PR Newswire | Aug 31, 2021 08:31AM EDT

08/31 07:30 CDT

Schmitt Announces Fiscal 2021 Operating Results PORTLAND, Ore., Aug. 31, 2021

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.

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."

"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 sharesauthorized, 4,204,553 and3,786,502 shares issued and outstanding atMay 31, 2021, respectively; and 12,223,359 12,257,3064,202,605 and 3,784,554 shares issued andoutstanding at May 31, 2020,respectively

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 financialstatements.

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 - 5,722,879gain on sale, net of tax

Net (loss) income $ (8,089,672) $ 3,880,575

Net loss per common share from continuingoperations:

Basic $ (2.15) $ (0.47)

Weighted-average number of common shares, 3,765,783 3,939,833basic

Diluted $ (2.15) $ (0.47)

Weighted-average number of common shares, 3,765,783 3,939,833diluted

Net income per common share from discontinuedoperations:

Basic $ - $ 1.45

Weighted-average number of common shares, 3,765,783 3,939,833basic

Diluted $ - $ 1.45

Weighted-average number of common shares, 3,765,783 3,939,833diluted

Net (loss) income per common share:

Basic $ (2.15) $ 0.98

Weighted-average number of common shares, 3,765,783 3,939,833basic

Diluted $ (2.15) $ 0.98

Weighted-average number of common shares, 3,765,783 3,939,833diluted

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 financialstatements.

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 $ (3,454,065) $ (703,823) $ (2,737,671) 389.0%continuing operations

Net loss per common shares from continuedoperations, $ (0.92) $ (0.18) $ (0.73) (405.5%)diluted

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 fromcontinuing $ (8,089,672) $ (1,842,304) $ (6,253,812) (339.5%)operations

Net loss per commonshares from continuedoperations, $ (2.15) $ (0.47) $ (1.68) (357.4%)diluted

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

Three Months Ended, May Change 31,

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 $ (465,203) $ (703,823) $ 238,527 33.9%operations

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 $ (1,789,814) $ (1,842,304) $ 52,492 2.11%operations

Net loss per common shares from continued operations,diluted $ (0.48) $ (0.47) $ - -

Ice Cream Segment

Three Months Ended, Change May 31,

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, (0.79)diluted $ $ - $ (0.79) 100.0%

Fiscal Year Ended, Change May 31,

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 $ (6,299,858) $ - $ (6,299,858) 100.0%operations

Net loss per common shares fromcontinued operations, $ (1.67) $ - $ (1.67) 100.0%diluted

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 $ 3,453,064 $ (706,426)operations

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 $ (8,493,338) $ (1,856,942)operations

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 IndustriesThis 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 IndustriesSchmitt Industries, Inc., founded in 1987, designs, manufactures and sells high precision test and measurement products, solutions and services through its Acuity(r) and Xact(r) 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 STATEMENTSThis 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.

Michael R. Zapata, President and CEO

For more information Philip Bosco, CFO and Treasurercontact: (503) 227-7908 or visit our website at www.schmitt-ind.com

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SOURCE Schmitt Industries, Inc.