UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒

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

For the Fiscal year ended: May 31, 2021

☐

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

For the transition period from Commission File Number: 001-38964

SCHMITT INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Oregon

(State or other jurisdiction of

incorporation or organization)

93-1151989

(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	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 (§ 232.405 of this chapter) 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 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

As of the last day of the second fiscal quarter of 2021, the aggregate market value of registrant's common stock held by non-affiliates of the registrant was $20,469,471 based upon the closing price of $5.71 reported for such date on the NASDAQ Capital Market. As of July 31, 2021, the registrant had 3,786,502 outstanding shares of common stock.

Documents Incorporated by Reference

Portions of the registrant's definitive Proxy Statement for its 2021 Annual Meeting of Shareholders are incorporated by reference into Part III hereof.

SCHMITT INDUSTRIES, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED MAY 31, 2021

TABLE OF CONTENTS

Part I
Item 1.	Business	3
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	17
Item 2.	Properties	17
Item 3.	Legal Proceedings	17
Item 4.	Mine Safety Disclosures	17

Part II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
Item 6.	Reserved	18
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 8.	Financial Statements and Supplementary Data	31
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	64
Item 9A.	Controls and Procedures	64
Item 9B.	Other Information	65

Part III
Item 10.	Directors, Executive Officers and Corporate Governance	66
Item 11.	Executive Compensation	66
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	66
Item 13.	Certain Relationships and Related Transactions and Director Independence	66
Item 14.	Principal Accounting Fees and Services	66

Part IV
Item 15.	Exhibits and Financial Statement Schedules	67
Exhibits		68
Signatures		71

Facility Name	Facility Location	Facility Type/Usage
	Measurement Segment
Portland	Portland, Oregon	Corporate Headquarters/Manufacturing/Administrative
Portland	Portland, Oregon	Asset held for sale – currently leased
Portland storage facility	Portland, Oregon	Investment-leased

	Ice Cream Segment
Red Hook Facility	Brooklyn, New York	Manufacturing/Administrative
Red Hook Retail	Brooklyn, New York	Retail
Astoria	Queens, New York	Retail
Chelsea	New York, New York	Retail
Fireboat	Brooklyn, New York	Retail
Gowanus	Brooklyn, New York	Retail
Prospect Heights	Brooklyn, New York	Retail
Dekalb	Brooklyn, New York	Retail
Jersey City	Jersey City, New Jersey	Retail
Essex	New York, New York	Retail
Long Beach	Long Beach, California	Retail
Prospect Park West	Brooklyn, New York	Retail

Plan Category	Number of Securities to be issued upon exercise of outstanding awards		Weighted-average exercise price of outstanding awards		Number of Securities remaining available for future issuance under equity compensation plans (excluding securities in column a)
		(a)		(b)		(c)

Equity compensation plans approved by security holders		60,629	$	3.55		359,477
Equity compensation plans not approved by security holders		-		-		-
Total		60,629	$	3.55		359,477

	Fiscal Year Ended May 31,
	2021					2020
Ice Cream Segment revenues	$	4,043,436		51.4	%	$	-		-
Measurement Segment revenues		3,820,914		48.6	%		4,189,924		100.0	%
Total revenue, net		7,864,350		100.0	%		4,189,924		100.0	%
Cost of sales		4,593,588		58.4	%		2,239,376		53.4	%
Gross profit		3,270,762		41.6	%		1,950,548		46.6	%
General, administrative and sales		12,045,174		153.2	%		4,061,621		96.9	%
Impairment of intangible assets		903,422		11.5	%		-		-
Transaction costs		125,167		1.6	%		-		-
Research & development		83,130		1.1	%		68,849		1.6	%
Total operating expenses		13,156,893		167.3	%		4,130,470		98.6	%
Operating loss		(9,886,131	)	(125.7	%)		(2,179,922	)	(52.0	%)
Bargain purchase gain		1,138,808		14.5	%		-		-
Interest expense		(19,038	)	(0.2	%)		-		-
Other income, net		273,023		3.5	%		322,980		7.7	%
Loss before income taxes		(8,493,338	)	(108.0	%)		(1,856,942	)	(44.3	%)
Income tax benefit		(403,666	)	(5.1	%)		(14,638	)	(0.3	%)
Net loss from continuing operations		(8,089,672	)	(102.9	%)		(1,842,304	)	(44.0	%)
Income from discontinued operations, net of tax		-		-			5,722,879		136.6	%
Net (loss) income	$	(8,089,672	)	(102.9	%)	$	3,880,575		92.6	%

	Fiscal Year Ended, May 31,				Year-Over-Year Change
	2021		2020		$			%
Acuity	$	1,510,437	$	1,673,121	$	(162,684	)		(9.7	%)
Xact – Product		608,976		825,114		(216,138	)		(26.2	%)
Xact – Monitoring		1,654,867		1,524,210		130,657			8.6	%
Other		46,634		167,479		(120,845	)		(72.2	%)
Total Measurement Segment revenue-current product lines	$	3,820,914	$	4,189,924	$	(369,010	)		(8.8	%)

	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
Inventory valuation adjustments		-			76,099
Software write-downs		-			17,473
Adjusted EBITDA from continuing operations	$	(7,834,723	)	$	(573,502	)

	Fiscal Quarter of 2020 Ended,
		8/31/2019			11 /31/2019			2/28/2020			5/31/2020
Consolidated revenue	$	1,095		$	1,033		$	1,095		$	967
Gross profit	$	477		$	390		$	604		$	480
Net loss	$	(222	)	$	(676	)	$	(240	)	$	(704	)
Net loss per share, basic	$	(0.06	)	$	(0.17	)	$	(0.06	)	$	(0.18	)
Net loss per share, diluted	$	(0.06	)	$	(0.17	)	$	(0.06	)	$	(0.18	)

	Fiscal Quarter of 2021 Ended,
		8/31/2020		11/30/2020			2/28/2021			5/31/2021
Consolidated revenue	$	1,507	$	2,030		$	1,668		$	2,659
Gross profit	$	608	$	962		$	831		$	870
Net income (loss)	$	151	$	(2,366	)	$	(2,420	)	$	(3,455	)
Net income (loss) per share, basic	$	0.04	$	(0.63	)	$	(0.64	)	$	(0.92	)
Net income (loss) per share, diluted	$	0.04	$	(0.63	)	$	(0.64	)	$	(0.92	)


	Year Ended May 31,
	2021			2020
Cash flows relating to operating activities
Net (loss) income	$	(8,089,672	)	$	3,880,575
Pre-tax earnings from discontinued operations		—			(616,711	)
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Bargain purchase gain		(1,138,808	)		—
Impairment of intangible assets

SEC Form 10-K filed by Schmitt Industries, Inc.