10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: November 30, 2015

Or

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

For the transition period from:                      To:                     

Commission File Number: 000-23996

SCHMITT INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

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

2765 NW Nicolai Street, Portland, Oregon 97210-1818

(Address of principal executive offices) (Zip Code)

(503) 227-7908

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its Corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of each class of common stock outstanding as of December 31, 2015

Common stock, no par value 2,995,910

SCHMITT INDUSTRIES, INC.

INDEX TO FORM 10-Q

		Page
Part I - FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Consolidated Balance Sheets: – November 30, 2015 and May 31, 2015 (unaudited)		3
	Consolidated Statements of Operations and Comprehensive Loss: – For the Three and Six Months Ended November 30, 2015 and 2014 (unaudited)		4
	Consolidated Statements of Cash Flows: – For the Six Months Ended November 30, 2015 and 2014 (unaudited)		5
	Consolidated Statement of Changes in Stockholders’ Equity: – For the Six Months Ended November 30, 2015 (unaudited)		6
	Notes to Consolidated Interim Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		18
Item 4.	Controls and Procedures		18
Part II - OTHER INFORMATION
Item 6.	Exhibits		19
Signatures
Certifications

Page 2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SCHMITT INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	November 30, 2015			May 31, 2015
ASSETS
Current assets
Cash and cash equivalents	$	1,263,567		$	1,795,654
Accounts receivable, net		2,541,465			2,660,426
Inventories		4,640,873			4,557,567
Prepaid expenses		136,112			153,970
Income taxes receivable		1,841			1,029
		8,583,858			9,168,646
Property and equipment, net		1,026,095			1,110,878
Other assets
Intangible assets, net		768,646			824,411
TOTAL ASSETS	$	10,378,599		$	11,103,935
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	592,441		$	834,002
Accrued commissions		344,324			284,944
Accrued payroll liabilities		141,128			140,872
Other accrued liabilities		382,312			355,513
Total current liabilities		1,460,205			1,615,331
Stockholders’ equity
Common stock, no par value, 20,000,000 shares authorized, 2,995,910 shares issued and outstanding at November 30, 2015 and May 31, 2015		10,549,277			10,511,324
Accumulated other comprehensive loss		(376,259	)		(366,945	)
Accumulated deficit		(1,254,624	)		(655,775	)
Total stockholders’ equity		8,918,394			9,488,604
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	10,378,599		$	11,103,935

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

Page 3

SCHMITT INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2015 AND 2014

(UNAUDITED)

	Three Months Ended November 30,						Six Months Ended November 30,
	2015			2014			2015			2014
Net sales	$	3,073,769		$	3,151,504		$	6,178,153		$	6,200,792
Cost of sales		1,797,359			1,597,326			3,459,251			3,183,047
Gross profit		1,276,410			1,554,178			2,718,902			3,017,745
Operating expenses:
General, administration and sales		1,581,635			1,500,328			3,119,517			2,838,352
Research and development		72,500			124,651			159,412			197,095
Total operating expenses		1,654,135			1,624,979			3,278,929			3,035,447
Operating loss		(377,725	)		(70,801	)		(560,027	)		(17,702	)
Other income (loss), net		(19,091	)		3,336			(25,011	)		4,397
Loss before income taxes		(396,816	)		(67,465	)		(585,038	)		(13,305	)
Provision for income taxes		6,971			2,375			13,811			4,752
Net loss	$	(403,787	)	$	(69,840	)	$	(598,849	)	$	(18,057	)
Net loss per common share:
Basic	$	(0.13	)	$	(0.02	)	$	(0.20	)	$	(0.01	)
Weighted average number of common shares, basic		2,995,910			2,995,910			2,995,910			2,995,910
Diluted	$	(0.13	)	$	(0.02	)	$	(0.20	)	$	(0.01	)
Weighted average number of common shares, diluted		2,995,910			2,995,910			2,995,910			2,995,910
Comprehensive loss
Net loss	$	(403,787	)	$	(69,840	)	$	(598,849	)	$	(18,057	)
Foreign currency translation adjustment		(15,673	)		(50,785	)		(9,314	)		(78,909	)
Total comprehensive loss	$	(419,460	)	$	(120,625	)	$	(608,163	)	$	(96,966	)

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

Page 4

SCHMITT INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED NOVEMBER 31, 2015 AND 2014

(UNAUDITED)

	Six Months Ended November 30,
	2015			2014
Cash flows relating to operating activities
Net loss	$	(598,849	)	$	(18,057	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		127,198			139,950
Gain on sale of property and equipment		(299	)		0
Stock based compensation		37,953			26,473
(Increase) decrease in:
Accounts receivable		115,949			(327,467	)
Inventories		(90,216	)		(21,292	)
Prepaid expenses		17,605			40,062
Income taxes receivable		(812	)		(387	)
Increase (decrease) in:
Accounts payable		(240,883	)		165,338
Accrued liabilities		87,286			250,603
Income taxes payable		0			(210	)
Net cash provided by (used in) operating activities		(545,068	)		255,013
Cash flows relating to investing activities
Proceeds from sale of property and equipment		14,950			0
Purchases of property and equipment		0			(13,050	)
Net cash provided by (used in) investing activities		14,950			(13,050	)
Effect of foreign exchange translation on cash		(1,969	)		(45,047	)
Increase (decrease) in cash and cash equivalents		(532,087	)		196,916
Cash and cash equivalents, beginning of period		1,795,654			1,510,565
Cash and cash equivalents, end of period	$	1,263,567		$	1,707,481
Supplemental disclosure of cash flow information
Cash paid during the period for income taxes	$	14,623		$	5,353
Cash paid during the period for interest	$	1,384		$	1,933

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

Page 5

SCHMITT INDUSTRIES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED NOVEMBER 30, 2015

(UNAUDITED)

	Shares		Amount		Accumulated other comprehensive loss			Accumulated deficit			Total
Balance, May 31, 2015		2,995,910	$	10,511,324	$	(366,945	)	$	(655,775	)	$	9,488,604
Stock-based compensation		0		37,953		0			0			37,953
Net loss		0		0		0			(598,849	)		(598,849	)
Other comprehensive loss		0		0		(9,314	)		0			(9,314	)
Balance, November 30, 2015		2,995,910	$	10,549,277	$	(376,259	)	$	(1,254,624	)	$	8,918,394

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

Page 6

SCHMITT INDUSTRIES, INC.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Note 1:

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial information included herein has been prepared by Schmitt Industries, Inc. (the Company or Schmitt) and its wholly owned subsidiaries. In the opinion of management, the accompanying unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly its financial position as of November 30, 2015 and its results of operations and its cash flows for the periods presented. The consolidated balance sheet at May 31, 2015 has been derived from the Annual Report on Form 10-K for the fiscal year ended May 31, 2015. The accompanying unaudited financial statements and related notes should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2015. 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, 2016.

Revenue Recognition

The Company recognizes revenue for sales and billing for freight charges upon delivery of the product to the customer at a fixed and determinable price with a reasonable assurance of collection, passage of title to the customer as indicated by shipping terms and fulfilment of all significant obligations, pursuant to the guidance provided by Accounting Standards Codification (“ASC”) Topic 605. For sales to all customers, including manufacturer representatives, distributors or their third-party customers, these criteria are met at the time product is shipped. When other significant obligations remain after products are delivered, revenue is recognized only after such obligations are fulfilled. In addition, judgments are required in evaluating the credit worthiness of our customers. Credit is not extended to customers and revenue is not recognized until we have determined that collectability is reasonably assured.

Financial Instruments

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

Accounts Receivable

The Company maintains credit limits for all customers based upon several factors, including but not limited to financial condition and stability, payment history, published credit reports and use of credit references. Management performs various analyses to evaluate accounts receivable balances to ensure recorded amounts reflect estimated net realizable value. This review includes using accounts receivable agings, other operating trends and relevant business conditions, including general economic factors, as they relate to each of the Company’s domestic and international customers. If these analyses lead management to the conclusion that potential significant accounts are uncollectible, a reserve is provided. The allowance for doubtful accounts was $44,258 and $56,370 as of November 30, 2015 and May 31, 2015, respectively.

Inventories

Inventories are valued at the lower of cost or market 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, 2015 and May 31, 2015, inventories consisted of:

	November 30, 2015		May 31, 2015
Raw materials	$	2,044,681	$	1,845,037
Work-in-process		975,886		836,346
Finished goods		1,620,306		1,876,184
	$	4,640,873	$	4,557,567

Page 7

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years for furniture, fixtures and equipment; three years for vehicles; and twenty-five years for buildings and improvements. As of November 30, 2015 and May 31, 2015, property and equipment consisted of:

	November 30, 2015			May 31, 2015
Land	$	299,000		$	299,000
Buildings and improvements		1,814,524			1,814,524
Furniture, fixtures and equipment		1,342,745			1,381,691
Vehicles		96,587			96,587
		3,552,856			3,591,802
Less accumulated depreciation		(2,526,761	)		(2,480,924	)
	$	1,026,095		$	1,110,878

Note 2:

STOCK OPTIONS AND STOCK-BASED COMPENSATION

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

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

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

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

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

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

To determine stock-based compensation expense recognized for those options granted during the six months ended November 30, 2015 and 2014, the Company has computed the value of all stock options granted using the Black-Scholes option pricing model. No options were issued during the six months ended November 30, 2015. 87,500 options were issued during the six months ended November 30, 2014.

Page 8

At November 30, 2015, the Company had a total of 327,500 outstanding stock options (249,168 vested and exercisable and 78,332 non-vested) with a weighted average exercise price of $3.65. The Company estimates that $46,944 will be recorded as additional stock-based compensation expense over a weighted-average period of 1.4 years for all options that were outstanding as of November 30, 2015, but which were not yet vested.

Outstanding Options						Exercisable Options
Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (yrs)		Number of Shares		Weighted Average Exercise Price
	35,000	$	2.53		7.8		23,333	$	2.53
	112,500		2.84		8.5		45,835		2.85
	130,000		3.65		5.5		130,000		3.65
	50,000		6.25		2.5		50,000		6.25
	327,500		3.65		6.3		249,168		3.92

Options granted, exercised, and forfeited or canceled under the Company’s stock option plan during the three and six months ended November 30, 2015 are summarized as follows:

	Three Months Ended November 30, 2015					Six Months Ended November 30, 2015
	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Options outstanding - beginning of period		332,500		$	3.68		332,500		$	3.68
Options granted		0			0		0			0
Options exercised		0			0		0			0
Options forfeited/canceled		(5,000	)		5.80		(5,000	)		5.80
Options outstanding - end of period		327,500			3.65		327,500			3.65

Note 3:

EPS RECONCILIATION

	Three Months Ended November 30,				Six Months Ended November 30,
	2015		2014		2015		2014
Weighted average shares (basic)		2,995,910		2,995,910		2,995,910		2,995,910
Effect of dilutive stock options		0		0		0		0
Weighted average shares (diluted)		2,995,910		2,995,910		2,995,910		2,995,910

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

Page 9

Note 4:

INCOME TAXES

The Company accounts for income taxes using the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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

Other long-term liabilities related to tax contingencies were $0 as of both November 30, 2015 and May 31, 2015. 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, 2015 and May 31, 2015.

Several tax years are subject to examination by major tax jurisdictions. In the United States, federal tax years for Fiscal 2012 and after are subject to examination. In the United Kingdom, tax years for Fiscal 2012 and after are subject to examination. In Canada, tax years for Fiscal 2005 and after are subject to examination.

Effective Tax Rate

The effective tax rate on consolidated net loss was 2.4% for the six months ended November 30, 2015. The effective tax rate on consolidated net loss differs from the federal statutory tax rate primarily due to the amount of income from foreign jurisdictions, changes in the deferred tax valuation allowance and certain expenses not being deductible for income tax reporting purposes. Management believes the effective tax rate for Fiscal 2016 will be approximately 6.8% due to the items noted above.

Note 5:

SEGMENTS OF BUSINESS

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

Page 10

Segment Information

	Three Months Ended November 30,
	2015						2014
	Balancer			Measurement			Balancer			Measurement
Gross sales	$	2,192,878		$	1,187,847		$	2,250,911		$	1,204,966
Intercompany sales		(312,149	)		5,193			(328,062	)		23,689
Net sales	$	1,880,729		$	1,193,040		$	1,922,849		$	1,228,655
Operating loss	$	(203,149	)	$	(174,576	)	$	(37,759	)	$	(33,042	)
Depreciation expense	$	24,236		$	9,832		$	24,471		$	10,983
Amortization expense	$	0		$	27,883		$	0		$	29,808
Capital expenditures	$	0		$	0		$	4,477		$	0
	Six Months Ended November 30,
	2015						2014
	Balancer			Measurement			Balancer			Measurement
Gross sales	$	4,419,124		$	2,373,911		$	4,267,346		$	2,409,436
Intercompany sales		(610,900	)		(3,982	)		(504,327	)		28,337
Net sales	$	3,808,224		$	2,369,929		$	3,763,019		$	2,437,773
Operating income (loss)	$	(336,643	)	$	(223,384	)	$	(109,583	)	$	91,881
Depreciation expense	$	51,046		$	20,387		$	54,272		$	22,211
Amortization expense	$	0		$	55,765		$	0		$	63,467
Capital expenditures	$	0		$	0		$	13,050		$	0

Geographic Information – Net Sales by Geographic Area

	Three Months Ended November 30,				Six Months Ended November 30,
	2015		2014		2015		2014
North America	$	2,082,607	$	1,800,419	$	4,167,922	$	3,819,073
Europe		432,412		411,314		684,722		626,550
Asia		531,287		863,045		1,220,556		1,627,482
Other markets		27,463		76,726		104,953		127,687
Total net sales	$	3,073,769	$	3,151,504	$	6,178,153	$	6,200,792

Page 11

	Three Months Ended November 30,
	2015						2014
	United States			Europe			United States			Europe
Operating income (loss)	$	(374,243	)	$	(3,482	)	$	(102,407	)	$	31,606
Depreciation expense	$	34,068		$	0		$	35,454		$	0
Amortization expense	$	27,883		$	0		$	29,808		$	0
Capital expenditures	$	0		$	0		$	4,477		$	0
	Six Months Ended November 30,
	2015						2014
	United States			Europe			United States			Europe
Operating income (loss)	$	(499,742	)	$	(60,285	)	$	(36,467	)	$	18,765
Depreciation expense	$	71,433		$	0		$	76,483		$	0
Amortization expense	$	55,765		$	0		$	63,467		$	0
Capital expenditures	$	0		$	0		$	13,050		$	0

Note — Europe is defined as the European subsidiary, Schmitt Europe, Ltd.

Segment and Geographic Assets

	November 30, 2015		May 31, 2015
Segment assets to total assets
Balancer	$	4,884,201	$	5,059,567
Measurement		4,228,989		4,247,684
Corporate assets		1,265,409		1,796,684
Total assets	$	10,378,599	$	11,103,935
Geographic assets to long-lived assets
United States	$	1,026,095	$	1,110,878
Europe		0		0
Total long-lived assets	$	1,026,095	$	1,110,878
Geographic assets to total assets
United States	$	9,524,797	$	10,107,523
Europe		853,802		996,412
Total assets	$	10,378,599	$	11,103,935

Page 12

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

Forward-Looking Statements

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

RESULTS OF OPERATIONS

Overview

Schmitt Industries, Inc. designs, manufactures and markets computer-controlled vibration detection, balancing and process control equipment (the Balancer segment) to the worldwide machine tool industry and through its wholly owned subsidiary, Schmitt Measurement Systems, Inc., designs, manufactures and markets precision laser-based surface measurement products, laser-based distance measurement products and ultrasonic measurement systems (the Measurement segment) for a variety of industrial applications worldwide. The Company sells and markets its products in Europe through its wholly owned subsidiary, Schmitt Europe Ltd. (SEL), located in the United Kingdom. The Company is organized into two operating segments: the Balancer segment and the Measurement segment. The accompanying unaudited financial information should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended May 31, 2015.

“SBS,” “SMS,” “Acuity,” “Xact”, “Lasercheck” and “AccuProfile” are registered trademarks owned by the Company.

For the three months ended November 30, 2015, total sales decreased $77,735, or 2.5%, to $3,073,769 from $3,151,504 in the three months ended November 30, 2014. For the six months ended November 30, 2015, total sales increased $22,639, or 0.4%, to $6,178,153 from $6,200,792 in the six months ended November 30, 2014.

Balancer segment sales focus throughout the world on end-users, rebuilders and original equipment manufacturers of grinding machines with the target geographic markets in North America, Asia, Europe and South America. Balancer segment sales decreased $42,120, or 2.2%, to $1,880,729 for the three months ended November 30, 2015 compared to $1,922,849 for the three months ended November 30, 2014, primarily attributed due to a significant decline in sales into China and decreased sales into Europe, offset by increased sales in North America for the quarter. Balancer segment sales increased $45,205, or 1.2%, to $3,808,224 for the six months ended November 30, 2015 compared to $3,763,019 for the six months ended November 30, 2014. The increase in worldwide balancer sales for the six month period ended November 30, 2015 is primarily attributed to stronger sales in North America, offset in part by a significant decline in sales into China and decreased sales into other parts of Asia and Europe for the first half of the fiscal year.

The Measurement segment product line consists of SMS^® and Lasercheck^® laser-based surface microroughness measurement system, Acuity^® laser-based distance measurement and dimensional sizing laser sensors, and Xact^® ultrasonic-based remote tank monitoring products. Total Measurement segment sales decreased $35,615, or 2.9%, to $1,193,040 for the three months ended November 30, 2015 compared to $1,228,655 for the three months ended November 30, 2014. The decrease is primarily due to lower SMS product line sales and the impact of the termination of a Latin American distributor for the Xact product line. Total Measurement segment sales decreased $67,844, or 2.8%, to $2,369,929 for the six months ended November 30, 2015 compared to $2,437,773 for the six months ended November 30, 2014, due to lower SMS product line sales and the impact of the termination of a Latin American distributor for the Xact product line.

Page 13

Operating expenses increased $29,156, or 1.8%, to $1,654,135 for the three months ended November 30, 2015 from $1,624,979 for the three months ended November 30, 2014. Operating expenses increased $243,482, or 8.0%, to $3,278,929 for the six months ended November 30, 2015 from $3,035,447 for the six months ended November 30, 2014. General, administration and sales expenses increased $81,307, or 5.4%, to $1,581,635 for the three months ended November 30, 2015 from $1,500,328 for the same period in the prior year. General, administration and sales expenses increased $281,165, or 9.9%, to $3,119,517 for the six months ended November 30, 2015 from $2,838,352 for the same period in the prior year.

Net loss was $403,787, or $(0.13) per fully diluted share, for the three months ended November 30, 2015 as compared to net loss of $69,840, or $(0.02) per fully diluted share, for the three months ended November 30, 2014. Net loss was $598,849, or $(0.20) per fully diluted share, for the six months ended November 30, 2015 as compared to net loss of $18,057, or $(0.01) per fully diluted share, for the six months ended November 30, 2014.

Critical Accounting Policies

There were no material changes in our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended May 31, 2015.

Page 14

Discussion of Operating Results

	Three Months Ended November 30,
	2015					2014
Balancer sales	$	1,880,729		61.2	%	$	1,922,849		61.0	%
Measurement sales		1,193,040		38.8	%		1,228,655		39.0	%
Total sales		3,073,769		100.0	%		3,151,504		100.0	%
Cost of sales		1,797,359		58.5	%		1,597,326		50.7	%
Gross profit		1,276,410		41.5	%		1,554,178		49.3	%
Operating expenses:
General, administration and sales		1,581,635		51.5	%		1,500,328		47.6	%
Research and development		72,500		2.4	%		124,651		4.0	%
Total operating expenses		1,654,135		53.8	%		1,624,979		51.6	%
Operating loss		(377,725	)	-12.3	%		(70,801	)	-2.2	%
Other income (loss)		(19,091	)	-0.6	%		3,336		0.1	%
Loss before income taxes		(396,816	)	-12.9	%		(67,465	)	-2.1	%
Provision for income taxes		6,971		0.2	%		2,375		0.1	%
Net loss	$	(403,787	)	-13.1	%	$	(69,840	)	-2.2	%
	Six Months Ended November 30,
	2015					2014
Balancer sales	$	3,808,224		61.6	%	$	3,763,019		60.7	%
Measurement sales		2,369,929		38.4	%		2,437,773		39.3	%
Total sales		6,178,153		100.0	%		6,200,792		100.0	%
Cost of sales		3,459,251		56.0	%		3,183,047		51.3	%
Gross profit		2,718,902		44.0	%		3,017,745		48.7	%
Operating expenses:
General, administration and sales		3,119,517		50.5	%		2,838,352		45.8	%
Research and development		159,412		2.6	%		197,095		3.2	%
Total operating expenses		3,278,929		53.1	%		3,035,447		49.0	%
Operating loss		(560,027	)	-9.1	%		(17,702	)	-0.3	%
Other income (loss)		(25,011	)	-0.4	%		4,397		0.1	%
Loss before income taxes		(585,038	)	-9.5	%		(13,305	)	-0.2	%
Provision for income taxes		13,811		0.2	%		4,752		0.1	%
Net loss	$	(598,849	)	-9.7	%	$	(18,057	)	-0.3	%

Sales – Sales in the Balancer segment decreased $42,120, or 2.2%, to $1,880,729 for the three months ended November 30, 2015 compared to $1,922,849 for the three months ended November 30, 2014. The decrease is primarily attributed to a significant decline in sales into China and decreased sales into Europe, offset by increased sales in North America for the second quarter. Sales in North America increased $209,424, or 25.1%, for the three months ended November 30, 2015 as compared to the three months ended November 30, 2014. China sales decreased $168,564, or 45.7%, for the three months ended November 30, 2015 as compared to the three months ended November 30, 2014. Other Asia sales increased $9,107, or 3.0%, in the three months ended November 30, 2015 compared to the same period in the prior year. European sales decreased $73,241, or 18.8%, in the second quarter of Fiscal 2016 compared to the second quarter of Fiscal 2015. Sales in other regions of the world decreased $18,846, or 76.1%, in the three months ended November 30, 2015 as compared to the same period in the prior year.

Page 15

Sales in the Balancer segment increased $45,205, or 1.2%, to $3,808,224 for the six months ended November 30, 2015 compared to $3,763,019 for the six months ended November 30, 2014. The increase is primarily attributed to stronger sales in North America, offset in part by a significant decline in sales into China and decreased sales into Europe for the first half of the fiscal year. Sales in North America increased $337,343, or 19.5%, for the six months ended November 30, 2015 as compared to the six months ended November 30, 2014. China sales decreased $233,886, or 27.6%, for the six months ended November 30, 2015 as compared to the six months ended November 30, 2014. Other Asia sales increased $25,111, or 4.7%, in the six months ended November 30, 2015 compared to the same period in the prior year. European sales decreased $57,573, or 9.8%, in the first half of Fiscal 2016 compared to the first half of Fiscal 2015. Sales in other regions of the world decreased $25,790, or 39.7%, in the six months ended November 30, 2015 as compared to the same period in the prior year. The levels of demand for our Balancer products in any of the geographic markets cannot be forecasted with any certainty given the recent volatility in the global economy and the historical volatility experienced in these markets.

Sales in the Measurement segment decreased $35,615, or 2.9%, to $1,193,040 in the three months ended November 30, 2015 compared to $1,228,655 in the three months ended November 30, 2014. The decrease is primarily due to lower SMS product line sales and the impact of the termination of one of the Latin American distributors for the Xact product line, offset by increased sales in the Acuity product line. Sales of SMS and Lasercheck light-scatter laser-based surface measurement products in the three months ended November 30, 2015 decreased $92,089, or 33.8%, as compared to the same period in the prior year. In addition, sales of Xact remote tank monitoring products and revenues from monitoring services decreased $8,216, or 12.1%. These decreases were offset by the increase in sales of Acuity laser-based distance measurement and dimensional sizing products in the amount of $64,690, or 4.2%, for the three months ended November 30, 2015 as compared to the same period in the prior year

Sales in the Measurement segment decreased $67,844, or 2.8%, to $2,369,929 in the six months ended November 30, 2015 compared to $2,437,773 in the six months ended November 30, 2014. The decrease is primarily due to lower SMS product line sales and the impact of the termination of one of the Latin American distributors for the Xact product line, offset by increased sales in the Acuity product line. Sales of SMS and Lasercheck light-scatter laser-based surface measurement products in the six months ended November 30, 2015 decreased $400,292, or 55.2%, as compared to the same period in the prior year. These in decreases were in part offset by the increase in sales of Acuity laser-based distance measurement and dimensional sizing products in the amount of $278,853, or 26.9%, for the six months ended November 30, 2015 as compared to the same period in the prior year. In addition, sales of Xact remote tank monitoring products and revenues from monitoring services increased $53,595, or 8.0%. Given the recent volatility in these markets, future sales of laser-based measurement products cannot be forecasted with any certainty.

Gross margin – Gross margin for the three months ended November 30, 2015 decreased to 41.5% as compared to 49.3% for the three months ended November 30, 2014. Gross margin for the six months ended November 30, 2015 decreased to 44.0% as compared to 48.7% for the six months ended November 30, 2014. The overall decrease in gross margin in both the three and six months ended November 30, 2015 as compared to the three and six months ended November 30, 2014 is primarily influenced by shifts in the product sales mix and the impact of the termination of a Latin American distributor for the Xact product line.

Operating expenses – Operating expenses increased $29,156, or 1.8%, to $1,654,135 for the three months ended November 30, 2015 as compared to $1,624,979 for the three months ended November 30, 2014. General, administrative and sales expenses increased $81,307, or 5.4%, for the three months ended November 30, 2015 as compared to the same period in the prior year due in part to increases in sales commissions and personnel expense, increases in patent expenses and increases in sales-related travel and general office and utilities costs offset by a reduction in trade show expenses. Research and development expenses decreased $52,151, or 41.8%, as compared to the same period in the prior year.

Operating expenses increased $243,482, or 8.0%, to $3,278,929 for the six months ended November 30, 2015 as compared to $3,035,447 for the six months ended November 30, 2014. General, administrative and sales expenses increased $281,165, or 9.9%, for the six months ended November 30, 2015 as compared to the same period in the prior year due to increases in sales commissions and personnel expense, increases in patent expenses and increases in sales-related travel and general office and utilities costs offset by a reduction in trade show expenses. Research and development expenses decreased $37,683, or 19.1%, as compared to the same period in the prior year.

Other income – Other income consists of interest income (expense), foreign currency exchange gain (loss) and other income (expense). Interest income (expense), net was $(483) and $1,743 for the three months ended November 30, 2015 and 2014, respectively and $(1,033) and $(1,886) for the six months ended November 30, 2015 and 2014, respectively. Foreign currency exchange gains (losses) were $(18,916) and $1,578 for the three months ended November 30, 2015 and 2014, respectively and $(24,295) and $6,255 for the six months ended November 30, 2015 and 2014, respectively. The shifts in the foreign currency exchange are related to fluctuations of foreign currencies against the U.S. dollar during the current period.

Page 16

Income taxes – The Company’s effective tax rate on consolidated net loss was 2.4% for the six months ended November 30, 2015. The effective tax rate on consolidated net loss differs from the federal statutory tax rate primarily due to the amount of income from foreign jurisdictions, changes in the deferred tax valuation allowance and certain expenses not being deductible for income tax reporting purposes. Management believes the effective tax rate for Fiscal 2016 will be approximately 6.8% due to the items noted above.

Net loss – Net loss was $403,787, or $(0.13) per diluted share, for the three months ended November 30, 2015 as compared to a net loss of $69,840, or $(0.02) per diluted share, for the three months ended November 30, 2014. Net loss was $598,849, or $(0.20) per diluted share, for the six months ended November 30, 2015 as compared to a net loss of $18,057, or $(0.01) per diluted share, for the same period in the prior year. Net loss for the three and six months ended November 30, 2015 decreased as compared to the same periods in the prior year primarily due to shifts in product mix with decreased sales of higher margin products and one-time charges associated with the termination of a Latin American distributor for the Xact product line.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s working capital decreased to $7,123,653 as of November 30, 2015 as compared to $7,553,315 as of May 31, 2015. Cash and cash equivalents decreased $532,087 to $1,263,567 as of November 30, 2015 from $1,795,654 as of May 31, 2015.

Cash used in operating activities totaled $545,068 for the six months ended November 30, 2015 as compared to cash provided by operating activities of $255,013 for the six months ended November 30, 2014. The change in cash used in operating activities was primarily impacted by the net loss of $598,849 for the six months ended November 30, 2015 as compared to net loss of $18,057 for the six months ended November 30, 2014. Changes in accounts receivable, inventories and accounts payable and other accrued liabilities also impacted the total cash provided by/used in operating activities and the changes are the result of timing of receipts and payments.

At November 30, 2015, the Company had accounts receivable of $2,541,465 as compared to $2,660,426 at May 31, 2015. The decrease in accounts receivable of $118,961 was due to timing of receipts. Inventories increased $83,306 to $4,640,873 as of November 30, 2015 compared to $4,557,567 at May 31, 2015, which is due primarily to the timing of purchases across our product lines. At November 30, 2015, total current liabilities decreased $155,126 to $1,460,205 as compared to $1,615,331 at May 31, 2015. The decrease in accounts payable and other accrued expenses is primarily due to the timing of payments to our vendors and an increase in accrued commissions.

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

Risk Factors

Please refer to the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2015 for a listing of factors that could cause actual results or events to differ materially from those contained in any forward-looking statements made by or on behalf of the Company.

Page 17

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes from the information previously reported under Item 7A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2015.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of November 30, 2015, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based on the evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Report, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the Company’s Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives, and management necessarily is required to use its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended November 30, 2015 that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.

Page 18

PART II - OTHER INFORMATION

Item 6. Exhibits

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

Page 19

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SCHMITT INDUSTRIES, INC. (Registrant)
Date: January 14, 2016	/s/ Ann M. Ferguson
	Ann M. Ferguson, Chief Financial Officer and Treasurer

Page 20

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David M. Hudson, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: January 14, 2016	/s/ David M. Hudson
	David M. Hudson Interim President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ann M. Ferguson, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: January 14, 2016	/s/ Ann M. Ferguson
	Ann M. Ferguson, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Schmitt Industries, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended November 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, David M. Hudson and Ann M. Ferguson, Interim President and Chief Executive Officer and Chief Financial Officer and Treasurer, respectively, of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

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

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

/s/ David M. Hudson

David M. Hudson

Interim President and Chief Executive Officer

January 14, 2016

/s/ Ann M. Ferguson

Ann M. Ferguson

Chief Financial Officer and Treasurer

January 14, 2016

XML

Document and Entity Information - shares	6 Months Ended
	Nov. 30, 2015	Dec. 31, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Nov. 30, 2015
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Trading Symbol	SMIT
Entity Registrant Name	SCHMITT INDUSTRIES INC
Entity Central Index Key	0000922612
Current Fiscal Year End Date	--05-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		2,995,910

XML

Consolidated Balance Sheets - USD ($)	Nov. 30, 2015	May. 31, 2015
Current assets
Cash and cash equivalents	$ 1,263,567	$ 1,795,654
Accounts receivable, net	2,541,465	2,660,426
Inventories	4,640,873	4,557,567
Prepaid expenses	136,112	153,970
Income taxes receivable	1,841	1,029
Total current assets	8,583,858	9,168,646
Property and equipment, net	1,026,095	1,110,878
Other assets
Intangible assets, net	768,646	824,411
TOTAL ASSETS	10,378,599	11,103,935
Current liabilities
Accounts payable	592,441	834,002
Accrued commissions	344,324	284,944
Accrued payroll liabilities	141,128	140,872
Other accrued liabilities	382,312	355,513
Total current liabilities	1,460,205	1,615,331
Stockholders' equity
Common stock, no par value, 20,000,000 shares authorized, 2,995,910 shares issued and outstanding at November 30, 2015 and May 31, 2015	10,549,277	10,511,324
Accumulated other comprehensive loss	(376,259)	(366,945)
Accumulated deficit	(1,254,624)	(655,775)
Total stockholders' equity	8,918,394	9,488,604
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 10,378,599	$ 11,103,935

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Nov. 30, 2015	May. 31, 2015
Statement of Financial Position [Abstract]
Common stock, par value
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares issued	2,995,910	2,995,910
Common stock, shares outstanding	2,995,910	2,995,910

XML

Consolidated Statements of Operations and Comprehensive Loss - USD ($)	3 Months Ended		6 Months Ended
	Nov. 30, 2015	Nov. 30, 2014	Nov. 30, 2015	Nov. 30, 2014
Income Statement [Abstract]
Net sales	$ 3,073,769	$ 3,151,504	$ 6,178,153	$ 6,200,792
Cost of sales	1,797,359	1,597,326	3,459,251	3,183,047
Gross profit	1,276,410	1,554,178	2,718,902	3,017,745
Operating expenses:
General, administration and sales	1,581,635	1,500,328	3,119,517	2,838,352
Research and development	72,500	124,651	159,412	197,095
Total operating expenses	1,654,135	1,624,979	3,278,929	3,035,447
Operating loss	(377,725)	(70,801)	(560,027)	(17,702)
Other income (loss), net	(19,091)	3,336	(25,011)	4,397
Loss before income taxes	(396,816)	(67,465)	(585,038)	(13,305)
Provision for income taxes	6,971	2,375	13,811	4,752
Net loss	$ (403,787)	$ (69,840)	$ (598,849)	$ (18,057)
Net loss per common share:
Basic	$ (0.13)	$ (0.02)	$ (0.20)	$ (0.01)
Weighted average number of common shares, basic	2,995,910	2,995,910	2,995,910	2,995,910
Diluted	$ (0.13)	$ (0.02)	$ (0.20)	$ (0.01)
Weighted average number of common shares, diluted	2,995,910	2,995,910	2,995,910	2,995,910
Comprehensive loss
Net loss	$ (403,787)	$ (69,840)	$ (598,849)	$ (18,057)
Foreign currency translation adjustment	(15,673)	(50,785)	(9,314)	(78,909)
Total comprehensive loss	$ (419,460)	$ (120,625)	$ (608,163)	$ (96,966)

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Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Nov. 30, 2015	Nov. 30, 2014
Cash flows relating to operating activities
Net loss	$ (598,849)	$ (18,057)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	127,198	139,950
Gain on sale of property and equipment	(299)	0
Stock based compensation	37,953	26,473
(Increase) decrease in:
Accounts receivable	115,949	(327,467)
Inventories	(90,216)	(21,292)
Prepaid expenses	17,605	40,062
Income taxes receivable	(812)	(387)
Increase (decrease) in:
Accounts payable	(240,883)	165,338
Accrued liabilities	87,286	250,603
Income taxes payable	0	(210)
Net cash provided by (used in) operating activities	(545,068)	255,013
Cash flows relating to investing activities
Proceeds from sale of property and equipment	14,950	0
Purchases of property and equipment	0	(13,050)
Net cash provided by (used in) investing activities	14,950	(13,050)
Effect of foreign exchange translation on cash	(1,969)	(45,047)
Increase (decrease) in cash and cash equivalents	(532,087)	196,916
Cash and cash equivalents, beginning of period	1,795,654	1,510,565
Cash and cash equivalents, end of period	1,263,567	1,707,481
Supplemental disclosure of cash flow information
Cash paid during the period for income taxes	14,623	5,353
Cash paid during the period for interest	$ 1,384	$ 1,933

XML

Consolidated Statement of Changes in Stockholders Equity - 6 months ended Nov. 30, 2015 - USD ($)	Total	Common stock [Member]	Accumulated other comprehensive loss [Member]	Accumulated deficit [Member]
Beginning balance at May. 31, 2015	$ 9,488,604	$ 10,511,324	$ (366,945)	$ (655,775)
Beginning balance, shares at May. 31, 2015	2,995,910	2,995,910
Stock-based compensation	$ 37,953	$ 37,953	0	0
Net income (loss)	(598,849)	0	0	(598,849)
Other comprehensive income (loss)	(9,314)	0	(9,314)	0
Ending balance at Nov. 30, 2015	$ 8,918,394	$ 10,549,277	$ (376,259)	$ (1,254,624)
Ending balance, shares at Nov. 30, 2015	2,995,910	2,995,910

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Summary of Significant Accounting Policies

6 Months Ended

Nov. 30, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 1:

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial information included herein has been prepared by Schmitt Industries, Inc. (the Company or Schmitt) and its wholly owned subsidiaries. In the opinion of management, the accompanying unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly its financial position as of November 30, 2015 and its results of operations and its cash flows for the periods presented. The consolidated balance sheet at May 31, 2015 has been derived from the Annual Report on Form 10-K for the fiscal year ended May 31, 2015. The accompanying unaudited financial statements and related notes should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2015. 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, 2016.

Revenue Recognition

The Company recognizes revenue for sales and billing for freight charges upon delivery of the product to the customer at a fixed and determinable price with a reasonable assurance of collection, passage of title to the customer as indicated by shipping terms and fulfilment of all significant obligations, pursuant to the guidance provided by Accounting Standards Codification (“ASC”) Topic 605. For sales to all customers, including manufacturer representatives, distributors or their third-party customers, these criteria are met at the time product is shipped. When other significant obligations remain after products are delivered, revenue is recognized only after such obligations are fulfilled. In addition, judgments are required in evaluating the credit worthiness of our customers. Credit is not extended to customers and revenue is not recognized until we have determined that collectability is reasonably assured.

Financial Instruments

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

Accounts Receivable

The Company maintains credit limits for all customers based upon several factors, including but not limited to financial condition and stability, payment history, published credit reports and use of credit references. Management performs various analyses to evaluate accounts receivable balances to ensure recorded amounts reflect estimated net realizable value. This review includes using accounts receivable agings, other operating trends and relevant business conditions, including general economic factors, as they relate to each of the Company’s domestic and international customers. If these analyses lead management to the conclusion that potential significant accounts are uncollectible, a reserve is provided. The allowance for doubtful accounts was $44,258 and $56,370 as of November 30, 2015 and May 31, 2015, respectively.

Inventories

Inventories are valued at the lower of cost or market 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, 2015 and May 31, 2015, inventories consisted of:

	November 30, 2015		May 31, 2015
Raw materials	$	2,044,681	$	1,845,037
Work-in-process		975,886		836,346
Finished goods		1,620,306		1,876,184
	$	4,640,873	$	4,557,567

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years for furniture, fixtures and equipment; three years for vehicles; and twenty-five years for buildings and improvements. As of November 30, 2015 and May 31, 2015, property and equipment consisted of:

	November 30, 2015			May 31, 2015
Land	$	299,000		$	299,000
Buildings and improvements		1,814,524			1,814,524
Furniture, fixtures and equipment		1,342,745			1,381,691
Vehicles		96,587			96,587
		3,552,856			3,591,802
Less accumulated depreciation		(2,526,761	)		(2,480,924	)
	$	1,026,095		$	1,110,878

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Stock Options and Stock-Based Compensation

6 Months Ended

Nov. 30, 2015

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

Stock Options and Stock-Based Compensation

Note 2:

STOCK OPTIONS AND STOCK-BASED COMPENSATION

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

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

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

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

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

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

To determine stock-based compensation expense recognized for those options granted during the six months ended November 30, 2015 and 2014, the Company has computed the value of all stock options granted using the Black-Scholes option pricing model. No options were issued during the six months ended November 30, 2015. 87,500 options were issued during the six months ended November 30, 2014.

At November 30, 2015, the Company had a total of 327,500 outstanding stock options (249,168 vested and exercisable and 78,332 non-vested) with a weighted average exercise price of $3.65. The Company estimates that $46,944 will be recorded as additional stock-based compensation expense over a weighted-average period of 1.4 years for all options that were outstanding as of November 30, 2015, but which were not yet vested.

Outstanding Options						Exercisable Options
Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (yrs)		Number of Shares		Weighted Average Exercise Price
	35,000	$	2.53		7.8		23,333	$	2.53
	112,500		2.84		8.5		45,835		2.85
	130,000		3.65		5.5		130,000		3.65
	50,000		6.25		2.5		50,000		6.25
	327,500		3.65		6.3		249,168		3.92

Options granted, exercised, and forfeited or canceled under the Company’s stock option plan during the three and six months ended November 30, 2015 are summarized as follows:

	Three Months Ended November 30, 2015					Six Months Ended November 30, 2015
	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Options outstanding - beginning of period		332,500		$	3.68		332,500		$	3.68
Options granted		0			0		0			0
Options exercised		0			0		0			0
Options forfeited/canceled		(5,000	)		5.80		(5,000	)		5.80
Options outstanding - end of period		327,500			3.65		327,500			3.65

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EPS Reconciliation

6 Months Ended

Nov. 30, 2015

Earnings Per Share [Abstract]

EPS Reconciliation

Note 3:

EPS RECONCILIATION

	Three Months Ended November 30,				Six Months Ended November 30,
	2015		2014		2015		2014
Weighted average shares (basic)		2,995,910		2,995,910		2,995,910		2,995,910
Effect of dilutive stock options		0		0		0		0
Weighted average shares (diluted)		2,995,910		2,995,910		2,995,910		2,995,910

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

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Income Taxes

6 Months Ended

Nov. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Note 4:

INCOME TAXES

The Company accounts for income taxes using the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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

Other long-term liabilities related to tax contingencies were $0 as of both November 30, 2015 and May 31, 2015. 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, 2015 and May 31, 2015.

Several tax years are subject to examination by major tax jurisdictions. In the United States, federal tax years for Fiscal 2012 and after are subject to examination. In the United Kingdom, tax years for Fiscal 2012 and after are subject to examination. In Canada, tax years for Fiscal 2005 and after are subject to examination.

Effective Tax Rate

The effective tax rate on consolidated net loss was 2.4% for the six months ended November 30, 2015. The effective tax rate on consolidated net loss differs from the federal statutory tax rate primarily due to the amount of income from foreign jurisdictions, changes in the deferred tax valuation allowance and certain expenses not being deductible for income tax reporting purposes. Management believes the effective tax rate for Fiscal 2016 will be approximately 6.8% due to the items noted above.

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Segments of Business

6 Months Ended

Nov. 30, 2015

Segment Reporting [Abstract]

Segments of Business

Note 5:

SEGMENTS OF BUSINESS

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

Segment Information

	Three Months Ended November 30,
	2015						2014
	Balancer			Measurement			Balancer			Measurement
Gross sales	$	2,192,878		$	1,187,847		$	2,250,911		$	1,204,966
Intercompany sales		(312,149	)		5,193			(328,062	)		23,689
Net sales	$	1,880,729		$	1,193,040		$	1,922,849		$	1,228,655
Operating loss	$	(203,149	)	$	(174,576	)	$	(37,759	)	$	(33,042	)
Depreciation expense	$	24,236		$	9,832		$	24,471		$	10,983
Amortization expense	$	0		$	27,883		$	0		$	29,808
Capital expenditures	$	0		$	0		$	4,477		$	0
	Six Months Ended November 30,
	2015						2014
	Balancer			Measurement			Balancer			Measurement
Gross sales	$	4,419,124		$	2,373,911		$	4,267,346		$	2,409,436
Intercompany sales		(610,900	)		(3,982	)		(504,327	)		28,337
Net sales	$	3,808,224		$	2,369,929		$	3,763,019		$	2,437,773
Operating income (loss)	$	(336,643	)	$	(223,384	)	$	(109,583	)	$	91,881
Depreciation expense	$	51,046		$	20,387		$	54,272		$	22,211
Amortization expense	$	0		$	55,765		$	0		$	63,467
Capital expenditures	$	0		$	0		$	13,050		$	0

Geographic Information – Net Sales by Geographic Area

	Three Months Ended November 30,				Six Months Ended November 30,
	2015		2014		2015		2014
North America	$	2,082,607	$	1,800,419	$	4,167,922	$	3,819,073
Europe		432,412		411,314		684,722		626,550
Asia		531,287		863,045		1,220,556		1,627,482
Other markets		27,463		76,726		104,953		127,687
Total net sales	$	3,073,769	$	3,151,504	$	6,178,153	$	6,200,792

	Three Months Ended November 30,
	2015						2014
	United States			Europe			United States			Europe
Operating income (loss)	$	(374,243	)	$	(3,482	)	$	(102,407	)	$	31,606
Depreciation expense	$	34,068		$	0		$	35,454		$	0
Amortization expense	$	27,883		$	0		$	29,808		$	0
Capital expenditures	$	0		$	0		$	4,477		$	0
	Six Months Ended November 30,
	2015						2014
	United States			Europe			United States			Europe
Operating income (loss)	$	(499,742	)	$	(60,285	)	$	(36,467	)	$	18,765
Depreciation expense	$	71,433		$	0		$	76,483		$	0
Amortization expense	$	55,765		$	0		$	63,467		$	0
Capital expenditures	$	0		$	0		$	13,050		$	0

Note — Europe is defined as the European subsidiary, Schmitt Europe, Ltd.

Segment and Geographic Assets

	November 30, 2015		May 31, 2015
Segment assets to total assets
Balancer	$	4,884,201	$	5,059,567
Measurement		4,228,989		4,247,684
Corporate assets		1,265,409		1,796,684
Total assets	$	10,378,599	$	11,103,935
Geographic assets to long-lived assets
United States	$	1,026,095	$	1,110,878
Europe		0		0
Total long-lived assets	$	1,026,095	$	1,110,878
Geographic assets to total assets
United States	$	9,524,797	$	10,107,523
Europe		853,802		996,412
Total assets	$	10,378,599	$	11,103,935

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Nov. 30, 2015

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The consolidated financial information included herein has been prepared by Schmitt Industries, Inc. (the Company or Schmitt) and its wholly owned subsidiaries. In the opinion of management, the accompanying unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly its financial position as of November 30, 2015 and its results of operations and its cash flows for the periods presented. The consolidated balance sheet at May 31, 2015 has been derived from the Annual Report on Form 10-K for the fiscal year ended May 31, 2015. The accompanying unaudited financial statements and related notes should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2015. 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, 2016.

Revenue Recognition

Revenue Recognition

The Company recognizes revenue for sales and billing for freight charges upon delivery of the product to the customer at a fixed and determinable price with a reasonable assurance of collection, passage of title to the customer as indicated by shipping terms and fulfilment of all significant obligations, pursuant to the guidance provided by Accounting Standards Codification (“ASC”) Topic 605. For sales to all customers, including manufacturer representatives, distributors or their third-party customers, these criteria are met at the time product is shipped. When other significant obligations remain after products are delivered, revenue is recognized only after such obligations are fulfilled. In addition, judgments are required in evaluating the credit worthiness of our customers. Credit is not extended to customers and revenue is not recognized until we have determined that collectability is reasonably assured.

Financial Instruments

Financial Instruments

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

Accounts Receivable

Accounts Receivable

The Company maintains credit limits for all customers based upon several factors, including but not limited to financial condition and stability, payment history, published credit reports and use of credit references. Management performs various analyses to evaluate accounts receivable balances to ensure recorded amounts reflect estimated net realizable value. This review includes using accounts receivable agings, other operating trends and relevant business conditions, including general economic factors, as they relate to each of the Company’s domestic and international customers. If these analyses lead management to the conclusion that potential significant accounts are uncollectible, a reserve is provided. The allowance for doubtful accounts was $44,258 and $56,370 as of November 30, 2015 and May 31, 2015, respectively.

Inventories

Inventories

Inventories are valued at the lower of cost or market 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, 2015 and May 31, 2015, inventories consisted of:

	November 30, 2015		May 31, 2015
Raw materials	$	2,044,681	$	1,845,037
Work-in-process		975,886		836,346
Finished goods		1,620,306		1,876,184
	$	4,640,873	$	4,557,567

Property and Equipment

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years for furniture, fixtures and equipment; three years for vehicles; and twenty-five years for buildings and improvements. As of November 30, 2015 and May 31, 2015, property and equipment consisted of:

	November 30, 2015			May 31, 2015
Land	$	299,000		$	299,000
Buildings and improvements		1,814,524			1,814,524
Furniture, fixtures and equipment		1,342,745			1,381,691
Vehicles		96,587			96,587
		3,552,856			3,591,802
Less accumulated depreciation		(2,526,761	)		(2,480,924	)
	$	1,026,095		$	1,110,878

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Nov. 30, 2015

Accounting Policies [Abstract]

Inventories

As of November 30, 2015 and May 31, 2015, inventories consisted of:

	November 30, 2015		May 31, 2015
Raw materials	$	2,044,681	$	1,845,037
Work-in-process		975,886		836,346
Finished goods		1,620,306		1,876,184
	$	4,640,873	$	4,557,567

Summary of Property and Equipment

As of November 30, 2015 and May 31, 2015, property and equipment consisted of:

	November 30, 2015			May 31, 2015
Land	$	299,000		$	299,000
Buildings and improvements		1,814,524			1,814,524
Furniture, fixtures and equipment		1,342,745			1,381,691
Vehicles		96,587			96,587
		3,552,856			3,591,802
Less accumulated depreciation		(2,526,761	)		(2,480,924	)
	$	1,026,095		$	1,110,878

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Stock Options and Stock-Based Compensation (Tables)

6 Months Ended

Nov. 30, 2015

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

Schedule of Outstanding Stock Options

Outstanding Options						Exercisable Options
Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (yrs)		Number of Shares		Weighted Average Exercise Price
	35,000	$	2.53		7.8		23,333	$	2.53
	112,500		2.84		8.5		45,835		2.85
	130,000		3.65		5.5		130,000		3.65
	50,000		6.25		2.5		50,000		6.25
	327,500		3.65		6.3		249,168		3.92

Schedule of Options Granted, Exercised, and Forfeited or Canceled

Options granted, exercised, and forfeited or canceled under the Company’s stock option plan during the three and six months ended November 30, 2015 are summarized as follows:

	Three Months Ended November 30, 2015					Six Months Ended November 30, 2015
	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Options outstanding - beginning of period		332,500		$	3.68		332,500		$	3.68
Options granted		0			0		0			0
Options exercised		0			0		0			0
Options forfeited/canceled		(5,000	)		5.80		(5,000	)		5.80
Options outstanding - end of period		327,500			3.65		327,500			3.65

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EPS Reconciliation (Tables)

6 Months Ended

Nov. 30, 2015

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

	Three Months Ended November 30,				Six Months Ended November 30,
	2015		2014		2015		2014
Weighted average shares (basic)		2,995,910		2,995,910		2,995,910		2,995,910
Effect of dilutive stock options		0		0		0		0
Weighted average shares (diluted)		2,995,910		2,995,910		2,995,910		2,995,910

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Segments of Business (Tables)

6 Months Ended

Nov. 30, 2015

Segment Reporting [Abstract]

Segment Information

Segment Information

	Three Months Ended November 30,
	2015						2014
	Balancer			Measurement			Balancer			Measurement
Gross sales	$	2,192,878		$	1,187,847		$	2,250,911		$	1,204,966
Intercompany sales		(312,149	)		5,193			(328,062	)		23,689
Net sales	$	1,880,729		$	1,193,040		$	1,922,849		$	1,228,655
Operating loss	$	(203,149	)	$	(174,576	)	$	(37,759	)	$	(33,042	)
Depreciation expense	$	24,236		$	9,832		$	24,471		$	10,983
Amortization expense	$	0		$	27,883		$	0		$	29,808
Capital expenditures	$	0		$	0		$	4,477		$	0
	Six Months Ended November 30,
	2015						2014
	Balancer			Measurement			Balancer			Measurement
Gross sales	$	4,419,124		$	2,373,911		$	4,267,346		$	2,409,436
Intercompany sales		(610,900	)		(3,982	)		(504,327	)		28,337
Net sales	$	3,808,224		$	2,369,929		$	3,763,019		$	2,437,773
Operating income (loss)	$	(336,643	)	$	(223,384	)	$	(109,583	)	$	91,881
Depreciation expense	$	51,046		$	20,387		$	54,272		$	22,211
Amortization expense	$	0		$	55,765		$	0		$	63,467
Capital expenditures	$	0		$	0		$	13,050		$	0

Geographic Information-Net Sales by Geographic Area

Geographic Information – Net Sales by Geographic Area

	Three Months Ended November 30,				Six Months Ended November 30,
	2015		2014		2015		2014
North America	$	2,082,607	$	1,800,419	$	4,167,922	$	3,819,073
Europe		432,412		411,314		684,722		626,550
Asia		531,287		863,045		1,220,556		1,627,482
Other markets		27,463		76,726		104,953		127,687
Total net sales	$	3,073,769	$	3,151,504	$	6,178,153	$	6,200,792

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

	Three Months Ended November 30,
	2015						2014
	United States			Europe			United States			Europe
Operating income (loss)	$	(374,243	)	$	(3,482	)	$	(102,407	)	$	31,606
Depreciation expense	$	34,068		$	0		$	35,454		$	0
Amortization expense	$	27,883		$	0		$	29,808		$	0
Capital expenditures	$	0		$	0		$	4,477		$	0
	Six Months Ended November 30,
	2015						2014
	United States			Europe			United States			Europe
Operating income (loss)	$	(499,742	)	$	(60,285	)	$	(36,467	)	$	18,765
Depreciation expense	$	71,433		$	0		$	76,483		$	0
Amortization expense	$	55,765		$	0		$	63,467		$	0
Capital expenditures	$	0		$	0		$	13,050		$	0

Segment and Geographic Assets

Segment and Geographic Assets

	November 30, 2015		May 31, 2015
Segment assets to total assets
Balancer	$	4,884,201	$	5,059,567
Measurement		4,228,989		4,247,684
Corporate assets		1,265,409		1,796,684
Total assets	$	10,378,599	$	11,103,935
Geographic assets to long-lived assets
United States	$	1,026,095	$	1,110,878
Europe		0		0
Total long-lived assets	$	1,026,095	$	1,110,878
Geographic assets to total assets
United States	$	9,524,797	$	10,107,523
Europe		853,802		996,412
Total assets	$	10,378,599	$	11,103,935

XML

Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($)	6 Months Ended
	Nov. 30, 2015	May. 31, 2015
Significant Accounting Policies [Line Items]
Allowance for doubtful accounts	$ 44,258	$ 56,370
Vehicles [Member]
Significant Accounting Policies [Line Items]
Property and equipment, useful life	3 years
Building and Improvements [Member]
Significant Accounting Policies [Line Items]
Property and equipment, useful life	25 years
Minimum [Member] | Furniture, Fixtures and Equipment [Member]
Significant Accounting Policies [Line Items]
Property and equipment, useful life	3 years
Maximum [Member] | Furniture, Fixtures and Equipment [Member]
Significant Accounting Policies [Line Items]
Property and equipment, useful life	7 years

XML

Summary of Significant Accounting Policies - Schedule of Inventories (Detail) - USD ($)	Nov. 30, 2015	May. 31, 2015
Inventory, Net [Abstract]
Raw materials	$ 2,044,681	$ 1,845,037
Work-in-process	975,886	836,346
Finished goods	1,620,306	1,876,184
Inventories	$ 4,640,873	$ 4,557,567

XML

Significant Accounting Policies - Summary of Property and Equipment (Detail) - USD ($)	Nov. 30, 2015	May. 31, 2015
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 3,552,856	$ 3,591,802
Less accumulated depreciation	(2,526,761)	(2,480,924)
Property, plant and equipment, net	1,026,095	1,110,878
Land [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	299,000	299,000
Building and Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	1,814,524	1,814,524
Furniture, Fixtures and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	1,342,745	1,381,691
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 96,587	$ 96,587

XML

Stock Options and Stock-Based Compensation - Additional Information (Detail) - USD ($)	3 Months Ended	6 Months Ended
	Nov. 30, 2015	Nov. 30, 2015	Nov. 30, 2014	Aug. 31, 2015	May. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Expected dividend rate		0.00%
Options Granted	0	0	87,500
Outstanding stock options, total	327,500	327,500		332,500	332,500
Vested and exercisable stock options	249,168	249,168
Non-vested shares	78,332	78,332
Weighted average exercise price	$ 3.65	$ 3.65		$ 3.68	$ 3.68
Additional stock-based compensation expense	$ 46,944	$ 46,944
Additional stock-based compensation expense weighted average period		1 year 4 months 24 days

XML

Stock Options and Stock-Based Compensation - Schedule of Outstanding Stock Options (Detail) - $ / shares	6 Months Ended
	Nov. 30, 2015	Aug. 31, 2015	May. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding Options	327,500	332,500	332,500
Weighted Average Exercise Price, Outstanding Options	$ 3.65	$ 3.68	$ 3.68
Weighted Average Remaining Contractual Life (yrs), Outstanding Options	6 years 3 months 18 days
Exercisable Options, Number of Shares	249,168
Exercisable Options, Weighted Average Exercise Price	$ 3.92
Options 1 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding Options	35,000
Weighted Average Exercise Price, Outstanding Options	$ 2.53
Weighted Average Remaining Contractual Life (yrs), Outstanding Options	7 years 9 months 18 days
Exercisable Options, Number of Shares	23,333
Exercisable Options, Weighted Average Exercise Price	$ 2.53
Options 2 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding Options	112,500
Weighted Average Exercise Price, Outstanding Options	$ 2.84
Weighted Average Remaining Contractual Life (yrs), Outstanding Options	8 years 6 months
Exercisable Options, Number of Shares	45,835
Exercisable Options, Weighted Average Exercise Price	$ 2.85
Options 3 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding Options	130,000
Weighted Average Exercise Price, Outstanding Options	$ 3.65
Weighted Average Remaining Contractual Life (yrs), Outstanding Options	5 years 6 months
Exercisable Options, Number of Shares	130,000
Exercisable Options, Weighted Average Exercise Price	$ 3.65
Options 4 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding Options	50,000
Weighted Average Exercise Price, Outstanding Options	$ 6.25
Weighted Average Remaining Contractual Life (yrs), Outstanding Options	2 years 6 months
Exercisable Options, Number of Shares	50,000
Exercisable Options, Weighted Average Exercise Price	$ 6.25

XML

Stock Options and Stock-Based Compensation - Schedule of Options Granted, Exercised, and Forfeited or Canceled (Detail) - $ / shares	3 Months Ended	6 Months Ended
	Nov. 30, 2015	Nov. 30, 2015	Nov. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Number of Shares, Options outstanding - beginning of period	332,500	332,500
Number of Shares, Options granted	0	0	87,500
Number of Shares, Options exercised	0	0
Number of Shares, Options forfeited/canceled	(5,000)	(5,000)
Number of Shares, Options outstanding - end of period	327,500	327,500
Weighted Average Exercise Price, Options outstanding - beginning of period	$ 3.68	$ 3.68
Weighted Average Exercise Price, Options granted	0	0
Weighted Average Exercise Price, Options exercised	0	0
Weighted Average Exercise Price, Options forfeited/canceled	5.80	5.80
Weighted Average Exercise Price, Options outstanding - end of period	$ 3.65	$ 3.65

XML

EPS Reconciliation - Schedule of Earnings Per Share (Detail) - shares	3 Months Ended		6 Months Ended
	Nov. 30, 2015	Nov. 30, 2014	Nov. 30, 2015	Nov. 30, 2014
Earnings Per Share [Abstract]
Weighted average shares (basic)	2,995,910	2,995,910	2,995,910	2,995,910
Effect of dilutive stock options	0	0	0	0
Weighted average shares (diluted)	2,995,910	2,995,910	2,995,910	2,995,910

XML

EPS Reconciliation - Additional Information (Detail)	6 Months Ended
	Nov. 30, 2015 shares
Earnings Per Share [Abstract]
Antidilutive common stock equivalents	0

XML

Income Taxes - Additional Information (Detail) - USD ($)	6 Months Ended	12 Months Ended
	Nov. 30, 2015	May. 31, 2016	May. 31, 2015
Income Tax Contingency [Line Items]
Other long-term liabilities related to uncertain tax positions	$ 0		$ 0
Liability for payment of interest and penalties	$ 0		$ 0
Effective tax rate on consolidated net loss	2.40%
Forecast [Member]
Income Tax Contingency [Line Items]
Effective tax rate for Fiscal 2016		6.80%
Earliest tax year [Member] | Canada [Member]
Income Tax Contingency [Line Items]
Income tax examination period under examination	2005
Domestic Tax Authority [Member] | Earliest tax year [Member]
Income Tax Contingency [Line Items]
Income tax examination period under examination	2012
Foreign Tax Authority [Member] | Earliest tax year [Member] | United Kingdom [Member]
Income Tax Contingency [Line Items]
Income tax examination period under examination	2012

XML

Segments of Business - Additional Information (Detail)	6 Months Ended
	Nov. 30, 2015 Segment Markets
Segment Reporting [Abstract]
Number of reportable business segments | Segment	2
Number of geographic markets in which entity operates | Markets	3

XML

Segments of Business - Segment Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Nov. 30, 2015	Nov. 30, 2014	Nov. 30, 2015	Nov. 30, 2014
Segment Reporting Information [Line Items]
Net sales	$ 3,073,769	$ 3,151,504	$ 6,178,153	$ 6,200,792
Operating income (loss)	(377,725)	(70,801)	(560,027)	(17,702)
Capital expenditures			0	13,050
Measurement [Member]
Segment Reporting Information [Line Items]
Net sales	1,193,040	1,228,655	2,369,929	2,437,773
Operating income (loss)	(174,576)	(33,042)	(223,384)	91,881
Depreciation expense	9,832	10,983	20,387	22,211
Amortization expense	27,883	29,808	55,765	63,467
Capital expenditures	0	0	0	0
Balancer [Member]
Segment Reporting Information [Line Items]
Net sales	1,880,729	1,922,849	3,808,224	3,763,019
Operating income (loss)	(203,149)	(37,759)	(336,643)	(109,583)
Depreciation expense	24,236	24,471	51,046	54,272
Amortization expense	0	0	0	0
Capital expenditures	0	4,477	0	13,050
Operating Segments [Member] | Measurement [Member]
Segment Reporting Information [Line Items]
Net sales	1,187,847	1,204,966	2,373,911	2,409,436
Operating Segments [Member] | Balancer [Member]
Segment Reporting Information [Line Items]
Net sales	2,192,878	2,250,911	4,419,124	4,267,346
Intersegment Eliminations [Member] | Measurement [Member]
Segment Reporting Information [Line Items]
Net sales	5,193	23,689	(3,982)	28,337
Intersegment Eliminations [Member] | Balancer [Member]
Segment Reporting Information [Line Items]
Net sales	$ (312,149)	$ (328,062)	$ (610,900)	$ (504,327)

XML

Segments of Business - Geographic Information-Net Sales by Geographic Area (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Nov. 30, 2015	Nov. 30, 2014	Nov. 30, 2015	Nov. 30, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net sales	$ 3,073,769	$ 3,151,504	$ 6,178,153	$ 6,200,792
North America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net sales	2,082,607	1,800,419	4,167,922	3,819,073
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net sales	432,412	411,314	684,722	626,550
Asia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net sales	531,287	863,045	1,220,556	1,627,482
Other markets [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net sales	$ 27,463	$ 76,726	$ 104,953	$ 127,687

XML

Segments of Business - Segment Information of Operating Income (Loss) and Expenditure by Geographic Areas (Detail) - USD ($)		3 Months Ended		6 Months Ended
		Nov. 30, 2015	Nov. 30, 2014	Nov. 30, 2015	Nov. 30, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Operating income (loss)		$ (377,725)	$ (70,801)	$ (560,027)	$ (17,702)
Capital expenditures				0	13,050
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Operating income (loss)		(374,243)	(102,407)	(499,742)	(36,467)
Depreciation expense		34,068	35,454	71,433	76,483
Amortization expense		27,883	29,808	55,765	63,467
Capital expenditures		0	4,477	0	13,050
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Operating income (loss)	[1]	(3,482)	31,606	(60,285)	18,765
Depreciation expense	[1]	0	0	0	0
Amortization expense	[1]	0	0	0	0
Capital expenditures	[1]	$ 0	$ 0	$ 0	$ 0

[1] Note - Europe is defined as the European subsidiary, Schmitt Europe, Ltd.

XML

Segments of Business - Segment and Geographic Assets (Detail) - USD ($)	Nov. 30, 2015	May. 31, 2015
Segment Reporting Information [Line Items]
Segment and geographic assets to total assets	$ 10,378,599	$ 11,103,935
Geographic assets to long-lived assets	1,026,095	1,110,878
Segment and geographic assets to total assets	10,378,599	11,103,935
United States [Member]
Segment Reporting Information [Line Items]
Segment and geographic assets to total assets	9,524,797	10,107,523
Geographic assets to long-lived assets	1,026,095	1,110,878
Segment and geographic assets to total assets	9,524,797	10,107,523
Europe [Member]
Segment Reporting Information [Line Items]
Segment and geographic assets to total assets	853,802	996,412
Geographic assets to long-lived assets	0	0
Segment and geographic assets to total assets	853,802	996,412
Operating Segments [Member] | Balancer [Member]
Segment Reporting Information [Line Items]
Segment and geographic assets to total assets	4,884,201	5,059,567
Segment and geographic assets to total assets	4,884,201	5,059,567
Operating Segments [Member] | Measurement [Member]
Segment Reporting Information [Line Items]
Segment and geographic assets to total assets	4,228,989	4,247,684
Segment and geographic assets to total assets	4,228,989	4,247,684
Corporate assets [Member]
Segment Reporting Information [Line Items]
Segment and geographic assets to total assets	1,265,409	1,796,684
Segment and geographic assets to total assets	$ 1,265,409	$ 1,796,684