10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: February 28, 2019

Or

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

For the transition period from:                      To:                     

Commission File Number: 000-23996

SCHMITT INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Oregon	93-1151989
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)

2765 NW Nicolai Street, Portland, Oregon 97210-1818

(Address of principal executive offices) (Zip Code)

(503) 227-7908

Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 of 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 required to be submitted pursuant to Rule 405 of Regulation S-T 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of shares of each class of common stock outstanding as of March 31, 2019

Common stock, no par value 4,032,878

SCHMITT INDUSTRIES, INC.

INDEX TO FORM 10-Q

		Page
Part I - FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited):
	Consolidated Balance Sheets		3
	Consolidated Statements of Operations and Comprehensive Income (Loss)		4
	Consolidated Statements of Cash Flows		5
	Consolidated Statement of Changes in Stockholders’ Equity		6
	Notes to Consolidated Interim Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		20
Item 4.	Controls and Procedures		20
Part II - OTHER INFORMATION
Item 1.	Legal Proceedings		21
Item 6.	Exhibits		21
Signatures			22
Certifications

Page 2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SCHMITT INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	February 28, 2019			May 31, 2018
ASSETS
Current assets
Cash and cash equivalents	$	1,168,930		$	2,053,181
Restricted cash		56,835			58,352
Accounts receivable, net		2,078,116			2,047,032
Inventories		5,751,164			5,710,888
Prepaid expenses		193,326			148,924
Income taxes receivable		206			0
Total current assets		9,248,577			10,018,377
Property and equipment, net		863,361			770,915
Other assets
Intangible assets, net		418,331			496,768
TOTAL ASSETS	$	10,530,269		$	11,286,060
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	977,436		$	1,024,256
Accrued commissions		194,943			194,797
Accrued payroll liabilities		192,953			188,568
Other accrued liabilities		437,209			358,790
Income taxes payable		0			3,993
Current portion of long-term liabilities		21,424			0
Total current liabilities		1,823,965			1,770,404
Long-term liabilities		35,601			0
Stockholders’ equity
Common stock, no par value, 20,000,000 shares authorized, 4,032,878 shares issued and outstanding at February 28, 2019 and 3,994,545 shares issued and outstanding at May 31, 2018		13,156,496			13,085,652
Accumulated other comprehensive loss		(509,826	)		(536,307	)
Accumulated deficit		(3,975,967	)		(3,033,689	)
Total stockholders’ equity		8,670,703			9,515,656
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	10,530,269		$	11,286,060

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

Page 3

SCHMITT INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 28, 2019 AND 2018

(UNAUDITED)

	Three Months Ended February 28,						Nine Months Ended February 28,
	2019			2018			2019			2018
Net sales	$	3,082,181		$	3,238,858		$	10,026,112		$	10,093,386
Cost of sales		2,069,798			1,916,345			6,310,824			5,645,372
Gross profit		1,012,383			1,322,513			3,715,288			4,448,014
Operating expenses:
General, administration and sales		1,507,233			1,286,718			4,452,091			4,279,505
Research and development		20,532			75,790			116,693			253,007
Total operating expenses		1,527,765			1,362,508			4,568,784			4,532,512
Operating loss		(515,382	)		(39,995	)		(853,496	)		(84,498	)
Other income (expense), net		46,779			61,815			(69,468	)		88,436
Income (loss) before income taxes		(468,603	)		21,820			(922,964	)		3,938
Provision for income taxes		6,586			6,267			19,314			19,235
Net income (loss)	$	(475,189)		$	15,553		$	(942,278)		$	(15,297)
Net income (loss) per common share:
Basic	$	(0.12	)	$	0.00		$	(0.24	)	$	0.00
Weighted average number of common shares, basic		4,000,990			3,706,050			3,996,670			3,230,022
Diluted	$	(0.12	)	$	0.00		$	(0.24	)	$	0.00
Weighted average number of common shares, diluted		4,000,990			3,769,814			3,996,670			3,230,022
Comprehensive income (loss)
Net income (loss)	$	(475,189	)	$	15,553		$	(942,278	)	$	(15,297	)
Foreign currency translation adjustment		(47,256	)		(51,983	)		26,481			(51,543	)
Total comprehensive income (loss)	$	(522,445	)	$	(36,430	)	$	(915,797	)	$	(66,840	)

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

Page 4

SCHMITT INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED FEBRUARY 28, 2019 AND 2018

(UNAUDITED)

	Nine Months Ended February 28,
	2019			2018
Cash flows relating to operating activities
Net loss	$	(942,278	)	$	(15,297	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		139,424			156,326
(Gain) loss on disposal of property and equipment		0			619
Stock based compensation		5,678			42,167
Reserve for excess or obsolete inventories		407,730			0
(Increase) decrease in:
Accounts receivable		(30,061	)		291,273
Inventories		(447,717	)		(1,218,520	)
Prepaid expenses		(44,503	)		(32,086	)
Income taxes receivable		(206	)		7,310
Increase (decrease) in:
Accounts payable		(46,263	)		(261,532	)
Accrued liabilities and customer deposits		(77	)		(69,917	)
Income taxes payable		(3,993	)		3,465
Net cash used in operating activities		(962,266	)		(1,096,192	)
Cash flows relating to investing activities
Purchases of property and equipment		(4,674	)		(8,467	)
Proceeds from the sale of property and equipment		0			1,500
Net cash used in investing activities		(4,674	)		(6,967	)
Cash flows relating to financing activities
Payments on long-term liabilities		(8,366	)		0
Common stock issued on exercise of stock options		65,166			0
Proceeds from the rights offering, net of expenses		0			2,386,029
Net cash provided by financing activities		56,800			2,386,029
Effect of foreign exchange translation on cash		24,372			(103,507	)
Change in cash, cash equivalents and restricted cash		(885,768	)		1,179,363
Cash, cash equivalents and restricted cash, beginning of period		2,111,533			867,607
Cash, cash equivalents and restricted cash, end of period	$	1,225,765		$	2,046,970
Supplemental disclosure of cash flow information
Cash paid during the period for income taxes	$	23,512		$	8,460
Cash paid during the period for interest	$	8,985		$	1,114
Supplemental disclosure of non-cash investing and financing activities
Acquisition of property and equipment through financed payables	$	148,760		$	0

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

Page 5

SCHMITT INDUSTRIES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED FEBRUARY 28, 2019

(UNAUDITED)

	Shares		Amount		Accumulated other comprehensive loss			Accumulated deficit			Total
Balance, May 31, 2018		3,994,545	$	13,085,652	$	(536,307	)	$	(3,033,689	)	$	9,515,656
Stock options exercised net of related tax benefit of $0		38,333		65,166		0			0			65,166
Stock-based compensation		0		5,678		0			0			5,678
Net loss		0		0		0			(942,278	)		(942,278	)
Other comprehensive income		0		0		26,481			0			26,481
Balance, February 28, 2019		4,032,878	$	13,156,496	$	(509,826	)	$	(3,975,967	)	$	8,670,703

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

Page 6

SCHMITT INDUSTRIES, INC.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 1:

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial information included herein has been prepared by Schmitt Industries, Inc. (the “Company” or “Schmitt”) and its wholly owned subsidiaries. In the opinion of management, the accompanying unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly its financial position as of February 28, 2019 and its results of operations and its cash flows for the periods presented. The consolidated balance sheet at May 31, 2018 has been derived from the Annual Report on Form 10-K for the fiscal year ended May 31, 2018. The accompanying unaudited financial statements and related notes should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2018. Operating results for the interim periods presented are not necessarily indicative of the results that may be experienced for the fiscal year ending May 31, 2019.

Revenue Recognition

On June 1, 2018, the Company adopted Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” using the modified retrospective approach. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or related disclosures.

The Company determines the amount of revenue it recognizes associated with the transfer of each product or service using the five-step model provided by Topic 606. For sales of products or delivery of monitoring services to all customers, including manufacturing representatives, distributors or their third-party customers, each transaction is evaluated to determine whether there is approval and commitment from both the Company and the customer for the transaction; whether the rights of each party are specifically identified; whether the transaction has commercial substance; whether collectability from the customer is probable at the inception of the contract and whether the transaction amount is defined. If a transaction to sell products or provide monitoring services meets all of the above criteria, revenue is recognized for the sales of product at the time of shipment or for monitoring services at the completion of the month in which monitoring services are provided.

The Company incurs commissions associated with the sales of products, which are accrued and expensed at the time the product is shipped. These amounts are recorded within general, administration and sales expense.

The Company also incurs costs related to shipping and handling of its products, the costs of which are expensed as incurred as a component of cost of sales. Shipping and handling fees billed to customers are recognized at the time of shipment as a component of net sales.

Financial Instruments

The carrying value of all other financial instruments potentially subject to valuation risk (principally consisting of cash and cash equivalents, accounts receivable and accounts payable) also approximates fair value because of their short-term maturities.

Restricted Cash

Restricted cash consists of an amount received from a customer in December 2017 as part of an on-going contract. The timeline for services being provided under this contract has been extended and is expected to be completed during the second half of Fiscal 2019, at which time the restrictions on this payment will lapse.

The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within the Consolidated Balance Sheets as of February 28, 2019 and May 31, 2018 to the sum of the same such amounts as shown in the Consolidated Statement of Cash Flows for the nine months ended February 28, 2019:

Page 7

	February 28, 2019		May 31, 2018
Cash and cash equivalents	$	1,168,930	$	2,053,181
Restricted cash		56,835		58,352
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statement of Cash Flows	$	1,225,765	$	2,111,533

Accounts Receivable

The Company maintains credit limits for all customers based upon several factors, including but not limited to financial condition and stability, payment history, published credit reports and use of credit references. Management performs various analyses to evaluate accounts receivable balances to ensure recorded amounts reflect estimated net realizable value. This review includes using accounts receivable agings, other operating trends and relevant business conditions, including general economic factors, as they relate to each of the Company’s domestic and international customers. If these analyses lead management to the conclusion that potential significant accounts are uncollectible, a reserve is provided. The allowance for doubtful accounts was $26,263 and $95,207 as of February 28, 2019 and May 31, 2018, respectively.

Inventories

Inventories are valued at the lower of cost or net realizable value with cost determined on the average cost basis. Costs included in inventories consist of materials, labor and manufacturing overhead, which are related to the purchase or production of inventories. Write-downs, when required, are made to reduce excess inventories to their net realizable values. Such estimates are based on assumptions regarding future demand and market conditions. If actual conditions become less favorable than the assumptions used, an additional inventory write-down may be required. As of February 28, 2019 and May 31, 2018, inventories consisted of:

	February 28, 2019		May 31, 2018
Raw materials	$	2,411,474	$	2,796,691
Work-in-process		1,056,251		1,009,424
Finished goods		2,283,439		1,904,773
	$	5,751,164	$	5,710,888

Inventories, as noted in the above table and on the Consolidated Balance Sheets as of February 28, 2019 and May 31, 2018, are presented net of inventory reserves of $1,150,597 and $742,900 as of February 28, 2019 and May 31, 2018.

Reserve adjustments of $(407,558) and $(6,555) for the three months ended February 28, 2019 and 2018, respectively, are included in cost of sales on the Consolidated Statements of Operations. Reserve adjustments of $(407,730) and $11,035 for the nine months ended February 28, 2019 and 2018, respectively, are included in cost of sales on the Consolidated Statements of Operations.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years for furniture, fixtures and equipment; three years for vehicles; and twenty-five years for buildings and improvements. As of February 28, 2019 and May 31, 2018, property and equipment consisted of:

Page 8

	February 28, 2019			May 31, 2018
Land	$	299,000		$	299,000
Buildings and improvements		1,814,524			1,814,524
Furniture, fixtures and equipment		1,406,725			1,252,598
Vehicles		44,704			44,704
		3,564,953			3,410,826
Less accumulated depreciation		(2,701,592	)		(2,639,911	)
	$	863,361		$	770,915

Long-term liabilities and current portion of long-term liabilities

Long-term liabilities consist of a financing arrangement executed for the purchase of certain property and equipment over a term of 36 months. Future minimum commitments under this agreement for the each of the years ending May 31 are as follows:

	Years ending May 31,
2019	$	4,218
2020		25,307
2021		25,307
2022		8,431
Total future minimum payments		63,263
Less: amount representing interest		(6,238	)
Present value of minimum payments of long-term liabilities	$	57,025
Current portion of long-term liabilities		21,424
Long-term liabilities		35,601
	$	57,025

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for most leases previously classified as operating leases. The ASU is required to be applied using a modified retrospective approach at the beginning of the earliest period presented, with optional practical expedients. The FASB recently proposed an optional transition alternative, which would allow for application of the guidance at the beginning of the period in which it is adopted, rather than at the beginning of the earliest comparative period presented. The Company will adopt the new standard on June 1, 2019.

The Company is currently evaluating the impact of this guidance, including reviewing the standard’s provisions and gathering and analyzing data to support further evaluation of all real estate and non-real estate leases. The Company is also evaluating the impact of the accounting standard on the Company’s financial statement disclosures, systems, processes and controls.

NOTE 2:

STOCK OPTIONS AND STOCK-BASED COMPENSATION

Stock-based compensation includes expense charges for all stock-based awards to employees and directors granted under the Company’s stock option plan. Stock-based compensation recognized during the period is based on the portion of the grant date fair value of the stock-based award that will vest during the period, adjusted for expected forfeitures. Compensation cost for all stock-based awards is recognized using the straight-line method. The Company uses the Black-Scholes option pricing model as its method of valuation for stock-based awards. The Black-Scholes option pricing model requires the input of highly subjective assumptions, and other reasonable assumptions could provide differing results. These variables include, but are not limited to:

Page 9

• Risk-Free Interest Rate. The Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award.

• Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and pre-vesting and post-vesting forfeitures.

• Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock. The volatility factor the Company uses is based on its historical stock prices over the most recent period commensurate with the estimated expected life of the award. These historical periods may exclude portions of time when unusual transactions occurred.

• Expected Dividend Yield. The Company does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of 0.

• Expected Forfeitures. The Company uses relevant historical data to estimate pre-vesting option forfeitures. The Company records stock-based compensation only for those awards that are expected to vest.

To determine stock-based compensation expense recognized for those options granted during the nine months ended February 28, 2019, the Company has computed the value of all stock options granted using the Black-Scholes option pricing model as prescribed by ASC Topic 718 using the following assumptions:

	Nine Months Ended
	February 28, 2019
Risk-free interest rate	3.1%
Expected life	6.0 years
Expected volatility	46.3%

At February 28, 2019, the Company had a total of 266,166 outstanding stock options (243,665 vested and exercisable and 22,501 non-vested) with a weighted average exercise price of $2.42. The Company estimates that $897 will be recorded as additional stock-based compensation expense during the next fiscal quarter for all options that were outstanding as of February 28, 2019, but which were not yet vested.

Outstanding Options						Exercisable Options
Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (yrs)		Number of Shares		Weighted Average Exercise Price
	124,166	$	1.70		8.1		101,665	$	1.70
	15,000		2.53		4.6		15,000		2.53
	82,000		2.82		5.8		82,000		2.82
	45,000		3.65		2.3		45,000		3.65
	266,166		2.42		6.2		243,665		2.49

Options granted, exercised, and forfeited or canceled under the Company’s stock option plan during the nine months ended February 28, 2019 are summarized as follows:

Page 10

	Nine Months Ended February 28, 2019
	Number of Shares			Weighted Average Exercise Price
Options outstanding - beginning of period		318,332		$	2.36
Options granted		27,000			2.55
Options exercised		(38,333	)		1.70
Options forfeited/canceled		(40,833	)		2.66
Options outstanding - end of period		266,166			2.42

NOTE 3:

WEIGHTED AVERAGE SHARES AND RECONCILIATION

	Three Months Ended February 28,				Nine Months Ended February 28,
	2019		2018		2019		2018
Weighted average shares (basic)		4,000,990		3,706,050		3,996,670		3,230,022
Effect of dilutive stock options		0		63,764		0		0
Weighted average shares (diluted)		4,000,990		3,769,814		3,996,670		3,230,022

Basic earnings (loss) per share is computed using the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed using the weighted average number of common shares outstanding, adjusted for dilutive incremental shares attributed to outstanding options to purchase common stock. Common stock equivalents for stock options are computed using the treasury stock method. In periods in which a net loss is incurred, no common stock equivalents are included since they are antidilutive and as such all stock options outstanding are excluded from the computation of diluted net loss in those periods.

NOTE 4:

INCOME TAXES

The Company accounts for income taxes using the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management continues to review the level of the valuation allowance on a quarterly basis. There can be no assurance that the Company’s future operations will produce sufficient earnings to allow for the deferred tax asset to be fully utilized. The Company currently maintains a full valuation allowance against net deferred tax assets.

Each year the Company files income tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the taxing authorities. Positions challenged by the taxing authorities may be settled or appealed by the Company. As a result, there is an uncertainty in income taxes recognized in the Company’s financial statements in accordance with ASC Topic 740. The Company applies this guidance by defining criteria that an individual income tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements and provides guidance on measurement, de-recognition, classification, accounting for interest and penalties, accounting in interim periods, disclosure, and transition.

Other long-term liabilities related to tax contingencies were $0 as of February 28, 2019 and May 31, 2018. Interest and penalties associated with uncertain tax positions are recognized as components of the “Provision for income taxes.” The liability for payment of interest and penalties was $0 as of February 28, 2019 and May 31, 2018.

Page 11

Several tax years are subject to examination by major tax jurisdictions. In the United States, federal tax years ended May 31, 2015 and after are subject to examination. In the United Kingdom, tax years ended May 31, 2013 and after are subject to examination.

Effective Tax Rate

The effective tax rate on consolidated net loss was 2.1% for the nine months ended February 28, 2019. The effective tax rate on consolidated net loss differs from the federal statutory tax rate primarily due to changes in the deferred tax valuation allowance and certain expenses not being deductible for income tax reporting purposes. Management believes the effective tax rate for Fiscal 2019 will be approximately 3.2% due to the items noted above.

NOTE 5:

SEGMENTS OF BUSINESS

The Company has two reportable business segments, Balancer and Measurement. Balancer focuses on dynamic balancing and process control systems for the machine tool industry and Measurement focuses on laser-based test and measurement systems and ultrasonic measurement products. The Company operates in three principal geographic markets: North America, Europe and Asia.

Segment Information

	Three Months Ended February 28,
	2019				2018
	Balancer		Measurement		Balancer		Measurement
Net sales	$	1,961,636	$	1,120,545	$	2,137,811	$	1,101,047
Operating income (loss)		$(593,462)	$	78,080	$	(39,720)	$	(275)
Depreciation expense	$	10,346	$	9,000	$	16,300	$	9,235
Amortization expense	$	0	$	26,145	$	0	$	26,146
Capital expenditures	$	147,917	$	0	$	0	$	0
	Nine Months Ended February 28,
	2019				2018
	Balancer		Measurement		Balancer		Measurement
Net sales	$	6,501,448	$	3,524,664	$	6,439,054	$	3,654,332
Operating income (loss)	$	(1,199,680)	$	346,184	$	(340,486)	$	255,988
Depreciation expense	$	33,989	$	26,998	$	49,670	$	28,218
Amortization expense	$	0	$	78,437	$	0	$	78,438
Capital expenditures	$	153,434	$	0	$	8,467	$	0

Inventory reserve adjustments of $(291,427) for the Balancer segment and $(116,131) for the Measurement segment are included in operating income (loss) for the three and nine months ended February 28, 2019, respectively.

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Geographic Information – Net Sales by Geographic Area

	Three Months Ended February 28,				Nine Months Ended February 28,
	2019		2018		2019		2018
North America	$	1,899,961	$	1,898,796	$	6,065,868	$	6,174,874
Europe		548,059		552,018		1,427,310		1,526,917
Asia		587,136		752,712		2,389,087		2,297,617
Other markets		47,025		35,332		143,847		93,978
Total net sales	$	3,082,181	$	3,238,858	$	10,026,112	$	10,093,386

	Three Months Ended February 28,
	2019					2018
	United States (2)			Europe (1)		United States (2)			Europe (1)
Operating income (loss)	$	(565,426	)	$	50,044	$	(123,205	)	$	83,210
Depreciation expense	$	19,346		$	0	$	25,535		$	0
Amortization expense	$	26,145		$	0	$	26,146		$	0
Capital expenditures	$	147,917		$	0	$	0		$	0
	Nine Months Ended February 28,
	2019					2018
	United States (2)			Europe (1)		United States (2)			Europe (1)
Operating income (loss)	$	(959,525)			106,029	$	(307,015)			222,517
Depreciation expense	$	60,987		$	0	$	77,888		$	0
Amortization expense	$	78,437		$	0	$	78,438		$	0
Capital expenditures	$	153,434		$	0	$	8,467		$	0

(1) “Europe” is defined in the above chart to include results from the European subsidiary, Schmitt Europe Ltd.

(2) “United States” is defined to include remainder of the results not included in the European subsidiary.

Segment and Geographic Assets

	February 28, 2019		May 31, 2018
Segment assets to total assets
Balancer	$	6,292,198	$	6,461,974
Measurement		3,012,100		2,712,553
Corporate assets		1,225,971		2,111,533
Total assets	$	10,530,269	$	11,286,060
Geographic assets to long-lived assets
United States (2)	$	863,361	$	770,915
Europe (1)		0		0
Total long-lived assets	$	863,361	$	770,915
Geographic assets to total assets
United States (2)	$	9,314,335	$	10,110,683
Europe (1)		1,215,934		1,175,377
Total assets	$	10,530,269	$	11,286,060

(1) “Europe” includes assets held by the European subsidiary, Schmitt Europe Ltd.

(2) “United States” includes remainder of the assets not held by the European subsidiary.

Page 13

NOTE 6:

RESTRUCTURING AND RELATED CHARGES

In November 2018 Schmitt announced a strategic reorganization following the appointment of two new board members. The reorganization will position the Company to better capitalize on the growing SBS Balancer business while streamlining the company and maximizing shareholder value through the disposition of non-core assets. The reorganization has involved a streamlining of contractors and services, and employee severance and termination benefits that have increased operating expenses in the third quarter. In conjunction with these efforts, an inventory adjustment of $(407,558) was recorded during the three months ended February 28, 2019 that was the outcome of efforts to evaluate the types and levels of inventory maintained across the Company’s three product lines.

Page 14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report filed with the SEC on Form 10-Q (the “Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Item 2, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and the future results of Schmitt Industries, Inc. and its consolidated subsidiaries (the “Company”) that are based on management’s current expectations, estimates, projections and assumptions about the Company’s business. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “sees,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including, but not limited to, those discussed in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Report as well as those discussed from time to time in the Company’s other Securities and Exchange Commission filings and reports. In addition, such statements could be affected by general industry and market conditions. Such forward-looking statements speak only as of the date of this Report or, in the case of any document incorporated by reference, the date of that document, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Report. If we update or correct one or more forward-looking statements, investors and others should not conclude that we will make additional updates or corrections with respect to other forward-looking statements.

RESULTS OF OPERATIONS

Overview

Schmitt Industries, Inc. (“Schmitt” or the “Company”) designs, manufactures and sells high precision test and measurement products, solutions and services. We provide the products and services through our SBS®, Acuity® and Xact® Product lines, which are reported in two business segments, Balancer and Measurement:

• Balancer (“Balancer”) Segment. Through our SBS products, the Balancer segment designs, manufactures and sells computer-controlled vibration detection, balancing and process control systems for the worldwide machine tool industry, particularly for grinding machines. The Company also provides sales and service for Europe and Asia through its wholly owned subsidiary, Schmitt Europe Limited (SEL), located in Coventry, England and through its sales representative office located in Shanghai, China.

• Measurement (“Measurement”) Segment. The Measurement segment manufacturers and sells products in two core product lines, Acuity and Xact:

• Acuity sells products, solutions and services that includes laser and white light sensor distance, measurement and dimensional sizing products;

• Xact product line includes ultrasonic-based remote tank monitoring products and related monitoring revenues for markets in the Internet of Things (“IoT”) environment. The products and services measure the fill levels of tanks holding propane, diesel and other tank-based liquids and the related monitoring services, which includes transmission of fill data from the tanks via satellite to a secure web site for display.

The accompanying unaudited financial information should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended May 31, 2018.

Highlights of the Three and Nine Months Ended February 28, 2019

• Balancer segment sales decreased $176,175, or 8.2%, to $1,961,636 for the three months ended February 28, 2019 as compared to $2,137,811 for the three months ended February 28, 2018. Balancer segment sales increased $62,394, or 1.0%, to $6,501,448 for the nine months ended February 28, 2019 as compared to $6,439,054 for the nine months ended February 28, 2018.

• Measurement segment sales increased $19,498, or 1.8%, to $1,120,545 for the three months ended February 28, 2019 as compared to $1,101,047 for the three months ended February 28, 2018. Measurement segment sales decreased $129,668, or 3.5%, to $3,524,664 for the nine months ended February 28, 2019 as compared to $3,654,332 for the nine months ended February 28, 2018.

Page 15

• Within the Measurement segment, Xact monitoring revenues continued to grow, increasing 13.4% for the three months ended February 28, 2019 compared to the three months ended February 28, 2018. Xact monitoring revenues increased 15.7% for the nine months ended February 28, 2019 as compared to the same period in the prior year.

• Operating expenses increased $165,257, or 12.1%, to $1,527,765 for the three months ended February 28, 2019 from $1,362,508 for the three months ended February 28, 2018, and increased $36,272, or 0.8%, to $4,568,784 for the nine months ended February 28, 2019 compared to $4,532,512 for the nine months ended February 28, 2018. These results include non-recurring reorganization, legal and other professional expenses of $292,888 and $637,447 incurred during the three-month and nine-month periods ended February 28, 2019, respectively, that were not incurred during the same periods in the prior year.

• An inventory adjustment of $(407,558) was recorded during the three months ended February 28, 2019 that was the outcome of efforts to evaluate the types and levels of inventory maintained across the Company’s three product lines. This resulted in a direct adjustment to cost of sales, thereby reducing gross margin from 46.1% to 32.8% for the three months ended February 28, 2019 and from 41.1% to 37.1% for the nine months ended February 28, 2019.

Critical Accounting Policies

There were no material changes in our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended May 31, 2018, other than the adoption of Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” which the Company adopted on June 1, 2018. See Note 1 “Revenue Recognition” for further discussion and disclosures related to the adoption of ASU No. 2014-09.

Discussion of Operating Results

	Three Months Ended
	February 28, 2019					February 28, 2018
Balancer sales	$	1,961,636		63.6	%	$	2,137,811		66.0	%
Measurement sales		1,120,545		36.4	%		1,101,047		34.0	%
Total net sales		3,082,181		100.0	%		3,238,858		100.0	%
Cost of sales		2,069,798		67.2	%		1,916,345		59.2	%
Gross profit		1,012,383		32.8	%		1,322,513		40.8	%
Operating expenses:
General, administration and sales		1,507,233		48.9	%		1,286,718		39.7	%
Research and development		20,532		0.7	%		75,790		2.3	%
Total operating expenses		1,527,765		49.6	%		1,362,508		42.1	%
Operating loss		(515,382	)	(16.7	%)		(39,995	)	(1.2	%)
Other income (expense), net		46,779		1.5	%		61,815		1.9	%
Income (loss) before income taxes		(468,603	)	(15.2	%)		21,820		0.7	%
Provision for income taxes		6,586		0.2	%		6,267		0.2	%
Net income (loss)	$	(475,189	)	(15.4	%)	$	15,553		0.5	%

Page 16

	Nine Months Ended
	February 28, 2019					February 28, 2018
Balancer sales	$	6,501,448		64.8	%	$	6,439,054		63.8	%
Measurement sales		3,524,664		35.2	%		3,654,332		36.2	%
Total net sales		10,026,112		100.0	%		10,093,386		100.0	%
Cost of sales		6,310,824		62.9	%		5,645,372		55.9	%
Gross profit		3,715,288		37.1	%		4,448,014		44.1	%
Operating expenses:
General, administration and sales		4,452,091		44.4	%		4,279,505		42.4	%
Research and development		116,693		1.2	%		253,007		2.5	%
Total operating expenses		4,568,784		45.6	%		4,532,512		44.9	%
Operating loss		(853,496	)	(8.5	%)		(84,498	)	(0.8	%)
Other income (expense), net		(69,468	)	(0.7	%)		88,436		0.9	%
Income (loss) before income taxes		(922,964	)	(9.2	%)		3,938		0.0	%
Provision for income taxes		19,314		0.2	%		19,235		0.2	%
Net loss	$	(942,278	)	(9.4	%)	$	(15,297	)	(0.2	%)

Net Sales – Total net sales for the Company decreased $156,677, or 4.8%, to $3,082,181 for the three months ended February 28, 2019 from $3,238,858 for the three months ended February 28, 2018. Total net sales for the Company decreased $67,274, or 0.7%, to $10,026,112 for the nine months ended February 28, 2019 from $10,093,386 for the nine months ended February 28, 2018.

Balancer Segment – The Balancer segment focuses its sales efforts on end-users, rebuilders and original equipment manufacturers of grinding machines within the worldwide machine tool industry, with our primary target geographic markets being North America, Asia, and Europe.

Balancer segment sales decreased $176,175, or 8.2%, to $1,961,636 for the three months ended February 28, 2019 as compared to $2,137,811 for the three months ended February 28, 2018. The decrease in the three-month results was primarily attributed to weaker sales in Asia, which was impacted by tariffs and the pending trade negotiations between the U.S. and China, and a decrease in sales into Europe driven primarily by an OEM customer’s shift in project schedule. These decreases were offset by increased sales in North America.

Balancer segment sales increased $62,394, or 1.0%, to $6,501,448 for the nine months ended February 28, 2019 as compared to $6,439,054 for the nine months ended February 28, 2018. The increase in the nine-month results was primarily driven by stronger sales in Asia which occurred in the first half of Fiscal 2019, offset by decreased sales in the European market.

Sales by geographic markets for the Balancer segment for the three and nine months ended February 28, 2019 and 2018 were as follows:

	Three Months Ended February 28,
	2019		2018		Variance
North America	$	929,389	$	888,238	$	41,151		4.6	%
Asia		506,294		672,431		(166,137	)	(24.7	%)
Europe		490,288		545,815		(55,527	)	(10.2	%)
Other		35,665		31,327		4,338		13.8	%
Total Balancer segment sales	$	1,961,636	$	2,137,811	$	(176,175	)	(8.2	%)

Page 17

	Nine Months Ended February 28,
	2019		2018		Variance
North America	$	2,801,985	$	2,801,118	$	867		0.0	%
Asia		2,225,387		2,049,900		175,487		8.6	%
Europe		1,360,840		1,514,173		(153,333	)	(10.1	%)
Other		113,236		73,863		39,373		53.3	%
Total Balancer segment sales	$	6,501,448	$	6,439,054	$	62,394		1.0	%

The levels of demand for our Balancer products in any of these geographic markets cannot be forecasted with any certainty given current economic trends and the historical volatility experienced in this market.

Measurement Segment – The Measurement segment includes two main product lines: the Acuity product line, which includes laser-based distance measurement and dimensional sizing laser sensors; and the Xact product line, which includes ultrasonic-based remote tank monitoring products and related monitoring revenues for markets in the IoT environment.

Measurement segment sales increased $19,498, or 1.8%, to $1,120,545 for the three months ended February 28, 2019 as compared to $1,101,047 for the three months ended February 28, 2018. This increase was due to strong Acuity sales realized in the third quarter of Fiscal 2019 and increases in Xact monitoring revenues, which increased 13.4% as product previously sold was deployed and measurements began. These increases were offset by decreases in Xact product sales.

Measurement segment sales decreased $129,668, or 3.5%, to $3,524,664 for the nine months ended February 28, 2019 from $3,654,332 for the nine months ended February 28, 2018. This decrease is primarily driven by a one-time large contract in Acuity that was realized in the second quarter of Fiscal 2018 and softer sales that occurred for Acuity during the first quarter of Fiscal 2019 as compared to the same period in the prior year. This decrease was offset by the increases in Xact product sales and monitoring revenues. The increase in Xact product sales was driven by strong results experienced in the first quarter of Fiscal 2019. Xact monitoring revenues increased 15.7% in the nine months ended February 28, 2019 as compared to the same period in the prior year as product previously sold was deployed and measurements began.

Sales by product line for the Measurement segment for the three and nine months ended February 28, 2019 and 2018 were as follows:

	Nine Months Ended February 28,
	2019		2018		Variance
North America	$	2,801,985	$	2,801,118	$	867		0.0	%
Asia		2,225,387		2,049,900		175,487		8.6	%
Europe		1,360,840		1,514,173		(153,333	)	(10.1	%)
Other		113,236		73,863		39,373		53.3	%
Total Balancer segment sales	$	6,501,448	$	6,439,054	$	62,394		1.0	%

	Nine Months Ended February 28,
	2019		2018		Variance
Acuity	$	1,578,521	$	1,905,397	$	(326,876	)	(17.2	%)
Xact - product sales		927,867		795,372		132,495		16.7	%
Xact - monitoring revenues		1,004,654		868,056		136,598		15.7	%
Lasercheck		0		64,140		(64,140	)	(100.0	%)
SMS		13,622		21,367		(7,745	)
Total Measurement segment sales	$	3,524,664	$	3,654,332	$	(129,668	)	(3.5	%)

Page 18

Gross Margin – Gross margin for the three months ended February 28, 2019 decreased to 32.8% as compared to 40.8% for the three months ended February 28, 2018. Gross margin for the nine months ended February 28, 2019 decreased to 37.1% as compared to 44.1% for the nine months ended February 28, 2018. The decreases in gross margin experienced between the periods presented were primarily influenced by efforts that occurred in the third quarter of Fiscal 2019 to evaluate the types and levels of inventory maintained across the Company’s three product lines. This resulted in a direct adjustment to cost of sales, thereby reducing gross margin from 46.1% to 32.8% for the three months ended February 28, 2019 and from 41.1% to 37.1% for the nine months ended February 28, 2019. In addition, margins were also influenced by the mix of products sold during the respective periods across the Company’s three product lines, decreases in overall product costs incurred, and the shift in SBS product sales between the European, North American and Asian markets.

Operating Expenses – Operating expenses increased $165,257, or 12.1%, to $1,527,765 for the three months ended February 28, 2019 from $1,362,508 for the three months ended February 28, 2018. These results include non-recurring reorganization and legal expenses of $292,888 incurred during the three-month period ended February 28, 2019, that are not expected to be incurred in future periods.

Other items that impacted operating expenses for the three months ended February 28, 2019 include:

• Decrease in trade show expenses in the amount of $29,188, or 65.2%, due to timing of certain trade shows for our three product lines; and

• Decrease in research and development expense in the amount of $55,258, or 72.9%, as a result of the shift of engineering resources towards support of existing product initiatives rather than research and development.

Operating expenses increased $36,272, or 0.8%, to $4,568,784 for the nine months ended February 28, 2019 from $4,532,512 for the nine months ended February 28, 2018. These results include non-recurring reorganization, legal and other professional expenses in the amount of $637,447 incurred during the nine-month period ended February 28, 2019, that are not expected to be incurred in future periods.

Other items that impacted operating expenses for the nine months ended February 28, 2019 include:

• Decrease in commission expense in the amount of $148,131, or 20.8%, as a result of the restructuring of the Company’s sales commissions programs that occurred during Fiscal 2018;

• Decrease in research and development expense in the amount of $136,314, or 53.9%, as a result of the shift of engineering resources towards support of existing product initiatives rather than research and development.

Other Income (Expense) – Other income (expense) consists of foreign currency exchange gain (loss), interest income (expense) and other income (expense). Foreign currency exchange gains were $50,725 and $58,725 for the three months ended February 28, 2019 and 2018, respectively. The shifts in the foreign currency exchange are related to significant fluctuations of foreign currencies against the U.S. dollar during the current period of Fiscal 2019. Interest income (expense), net was $(3,957) and $3,090 for the three months ended February 28, 2019 and 2018, respectively. Other income (expense) was $11 for the first quarter of Fiscal 2019 as compared to $0 for the same period in the prior year.

Foreign currency exchange gains (losses) were $(79,397) and $85,913 for the nine months ended February 28, 2019 and 2018, respectively. The shifts in the foreign currency exchange are related to significant fluctuations of foreign currencies against the U.S. dollar during the current period of Fiscal 2019. Interest income (expense), net was $9,890 and $3,122 for the nine months ended February 28, 2019 and 2018, respectively. Other income (expense) was $39 for the first half of Fiscal 2019 as compared to $(599) for the same period in the prior year.

Income Taxes – The Company’s effective tax rate on consolidated net loss was 2.1% for the nine months ended February 28, 2019. The effective tax rate on consolidated net loss differs from the federal statutory tax rate primarily due to changes in the deferred tax valuation allowance and certain expenses not being deductible for income tax reporting purposes. Management believes the effective tax rate for Fiscal 2019 will be approximately 3.2% due to the items noted above.

Net Income (Loss) – Net loss was $475,189, or $(0.12) per fully diluted share, for the three months ended February 28, 2019 as compared to net income of $15,553, or $0.00 per fully diluted share, for the three months ended February 28, 2018. Net loss was $942,278, or $(0.24) per fully diluted share, for the nine months ended February 28, 2019 as compared to net loss of $15,297, or $0.00 per fully diluted share, for the nine months ended February 28, 2018.

Page 19

LIQUIDITY AND CAPITAL RESOURCES

The Company’s working capital decreased $823,361 to $7,424,612 as of February 28, 2019 as compared to $8,247,973 as of May 31, 2018.

Cash, cash equivalents and restricted cash decreased $885,768 to $1,225,765 as of February 28, 2019 from $2,111,533 as of May 31, 2018. Cash used in operating activities totaled $962,266 for the nine months ended February 28, 2019 as compared to cash used in operating activities of $1,096,192 for the nine months ended February 28, 2018. The net loss of $942,278, along with slight increases in inventories and accounts receivable, primarily impacted the total cash used in operating activities for the nine months ended February 28, 2019. The changes in inventories had the largest impact on the cash used in operating activities for the nine-month period ended February 28, 2018.

At February 28, 2019, the Company had accounts receivable of $2,078,116 as compared to $2,047,032 at May 31, 2018. The increase in accounts receivable of $31,084 was due to timing of receipts. Inventories increased $40,276 to $5,751,164 as of February 28, 2019 as compared to $5,710,888 at May 31, 2018. At February 28, 2019, total current liabilities increased $53,561 to $1,823,965, as compared to $1,770,404 at May 31, 2018. The increase in current liabilities is primarily due to the timing of payments to our vendors and sales representatives and the financing of the purchase of a new accounting and operational software system and a replacement of switches for the Company’s server.

We believe that our existing cash and cash equivalents combined with the cash we anticipate generating from operating activities will be sufficient to meet our cash requirements for the foreseeable future. We do not have any significant commitments nor are we aware of any significant events or conditions that are likely to have a material impact on our liquidity or capital resources.

Risk Factors

Please refer to the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2018 for a listing of factors that could cause actual results or events to differ materially from those contained in any forward-looking statements made by or on behalf of the Company.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes from the information previously reported under Item 7A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2018.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of February 28, 2019, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based on the evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Report, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the Company’s Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives, and management necessarily is required to use its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended February 28, 2019 that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.

Page 20

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On April 1, 2019, Schmitt Industries, Inc. (the “Company”) and plaintiffs North American Satellite Corp., Insite Platform Partners, and Rick Humphreys settled the lawsuit brought by the plaintiffs on January 8, 2019. Though the terms of the settlement agreement are confidential, the settlement amount is immaterial to the Company.

Item 6. Exhibits

Exhibit	Description
3.1	Second Restated Articles of Incorporation of Schmitt Industries, Inc. [Form 10-K for the fiscal year ended May 31, 1998, Exhibit 3(i)].
3.2	Second Restated Bylaws of Schmitt Industries, Inc. [Form 10-K for the fiscal year ended May  31, 1998, Exhibit 3(ii)].
4.1	See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation and Bylaws defining the rights of security holders.
31.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

Page 21

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 thereunto duly authorized.

	SCHMITT INDUSTRIES, INC.
	(Registrant)
Date: April 10, 2019	/s/ Ann M. Ferguson
	Ann M. Ferguson, Chief Financial Officer and Treasurer

Page 22

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael R. Zapata, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Schmitt Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-15(f) and 15d-15(f))for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 10, 2019	/s/ Michael R. Zapata
		Michael R. Zapata, Executive Chairman and President

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ann M. Ferguson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Schmitt Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 10, 2019	/s/ Ann M. Ferguson
		Ann M. Ferguson, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Schmitt Industries, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended February 28, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Michael R. Zapata and Ann M. Ferguson, Executive Chairman and President and Chief Financial Officer and Treasurer, respectively, of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael R. Zapata

Michael R. Zapata

Executive Chairman and President

April 10, 2019

/s/ Ann M. Ferguson

Ann M. Ferguson

Chief Financial Officer and Treasurer

April 10, 2019

XML

Document and Entity Information - shares	9 Months Ended
	Feb. 28, 2019	Mar. 31, 2019
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Feb. 28, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Trading Symbol	SMIT
Entity Registrant Name	SCHMITT INDUSTRIES INC
Entity Central Index Key	0000922612
Current Fiscal Year End Date	--05-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		4,032,878
Entity Emerging Growth Company	false
Entity Small Business	true

XML

Consolidated Balance Sheets - USD ($)	Feb. 28, 2019	May 31, 2018
Current assets
Cash and cash equivalents	$ 1,168,930	$ 2,053,181
Restricted cash	56,835	58,352
Accounts receivable, net	2,078,116	2,047,032
Inventories	5,751,164	5,710,888
Prepaid expenses	193,326	148,924
Income taxes receivable	206	0
Total current assets	9,248,577	10,018,377
Property and equipment, net	863,361	770,915
Other assets
Intangible assets, net	418,331	496,768
TOTAL ASSETS	10,530,269	11,286,060
Current liabilities
Accounts payable	977,436	1,024,256
Accrued commissions	194,943	194,797
Accrued payroll liabilities	192,953	188,568
Other accrued liabilities	437,209	358,790
Income taxes payable	0	3,993
Current portion of long-term liabilities	21,424	0
Total current liabilities	1,823,965	1,770,404
Long-term liabilities	35,601	0
Stockholders' equity
Common stock, no par value, 20,000,000 shares authorized, 4,032,878 shares issued and outstanding at February 28, 2019 and 3,994,545 shares issued and outstanding at May 31, 2018	13,156,496	13,085,652
Accumulated other comprehensive loss	(509,826)	(536,307)
Accumulated deficit	(3,975,967)	(3,033,689)
Total stockholders' equity	8,670,703	9,515,656
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 10,530,269	$ 11,286,060

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Feb. 28, 2019	May 31, 2018
Statement of Financial Position [Abstract]
Common stock, par value
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares issued	4,032,878	3,994,545
Common stock, shares outstanding	4,032,878	3,994,545

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Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($)	3 Months Ended		9 Months Ended
	Feb. 28, 2019	Feb. 28, 2018	Feb. 28, 2019	Feb. 28, 2018
Income Statement [Abstract]
Net sales	$ 3,082,181	$ 3,238,858	$ 10,026,112	$ 10,093,386
Cost of sales	2,069,798	1,916,345	6,310,824	5,645,372
Gross profit	1,012,383	1,322,513	3,715,288	4,448,014
Operating expenses:
General, administration and sales	1,507,233	1,286,718	4,452,091	4,279,505
Research and development	20,532	75,790	116,693	253,007
Total operating expenses	1,527,765	1,362,508	4,568,784	4,532,512
Operating loss	(515,382)	(39,995)	(853,496)	(84,498)
Other income (expense), net	46,779	61,815	(69,468)	88,436
Income (loss) before income taxes	(468,603)	21,820	(922,964)	3,938
Provision for income taxes	6,586	6,267	19,314	19,235
Net income (loss)	$ (475,189)	$ 15,553	$ (942,278)	$ (15,297)
Net income (loss) per common share:
Basic	$ (0.12)	$ 0.00	$ (0.24)	$ 0.00
Weighted average number of common shares, basic	4,000,990	3,706,050	3,996,670	3,230,022
Diluted	$ (0.12)	$ 0.00	$ (0.24)	$ 0.00
Weighted average number of common shares, diluted	4,000,990	3,769,814	3,996,670	3,230,022
Comprehensive income (loss)
Net income (loss)	$ (475,189)	$ 15,553	$ (942,278)	$ (15,297)
Foreign currency translation adjustment	(47,256)	(51,983)	26,481	(51,543)
Total comprehensive income (loss)	$ (522,445)	$ (36,430)	$ (915,797)	$ (66,840)

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Consolidated Statements of Cash Flows - USD ($)	9 Months Ended
	Feb. 28, 2019	Feb. 28, 2018
Cash flows relating to operating activities
Net loss	$ (942,278)	$ (15,297)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	139,424	156,326
(Gain) loss on disposal of property and equipment	0	619
Stock based compensation	5,678	42,167
Reserve for excess or obsolete inventories	407,730	0
(Increase) decrease in:
Accounts receivable	(30,061)	291,273
Inventories	(447,717)	(1,218,520)
Prepaid expenses	(44,503)	(32,086)
Income taxes receivable	(206)	7,310
Increase (decrease) in:
Accounts payable	(46,263)	(261,532)
Accrued liabilities and customer deposits	(77)	(69,917)
Income taxes payable	(3,993)	3,465
Net cash used in operating activities	(962,266)	(1,096,192)
Cash flows relating to investing activities
Purchases of property and equipment	(4,674)	(8,467)
Proceeds from the sale of property and equipment	0	1,500
Net cash used in investing activities	(4,674)	(6,967)
Cash flows relating to financing activities
Payments on long-term liabilities	(8,366)	0
Common stock issued on exercise of stock options	65,166	0
Proceeds from the rights offering, net of expenses	0	2,386,029
Net cash provided by financing activities	56,800	2,386,029
Effect of foreign exchange translation on cash	24,372	(103,507)
Change in cash, cash equivalents and restricted cash	(885,768)	1,179,363
Cash, cash equivalents and restricted cash, beginning of period	2,111,533	867,607
Cash, cash equivalents and restricted cash, end of period	1,225,765	2,046,970
Supplemental disclosure of cash flow information
Cash paid during the period for income taxes	23,512	8,460
Cash paid during the period for interest	8,985	1,114
Supplemental disclosure of non-cash investing and financing activities
Acquisition of property and equipment through financed payables	$ 148,760	$ 0

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Consolidated Statement of Changes in Stockholders' Equity - 9 months ended Feb. 28, 2019 - USD ($)	Total	Common Stock [Member]	Accumulated Other Comprehensive Loss [Member]	Accumulated Deficit [Member]
Beginning balance at May. 31, 2018	$ 9,515,656	$ 13,085,652	$ (536,307)	$ (3,033,689)
Beginning balance, shares at May. 31, 2018	3,994,545	3,994,545
Stock options exercised net of related tax benefit of $0, shares	38,333	38,333
Stock options exercised net of related tax benefit of $0, value	$ 65,166	$ 65,166	0	0
Stock-based compensation	5,678	5,678	0	0
Net loss	(942,278)	0	0	(942,278)
Other comprehensive income	26,481	0	26,481	0
Ending balance at Feb. 28, 2019	$ 8,670,703	$ 13,156,496	$ (509,826)	$ (3,975,967)
Ending balance, shares at Feb. 28, 2019	4,032,878	4,032,878

XML

Consolidated Statement of Changes in Stockholders' Equity (Parenthetical)	9 Months Ended
	Feb. 28, 2019 USD ($)
Stock options exercised net of related tax benefit of $0	$ 0

XML

Summary of Significant Accounting Policies

9 Months Ended

Feb. 28, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 1:

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial information included herein has been prepared by Schmitt Industries, Inc. (the “Company” or “Schmitt”) and its wholly owned subsidiaries. In the opinion of management, the accompanying unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly its financial position as of February 28, 2019 and its results of operations and its cash flows for the periods presented. The consolidated balance sheet at May 31, 2018 has been derived from the Annual Report on Form 10-K for the fiscal year ended May 31, 2018. The accompanying unaudited financial statements and related notes should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2018. Operating results for the interim periods presented are not necessarily indicative of the results that may be experienced for the fiscal year ending May 31, 2019.

Revenue Recognition

On June 1, 2018, the Company adopted Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” using the modified retrospective approach. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or related disclosures.

The Company determines the amount of revenue it recognizes associated with the transfer of each product or service using the five-step model provided by Topic 606. For sales of products or delivery of monitoring services to all customers, including manufacturing representatives, distributors or their third-party customers, each transaction is evaluated to determine whether there is approval and commitment from both the Company and the customer for the transaction; whether the rights of each party are specifically identified; whether the transaction has commercial substance; whether collectability from the customer is probable at the inception of the contract and whether the transaction amount is defined. If a transaction to sell products or provide monitoring services meets all of the above criteria, revenue is recognized for the sales of product at the time of shipment or for monitoring services at the completion of the month in which monitoring services are provided.

The Company incurs commissions associated with the sales of products, which are accrued and expensed at the time the product is shipped. These amounts are recorded within general, administration and sales expense.

The Company also incurs costs related to shipping and handling of its products, the costs of which are expensed as incurred as a component of cost of sales. Shipping and handling fees billed to customers are recognized at the time of shipment as a component of net sales.

Financial Instruments

The carrying value of all other financial instruments potentially subject to valuation risk (principally consisting of cash and cash equivalents, accounts receivable and accounts payable) also approximates fair value because of their short-term maturities.

Restricted Cash

Restricted cash consists of an amount received from a customer in December 2017 as part of an on-going contract. The timeline for services being provided under this contract has been extended and is expected to be completed during the second half of Fiscal 2019, at which time the restrictions on this payment will lapse.

The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within the Consolidated Balance Sheets as of February 28, 2019 and May 31, 2018 to the sum of the same such amounts as shown in the Consolidated Statement of Cash Flows for the nine months ended February 28, 2019:

	February 28, 2019		May 31, 2018
Cash and cash equivalents	$	1,168,930	$	2,053,181
Restricted cash		56,835		58,352
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statement of Cash Flows	$	1,225,765	$	2,111,533

Accounts Receivable

The Company maintains credit limits for all customers based upon several factors, including but not limited to financial condition and stability, payment history, published credit reports and use of credit references. Management performs various analyses to evaluate accounts receivable balances to ensure recorded amounts reflect estimated net realizable value. This review includes using accounts receivable agings, other operating trends and relevant business conditions, including general economic factors, as they relate to each of the Company’s domestic and international customers. If these analyses lead management to the conclusion that potential significant accounts are uncollectible, a reserve is provided. The allowance for doubtful accounts was $26,263 and $95,207 as of February 28, 2019 and May 31, 2018, respectively.

Inventories

Inventories are valued at the lower of cost or net realizable value with cost determined on the average cost basis. Costs included in inventories consist of materials, labor and manufacturing overhead, which are related to the purchase or production of inventories. Write-downs, when required, are made to reduce excess inventories to their net realizable values. Such estimates are based on assumptions regarding future demand and market conditions. If actual conditions become less favorable than the assumptions used, an additional inventory write-down may be required. As of February 28, 2019 and May 31, 2018, inventories consisted of:

	February 28, 2019		May 31, 2018
Raw materials	$	2,411,474	$	2,796,691
Work-in-process		1,056,251		1,009,424
Finished goods		2,283,439		1,904,773
	$	5,751,164	$	5,710,888

Inventories, as noted in the above table and on the Consolidated Balance Sheets as of February 28, 2019 and May 31, 2018, are presented net of inventory reserves of $1,150,597 and $742,900 as of February 28, 2019 and May 31, 2018.

Reserve adjustments of $(407,558) and $(6,555) for the three months ended February 28, 2019 and 2018, respectively, are included in cost of sales on the Consolidated Statements of Operations. Reserve adjustments of $(407,730) and $11,035 for the nine months ended February 28, 2019 and 2018, respectively, are included in cost of sales on the Consolidated Statements of Operations.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years for furniture, fixtures and equipment; three years for vehicles; and twenty-five years for buildings and improvements. As of February 28, 2019 and May 31, 2018, property and equipment consisted of:

	February 28, 2019			May 31, 2018
Land	$	299,000		$	299,000
Buildings and improvements		1,814,524			1,814,524
Furniture, fixtures and equipment		1,406,725			1,252,598
Vehicles		44,704			44,704
		3,564,953			3,410,826
Less accumulated depreciation		(2,701,592	)		(2,639,911	)
	$	863,361		$	770,915

Long-term liabilities and current portion of long-term liabilities

Long-term liabilities consist of a financing arrangement executed for the purchase of certain property and equipment over a term of 36 months. Future minimum commitments under this agreement for the each of the years ending May 31 are as follows:

	Years ending May 31,
2019	$	4,218
2020		25,307
2021		25,307
2022		8,431
Total future minimum payments		63,263
Less: amount representing interest		(6,238	)
Present value of minimum payments of long-term liabilities	$	57,025
Current portion of long-term liabilities		21,424
Long-term liabilities		35,601
	$	57,025

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for most leases previously classified as operating leases. The ASU is required to be applied using a modified retrospective approach at the beginning of the earliest period presented, with optional practical expedients. The FASB recently proposed an optional transition alternative, which would allow for application of the guidance at the beginning of the period in which it is adopted, rather than at the beginning of the earliest comparative period presented. The Company will adopt the new standard on June 1, 2019.

The Company is currently evaluating the impact of this guidance, including reviewing the standard’s provisions and gathering and analyzing data to support further evaluation of all real estate and non-real estate leases. The Company is also evaluating the impact of the accounting standard on the Company’s financial statement disclosures, systems, processes and controls.

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Stock Options and Stock-Based Compensation

9 Months Ended

Feb. 28, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Options and Stock-Based Compensation

NOTE 2:

STOCK OPTIONS AND STOCK-BASED COMPENSATION

Stock-based compensation includes expense charges for all stock-based awards to employees and directors granted under the Company’s stock option plan. Stock-based compensation recognized during the period is based on the portion of the grant date fair value of the stock-based award that will vest during the period, adjusted for expected forfeitures. Compensation cost for all stock-based awards is recognized using the straight-line method. The Company uses the Black-Scholes option pricing model as its method of valuation for stock-based awards. The Black-Scholes option pricing model requires the input of highly subjective assumptions, and other reasonable assumptions could provide differing results. These variables include, but are not limited to:

• Risk-Free Interest Rate. The Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award.

• Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and pre-vesting and post-vesting forfeitures.

• Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock. The volatility factor the Company uses is based on its historical stock prices over the most recent period commensurate with the estimated expected life of the award. These historical periods may exclude portions of time when unusual transactions occurred.

• Expected Dividend Yield. The Company does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of 0.

• Expected Forfeitures. The Company uses relevant historical data to estimate pre-vesting option forfeitures. The Company records stock-based compensation only for those awards that are expected to vest.

To determine stock-based compensation expense recognized for those options granted during the nine months ended February 28, 2019, the Company has computed the value of all stock options granted using the Black-Scholes option pricing model as prescribed by ASC Topic 718 using the following assumptions:

	Nine Months Ended
	February 28, 2019
Risk-free interest rate	3.1%
Expected life	6.0 years
Expected volatility	46.3%

At February 28, 2019, the Company had a total of 266,166 outstanding stock options (243,665 vested and exercisable and 22,501 non-vested) with a weighted average exercise price of $2.42. The Company estimates that $897 will be recorded as additional stock-based compensation expense during the next fiscal quarter for all options that were outstanding as of February 28, 2019, but which were not yet vested.

Outstanding Options						Exercisable Options
Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (yrs)		Number of Shares		Weighted Average Exercise Price
	124,166	$	1.70		8.1		101,665	$	1.70
	15,000		2.53		4.6		15,000		2.53
	82,000		2.82		5.8		82,000		2.82
	45,000		3.65		2.3		45,000		3.65
	266,166		2.42		6.2		243,665		2.49

Options granted, exercised, and forfeited or canceled under the Company’s stock option plan during the nine months ended February 28, 2019 are summarized as follows:

	Nine Months Ended February 28, 2019
	Number of Shares			Weighted Average Exercise Price
Options outstanding - beginning of period		318,332		$	2.36
Options granted		27,000			2.55
Options exercised		(38,333	)		1.70
Options forfeited/canceled		(40,833	)		2.66
Options outstanding - end of period		266,166			2.42

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Weighted Average Shares and Reconciliation

9 Months Ended

Feb. 28, 2019

Earnings Per Share [Abstract]

Weighted Average Shares And Reconciliation Disclosure [Text Block]

NOTE 3:

WEIGHTED AVERAGE SHARES AND RECONCILIATION

	Three Months Ended February 28,				Nine Months Ended February 28,
	2019		2018		2019		2018
Weighted average shares (basic)		4,000,990		3,706,050		3,996,670		3,230,022
Effect of dilutive stock options		0		63,764		0		0
Weighted average shares (diluted)		4,000,990		3,769,814		3,996,670		3,230,022

Basic earnings (loss) per share is computed using the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed using the weighted average number of common shares outstanding, adjusted for dilutive incremental shares attributed to outstanding options to purchase common stock. Common stock equivalents for stock options are computed using the treasury stock method. In periods in which a net loss is incurred, no common stock equivalents are included since they are antidilutive and as such all stock options outstanding are excluded from the computation of diluted net loss in those periods.

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Income Taxes

9 Months Ended

Feb. 28, 2019

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 4:

INCOME TAXES

The Company accounts for income taxes using the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management continues to review the level of the valuation allowance on a quarterly basis. There can be no assurance that the Company’s future operations will produce sufficient earnings to allow for the deferred tax asset to be fully utilized. The Company currently maintains a full valuation allowance against net deferred tax assets.

Each year the Company files income tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the taxing authorities. Positions challenged by the taxing authorities may be settled or appealed by the Company. As a result, there is an uncertainty in income taxes recognized in the Company’s financial statements in accordance with ASC Topic 740. The Company applies this guidance by defining criteria that an individual income tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements and provides guidance on measurement, de-recognition, classification, accounting for interest and penalties, accounting in interim periods, disclosure, and transition.

Other long-term liabilities related to tax contingencies were $0 as of February 28, 2019 and May 31, 2018. Interest and penalties associated with uncertain tax positions are recognized as components of the “Provision for income taxes.” The liability for payment of interest and penalties was $0 as of February 28, 2019 and May 31, 2018.

Several tax years are subject to examination by major tax jurisdictions. In the United States, federal tax years ended May 31, 2015 and after are subject to examination. In the United Kingdom, tax years ended May 31, 2013 and after are subject to examination.

Effective Tax Rate

The effective tax rate on consolidated net loss was 2.1% for the nine months ended February 28, 2019. The effective tax rate on consolidated net loss differs from the federal statutory tax rate primarily due to changes in the deferred tax valuation allowance and certain expenses not being deductible for income tax reporting purposes. Management believes the effective tax rate for Fiscal 2019 will be approximately 3.2% due to the items noted above.

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Segment of Business

9 Months Ended

Feb. 28, 2019

Segment Reporting [Abstract]

Segment of Business

NOTE 5:

SEGMENTS OF BUSINESS

The Company has two reportable business segments, Balancer and Measurement. Balancer focuses on dynamic balancing and process control systems for the machine tool industry and Measurement focuses on laser-based test and measurement systems and ultrasonic measurement products. The Company operates in three principal geographic markets: North America, Europe and Asia.

Segment Information

	Three Months Ended February 28,
	2019					2018
	Balancer			Measurement		Balancer			Measurement
Net sales	$	1,961,636		$	1,120,545	$	2,137,811		$	1,101,047
Operating income (loss)	$	(593,462	)	$	78,080	$	(39,720	)	$	(275	)
Depreciation expense	$	10,346		$	9,000	$	16,300		$	9,235
Amortization expense	$	0		$	26,145	$	0		$	26,146
Capital expenditures	$	147,917		$	0	$	0		$	0

	Nine Months Ended February 28,
	2019					2018
	Balancer			Measurement		Balancer			Measurement
Net sales	$	6,501,448		$	3,524,664	$	6,439,054		$	3,654,332
Operating income (loss)	$	(1,199,680	)	$	346,184	$	(340,486	)	$	255,988
Depreciation expense	$	33,989		$	26,998	$	49,670		$	28,218
Amortization expense	$	0		$	78,437	$	0		$	78,438
Capital expenditures	$	153,434		$	0	$	8,467		$	0

Inventory reserve adjustments of $(291,427) for the Balancer segment and $(116,131) for the Measurement segment are included in operating income (loss) for the three and nine months ended February 28, 2019, respectively.

Geographic Information – Net Sales by Geographic Area

	Three Months Ended February 28,				Nine Months Ended February 28,
	2019		2018		2019		2018
North America	$	1,899,961	$	1,898,796	$	6,065,868	$	6,174,874
Europe		548,059		552,018		1,427,310		1,526,917
Asia		587,136		752,712		2,389,087		2,297,617
Other markets		47,025		35,332		143,847		93,978
Total net sales	$	3,082,181	$	3,238,858	$	10,026,112	$	10,093,386

	Three Months Ended February 28,
	2019					2018
	United States (2)			Europe (1)		United States (2)			Europe (1)
Operating income (loss)	$	(565,426	)	$	50,044	$	(123,205	)	$	83,210
Depreciation expense	$	19,346		$	0	$	25,535		$	0
Amortization expense	$	26,145		$	0	$	26,146		$	0
Capital expenditures	$	147,917		$	0	$	0		$	0

	Nine Months Ended February 28,
	2019					2018
	United States (2)			Europe (1)		United States (2)			Europe (1)
Operating income (loss)	$	(959,525	)		106,029	$	(307,015	)		222,517
Depreciation expense	$	60,987		$	0	$	77,888		$	0
Amortization expense	$	78,437		$	0	$	78,438		$	0
Capital expenditures	$	153,434		$	0	$	8,467		$	0

(1) “Europe” is defined in the above chart to include results from the European subsidiary, Schmitt Europe Ltd.

(2) “United States” is defined to include remainder of the results not included in the European subsidiary.

Segment and Geographic Assets

	February 28, 2019		May 31, 2018
Segment assets to total assets
Balancer	$	6,292,198	$	6,461,974
Measurement		3,012,100		2,712,553
Corporate assets		1,225,971		2,111,533
Total assets	$	10,530,269	$	11,286,060
Geographic assets to long-lived assets
United States (2)	$	863,361	$	770,915
Europe (1)		0		0
Total long-lived assets	$	863,361	$	770,915
Geographic assets to total assets
United States (2)	$	9,314,335	$	10,110,683
Europe (1)		1,215,934		1,175,377
Total assets	$	10,530,269	$	11,286,060

(1) “Europe” includes assets held by the European subsidiary, Schmitt Europe Ltd.

(2) “United States” includes remainder of the assets not held by the European subsidiary.

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Restructuring and Related Charges

9 Months Ended

Feb. 28, 2019

Restructuring and Related Activities [Abstract]

Restructuring and Related Activities Disclosure

NOTE 6:

RESTRUCTURING AND RELATED CHARGES

In November 2018 Schmitt announced a strategic reorganization following the appointment of two new board members. The reorganization will position the Company to better capitalize on the growing SBS Balancer business while streamlining the company and maximizing shareholder value through the disposition of non-core assets. The reorganization has involved a streamlining of contractors and services, and employee severance and termination benefits that have increased operating expenses in the third quarter. In conjunction with these efforts, an inventory adjustment of $(407,558) was recorded during the three months ended February 28, 2019 that was the outcome of efforts to evaluate the types and levels of inventory maintained across the Company’s three product lines.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Feb. 28, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The consolidated financial information included herein has been prepared by Schmitt Industries, Inc. (the “Company” or “Schmitt”) and its wholly owned subsidiaries. In the opinion of management, the accompanying unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly its financial position as of February 28, 2019 and its results of operations and its cash flows for the periods presented. The consolidated balance sheet at May 31, 2018 has been derived from the Annual Report on Form 10-K for the fiscal year ended May 31, 2018. The accompanying unaudited financial statements and related notes should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2018. Operating results for the interim periods presented are not necessarily indicative of the results that may be experienced for the fiscal year ending May 31, 2019.

Revenue Recognition

Revenue Recognition

On June 1, 2018, the Company adopted Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” using the modified retrospective approach. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or related disclosures.

The Company determines the amount of revenue it recognizes associated with the transfer of each product or service using the five-step model provided by Topic 606. For sales of products or delivery of monitoring services to all customers, including manufacturing representatives, distributors or their third-party customers, each transaction is evaluated to determine whether there is approval and commitment from both the Company and the customer for the transaction; whether the rights of each party are specifically identified; whether the transaction has commercial substance; whether collectability from the customer is probable at the inception of the contract and whether the transaction amount is defined. If a transaction to sell products or provide monitoring services meets all of the above criteria, revenue is recognized for the sales of product at the time of shipment or for monitoring services at the completion of the month in which monitoring services are provided.

The Company incurs commissions associated with the sales of products, which are accrued and expensed at the time the product is shipped. These amounts are recorded within general, administration and sales expense.

The Company also incurs costs related to shipping and handling of its products, the costs of which are expensed as incurred as a component of cost of sales. Shipping and handling fees billed to customers are recognized at the time of shipment as a component of net sales.

Financial Instruments

Financial Instruments

The carrying value of all other financial instruments potentially subject to valuation risk (principally consisting of cash and cash equivalents, accounts receivable and accounts payable) also approximates fair value because of their short-term maturities.

Restricted Cash

Restricted Cash

Restricted cash consists of an amount received from a customer in December 2017 as part of an on-going contract. The timeline for services being provided under this contract has been extended and is expected to be completed during the second half of Fiscal 2019, at which time the restrictions on this payment will lapse.

The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within the Consolidated Balance Sheets as of February 28, 2019 and May 31, 2018 to the sum of the same such amounts as shown in the Consolidated Statement of Cash Flows for the nine months ended February 28, 2019:

	February 28, 2019		May 31, 2018
Cash and cash equivalents	$	1,168,930	$	2,053,181
Restricted cash		56,835		58,352
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statement of Cash Flows	$	1,225,765	$	2,111,533

Accounts Receivable

Accounts Receivable

The Company maintains credit limits for all customers based upon several factors, including but not limited to financial condition and stability, payment history, published credit reports and use of credit references. Management performs various analyses to evaluate accounts receivable balances to ensure recorded amounts reflect estimated net realizable value. This review includes using accounts receivable agings, other operating trends and relevant business conditions, including general economic factors, as they relate to each of the Company’s domestic and international customers. If these analyses lead management to the conclusion that potential significant accounts are uncollectible, a reserve is provided. The allowance for doubtful accounts was $26,263 and $95,207 as of February 28, 2019 and May 31, 2018, respectively.

Inventories

Inventories

Inventories are valued at the lower of cost or net realizable value with cost determined on the average cost basis. Costs included in inventories consist of materials, labor and manufacturing overhead, which are related to the purchase or production of inventories. Write-downs, when required, are made to reduce excess inventories to their net realizable values. Such estimates are based on assumptions regarding future demand and market conditions. If actual conditions become less favorable than the assumptions used, an additional inventory write-down may be required. As of February 28, 2019 and May 31, 2018, inventories consisted of:

	February 28, 2019		May 31, 2018
Raw materials	$	2,411,474	$	2,796,691
Work-in-process		1,056,251		1,009,424
Finished goods		2,283,439		1,904,773
	$	5,751,164	$	5,710,888

Inventories, as noted in the above table and on the Consolidated Balance Sheets as of February 28, 2019 and May 31, 2018, are presented net of inventory reserves of $1,150,597 and $742,900 as of February 28, 2019 and May 31, 2018.

Reserve adjustments of $(407,558) and $(6,555) for the three months ended February 28, 2019 and 2018, respectively, are included in cost of sales on the Consolidated Statements of Operations. Reserve adjustments of $(407,730) and $11,035 for the nine months ended February 28, 2019 and 2018, respectively, are included in cost of sales on the Consolidated Statements of Operations.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years for furniture, fixtures and equipment; three years for vehicles; and twenty-five years for buildings and improvements. As of February 28, 2019 and May 31, 2018, property and equipment consisted of:

	February 28, 2019			May 31, 2018
Land	$	299,000		$	299,000
Buildings and improvements		1,814,524			1,814,524
Furniture, fixtures and equipment		1,406,725			1,252,598
Vehicles		44,704			44,704
		3,564,953			3,410,826
Less accumulated depreciation		(2,701,592	)		(2,639,911	)
	$	863,361		$	770,915

Long-term liabilities and current portion of long-term liabilities

Long-term liabilities and current portion of long-term liabilities

Long-term liabilities consist of a financing arrangement executed for the purchase of certain property and equipment over a term of 36 months. Future minimum commitments under this agreement for the each of the years ending May 31 are as follows:

	Years ending May 31,
2019	$	4,218
2020		25,307
2021		25,307
2022		8,431
Total future minimum payments		63,263
Less: amount representing interest		(6,238	)
Present value of minimum payments of long-term liabilities	$	57,025
Current portion of long-term liabilities		21,424
Long-term liabilities		35,601
	$	57,025

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for most leases previously classified as operating leases. The ASU is required to be applied using a modified retrospective approach at the beginning of the earliest period presented, with optional practical expedients. The FASB recently proposed an optional transition alternative, which would allow for application of the guidance at the beginning of the period in which it is adopted, rather than at the beginning of the earliest comparative period presented. The Company will adopt the new standard on June 1, 2019.

The Company is currently evaluating the impact of this guidance, including reviewing the standard’s provisions and gathering and analyzing data to support further evaluation of all real estate and non-real estate leases. The Company is also evaluating the impact of the accounting standard on the Company’s financial statement disclosures, systems, processes and controls.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Feb. 28, 2019

Accounting Policies [Abstract]

Summary of Reconciliation of Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within the Consolidated Balance Sheets as of February 28, 2019 and May 31, 2018 to the sum of the same such amounts as shown in the Consolidated Statement of Cash Flows for the nine months ended February 28, 2019:

	February 28, 2019		May 31, 2018
Cash and cash equivalents	$	1,168,930	$	2,053,181
Restricted cash		56,835		58,352
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statement of Cash Flows	$	1,225,765	$	2,111,533

Inventories

As of February 28, 2019 and May 31, 2018, inventories consisted of:

	February 28, 2019		May 31, 2018
Raw materials	$	2,411,474	$	2,796,691
Work-in-process		1,056,251		1,009,424
Finished goods		2,283,439		1,904,773
	$	5,751,164	$	5,710,888

Summary of Property and Equipment

As of February 28, 2019 and May 31, 2018, property and equipment consisted of:

	February 28, 2019			May 31, 2018
Land	$	299,000		$	299,000
Buildings and improvements		1,814,524			1,814,524
Furniture, fixtures and equipment		1,406,725			1,252,598
Vehicles		44,704			44,704
		3,564,953			3,410,826
Less accumulated depreciation		(2,701,592	)		(2,639,911	)
	$	863,361		$	770,915

Long-term Purchase Commitment

Long-term liabilities consist of a financing arrangement executed for the purchase of certain property and equipment over a term of 36 months. Future minimum commitments under this agreement for the each of the years ending May 31 are as follows:

	Years ending May 31,
2019	$	4,218
2020		25,307
2021		25,307
2022		8,431
Total future minimum payments		63,263
Less: amount representing interest		(6,238	)
Present value of minimum payments of long-term liabilities	$	57,025
Current portion of long-term liabilities		21,424
Long-term liabilities		35,601
	$	57,025

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Stock Options and Stock-Based Compensation (Tables)

9 Months Ended

Feb. 28, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Fair Value of Options

To determine stock-based compensation expense recognized for those options granted during the nine months ended February 28, 2019, the Company has computed the value of all stock options granted using the Black-Scholes option pricing model as prescribed by ASC Topic 718 using the following assumptions:

	Nine Months Ended
	February 28, 2019
Risk-free interest rate	3.1%
Expected life	6.0 years
Expected volatility	46.3%

Schedule of Outstanding Stock Options

The Company estimates that $897 will be recorded as additional stock-based compensation expense during the next fiscal quarter for all options that were outstanding as of February 28, 2019, but which were not yet vested.

Outstanding Options						Exercisable Options
Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (yrs)		Number of Shares		Weighted Average Exercise Price
	124,166	$	1.70		8.1		101,665	$	1.70
	15,000		2.53		4.6		15,000		2.53
	82,000		2.82		5.8		82,000		2.82
	45,000		3.65		2.3		45,000		3.65
	266,166		2.42		6.2		243,665		2.49

Schedule of Options Granted, Exercised, and Forfeited or Canceled

Options granted, exercised, and forfeited or canceled under the Company’s stock option plan during the nine months ended February 28, 2019 are summarized as follows:

	Nine Months Ended February 28, 2019
	Number of Shares			Weighted Average Exercise Price
Options outstanding - beginning of period		318,332		$	2.36
Options granted		27,000			2.55
Options exercised		(38,333	)		1.70
Options forfeited/canceled		(40,833	)		2.66
Options outstanding - end of period		266,166			2.42

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Weighted Average Shares and Reconciliation (Tables)

9 Months Ended

Feb. 28, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

	Three Months Ended February 28,				Nine Months Ended February 28,
	2019		2018		2019		2018
Weighted average shares (basic)		4,000,990		3,706,050		3,996,670		3,230,022
Effect of dilutive stock options		0		63,764		0		0
Weighted average shares (diluted)		4,000,990		3,769,814		3,996,670		3,230,022

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Segment of Business (Tables)

9 Months Ended

Feb. 28, 2019

Segment Reporting [Abstract]

Segment Information

Segment Information

	Three Months Ended February 28,
	2019					2018
	Balancer			Measurement		Balancer			Measurement
Net sales	$	1,961,636		$	1,120,545	$	2,137,811		$	1,101,047
Operating income (loss)	$	(593,462	)	$	78,080	$	(39,720	)	$	(275	)
Depreciation expense	$	10,346		$	9,000	$	16,300		$	9,235
Amortization expense	$	0		$	26,145	$	0		$	26,146
Capital expenditures	$	147,917		$	0	$	0		$	0

	Nine Months Ended February 28,
	2019					2018
	Balancer			Measurement		Balancer			Measurement
Net sales	$	6,501,448		$	3,524,664	$	6,439,054		$	3,654,332
Operating income (loss)	$	(1,199,680	)	$	346,184	$	(340,486	)	$	255,988
Depreciation expense	$	33,989		$	26,998	$	49,670		$	28,218
Amortization expense	$	0		$	78,437	$	0		$	78,438
Capital expenditures	$	153,434		$	0	$	8,467		$	0

Geographic Information

Geographic Information – Net Sales by Geographic Area

	Three Months Ended February 28,				Nine Months Ended February 28,
	2019		2018		2019		2018
North America	$	1,899,961	$	1,898,796	$	6,065,868	$	6,174,874
Europe		548,059		552,018		1,427,310		1,526,917
Asia		587,136		752,712		2,389,087		2,297,617
Other markets		47,025		35,332		143,847		93,978
Total net sales	$	3,082,181	$	3,238,858	$	10,026,112	$	10,093,386

Segment Information of Operating Income (Loss) and Expenditure by Geographic Areas

	Three Months Ended February 28,
	2019					2018
	United States (2)			Europe (1)		United States (2)			Europe (1)
Operating income (loss)	$	(565,426	)	$	50,044	$	(123,205	)	$	83,210
Depreciation expense	$	19,346		$	0	$	25,535		$	0
Amortization expense	$	26,145		$	0	$	26,146		$	0
Capital expenditures	$	147,917		$	0	$	0		$	0

	Nine Months Ended February 28,
	2019					2018
	United States (2)			Europe (1)		United States (2)			Europe (1)
Operating income (loss)	$	(959,525	)		106,029	$	(307,015	)		222,517
Depreciation expense	$	60,987		$	0	$	77,888		$	0
Amortization expense	$	78,437		$	0	$	78,438		$	0
Capital expenditures	$	153,434		$	0	$	8,467		$	0

(1) “Europe” is defined in the above chart to include results from the European subsidiary, Schmitt Europe Ltd.

(2) “United States” is defined to include remainder of the results not included in the European subsidiary.

Segment and Geographic Assets

Segment and Geographic Assets

	February 28, 2019		May 31, 2018
Segment assets to total assets
Balancer	$	6,292,198	$	6,461,974
Measurement		3,012,100		2,712,553
Corporate assets		1,225,971		2,111,533
Total assets	$	10,530,269	$	11,286,060
Geographic assets to long-lived assets
United States (2)	$	863,361	$	770,915
Europe (1)		0		0
Total long-lived assets	$	863,361	$	770,915
Geographic assets to total assets
United States (2)	$	9,314,335	$	10,110,683
Europe (1)		1,215,934		1,175,377
Total assets	$	10,530,269	$	11,286,060

(1) “Europe” includes assets held by the European subsidiary, Schmitt Europe Ltd.

(2) “United States” includes remainder of the assets not held by the European subsidiary.

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Significant Accounting Policies - Summary of Reconciliation of Cash, Cash Equivalents and Restricted Cash (Detail) - USD ($)	Feb. 28, 2019	May 31, 2018	Feb. 28, 2018	May 31, 2017
Restricted Cash and Cash Equivalents [Abstract]
Cash and cash equivalents	$ 1,168,930	$ 2,053,181
Restricted cash	56,835	58,352
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statement of Cash Flows	$ 1,225,765	$ 2,111,533	$ 2,046,970	$ 867,607

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Significant Accounting Policies - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Feb. 28, 2019	Feb. 28, 2018	Feb. 28, 2019	Feb. 28, 2018	May 31, 2018
Significant Accounting Policies [Line Items]
Allowance for doubtful accounts	$ 26,263		$ 26,263		$ 95,207
Inventory Reserve Adjustments	1,150,597		1,150,597		$ 742,900
Reserve Adjustments for Excess or Obsolete Inventories	(407,558)
Cost of Sales [Member]
Significant Accounting Policies [Line Items]
Reserve Adjustments for Excess or Obsolete Inventories	$ (407,558)	$ (6,555)	$ (407,730)	$ 11,035
Vehicles [Member]
Significant Accounting Policies [Line Items]
Property and equipment, useful life			3 years
Building and Improvements [Member]
Significant Accounting Policies [Line Items]
Property and equipment, useful life			25 years
Minimum [Member] | Furniture, Fixtures and Equipment [Member]
Significant Accounting Policies [Line Items]
Property and equipment, useful life			3 years
Maximum [Member] | Furniture, Fixtures and Equipment [Member]
Significant Accounting Policies [Line Items]
Property and equipment, useful life			7 years

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Significant Accounting Policies - Schedule of Inventories (Detail) - USD ($)	Feb. 28, 2019	May 31, 2018
Inventory, Net [Abstract]
Raw materials	$ 2,411,474	$ 2,796,691
Work-in-process	1,056,251	1,009,424
Finished goods	2,283,439	1,904,773
Inventories	$ 5,751,164	$ 5,710,888

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Significant Accounting Policies - Summary of Property and Equipment (Detail) - USD ($)	Feb. 28, 2019	May 31, 2018
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 3,564,953	$ 3,410,826
Less accumulated depreciation	(2,701,592)	(2,639,911)
Property, plant and equipment, net	863,361	770,915
Land [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	299,000	299,000
Building and Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	1,814,524	1,814,524
Furniture, Fixtures and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	1,406,725	1,252,598
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 44,704	$ 44,704

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Significant Accounting Policies - Summary of Long-term liabilities (Detail)	Feb. 28, 2019 USD ($)
2019	$ 4,218
2020	25,307
2021	25,307
2022	8,431
Total future minimum payments	63,263
Less: amount representing interest	(6,238)
Present value of minimum payments of long-term liabilities	57,025
Total	$ 57,025

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Stock Options and Stock Based Compensation - Additional Information (Detail) - USD ($)	9 Months Ended
	Feb. 28, 2019	May 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Expected dividend rate	0.00%
Outstanding stock options, total	266,166	318,332
Vested and exercisable stock options	243,665
Non-vested shares	22,501
Weighted average exercise price	$ 2.42	$ 2.36
Additional stock-based compensation expense	$ 897
Weighted average period over which unrecognized compensation is expected to be recognized	1 month 6 days

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Stock Options and Stock Based Compensation - Schedule of Fair Value of Options (Detail)	9 Months Ended
	Feb. 28, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Risk-free interest rate	3.10%
Expected life	6 years
Expected volatility	46.30%

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Stock Options and Stock Based Compensation - Schedule of Outstanding Stock Options (Detail) - $ / shares	9 Months Ended
	Feb. 28, 2019	May 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding Options	266,166	318,332
Weighted Average Exercise Price, Outstanding Options	$ 2.42	$ 2.36
Weighted Average Remaining Contractual Life (yrs), Outstanding Options	6 years 2 months 12 days
Exercisable Options, Number of Shares	243,665
Exercisable Options, Weighted Average Exercise Price	$ 2.49
Options 1 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding Options	124,166
Weighted Average Exercise Price, Outstanding Options	$ 1.70
Weighted Average Remaining Contractual Life (yrs), Outstanding Options	8 years 1 month 6 days
Exercisable Options, Number of Shares	101,665
Exercisable Options, Weighted Average Exercise Price	$ 1.70
Options 2 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding Options	15,000
Weighted Average Exercise Price, Outstanding Options	$ 2.53
Weighted Average Remaining Contractual Life (yrs), Outstanding Options	4 years 7 months 6 days
Exercisable Options, Number of Shares	15,000
Exercisable Options, Weighted Average Exercise Price	$ 2.53
Options 3 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding Options	82,000
Weighted Average Exercise Price, Outstanding Options	$ 2.82
Weighted Average Remaining Contractual Life (yrs), Outstanding Options	5 years 9 months 18 days
Exercisable Options, Number of Shares	82,000
Exercisable Options, Weighted Average Exercise Price	$ 2.82
Options 4 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding Options	45,000
Weighted Average Exercise Price, Outstanding Options	$ 3.65
Weighted Average Remaining Contractual Life (yrs), Outstanding Options	2 years 3 months 18 days
Exercisable Options, Number of Shares	45,000
Exercisable Options, Weighted Average Exercise Price	$ 3.65

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Stock Options and Stock Based Compensation - Schedule of Options Granted, Exercised, and Forfeited or Canceled (Detail)	9 Months Ended
	Feb. 28, 2019 $ / shares shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Number of Shares, Options outstanding - beginning of period | shares	318,332
Number of Shares, Options granted | shares	27,000
Number of Shares, Options exercised | shares	(38,333)
Number of Shares, Options forfeited/canceled | shares	(40,833)
Number of Shares, Options outstanding - end of period | shares	266,166
Weighted Average Exercise Price, Options outstanding - beginning of period | $ / shares	$ 2.36
Weighted Average Exercise Price, Options granted | $ / shares	2.55
Weighted Average Exercise Price, Options exercised | $ / shares	1.70
Weighted Average Exercise Price, Options forfeited/canceled | $ / shares	2.66
Weighted Average Exercise Price, Options outstanding - end of period | $ / shares	$ 2.42

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Weighted Average Shares and Reconciliation - Schedule of Weighted Average of Basic and Diluted Shares (Detail) - shares	3 Months Ended		9 Months Ended
	Feb. 28, 2019	Feb. 28, 2018	Feb. 28, 2019	Feb. 28, 2018
Earnings Per Share [Abstract]
Weighted average shares (basic)	4,000,990	3,706,050	3,996,670	3,230,022
Effect of dilutive stock options	0	63,764	0	0
Weighted average shares (diluted)	4,000,990	3,769,814	3,996,670	3,230,022

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Income Taxes - Additional Information (Detail) - USD ($)	9 Months Ended	12 Months Ended
	Feb. 28, 2019	May 31, 2019	May 31, 2018
Income Tax Contingency [Line Items]
Other long-term liabilities related to uncertain tax positions	$ 0		$ 0
Liability for payment of interest and penalties	$ 0		$ 0
Effective tax rate on consolidated net loss	2.10%
Forecast [Member]
Income Tax Contingency [Line Items]
Effective tax rate for Fiscal 2019		3.20%
Domestic Tax Authority [Member]
Income Tax Contingency [Line Items]
Income tax examination period under examination	2015
Foreign Tax Authority [Member] | United Kingdom [Member]
Income Tax Contingency [Line Items]
Income tax examination period under examination	2013

XML

Segment of Business - Additional Information (Detail) - USD ($)	3 Months Ended	9 Months Ended
	Feb. 28, 2019	Feb. 28, 2019
Segment Reporting Information [Line Items]
Reserve Adjustments for Excess or Obsolete Inventories	$ 407,558
Balancer [Member]
Segment Reporting Information [Line Items]
Reserve Adjustments for Excess or Obsolete Inventories	$ (291,427)
Measurement [Member]
Segment Reporting Information [Line Items]
Reserve Adjustments for Excess or Obsolete Inventories		$ (116,131)

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Segment of Business - Segment Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Feb. 28, 2019	Feb. 28, 2018	Feb. 28, 2019	Feb. 28, 2018
Segment Reporting Information [Line Items]
Net sales	$ 3,082,181	$ 3,238,858	$ 10,026,112	$ 10,093,386
Operating income (loss)	(515,382)	(39,995)	(853,496)	(84,498)
Capital expenditures			4,674	8,467
Measurement [Member]
Segment Reporting Information [Line Items]
Net sales	1,120,545	1,101,047	3,524,664	3,654,332
Operating income (loss)	78,080	(275)	346,184	255,988
Depreciation expense	9,000	9,235	26,998	28,218
Amortization expense	26,145	26,146	78,437	78,438
Capital expenditures	0	0	0	0
Balancer [Member]
Segment Reporting Information [Line Items]
Net sales	1,961,636	2,137,811	6,501,448	6,439,054
Operating income (loss)	(593,462)	(39,720)	(1,199,680)	(340,486)
Depreciation expense	10,346	16,300	33,989	49,670
Amortization expense	0	0	0	0
Capital expenditures	$ 147,917	$ 0	$ 153,434	$ 8,467

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Segment of Business - Geographic Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Feb. 28, 2019	Feb. 28, 2018	Feb. 28, 2019	Feb. 28, 2018
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net sales	$ 3,082,181	$ 3,238,858	$ 10,026,112	$ 10,093,386
North America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net sales	1,899,961	1,898,796	6,065,868	6,174,874
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net sales	548,059	552,018	1,427,310	1,526,917
Asia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net sales	587,136	752,712	2,389,087	2,297,617
Other markets [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net sales	$ 47,025	$ 35,332	$ 143,847	$ 93,978

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Segment of Business - Segment Information of Operating Income (Loss) and Expenditure by Geographic Areas (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Feb. 28, 2019	Feb. 28, 2018	Feb. 28, 2019		Feb. 28, 2018
Revenues from External Customers and Long-Lived Assets [Line Items]
Operating income (loss)	$ (515,382)	$ (39,995)	$ (853,496)		$ (84,498)
Capital expenditures			4,674		8,467
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Operating income (loss)	(565,426)	(123,205)	(959,525)	[1]	(307,015)	[1]
Depreciation expense	19,346	25,535	60,987	[1]	77,888	[1]
Amortization expense	26,145	26,146	78,437	[1]	78,438	[1]
Capital expenditures	147,917	0	153,434	[1]	8,467	[1]
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Operating income (loss)	50,044	83,210	106,029	[2]	222,517	[2]
Depreciation expense	0	0	0	[2]	0	[2]
Amortization expense	0	0	0	[2]	0	[2]
Capital expenditures	$ 0	$ 0	$ 0	[2]	$ 0	[2]

[1] “United States” is defined to include remainder of the results not included in the European subsidiary.

[2] “Europe” is defined in the above chart to include results from the European subsidiary, Schmitt Europe Ltd.

XML

Segment of Business - Segment and Geographic Assets (Detail) - USD ($)		Feb. 28, 2019	May 31, 2018
Segment Reporting Information [Line Items]
Segment and geographic assets to total assets		$ 10,530,269	$ 11,286,060
Geographic assets to long-lived assets		863,361	770,915
Segment and geographic assets to total assets		10,530,269	11,286,060
United States [Member]
Segment Reporting Information [Line Items]
Segment and geographic assets to total assets	[1]	9,314,335	10,110,683
Geographic assets to long-lived assets	[1]	863,361	770,915
Segment and geographic assets to total assets	[1]	9,314,335	10,110,683
Europe [Member]
Segment Reporting Information [Line Items]
Segment and geographic assets to total assets	[2]	1,215,934	1,175,377
Geographic assets to long-lived assets	[2]	0	0
Segment and geographic assets to total assets	[2]	1,215,934	1,175,377
Operating Segments [Member] | Balancer [Member]
Segment Reporting Information [Line Items]
Segment and geographic assets to total assets		6,292,198	6,461,974
Segment and geographic assets to total assets		6,292,198	6,461,974
Operating Segments [Member] | Measurement [Member]
Segment Reporting Information [Line Items]
Segment and geographic assets to total assets		3,012,100	2,712,553
Segment and geographic assets to total assets		3,012,100	2,712,553
Corporate Assets [Member]
Segment Reporting Information [Line Items]
Segment and geographic assets to total assets		1,225,971	2,111,533
Segment and geographic assets to total assets		$ 1,225,971	$ 2,111,533

[1] “United States” includes remainder of the assets not held by the European subsidiary.

[2] “Europe” includes assets held by the European subsidiary, Schmitt Europe Ltd.

XML

Restructuring and Related Charges - Additional Information (Detail)	3 Months Ended
	Feb. 28, 2019 USD ($)
Reserve Adjustments for Excess or Obsolete Inventories	$ (407,558)