Schmitt Industries (SMIT) 8-K Schmitt Announces Third Quarter 2020 Operating Results

Exhibit 99.1

IMMEDIATE NEWS RELEASE

Schmitt Announces Third Quarter 2020 Operating Results

April 14, 2020 NASDAQ: SMIT

Portland, Oregon – Schmitt Industries, Inc. (NASDAQ: SMIT) (the “Company” or “Schmitt”) today announced its operating results for the third quarter of Fiscal 2020.

Highlights of the three and nine months ended February 29, 2020:

• Company revenue decreased 2.3% and 8.6% for the three and nine months ended February 29, 2020, respectively, as compared to the three and nine months ended February 28, 2019. The decrease is primarily due to a 14.4% decrease in Acuity product revenue for the three months ended February 29, 2019, and to a 34.9% decrease in Xact product revenue and a 14.9% decrease in Acuity product revenue for the nine months ended February 29, 2020. Xact’s monitoring revenue continued to grow, increasing 11.5% and 13.5% to $391,678 and $1,140,494, respectively, for the three months and nine months ended February 29, 2020.

• Gross margin increased to 55.1% and 45.6% for the three and nine months ended February 29, 2020, respectively. The increase was primarily due to an inventory reserve adjustment in Q3 FY19, better pricing from vendors and improved pricing in the Xact business line for the three months ended February 29, 2020, and primarily due to a favorable product mix shift for the nine months ended February 29, 2020.

• Operating expenses increased 24.5% and 15.7% for the three and nine months ended February 29, 2020, respectively. The increase was primarily due to stock-based compensation recognized as a result of vesting of market-based RSUs for the three and nine months ended February 29, 2020.

• Adjusted EBITDA was $1,612 and $(101,011) for the three and nine months ended February 29, 2020, respectively, as compared to $(30,764) and $(348,437) for the three and nine months ended February 28, 2019, respectively.

• Net loss from continuing operations per fully diluted share was $(0.06) and $(0.29) for the three and nine months ended February 29, 2020. Excluding expenses not expected to be incurred in future periods, including unrecoverable inventory costs, non-GAAP EPS was $(0.02) and $(0.11) for the three and nine months ended February 28, 2020, respectively.

Michael Zapata, Schmitt’s CEO and Chairman, commented, “This past quarter is indicative of the team’s focus on transitioning into Schmitt 2.0. Given the recent global developments, we are fortunate to have successfully consummated the SBS transaction last fall, which gives us a strong balance sheet and cash to be opportunistic in a difficult environment.”

“In the face of many unknowns and the unprecedented circumstances of COVID-19 pandemic we are dealing with, I believe we are also positioned well with a management team that has experience operating and making decisions in uncertain environments. As we continue forward in these uncertain times, I want to thank our team as they remain focused on long-term goals with an ability to remain flexible and adaptive. This will pass and I’m confident we will be stronger once we emerge from this environment.”

CORPORATE OFFICE: 2765NW NICOLAIST. • PORTLAND, OREGON 97210 • 503/227-7908 • FAX 503/223-1258

COVID-19 Update

Schmitt has implemented COVID-19 response and business continuity plans to protect its employees and their families, to safeguard continuity of Schmitt operations, and to ensure full support to its customers and partners. For the time being, the Company has implemented new safety guidelines that maximize interpersonal space to protect employees working on location, while all other employees who can telecommute work remotely.

The Company is highly focused on retaining its workforce and leadership during these extraordinary times and will continue to evaluate the business environment and outlook to ensure preservation of enterprise value under a wide range of circumstances.

De-listing and Deregistration Update

Schmitt continues to evaluate a shareholder value opportunity in regard to the previously announced intent to delist. There can be no assurance that the Company will enter into an agreement relating to the transaction or as to the timing or the terms of such opportunity thereof or what impact of such opportunity would be on the trading of the Company’s common stock. To the extent that the Company elects to proceed with delisting, it will provide shareholders and NASDAQ ten days notice of any intent to file a Form 25.

Share Repurchases

On December 3, 2019, the Company announced that its Board of Directors authorized a share repurchase plan to buy up to $2 million of its Common Stock. Since the announcement, the Company has repurchased approximately 10% of its shares through both a private transaction for 365,490 shares at $3.25 per share and 46,932 shares at an average price of $3.10 per share, which was done in accordance with a 10b5-1 plan. At this time, the plan has been suspended pending the evaluation of the shareholder value opportunity discussed above. Due to the private transaction remaining outside of the $2m repurchase plan, $1.85 million remains available on the repurchase plan once resumed.

Summary data for the three months ended February 29 and 28, 2020 and 2019:

	Three Months Ended February 29 and 28,
	2020			2019			Change ($)			Change (%)
Total net revenue	$	1,094,967		$	1,120,545		$	(25,578	)		(2.3	%)
Gross margin		55.1	%		37.1	%
Operating expenses	$	1,035,322		$	831,602		$	203,720			24.5	%
Net loss from continuing operations	$	(240,277	)	$	(423,963	)	$	183,686			(43.3	%)
Net loss per fully diluted share from continuing operations	$	(0.06	)	$	(0.11	)	$	0.04			(41.2	%)

Summary data for the nine months ended February 29 and 28, 2020 and 2019:

	Nine Months Ended February 29 and 28,
	2020			2019			Change ($)			Change (%)
Total net revenue	$	3,222,846		$	3,524,666		$	(301,820	)		(8.6	%)
Gross margin		45.6	%		39.0	%
Operating expenses	$	2,818,187		$	2,435,661		$	382,526			15.7	%
Net loss from continuing operations	$	(1,138,481	)	$	(1,058,660	)	$	(79,821	)		7.5	%
Net loss per fully diluted share from continuing operations	$	(0.29	)	$	(0.26	)	$	(0.02	)		7.6	%

CORPORATE OFFICE: 2765NW NICOLAIST. • PORTLAND, OREGON 97210 • 503/227-7908 • FAX 503/223-1258

Reconciliation of Adjusted EBITDA:

	Three Months Ended February 29, 2020			Nine Months Ended February 29, 2020
Loss before income taxes from continuing operations	$	(244,483	)	$	(1,150,516	)
Depreciation and amortization		37,803			121,080
EBITDA from continuing operations	$	(206,680	)	$	(1,029,436	)
Adjusted for:
Stock-based compensation		134,122			326,724
Non-recurring expenses		93,249			601,929
Software write-down & recoveries		(19,079	)		57,942
Non-recurring loss from discontinued product line		—			(134,269	)
Unrecoverable inventory costs		—			76,099
Adjusted EBITDA from continuing operations	$	1,612		$	(101,011	)

	Three Months Ended February 28, 2019			Nine Months Ended February 28, 2019
Loss before income taxes from continuing operations	$	(421,774	)	$	(1,052,244	)
Depreciation and amortization		42,118			131,097
EBITDA from continuing operations	$	(379,656	)	$	(921,147	)
Adjusted for:
Stock-based compensation		(3,309	)		5,679
Inventory reserve adjustment		116,131			116,131
Non-recurring expenses		236,070			450,900
Adjusted EBITDA from continuing operations	$	(30,764	)	$	(348,437	)

Reconciliation of Adjusted Net Income andNon-GAAP EPS:

	Three Months Ended February 29, 2020			Nine Months Ended February 29, 2020
Net loss from continuing operations	$	(240,277	)	$	(1,138,481	)
Adjusted for:
Stock-based compensation		134,122			326,724
Non-recurring expenses		93,249			601,929
Software write-down & recoveries		(19,079	)		57,942
Non-recurring loss from discontinued product line		—			(134,269	)
Unrecoverable inventory costs		—			76,099
Tax effect of adjustments*		(52,073	)		(232,106	)
Adjusted net loss from continuing operations(non-GAAP)	$	(84,058	)	$	(442,162	)
Non-GAAP (loss) per fully diluted share	$	(0.02	)	$	(0.11	)

* Assumes a marginal effective tax rate of 25%

CORPORATE OFFICE: 2765NW NICOLAIST. • PORTLAND, OREGON 97210 • 503/227-7908 • FAX 503/223-1258

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.

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 and its Quarterly Report on Form 10-Q 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 Jamie Schmidt, CFO and Treasurer (503) 227-7908 or visit our web site atwww.schmitt-ind.com

CORPORATE OFFICE: 2765NW NICOLAIST. • PORTLAND, OREGON 97210 • 503/227-7908 • FAX 503/223-1258

SCHMITT INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	February 29, 2020		May 31, 2019
ASSETS
Current assets
Cash and cash equivalents	$	10,544,255	$	1,467,435
Restricted cash		420,000		—
Accounts receivable, net		645,691		631,126
Inventories		1,057,084		1,241,132
Prepaid expenses		91,376		101,617
Current assets held for sale		—		5,192,384
Total current assets		12,758,406		8,633,694
Property and equipment, net		659,263		753,407
Other assets
Intangible assets, net		313,748		392,185
Noncurrent assets held for sale		—		85,967
TOTAL ASSETS	$	13,731,417	$	9,865,253
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	277,825	$	102,566
Accrued commissions		54,317		71,663
Accrued payroll liabilities		51,981		112,351
Customer deposits and prepayments		104,578		78,376
Other accrued liabilities		620,687		128,353
Income taxes payable		62,788		491
Current portion of long-term liabilities		—		20,828
Current liabilities held for sale		—		849,149
Total current liabilities		1,172,176		1,363,777
Long-term liabilities		—		28,543
Total liabilities		1,172,176		1,392,320
Stockholders’ equity
Common stock, no par value, 20,000,000 shares authorized, 3,783,485 shares issued and outstanding at February 29, 2020 and 4,032,878 shares issued and outstanding at May 31, 2019		12,247,264		13,245,439
Accumulated other comprehensive loss		—		(527,827	)
Retained earnings (accumulated deficit)		311,977		(4,244,679	)
Total stockholders’ equity		12,559,241		8,472,933
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	13,731,417	$	9,865,253

SCHMITT INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS AND NINE MONTHS ENDED FEBRUARY 29 AND 28, 2020 AND 2019

(UNAUDITED)

	Three Months Ended February 29 and 28,						Nine Months Ended February 29 and 28,
	2020			2019			2020			2019
Net revenue	$	1,094,967		$	1,120,545		$	3,222,846		$	3,524,666
Cost of revenue		491,346			705,259			1,752,116			2,148,567
Gross profit		603,621			415,286			1,470,730			1,376,099
Operating expenses:
General, administration and sales		1,011,414			826,105			2,785,816			2,382,756
Research and development		23,908			5,497			32,371			52,905
Total operating expenses		1,035,322			831,602			2,818,187			2,435,661
Operating (loss)		(431,701	)		(416,316	)		(1,347,457	)		(1,059,562	)
Other income, net		187,218			(5,458	)		196,941			7,318
(Loss) before income taxes		(244,483	)		(421,774	)		(1,150,516	)		(1,052,244	)
Provision for income taxes		(4,206	)		2,189			(12,035	)		6,416
Net (loss) from continuing operations		(240,277	)	$	(423,963	)	$	(1,138,481	)	$	(1,058,660	)
Income from discontinued operations, including gain on sale, net of tax		109,107			(51,226	)		5,695,137			116,382
Net income (loss)	$	(131,170	)	$	(475,189	)	$	4,556,656		$	(942,278	)
Net (loss) per common share from continuing operations:
Basic	$	(0.06	)	$	(0.11	)	$	(0.29	)	$	(0.26	)
Weighted average number of common shares, basic		3,858,287			4,000,990			3,992,664			3,996,670
Diluted	$	(0.06	)	$	(0.11	)	$	(0.29	)	$	(0.26	)
Weighted average number of common shares, diluted		3,858,287			4,000,990			3,992,664			3,996,670
Net income per common share from discontinued operations:
Basic	$	0.03		$	(0.01	)	$	1.43		$	0.03
Weighted average number of common shares, basic		3,858,287			4,000,990			3,992,664			3,996,670
Diluted	$	0.03		$	(0.01	)	$	1.43		$	0.03
Weighted average number of common shares, diluted		3,858,287			4,000,990			3,992,664			3,996,670
Net income (loss) per common share:
Basic	$	(0.03	)	$	(0.12	)	$	1.14		$	(0.24	)
Weighted average number of common shares, basic		3,858,287			4,000,990			3,992,664			3,996,670
Diluted	$	(0.03	)	$	(0.12	)	$	1.14		$	(0.24	)
Weighted average number of common shares, diluted		3,858,287			4,000,990			3,992,664			3,996,670
Comprehensive income (loss)
Net income (loss)	$	(131,170	)	$	(475,189	)	$	4,556,656		$	(942,278	)
Foreign currency translation adjustment		—			(47,256	)		527,827			26,481
Total comprehensive income (loss)	$	(131,170	)	$	(522,445	)	$	5,084,483		$	(915,797	)