UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under Rule 14a-12
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SCHMITT INDUSTRIES, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials:
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☐ Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of
its filing.
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(1)
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Amount previously paid:
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(2)
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Form, Schedule or Registration Statement No.:
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PROXY STATEMENT
SCHMITT INDUSTRIES, INC.
2765 N.W. Nicolai Street
Portland, Oregon 97210
November 9, 2021
Dear Shareholders:
It is our pleasure to invite you to the 2021
Annual Meeting of Shareholders of Schmitt Industries, Inc. (the “Annual Meeting”). We will hold the Annual Meeting on Friday,
December 10, 2021 at 10:30 a.m. EST, at our Ample Hills Red Hook Shop at 421 Van Brunt Street, Brooklyn, New York 11231. Due to the public
health impact of the novel coronavirus (“COVID-19”) outbreak and governmental restrictions limiting the number of people who
may gather together, and to support the health and well-being of our shareholders, employees and communities, attendees will be required
to show proof of vaccination to enter the premises and be subject to temperature checks and COVID protection measures. Any person in attendance
who exhibits cold or flu-like symptoms or who has been exposed to COVID-19 may be asked to leave the premises for the protection of the
other attendees. We reserve the right to take any additional precautionary measures we deem appropriate in relation to the physical meeting
and access to our premises. As a result of the public health and travel risks and concerns due to COVID-19, we may announce alternative
arrangements for the meeting, which may include switching to a virtual meeting format, or changing the time, date or location of the Annual
Meeting. If we take this step, we will announce any changes in advance in a press release available on our website (www.schmittindustries.com)
and filed with the Securities Exchange Commission as additional proxy materials, and as otherwise required by applicable state law.
We describe in detail the actions we expect
to take at the Annual Meeting in the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement.
Your vote is important. Whether or not you plan
to attend the Annual Meeting, please promptly sign, date and return the enclosed proxy card or voting instruction card in the envelope
provided, or submit your proxy by telephone or over the internet (if those options are available to you) in accordance with the instructions
on the enclosed proxy card or voting instruction card.
Thank you for your ongoing support of and continued
interest in Schmitt Industries, Inc.
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Sincerely,
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/s/ Michael R. Zapata
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Michael R. Zapata
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Chairman of the Board
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SCHMITT INDUSTRIES, INC.
2765 N.W. Nicolai Street
Portland, Oregon 97210
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, DECEMBER 10, 2021
Notice is hereby given that the 2021 Annual
Meeting of Shareholders (the “Annual Meeting”) of Schmitt Industries, Inc. (the “Company”) will be held on Friday,
December 10, 2021 at 10:30 a.m. EST, at our Ample Hills Red Hook Shop at 421 Van Brunt Street, Brooklyn, New York 11231. Due to the public
health impact of the novel coronavirus (“COVID-19”) outbreak and governmental restrictions limiting the number of people who
may gather together, and to support the health and well-being of our shareholders, employees and communities, attendees will be required
to show proof of vaccination to enter the premises and be subject to temperature checks and COVID protection measures. Any person in attendance
who exhibits cold or flu-like symptoms or who has been exposed to COVID-19 may be asked to leave the premises for the protection of the
other attendees. We reserve the right to take any additional precautionary measures we deem appropriate in relation to the physical meeting
and access to our premises. As a result of the public health and travel risks and concerns due to COVID-19, we may announce alternative
arrangements for the meeting, which may include switching to a virtual meeting format, or changing the time, date or location of the Annual
Meeting. If we take this step, we will announce any changes in advance in a press release available on our website (www.schmittindustries.com)
and filed with the Securities Exchange Commission as additional proxy materials, and as otherwise required by applicable state law.
We have scheduled the Annual Meeting for the
following purposes, for the following purposes, as more fully described in the accompanying proxy statement:
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1.
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to elect Michael Zapata to serve as a director for a three-year term expiring in 2024 and Alex Zyngier to serve for a two-year term
expiring 2023;
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to vote on a non-binding advisory resolution to approve the compensation of the Company’s named executive officers;
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to ratify the appointment of UHY LLP as the Company’s independent registered public accounting firm for the fiscal year ending
May 31, 2022; and
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to transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
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Only shareholders of record at the close of
business on October 25, 2021 are entitled to notice of, and to vote at, the Annual Meeting.
Your vote is extremely important, regardless
of the number of shares you own. Whether or not you plan to attend the Annual Meeting, we ask that you promptly sign, date and return
the enclosed proxy card or voting instruction card in the envelope provided, or submit your proxy by telephone or over the internet (if
those options are available to you) in accordance with the instructions on the enclosed proxy card or voting instruction card.
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By order of the Board of Directors,
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/s/ Michael R. Zapata
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Portland, Oregon
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Michael R. Zapata
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November 9, 2021
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Chairman of the Board
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Important Notice Regarding the Availability
of Proxy Materials for the Schmitt Industries, Inc. 2021 Annual Meeting of Shareholders to Be Held on Friday, December 10, 2021
The Proxy Statement, proxy card, and our
Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended May 31, 2021 are available on the Internet at http://investor.schmitt-ind.com/sec-filings
SCHMITT INDUSTRIES, INC.
TABLE OF CONTENTS
PROXY STATEMENT
This proxy statement (“Proxy Statement”)
is furnished by the Board of Directors of Schmitt Industries, Inc. (the “Board”) in connection with the solicitation of proxies
for use at the 2021 Annual Meeting of Shareholders (the “Annual Meeting”) to be held on Friday, December 10, 2021 at 10:30
a.m. EST, at our Ample Hills Red Hook Shop at 421 Van Brunt Street, Brooklyn, New York 11231. Due to the public health impact of the novel
coronavirus (“COVID-19”) outbreak and governmental restrictions limiting the number of people who may gather together, and
to support the health and well-being of our shareholders, employees and communities, attendees will be required to show proof of vaccination
to enter the premises and be subject to temperature checks and COVID protection measures. Any person in attendance who exhibits cold or
flu-like symptoms or who has been exposed to COVID-19 may be asked to leave the premises for the protection of the other attendees. We
reserve the right to take any additional precautionary measures we deem appropriate in relation to the physical meeting and access to
our premises. As a result of the public health and travel risks and concerns due to COVID-19, we may announce alternative arrangements
for the meeting, which may include switching to a virtual meeting format, or changing the time, date or location of the Annual Meeting.
If we take this step, we will announce any changes in advance in a press release available on our website (www.schmittindustries.com) and
filed with the Securities Exchange Commission as additional proxy materials, and as otherwise required by applicable state law.
This Proxy Statement, along with a Notice of
Annual Meeting of Shareholders and either a proxy card or a voting instruction card, are being mailed to shareholders beginning on or
about November 9, 2021.
Unless the context otherwise requires, in this
Proxy Statement, we use the terms “we,” “our,” “us” and “the Company” to refer to Schmitt
Industries, Inc. and its subsidiaries.
Questions
and Answers about
the Proxy Materials and the Annual Meeting
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Q:
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Why did I receive this Proxy Statement?
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The Board is soliciting your proxy to vote at the Annual Meeting because you were a shareholder at the close of business on October
25, 2021, the record date, and are entitled to vote at the Annual Meeting.
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This Proxy Statement summarizes the information you need to
know to vote at the Annual Meeting. You do not need to attend the Annual Meeting to vote your shares.
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What information is contained in this Proxy Statement?
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The information in this Proxy Statement relates to the proposals to be voted on at the Annual Meeting, the voting process, the Board
and its committees, the compensation of directors and certain executive officers, and certain other required information.
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What should I do if I receive more than one set of voting materials?
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You may receive more than one set of voting materials, including multiple copies of this Proxy Statement and multiple proxy cards
or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting
instruction card for each brokerage account in which you hold shares. If you are a shareholder of record and your shares are registered
in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction
card that you receive.
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How may I obtain an additional set of proxy materials?
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All shareholders may write to us at the following address to request an additional copy of these materials:
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Schmitt Industries, Inc.
2765 N.W. Nicolai Street
Portland, Oregon 97210
Attention: Corporate Secretary
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What is the difference between holding shares as a shareholder of record and as a beneficial owner?
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If your shares are registered directly in your name with our transfer agent, Equity Stock Transfer, LLC, you are considered, with
respect to those shares, the “shareholder of record.” If you are a shareholder of record, this Proxy Statement and our 2021
Annual Report on Form 10-K (the “2021 Form 10-K”), and a proxy card have been sent directly to you by the Company.
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If your shares are held in a stock brokerage account or by
a bank or other nominee, you are considered the “beneficial owner” of shares held in street name. If you own shares held in
street name, this Proxy Statement and the 2021 Form 10-K have been forwarded to you by your broker, bank or nominee who is considered,
with respect to those shares, the shareholder of record. As the beneficial owner, you have the right to direct your broker, bank or nominee
how to vote your shares by using the voting instruction card included in the mailing or by following their instructions for voting by
telephone or the Internet, if the broker, bank or nominee offers these alternatives. Since a beneficial owner is not the shareholder of
record, you may not vote these shares in person at the Annual Meeting unless you obtain a “legal proxy” from the broker, bank
or nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting.
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What am I voting on at the Annual Meeting?
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You are voting on the following proposals:
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to elect Michael Zapata to serve as a director for a three-year term expiring in 2024 and Alex Zyngier to serve for a two-year term
expiring 2023;
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to vote on a non-binding advisory resolution to approve the compensation of the Company’s named executive officers;
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to ratify the appointment of UHY LLP as the Company’s independent registered public accounting firm for the fiscal year ending
May 31, 2022; and
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to transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
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The Board recommends a vote “FOR” the election
of each nominee to the Board; “FOR” the approval of a non-binding advisory resolution approving the compensation of our named
executive officers; and “FOR” the ratification of the appointment of UHY LLP as the Company’s independent registered
public accounting firm for the fiscal year ending May 31, 2022.
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You may vote using any of the following methods:
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Proxy card or voting
instruction card. Be sure to complete, sign and date the card and return it in the prepaid
envelope.
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By telephone or the
internet. If you own shares held in street name, you will receive voting instructions
from your bank, broker or other nominee and may vote by telephone or on the internet if they
offer that alternative. Shareholders of record will be able to vote by telephone or on the
internet.
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In person at the Annual
Meeting. All shareholders may vote in person at the Annual Meeting. You may also be represented
by another person at the Annual Meeting by executing a proper proxy designating that person.
If you own shares held in street name, you must obtain a legal proxy from your bank, broker
or other nominee and present it to the inspector of election with your ballot when you vote
at the Annual Meeting.
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What can I do if I change my mind after I vote my shares?
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If you are a shareholder of record, you may revoke your proxy at any time before it is voted at the Annual Meeting by:
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sending written notice of revocation to our Corporate Secretary
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submitting a new, proper proxy dated later than the date of the revoked proxy; or
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attending the Annual Meeting and voting in person.
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If you own shares held in street name, you may submit new
voting instructions by contacting your broker, bank or nominee. You may also vote in person at the Annual Meeting if you obtain a legal
proxy as described in the answer to the previous question. Attendance at the Annual Meeting will not, by itself, revoke a proxy.
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What if I return a signed proxy card, but do not vote for some of the matters listed on the proxy card?
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If you return a signed proxy card without indicating your vote, your shares will be voted in accordance with the Board’s recommendations
as follows: “FOR” the election of each nominee to the Board; “FOR” the approval of a non-binding advisory resolution
approving the compensation of our named executive officers; and “FOR” the ratification of the appointment of UHY LLP as the
Company’s independent registered public accounting firm for the fiscal year ending May 31, 2022.
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Can my broker vote my shares for me without my instructions?
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Brokers may not use discretionary authority to vote shares on the election of directors, the compensation of the Company’s named
executive officers if they have not received instructions from their clients. Please provide voting instructions on these proposals so
your vote can be counted.
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Can my shares be voted if I do not return my proxy card or voting instruction card and do not attend the Annual Meeting?
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If you do not vote your shares held of record (registered directly in your name, not in the name of a bank or broker), your shares
will not be voted.
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If you do not vote your shares held in street name with a
broker, your broker will not be authorized to vote on most items being put to a vote, including the election of directors, and the compensation
of the Company’s named executive officers. If your broker returns a valid proxy but is not able to vote your shares, they will constitute
“broker non-votes,” which are counted for the purpose of determining the presence of a quorum, but otherwise do not affect
the outcome of any matter being voted on at the Annual Meeting.
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What are the voting requirements with respect to each of the proposals?
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In the election of directors (Proposal No. 1), each director receiving a plurality of the affirmative (“FOR”) votes cast
will be elected. You may withhold votes from any or all nominees.
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Proposal Nos. 2 and 3 require the affirmative (“FOR”)
vote of a majority of the votes cast by shares entitled to vote. Abstentions will count as votes “AGAINST” this proposal.
If you own shares held in street name and do not provide your
broker with voting instructions, your shares may constitute “broker non-votes.” Generally, broker non-votes occur on a matter
when a broker is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. In
tabulating the voting result for any particular proposal, shares that constitute broker non-votes will be counted for the purpose of establishing
a quorum at the Annual Meeting, but otherwise do not affect the outcome of any matter being voted on at the Annual Meeting.
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Q:
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How many votes do I have?
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You are entitled to one vote for each share of our common stock, no par value per share (“Common Stock”) that you hold.
As of October 25, 2021, the record date, there were 3,808,068 shares of Common Stock outstanding.
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Is cumulative voting permitted for the election of directors?
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We do not use cumulative voting for the election of directors.
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What happens if a nominee for director does not stand for election?
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If for any reason any nominee does not stand for election, any proxies we receive will be voted in favor of the remaining nominees
and may be voted for a substitute nominee in place of the nominee who does not stand. We have no reason to expect that any of the nominees
will not stand for election.
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What happens if additional matters are presented at the Annual Meeting?
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A:
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Other than the three items of business described in this Proxy Statement, we are not aware of any other business to be acted upon
at the Annual Meeting. If you grant a proxy, the persons named as proxy holders, Michael R. Zapata and Philip Bosco, will have the discretion
to vote your shares on any additional matters properly presented for a vote at the Annual Meeting.
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How many shares must be present or represented to conduct business at the Annual Meeting?
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A:
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A quorum will be present if at least a majority of the outstanding shares of our Common Stock entitled to vote at the Annual Meeting,
totaling 3,808,068 shares, is represented at the Annual Meeting, either in person or by proxy.
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Both abstentions and broker non-votes (described above) are
counted for the purpose of determining the presence of a quorum.
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How can I attend the Annual Meeting?
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You are entitled to attend the Annual Meeting only if you were a shareholder of the Company as of the close of business on October
25, 2021, the record date, or if you hold a valid proxy for the Annual Meeting. You should be prepared to present photo identification
and proof of vaccination for admittance. If you are a shareholder of record, your name will be verified against the list of shareholders
of record on the record date prior to your admission to the Annual Meeting. If you are not a shareholder of record, but hold shares through
a broker, bank or nominee (i.e., in street name), you should provide proof of beneficial ownership on the record date, such as your most
recent account statement prior to October 25, 2021, a copy of the voting instruction card provided by your broker, bank or nominee, or
other similar evidence of ownership. If you do not provide photo identification or comply with the other procedures outlined above, you
will not be admitted to the Annual Meeting.
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The Annual Meeting will begin promptly on December 10, 2021,
at 10:30 a.m., EST. You should allow adequate time for check-in procedures.
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How can I vote my shares in person at the Annual Meeting?
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Shares held in your name as the shareholder of record may be voted in person at the Annual Meeting. Shares held beneficially in street
name may be voted in person at the Annual Meeting only if you obtain a legal proxy from the broker, bank or nominee that holds the shares
giving you the right to vote the shares. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy card
or voting instruction card as described herein so your vote will be counted if you later decide not to attend the Annual Meeting.
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What is the deadline for voting my shares?
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If you hold shares as the shareholder of record, your vote by proxy must be received before the polls close at the Annual Meeting.
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If you hold shares beneficially in street name, please follow
the voting instructions provided by your broker, bank or nominee. You may vote these shares in person at the Annual Meeting only if at
the Annual Meeting you provide a legal proxy obtained from your broker, bank or nominee.
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Is my vote confidential?
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A:
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Proxy instructions, ballots and voting tabulations that identify individual shareholders are handled in a manner that protects your
voting privacy. Your vote will not be disclosed either within the Company or to third parties except (i) as necessary to meet applicable
legal requirements, (ii) to allow for the tabulation of votes and certification of the vote and (iii) to facilitate a successful proxy
solicitation. Occasionally, shareholders provide written comments on their proxy card, which are then forwarded to our management.
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How are votes counted?
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A:
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For the election of directors, you may vote “FOR” any or all nominees or your vote may be “WITHHELD” with
respect to any or all nominees. For the other items of business, you may vote “FOR,” “AGAINST” or “ABSTAIN.”
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Where can I find the voting results of the Annual Meeting?
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A:
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We intend to announce preliminary voting results at the Annual Meeting and publish final voting results in a Current Report on Form
8-K to be filed with the Securities and Exchange Commission (“SEC”) within four business days after the Annual Meeting.
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Who will bear the cost of soliciting votes for the Annual Meeting?
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A:
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We are making this solicitation and will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy
materials and soliciting votes.
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We will also reimburse brokerage firms and nominees for their
expenses in forwarding proxy material to beneficial owners of our Common Stock. In addition, our officers and employees (none of whom
will receive any compensation therefore in addition to their regular compensation) may solicit proxies. Proxies may be solicited through
the mail and through telephonic or telegraphic communications to, or by meetings with, shareholders or their representatives.
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How can I obtain the Company’s corporate governance information?
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A:
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The following information is available in print to any shareholder who requests it:
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Second Restated Articles of Incorporation of Schmitt Industries, Inc.
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Second Restated Bylaws of Schmitt Industries, Inc. (the “Bylaws”)
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The charters of the following committees of the Board: the Audit Committee, the Nominating and Corporate Governance Committee and
the Compensation Committee
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Code of Ethics and Business Conduct
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Policy regarding shareholder communications with the Board
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How may I obtain the 2021 Form 10-K and other financial information?
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A:
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A copy of the 2021 Form 10-K is enclosed with this Proxy Statement. Shareholders may request another free copy of the 2021 Form 10-K
and other financial information by contacting us at:
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Schmitt Industries, Inc.
2765 N.W. Nicolai Street
Portland, Oregon 97210
Attention: Corporate Secretary
Alternatively, current and prospective investors can access
the 2021 Form 10-K at http://investor.schmitt-ind.com/sec-filings. We will also furnish any exhibit to the 2021 Form 10-K if specifically
requested. Our SEC filings are also available free of charge at the SEC’s website, www.sec.gov, and at the Investor Relations portion
of our website, http://investor.schmitt-ind.com/investor-relations.
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What if I have questions for the Company’s transfer agent?
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A:
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Please contact our transfer agent at the telephone number or address listed below with any questions concerning stock certificates,
transfer of ownership or other matters pertaining to your stock account.
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Equity Stock Transfer, LLC
Mail Address: 237 W 37th St. Suite 602
New York, NY 10018
Toll free for US and Canada: 212.575.5757
Outside of US and Canada: 1 212.575.5757
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Who can help answer my questions?
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A:
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If you have any questions about the Annual Meeting or how to vote or revoke your proxy, please contact us at:
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Schmitt Industries, Inc.
2765 N.W. Nicolai Street
Portland, Oregon 97210
Attention: Corporate Secretary
Corporate
Governance
Shareholder Communications with the Board
Any shareholder may contact the Board in writing
by addressing the communication to the Board of Directors of Schmitt Industries, Inc., c/o Corporate Secretary, 2765 N.W. Nicolai Street,
Portland, Oregon 97210.
Our Corporate Secretary has undertaken the responsibility
to forward all written shareholder correspondence to the appropriate director(s), except for spam, junk mail, mass mailings, customer
complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate
material. Our Corporate Secretary will determine, in his discretion, whether any response is necessary and may forward certain correspondence,
such as customer-related inquiries, elsewhere within our company for review and possible response. Comments or questions regarding our
accounting, internal controls or auditing matters will be referred to the Audit Committee. Comments or questions regarding the nomination
of directors will be referred to the Nominating Committee. Comments or questions regarding executive compensation will be referred to
the Compensation Committee. Comments or questions regarding other corporate governance matters will be referred to the appropriate Committee.
Board Leadership Structure
The Board does not have a policy on whether
or not the roles of Chairman of the Board and Chief Executive Officer should be separate. The Board believes that it should be free to
make a choice from time to time in any manner that is in the best interests of the Company and the shareholders. Currently, Mr. Zapata
serves as the Chief Executive Officer and as Chairman. The Board believes that this enables Mr. Zapata to ensure that the Board’s
agenda responds to strategic challenges, that the Board is presented with information required for it to fulfill its responsibilities,
and that Board meetings are as productive and effective as possible.
The Board does not have a lead independent director.
Given our current size and operating history,
we believe that the Board’s existing leadership structure is appropriate. The Board will continue to evaluate its role and the appropriateness
of its structure in the future.
Board Composition
Our business and affairs are managed under the
direction of our Board. The number of directors is determined by our Board, subject to the terms of our Charter and Bylaws. Our Board
currently consists of five members, three of which are independent directors.
Director Independence
Our Common Stock is listed for trading on The
Nasdaq Capital Market. Under Nasdaq rules, independent directors must comprise a majority of a listed company’s board of directors.
In addition, Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and
nominating and governance committees must be independent. Under Nasdaq rules, a director will only qualify as an “independent director”
if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the
exercise of independent judgment in carrying out the responsibilities of a director.
Audit committee members must also satisfy the
independence criteria set forth in Rule 10A-3 under the Exchange Act of 1934, as amended. In order to be considered independent for purposes
of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit
committee, the board of directors, or any other board committee: (i) accept, directly or indirectly, any consulting, advisory, or other
compensatory fee from the listed company or any of its subsidiaries; or (ii) be an affiliated person of the listed company or any of its
subsidiaries.
Our Board undertook a review of its composition,
the composition of its committees and the independence of each director. Based upon information requested from and provided by each director
concerning his or her background, employment and affiliations, including family relationships, our Board has determined that directors
Davidson, Zyngier and Tung, representing a majority of our directors, do not have any relationships that would interfere with the exercise
of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent”
as that term is defined under Nasdaq rules. In making these determinations, our Board considered the relationships that each non-employee
director has with our company and all other facts and circumstances our Board deemed relevant in determining their independence, including
the beneficial ownership of our capital stock by each non-employee director.
Director Compensation
In July 2019, the Board simplified the director
compensation structure. Directors are expected to attend, at a minimum, each quarterly meeting, and to be available to provide insight
and guidance of the strategy of the Company, as needed throughout the year.
Under this current policy, independent directors
are paid a $20,000 annual retainer, and the Chairman will receive a $30,000 annual retainer, paid quarterly. These retainers will be paid
in restricted stock units (“RSUs”) until the director has reached the minimum share ownership guidelines of three times their
annual retainer amount.
Further, the chairman and members of the Audit
Committee will receive an annual fee of $5,000 and $2,000, respectively, paid quarterly; the chairman and members of the Compensation
Committee will receive an annual fee of $2,000 and $1,000, respectively, paid quarterly; and the chairman and members of the Nominating
and Corporate Governance Committee will receive an annual fee of $1,000 and $500, respectively, paid quarterly. Directors may receive
their committee fees in cash regardless of their Company stock ownership level.
The Company also reimburses travel and lodging
expenses incurred in connection with attending meetings of the Board and its committees.
The following table presents information regarding
cash and non-cash compensation paid to non-employee directors of the Company for fiscal year 2021 (“Fiscal 2021”):
|
Name
|
|
Cash
|
|
Equity(1)
|
|
Total
|
|
Current Directors(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles Davidson
|
|
$
|
26,000
|
|
|
$
|
26,520
|
|
|
$
|
52,520
|
|
|
Andrew Hines
|
|
|
—
|
|
|
|
49,726
|
(3)
|
|
|
166,523
|
|
|
Steven Strom(4)
|
|
|
1,980
|
|
|
|
21,983
|
|
|
|
23,963
|
|
|
Lillian Tung(5)
|
|
|
12,847
|
|
|
|
19,285
|
|
|
|
32,132
|
|
_______________
|
|
(1)
|
The value of restricted stock units is granted to each applicable director have been determined in accordance with United States generally
accepted accounting principles.
|
|
|
(2)
|
Mr. Zyngier became a director of the Company in October 2021.
|
|
|
(3)
|
Does not include certain compensation paid to the Mr. Hines’ spouse in connection to services to the Company. See “Certain
Relationships and Related Transactions and Director Independence”.
|
|
|
(4)
|
Mr. Strom stepped down as a director in October 2021.
|
|
|
(5)
|
Ms. Tung became a director of the Company in October 2020.
|
Minimum Share Ownership Guidelines
In August 2019, the Board announced Minimum
Share Ownership Guidelines for Executives and Directors. The Board believes strongly that its directors and executives should have meaningful
share ownership in the Company.
Each Board member is expected to own, at a minimum,
that number of shares of Common Stock of the Company equal in value to three times their annual retention payment. Current directors will
have three years from the implementation of this policy to reach these minimum ownership guidelines. Given the illiquidity of the stock,
directors will receive their retention payment in RSUs until they achieve their minimum ownership threshold. Upon reaching this threshold,
directors will have the choice of cash or RSUs for future payments, as long as they remain above the share-ownership guidelines.
Board Role in Risk Oversight
Risk is inherent with every business, and how
well a business manages risk can ultimately determine its success. The Company faces a number of risks, including credit risk, interest
rate risk, liquidity risk, operational risk, strategic risk and reputation risk. Management is responsible for the day-to-day management
of risks the Company faces, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management.
In its risk oversight role, the Board has the
responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning
as designed. To do this, the Chairman of the Board meets regularly with management to discuss strategy and the risks facing the Company.
Senior management attends the Board meetings and is available to address any questions or concerns raised by the Board on risk management
and any other matters. The Chairman of the Board and independent members of the Board work together to provide strong, independent oversight
of the Company’s management and affairs through its standing committees and, when necessary, special meetings of independent directors.
Meetings
During Fiscal 2021, the Board held 14 meetings.
Each incumbent director serving as a director during Fiscal 2021 attended 75% or more of the aggregate of the total number of meetings
held by the Board and the total number of meetings held by all committees of the Board on which he served during the period that he served.
While the Company does not have a formal policy with regard to directors’ attendance at annual meetings, all then-serving members
of the Board attended the 2020 Annual Meeting of Shareholders.
Board of Director Committees
The Board has standing Audit, Compensation and
Nominating and Corporate Governance Committees. The Audit, Compensation and Nominating and Corporate Governance Committees operate pursuant
to written charters. The charters may be viewed online at www.schmitt-ind.com/corporate-governance. Each committee may obtain advice and
assistance from internal or external legal, accounting and other advisors. The members of the committees, each of whom has been determined
to be “independent” as defined by applicable rules of the Securities and Exchange Commission (the “SEC”) and the
NASDAQ Stock Market, are identified in the following table.
|
Name
|
Audit
|
Compensation
|
Nominating and
Corporate Governance
|
|
Charles Davidson
|
Chair
|
X
|
|
|
Andrew P. Hines
|
Chair
|
|
|
|
Lillian Tung
|
X
|
X
|
X
|
|
Alexandre Zyngier
|
X
|
X
|
Chair
|
Audit Committee. The Audit Committee
currently consists of Ms. Tung and Messrs. Davidson and Zyngier. Mr. Davidson chairs the committee. The Board has determined all current
members of the Audit Committee are independent under the rules of the SEC and the NASDAQ Stock Market, and each of them is able to read
and understand fundamental financial statements. The Board has determined that Charles Davidson qualifies as an “audit committee
financial expert” as defined by the rules of the SEC and the NASDAQ Stock Market. The Audit Committee is responsible for, among
other things, the engagement, compensation and oversight of the Company’s independent certified public accountants, the review of
the scope and results of the audit, and the review and evaluation of accounting procedures and internal controls within the Company. The
Audit Committee operates pursuant to a written charter which is available on the Company’s website (www.schmitt-ind.com). The Audit
Committee held 4 meetings in Fiscal 2021.
Compensation Committee. The Compensation
Committee currently consists of Ms. Tung and Messrs. Hines and Zyngier. Mr. Hines chairs the committee. The Board has determined that
all members of the Compensation Committee are independent under the rules of the SEC and the NASDAQ Stock Market. The Compensation Committee
reviews executive compensation, establishes executive compensation levels, and administers the Company’s stock option plans. The
Compensation Committee operates pursuant to a written charter which is available on the Company’s website (www.schmitt-ind.com).
The Compensation Committee held one meeting in Fiscal 2021.
Nominating and Corporate Governance Committee.
The Nominating and Corporate Governance Committee (the “Nominating Committee”) currently consists of Ms. Tung and Messrs.
Davidson and Zyngier. Mr. Zyngier chairs the committee. The Board has determined that all members of the Nominating Committee are independent
under the rules of the SEC and the NASDAQ Stock Market. The Nominating Committee assists the Board in director selection, identifying
and assessing each candidate based upon his or her background, skills and experience and in light of the needs of the Board at that time.
The committee operates pursuant to a written charter which is available on the Company’s website (www.schmitt-ind.com). The Nominating
Committee held one meeting in Fiscal 2021.
Code of Ethics and Business Conduct
We have adopted a Code of Ethics and Business
Conduct (the “Code of Ethics”) that applies to all employees, officers and directors of the Company. A copy of the Code of
Ethics is publicly available on our website at http://investor.schmitt-ind.com/corporate-governance. Amendments to the Code of Ethics
or any grant of a waiver from a provision of the Code of Ethics requiring disclosure under applicable SEC rules will also be disclosed
on our website.
Employee, Officer and Director Hedging
Pursuant to the Company’s insider trading
policy, no member of the Board, officer, employee, consultant, or other person associated with the Company may (i) trade in any interest
or position relating to the future price of the Company’s securities, such as options, warrants, puts, calls or short sales, or
use the Company stock as collateral for margin loans; or (ii) use Company securities as covered collateral for a line of credit, loan,
or other financing mechanism. The Company believe this policy has the effect of restricting the ability of officers, directors and employees
to hedge or offset against any decrease in the market value of the Company’s equity securities.
Director Qualifications
There are certain minimum qualifications for
Board membership that director candidates should possess, including strong values and discipline, high ethical standards, a commitment
to full participation on the Board and its committees, and relevant career experience. The Nominating Committee also evaluates candidates
for Board membership based on individual skills, experience and demonstrated abilities that help meet the current needs of the Board,
such as experience or expertise in some of the following areas: global business, science and technology, finance and/or economics, competitive
positioning, corporate governance, public affairs, and experience as an executive officer. Other factors that are considered include independence
of thought, meeting applicable director independence standards (where independence is desired) and absence of conflicts of interest. The
Nominating Committee may modify the minimum qualifications and evaluation guidelines from time to time as it deems appropriate. The Nominating
Committee does not have a formal policy with respect to diversity; however, the Board and the Nominating Committee believe that it is
essential that Board members represent diverse viewpoints. In the context of the existing composition and needs of the Board and its committees,
the Nominating Committee considers various factors, including, but not limited to, independence, age, diversity (which, in this context,
means race, ethnicity and gender), integrity, skills, financial and other expertise, breadth of experience and knowledge about our business
or industry.
Shareholder Nominations for Director and
Related Procedures
The Nominating Committee will consider recommendations
by shareholders of individuals to consider as candidates for election to the Board. Any such recommendations should be submitted to Schmitt
Industries, Inc., c/o Corporate Secretary, 2765 N.W. Nicolai Street, Portland, Oregon 97210. Historically, the Company has not had a formal
policy concerning shareholder recommendations to the Nominating Committee (or its predecessors) because it believes that the informal
consideration process in place to date, based in part on the minimum criteria as described in “Director Qualifications” above,
has been adequate given that the Company has never received any director recommendations from shareholders. The absence of such a policy
does not mean, however, that a recommendation would not have been considered had one been received. The Nominating Committee intends to
periodically review whether a more formal policy should be adopted.
The Bylaws of the Company permit shareholders
to make nominations for the election of directors, if such nominations are made pursuant to timely notice in writing to the Company’s
Secretary. To be timely, notice must be delivered to, or mailed to and received at, the principal executive offices of the Company not
less than 60 days nor more than 90 days prior to the date of the meeting, provided that at least 60 days’ notice or prior public
disclosure of the date of the meeting is given or made to shareholders. If less than 60 days’ notice or prior public disclosure
of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be received by the Company not
later than the close of business on the tenth business day following the date on which such notice of the meeting was mailed or such public
disclosure was made. A shareholder’s notice of nomination must also set forth certain information specified in Section 2.3.2 of
the Bylaws concerning each person the shareholder proposes to nominate for election and the nominating shareholder.
Environmental,
Social, and Governance Principles
In Fiscal 2022, we intend to formalize and develop
environmental, social, and governance programs as well as to increase transparency and disclosure about these programs. As reflected in
this proxy statement, in Fiscal 2021 we continued our commitment to strong corporate governance principles, which include committees of
the board comprised of independent directors, prohibitions on pledging and hedging our stock, and strong corporate ethics and compliance
policies such as our Code of Ethics.
Audit
Committee Report
The Audit Committee has reviewed and discussed
the consolidated financial statements for the fiscal year ended May 31, 2021 with both management and UHY LLP, the Company’s independent
registered public accounting firm. In its discussion, management has represented to the Audit Committee that the Company’s consolidated
financial statements for the fiscal year ended May 31, 2021 were prepared in accordance with generally accepted accounting principles.
The Audit Committee meets with the Company’s
independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their
evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting. The Audit Committee
has discussed with UHY LLP the matters required to be discussed by Statement on Auditing Standard No. 16, “Communications with Audit
Committees,” issued by the Public Company Accounting Oversight Board. UHY LLP reported to the Audit Committee regarding the critical
accounting estimates and practices and the estimates and assumptions used by management in the preparation of the audited consolidated
financial statements as of May 31, 2021 and for the fiscal year then ended, all alternative treatments of financial information within
generally accepted accounting principles that have been discussed with management, the ramifications of use of such alternative treatments
and the treatment preferred by UHY LLP.
UHY LLP provided a report to the Audit Committee
describing UHY LLP’s internal quality-control procedures and related matters. UHY LLP also provided to the Audit Committee the written
disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding UHY LLP’s
communications with the Audit Committee concerning independence, and the Audit Committee discussed with UHY LLP its independence. When
considering UHY LLP’s independence, the Audit Committee considered, among other matters, whether UHY LLP’s provision of non-audit
services to the Company is compatible with maintaining the independence of UHY LLP. All audit and permissible non-audit services in 2021
and 2020 were pre-approved pursuant to these procedures.
Based on the Audit Committee’s review
of the audited financial statements and the various discussions noted above, the Audit Committee recommended to the Board that the audited
consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2021.
|
|
AUDIT COMMITTEE
|
|
|
|
|
|
Charles Davidson (Chairman)
|
|
|
Steven Strom
|
|
|
Lillian Tung
|
Proposal
No. 1: Election of Directors
There are two nominees for election to the
Board at the Annual Meeting: Michael Zapata and Alexandre Zyngier. Each nominee currently serves as a director of the Company.
Mr. Zapata is being nominated to serve for a
three-year term and until his successor is duly elected and qualified. Mr. Zyngier is being nominated to serve for a two-year term and
until his successor is duly elected and qualified. Except where authority to vote for directors has been withheld, it is intended that
the proxies received pursuant to this solicitation will be voted “FOR” the nominees named below. If for any reason any nominee
does not stand for election, such proxies will be voted in favor of the remainder of those named and may be voted for substitute nominees
in place of those who do not stand. Management has no reason to expect that any of the nominees will not stand for election.
Andrew Hines, who currently serves as a director,
is not standing for re-election.
The following table and paragraphs set forth
information regarding our executive officers, continuing directors, and nominees for election to the Board, including the business experience
for the past five years (and, in some instances, for prior years) of each of our executive officers and directors and the experiences
and skills that led to the conclusion that the nominees should serve as directors.
|
NAME
|
AGE
|
POSITION
|
|
Nominees for Election:
|
|
|
|
Michael R. Zapata (1)
|
43
|
Chief Executive Officer, President and Chairman of the Board of Directors
|
|
Alexandre Zyngier (2)
|
51
|
Director and Chairman of the Nominating and Corporate Governance Committee
|
|
Continuing Directors/Executive Officers:
|
|
Charles Davidson
|
62
|
Director and Chairman of the Audit Committee
|
|
Lillian Tung
|
38
|
Director
|
|
Philip Bosco (3)
|
52
|
Chief Financial Officer and Treasurer
|
_______________
|
|
(1)
|
Mr. Zapata was appointed Executive Chairman and President, effective December 1, 2018, and Chief Executive Officer effective July
30, 2019.
|
|
|
(2)
|
Mr. Zyngier was appointed as director to the Board in October 2021.
|
|
|
(3)
|
Mr. Bosco was appointed Chief Financial Officer and Treasurer, effective December 1, 2020
|
Nominees for Election
Michael R. Zapata has served as a director since
October 2018, as the Company’s Executive Chairman and President since December 2018, and as Chief Executive Officer since July 2019.
Mr. Zapata is the founder and Managing Member of Sententia Capital Management, LLC (“Sententia”), a value investing focused
investment management firm. Since inception in 2012, the firm has invested in deep value public equities in a concentrated portfolio.
The firm employs a rigorous research process and attempts to engage constructively with management when appropriate. Prior to Sententia,
Mr. Zapata served nearly 10 years in the U.S. Navy. During his service from 2001 to 2010, he held various leadership roles during the
Global War on Terror. Deploying to locations including Iraq, Afghanistan, Africa, the Middle East and the Arabian Peninsula, he brings
valuable insight and expertise in intelligence fusion, operational execution, strategic planning and risk mitigation. He received his
B.S. from Texas A&M University, where he was recognized as a Dougherty Award Recipient. He received his M.B.A. from Columbia University
as a student in the Heilbrunn Center for Value Investing. He is a director of Communication Systems, Inc. He also serves as a director
of Tip of the Spear Foundation, a non-profit dedicated to supporting Elite Operators and their families during times of need.
Mr. Zapata’s qualifications to serve on
our Board include his years of business experience as an executive at various companies and as an investment professional. In addition,
Mr. Zapata’s role as the Chief Executive Officer of the Company provides the Board with invaluable insight into the management and
daily operations of the Company.
Alexandre Zyngier was appointed as a director
in October 2021. He is the founder of Batuta Advisors and has over twenty years of experience in investment advisory opportunities in
restructuring, turnaround and event driven situations. Mr. Zyngier founded Batuta in 2013 and was Lead Director at AudioEye, Inc., Director
Eileen Fisher, Inc., Director Torchlight Energy Resources, Inc., Chairman of the Board of Vertis Inc., a Director of Island One LLC, Executive
Chairman of DTV America Corporation and other companies. Mr. Zyngier is the trustee for HFZ Unsecured Creditors, Linc Energy and sole
liquidating Director for Tetralogic Pharmaceuticals Inc. Mr. Zyngier is also an expert witness in Delaware Bankruptcy Court. Mr. Zyngier
has worked as a Portfolio Manager, investing in public and private distressed opportunities, at Alden Global Capital (2009-2013), Deutsche
Bank Co. (2007-2008) and Goldman Sachs & Co. (2003-2007). During this time, his focus was on distressed investments representing fulcrum
securities in the Capital Structure. He was also a strategy consultant at McKinsey & Company (1997-2000). Prior to that, he was a
technical brand manager at Procter & Gamble (1991-1995), focused on Latin America Beauty Care Products. Mr. Zyngier has an MBA with
a concentration in Finance and Accounting from the University of Chicago (1997) and a bachelor’s degree in Chemical Engineering
from UNICAMP (1991).
Mr. Zyngier’s qualifications to serve
on our Board include his years of investment and advisory experiences with various companies.
Continuing Directors/Executive Officers
Charles Davidson has served as a director since
May 2016. Mr. Davidson has served as Chief Executive Officer of Attensa Corporation, an enterprise software provider, since August 2014.
He was the CEO of Attensa’s predecessor company Leeward, Inc. from 2009 until 2014, when it was merged into Attensa Corporation,
and was Chief Executive Officer of Attensa, Inc. from 2007 until 2009. From 2000 to 2003, Mr. Davidson was Chief Executive Officer and
President of StatiaFX, a developer of software solutions for financial advisory services. When StatiaFX was acquired in 2003 by Financial
Profiles, a business unit of Hanover Insurance Group, Mr. Davidson became Vice President for Strategy and Business Development of Financial
Profiles and served in that function until 2006 when the business was sold. From 1994 to 1999, Mr. Davidson was Chief Operating Officer
and a member of the Board of Directors of the Crabbe Huson Group. In 1993, he co-founded Co-Operations, Inc. and served as its Chairman
until 2000. Mr. Davidson holds a B.S. degree in Business from the University of Oregon and a J.D. magna cum laude from Northwestern School
of Law, Portland. He is a member (inactive) of the bar associations of Oregon and Washington.
Mr. Davidson’s qualifications to serve
on our Board include his years of business experience as an executive at various companies.
Lillian Tung has served as a director since
October 2020. She is the co-founder of Fur and has more than a decade of experience in marketing and entrepreneurship. Prior to starting
Fur, Ms. Tung worked at L’Oréal USA on the Maybelline Global Marketing team from 2011 to 2015. Prior to L’Oréal,
Ms. Tung served in the Consumer Marketing division of Time Inc. from 2007 – 2008, and as an analyst for JPMorgan Chase Inc. in the
Financial Sponsors Group from 2005 to 2007. She currently serves on the board of the Horace Mann School Alumni Council. Ms. Tung has an
MBA with a concentration in Management and Marketing from Columbia Business School (2011) and a bachelor’s degree in East Asian
Languages and Civilizations from Harvard University (2005) where she was on the dean’s list for three years.
Ms. Tung’s broad business experience across
marketing channels with a strong emphasis on digital acquisition, brand development, and consumer engagement qualifies her to serve on
our Board.
Philip Bosco was appointed as Chief Financial
Officer and Treasurer, effective December 1, 2020. Mr. Bosco has a wide range of financial experience across a diverse set of industries
and companies, including start-ups, turnaround situations, and established organizations. Prior to joining Schmitt, Mr. Bosco served as
CFO Americas for Intega Group Limited, a publicly held company, with the Americas division generating $200M of revenue and including 1,100
staff and over 50 offices. Prior to that, Mr. Bosco worked for Shell Oil Company in a variety of global and regional roles, both financial
and commercial, across the chemicals, refining, and distribution businesses. Mr. Bosco also served as CFO for a start-up biofuels joint
venture seeking to commercialize its core technology. Mr. Bosco received a Bachelor of Science in Accounting from Marquette University,
and his Master of Business Administration from the University of Houston. He is a Certified Public Accountant licensed in the State of
Texas.
Family Relationships
There are no family relationships among our
executive officers and directors.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our
directors, executive officers and holders of more than 10% of our Common Stock to file with the SEC initial reports of ownership and reports
of changes in the ownership of Common Stock and other equity securities of the Company. Such persons are required to furnish us with copies
of all Section 16(a) filings.
Based upon a review of the copies of the forms
furnished to us, we believe that our directors, officers and holders of more than 10% of our Common Stock complied with all applicable
filing requirements during the 2021 fiscal year other than the following Company Form 4 filings: (i) Ms. Tung on November 6, 2020, (ii)
Mr. Zapata, Mr. Bosco, Mr. Schmidt (our former Chief Financial Officer), Mr. Davidson and Mr. Strom on November 30, 2020, (iii) Mr. Hines
on December 2, 2020, (iv) Ms. Tung, Mr. Hines and Mr. Strom on January 19, 2021, (v) Ms. Tung and Mr. Strom on April 21, 2021, (vi) Mr.
Hines on April 22, 2021 and (vii) Mr. Hines on April 26, 2021 and May 6, 2021. The Form 4 filings primarily relate to the grant or vesting
of restricted stock units of which the Company had data entry problems that resulted in delayed filings on behalf of named directors.
Related Person Transactions and Certain Relationships
Mr. Zapata is the founding member of Sententia,
a value-based investment firm, of which he has served as general partner since its inception in 2012. The Company entered into a consulting
agreement with Sententia, where Sententia has agreed to provide executive management services to the Company, which shall be performed
by Mr. Zapata in his role as CEO. The Company and Mr. Zapata transitioned from the consulting agreement to full employment of Mr. Zapata
in 2020. For further discussion of the CEO agreement, see the section title “Executive Compensation—Employment Agreements.”
Sherry Hines, the wife of director Andrew Hines,
was engaged in an independent contractor agreement with the Company, effective July 4, 2020, to provide human resource services for Ample
Hills Creamery. She was granted 10,000 restricted stock units for her initial term. The Company entered into a subsequent agreement, effective
October 4, 2020, whereby she would be granted cash or additional stock each quarter for continued services, with total compensation not
exceeding $120,000. Due to Ms. Hines’ compensation. Mr. Hines was no longer considered an independent director for the Audit Committee
and stepped down from his position on the Audit Committee.
Procedures for Review and Approval of Transactions with Related
Parties
The Board has delegated to the Audit Committee
the responsibility to review and approve all transactions or series of transactions in which we or a subsidiary is a participant, the
amount involved exceeds $120,000 and a “related person” (as defined in Item 404 of Regulation S-K) has a direct or indirect
material interest. Transactions that fall within this definition will be referred to the Audit Committee for approval, ratification or
other action. Based on its consideration of all of the relevant facts and circumstances, the Audit Committee will decide whether or not
to approve the transaction and will approve only those transactions that are in the best interests of the Company.
Vote Required
Each nominee receiving a plurality of the affirmative
(“FOR”) votes cast at the Annual Meeting will be elected to the Board.
Recommendation of the Board
OUR BOARD UNANIMOUSLY RECOMMENDS SHAREHOLDERS
VOTE “FOR” THE ELECTION OF OUR DIRECTOR NOMINEES MR. ZAPATA AND MR. ZYNGIER
Proposal
No. 2: Advisory Vote on Executive Compensation
The Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010, or the “Dodd-Frank Act,” enables shareholders to vote to approve, on an advisory, non-binding basis,
the compensation of the named executive officers as disclosed in this Proxy Statement in accordance with the SEC’s rules.
We are asking shareholders to indicate their
support for the compensation of our named executive officers named in the “Summary Compensation Table” included in this Proxy
Statement. This proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to express their views
on the compensation of our named executive officers. Accordingly, we will ask shareholders to vote “FOR” the following resolution
at the Annual Meeting:
“RESOLVED, that the Company’s shareholders
approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for
the 2021 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including
the Summary Compensation Table and the other related tables and disclosure.”
The say-on-pay vote is advisory, and therefore
not binding on the Company, the Compensation Committee or the Board. The Board and the Compensation Committee value the opinions of our
shareholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy
Statement, we will consider our shareholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary
to address those concerns.
Vote Required
The affirmative (“FOR”) vote of
the majority of the shares entitled to vote present in person or by proxy at the Annual Meeting is required to approve the compensation
of our named executive officers.
Recommendation of the Board
THE BOARD UNANIMOUSLY RECOMMENDS SHAREHOLDERS
VOTE “FOR” THE ADOPTION OF THE RESOLUTION APPROVING EXECUTIVE COMPENSATION.
Executive
Compensation
Performance Based Pay Policy
In August 2019, the Board announced the implementation
of a Performance Based Pay for Executives Policy. The primary goal of this policy it to align executive incentives with Company performance
and long-term shareholder interests.
Our compensation program aims to achieve the
following main objectives:
|
|
·
|
link pay to company performance;
|
|
|
·
|
align our executives’ interest with our shareholders;
|
|
|
·
|
provide incentives that motivate and reward for achievement of our key performance goals that increase stakeholder value over the
long-term; and
|
|
|
·
|
attract, retain and reward highly qualified executives;
|
To accomplish this, the executive compensation
program will generally consist of three principle components: base salary, annual-performance based bonuses, and long-term incentive compensation.
These principles are described in detail in the following table.
|
Principle Components
|
Objectives
|
Key Features
|
|
Base Salary (fixed cash)
|
Provides a base level of compensation for financial stability for performing job functions.
|
Fixed compensation that is periodically reviewed and adjusted as needed; determined based on a number of factors, including individual performance, experience, skills, level of responsibility and level of complexity of the position as well as the competitive marketplace; and the overall performance of our Company.
|
|
Performance Bonus (at-risk equity and cash)
|
Aligns and rewards executives for reaching individual and Company annual performance goals.
|
Bonuses are dependent upon specific Company performance objectives consistent with our long-term strategic plan and individual performance objectives that relate to the executive’s position and expected contribution toward reaching Company goals, generally determined by the Compensation Committee and communicated at the beginning of the year. Actual bonus amounts earned are determined after the end of the year, taking into account achievement of Company and individual performance objectives.
|
|
Long-Term Incentive (at-risk equity)
|
Aligns and rewards for long-term Company performance; aligns executive’s interests with shareholder interests and changes in shareholder value.
|
Individual awards are determined based on a number of factors, including
long-term Company and individual performance.
Equity grants have historically been provided primarily in the form of
stock options. More recently, restricted stock unit and awards grants have been awarded.
|
Minimum Share Ownership Guidelines
In August 2019, the Board announced Minimum
Share Ownership Guidelines for Executives and Directors. The Board believes strongly that its executives and directors should have meaningful
share ownership in the Company.
Each executive is expected to own, at a minimum,
that number of shares of Company Common Stock equal in value to a multiple of his or her annual base salary ranging from a low of one
time for the Chief Financial Officer to a high of three times for the Chief Executive Officer. Executives will have three years from the
implementation of this policy to reach these minimum ownership guidelines. Executives will receive any bonus in RSUs until they achieve
their minimum ownership threshold. Upon reaching this threshold, Executives will have the choice of cash or RSUs for future bonus payments,
as long as they remain above the share ownership guidelines.
Summary Compensation Table
The following table presents the dollar amounts
of various forms of compensation earned by our named executive officers (“NEOs”) during the years noted:
|
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock Awards
($)(1)
|
|
Option Awards
($)(2)
|
|
All Other Compensation
($)
|
|
Total
($)
|
|
Michael R. Zapata(3)
|
|
|
2021
|
|
|
$
|
222,667
|
|
|
$
|
—
|
|
|
$
|
57,543
|
|
|
|
—
|
|
|
$
|
18,000
|
|
|
$
|
298,210
|
|
|
Chairman, President and CEO
|
|
|
2020
|
|
|
|
140,000
|
|
|
|
152,408
|
|
|
|
137,012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
429,420
|
|
|
Philip Bosco(4)
|
|
|
2021
|
|
|
|
121,875
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
121,875
|
|
|
CFO and Treasurer
|
|
|
2020
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Jamie Schmidt(5)
|
|
|
2021
|
|
|
|
95,756
|
|
|
|
—
|
|
|
|
127,024
|
|
|
|
—
|
|
|
|
—
|
|
|
|
223,780
|
|
|
Former CFO and Treasurer
|
|
|
2020
|
|
|
|
59,292
|
|
|
|
92,500
|
|
|
|
31,215
|
|
|
|
—
|
|
|
|
82,000
|
|
|
|
265,007
|
|
|
|
(1)
|
The fair value of these stock awards was computed in accordance with methods allowed under FASB ASC Topic 718 “Compensation
- Stock Compensation.” The stock awards were performance based awards and triggered in various tranches as the Company’s stock
price appreciated.
|
|
|
(2)
|
Value of stock options awards was calculated using Black Scholes pricing model with assumptions discussed in Note 7 to the Company’s
financial statements as of and for the year ended May 31, 2021.
|
|
|
(3)
|
Mr. Zapata was appointed Executive Chairman and President, effective December 1, 2018. Mr. Zapata was appointed Chief Executive Officer,
effective July 30, 2019.
|
|
|
(4)
|
Mr. Bosco was appointed Chief Financial Officer, effective December 1, 2020.
|
|
|
(5)
|
Mr. Schmidt transitioned from Chief Financial Officer of the Company, effective December 1, 2020.
|
Oversight of Executive Compensation
The Board has delegated the responsibility for
fixing the compensation of the NEOs to the Compensation Committee. The Compensation Committee consists entirely of independent, non-employee
directors. The Compensation Committee approves all compensation and awards to executive officers.
Employment Agreements
Michael R. Zapata. Mr. Zapata is the
founding member of Sententia Capital Management, LLC, a value-based investment firm, of which he has served as general partner since its
inception in 2012. The Company entered into a consulting agreement with Sententia, pursuant to which Sententia has agreed to provide executive
management services to the Company, which shall be performed by Mr. Zapata. As contemplated by the terms of the agreement, the Company
pays $14,000 directly to Sententia per month during the term of the agreement, which was defined as July 30, 2019 through July 31, 2020.
Effective August 1, 2020, the Company extended this agreement on a month-to-month basis under similar terms. In addition, pursuant to
the consulting agreement, Mr. Zapata was granted 17,777 restricted stock units on August 6, 2019 that vested on such date, and Mr. Zapata
may receive a performance-based bonus to be paid in additional restricted stock units with a maximum cash value equivalent of $168,000.
Effective September 30, 2020, Mr. Zapata entered
into an employment agreement with the Company. Pursuant to the terms of his agreement, Mr. Zapata became an employee of the Company. In
recognition of his services, Mr. Zapata is entitled to receive (i) an annualized salary of $250,000, and (ii) upon achieving certain performance-based
objectives determined by the Board or its Compensation Committee, a bonus of up to 50% of his annual salary, payable half in cash and
half in stock. Such performance-based objectives will be established by the Board as soon as reasonably practicable and reevaluated on
an annual basis by mutual agreement of Mr. Zapata and the Board or its Compensation Committee.
Philip Bosco. Mr. Bosco was named the
Company’s Chief Financial Officer and Treasurer effective December 1, 2020. The Company entered into an employment agreement with
Mr. Bosco as of November 16, 2020. As contemplated by the terms of the agreement, the Company will pay to Mr. Bosco an annual salary of
$225,000. Mr. Bosco was granted 9,222 shares of restricted stock upon execution of his agreement. The employment agreement allows for
performance-based bonus to be paid in additional restricted stock units with a maximum cash value equivalent of $67,500.
Outstanding Equity Awards at Fiscal Year
End
The following table presents information regarding
our NEOs’ unexercised option and other equity incentive plan awards to purchase our Common Stock as of May 31, 2021:
|
|
Option Awards
|
Other Equity Incentive
Plan Awards
|
|
Name
|
Number of Securities Underlying Unexercised Options
Exercisable
(#)
|
Number of Securities Underlying Unexercised Options
Unexercisable
(#)
|
Option Exercise Price
($)
|
Option Expiration
Date
|
Equity Incentive Plan Awards:
Number of Unearned Shares, Units or Other Rights
That Have Not Vested
(#)
|
Equity Incentive Plan Awards:
Market or Payout Value of Unearned Shares, Units
or Other Rights That Have Not Vested ($)(4)
|
|
Michael R. Zapata(1)
|
—
|
—
|
—
|
—
|
—
|
$—
|
|
Philip Bosco(2)
|
—
|
—
|
—
|
—
|
9,222
|
$49,799
|
|
Jamie Schmidt(3)
|
—
|
—
|
—
|
—
|
—
|
—
|
|
|
(1)
|
Mr. Zapata was appointed Executive Chairman and President, effective December 1, 2018.
|
|
|
(2)
|
Mr. Bosco was appointed Chief Financial Officer, effective December 1, 2020.
|
|
|
(3)
|
Mr. Schmidt transitioned as Chief Financial Officer of the Company, effective December 1, 2020.
|
|
|
(4)
|
The market value of the unearned shares is based on the closing price on May 31, 2021 of $5.40.
|
Compensation of Non-Employee Directors
The Compensation Committee periodically awards
directors with equity-based compensation. Please see “Director Compensation” for a summary of the compensation to non-employee
directors.
Stock
Owned by Management and Principal Shareholders
The following table presents information with
respect to the beneficial ownership of our Common Stock as of October 25, 2021, by:
|
|
·
|
each person, or group of affiliated persons, known to us to beneficially own more than 5% of the outstanding Common Stock;
|
|
|
·
|
each of our directors and NEOs; and
|
|
|
·
|
all of our directors and executive officers as a group.
|
The amounts and percentages of Common Stock
beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities.
The information relating to our 5% beneficial owners is based on information we received from such holders. Under the rules of the SEC,
a person is deemed to be a “beneficial owner” of a security if that person has or shares voting power, which includes the
power to vote or direct the voting of a security, or investment power, which includes the power to dispose of or to direct the disposition
of a security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial
ownership within 60 days. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person
may be deemed to be a beneficial owner of securities as to which such person has no economic interest. The percentage of beneficial ownership
is based on 3,808,068 shares of Common Stock outstanding as of October 25, 2021. Except as otherwise noted below, the address of persons
listed in the following table is: c/o Schmitt Industries, Inc., 2765 N.W. Nicolai Street, Portland, Oregon 97210.
|
|
|
Shares Beneficially Owned
|
|
Name of Beneficial Owner
|
|
Number
|
|
Percentage
|
|
Persons known to beneficially own more than 5%
|
|
|
|
|
|
|
|
|
|
GAMCO Investors, Inc.(1)
|
|
|
610,000
|
|
|
|
16.1
|
%
|
|
Sententia Capital Management LLC(2)
|
|
|
474,235
|
|
|
|
12.5
|
%
|
|
Renaissance Technologies LLC(3)
|
|
|
258,048
|
|
|
|
6.8
|
%
|
|
Directors and NEOs
|
|
|
|
|
|
|
|
|
|
Michael R. Zapata(2)(4)
|
|
|
538,040
|
|
|
|
14.2
|
%
|
|
Philip Bosco(5)
|
|
|
0
|
|
|
|
*
|
|
|
Charles Davidson(6)
|
|
|
41,967
|
|
|
|
1.1
|
%
|
|
Andrew P. Hines(7)
|
|
|
65,220
|
|
|
|
1.7
|
%
|
|
Alexandre Zyngier(8)
|
|
|
3,886
|
|
|
|
*
|
|
|
Lillian Tung(9)
|
|
|
5,134
|
|
|
|
*
|
|
|
Jamie Schmidt(10)
|
|
|
0
|
|
|
|
|
|
|
All executive officers and directors as a group (6 persons)(11)
|
|
|
654,247
|
|
|
|
17.1
|
%
|
_______________
|
|
*
|
Represents holdings of less than 1% of shares outstanding.
|
Please note that the figures represented in the table above
exclude RSUs that have not yet vested.
|
|
(1)
|
The address of GAMCO Investors, Inc. is One Corporate Center, Rye, NY 10580. This disclosure is based on information contained in
a Schedule 13D/A filed by GAMCO Investors, Inc. with the SEC on August 27, 2020.
|
|
|
(2)
|
Michael R. Zapata, as the managing member of Sententia Capital Management, LLC, general partner of Sententia Group, LP, and as the
managing member of Sententia Capital Management, LLC, may be deemed to beneficially own the shares of Common Stock beneficially owned
by Sententia Capital Management LLC. Mr. Zapata disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest
therein. This disclosure is based on information contained in a Schedule 13D/A filed by Sententia Capital Management LLC with the SEC
on December 17, 2019 and a Form 4 filed by Michael Zapata with the SEC on October 21, 2021.
|
|
|
(3)
|
The address of Renaissance Technologies LLC is 800 Third Avenue, New York, NT 10022. This disclosure is based on information contained
in a Schedule 13G/A filed by Renaissance Technologies LLC with the SEC on February 14, 2020.
|
|
|
(4)
|
Includes 63,805 shares of Common Stock held directly by Mr. Zapata as of October 25, 2021.
|
|
|
(5)
|
Includes 0 shares of Common Stock held as of October 25, 2021.
|
|
|
(6)
|
Includes 26,967 shares of Common Stock held as of October 25, 2021, and options to purchase 15,000 shares of Common Stock at a strike
price of $1.70, all of which were vested on October 25, 2021.
|
|
|
(7)
|
Includes 45,086 shares of Common Stock held as of October 25, 2021, and 20,134 shares of Common Stock held by Mr. Hines’ spouse.
|
|
|
(8)
|
Includes 3,886 shares of Common Stock held as of October 25, 2021.
|
|
|
(9)
|
Includes 5,134 shares of Common Stock held as of October 25, 2021.
|
|
|
(10)
|
Jamie Schmidt transitioned from Chief Financial Officer of the Company, effective December 1, 2020.
|
|
|
(11)
|
Consists of 654,247 shares held as of August 31, 2021, 15,000 shares of Common Stock issuable upon exercise of options with a strike
price of $1.70. Excludes shares beneficially owned by Mr. Schmidt, who, as of December 1, 2020 is no longer an executive officer of the
Company.
|
Proposal
No. 3: Ratification of Appointment of Independent Registered Public Accounting Firm
The Audit Committee has appointed UHY LLP as
our independent registered public accounting firm for the fiscal year ending May 31, 2022. Although this appointment does not require
ratification, the Board has directed that the appointment of UHY LLP be submitted to shareholders for ratification due to the significance
of the appointment. If shareholders do not ratify the appointment of UHY LLP, the Audit Committee will consider the appointment of another
independent registered public accounting firm.
UHY LLP served as the Company’s independent
registered public accounting firm for the fiscal year ended May 31, 2021, while Moss Adams LLP was the Company’s independent registered
public accounting firm for the fiscal year ended May 31, 2020. A representative of UHY LLP is expected to be present at the Annual Meeting,
will have an opportunity to make a statement and will be available to respond to appropriate questions.
Change in Independent Accounting Firm
On May 13, 2021, Moss Adams LLP (“Moss
Adams”), the Company’s former independent registered public accounting informed the Company of its decision to resign as auditors
of the Company, effective May 13, 2021. Moss Adams informed the Company and the Audit Committee that the decision was based on previously
identified material weaknesses as well as resource considerations to support the audit. As described below, the Company has engaged an
outside advisor to assess and remediate the material weakness and increase the efficiency of its reporting processes.
Moss Adams’ reports on the Company’s
consolidated financial statements as of and for the fiscal years ended May 31, 2019 (“Fiscal 2019”) and May 31, 2020 (“Fiscal
2020”) did not contain any adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit
scope, or accounting principles. During Fiscal 2019 and Fiscal 2020, and in the subsequent interim period through May 13, 2021, there
were no disagreements with Moss Adams (within the meaning of Item 304(a)(1)(iv) of Regulation S-K) on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure that if not resolved to Moss Adam’s satisfaction, would
have caused Moss Adams to make reference thereto in their reports on the financial statements for such years.
During Fiscal 2019 and Fiscal 2020, and in the
subsequent interim period through the date of this Proxy Statement, there have been no reportable events (as defined in Item 304(a)(1)(v)
of Regulation S-K), except as noted below.
As disclosed in Item 9A of the Company’s
Annual Report on Form 10-K for the fiscal year ended May 31, 2020 filed with the Securities and Exchange Commission (the “SEC”)
on August 31, 2020, the Company identified the following control deficiencies that constituted material weaknesses in the Company’s
internal control over financial reporting: (i) deficiencies in the design and operation of internal controls over segregation of duties;
and (ii) ineffective management review over the accounting reconciliations, including accounting for inventory, accrued liabilities and
taxes.
As disclosed in Item 4 of the Company’s
Quarterly Reports on Form 10-Q for the fiscal quarters ended February 28, 2021 and August 31, 2021, filed with the SEC on April 22, 2021
and October 20, 2021, respectively, and in Item 9A of the 2021 Form 10-K, the Company identified the following control deficiencies that
constituted material weaknesses in the Company’s internal control over financial reporting: (i) insufficient and imprecise management
review controls in the financial close process relating to the accounting for stock based compensation, accounts receivable, accounts
payable, inventory, accrued liabilities, income taxes, expense classification, depreciation of property and equipment, and earnings per
share and (ii) an insufficient number of qualified accounting personnel governing the financial close and reporting process.
On February 12, 2021, the Company engaged consultants
to advise the company with respect to the material weaknesses including a risk assessment, business process review, and preparation of
an implementation and remediation plan based on their analysis. On May 12, 2021, the Company extended the engagement to include the implementation
of the remediation plan to address the identified deficiencies and material weaknesses.
The Company provided Moss Adams with a copy
of the disclosures required under this Item 4.01(a), and has requested Moss Adams to furnish the Company with a letter addressed to the
Securities and Exchange Commission stating whether Moss Adams agrees with the above statements made by the Company in this Item 4.01(a)
and, if not, stating the respects in which it does not agree. Moss Adams’s letter is filed as Exhibit 16.1 to the Company’s
Current Report on Form 8-K, filed with the SEC on May 18, 2021.
Audit and Non-Audit Fees
Audit and Related Fees
For the fiscal years ended May 31, 2021 and
May 31, 2020, Moss Adams LLP and their affiliates billed, or have estimated they will bill, a total of $314,747, and $204,495, respectively,
for their audits, and fees reasonably related to the performance of the audits of the Company’s annual consolidated financial statements
for those fiscal years; review of financial statements contained in the Company’s Forms 10-Q in those fiscal years; and services
that are normally provided by the accountants in connection with statutory and regulatory filings or engagements for those fiscal years.
For the fiscal years ended May 31, 2021 and
May 31, 2020, UHY LLP and their affiliates billed, or have estimated they will bill, a total of $92,250 and $0, respectively.
Tax Fees
For the fiscal years ended May 31, 2021 and
May 31, 2020, Moss Adams LLP and their affiliates billed, or have estimated they will bill, the Company $0 and $0, respectively, for preparation
of subsidiary tax return.
For the fiscal years ended May 31, 2021 and
May 31, 2020 UHY LLP and their affiliates billed, or have estimated they will bill, a total of $0 and $0, respectively, for preparation
of subsidiary tax return.
All Other Fees
In the fiscal years ended May 31, 2021 and May
31, 2020, Moss Adams LLP and their affiliates billed the Company $71,878 and $0, respectively, for services other than those already disclosed
above.
For the fiscal years ended May 31, 2021 and
May 31, 2020 UHY LLP and their affiliates billed, or have estimated they will bill, a total of $0 and $0, respectively, for services other
than those already disclosed above.
Pre-Approval Policies and Procedures
The Audit Committee pre-approves all audit and
non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services
and other services as allowed by law or regulation. Pre-approval is generally provided for up to one year, and any pre-approval is detailed
as to the particular service or category of services and is generally subject to a specifically approved amount. The independent auditors
and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent
auditors in accordance with this pre-approval and the fees incurred to date. The Audit Committee, or one of its members to whom authority
has been delegated by the Audit Committee, may also pre-approve particular services on a case-by-case basis. The Audit Committee, or one
of its members to whom authority had been delegated, pre-approved all of the Company’s audit fees, audit-related fees, tax fees,
and all other fees for services by the independent auditors during Fiscal 2021 and Fiscal 2020.
Vote Required
The affirmative (“FOR”) vote of
the majority of the shares entitled to vote present in person or by proxy at the Annual Meeting is required to ratify the appointment
of UHY LLP as our registered public accounting firm for the fiscal year ending May 31, 2022.
Recommendation of the Board
THE BOARD UNANIMOUSLY RECOMMENDS SHAREHOLDERS
VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF UHY LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR
ENDED MAY 31, 2022.
Shareholder
Proposals
Proposals of shareholders intended to be presented
at the Company’s 2022 Annual Meeting of Shareholders (the “2022 Annual Meeting”) must be received by the Company at
its principal executive offices on or before July 22, 2022 and must satisfy the requirements of the proxy rules promulgated by the SEC,
in order to be included in our proxy statement and form of proxy relating to the 2022 Annual Meeting. Alternatively, under the Company’s
Bylaws, a proposal or director nomination that a shareholder does not seek to include in the Company’s Proxy Statement pursuant
to Rule 14a-8 may be delivered to the Secretary of the Company not less than 60 days nor more than 90 days prior to the date of an annual
meeting, unless notice or public disclosure of the date of the annual meeting occurs less than 60 days prior to the date of such annual
meeting, in which event, shareholders may deliver such notice not later than the 10th day following the day on which notice of the date
of the annual meeting was mailed or public disclosure thereof was made. A shareholder’s submission must include certain specified
information concerning the proposal or director nominee, as the case may be, and information as to the shareholder’s ownership of
Common Stock. Proposals or director nominations not meeting these requirements will not be entertained at the 2022 Annual Meeting. If
the shareholder does not also comply with the requirements of Rule 14a-4(c)(2) under the Securities Exchange Act of 1934, the Company
may exercise discretionary voting authority under proxies it solicits to vote in accordance with its best judgment on any such proposal
or director nomination submitted by a shareholder.
Proxy
Solicitation
The solicitation of proxies is made on behalf
of the Board, and the cost thereof will be borne by us. We will also reimburse brokerage firms and nominees for their expenses in forwarding
proxy material to beneficial owners of our Common Stock. In addition, our officers and employees (none of whom will receive any compensation
therefore in addition to their regular compensation) may solicit proxies. Proxies may be solicited through the mail and through telephonic
or telegraphic communications to, or by meetings with, shareholders or their representatives.
Annual
Report
The 2021 Form 10-K is being sent with this Proxy
Statement to each shareholder and is available at http://investor.schmitt-ind.com/sec-filings. The 2021 Form 10-K contains audited consolidated
financial statements of the Company and its subsidiaries for the fiscal year ended May 31, 2021. The 2021 Form 10-K, however, is not to
be regarded as part of the proxy soliciting material.
Householding
of Annual Meeting Materials
Some banks, brokers and other nominee record
holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one
copy of our Proxy Statement and annual report may have been sent to multiple shareholders in your household unless we have received contrary
instructions from one or more shareholders. We will promptly deliver a separate copy of either document to you if you contact us at the
following address or telephone number: Schmitt Industries, Inc., 2765 N.W. Nicolai Street, Portland, Oregon 97210, tel.: (503) 227-7908.
If you want to receive separate copies of the Proxy Statement or annual report in the future, or if you are receiving multiple copies
and would like to receive only one copy per household, you should contact your bank, broker or other nominee record holder, or you may
contact us at the above address.
SCHMITT INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS – DECEMBER 10, 2021
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Schmitt Industries, Inc., an Oregon
corporation (the “Company”), hereby appoints Michael R. Zapata and Philip Bosco, each with full power of substitution, as
proxies, to vote all capital stock of the Company that the shareholder would be entitled to vote on all matters that may properly come
before the Company’s Annual Meeting of the Shareholders to be held on Friday, December 10, 2021 at 10:30 a.m. EST, at the Company’s
Ample Hills Red Hook Shop at 421 Van Brunt Street, Brooklyn, New York 11231 (the “Annual Meeting”) and any adjournments or
postponements thereof. The undersigned shareholder hereby revokes any proxy or proxies heretofore given by the undersigned for the Annual
Meeting.
This proxy when properly executed and returned will be voted
in the manner directed by the undersigned shareholder. If no direction is made, this proxy will be voted in accordance with the recommendations
of the Board. The proxies are also authorized to vote upon such other matters as may properly come before the Annual Meeting in accordance
with their discretion.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ☒
The Board recommends a vote FOR the election of the listed nominees
and FOR Proposals No., 2 and 3.
|
|
1.
|
Election of nominees named below to the Board of Directors of the Company.
|
☐ FOR
ALL NOMINEES.
☐ WITHHOLD
AUTHORITY FOR ALL NOMINEES.
☐ FOR
ALL EXCEPT.
(See instructions below)
|
|
Nominees:
|
O
|
Michael Zapata
|
|
|
|
O
|
Alexandre Zyngier
|
|
|
|
|
|
|
INSTRUCTION:
|
To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here:
|
|
|
2.
|
To approve a non-binding advisory vote on executive compensation.
|
FOR ☐ AGAINST
☐ ABSTAIN
☐
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3.
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To ratify the appointment of UHY LLP as the Company’s independent registered public accounting firm for the fiscal year ending
May 31, 2022.
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FOR ☐ AGAINST
☐ ABSTAIN
☐
This proxy may be revoked prior to the
time it is voted by delivering to the Secretary of the Company either a written revocation or a proxy bearing a later date, or by appearing
at the Annual Meeting and voting in person.
See reverse side for additional instructions
PLEASE ACT PROMPTLY
PLEASE SIGN AND DATE THIS PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE TODAY
To change the address on your account, please check the box at right
and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be
submitted via this method. ☐
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DATE:
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(Signature of Shareholder)
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DATE:
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(Signature of Shareholder)
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Please sign exactly as your name or names appear on this proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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Schmitt Industries (NASDAQ:SMIT)
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