SCHMITT INDUSTRIES, INC. OVERVIEW
Schmitt Industries Inc. ("Schmitt," "Company" or "Registrant" or "we") is a holding company owning subsidiaries engaged in diverse business activities. We purchase companies where we believe we can help operate more effectively to achieves their full potentials. We continually assess strategic opportunities to improve shareholder value. Schmitt's operating businesses include propane tank monitoring solutions, precision measurement solutions and ice cream production and distribution. Our subsidiaries include our Measurement Segment ("SMS") and our Ice Cream Segment, which is comprised of our recent acquisition ofAmple Hills . 18 Table of Contents As described in Note 12- Discontinued Operations, the Company sold the Schmitt Dynamic Balance Systems ("SBS") business line onNovember 22, 2019 . After the sale of the SBS business, but prior to the acquisition ofAmple Hills , the Company conducted an analysis and determined that, based on the types of products and services sold, and the manner in which the Company reviews and manages operations, that it operated as one segment. Subsequent to theAmple Hills acquisition, the Company determined that it had two distinct segments: the Measurement Segment and the Ice Cream Segment. OnJuly 9, 2020 , Buyer entered into an Asset Purchase Agreement (the "Agreement"), dated as ofJune 29, 2020 , withAmple Hills . The transactions contemplated by the Agreement (the "Transactions") closed onJuly 9, 2020 , the day after a sale order approving the Transactions was entered by theBankruptcy 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 onMarch 15, 2020 in the Bankruptcy Courts. The Transactions were conducted through aBankruptcy Court -supervised process, subject toBankruptcy Court -approved bidding procedures, approval of the Transactions by theBankruptcy Court , and the satisfaction of certain closing conditions. RECENT DEVELOPMENTS Strategic Highlights
As disclosed above, the Company acquired theAmple Hills ice cream business as ofJuly 9, 2020 . Following the Transactions,Ample Hills began reopening retail locations, rehiringAmple Hills team members, and reopened theRed Hook ice cream factory inBrooklyn, New York . Further, onMay 28, 2021 , the Company opened a new retail location inBrooklyn, New York , bringing its total retail locations to 11 as noted above. As the Transactions occurred after Fiscal 2020, the results ofAmple Hills are not reflected in the Company's results for Fiscal 2020, but are included in the results for Fiscal 2021 and anticipated to be a significant component of the Company's results in fiscal years subsequent to the acquisition.
SIGNIFICANT ACCOUNTING POLICIES
The analysis of the Company's financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with Generally Accepted Accounting Principles in theU.S. ("GAAP"). In preparing the Consolidated Financial Statements certain estimates and judgments are required that affect the reported amounts within the Consolidated Statement of Operations and Balance Sheet. Note 2 - Summary of Significant Accounting Policies, in the accompanying Notes to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of our Consolidated Financial Statements.
Management asserts the estimates, assumptions and judgments involved in the accounting policies described in Note 2 - Summary of Significant Accounting Policies have the greatest potential impact on our Consolidated Financial Statements and have deemed these to be our critical accounting policies and estimates.
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Revenue Recognition
The Company generates revenues from the following sources: (i) retail restaurant
sales, (ii) factory sales, (iii) measurement product sales, and (iv) remotetank monitoring services. Retail Restaurant Sales, net The Company's Ice Cream Segment 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 is presented on a net basis within revenue in our Consolidated Statement of Operations. Factory Sales, net The Company's Ice Cream Segment generates revenues from sales of finished goods from itsBrooklyn, New York factory, including wholesale, e-commerce, and direct-to-consumer sales. These revenues, net of sales tax paid to states, are recognized when control of the goods is transferred to the customer, in accordance with the terms of the applicable agreement. The Company also generates revenues by providing manufacturing production services to third parties, and recognizes revenues as services are provided to the customer.
Measurement Product Sales
The Company's Measurement Segment 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 commission expense associated with the sales of certain
measurement products. The Company applies the practical expedient allowed under
Accounting Standards Codification ("ASC") 340-40-25-4 by recognizing the expense
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.
Remote Tank Monitoring Services
The Company's Measurement Segment revenues associated with the Xact product line
include satellite focused remote tank monitoring products and related monitoring
services for markets in the Internet of Things environment ("IoT").
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.
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Business Combinations
In accordance with ASC 805 - Business Combinations ("ASC 805"), the Company
allocates the purchase consideration to the identifiable assets acquired and
liabilities assumed in business combinations based on their acquisition-date
fair values. The excess of the purchase consideration over the amounts assigned
to the identifiable assets and liabilities is recognized as goodwill, or if the
fair value of the net assets acquired exceeds the purchase consideration, a
bargain purchase gain is recorded. Factors giving rise to goodwill generally
include operational synergies that are anticipated as a result of the business
combination and growth expected to result in economic benefits from access to
new customers and markets. The fair values of identifiable intangible assets
acquired in business combinations are generally determined using an income
approach, requiring financial forecasts and estimates as well as market
participant assumptions.
The incremental financial results of the Ample Hills acquisition are included in
the Company's consolidated financial results from the respective acquisition
date.
Bargain Purchase Gain
In connection with the acquisition of Ample Hills during Fiscal 2021, the
Company recorded an initial bargain purchase gain of $1,271,615 that was
recorded as a component of other income on the Consolidated Statement of
Operations. 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
year, which resulted in a reduction in the bargain purchase gain for Fiscal 2021
to $1,138,808 . The adjustments related to additional cure payments made during
the year, the discovery of obsolete inventory, and the reduction of the deferred
tax liability. 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, we have estimated the
fair value of the net assets acquired as of the acquisition date.
Intangible Assets and Impairment
Indefinite-Lived Intangible Assets
The Company's indefinite-lived assets, included tradenames and trademarks for the Company's Ice Cream Segment. The Company reviews the carrying values of identifiable intangibles annually or whenever events or changes in circumstances indicate that such carrying values may not be recoverable as required by ASC 350, Intangibles -Goodwill and Other. This guidance provides the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, based on a review of qualitative factors, it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company performs a quantitative analysis. If the carrying value of a reporting unit exceeds its fair value, we measure any intangible impairment losses as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of the intangible allocated to that reporting unit.
Unforeseen events, changes in circumstances, market conditions and material
differences in the value of intangible assets due to changes in estimates of
future cash flows could negatively affect the fair value of the Company's assets
and result in a non-cash impairment charge. Some factors considered important
that could trigger an impairment review include the following: significant
underperformance relative to expected historical or projected future operating
results, significant changes in the manner of the Company's use of acquired
assets or the strategy for its overall business and significant negative
industry or economic trends.
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Finite-lived Intangible Assets
Amortizable intangible assets include purchased technology and patents for the Company's Measurement Segment and proprietary recipes and the Company's website for its Ice Cream Segment. These assets are amortized over their estimated useful lives ranging from three to fifteen years. The Company reviews finite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Recoverability is determined by comparing the forecasted future net undiscounted cash flows from the operations to which the assets relate, based on management's best estimates using the appropriate assumptions and projections at the time, to the carrying amount of the assets. If the carrying value is determined to be in excess of such undiscounted cash flows, the asset is considered impaired and a loss is recognized equal to the amount by which the carrying amount exceeds the estimated fair value of the assets, which is determined by discounting future projected cash flows. Inventories, net 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. Lease Accounting - Leases The Company evaluates their leases to determine if they have the right to control the use of an asset, or groups of assets, for a period of time in exchange for consideration. If the determine that they have the right to obtain substantially all of the economic benefits arising from the use of such asset, the recognize a right-of-use asset and lease liability. The Company evaluates each lease to estimate their expected term which includes renewal options that they are reasonably assured that they will exercise and they also evaluate the classification of the lease as either an operating lease or a finance lease. As the Company's leases do not provide an implicit rate, the Company must estimate an incremental borrowing rate based on the information available at the time the lease is commenced or amended. The estimated rate is directly utilized in determining the present value of the lease payments. As the Company does not have any outstanding debt other than the PPP loans discussed in Note 16 - Long-Term Debt, to the extent not forgiven, or committed credit facilities, the Company must estimate the incremental borrowing rate based on prevailing financial market conditions, peer company credit analyses and management judgment. The Company asses their right-of-use assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Changes in assumptions regarding lease renewals and estimated incremental borrowing rates may produce materially different amounts in the initial recognition of right-of-use assets and lease liabilities. Additionally, an inability to perform on the Company's strategic revenue and cash flow growth plans could result in the recognition of impairment losses in future periods and could be material. 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.
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Each year the Company files income tax returns in the various taxing
jurisdictions in which it operates. These tax returns are subject to examination
and possible challenge by the taxing authorities. Positions challenged by the
taxing authorities may be settled or appealed by the Company. As a result, there
is an uncertainty in income taxes recognized in the Company's financial
statements in accordance with ASC Topic 740. The Company applies this guidance
by defining criteria that an individual income tax position must meet for any
part of the benefit of that position to be recognized in an enterprise's
financial statements and provides guidance on measurement, de-recognition,
classification, accounting for interest and penalties, accounting in interim
periods, disclosure, and transition.
Discussion of Operating Results From Continuing Operations
The Company has previously reported segment information for their two identified reportable segments: Balancer and Measurement. As described in the accompanying Consolidated Financial Statements, the Company sold the SBS business line onNovember 22, 2019 . This entity composed substantially all of the business activities of the Company's legacy Balancer Segment. Subsequent to this sale, management determined the Company had a single reportable segment (until the acquisition ofAmple Hills onJuly 9, 2020 ). Subsequent to the acquisition ofAmple Hills , the Company determined they have two segments: the Measurement Segment and the Ice Cream Segment. The foregoing information presents the balances and activities of the Measurement Segment for Fiscal 2021 and Fiscal 2020 and the activities of the Ice Cream Segment for Fiscal 2021. COVID-19 Update As ofMay 31, 2021 , all of our manufacturing facilities and retail shops were operational. Throughout the COVID-19 pandemic, the Company has been adhering to mandates and other guidance from local governments and health authorities, including theWorld Health Organization and theCenters for Disease Control and Prevention . The Company has taken extraordinary measures and invested significantly in practices to protect employees and reduce the risk of spreading the virus, while continuing to operate where permitted and to the extent possible. These actions include additional cleaning of our facilities, staggering crews, incorporating visual cues to reinforce social distancing, providing face coverings and gloves, as well as implementing daily health validation at our manufacturing and office facilities. We expect to continue to incur costs to maintain these precautionary measures for the foreseeable future. The health and safety of our employees and our communities is our highest priority. Key Leadership Changes
On
On
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RESULTS OF OPERATIONS
Fiscal Year Ended May 31,
2021 2020
Ice Cream Segment revenues $ 4,043,436 51.4 % $ - -
Measurement Segment revenues 3,820,914 48.6 % 4,189,924 100.0 %
Total revenue, net 7,864,350 100.0 % 4,189,924 100.0 %
Cost of sales 4,593,588 58.4 % 2,239,376 53.4 %
Gross profit 3,270,762 41.6 % 1,950,548 46.6 %
General, administrative and
sales 12,045,174 153.2 % 4,061,621 96.9 %Impairment of intangible assets 903,422 11.5 %
- - Transaction costs 125,167 1.6 % - - Research & development 83,130 1.1 % 68,849 1.6 % Total operating expenses 13,156,893 167.3 % 4,130,470 98.6 % Operating loss (9,886,131 ) (125.7 %) (2,179,922 ) (52.0 %) Bargain purchase gain 1,138,808 14.5 % - - Interest expense (19,038 ) (0.2 %) - - Other income, net 273,023 3.5 % 322,980 7.7 % Loss before income taxes (8,493,338 ) (108.0 %) (1,856,942 ) (44.3 %) Income tax benefit (403,666 ) (5.1 %) (14,638 ) (0.3 %) Net loss from continuing operations (8,089,672 ) (102.9 %) (1,842,304 ) (44.0 %) Income from discontinued operations, net of tax - - 5,722,879 136.6 % Net (loss) income$ (8,089,672 ) (102.9 %)$ 3,880,575 92.6 %
Fiscal Year Ended
Consolidated Revenue - Consolidated revenue increased$3,674,426 , or 87.7%, to$7,864,350 in Fiscal 2021 from$4,189,924 in Fiscal 2020. The increase was driven by the new Ice Cream Segment, which generated$4,043,436 in sales during Fiscal 2021, accounting for 51.4% of total revenue for the fiscal year, offset by a decrease in the Measurement Segment sales of$369,010 , or 8.8%, to$3,820,914 which accounted for 48.6% of total revenue. No revenues for the Ice Cream Segment are included in Fiscal 2020 due to the acquisition occurring subsequent to Fiscal 2020 year end. Ice Cream Segment Revenue - The Ice Cream Segment encompasses the operations ofAmple Hills and focuses on the wholesale and retail sales of their ice cream and related products through a network of 11 individual retail locations located inNew York ,New Jersey andCalifornia , in addition to sales on the Company's website. Revenues for the Ice Cream Segment for Fiscal 2021 were$4,043,436 . Measurement Segment Revenue - The Measurement Segment includes two main product lines: the Acuity product line, which includes laser-based distance measurement and dimensional sizing laser sensor, and the Xact product line, which includes ultrasonic-based remote tank monitoring products and related monitoring revenues for markets in the LoT environment. All activity in the Company's Measurement Segment was conducted inNorth America in Fiscal 2021 and substantially all
in Fiscal 2020. Measurement Segment Revenue decreased$369,010 , or 8.8%, to$3,820,914 in Fiscal 2021 as compared to$4,189,924 in Fiscal 2020. The decrease in Fiscal 2021 is driven by a decrease in Acuity and Xact product revenue of$162,684 , or 9.7%, and$216,138 , or 26.2%, respectively. Additionally, other revenue decreased$120,845 , or 72.2%. These decreases were partially offset by an increase in Xact monitoring revenue of$130,657 , or 8.6%, in Fiscal 2021 as the Company's installed base of monitoring devices continues to grow. 24 Table of Contents Revenue by product line for the Measurement Segment for Fiscal 2021 compared to Fiscal 2020 were as follows: Fiscal Year Ended, May 31, Year-Over-Year Change 2021 2020 $ % Acuity$ 1,510,437 $ 1,673,121 $ (162,684 ) (9.7 %) Xact - Product 608,976 825,114 (216,138 ) (26.2 %) Xact - Monitoring 1,654,867 1,524,210 130,657 8.6 % Other 46,634 167,479 (120,845 ) (72.2 %) Total Measurement Segment revenue-current product lines$ 3,820,914 $ 4,189,924 $ (369,010 ) (8.8 %)
Gross Margin - Consolidated gross margin for Fiscal 2021 decreased 5.0% to 41.6% as compared to 46.6% in Fiscal 2020, primarily due to lower gross margins in the newly acquired Ice Cream Segment and increased material costs for the Measurement Segment due to market effects of the COVID-19 pandemic. Measurement Segment gross margin for Fiscal 2021 decreased 2.6% to 44.0% as compared to 46.6% in Fiscal 2020. The decrease was due to an increase of material costs due to the market effects of the COVID-19 pandemic and a decrease of sales from its discontinued product line, which had no associated cost of sales. Ice Cream Segment gross margin was 39.4% in Fiscal 2021. As the Company continues to manage the day-to-day operations of the business and as capital improvements are placed into service, the Company expects to be able to identify opportunities to drive additional revenue and volume through their factory, which will improve gross margin. Operating Expenses - Consolidated operating expenses increased$9,026,423 , or 218.5% to$13,156,893 in Fiscal 2021 compared to$4,130,470 in Fiscal 2020. This increase was primarily due to the inclusion of the Ice Cream Segment, which had operating expenses of$9,411,447 in Fiscal 2021 and accounted for 71.5% of total operating expenses. Operating expenses for the Measurement Segment decreased$385,024 or 9.3%, to$3,745,446 in Fiscal 2021 from$4,130,470 in Fiscal 2020. Further detail of the increase in operating expenses include the following
items in Fiscal 2021:
· Impairment of indefinite live assets of
· Professional fees increased
as compared to
Fiscal 2021 inclusion of
were not included in Fiscal 2020, offset by a decrease in professional fees
within the Measurement Segment.
The increase in operating expenses was partially offset by the following:
· Stock compensation expense decreased
2021 as compared to
both Fiscal 2021 and Fiscal 2020 was due to issuance and vesting of performance
based Restricted Stock Units ("RSUs").
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Bargain Purchase Gain - As previously noted above, in connection with
acquisition of Ample Hills during Fiscal 2021, the Company recorded a bargain
purchase gain of $1,271,615 that was recorded as a component of net income.
Adjustments of $132,807 were recorded to the bargain purchase gain subsequent to
the initial recording of the gain that reduced the bargain purchase gain to
$1,138,808 . The adjustments related to additional cure payments made during the
year, the discovery of obsolete inventory, and the reduction of the deferred tax
liability. This bargain purchase gain represents the excess of the estimated
fair value of the net assets acquired over the estimated fair value of the
consideration transferred to the sellers and their landlords.
Other Income - Other income primarily consists of rental income, interest income
and foreign currency exchange gain (in Fiscal 2020 only) and other income. Other
income was $273,023 for Fiscal 2021 as compared to $322,980 for Fiscal 2020. The
decrease in other income was primarily due to the Tosei restricted cash
write-off of $219,872 that was settled in May of 2021, partially offset by an
increase in rental income of $181,495 or 96.8% to $369,159 in Fiscal 2021 as
compared to $187,664 in Fiscal 2020 due to rent collected under the lease
executed with Tosei in November of 2019.
Interest income was $9,661 for Fiscal 2021 as compared to $67,129 for Fiscal
2020. Interest income was offset by interest expense of $19,038 and $2,435 for
Fiscal 2021 and Fiscal 2020, respectively. Fluctuations in interest income are
impacted by the levels of our average cash and investment balances and changes
in interest rates.
Benefit from Income Taxes - The effective tax rate in Fiscal 2021 was 4.7%, as compared 1.2% in Fiscal 2020. The effective tax rate on consolidated net (loss) income in Fiscal 2021 and 2020 differs from the federal statutory tax rate primarily due to changes in the deferred tax valuation allowance and the impact of certain expenses not being deductible for income tax reporting purposes. Net loss - Net loss from continuing operations in Fiscal 2021 was$8,089,672 , or$2.15 per fully diluted share, and net loss from continuing operations in Fiscal 2020 was$1,842,304 , or$0.47 per fully diluted share. The increase in net loss for Fiscal 2021 was primarily due to the Ice Cream Segment's operating loss of$6,299,858 , the Measurement Segment's operating loss of$1,789,814 and an impairment of intangible assets of$903,422 , partially offset by the inclusion of a$1,138,808 bargain purchase gain in Fiscal 2020 as a result of the acquisition ofAmple Hills , which was not present in Fiscal 2021 results. 26 Table of Contents NON-GAAP FINANCIAL MEASURES Adjusted EBITDA - Adjusted EBITDA, which excludes certain reorganization, legal and other professional expense and inventory adjustments, was ($7,834,723 ) for Fiscal 2021 as compared to Adjusted EBITDA of ($573,502 ) in Fiscal 2020. Reconciliation of EBITDA to Adjusted EBITDA - Adjusted EBITDA for Fiscal 2021 and Fiscal 2020 is calculated as follows on a consolidated basis and by segment: Fiscal Year EndedMay 31, 2021 2020
Loss before income taxes from continuing operations
549,223 161,137
EBITDA from continuing operations$ (7,944,115 ) $ (1,695,805 ) Adjusted for: Bargain purchase gain (1,138,808 )
-
Impairment of intangible assets 903,422
-
Stock-based compensation 266,545
354,048
Income from discontinued product line (46,934 ) (167,479 ) Reorganization, legal, and transaction fees 125,167
842,162
Inventory valuation adjustments -
76,099
Software write-downs -
17,473
Adjusted EBITDA from continuing operations$ (7,834,723 ) $
(573,502 )
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased
· Cash and cash equivalents decreased
Fiscal 2021 as compared to $10,146,531 at the end of Fiscal 2020. The
decrease in cash in Fiscal 2021 was primarily due to the net loss from
continuing operations of
purchase gain of $1,138,808 . In addition, cash and cash equivalents
included proceeds from the sale of SBS in Fiscal 2020.
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· As of
2020 of$420,000 .
· Accounts payable increased
compared to$267,660 at the end of Fiscal 2020.
· Accrued payroll liabilities increased
2021 as compared to
· Accrued liabilities increased
compared to$265,349 at the end of Fiscal 2020.
· Other accrued liabilities increased
2021 as compared to$587,492 at the end of Fiscal 2020.
· The Company had no current portion of long-term lease liabilities at the end of
Fiscal 2020. Subsequent to implementing Accounting Standards Update ("ASU")
No. 2016-02, Leases (Topic 842) on
long-term lease liability. As of the end of Fiscal 2021, the Company has
related to the leases acquired in connection with the
· The Company did not receive loans in connection with the PPP in Fiscal
2020, and as such had no current portion of long-term debt. As a result of
COVID-19 relief during Fiscal 2021, the Company has recorded the current
portion of PPP totaling $541,691 as of the end of Fiscal 2021.
These decreases were partially offset by the following:
· Accounts receivable, net, increased
2021 as compared to
· Inventories increased
compared to
· Prepaid expenses increased
compared to$60,674 at the end of Fiscal 2020. Net cash used in operating activities for continuing operations was$6,939,962 in Fiscal 2021 as compared to cash used in operating activities of$228,994 in Fiscal 2020. The net loss of$8,089,672 , a bargain purchase gain of$1,138,808 , an increase in accounts receivable of$579,719 , an decrease in deferred income taxes of$453,238 , an increase in rent, utility deposits and ERP deposits of$206,628 , and an increase in prepaid expenses of$84,388 were the primary drivers of the overall operating cash usage for Fiscal 2021, offset by an impairment of indefinite-lived intangible assets of$903,422 , non-cash lease costs of$735,709 , depreciation and amortization of$549,223 , stock based compensation expense of$266,545 , and an increase in accrued liabilities and customer deposits of$793,082 , accounts payable of$316,090 and inventories of$138,147 . In Fiscal 2020, net income of$3,880,575 , depreciation and amortization of$161,137 , stock-based compensation of$354,048 and an increase in inventories of$181,775 , accounts payable of$165,094 , accrued liabilities and customer deposits of$328,450 and accrued taxes of$265,349 , offset by a gain on sale of discontinued operations before income taxes of$5,166,845 were the primary drivers of the overall operating cash usage for Fiscal 2020. Net cash used in investing activities for continuing operations was$3,035,184 in Fiscal 2021 as compared to net cash provided by investing activities of$10,396,607 for Fiscal 2020. The net cash used in investing activities for Fiscal 2021 is driven by the$1,665,854 acquisition ofAmple Hills , in addition to purchases of property and equipment and upgrades totaling$1,404,830 , to increase factory capabilities, establish theAmple Hills commissary, and renovate retail locations, which includes$438,370 for the opening of a newAmple Hills retail location inBrooklyn, New York . Schmitt's Measurement Segment incurred expenditures associated with the build out of Xact monitoring tool of$110,253 in Fiscal 2021. Fiscal 2020 investing activity is related to the sale of the SBS business. See Note 12 - Discontinued Operations, to the financial statements below for further details. 28 Table of Contents
Net cash provided by financing activities was$3,441,305 in Fiscal 2021 as compared to net cash used in financing activities of$1,391,576 for Fiscal 2020. The net cash provided by financing activities was primarily due to the proceeds from the Paycheck Protection Program totaling$4,059,556 , offset by repayments to the program of$264,476 , the repurchase of common stock related to the stock buyback program totaling$234,517 and the repurchase of RSUs totaling$65,975 . The net cash used in financing activities for Fiscal 2020 was due to the repurchase of shares from a large company stockholder totaling$1,350,681 . See the notes to the financial statements for further details on the share repurchase. Management is seeking to sell the assets held for sale, which would be a source of liquidity. Additionally, a stockholder of the Company has committed to providing additional capital up to$1,300,000 , to the extent necessary to fund operations.
We believe our existing cash and cash equivalents combined with the cash we anticipate generating from operating and financing activities will be sufficient to meet our working capital requirements for the next twelve months. In the Fiscal Year endedMay 31, 2021 , the Company had a significant reduction in its cash and cash equivalents due to planned capital expenditures. The Company's plans for the current Fiscal Year do not require capital investments at the
same level. The Company's primary source of working capital is cash generated through the sale of assets as the company realigns its operating businesses and PPP loans. As ofMay 31, 2021 , our available funds consisted of$4,032,690 in cash and cash equivalents. The Company is seeking to sell real estate used in connection with SBS Business unit which was sold in 2019. The Company may also seek additional financing for working capital purposes or to facilitate accelerating its business plans. Any subsequent financing may have dilutive effects on our current shareholders.Shareholder Sententia Capital Management, LLC which is controlled byMichael Zapata , the Company's Chairman and CEO, has committed$1,300,000 , to the extent necessary to fund operations throughAugust 31, 2022 .
QUARTERLY FINANCIAL DATA - Continuing Operations
In thousands, except per share information
Fiscal Quarter of 2020 Ended,
8/31/2019 11 /31/2019 2/28/2020 5/31/2020
Consolidated revenue $ 1,095 $ 1,033 $ 1,095 $ 967
Gross profit $ 477 $ 390 $ 604 $ 480
Net loss $ (222 ) $ (676 ) $ (240 ) $ (704 )
Net loss per share, basic $ (0.06 ) $ (0.17 ) $ (0.06 ) $ (0.18 ) Net loss per share, diluted$ (0.06 ) $ (0.17 ) $ (0.06
)$ (0.18 ) Fiscal Quarter of 2021 Ended, 8/31/2020 11/30/2020 2/28/2021 5/31/2021 Consolidated revenue$ 1,507 $ 2,030 $ 1,668 $ 2,659 Gross profit$ 608 $ 962 $ 831 $ 870 Net income (loss)$ 151 $ (2,366 ) $ (2,420 ) $ (3,455 )
Net income (loss) per share, basic$ 0.04 $ (0.63 ) $ (0.64 ) $ (0.92 ) Net income (loss) per share, diluted$ 0.04 $ (0.63 ) $
(0.64 )$ (0.92 )
Recently Issued Accounting Guidance
Refer to Note 3 - Recently Issued Accounting Guidance in the accompanying Notes
to the Consolidated Financial Statements for a discussion of recent accounting
pronouncements.
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