Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Nov. 30, 2020 | Dec. 31, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Nov. 30, 2020 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2021 | |
Current Fiscal Year End Date | --05-31 | |
Entity File Number | 001-38964 | |
Entity Registrant Name | SCHMITT INDUSTRIES INC | |
Entity Central Index Key | 0000922612 | |
Entity Incorporation, State or Country Code | OR | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 3,802,251 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Nov. 30, 2020 | May 31, 2020 |
Current assets | ||
Cash and cash equivalents | $ 6,771,335 | $ 10,146,531 |
Restricted cash | 566,134 | 420,000 |
Accounts receivable, net | 795,440 | 574,926 |
Inventories | 1,751,707 | 1,059,357 |
Prepaid expenses | 107,557 | 60,674 |
Income taxes receivable | 33,140 | 0 |
Total current assets | 10,025,313 | 12,261,488 |
Leasehold assets | 11,005,994 | 0 |
Property and equipment, net | 2,045,329 | 486,789 |
Property and equipment held for sale, net | 174,847 | 165,347 |
Leasehold and utilities deposits | 304,350 | 0 |
Deposits on capital improvements to factory | 273,278 | 0 |
Other assets | ||
Intangible assets, net | 1,347,336 | 287,602 |
Total assets | 25,176,447 | 13,201,226 |
Current liabilities | ||
Accounts payable | 771,524 | 267,660 |
Accrued commissions | 84,111 | 41,450 |
Accrued payroll liabilities | 251,487 | 86,372 |
Accrued liabilities | 619,013 | 265,349 |
Customer deposits and prepayments | 91,176 | 12,239 |
Other accrued liabilities | 408,108 | 587,492 |
Income taxes payable | 0 | 47,462 |
Current portion of long-term lease liabilities | 800,889 | 0 |
Total current liabilities | 3,026,308 | 1,308,024 |
Long-term debt | 1,791,080 | 0 |
Long-term leasehold liabilities | 10,617,879 | 0 |
Long-term deferred tax liability | 46,934 | 0 |
Total liabilities | 15,482,201 | 1,308,024 |
Stockholders' equity | ||
Common stock, no par value, 20,000,000 shares authorized, 3,769,685 shares issued and outstanding at November 30, 2020 and 3,784,554 | 12,274,160 | 12,257,306 |
Accumulated deficit | (2,579,914) | (364,104) |
Total stockholders' equity | 9,694,246 | 11,893,202 |
Total liabilities and stockholders' equity | $ 25,176,447 | $ 13,201,226 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Nov. 30, 2020 | May 31, 2020 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0 | $ 0 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 3,769,685 | 3,784,554 |
Common stock, shares outstanding | 3,769,685 | 3,784,554 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2020 | Nov. 30, 2019 | Nov. 30, 2020 | Nov. 30, 2019 | |
Income Statement [Abstract] | ||||
Net sales | $ 2,029,712 | $ 1,033,102 | $ 3,537,197 | $ 2,127,879 |
Cost of revenue | 1,067,599 | 643,348 | 1,967,440 | 1,260,771 |
Gross profit | 962,113 | 389,754 | 1,569,757 | 867,108 |
Operating expenses | ||||
General, administration and sales | 3,091,516 | 993,230 | 5,178,232 | 1,697,382 |
Transaction costs | 0 | 5,377 | 125,167 | 0 |
Research and development | 17,877 | 0 | 35,330 | 8,463 |
Total operating expenses | 3,109,393 | 998,607 | 5,338,729 | 1,705,845 |
Operating loss | (2,147,280) | (608,853) | (3,768,972) | (838,737) |
Bargain purchase gain | (82,103) | 0 | 1,189,512 | 0 |
Other income (expense), net | (135,449) | 5,356 | (39,380) | 9,723 |
Loss before income taxes | (2,364,832) | (603,497) | (2,618,840) | (829,014) |
Income tax provision (benefit) from continuing operations | 1,637 | (4,439) | (403,030) | (7,829) |
Net loss from continuing operations | (2,366,469) | (599,058) | (2,215,810) | (821,185) |
Income from discontinued operations, net of tax | 0 | 5,117,005 | 0 | 5,509,010 |
Net income (loss) | $ (2,366,469) | $ 4,517,947 | $ (2,215,810) | $ 4,687,825 |
Net loss per common share from continuing operations, basic | $ (0.63) | $ (0.15) | $ (0.59) | $ (0.20) |
Weighted average number of common shares, basic | 3,763,156 | 4,083,538 | 3,763,454 | 4,030,709 |
Net loss per common share from continuing operations, diluted | $ (0.63) | $ (0.15) | $ (0.59) | $ (0.20) |
Weighted average number of common shares, diluted | 3,763,156 | 4,083,538 | 3,763,454 | 4,030,709 |
Net income per common share from discontinued operations, basic | $ 0 | $ 1.25 | $ 0 | $ 1.37 |
Weighted average number of common shares, basic | 3,763,156 | 4,083,538 | 3,763,454 | 4,030,709 |
Net income per common share from discontinued operations, diluted | $ 0 | $ 1.25 | $ 0 | $ 1.37 |
Weighted average number of common shares, diluted | 3,763,156 | 4,083,538 | 3,763,454 | 4,030,709 |
Net income (loss) per common share, basic | $ (0.63) | $ 1.11 | $ (0.59) | $ 1.16 |
Weighted average number of common shares, basic | 3,763,156 | 4,083,538 | 3,763,454 | 4,030,709 |
Net income (loss) per common share, diluted | $ (0.63) | $ 1.11 | $ (0.59) | $ 1.16 |
Weighted average number of common shares, diluted | 3,763,156 | 4,083,538 | 3,763,454 | 4,030,709 |
Comprehensive income (loss) | ||||
Net income (loss) | $ (2,366,469) | $ 4,517,947 | $ (2,215,810) | $ 4,687,825 |
Foreign currency translation adjustment | 0 | 527,827 | 0 | 527,827 |
Total comprehensive income | $ (2,366,469) | $ 5,045,774 | $ (2,215,810) | $ 5,215,652 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 6 Months Ended | |
Nov. 30, 2020 | Nov. 30, 2019 | |
Cash flows relating to operating activities | ||
Net income (loss) | $ (2,215,810) | $ 4,687,825 |
Pre-tax (earnings) from discontinued operations | 0 | (532,103) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Bargain purchase gain | (1,189,512) | 0 |
Depreciation and amortization | 187,114 | 83,277 |
Loss on disposal of property and equipment | 0 | 65,020 |
Stock based compensation | 251,371 | 192,602 |
Deferred income taxes | (406,304) | 0 |
Gain on sale of discontinued operations before income taxes | 0 | (5,059,845) |
(Increase) decrease in: | ||
Accounts receivable | (220,514) | 235,885 |
Inventories | (60,250) | 163,514 |
Prepaid expenses | (46,883) | 54,042 |
Leasehold and utilities deposits | (79,170) | 0 |
Deposits on capital improvements to factory | (273,278) | 0 |
Leasehold assets | (360,896) | 0 |
Increase (decrease) in: | ||
Accounts payable | 503,864 | 123,701 |
Accrued liabilities customer deposits and other accrueds | 433,514 | 436,683 |
Income taxes payable | (80,602) | 68,609 |
Leasehold liabilities | 773,670 | 0 |
Net cash provided by (used in) operating activities - continuing operations | (2,783,686) | 519,210 |
Net cash provided by operating activities - discontinued operations | 0 | 172,839 |
Net cash provided by (used in) operating activities - total | (2,783,686) | 692,049 |
Cash flows relating to investing activities | ||
Acquisition of Ample Hills | (1,711,127) | 0 |
Purchases of property and equipment | (258,371) | (14,690) |
Proceeds from sale of property and equipment | 0 | 12,000 |
Proceeds from the sale of net assets of discontinued operations | 0 | 10,319,589 |
Net cash provided by (used in) investing activities - continuing operations | (1,969,498) | 10,316,899 |
Net cash provided by (used in) investing activities - discontined operations | 0 | (12,693) |
Net cash provided by (used in) investing activities - total | (1,969,498) | 10,304,206 |
Cash flows relating to financing activities | ||
Proceeds from Paycheck Protection Program | 2,059,556 | 0 |
Repayments on Paycheck Protection Program | (264,476) | 0 |
Payments on short-term borrowing | (36,441) | (10,201) |
Repurchase of common stock | (234,517) | 0 |
Net cash provided by (used in) financing activities | 1,524,122 | (10,201) |
Effect of foreign exchange translation on cash | 0 | 71,973 |
Increase (decrease) in cash, cash equivalents and restricted cash | (3,229,062) | 11,058,027 |
Cash, cash equivalents and restricted cash, beginning of period | 10,566,531 | 1,467,435 |
Cash, cash equivalents and restricted cash, end of period | 7,337,469 | 12,525,462 |
Supplemental disclosure of cash flow information | ||
Cash paid during the year for income taxes | 80,600 | 4,289 |
Cash paid during the year for interest | $ 616 | $ 2,435 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) | Common Stock | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total |
Beginning balance, shares at May. 31, 2019 | 4,032,878 | |||
Beginning balance at May. 31, 2019 | $ 13,245,439 | $ (527,827) | $ (4,244,679) | $ 8,472,933 |
Stock-based compensation expense for restricted stock units granted to employees and directors | $ 192,602 | 192,602 | ||
Restricted stock units exercised, shares | 94,754 | |||
Restricted stock units exercised, amount | $ 0 | 0 | ||
Net income (loss) | 4,687,825 | 4,687,825 | ||
Other comprehensive income | 527,827 | 527,827 | ||
Ending balance, shares at Nov. 30, 2019 | 4,127,632 | |||
Ending balance at Nov. 30, 2019 | $ 13,438,041 | 0 | 443,146 | 13,881,187 |
Beginning balance, shares at May. 31, 2020 | 3,784,554 | |||
Beginning balance at May. 31, 2020 | $ 12,257,306 | 0 | (364,104) | 11,893,202 |
Share repurchases, shares | (72,159) | |||
Share repurchases, amount | $ (234,517) | (234,517) | ||
Shares issued to directors and officers upon vesting of RSUs | 57,290 | |||
Stock-based compensation expense for restricted stock units granted to employees and directors | 64,174 | |||
Stock-based compensation | $ 251,371 | 251,371 | ||
Net income (loss) | (2,215,810) | (2,215,810) | ||
Ending balance, shares at Nov. 30, 2020 | 3,769,685 | |||
Ending balance at Nov. 30, 2020 | $ 12,274,160 | $ 0 | $ (2,579,914) | $ 9,694,246 |
Summary Of Significant Accounti
Summary Of Significant Accounting Policies | 6 Months Ended |
Nov. 30, 2020 | |
Accounting Policies [Abstract] | |
Summary Of Significant Accounting Policies | Basis of Presentation In the opinion of management of Schmitt Industries, Inc. (the "Company", "Schmitt", "we" or "our"), the accompanying unaudited interim condensed 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 November 30, 2020 and its results of operations and its cash flows for the periods presented. The condensed consolidated balance sheet at May 31, 2020 has been derived from the Annual Report on Form 10-K for the fiscal year ended May 31, 2020. The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2020. 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, 2021. Principles of Consolidation These condensed consolidated financial statements include those of the Company and its wholly owned subsidiaries: Ample Hills Acquisition, LLC, Schmitt Measurement Systems, Inc., and Schmitt Industries (Canada) Limited. All significant intercompany accounts and transactions have been eliminated in the preparation of the consolidated condensed financial statements. Business Combination On July 9, 2020, Ample Hills Acquisition LLC ("Buyer"), a New York limited liability company and wholly owned subsidiary of the Company, entered into an Asset Purchase Agreement (the "Agreement"), dated as of June 29, 2020, with Ample Hills Holdings, Inc., a Delaware corporation, Ample Hills Creamery, Inc., a New York corporation, and their subsidiaries (collectively, "Ample Hills"). The transactions contemplated by the Agreement (the "Transactions") closed on July 9, 2020, the day after a sale order approving the Transactions was entered by the Bankruptcy Court (defined below). The Ample Hills entities were debtors-in-possession under title 11 of the United States Code, 11 U.S.C. § 101 et seq. pursuant to voluntary petitions for relief filed under chapter 11 of the Bankruptcy Code on March 15, 2020 in the United States Bankruptcy Court for the Eastern District of New York (the "Bankruptcy Court"). The Transactions were conducted through a Bankruptcy Court-supervised process, subject to Bankruptcy Court-approved bidding procedures, approval of the Transactions by the Bankruptcy Court, and the satisfaction of certain closing conditions. The Agreement provided that, upon the terms and subject to the conditions set forth therein, Ample Hills sold, transferred and assigned to Buyer, or one or more of its affiliates, the Acquired Assets (as defined in the Agreement) and Buyer, or one or more of its affiliates, assumed the Assumed Liabilities (as defined in the Agreement) for a purchase price of $1.0 million. The Asset Acquisition includes the following assets, among other things, Ample Hills' equipment, inventory, and all intellectual property, including the names and marks of "AMPLE HILLS" and "AMPLE HILLS CREAMERY" and all derivatives thereof. Pursuant to the Agreement, Buyer also paid an additional approximately $0.7 million to certain landlords of Ample Hills in exchange for the right to assume leases with such landlords. See Note 10 for acquisition accounting based on the estimated fair value of assets acquired and liabilities assumed. The Company's strategy includes utilizing its capital for value opportunities. Accordingly, the primary purpose of the Ample Hills acquisition was to capitalize on this strategy by purchasing a business with a good brand name, which in light of the price we paid in bankruptcy, could have a significant upside. The Transactions were funded by the Company with cash on hand and has been accounted for in accordance with ASC 805 - Business Combinations Revenue Recognition The Company generates revenues from the following sources: (i) retail restaurant sales, (ii) factory sales, (iii) measurement product sales, and (iv) remote tank monitoring services. Retail Restaurant Sales, net The Company's generates revenues from retail restaurant sales to its end-user customers at the time of sale, net of discounts, coupons, employee meals, and complimentary meals and gift cards. Sales tax is collected from customers and remitted to governmental authorities and are presented on a net basis within revenue in our consolidated and combined statements of operations. Factory Sales, net The Company generates revenues from sales from its Brooklyn, NY factory, including wholesale, e-commerce or direct-to-consumer, and manufacturing production sales for Measurement Product Sales The Company determines the amount of revenue it recognizes associated with the transfer of each product. For sales of products to all 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 meets all of the above criteria, revenue is recognized for the sales of product at the time of shipment. The Company incurs commissions associated with the sales of certain products, which are accrued and expensed at the time the product is shipped. These amounts are recorded within general, administrative 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, which are recognized at the time of shipment as a component of net revenues, were $4,511 and $6,534 for the six months ended November 30, 2020 and November 30, 2019, respectively. Remote Tank Monitoring Services The Company's Xact product line includes satellite focused remote tank monitoring products and related monitoring services for markets in the Internet of Things ("IoT") environment. The Company determines the amount of revenue it recognizes associated with the transfer of such services. For delivery of monitoring services to all 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 provide monitoring services meets all of the above criteria, revenue is recognized at the completion of the month in which monitoring services are provided. Customer deposits and prepayments The Company defers revenue recognition of revenues in instances where consideration is received from customers in advance of the Company completing its obligations in exchange for such consideration. As of November 30, 2020 and May 31, 2020, significant contract balances were as follows: November 30, 2020 May 31, 2020 Customer deposits and prepayments: Customer deposits, current $ 61,544 $ 12,239 Gift card liabilities, current 29,632 — Total customer deposits and prepayments $ 91,176 $ 12,239 Cash, Cash Equivalents and Restricted Cash The Company generally invests its excess cash in money market funds. The Company's investment policy also allows for cash to be invested in investment grade highly liquid securities, and the Company considers securities that are highly liquid, readily convertible into cash and have original maturities of less than three months when purchased to be cash equivalents. The Company's cash consists of demand deposits in large financial institutions. At times, balances may exceed federally insured limits. Restricted cash consists of an amount held in escrow related to the sale of the balancer business segment and Ample Hills Retail Operations respectively, as described in the notes to the condensed consolidated financial statements. Once certain events are complete, the restrictions on this cash payment will be released. The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within the Consolidated Balance Sheets as of November 30, 2020 and May 31, 2020 to the sum of the same such amounts as shown in the Consolidated Statement of Cash Flows for the three months ended November 30, 2020: November 30, 2020 May 31, 2020 Cash and cash equivalents $ 6,771,335 $ 10,146,531 Restricted cash 566,134 420,000 Total cash, cash equivalents, and restricted cash $ 7,337,469 $ 10,566,531 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 aging reports, other operating trends and relevant business conditions, including general economic factors, as they relate to each of the Company's domestic and international customers. In the event there is doubt about whether a customer account is collectible, a reserve is provided. If these analyses lead management to the conclusion that a customer account is uncollectible, the balance will be directly charged to bad debt expense. The allowance for doubtful accounts was $94,007 and $103,029 as of November 30, 2020 and May 31, 2020, 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 November 30, 2020 and May 31, 2020 inventories consisted of: November 30, 2020 May 31, 2020 Raw materials $ 1,065,710 $ 154,293 Work-in-process 113,652 525,615 Finished goods 572,345 379,449 Total inventories $ 1,751,707 $ 1,059,357 Property and Equipment Property and equipment are stated at cost, less 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. Expenditures for maintenance and repairs are charged to expense as incurred. As of November 30, 2020 and May 31, 2020, property and equipment consisted of: November 30, 2020 May 31, 2020 Land $ 159,000 $ 159,000 Buildings and improvements 2,612,265 1,612,003 Furniture, fixtures and equipment 1,078,204 396,264 $ 3,849,469 $ 2,167,267 Less accumulated depreciation (1,804,140 ) (1,680,478 ) Total property and equipment $ 2,045,329 $ 486,789 Assets Held for Sale The Company owns a two story 35,050 sq. foot building in industrial zoning that has been listed for sale. Assets held for sale are stated at the lower of cost less depreciation and expected net realizable value. Depreciation is computed using the straight-line method over estimated useful lives of 25 years for building improvements. Expenditures for maintenance and repairs are charged to expense as incurred. As of November 30, 2020 and May 31, 2020, assets held for sale consisted of: November 30, 2020 May 31, 2020 Land $ 140,000 $ 140,000 Building and improvements 246,135 235,502 $ 386,135 $ 375,502 Less accumulated depreciation (211,288 ) (210,155 ) Carrying value of Assets Held for sale $ 174,847 $ 165,347 Leases 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. Subsequent amendments have been issued by the FASB to clarify the codification and to correct unintended application of the new guidance. The ASU is required to be applied using a retrospective approach with two disclosure methods permissible. The full retrospective approach requires that the guidance be applied to each lease that existed at the beginning of the earliest comparative period presented. The modified retrospective approach requires that the guidance be applied to each lease that existed as of the beginning of the reporting period in which the entity first applied the standard. In July 2018, the FASB issued ASU No. 2018-11, Leases: Targeted Improvements, which provides an option to apply the guidance prospectively, instead of retrospectively, and allows for other classification provisions. On June 1, 2019, the Company adopted the new standard using the modified retrospective approach and electing the option to not apply the guidance to comparative periods, which continue to be presented under the accounting methods in effect for those periods. On November 22, 2019, the Company entered into a commercial lease agreement in which it is the lessor. This agreement contains a 10-year term with a renewal option to extend. In connection with the acquisition of Ample Hills on July 9, 2020, the Company executed a business combination through its acquisition of Ample Hills. In connection with this business combination, the Company became the lessee for multiple leased stores and a manufacturing facility. Upon acquisition, the Company renegotiated the terms of these leases. Upon acquisition, the lease liabilities were measured based upon the present value of future lease payments. On October 1, 2020 the Company entered into a triple-net lease agreement (the "Humboldt Lease") with Humboldt Street Collective, LLC ("Humboldt"), whereby Humboldt will lease the Company's building located at 2765-2755 NW Nicolai Street, Portland, OR 97210 for a monthly fee of $3,185 for a term of 62 months. Bargain Purchase Gain In connection with the acquisition of Ample Hills during the quarter ended August 31, 2020 the Company recorded a bargain purchase gain of $1,271,615 that was recorded as a component of net income. As a result of additional information obtained during the measurement period about the facts and circumstances that existed as of the acquisition date, the Company recorded measurement period adjustments during the three months ended November 30, 2020 in the amount of $82,103, which resulted in a reduction in the bargain purchase gain for the six months ended November 30, 2020 to $1,189,512. The adjustment related to additional cure payments made during the quarter and obsolete inventory acquired as part of the acquisition. The bargain purchase gain amount represents the excess of the estimated fair value of the net assets and intangibles, described below, acquired over the estimated fair value of the consideration transferred to the sellers and their landlords. In accordance with ASC 805 - Business Combinations Intangible Assets In connection with the acquisition of Ample Hills during the quarter ended August 31, 2020 the Company acquired multiple intangible assets including the names and marks, proprietary recipes, and company website related to the Ample Hills business. The Company has determined that the aggregate fair value of such intangibles upon the closing of the acquisition was $1,117,470. The Company estimated the fair value of these assets utilizing the relief-from-royalty method, for the Proprietary Recipes and Tradename, which requires assumptions related to projected sales from its annual long-range plan; assumed royalty rates that could be payable if the Company did not own the trademarks; and a discount rate. For the website, the Reproduction Cost Approach was used which estimates the cost to replace the website. These assets have been determined to be indefinite-lived and are not amortized, but instead are reviewed for impairment at least annually or more frequently if indicators of impairment exist. As of November 30, 2020 and May 31, 2020, net amortizable intangible assets were $1,347,336 and $287,602, respectively. Use of Estimates The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 6 Months Ended |
Nov. 30, 2020 | |
Accounting Policies [Abstract] | |
Recent Accounting Pronouncements | In December 2019, the FASB issued ASU No . Simplifying the Accounting for Income Taxes (Topic 740) In November 2019, the FASB issued ASU 2019-08, Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements - Share-based Consideration Payable to a Customer |
Stock Options and Stock-Based C
Stock Options and Stock-Based Compensation | 6 Months Ended |
Nov. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
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. Stock Options At November 30, 2020, the Company had outstanding stock options to purchase 22,500 Outstanding Options Exercisable Options Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (yrs) Number of Shares Weighted Average Exercise Price 22,500 $ 1.70 6.3 22,500 $ 1.70 No stock options were granted, exercised, canceled and expired under the Company's stock-based compensation plans during the six months ended November 30, 2020. Restricted Stock Units Service-based and market-based restricted stock units are granted to key employees and members of the Company's Board of Directors. Service-based restricted stock units generally fully vest on the first anniversary date of the award. Market-based restricted stock units are contingent on continued service and vest based on the 15-day average closing price of the Company's Common Stock equal or exceeding certain targets established by the Compensation Committee of the Board of Directors. No market-based restricted stock units were granted in the six months ended November 30, 2020. During the six months ended November 30, 2020, two tranches of the market-based restricted stock units granted in Fiscal 2020 and Fiscal 2019 vested. During the six months ended November 30, 2020, 44,803 service-based restricted stock units were granted. Restricted stock unit activity under the Company's stock-based compensation plans during the six months ended November 30, 2020 is summarized as follows: Number of Units Weighted Average Price at Grant Date Aggregate Intrinsic Value Non-vested restricted stock units - May 31, 2020 55,147 $ 3.28 $ 180,882 Restricted stock units granted 44,803 4.17 186,813 Restricted stock units vested (57,290 ) 3.44 (197,089 ) Non-vested restricted stock units - November 30, 2020 42,660 $ 4.00 $ 170,606 During the six months ended November 30, 2020, total restricted stock unit compensation expense recognized was $251,371 and has been recorded as general, administration and sales expense in the Consolidated Statements of Operations and Comprehensive Loss. Stock compensation expense related to non-vested restricted stock units with a time vesting condition was $64,174. |
Weighted Average Shares and Rec
Weighted Average Shares and Reconciliation | 6 Months Ended |
Nov. 30, 2020 | |
Earnings Per Share [Abstract] | |
Weighted Average Shares and Reconciliation | Basic net income (loss) per share is computed using the weighted average number of shares of Common Stock outstanding. Diluted net income (loss) per share is computed using the weighted average number of shares of Common Stock outstanding, adjusted for dilutive incremental shares attributed to outstanding options to purchase Common Stock and restricted stock units vested but not issued. 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. For the three and six months ended November 30, 2020, potentially dilutive securities consisted of options to purchase 22,500 shares of Common Stock at $1.70 per share. Of these potentially dilutive securities, all of the shares of Common Stock underlying the options are excluded from the computation of diluted earnings per share because the Company incurred a net loss from continuing operations. In periods when a net loss is incurred in continuing operations, no Common Stock equivalents are included in the calculation of diluted net income or loss from discontinued operations or overall Company net income or loss since they are antidilutive. As such, all stock options outstanding are excluded from the computation of diluted net income in those periods. Basic weighted average shares for the three and six months ended November 30, 2020 and November 30, 2019 were as follows: Three Months Ended Six Months Ended 2020 2019 2020 2019 Weighted average shares (basic) 3,763,156 4,083,538 3,763,454 4,030,709 Effect of dilutive stock options — — — — Weighted average shares (diluted) 3,763,156 4,083,538 3,763,454 4,030,709 On December 3, 2019, the Company announced that its Board of Directors authorized a share repurchase plan to buy up to $2 million of its Common Stock. The Company intends to purchase shares from time to time through open market and private transactions in accordance with Securities and Exchange Commission rules. The plan was authorized through December 16, 2020. On December 17, 2019, the Company acquired 365,490 shares of Common Stock at $3.25 per share from Walter Brown Pistor. On January 31, 2020, the Company entered into an agreement with former director David Hudson to initiate a cashless exercise for 64,166 of his options, whereby the Company purchased 36,000 shares for $3.25 per share from Mr. Hudson to fund the exercise of his remaining 28,166 shares. Through November 30, 2020, the Company repurchased 418,051 shares, at an average price of $3.23 per share, under its previously announced $2 million share repurchase plan, which was done in accordance with a 10b5-1 plan. In addition, on July 20, 2020, the Company concluded its previously announced cash tender offer to purchase up to $2.5 million of the Company's common stock at a price per share not less than $3.00 and not greater than $3.25 per share. The Company accepted for purchase 72,159 shares at a price of $3.25 per share. |
Income Taxes
Income Taxes | 6 Months Ended |
Nov. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
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 consolidated 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 income tax contingencies were $0 as of November 30, 2020 and $0 as of May 31, 2020. 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 November 30, 2020 and May 31, 2020. Several tax years are subject to examination by major tax jurisdictions. In the United States, federal tax years ended May 31, 2017 and after are subject to examination. Effective Tax Rate The effective tax rate was (0.1%) and (15.4%) for the three and six months ended November 30, 2020 respectively. The effective tax rate on consolidated net income for the three and six months ended November 30, 2020 and 2019 differs from the federal statutory tax rate primarily due to changes in the deferred tax valuation allowance, tax benefit recorded related to the bargain purchase gain and the impact of certain expenses not being deductible for income tax reporting purposes. |
Leases
Leases | 6 Months Ended |
Nov. 30, 2020 | |
Leases [Abstract] | |
Leases | On November 22, 2019, the Company entered in a commercial lease agreement as part of the sale of the Schmitt Dynamic Balance Systems business line to Tosei Engineering Corp. and Tosei America Inc., which has been accounted for pursuant to (ASU) No. 2016-02, "Leases (Topic 842)". The Company elected the practical expedient to not separate lease and non-lease components and will present property revenues as Other Income, combined based upon the lease being determined to be the predominant component. The lessor commercial agreement contains a 10-year term with a renewal option to extend, which will be considered a new, separate contract and will be recognized at the time the option is exercised on a straight-line basis over the renewal period, and early termination options based on established terms specific to the individual agreement. Minimum future lease payments receivable are as follows: Years Ending May 31, 2021 $ 143,886 2022 291,906 2023 300,666 2024 309,870 2025 319,164 Thereafter 1,557,600 Total undiscounted cash flow $ 2,923,092 On October 1, 2020, the Company entered into a triple-net lease agreement with Humboldt Street Collective ("Humboldt Lease"), whereby Humboldt will lease the Company's building located at 2755 NW Nicolai Street, Portland, OR 97210 for a monthly fee of $3,185 for a term of 62 months. This lease arrangement been accounted for pursuant to (ASU) No. 2016-02, "Leases (Topic 842)". The Company presents property revenues as other income. Minimum future lease payments receivable are as follows: Years ending May 31, 2021 $ 19,109 2022 38,982 2023 40,151 2024 41,356 2025 42,597 Thereafter 20,708 Total undiscounted cash flow $ 202,902 In connection with the July 9, 2020 acquisition of Ample Hills, the Company has multiple real estate leases for its leased stores as well as a manufacturing facility that are recorded as operating leases under various non-cancellable operating leases. To determine whether a contract is or contains a lease, the Company determines at contract inception whether it contains the right to control the use of an identified asset for a period of time in exchange for consideration to the counterparty in the transaction. If the Company determines that the contract provides the right to obtain substantially all of the economic benefit from the use of the leased asset, as well as the right for the Company to direct the asset's use, the Company recognizes a right-of-use asset and liability upon contract inception. The initial carrying value of the operating lease liability is determined by calculating the present value of future lease payments under the contract. The Company considers the future lease payments under the original terms of the contract and also includes explicitly enumerated renewal periods where management is reasonably certain that such renewal options will be exercised. Our operating leases contain varying terms and expire at various dates through 2030. For the three months ended November 30, 2020 and 2019 lease expenses under fixed term leases amounted to $424,824 and $0, respectively. For the six months ended November 30, 2020 and 2019, lease expenses under fixed term leases amounted to $690,092 and $0, respectively. Certain of our operating leases contain variable lease payments, either in part or in total, related to certain performance targets by the Company at the underlying store locations. These variable leases costs are recognized as incurred in accordance with ASC 842 - Leases The Company's future minimum lease payments required under operating leases that have commenced as of November 30, 2020 were as follows: Fiscal Year Ended May 31, 2021 $ 526,474 2022 1,457,541 2023 1,714,502 2024 1,720,065 2025 1,694,403 Thereafter 6,549,089 Total lease payments $ 13,662,074 Less: imputed interest (2,243,306 ) Present value of lease payments 11,418,768 less: current lease obligations (800,889 ) Long-term lease obligations $ 10,617,879 In order to calculate the operating lease asset and liability for a lease, ASC 842 - Leases Lease term and discount rates were as follows: November 30, 2020 Weighted average remaining lease term (years) 7.91 Weighted average discount rate 3.87 % |
Customer Concentration
Customer Concentration | 6 Months Ended |
Nov. 30, 2020 | |
Risks and Uncertainties [Abstract] | |
Customer Concentration | The Company had one customer who exceeded 10% of net revenues for the six months ended November 30, 2020, accounting for 16.2% of revenues. |
Discontinued Operations
Discontinued Operations | 6 Months Ended |
Nov. 30, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | On October 10, 2019, the Company entered into an agreement ("Purchase Agreement") to sell the Schmitt Dynamic Balance Systems ("SBS") business line to Tosei Engineering Corp. and Tosei America, Inc. (collectively "Tosei") for a purchase price of $10,500,000 in cash. The transaction closed on November 22, 2019 and included certain assets held by the U.S. parent company and all the outstanding stock of the UK subsidiary, Schmitt Europe Limited. As a result, the financial position, results of operations, and cash flows relating to our SBS business line are reported as discontinued operations in the accompanying condensed consolidated financial statements. The consideration included $9,940,000 in unrestricted cash from the Buyer at closing, plus $420,000 to be placed into an escrow account, net of $140,000 in minimum cash settled via the funds flow at closing. Remaining escrow funds become unrestricted after certain events are completed and after one year from closing. The Purchase Agreement requires an adjustment to purchase price after closing based on the difference between (a) the calculated amount of working capital at closing and (b) the target working capital of $4,200,000. The closing working capital calculation resulted in $107,000 in net proceeds paid from Buyer to Seller in February 2020. The following is a composition of the line items constituting income from discontinued operations: Three Months Ended, Six Months Ended, November 30, 2020 November 30, 2019 November 30, 2020 November 30, 2019 Net revenue $ — $ 2,095,901 $ — $ 4,343,008 Cost of revenue — 1,210,126 — 2,374,251 Gross profit — 885,775 — 1,968,757 Operating expenses: General, administration and sales — 665,365 — 1,252,222 Research and development — 26,839 — 35,920 Total operating expenses — 692,204 — 1,288,142 Operating income — 193,571 — 680,615 Other expense, net — (65,192 ) — (140,923 ) Income before taxes — 128,379 — 539,692 Provision for income taxes — (11,719 ) — 7,589 Net income from discontinued operations $ — $ 140,098 $ — $ 532,103 |
Segment Information
Segment Information | 6 Months Ended |
Nov. 30, 2020 | |
Segment Reporting Information, Revenue for Reportable Segment [Abstract] | |
Segment Information | As described in Note 1 and Note 10, the Company closed on the acquisition of Ample Hills during the three months ended August 31, 2020. With the acquisition of Ample Hills, the Company has two reportable business segments, Ice Cream and Measurement. The Ice Cream Segment encompasses the activities of Ample Hills and focuses on the wholesale and retail sale of the Company's ice cream products from 10 separate retail locations in New York, New Jersey and California. The Measurement Segment focuses on laser-based test and measurement systems and ultrasonic products. Substantially all of the Company's operations are conducted within North America. The Company has previously reported segment information between their two identified legacy reportable segments: Balancer and Measurement. As described in Note 8, the Company sold the Dynamic Balance Systems ("SBS") business line on November 22, 2019. This entity composed substantially all of the business activities of the Company's legacy Balancer segment. Subsequent to this sale, management determined that the Company had a single reportable segment (until the aforementioned acquisition of Ample Hills closed during the quarter ended August 31, 2020). The foregoing information presents the balances and activities of only the Measurement segment as of and for the three and six months ended November 30, 2019. Segment Information Three Months Ended November 30, 2020 2019 Ice Cream Measurement Ice Cream Measurement Net revenue $ 1,158,989 $ 870,723 $ — $ 1,033,102 Operating income (loss) (1,737,598 ) (409,682 ) — (608,853 ) Depreciation expense 59,160 9,401 — 15,493 Amortization expense 6,017 26,146 — 25,756 Capital expenditures $ 111,387 $ 13,680 $ — $ 13,566 Six Months Months Ended November 30, 2020 2019 Ice Cream* Measurement Ice Cream Measurement Net revenue $ 1,660,409 $ 1,876,788 $ — $ 2,127,879 Operating income (loss) (2,700,352 ) (1,068,620 ) — (838,737 ) Depreciation expense 94,486 30,309 — 30,986 Amortization expense 10,028 52,291 — 52,291 Capital expenditures $ 232,051 $ 26,320 $ — $ 14,690 * Ice Cream Segment activity includes activities from the date of acquisition (July 9 ,2020) through November 30, 2020 Segment Assets November 30, 2020 May 31, 2020 Segment assets to total assets Ice Cream $ 16,329,077 $ — Measurement 1,453,148 2,251,090 Corporate assets 7,394,222 10,950,136 Total assets $ 25,176,447 $ 13,201,226 |
Ample Hills Business Acquisitio
Ample Hills Business Acquisition | 6 Months Ended |
Nov. 30, 2020 | |
Business Combination, Step Acquisition [Abstract] | |
Ample Hills Business Acquisition | As described in Note 1, the Company closed on the Ample Hills acquisition on July 9, 2020. The Company paid the sellers $1.0 million dollars for assets of Ample Hills. Additionally, the Company paid approximately $0.7 million dollars to certain landlords and vendors of the sellers in exchange for the right to assume the associated leases with such landlords and $125,167 in transaction costs. In accordance with ASC 805 - Business Combinations, The following table summarizes the Company's preliminary fair value of the assets acquired, and liabilities assumed, as of July 9, 2020, for the Company’s acquisition of Ample Hills. Purchase Price Cash paid to sellers $ 1,000,000 Cash paid to landlords, designer, and insurer 711,127 Total Purchase Price $ 1,711,127 Purchase Price Allocation Assets Acquired Right-of-use operating lease assets 10,645,098 Website 26,601 Tradename and trademarks 938,863 Proprietary Recipes 152,006 Security deposits 225,180 Machinery and equipment 581,616 Leasehold improvements 852,848 Inventory 632,100 Total Assets Acquired $ 14,054,312 Liabilities Assumed Right-of-use operating lease liabilities 10,645,098 Deferred Tax Liability 453,238 Customer Deposits 20,204 Gift card liabilities 35,133 Total Liabilities Assumed $ 11,153,673 Net Assets Acquired $ 2,900,639 Gain on bargain purchase $ 1,189,512 As a result of additional information obtained during the measurement period about the facts and circumstances that existed as of the acquisition date, the Company recorded a measurement period adjustment during the three months ended November 30, 2020 in the amount of $82,103, which resulted in a reduction in the bargain purchase gain for the six months ended November 30, 2020 to $1,189,512. The purchase price allocation will be finalized as soon as practicable within the measurement period, but no later than one year following the acquisition date. Prior to acquisition of Ample Hills, the company was a privately held company that was acquired out of bankruptcy. Management has performed a thorough evaluation of the pre-bankruptcy books and found the records to not be auditable. Therefore, management has engaged a third party consultant to assist in evaluating alternative means by which to provide historic financial data in future periods. Further, please reference Note 9 for further details regarding the results of the Ice Cream segment. |
Intangible Assets
Intangible Assets | 6 Months Ended |
Nov. 30, 2020 | |
Intangible Assets, Net (Including Goodwill) [Abstract] | |
Intangible Assets | Tradenames, Trademarks, Recipes and the Company website In connection with the acquisition of Ample Hills during the six months ended November 30, 2020 the Company acquired multiple intangible assets including the names and marks, proprietary recipes, and company website related to the Ample Hills business. The Company has determined that the aggregate fair value of such tradenames upon the closing of the acquisition was $1,117,470. The Company estimated the fair value of these assets utilizing the relief-from-royalty method, for the Proprietary Recipes and Tradename, which requires assumptions related to projected sales from its annual long-range plan; assumed royalty rates that could be payable if the Company did not own the trademarks; and a discount rate. For the website, the Reproduction Cost Approach was used which estimates the cost to replace the website. These assets have been determined to be indefinite-lived and are not amortized, but instead are reviewed for impairment at least annually or more frequently if indicators of impairment exist. |
Debt
Debt | 6 Months Ended |
Nov. 30, 2020 | |
Long-term Debt, Unclassified [Abstract] | |
Debt | Paycheck Protection Program Loan On March 21, 2020, the Coronavirus Aid Relief and Economic Security Act ("CARES ACT") was enacted. The CARES ACT established the Paycheck Protection Program ("PPP") which funds eligible businesses through federally guaranteed loans. Under the PPP, companies are eligible for forgiveness of principal and accrued interest if the proceeds are used for eligible costs. On August 3, 2020, Schmitt received loan proceeds in the amount of $584,534 (and subsequently returned $264,476 of the funds received) and, on August 3, 2020, Ample Hills received $1,471,022 under the PPP (the "Loans"). The Loans were granted on July 30, 2020, under two notes payable (the "Notes"). The note payable issued by Schmitt was dated July 30, 2020 and the note payable issued by Ample Hills was dated July 30, 2020. The Notes mature two years from the date of issuance and bear interest annually at 1.0%. Principal and accrued interest are payable monthly through the maturity date, commencing on July 30, 2020 and July 30, 2020 for the Notes issued by Schmitt and Ample Hills, respectively, unless forgiven as described below. The Notes may be prepaid at any time prior to maturity with no prepayment penalties. Loan proceeds may be used only to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments. The Company intends to use the funds for eligible purposes, including the re-hiring of Ample Hills's work force, and seek forgiveness of the balance of the loans. Forgiveness of the Loans is only available for principal that is used for the limited purposes that qualify for forgiveness under the requirements of the United States Small Business Administration ("SBA"). To obtain forgiveness, the Company or Ample Hills, as the case may be, must request it, provide documentation in accordance with the SBA requirements, and certify that the amounts requested to be forgiven qualify under those requirements. There is no guarantee that the Loan will be forgiven by the SBA and therefore the Company has recorded $1.8 million as a loan payable on the November 30, 2020 condensed consolidated balance sheet. Of this amount, $0.0 million has been recorded as a current liability to reflect the amount due within twelve months from the balance sheet. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Nov. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Beginning on December 1, 2020 the Company, lessor, entered in a lease agreement for its property located at 2451 NW 28th Avenue, Portland OR 97210, with (“Humboldt”) for a monthly fee of $4,734 for an initial lease term of 59 months. |
Summary Of Significant Accoun_2
Summary Of Significant Accounting Policies (Policies) | 6 Months Ended |
Nov. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | In the opinion of management of Schmitt Industries, Inc. (the "Company", "Schmitt", "we" or "our"), the accompanying unaudited interim condensed 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 November 30, 2020 and its results of operations and its cash flows for the periods presented. The condensed consolidated balance sheet at May 31, 2020 has been derived from the Annual Report on Form 10-K for the fiscal year ended May 31, 2020. The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2020. 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, 2021. |
Principles of Consolidation | These condensed consolidated financial statements include those of the Company and its wholly owned subsidiaries: Ample Hills Acquisition, LLC, Schmitt Measurement Systems, Inc., and Schmitt Industries (Canada) Limited. All significant intercompany accounts and transactions have been eliminated in the preparation of the consolidated condensed financial statements. |
Business Combination | On July 9, 2020, Ample Hills Acquisition LLC ("Buyer"), a New York limited liability company and wholly owned subsidiary of the Company, entered into an Asset Purchase Agreement (the "Agreement"), dated as of June 29, 2020, with Ample Hills Holdings, Inc., a Delaware corporation, Ample Hills Creamery, Inc., a New York corporation, and their subsidiaries (collectively, "Ample Hills"). The transactions contemplated by the Agreement (the "Transactions") closed on July 9, 2020, the day after a sale order approving the Transactions was entered by the Bankruptcy Court (defined below). The Ample Hills entities were debtors-in-possession under title 11 of the United States Code, 11 U.S.C. § 101 et seq. pursuant to voluntary petitions for relief filed under chapter 11 of the Bankruptcy Code on March 15, 2020 in the United States Bankruptcy Court for the Eastern District of New York (the "Bankruptcy Court"). The Transactions were conducted through a Bankruptcy Court-supervised process, subject to Bankruptcy Court-approved bidding procedures, approval of the Transactions by the Bankruptcy Court, and the satisfaction of certain closing conditions. The Agreement provided that, upon the terms and subject to the conditions set forth therein, Ample Hills sold, transferred and assigned to Buyer, or one or more of its affiliates, the Acquired Assets (as defined in the Agreement) and Buyer, or one or more of its affiliates, assumed the Assumed Liabilities (as defined in the Agreement) for a purchase price of $1.0 million. The Asset Acquisition includes the following assets, among other things, Ample Hills' equipment, inventory, and all intellectual property, including the names and marks of "AMPLE HILLS" and "AMPLE HILLS CREAMERY" and all derivatives thereof. Pursuant to the Agreement, Buyer also paid an additional approximately $0.7 million to certain landlords of Ample Hills in exchange for the right to assume leases with such landlords. See Note 10 for acquisition accounting based on the estimated fair value of assets acquired and liabilities assumed. The Company's strategy includes utilizing its capital for value opportunities. Accordingly, the primary purpose of the Ample Hills acquisition was to capitalize on this strategy by purchasing a business with a good brand name, which in light of the price we paid in bankruptcy, could have a significant upside. The Transactions were funded by the Company with cash on hand and has been accounted for in accordance with ASC 805 - Business Combinations |
Revenue Recognition | The Company generates revenues from the following sources: (i) retail restaurant sales, (ii) factory sales, (iii) measurement product sales, and (iv) remote tank monitoring services. Retail Restaurant Sales, net The Company's generates revenues from retail restaurant sales to its end-user customers at the time of sale, net of discounts, coupons, employee meals, and complimentary meals and gift cards. Sales tax is collected from customers and remitted to governmental authorities and are presented on a net basis within revenue in our consolidated and combined statements of operations. Factory Sales, net The Company generates revenues from sales from its Brooklyn, NY factory, including wholesale, e-commerce or direct-to-consumer, and manufacturing production sales for Measurement Product Sales The Company determines the amount of revenue it recognizes associated with the transfer of each product. For sales of products to all 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 meets all of the above criteria, revenue is recognized for the sales of product at the time of shipment. The Company incurs commissions associated with the sales of certain products, which are accrued and expensed at the time the product is shipped. These amounts are recorded within general, administrative 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, which are recognized at the time of shipment as a component of net revenues, were $4,511 and $6,534 for the six months ended November 30, 2020 and November 30, 2019, respectively. Remote Tank Monitoring Services The Company's Xact product line includes satellite focused remote tank monitoring products and related monitoring services for markets in the Internet of Things ("IoT") environment. The Company determines the amount of revenue it recognizes associated with the transfer of such services. For delivery of monitoring services to all 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 provide monitoring services meets all of the above criteria, revenue is recognized at the completion of the month in which monitoring services are provided. Customer deposits and prepayments The Company defers revenue recognition of revenues in instances where consideration is received from customers in advance of the Company completing its obligations in exchange for such consideration. As of November 30, 2020 and May 31, 2020, significant contract balances were as follows: November 30, 2020 May 31, 2020 Customer deposits and prepayments: Customer deposits, current $ 61,544 $ 12,239 Gift card liabilities, current 29,632 — Total customer deposits and prepayments $ 91,176 $ 12,239 |
Cash, Cash Equivalents and Restricted Cash | The Company generally invests its excess cash in money market funds. The Company's investment policy also allows for cash to be invested in investment grade highly liquid securities, and the Company considers securities that are highly liquid, readily convertible into cash and have original maturities of less than three months when purchased to be cash equivalents. The Company's cash consists of demand deposits in large financial institutions. At times, balances may exceed federally insured limits. Restricted cash consists of an amount held in escrow related to the sale of the balancer business segment and Ample Hills Retail Operations respectively, as described in the notes to the condensed consolidated financial statements. Once certain events are complete, the restrictions on this cash payment will be released. The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within the Consolidated Balance Sheets as of November 30, 2020 and May 31, 2020 to the sum of the same such amounts as shown in the Consolidated Statement of Cash Flows for the three months ended November 30, 2020: November 30, 2020 May 31, 2020 Cash and cash equivalents $ 6,771,335 $ 10,146,531 Restricted cash 566,134 420,000 Total cash, cash equivalents, and restricted cash $ 7,337,469 $ 10,566,531 |
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 aging reports, other operating trends and relevant business conditions, including general economic factors, as they relate to each of the Company's domestic and international customers. In the event there is doubt about whether a customer account is collectible, a reserve is provided. If these analyses lead management to the conclusion that a customer account is uncollectible, the balance will be directly charged to bad debt expense. The allowance for doubtful accounts was $94,007 and $103,029 as of November 30, 2020 and May 31, 2020, 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 November 30, 2020 and May 31, 2020 inventories consisted of: November 30, 2020 May 31, 2020 Raw materials $ 1,065,710 $ 154,293 Work-in-process 113,652 525,615 Finished goods 572,345 379,449 Total inventories $ 1,751,707 $ 1,059,357 |
Property and Equipment | Property and equipment are stated at cost, less 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. Expenditures for maintenance and repairs are charged to expense as incurred. As of November 30, 2020 and May 31, 2020, property and equipment consisted of: November 30, 2020 May 31, 2020 Land $ 159,000 $ 159,000 Buildings and improvements 2,612,265 1,612,003 Furniture, fixtures and equipment 1,078,204 396,264 $ 3,849,469 $ 2,167,267 Less accumulated depreciation (1,804,140 ) (1,680,478 ) Total property and equipment $ 2,045,329 $ 486,789 |
Assets Held For Sale | The Company owns a two story 35,050 sq. foot building in industrial zoning that has been listed for sale. Assets held for sale are stated at the lower of cost less depreciation and expected net realizable value. Depreciation is computed using the straight-line method over estimated useful lives of 25 years for building improvements. Expenditures for maintenance and repairs are charged to expense as incurred. As of November 30, 2020 and May 31, 2020, assets held for sale consisted of: November 30, 2020 May 31, 2020 Land $ 140,000 $ 140,000 Building and improvements 246,135 235,502 $ 386,135 $ 375,502 Less accumulated depreciation (211,288 ) (210,155 ) Carrying value of Assets Held for sale $ 174,847 $ 165,347 |
Leases | 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. Subsequent amendments have been issued by the FASB to clarify the codification and to correct unintended application of the new guidance. The ASU is required to be applied using a retrospective approach with two disclosure methods permissible. The full retrospective approach requires that the guidance be applied to each lease that existed at the beginning of the earliest comparative period presented. The modified retrospective approach requires that the guidance be applied to each lease that existed as of the beginning of the reporting period in which the entity first applied the standard. In July 2018, the FASB issued ASU No. 2018-11, Leases: Targeted Improvements, which provides an option to apply the guidance prospectively, instead of retrospectively, and allows for other classification provisions. On June 1, 2019, the Company adopted the new standard using the modified retrospective approach and electing the option to not apply the guidance to comparative periods, which continue to be presented under the accounting methods in effect for those periods. On November 22, 2019, the Company entered into a commercial lease agreement in which it is the lessor. This agreement contains a 10-year term with a renewal option to extend. In connection with the acquisition of Ample Hills on July 9, 2020, the Company executed a business combination through its acquisition of Ample Hills. In connection with this business combination, the Company became the lessee for multiple leased stores and a manufacturing facility. Upon acquisition, the Company renegotiated the terms of these leases. Upon acquisition, the lease liabilities were measured based upon the present value of future lease payments. On October 1, 2020 the Company entered into a triple-net lease agreement (the "Humboldt Lease") with Humboldt Street Collective, LLC ("Humboldt"), whereby Humboldt will lease the Company's building located at 2765-2755 NW Nicolai Street, Portland, OR 97210 for a monthly fee of $3,185 for a term of 62 months. |
Bargain Purchase Gain | In connection with the acquisition of Ample Hills during the quarter ended August 31, 2020 the Company recorded a bargain purchase gain of $1,271,615 that was recorded as a component of net income. As a result of additional information obtained during the measurement period about the facts and circumstances that existed as of the acquisition date, the Company recorded measurement period adjustments during the three months ended November 30, 2020 in the amount of $82,103, which resulted in a reduction in the bargain purchase gain for the six months ended November 30, 2020 to $1,189,512. The adjustment related to additional cure payments made during the quarter and obsolete inventory acquired as part of the acquisition. The bargain purchase gain amount represents the excess of the estimated fair value of the net assets and intangibles, described below, acquired over the estimated fair value of the consideration transferred to the sellers and their landlords. In accordance with ASC 805 - Business Combinations |
Intangible Assets | In connection with the acquisition of Ample Hills during the quarter ended August 31, 2020 the Company acquired multiple intangible assets including the names and marks, proprietary recipes, and company website related to the Ample Hills business. The Company has determined that the aggregate fair value of such intangibles upon the closing of the acquisition was $1,117,470. The Company estimated the fair value of these assets utilizing the relief-from-royalty method, for the Proprietary Recipes and Tradename, which requires assumptions related to projected sales from its annual long-range plan; assumed royalty rates that could be payable if the Company did not own the trademarks; and a discount rate. For the website, the Reproduction Cost Approach was used which estimates the cost to replace the website. These assets have been determined to be indefinite-lived and are not amortized, but instead are reviewed for impairment at least annually or more frequently if indicators of impairment exist. As of November 30, 2020 and May 31, 2020, net amortizable intangible assets were $1,347,336 and $287,602, respectively. |
Use of Estimates | The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. |
Summary Of Significant Accoun_3
Summary Of Significant Accounting Policies (Tables) | 6 Months Ended |
Nov. 30, 2020 | |
Accounting Policies [Abstract] | |
Customer deposits and prepayments | November 30, 2020 May 31, 2020 Customer deposits and prepayments: Customer deposits, current $ 61,544 $ 12,239 Gift card liabilities, current 29,632 — Total customer deposits and prepayments $ 91,176 $ 12,239 |
Reconciliation of cash and cash equivalents and restricted cash | November 30, 2020 May 31, 2020 Cash and cash equivalents $ 6,771,335 $ 10,146,531 Restricted cash 566,134 420,000 Total cash, cash equivalents, and restricted cash $ 7,337,469 $ 10,566,531 |
Inventories | November 30, 2020 May 31, 2020 Raw materials $ 1,065,710 $ 154,293 Work-in-process 113,652 525,615 Finished goods 572,345 379,449 Total inventories $ 1,751,707 $ 1,059,357 |
Property and equipment | November 30, 2020 May 31, 2020 Land $ 159,000 $ 159,000 Buildings and improvements 2,612,265 1,612,003 Furniture, fixtures and equipment 1,078,204 396,264 $ 3,849,469 $ 2,167,267 Less accumulated depreciation (1,804,140 ) (1,680,478 ) Total property and equipment $ 2,045,329 $ 486,789 |
Assets held for sale | November 30, 2020 May 31, 2020 Land $ 140,000 $ 140,000 Building and improvements 246,135 235,502 $ 386,135 $ 375,502 Less accumulated depreciation (211,288 ) (210,155 ) Carrying value of Assets Held for sale $ 174,847 $ 165,347 |
Stock Options And Stock-Based_2
Stock Options And Stock-Based Compensation (Tables) | 6 Months Ended |
Nov. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock options outstanding | Outstanding Options Exercisable Options Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (yrs) Number of Shares Weighted Average Exercise Price 22,500 $ 1.70 6.3 22,500 $ 1.70 |
Schedule of share-based compensation, restricted stock units award activity | Number of Units Weighted Average Price at Grant Date Aggregate Intrinsic Value Non-vested restricted stock units - May 31, 2020 55,147 $ 3.28 $ 180,882 Restricted stock units granted 44,803 4.17 186,813 Restricted stock units vested (57,290 ) 3.44 (197,089 ) Non-vested restricted stock units - November 30, 2020 42,660 $ 4.00 $ 170,606 |
Weighted Average Shares and R_2
Weighted Average Shares and Reconciliation (Tables) | 6 Months Ended |
Nov. 30, 2020 | |
Earnings Per Share [Abstract] | |
Earnings per share | Three Months Ended Six Months Ended 2020 2019 2020 2019 Weighted average shares (basic) 3,763,156 4,083,538 3,763,454 4,030,709 Effect of dilutive stock options — — — — Weighted average shares (diluted) 3,763,156 4,083,538 3,763,454 4,030,709 |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Nov. 30, 2020 | |
Leases [Abstract] | |
Schedule of minimum future lease payments receivable on an indiscounted cash flow basis | Years Ending May 31, 2021 $ 143,886 2022 291,906 2023 300,666 2024 309,870 2025 319,164 Thereafter 1,557,600 Total undiscounted cash flow $ 2,923,092 Years ending May 31, 2021 $ 19,109 2022 38,982 2023 40,151 2024 41,356 2025 42,597 Thereafter 20,708 Total undiscounted cash flow $ 202,902 |
Future minimum lease payments | Fiscal Year Ended May 31, 2021 $ 526,474 2022 1,457,541 2023 1,714,502 2024 1,720,065 2025 1,694,403 Thereafter 6,549,089 Total lease payments $ 13,662,074 Less: imputed interest (2,243,306 ) Present value of lease payments 11,418,768 less: current lease obligations (800,889 ) Long-term lease obligations $ 10,617,879 |
Lease term discount rates | November 30, 2020 Weighted average remaining lease term (years) 7.91 Weighted average discount rate 3.87 % |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 6 Months Ended |
Nov. 30, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued operations | Three Months Ended, Six Months Ended, November 30, 2020 November 30, 2019 November 30, 2020 November 30, 2019 Net revenue $ — $ 2,095,901 $ — $ 4,343,008 Cost of revenue — 1,210,126 — 2,374,251 Gross profit — 885,775 — 1,968,757 Operating expenses: General, administration and sales — 665,365 — 1,252,222 Research and development — 26,839 — 35,920 Total operating expenses — 692,204 — 1,288,142 Operating income — 193,571 — 680,615 Other expense, net — (65,192 ) — (140,923 ) Income before taxes — 128,379 — 539,692 Provision for income taxes — (11,719 ) — 7,589 Net income from discontinued operations $ — $ 140,098 $ — $ 532,103 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Nov. 30, 2020 | |
Segment Reporting Information, Revenue for Reportable Segment [Abstract] | |
Segment information | Three Months Ended November 30, 2020 2019 Ice Cream Measurement Ice Cream Measurement Net revenue $ 1,158,989 $ 870,723 $ — $ 1,033,102 Operating income (loss) (1,737,598 ) (409,682 ) — (608,853 ) Depreciation expense 59,160 9,401 — 15,493 Amortization expense 6,017 26,146 — 25,756 Capital expenditures $ 111,387 $ 13,680 $ — $ 13,566 Six Months Months Ended November 30, 2020 2019 Ice Cream* Measurement Ice Cream Measurement Net revenue $ 1,660,409 $ 1,876,788 $ — $ 2,127,879 Operating income (loss) (2,700,352 ) (1,068,620 ) — (838,737 ) Depreciation expense 94,486 30,309 — 30,986 Amortization expense 10,028 52,291 — 52,291 Capital expenditures $ 232,051 $ 26,320 $ — $ 14,690 * Ice Cream Segment activity includes activities from the date of acquisition (July 9 ,2020) through November 30, 2020 |
Segment assets | November 30, 2020 May 31, 2020 Segment assets to total assets Ice Cream $ 16,329,077 $ — Measurement 1,453,148 2,251,090 Corporate assets 7,394,222 10,950,136 Total assets $ 25,176,447 $ 13,201,226 |
Ample Hills Business Acquisit_2
Ample Hills Business Acquisition (Tables) | 6 Months Ended |
Nov. 30, 2020 | |
Business Combination, Step Acquisition [Abstract] | |
Purchase price allocation | Purchase Price Cash paid to sellers $ 1,000,000 Cash paid to landlords, designer, and insurer 711,127 Total Purchase Price $ 1,711,127 Purchase Price Allocation Assets Acquired Right-of-use operating lease assets 10,645,098 Website 26,601 Tradename and trademarks 938,863 Proprietary Recipes 152,006 Security deposits 225,180 Machinery and equipment 581,616 Leasehold improvements 852,848 Inventory 632,100 Total Assets Acquired $ 14,054,312 Liabilities Assumed Right-of-use operating lease liabilities 10,645,098 Deferred Tax Liability 453,238 Customer Deposits 20,204 Gift card liabilities 35,133 Total Liabilities Assumed $ 11,153,673 Net Assets Acquired $ 2,900,639 Gain on bargain purchase $ 1,189,512 |
Summary Of Significant Accoun_4
Summary Of Significant Accounting Policies (Details) - USD ($) | Nov. 30, 2020 | May 31, 2020 |
Accounting Policies [Abstract] | ||
Customer deposits, current | $ 61,544 | $ 12,239 |
Gift card liabilities, current | 29,632 | 0 |
Total customer deposits and prepayments | $ 91,176 | $ 12,239 |
Summary Of Significant Accoun_5
Summary Of Significant Accounting Policies (Details 1) - USD ($) | Nov. 30, 2020 | May 31, 2020 | Nov. 30, 2019 | May 31, 2019 |
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 6,771,335 | $ 10,146,531 | ||
Restricted cash | 566,134 | 420,000 | ||
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statement of Cash Flows | $ 7,337,469 | $ 10,566,531 | $ 12,525,462 | $ 1,467,435 |
Summary Of Significant Accoun_6
Summary Of Significant Accounting Policies (Details 2) - USD ($) | Nov. 30, 2020 | May 31, 2020 |
Accounting Policies [Abstract] | ||
Raw materials | $ 1,065,710 | $ 154,293 |
Work-in-process | 113,652 | 525,615 |
Finished goods | 572,345 | 379,449 |
Inventories | $ 1,751,707 | $ 1,059,357 |
Summary Of Significant Accoun_7
Summary Of Significant Accounting Policies (Details 3) - USD ($) | Nov. 30, 2020 | May 31, 2020 |
Property, plant and equipment, gross | $ 3,849,469 | $ 2,167,267 |
Less accumulated depreciation | (1,804,140) | (1,680,478) |
Property, plant and equipment, net | 2,045,329 | 486,789 |
Land | ||
Property, plant and equipment, gross | 159,000 | 159,000 |
Buildings and Improvements | ||
Property, plant and equipment, gross | 2,612,265 | 1,612,003 |
Furniture, Fixtures and Equipment | ||
Property, plant and equipment, gross | $ 1,078,204 | $ 396,264 |
Summary Of Significant Accoun_8
Summary Of Significant Accounting Policies (Details 4) - USD ($) | Nov. 30, 2020 | May 31, 2020 |
Accounting Policies [Abstract] | ||
Land | $ 140,000 | $ 140,000 |
Building improvements | 246,135 | 235,502 |
Total | 386,135 | 375,502 |
Less: accumulated depreciation | (211,288) | (210,155) |
Carrying value of assets held for sale | $ 174,847 | $ 165,347 |
Summary Of Significant Accoun_9
Summary Of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Nov. 30, 2020 | Nov. 30, 2019 | Nov. 30, 2020 | Nov. 30, 2019 | May 31, 2020 | |
Allowance for doubtful accounts | $ 94,007 | $ 94,007 | $ 103,029 | ||
Bargain purchase gain | (82,103) | $ 0 | 1,189,512 | $ 0 | |
Intangible assets, net | $ 1,347,336 | 1,347,336 | $ 287,602 | ||
Shipping and Handling | |||||
Revenues | $ 4,511 | $ 6,534 |
Stock Options And Stock-Based_3
Stock Options And Stock-Based Compensation (Details) | 6 Months Ended |
Nov. 30, 2020$ / sharesshares | |
Share-based Payment Arrangement [Abstract] | |
Outstanding options | shares | 22,500 |
Weighted average exercise price, outstanding options | $ / shares | $ 1.70 |
Weighted average remaining contractual term (years), exercisable options | 6 years 3 months 18 days |
Exercisable options | shares | 22,500 |
Weighted average exercise price, exercisable options | $ / shares | $ 1.70 |
Stock Options And Stock-Based_4
Stock Options And Stock-Based Compensation (Details 2) | 6 Months Ended |
Nov. 30, 2020USD ($)$ / sharesshares | |
Share-based Payment Arrangement [Abstract] | |
Non-vested restricted stock units outstanding, beginning | shares | 55,147 |
Restricted stock units granted | shares | 44,803 |
Restricted stock units vested | shares | (57,290) |
Non-vested restricted stock units outstanding, ending | shares | 42,660 |
Weighted average exercise price, beginning | $ / shares | $ 3.28 |
Weighted average exercise price granted | $ / shares | 4.17 |
Weighted average exercise price vested | $ / shares | 3.44 |
Weighted average exercise price, ending | $ / shares | $ 4 |
Aggregate intrinsic value, beginning | $ | $ 180,882 |
Aggregate intrinsic value granted | $ | 186,813 |
Aggregate intrinsic value vested | $ | (197,089) |
Aggregate intrinsic value, ending | $ | $ 170,606 |
Stock Options And Stock-Based_5
Stock Options And Stock-Based Compensation (Details Narrative) - USD ($) | 6 Months Ended | |
Nov. 30, 2020 | Nov. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | ||
Outstanding options | 22,500 | |
Weighted average exercise price, outstanding options | $ 1.70 | |
Restricted stock units granted | 44,803 | |
Restricted stock unit compensation expense | $ 251,371 | $ 192,602 |
Stock compensation expense related to non-vested restricted stock units | $ 64,174 | $ 192,602 |
Weighted Average Shares and R_3
Weighted Average Shares and Reconciliation (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2020 | Nov. 30, 2019 | Nov. 30, 2020 | Nov. 30, 2019 | |
Earnings Per Share [Abstract] | ||||
Weighted average shares, basic | 3,763,156 | 4,083,538 | 3,763,454 | 4,030,709 |
Effect of dilutive securities stock options | 0 | 0 | 0 | 0 |
Weighted average shares, diluted | 3,763,156 | 4,083,538 | 3,763,454 | 4,030,709 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |
Nov. 30, 2020 | Nov. 30, 2020 | May 31, 2020 | |
Income Tax Disclosure [Abstract] | |||
Other long-term liabilities | $ 0 | $ 0 | $ 0 |
Effective tax rate | (15.40%) | (0.10%) |
Leases (Details)
Leases (Details) | May 31, 2020USD ($) |
2021 | $ 143,886 |
2022 | 291,906 |
2023 | 300,666 |
2024 | 309,870 |
2025 | 319,164 |
Thereafter | 1,557,600 |
Total undiscounted cash flow | 2,923,092 |
Humboldt Lease | |
2021 | 19,109 |
2022 | 38,982 |
2023 | 40,151 |
2024 | 41,356 |
2025 | 42,597 |
Thereafter | 20,708 |
Total undiscounted cash flow | $ 202,902 |
Leases (Details 1)
Leases (Details 1) - USD ($) | Nov. 30, 2020 | May 31, 2020 |
Leases [Abstract] | ||
2021 | $ 526,474 | |
2022 | 1,457,541 | |
2023 | 1,714,502 | |
2024 | 1,720,065 | |
2025 | 1,694,403 | |
Thereafter | 6,549,089 | |
Total lease payments | 13,662,074 | |
Less: imputed interest | (2,243,306) | |
Present value of lease payments | 11,418,768 | |
Less: current lease obligations | (800,889) | $ 0 |
Long-term lease obligations | $ 10,617,879 |
Leases (Details 2)
Leases (Details 2) | Nov. 30, 2020 |
Leases [Abstract] | |
Weighted average remaining lease term (years) | 7 years 10 months 28 days |
Weighted average discount rate | 3.87% |
Customer Concentration (Details
Customer Concentration (Details Narrative) | 6 Months Ended |
Nov. 30, 2020 | |
Customer One | Revenue | |
Concentration risk percentage | 16.20% |
Discontinued Operations (Detail
Discontinued Operations (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2020 | Nov. 30, 2019 | Nov. 30, 2020 | Nov. 30, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | ||||
Net revenue | $ 0 | $ 2,095,901 | $ 0 | $ 4,343,008 |
Cost of revenue | 0 | 1,210,126 | 0 | 2,374,251 |
Gross profit | 0 | 885,775 | 0 | 1,968,757 |
Operating expenses: | ||||
General, administration and sales | 0 | 665,365 | 0 | 1,252,222 |
Research and development | 0 | 26,839 | 0 | 35,920 |
Total operating expenses | 0 | 692,204 | 0 | 1,288,142 |
Operating income | 0 | 193,571 | 0 | 680,615 |
Other expense, net | 0 | (65,192) | 0 | (140,923) |
Income before taxes | 0 | 128,379 | 0 | 539,692 |
Provision for income taxes | 0 | (11,719) | 0 | 7,589 |
Net income from discontinued operations | $ 0 | $ 140,098 | $ 0 | $ 532,103 |
Segment Information (Details)
Segment Information (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Nov. 30, 2020 | Nov. 30, 2019 | Nov. 30, 2020 | Nov. 30, 2019 | ||
Operating loss | $ (2,147,280) | $ (608,853) | $ (3,768,972) | $ (838,737) | |
Ice Cream | |||||
Net revenue | 1,158,989 | 0 | 1,660,409 | [1] | 0 |
Operating loss | (1,737,598) | 0 | (2,700,352) | [1] | 0 |
Depreciation expense | 59,160 | 0 | 94,486 | [1] | 0 |
Amortization expense | 6,017 | 0 | 10,028 | [1] | 0 |
Capital expenditures | 111,387 | 0 | 232,051 | [1] | 0 |
Measurement | |||||
Net revenue | 870,723 | 1,033,102 | 1,876,788 | 2,127,879 | |
Operating loss | (409,682) | (608,853) | (1,068,620) | (838,737) | |
Depreciation expense | 9,401 | 15,493 | 30,309 | 30,986 | |
Amortization expense | 26,146 | 25,756 | 52,291 | 52,291 | |
Capital expenditures | $ 13,680 | $ 13,566 | $ 26,320 | $ 14,690 | |
[1] | Ice Cream Segment activity includes activities from the date of acquisition (July 9 ,2020) through November 30, 2020 |
Segment Information (Details 1)
Segment Information (Details 1) - USD ($) | Nov. 30, 2020 | May 31, 2020 |
Segment assets to total assets | ||
Ice cream | $ 16,329,077 | $ 0 |
Measurement | 1,453,148 | 2,251,090 |
Corporate assets | 7,394,222 | 10,950,136 |
Total assets | $ 25,176,447 | $ 13,201,226 |
Ample Hills Business Acquisit_3
Ample Hills Business Acquisition (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2020 | Nov. 30, 2019 | Nov. 30, 2020 | Nov. 30, 2019 | |
Purchase Price | ||||
Cash paid to sellers | $ 1,000,000 | |||
Cash paid to landlords, designer, and insurer | 711,127 | |||
Total purchase price | 1,711,127 | |||
Assets Acquired | ||||
Right-of-use operating lease assets | $ 10,645,098 | 10,645,098 | ||
Website | 26,601 | 26,601 | ||
Tradename and trademarks | 938,863 | 938,863 | ||
Proprietary recipes | 152,006 | 152,006 | ||
Security deposits | 225,180 | 225,180 | ||
Machinery and equipment | 581,616 | 581,616 | ||
Leasehold improvements | 852,848 | 852,848 | ||
Inventory | 632,100 | 632,100 | ||
Total assets acquired | 14,054,312 | 14,054,312 | ||
Liabilities Assumed | ||||
Right-of-use operating lease liabilities | 10,645,098 | 10,645,098 | ||
Deferred Tax Liability | 453,238 | 453,238 | ||
Customer deposits | 20,204 | 20,204 | ||
Gift card liabilities | 35,133 | 35,133 | ||
Total liabilities assumed | 11,153,673 | 11,153,673 | ||
Net assets acquired | 2,900,639 | 2,900,639 | ||
Gain on bargain purchase price | $ (82,103) | $ 0 | $ 1,189,512 | $ 0 |
Debt (Details Narrative)
Debt (Details Narrative) | Nov. 30, 2020USD ($) |
Long-term Debt, Unclassified [Abstract] | |
Loan payable | $ 1,800,000 |