EXHIBIT 99.4
SCHMITT INDUSTRIES, INC.
Unaudited Pro Forma Consolidated Financial Information
The following unaudited pro forma consolidated balance sheet as of August 31, 2019 and the unaudited pro forma consolidated statements of operations for the three months ended August 31, 2019 and the years ended May 31, 2019 and 2018, have been derived from the historical consolidated financial statements of Schmitt Industries, Inc. (together with its subsidiaries, “Schmitt”, “we”, or “us”) as adjusted to give effect to the sale of our Schmitt Dynamic Balance Systems business line (“SBS Sale”), and are intended to reflect the impact of the SBS Sale on Schmitt on a pro forma basis as of and for the periods indicated.
The following unaudited pro forma consolidated financial information is based upon, and should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included in our Quarterly Report on Form10-Q for the three months ended August 31, 2019 and our historical audited consolidated financial statements and the related notes and MD&A included in our Annual Reports on Forms10-K for the fiscal years ended May 31, 2019 and 2018, as filed with the Securities and Exchange Commission on October 8, 2019, August 21, 2019 and August 21, 2018, respectively.
The unaudited pro forma consolidated balance sheet as of August 31, 2019 reflects the SBS Sale as if it had been consummated on August 31, 2019, and includes pro forma adjustments based on estimates made by management.
The unaudited pro forma consolidated statements of operations for the three months ended August 31, 2019 and for the years ended May 31, 2019 and 2018 give effect to the SBS Sale as if it had been consummated on June 1st of the respective fiscal year.
We have prepared the unaudited pro forma consolidated financial information for informational purposes only and it is based upon estimates by Schmitt’s management, which are based upon available information and certain assumptions that Schmitt’s management believes are reasonable as of the date of this report. The unaudited pro forma combined financial information is not intended to be indicative of actual financial position or results of operations that would have been achieved had the SBS Sale been consummated on the dates indicated, nor does it purport to indicate results which may be attained in the future. Actual amounts could differ materially from these estimates.
SCHMITT INDUSTRIES, INC.
Unaudited Pro Forma Consolidated Balance Sheet
August 31, 2019
HISTORICAL | PRO FORMA ADJUSTMENTS | PRO FORMA | ||||||||||||||
Schmitt Industries, Inc. Consolidated | Sale of SBS | Notes | Schmitt Industries, Inc. Consolidated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 1,592,847 | $ | 9,895,677 | A | $ | 11,488,524 | |||||||||
Restricted cash | 54,895 | 365,105 | A | 420,000 | ||||||||||||
Accounts receivable, net | 2,004,159 | (1,399,703 | ) | 604,456 | ||||||||||||
Inventories | 5,019,109 | (3,845,936 | ) | 1,173,173 | ||||||||||||
Prepaid expenses | 155,405 | (77,824 | ) | 77,581 | ||||||||||||
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8,826,415 | 4,937,319 | 13,763,734 | ||||||||||||||
Property and equipment, net | 817,478 | (156,999 | ) | 660,479 | ||||||||||||
Other assets | ||||||||||||||||
Operating leaseright-of-use assets | 102,767 | (102,767 | ) | — | ||||||||||||
Intangible assets, net | 366,039 | — | 366,039 | |||||||||||||
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TOTAL ASSETS | $ | 10,112,699 | $ | 4,677,553 | $ | 14,790,252 | ||||||||||
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LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable | $ | 505,496 | $ | (396,946 | ) | $ | 108,550 | |||||||||
Accrued commissions | 173,491 | (99,557 | ) | 73,934 | ||||||||||||
Accrued payroll liabilities | 171,768 | (98,631 | ) | 73,137 | ||||||||||||
Customer deposits and prepayments | 197,982 | (115,922 | ) | 82,060 | ||||||||||||
Other accrued liabilities | 127,635 | (54,398 | ) | 73,237 | ||||||||||||
Income taxes payable | 14,134 | — | 14,134 | |||||||||||||
Current portion of long-term liabilities | 21,258 | (21,258 | ) | — | ||||||||||||
Current portion of operating lease liabilities | 32,721 | (32,721 | ) | — | ||||||||||||
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Total current liabilities | 1,244,485 | (819,433 | ) | 425,052 | ||||||||||||
Long-term liabilities | 23,065 | (23,065 | ) | — | ||||||||||||
Long-term operating lease liabilities | 70,046 | (70,046 | ) | — | ||||||||||||
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Total liabilities | 1,337,596 | (912,544 | ) | 425,052 | ||||||||||||
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Stockholders’ equity | ||||||||||||||||
Common stock, no par value, 20,000,000 shares authorized, 4,032,878 shares issued and outstanding at August 31, 2019 | 13,317,453 | — | 13,317,453 | |||||||||||||
Accumulated other comprehensive loss | (467,479 | ) | — | (467,479 | ) | |||||||||||
Accumulated deficit | (4,074,871 | ) | 5,590,097 | B | 1,515,226 | |||||||||||
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Total stockholders’ equity | 8,775,103 | 5,590,097 | 14,365,200 | |||||||||||||
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 10,112,699 | $ | 4,677,553 | $ | 14,790,252 | ||||||||||
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SCHMITT INDUSTRIES, INC.
Unaudited Pro Forma Consolidated Statements of Operations
For the three months ended August 31, 2019
HISTORICAL | PRO FORMA ADJUSTMENTS | PRO FORMA | ||||||||||||||
Schmitt Industries, Inc. Consolidated | Sale of SBS | Notes | Schmitt Industries, Inc. Consolidated | |||||||||||||
Net Sales | $ | 3,341,885 | $ | (2,247,107 | ) | $ | 1,094,778 | |||||||||
Cost of sales | 1,781,547 | (1,164,124 | ) | 617,423 | ||||||||||||
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Gross profit | 1,560,338 | (1,082,983 | ) | 477,355 | ||||||||||||
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Operating expenses: | ||||||||||||||||
General, administration and sales | 1,279,007 | (550,848 | ) | 728,159 | ||||||||||||
Research and development | 12,167 | (9,081 | ) | 3,086 | ||||||||||||
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Total operating expenses | 1,291,174 | (559,929 | ) | 731,245 | ||||||||||||
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Operating income (loss) | 269,164 | (523,054 | ) | (253,890 | ) | |||||||||||
Other income (expense), net | (83,388 | ) | 84,731 | C | 1,343 | |||||||||||
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Income (loss) before income taxes | 185,776 | (438,323 | ) | (252,547 | ) | |||||||||||
Provision for income taxes | 15,968 | — | 15,968 | |||||||||||||
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Net income (loss) | $ | 169,808 | $ | (438,323 | ) | $ | (268,515 | ) | ||||||||
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Net income (loss) per common share, basic | $ | 0.04 | $ | (0.07 | ) | |||||||||||
Weighted average number of common shares, basic | 4,032,878 | 4,032,878 | ||||||||||||||
Net income (loss) per common share, diluted | $ | 0.04 | $ | (0.07 | ) | |||||||||||
Weighted average number of common shares, diluted | 4,059,279 | 4,059,279 |
SCHMITT INDUSTRIES, INC.
Unaudited Pro Forma Consolidated Statements of Operations
For the fiscal year ended May 31, 2019
HISTORICAL | PRO FORMA ADJUSTMENTS | PRO FORMA | ||||||||||||||
Schmitt Industries, Inc. Consolidated | Sale of SBS | Notes | Schmitt Industries, Inc. Consolidated | |||||||||||||
Net Sales | $ | 13,810,161 | $ | (9,080,719 | ) | $ | 4,729,442 | |||||||||
Cost of sales | 8,836,856 | (5,876,176 | ) | 2,960,680 | ||||||||||||
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Gross profit | 4,973,305 | (3,204,543 | ) | 1,768,762 | ||||||||||||
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Operating expenses: | ||||||||||||||||
General, administration and sales | 5,951,765 | (2,771,252 | ) | 3,180,513 | ||||||||||||
Research and development | 129,040 | (72,207 | ) | 56,833 | ||||||||||||
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Total operating expenses | 6,080,805 | (2,843,459 | ) | 3,237,346 | ||||||||||||
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Operating income (loss) | (1,107,500 | ) | (361,084 | ) | (1,468,584 | ) | ||||||||||
Other income (expense), net | (77,051 | ) | 85,977 | C | 8,926 | |||||||||||
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Income (loss) before income taxes | (1,184,551 | ) | (275,107 | ) | (1,459,658 | ) | ||||||||||
Provision for income taxes | 26,439 | — | 26,439 | |||||||||||||
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Net income (loss) | $ | (1,210,990 | ) | $ | (275,107 | ) | $ | (1,486,097 | ) | |||||||
Net income (loss) per common share, basic | $ | (0.30 | ) | $ | (0.37 | ) | ||||||||||
Weighted average number of common shares, basic | 4,005,795 | 4,005,795 | ||||||||||||||
Net income (loss) per common share, diluted | $ | (0.30 | ) | $ | (0.37 | ) | ||||||||||
Weighted average number of common shares, diluted | 4,005,795 | 4,005,795 |
SCHMITT INDUSTRIES, INC.
Unaudited Pro Forma Consolidated Statements of Operations
For the fiscal year ended May 31, 2018
HISTORICAL | PRO FORMA ADJUSTMENTS | PRO FORMA | ||||||||||||||
Schmitt Industries, Inc. Consolidated | Sale of SBS | Notes | Schmitt Industries, Inc. Consolidated | |||||||||||||
Net Sales | $ | 13,888,063 | $ | (9,026,562 | ) | $ | 4,861,501 | |||||||||
Cost of sales | 7,822,749 | (4,989,747 | ) | 2,833,002 | ||||||||||||
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Gross profit | 6,065,314 | (4,036,815 | ) | 2,028,499 | ||||||||||||
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Operating expenses: | ||||||||||||||||
General, administration and sales | 5,582,625 | (2,656,607 | ) | 2,926,018 | ||||||||||||
Research and development | 327,317 | (114,089 | ) | 213,228 | ||||||||||||
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Total operating expenses | 5,909,942 | (2,770,696 | ) | 3,139,246 | ||||||||||||
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Operating income (loss) | 155,372 | (1,266,119 | ) | (1,110,747 | ) | |||||||||||
Other income (expense), net | 81,182 | (85,870 | ) | C | (4,688 | ) | ||||||||||
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Income (loss) before income taxes | 236,554 | (1,351,989 | ) | (1,115,435 | ) | |||||||||||
Provision for income taxes | 25,915 | — | 25,915 | |||||||||||||
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Net income (loss) | $ | 210,639 | $ | (1,351,989 | ) | $ | (1,141,350 | ) | ||||||||
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Net income (loss) per common share, basic | $ | 0.06 | $ | (0.33 | ) | |||||||||||
Weighted average number of common shares, basic | 3,422,724 | 3,422,724 | ||||||||||||||
Net income (loss) per common share, diluted | $ | 0.06 | $ | (0.33 | ) | |||||||||||
Weighted average number of common shares, diluted | 3,460,339 | 3,460,339 |
SCHMITT INDUSTRIES, INC.
Notes to Unaudited Pro Forma Consolidated Financial Statements
The unaudited pro forma consolidated financial information above reflects the following pro forma adjustments:
A | Represents gross proceeds of $10,500,000 less $140,000 paid to the buyer as minimum operating cash and $44,323 used to pay off an equipment financing arrangement. $420,000 of the gross proceeds was placed in escrow and is reflected in the balance of restricted cash. |
B | Net effect of pro forma adjustments. |
C | Elimination of foreign currency exchange gain/(loss) attributable to SBS. |