SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
June 5, 1996
Date of report (Date of earliest event reported)
SCHMITT INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Oregon 0-23996 93-1151989
(State or Other (Commission File (IRS Employer
Jurisdiction of Incorporation) Number) 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)
Former Name or Former Address, if Changed Since Last Report: N/A
The total number of pages contained in this filing is 0007
Exhibit Index is located on page 00004
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ITEM 5. OTHER EVENTS.
The Company is filing certain "Cautionary Statements" for the purpose
of establishing a readily available document that may be referenced pursuant to
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Such Cautionary Statements are attached as Exhibit 99.1 and incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS.
(c) Exhibits
Exhibit 99.1 - Cautionary Statements
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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 hereunto duly authorized.
SCHMITT INDUSTRIES, INC.
Date: June 5, 1996 /s/ Wayne A. Case
----------------------------------------------------
Wayne A. Case, President and Chief Executive Officer
/s/ Annie Windsor
----------------------------------------------------
Annie Windsor, Chief Financial Officer
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EXHIBIT INDEX
NUMBER DESCRIPTION PAGE NUMBER
- ------ ----------- -----------
99.1 Cautionary Statements 00005
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EXHIBIT 99.1
CAUTIONARY STATEMENTS
Information provided by the Company from time to time contains certain
"forward-looking" information as that term is defined by the Private Securities
Litigation Reform Act of 1995 (the "Act") and in releases made by the Securities
Exchange Commission. These Cautionary Statements are being made pursuant to the
provisions of the Act and with the intention of obtaining the benefits of the
"safe harbor" provisions of the Act. The Company cautions investors that any
forward-looking statements made by the Company are not guarantees of future
performance and that actual results may differ materially from those in the
forward-looking statements as a result of various factors including, but not
limited to, the following:
LACK OF DIVERSIFICATION
The Company's balancer product line accounted for a substantial majority of
the Company's revenue during fiscal 1996. Although the Company is developing
new applications for its Schmitt Dynamic Balance System ("SBS") products and
intends to develop other measurement product lines to complement its existing
Schmitt Measurement Systems ("SMS") products, it expects to continue to derive
most of its revenue from the SBS product line in the foreseeable future.
Because of this concentration of revenue, a decline in the demand for, or in the
prices of, the Company's SBS balancer products as a result of competition,
technological change or otherwise would have a material adverse effect on the
Company. The Company is more vulnerable to the impact of market declines and
competition than a company with more diversified sources of revenue. There can
be no assurance that the Company will be successful in its plan to diversify its
operations with SMS measurement products and additional SBS balancer products.
COMPETITION
The Company currently faces competition from a number of other equipment
manufacturers and expects competition to increase in the future. Competitive
pressures could result not only in a decline in sales volume but also in
sustained price reductions, which could adversely affect the Company's operating
results. There can be no assurance that the Company will be able to compete
effectively against its competitors, most of whom have substantially greater
financial, technical, marketing and support resources and trade name recognition
than the Company.
PRODUCT EFFICACY
Certain products distributed by the Company have been marketed in the
machine tool industry for close to ten years. However, the Company's potential
introduction of new products, especially SMS measurement products, may be
relatively new to the commercial marketplace. Until any product has been in use
for a significant period of time, there can be no assurance that it does not
have defects that may adversely affect the Company's business. The Company will
be subject to product efficacy risks with the new products it chooses to
manufacture, market or distribute.
TECHNOLOGICAL OBSOLESCENCE AND NEW PRODUCT INTRODUCTIONS
The business of designing and manufacturing products such as those
manufactured and marketed by the Company is characterized by rapid technological
change. There can be no assurance that the Company's competitors will not
develop or manufacture products technologically superior to those of the
Company.
The ability of the Company to expand its product lines and market new
products will depend upon the willingness of potential customers to purchase
such products and, in many instances, to replace products of the
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Company's competitors. In addition, there can be no assurance that any new
products or technologies developed or acquired by the Company and its
subsidiaries will be accepted by the marketplace.
DEPENDENCE ON PRINCIPAL SUPPLIERS
The Company relies on maintaining satisfactory relationships with its
customers and users, which are dependent on the ability of the Company to meet
expectations for an adequate supply of its products. The Company relies on a
limited number of suppliers for several of its key components for products which
represent a significant portion of its sales. The Company has entered into
agreements with most of its suppliers, which generally provide price protection
and supply stability. Although the Company evaluates other vendors on an
ongoing basis, it is subject to the risks associated with dependence on
principal suppliers, including the risk that current contracts may not be
renewed. There is a risk that if a vendor contract is not renewed or a key
supplier relationship is otherwise terminated, the Company may not be able to
find alternate sources for its component needs quickly. Moreover, at various
times in the electronics and machine tool industries, there have been shortages
of certain components which have in the past affected the Company. Although the
Company believes that there are alternate available sources for the products
provided by its suppliers, the loss of any significant supplier or the shortage
of any significant component could adversely affect the Company's ability to
retain or attract customers or to fill orders on a timely basis and, as a
result, could have a material adverse effect on the Company's operating results.
USE OF PROPRIETARY TECHNOLOGY
The Company owns or licenses several patents issued by the United States
Patent and Trademark Office for the product technology used in its operations.
The Company's license agreements generally entitle the Company to all
enhancements or future modifications of the patent. The Company intends to file
additional patent applications or upgrades as its products warrant. The Company
believes that, while these patents are useful to the Company, they are not
critical or valuable on an individual basis; the collective value of the
Company's intellectual property is comprised of its patents, blueprints,
specifications, technical processes and cumulative employee knowledge. Although
the Company attempts to protect its proprietary technology through a combination
of trade secrets, patent law, non-disclosure agreements and technical measures,
there can be no assurance that competitors may not be able to substantially copy
the Company's products without infringing on patents or develop an alternate
system that may render the Company's technology obsolete.
The laws of some foreign countries in which the Company may sell its
products, including The Republic of Korea, The People's Republic of China, Saudi
Arabia, Thailand, Dubai, India and Brazil, do not protect the Company's
proprietary rights in the products to the same extent as do the laws of the
United States. Although the Company does not believe that it is infringing on
the patents or intellectual property rights of others and has not received any
notice of any claim or threatened claim of infringement, there can be no
assurance that a claim will not be asserted against the Company in the future or
that the outcome of such a claim would not be materially adverse to the Company.
In addition, although under its license agreements the Company believes it will
be successfully indemnified against potential claims or encumbrances related to
its technology, if a claim is successfully brought by a third party regarding
the ownership of its technology, the Company could lose some or all of its
license rights, adversely affecting its business and ability to survive.
RISKS INHERENT IN THE COMPANY'S GROWTH STRATEGY
The Company may continue to grow and diversify by expanding current
operations or acquiring other entities or lines of business or both. This
growth strategy is subject to the risks inherent in assessing the value,
strengths and weaknesses of acquisition candidates or new products and in
integrating and managing the operations of acquired companies. In addition, the
Company's growth may place significant demands on its financial and management
resources. There can be no assurance that the Company will be able to implement
its growth strategy or that such strategy ultimately will prove successful.
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DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL
The Company depends on the continuing services of its current management,
especially Wayne A. Case. The loss of any of its executive officers could have
a material adverse effect on the Company if suitable replacements could not be
retained. Moreover, as the operations of the Company increase in size and
scope, additional personnel will be required. There is no assurance that the
Company will be successful in attracting and retaining qualified employees.
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