inc.