DYNATRONICS CORP
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to
Section 14(a)
Filed
by the Registrant
☑
Filed
by a Party other than the Registrant
☐
Check
the appropriate box:
☐
Preliminary
Proxy
Statement
☐
Confidential, for
Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
☑
Definitive Proxy
Statement
☐
Definitive
Additional Materials
☐
Soliciting Material
Pursuant to
§
240.14a-12
DYNATRONICS CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement if
Other Than the
Registrant)
Payment
of Filing Fee (Check the appropriate box)
☑
No fee
required.
☐
Fee computed on
table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1.
Title of each class
of securities to which transaction applies:
________________________________________
2.
Aggregate number of
securities to which transaction applies:
_______________________________________
3.
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):
__________________
4.
Proposed maximum
aggregate value of transaction:
_______________________________________________
5.
Total fee paid:
____________________________________________________________________________
☐
Fee
paid
previously with preliminary materials.
☐
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.
1.
Amount Previously
Paid:
____________________________________________________________________
2.
Form, Schedule or
Registration Statement No:
___________________________________________________
3.
Filing Party:
______________________________________________________________________________
4.
Date Filed:
_______________________________________________________________________________
DYNATRONICS CORPORATION
7030 Park Centre Dr.
Cottonwood Heights, Utah 84121
October
11, 2019
Dear
Dynatronics Shareholders:
On
behalf of Dynatronics Corporation, a Utah corporation, I cordially
invite you to attend the Annual Meeting of Shareholders on
Wednesday, December 4, 2019 at 8:00 a.m. local time at our
principal executive offices located at 7030 Park Centre Dr.,
Cottonwood Heights, Utah 84121.
We will
be conducting the business outlined and described in detail in our
proxy materials, which will include a Proxy Statement. You will
receive the Proxy Statement and a copy of our Annual Report on Form
10-K for the fiscal year ended June 30, 2019, as well as
instructions for voting your shares if you were a shareholder of
record on the October 4, 2019 record date established by the Board
of Directors.
Be sure
to follow the instructions on the proxy card or voting instruction
card. Submitting your vote in any of the authorized ways will
ensure your representation at the Annual Meeting, regardless of
whether you will be attending the Annual Meeting in
person.
Your
vote is important to us and I do hope you will vote as soon as
possible.
Sincerely,
/s/
Brian D. Baker
Brian
D. Baker
President and Chief Executive Officer
i
NOTICE OF 2019 ANNUAL MEETING OF SHAREHOLDERS AND PROXY
STATEMENT
DYNATRONICS CORPORATION
Annual
Meeting of Shareholders
December
4, 2019
8:00
a.m. Mountain Standard Time
7030
Park Centre Dr.
Cottonwood
Heights, Utah 84121
To the
Shareholders of Dynatronics Corporation:
We
invite you to attend the 2019 Annual Meeting of Shareholders
(“
Annual
Meeting
”) of Dynatronics Corporation, a Utah
corporation (“
Dynatronics
,” “
Company
” or “
we
”), on December 4, 2019, at
8:00 a.m. Mountain Standard Time, at the corporate offices located
at 7030 Park Centre Dr., Cottonwood Heights, Utah
84121.
Items of
Business
–
At the meeting, we will conduct the following
business, as more fully described in the proxy statement
(“
Proxy
Statement
”) accompanying this Notice of Annual
Meeting:
1.
Elect three
directors named in the accompanying Proxy Statement;
2.
Ratify the
appointment of the independent registered public accounting firm
for the fiscal year ending June 30, 2020;
3.
Approve, on an
advisory basis, the compensation of our principal executive officer
and the two other most highly compensated executive officers
(collectively, the “
Named
Executive Officers
”) named in the Proxy
Statement;
4.
Provide, on an
advisory basis, a recommendation regarding the frequency of future
advisory votes on executive compensation of one, two, or three
years; and
5.
Consider such other
business as may properly come before the meeting.
Record
Date and
Notice –
Shareholders
of record as of the close of business on October 4, 2019 are able
to participate in this year’s Annual Meeting or any
adjournment or postponement thereof and to vote on the matters
listed above. For 10 days prior to the Annual Meeting, a complete
list of shareholders entitled to vote at the Annual Meeting will be
available for examination by any shareholder, for any purpose
relating to the Annual Meeting, during ordinary business hours at
our corporate offices located at 7030 Park Centre
Dr., Cottonwood
Heights, Utah 84121.
Voting –
Telephone and Internet voting are available.
You may also vote by mail by requesting a paper copy of our proxy
materials. For specific instructions on voting, please refer to the
instructions in the Notice of Internet Availability of Proxy
Materials. If you hold your shares through an account with a
brokerage firm, bank or other nominee, please follow the
instructions you receive from them to vote your
shares.
Adjournments and
Postponements –
Any action on the
items of business described above may be considered at the Annual
Meeting at the time and on the date specified above or at any time
and date to which the Annual Meeting may be properly adjourned or
postponed.
Important Notice Regarding Availability of Proxy Materials
for the Annual Meeting:
Our
Notice of 2019 Annual Meeting of Shareholders, Proxy Statement and
Annual Report on Form 10-K are available at
www.proxyvote.com
.
Your vote is important to us.
Whether or not you plan to attend the Annual Meeting, we encourage
you to review the accompanying Proxy Statement for information
relating to each of the proposals and to cast your vote
promptly.
By
Order of the Board of Directors,
/s/
David A. Wirthlin
David
A. Wirthlin
Chief
Financial Officer and Corporate Secretary
Cottonwood
Heights, Utah
October
11, 2019
ii
CONTENTS
|
NOTICE OF 2019 ANNUAL MEETING OF SHAREHOLDERS AND PROXY
STATEMENT
|
ii
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|
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND
VOTING
|
1
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Why am I receiving these materials?
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1
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What is included in these materials?
|
1
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|
What am I voting on?
|
1
|
|
Why did I receive a one-page notice in the mail or email
notification regarding the Internet availability of proxy materials
instead of a full set of proxy materials?
|
1
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|
How can I get electronic access to the proxy
materials?
|
2
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|
Who can vote at the Annual Meeting?
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2
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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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2
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|
How do I vote?
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3
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|
What if my shares are registered in more than one person’s
name?
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3
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What does it mean if I receive more than one Notice?
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3
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|
How many votes must be present to hold the Annual
Meeting?
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3
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How many votes are needed to elect the directors?
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3
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How many votes are needed to ratify the appointment of Tanner LLC
as the independent registered public accounting firm of Dynatronics
for the fiscal year ending June 30, 2020?
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4
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How many votes are needed to approve the compensation of the Named
Executive Officers?
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4
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How many votes are needed to approve the selection of a
recommendation for the frequency of holding future advisory votes
on executive compensation?
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4
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What happens if I do not vote?
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4
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What if I return a proxy card or otherwise vote but do not make
specific choices?
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4
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Can I change my vote after submitting my proxy?
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4
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Who is paying for this proxy solicitation?
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5
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How can I find out the results of the voting at the Annual
Meeting?
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5
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Who can answer my questions about the Annual Meeting?
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5
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THE ANNUAL MEETING
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5
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General
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5
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Date, Time, Place and Purpose of the Annual Meeting
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5
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Recommendations of the Board of Directors
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6
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Record Date and Voting Power
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6
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Quorum and Vote Required
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6
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Voting Your Shares
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6
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Revoking a Proxy
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7
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Abstentions and Broker Non-Votes
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7
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Solicitation of Proxies
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8
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Other Business
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8
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Voting Results
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8
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PROPOSAL NO. 1 ELECTION OF DIRECTORS
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8
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General
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8
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Vote required
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8
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Nominees for Director
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9
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Business Experience and Qualifications of Nominees
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9
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Recommendation of the Board
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9
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iii
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INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE
GOVERNANCE
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10
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General Information
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10
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Director Attendance at the Annual Meeting
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10
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Preferred Directors
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10
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Family Relationships
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11
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Independence of the Board of Directors
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11
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Board Leadership Structure
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12
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Role of the Board in Risk Oversight
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12
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Communications with the Board of Directors
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13
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Meetings of the Board of Directors
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13
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Executive Sessions
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13
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Information Regarding Committees of the Board of
Directors
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13
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Audit Committee
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14
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Report of the Audit Committee of the Board of
Directors
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14
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Compensation Committee
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15
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Nominating and Governance Committee
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16
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Code of Ethics
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17
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Corporate Governance Guidelines
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17
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DIRECTOR COMPENSATION
|
18
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Director Compensation Table 2019
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18
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Director Compensation – Equity
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18
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PROPOSAL NO. 2 RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
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19
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What am I voting on?
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19
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Vote Required
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19
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Independence
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19
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Principal Accountant Fees and Services
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19
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Pre-approval Policies and Procedures
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19
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Recommendation of the Board
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19
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PROPOSAL NO. 3 ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED
EXECUTIVE OFFICERS
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20
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Vote Required
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20
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Recommendation of the Board
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20
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PROPOSAL NO. 4 ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON
EXECUTIVE COMPENSATION
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21
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Vote Required
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22
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Recommendation of the Board
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22
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EXECUTIVE OFFICERS
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22
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
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23
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Beneficial Ownership Table
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24
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Delinquent Section 16(a) Reports
|
26
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EXECUTIVE COMPENSATION
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26
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Summary Compensation Table
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27
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Outstanding Equity Awards at June 30, 2019
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28
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Employment Agreements
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28
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Payments upon Termination
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29
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Retirement Benefits
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29
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Equity Compensation Plans at June 30, 2019
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30
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Equity Compensation Plan Information
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30
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RELATED-PARTY TRANSACTIONS POLICY AND PROCEDURES
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31
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SHAREHOLDER PROPOSALS FOR 2020 ANNUAL MEETING OF
SHAREHOLDERS
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31
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HOUSEHOLDING OF PROXY MATERIALS
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31
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OTHER MATTERS
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32
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iv
DYNATRONICS CORPORATION
7030 Park Centre Dr.
Cottonwood Heights, Utah 84121
PROXY STATEMENT
FOR THE 2019 ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 4, 2019
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND
VOTING
Why am I receiving these materials?
The
Board of Directors (“
Board
of Directors
” or “
Board
”) of Dynatronics
Corporation, a Utah corporation (“
Dynatronics
,” “
Company
”, or “
we
”) has made these materials
available to you on the Internet or upon your request, has
delivered printed versions of these materials to you by mail in
connection with the solicitation of proxies by and on behalf of the
Board for use at our 2019 Annual Meeting of Shareholders (the
“
Annual
Meeting
”) to be held at our executive offices located
at 7030 Park Centre Drive, Cottonwood Heights, Utah, on December 4,
2019, at 8:00 a.m., Mountain Standard Time, and any adjournment or
postponement thereof. Shareholders are invited to attend the Annual
Meeting and are requested to vote on the proposals described in
this Proxy Statement.
We are
making these materials available to shareholders on or about
October 11, 2019.
What is included in these materials?
These
materials include:
●
this Proxy Statement
for the Annual Meeting; and
●
our
2019
Annual Report to
Shareholders
on
Form 10-K
(“
Annual
Report
”), which includes
our audited consolidated financial statements for the fiscal year
ended June 30, 2019.
If you request printed versions of these materials by mail, they
will also include the proxy card
for the Annual Meeting.
What am I voting on?
You
will be voting on each of the following:
●
the election of three directors
for a one-year term of
office;
●
the ratification of the appointment of Tanner LLC
(“
Tanner
”) as our independent registered public
accounting firm
for the fiscal
year ending June 30, 2020;
●
the approval, on an advisory basis, of the
compensation of our
Named
Executive Officers;
●
the
approval, on an advisory basis, of the frequency of holding future
advisory votes on executive compensation; and
●
any
other business that may properly come before the Annual Meeting or
any adjournment or postponement thereof.
As of the date of this Proxy Statement, the Board of Directors
knows of no other matters to be brought before the Annual
Meeting.
Why did I receive a one-page
notice in the mail or email
notification regarding the Internet availability of proxy materials
instead of a full set of proxy materials?
Pursuant to rules adopted by the U.S. Securities
and Exchange Commission, or
SEC
, we have provided access to our proxy materials
over the Internet. Accordingly, we are sending a
Notice of Internet Availability
of
Proxy Materials (the
“
Notice
”) to shareholders. All shareholders will
have the ability to access the proxy materials on the website
referred to in the Notice (
www.proxyvote.com
),
free of charge, or request to receive a printed set of the proxy
materials. Instructions on how to access the proxy materials over
the Internet or to request a printed copy are found in the Notice.
In addition, shareholders may request to receive proxy materials
electronically by email on an ongoing basis.
1
How can I get electronic access to the proxy
materials?
The
Notice provides you with instructions regarding how
to:
●
View proxy materials
for the Annual Meeting on the Internet and execute
a proxy; and
●
Instruct
us to send future proxy materials to you electronically by
email.
Choosing
to receive future proxy materials by email will save us the cost of
printing and mailing documents to you and will reduce the impact of
its Annual Meetings on the environment. If you choose to receive
future proxy materials by email, you will receive an email next
year with instructions containing a link to those materials and a
link to the proxy voting site. Your election to receive proxy
materials by email will remain in effect until you terminate
it.
Who can vote at the Annual Meeting?
You may vote at the Annual Meeting if you owned
shares of our common stock,
our
Series
A
8%
Convertible Preferred Stock
(“
Series A
Preferred
”), or
our Series B Convertible Preferred
Stock (“
Series B
Preferred
”) as of the
close of business on October 4, 2019, the
record date
for the Annual Meeting.
Common Stock
.
Holders of record of shares of common stock are entitled to one
vote for each share of common stock owned by them as of the record
date.
Convertible Preferred
Stock
. Holders of record of shares of Series A Preferred and
Series B Preferred vote those shares on an as-converted basis, one
vote for each share of common stock issuable upon an assumed
conversion of the preferred stock;
provided
,
however
, that the
voting rights of some holders of the Series A Preferred and Series
B Preferred are subject to limitations pursuant to a rule of The
Nasdaq Stock Market (
“
NASDAQ
”
) referred to as a
“
Voting Cutback
.
”
The
Voting Cutback
limits the number of
“
as-if-converted common
shares
”
that may be voted
by the shareholder to the number of shares of common stock issuable
upon conversion of the preferred stock held by such holder that
exceeds the quotient of (x) the aggregate purchase price paid by
such holder of the preferred stock for the shares of preferred
stock, divided by (y) the greater of (i) $2.50 and (ii) the market
price of the common stock on the trading day immediately prior to
the date of issuance of the holder
’
s preferred stock.
As of
the record date, the total number of shares of common stock issued
and outstanding (including as-converted Series A Preferred and
Series B Preferred) entitled to vote at the Annual Meeting is
11,812,433 shares (after taking into consideration the applicable
Voting Cutback). This number includes 8,849,928 shares of common
stock, 2,000,000 shares of Series A Preferred (1,636,130 shares
“as-converted” voting power after the applicable Voting
Cutback), and 1,459,000 shares of Series B Preferred (1,326,364
shares “as-converted” voting power after the applicable
Voting Cutback).
We also
have our Series C Non-Voting Convertible Preferred Stock (the
“
Series C
Preferred
”) outstanding, which is convertible to
common stock, but which is non-voting stock. The holders of the
Series C Preferred are
not
entitled to vote such shares at the Annual Meeting.
What is the difference between holding shares as a shareholder of
record and as a beneficial owner?
Shareholder of Record:
Shares
Registered in Your
Name
– If your shares were registered directly in your
name with our transfer agent, Interwest Transfer Co, Inc., on
October 4, 2019 – the record date – then you are the
“shareholder of record” of those shares. As the
shareholder of record, you may vote those shares in person at the
meeting or you may vote them by proxy. Whether or not you plan to
attend the meeting, we urge you to fill out and return the enclosed
proxy card or to vote in one of the ways indicated in the Notice to
ensure your vote is counted.
Beneficial Owner:
Shares
Registered in the
Name of a
Broker or Bank
– If on the record date, your
shares were held on your behalf in an account at a brokerage firm,
bank, dealer or other similar organization, then you are the
“beneficial owner” of shares held in “street
name” and the Notice of the Annual Meeting is being
forwarded to you by that organization. The organization holding
your account is considered to be the shareholder of record for
purposes of voting the shares in the account at the Annual Meeting.
As a beneficial owner, you have the right to direct your broker or
other agent regarding how to vote the shares in your account. You
are also invited to attend the Annual Meeting. However, since you
are not the shareholder of record, you may not vote your shares in
person at the meeting unless you request and obtain a valid proxy
from your broker or other agent – the shareholder of
record.
2
How do I vote?
Shareholders may
vote using one of the following four methods:
●
over the Internet,
which you are encouraged to do if you have access to the
Internet;
●
by
telephone;
●
by requesting a
paper or email copy of these materials and completing, signing and
returning the included proxy card in the mail; or
●
by attending the
Annual Meeting and voting in person.
The
Notice provides instructions on how to access your proxy, which
contains instructions on how to vote via the Internet or by
telephone. For shareholders who request to receive a paper proxy
card in the mail, instructions for voting via the Internet, by
telephone or by mail are set forth on the proxy card.
If you
hold shares in street name, the organization holding your account
is considered the shareholder of record for purposes of voting at
the Annual Meeting. The shareholder of record will provide you with
instructions on how to vote your shares. Internet and telephone
voting will be offered to shareholders owning shares through most
brokerage firms and banks. Additionally, if you would like to vote
in person at the Annual Meeting, contact the brokerage firm, bank
or other nominee who holds your shares to obtain a proxy from them
and bring it with you to the Annual Meeting. You will not be able
to vote at the Annual Meeting unless you have a proxy from your
brokerage firm, bank or other nominee.
You may
either vote
“
FOR
”
the nominees to the Board of
Directors or you may
“
Withhold
”
your vote for any nominee you
specify. For all other proposals you may vote
“
FOR
”
or
“
Against
”
or
“
Abstain
”
from voting.
What if my shares are registered in more than one person’s
name?
If you
own shares that are registered in the name of more than one person,
each person registered as a shareholder must sign the proxy. If an
attorney, executor, administrator, trustee, guardian or any other
person signs the proxy in a representative capacity, the full title
of the person signing the proxy should be given and a certificate
should be furnished showing evidence of appointment.
What does it mean if I receive more than one Notice?
If you
receive more than one Notice, then you have multiple accounts with
brokers or with our transfer agent. Please vote all of these
shares. We recommend that you contact your broker or our transfer
agent, as applicable, to consolidate as many accounts as possible
under the same name and address. Interwest Transfer Co, Inc., our
transfer agent, may be contacted by telephone at (877)
481-4014.
How many votes must be present to hold the Annual
Meeting?
In
order for us to conduct the Annual Meeting, the holders of a
majority of the shares of the common stock outstanding and entitled
to vote (including the Series A Preferred and Series B Preferred on
an as-converted basis, as indicated above) as of the record date
must be present, in person or by proxy, at the Annual Meeting. This
is referred to as a “quorum.” Your shares will be
counted as present at the Annual Meeting if you do any one of the
following:
●
vote via the
Internet or by telephone;
●
return a properly
executed proxy by mail (even if you do not provide voting
instructions); or
●
attend the Annual
Meeting and vote in person.
How many votes are needed to elect the directors?
Directors are
elected by a plurality of the votes cast at the Annual Meeting,
meaning that the three nominees receiving the most votes will be
elected.
See
,
“Quorum and Vote Required” on page 6, and “Vote
Required” on page 9 of this Proxy Statement, under the
discussion of Proposal No. 1.
3
How many votes are needed to ratify
the appointment of Tanner LLC as the independent registered public
accounting firm
of Dynatronics
for the fiscal year ending June 30, 2020?
The
approval of this proposal requires the affirmative vote in favor of
it of a majority of the votes cast at the Annual Meeting.
See
, “Quorum and Vote
Required” on page 6, and “Vote Required” on page
19 of this Proxy Statement, under the discussion of Proposal No.
2.
How many votes are needed to approve
the compensation of the
Named
Executive Officers?
The
approval of this proposal requires the affirmative vote in favor of
it of a majority of the votes cast on this proposal at the Annual
Meeting.
See
, “Quorum
and Vote Required” on page 6, and “Vote Required”
on page 20 of this Proxy Statement, under the discussion of
Proposal No. 3.
How many votes are needed to approve the selection of a
recommendation for the frequency of holding future advisory votes
on executive compensation?
The
frequency of the advisory vote on compensation of our Named
Executive Officers that receives the greatest number of votes -
every year, every two years or every three years - cast by
shareholders will be considered the shareholders’ preferred
frequency with regard to how often an advisory vote regarding the
compensation of our Named Executive Officers should be submitted to
the shareholders in the future.
See
, “Quorum and Vote
Required” on page 6, and “Vote Required” on page
22 of this Proxy Statement, under the discussion of Proposal No.
4.
What happens if I do not vote?
If you
hold your shares directly in your own name, they will not be voted
if you do not vote them or provide a proxy. However, your shares
may be voted under certain circumstances where you do not provide a
proxy if they are held in the name of a brokerage firm. Brokerage
firms have the authority under stock exchange rules to vote
customers
’
unvoted shares
on
“
routine
”
matters, which include the
ratification of the appointment of our independent registered
public accounting firm. Accordingly, if a brokerage firm votes your
shares on these matters in accordance with these rules, your shares
will count as present at the Annual Meeting for purposes of
establishing a quorum and will count as
“
for
”
votes or
“
against
”
votes, as the case may be. If a
brokerage firm signs and returns a proxy on your behalf that does
not contain voting instructions, your shares will count as present
at the Annual Meeting for quorum purposes, but your shares will not
count as a vote cast in respect of any proposal. These are referred
to as
“
broker
non-votes.
”
What if I return a proxy card or otherwise vote but do not make
specific choices?
If you
return a signed and dated proxy card or otherwise vote without
marking voting selections, your shares will be voted by us
in favor
of the nominees for
director and “
for
” each of the proposals
according to the recommendation of the Board of Directors as
indicated in the Proxy Statement.
If any
other matter is properly presented at the meeting, your proxyholder
(one of the individuals named on your proxy card) will vote your
shares using their best judgment.
Can I change my vote after submitting my proxy?
You can
revoke your proxy at any time before the final vote at the meeting.
If you are the record holder of your shares, you may revoke your
proxy in any one of the following ways:
●
You may submit
another properly completed proxy card with a later
date.
●
You may grant a
subsequent proxy by telephone or through the Internet.
●
You may send a
timely written notice that you are revoking your proxy to our
Secretary at 7030 Park Centre Dr., Cottonwood Heights, Utah
84121.
●
You may attend the
Annual Meeting and vote in person. Simply attending the Annual
Meeting will not, by itself, revoke your proxy.
4
Your
most current proxy card or Internet proxy is the one that is
counted. If your shares are held by your broker or bank as a
nominee or agent, you should follow the instructions provided by
your broker or bank.
Who is paying
for this proxy solicitation?
We will
pay for the entire cost of soliciting proxies. In addition to these
proxy materials, our directors and employees may also solicit
proxies in person, or by other means of communication. Directors
and employees will not be paid any additional compensation for
soliciting proxies. We may also reimburse brokerage firms, banks
and other agents for the cost of forwarding proxy materials to
beneficial owners.
How can I find out the results of the voting at the Annual
Meeting?
Preliminary voting
results will be announced at the Annual Meeting. In addition, final
voting results will be published in a Current Report on Form 8-K
that we expect to file within four business days after the Annual
Meeting. If final voting results are not available to us in time to
file a Form 8-K within four business days after the meeting, we
intend to file a Form 8-K to publish preliminary results and,
within four business days after the final results are known to us,
file an additional Form 8-K to publish the final
results.
Who can answer my questions about the Annual Meeting?
You can
contact our corporate secretary, David A. Wirthlin, by telephone,
at (801) 568-7000 or by writing to Dynatronics Corporation, 7030
Park Centre Dr., Cottonwood Heights, Utah 84121, Attn: Corporate
Secretary, with any questions about the proposals described in this
Proxy Statement or how to execute your vote.
THE ANNUAL MEETING
General
This Proxy Statement is being furnished to you, as
a shareholder of Dynatronics, as part of the solicitation of
proxies by our Board of Directors
for use at the Annual Meeting to be held on
December 4, 2019 and any adjournment or postponement
thereof.
Date, Time, Place and Purpose of the Annual Meeting
The Annual Meeting will be held at our principal
executive offices, located at
7030 Park Centre Dr.,
Cottonwood Heights, Utah
, on December
4, 2019, at 8:00 a.m., Mountain Standard Time.
The Annual Meeting is being held
for the following purposes, which are
more fully described in this
Proxy Statement:
1.
to elect three directors to the Board of Directors
to hold office
for a one-year
term;
2.
to ratify the appointment of Tanner as our
independent registered public accounting firm
for the fiscal year ending June 30,
2020;
3.
to approve, on an advisory basis, the compensation
of our
Named Executive
Officers;
4.
to
vote, on an advisory basis, on the frequency of holding future
advisory votes on executive compensation; and
5.
to
transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
5
Recommendations of the Board of Directors
The
Board of
Directors has unanimously determined to recommend that shareholders
vote (i)
“FOR”
each of the director nominees;
(ii)
“FOR”
the ratification of the appointment of
Tanner as our independent registered public accounting firm
for the fiscal year ending June 30,
2020; (iii)
“FOR”
the approval of the compensation of
our
Named Executive Officers;
and (iv)
“FOR”
the option of once every three years
as the preferred frequency
for
an advisory vote on executive compensation.
Record Date and Voting Power
Only holders of record of
Dynatronics common stock, Series A Preferred, and
Series B Preferred at the close of business on the record date,
October 4, 2019, are entitled to
notice of and to vote at the Annual
Meeting.
As of the record date,
there were 11,812,433 shares of common s
tock outstanding and entitled to vote at the
Annual Meeting (including shares of Series A Preferred and Series B
Preferred on an as-converted basis), held by 433 holders of record.
A list of our shareholders will be available
for review at our principal
exec
utive offices during
regular business hours
for a
period of 10 days before
the
Annual Meeting.
Each holder of
common stock (or Series A Preferred or Series B
Preferred, on an as-converted basis) is entitled to one vote
for each sha
re of
common
stock he or she owned as of the record date, subject, in the case
of the Series A Preferred and the Series B Preferred, to any
applicable
Voting Cutback.
Cumulative voting is not permitted, and shareholders are not
entitled to appraisal or dissenters’ rights with respect to
any matter to be voted on at the Annual
Meeting.
Quorum and Vote Required
A quorum of shareholders is necessary to transact
business at the Annual Meeting. The presence, in person or by
proxy, of shares of
common
stock representing a majority of the shares of common stock
(on an as-converted basis) outstanding
and entitled to vote on the record date is necessary to constitute
a quorum at the Annual Meeting. Abstentions and broker
“non-votes” will count as present
for establishing a quoru
m at the Annual Meeting.
Directors are elected by a plurality of the votes
cast, meaning that the three nominees receiving the most properly
cast votes will be elected as directors to the vacancies
open
for election at the Annual
Meeting. The ratification of the appointment of Tanner as our
independent registered public accounting firm and the approval of
the compensation of our
Named
Executive Officers each requires the affirmative vote in favor of
such proposal of a majority of the votes cast at the Annual Meeting
in respect of such proposal. The option for the frequency of the
advisory vote on compensation of our
Named Executive Officers - every year, every other
year or every three years - that receives the greatest number of
votes cast by shareholders will be considered the
shareholders’ preferred frequency with regard to how often an
advisory vote regarding the compensation of the
Named Executive Officers should be submitted to
the shareholders in the future. If a quorum is not present at the
Annual Meeting, then it is expected that the Annual Meeting will be
adjourned or postponed for the Board to solicit additional
proxies.
As of the record date, our directors and executive
officers as a group beneficially owned and were entitled to vote
approximately 3,164,826 shares of
common stock (including 1,232,800 shares of Series
A Preferred and 322,000 shares of Series B Preferred), or
approximately 26.8% of the outstanding voting shares of Dynatronics
as of that date.
Voting Your Shares
You
may vote by Internet, telephone, proxy or in person at the Annual
Meeting.
Voting in Person
. If
you plan to attend the Annual Meeting and wish to vote in person,
you will be given a ballot at the Annual Meeting. Please note,
however, that if your shares are held in “street name,”
which means your shares are held of record by a brokerage firm,
bank or other nominee holder, and you wish to vote at the Annual
Meeting, you must bring to the Annual Meeting a proxy from the
record holder of the shares authorizing you to vote at the Annual
Meeting.
6
Voting by Proxy
.
Even if you plan to attend the Annual Meeting, we recommend that
you vote your proxy over the Internet, by telephone or, if you
receive a paper proxy card in the mail, by mailing the completed
proxy card. You can always change your vote at the Annual Meeting.
Unless you change your vote at the Annual Meeting, your latest
dated vote before the Annual Meeting will be the vote counted.
Voting instructions are included on your proxy. If you properly
grant your proxy and submit it to us in time to vote, one of the
individuals named as your proxy will vote your shares as you have
directed. If no instructions are indicated on a properly executed
proxy or voting instruction, the shares will be voted according to
the recommendations of the Board of Directors as follows: (i)
“
FOR
” the
director nominees; (ii) “
FOR
” the ratification of the
appointment of Tanner as our independent registered public
accounting firm for the fiscal year ending June 30, 2020; (iii)
“
FOR
” the
approval of the compensation of our Named Executive Officers; and
(iv) “
FOR
” the
option of once every three years as the preferred frequency for an
advisory vote on executive compensation. If other matters come
before the Annual Meeting, the shares represented by proxies will
be voted, or not voted, by the individuals named in the proxies in
their discretion.
If
you are the shareholder of record of your shares, you may deliver
your voting instructions by telephone or over the Internet or, if
you requested to receive a printed proxy card in the mail, by
completing the proxy card and signing, dating and returning it in
the included pre-addressed, postage-paid envelope. To be valid, a
returned proxy card must be properly signed and dated.
If you are not the record holder of your shares,
you must provide the record holder of your shares with instructions
on how to vote your shares. If your shares are held by a brokerage
firm, bank or other nominee holder, that brokerage firm, bank or
nominee may allow you to deliver your voting instructions by
telephone or over the Internet.
Shareholders whose shares are held by a brokerage
firm, bank or other nominee should refer to the voting instruction
card forwarded to them by that brokerage firm, bank or nominee
holding their shares.
Revoking a Proxy
If you are a shareholder of record, you may revoke
your proxy at any time before it is voted at the Annual Meeting by
(i) delivering to our
Corporate
Secretary a signed
notice of
revocation bearing a date later than the date of the proxy and
stating that the proxy is revoked, (ii) granting a new proxy
relating to the same shares and bearing a later date (which, if you
intend to do by telephone or over the Internet, you may do only
until 11:59 p.m., Mountain Standard Time, on December 3, 2019); or
(iii) attending the Annual Meeting and voting in person.
Written
notices of revocation
and other communications with respect to the revocation of proxies
should be addressed to
Dynatronics Corporation, 7030 Park Centre Dr.,
Cottonwood Heights, Utah 84121, Attn: Corporate
Secretary.
If
your shares are held in the name of a brokerage firm, bank or other
nominee, you may change your vote by submitting new voting
instructions to your brokerage firm, bank or other nominee. You
must contact your broker, bank or other nominee to find out how to
do so. However, since you are not the shareholder of record in that
case, you may not change your vote by voting those shares in person
at the Annual Meeting unless you receive a valid proxy from your
brokerage firm, bank or other nominee holder authorizing you to
vote at the Annual Meeting.
Abstentions and Broker Non-Votes
Shares of
common stock
for which we have received proxies but with
respect to which holders of those shares have chosen to
abstain from voting will be counted as
present at the Annual Meeting
for purposes
of determining the presence or absence of a
quorum
for the
tran
saction of business at the
Annual Meeting, but such shares will not count as votes cast in
respect of the election of directors or any other proposal with
respect to which the shareholder has chosen to
abstain. As a result, those shares will not be
included in the vote totals
for
such pro
posal and, therefore,
will have no effect on such proposal.
Brokers are prohibited in certain circumstances
from exercising discretionary authority
for beneficial owners who have not returned
proxies to the brokers (so-called “broker non-votes”).
In these circumstances, those shares will be counted
for the purpose of determining if a
quorum is present, but such shares will not be included in the vote
totals and, therefore, will have no effect on any proposal. Under
the rules that govern brokers, brokers do not have discretionary
authority to vote on the election of directors or on executive
compensation matters; however, brokers have discretionary authority
to vote on the ratification of our independent registered public
accounting firm and may choose to do so.
7
All votes will be tabulated by the inspector of
elections
for the Annual
Meeting, who will separately tabulate affirmative and negative
votes, abstentions and broker non-votes.
Solicitation of Proxies
Dynatronics will bear all costs incurred on behalf
of the Board of Directors in connection with its solicitation of
proxies
for the Annual Meeting,
including any costs associated with printing and mailing proxy
materials
for those
shareholders who request to receive printed versions of
them.
In addition, directors, officers and employees of
Dynatronics and its subsidiaries may solicit proxies by mail,
personal interview, telephone, email or facsimile transmission
without additional compensation. We may also solicit proxies
through press releases and postings on our website at
www.dynatronics.com
.
Arrangements will be made with brokerage houses, voting trustees,
banks, associations and other custodians, nominees and fiduciaries,
who are record holders of our voting stock not beneficially owned
by them,
for forwarding these
proxy materials to, and obtaining proxies from, the beneficial
owners of such stock entitled to vote at the Annual Meeting. We
will reimburse these persons
for their reasonable expenses incurred in
performing these services.
Other Business
We do not expect that any matter other than the
proposals presented in this
Proxy Statement will be brought before the Annual
Meeting. However, if other matters are properly presented at the
Annual Meeting or any adjournment or postponement of the Annual
Meeting, the persons named as proxies will vote in their discretion
with respect to those matters.
Voting Results
We will announce preliminary voting results at the
Annual Meeting. We will report final results in a
Form 8-K report filed with the
SEC.
PROPOSAL NO. 1 ELECTION OF
DIRECTORS
General
Under
our Bylaws, as amended and restated our Board of Directors may
consist of up to seven directors. Up to four of the directors may
be elected annually by the holders of our common stock voting as a
group, including holders of the Series A Preferred and Series B
Preferred voting on an as-converted basis. The remaining three
directors are referred to as the “
Preferred Directors
” and elected
and hold office at the pleasure of the holders of the Series A
Preferred.
In
2019, the Board had seven members, with four common directors and
three Preferred Directors. Mr. Kelvyn H. Cullimore, Jr. informed
the Nominating and Governance Committee that he will not be
standing for re-election and the Committee has determined that the
size of the Board will be reduced to six members, as it had been
prior to June 2018. The Board and management extend their gratitude
to Mr. Cullimore for his many years of service to Dynatronics
since its founding, both as an executive officer and as a member of
our Board.
As a
consequence of the reduction in the size of the Board, at this
year’s Annual Meeting our shareholders will elect three
common directors. The nominees identified below have been selected
by the Nominating and Governance Committee to serve as directors
for one-year terms until the 2020 Annual Meeting of shareholders
and until their respective successors are elected or
appointed.
Vote required
Directors are
elected by a plurality of the votes cast in person or by proxy,
assuming a quorum is present. This means that the three director
nominees receiving the highest number of
“FOR”
votes (even if they
receive less than a majority) will be elected as directors. Since
the nominees are running unopposed for the same number of seats as
there are nominees, a nominee only needs one vote to be elected if
there is a quorum present at the Annual Meeting.
8
Shares
represented by executed proxies will be voted, if authority to do
so is not withheld, for the election of the nominees named below.
If a nominee becomes unavailable for election as a result of an
unexpected occurrence, shares that would have been voted for that
nominee instead will be voted for the election of a substitute
nominee that we may propose. If you hold your shares through a
broker and you do not instruct the broker on how to vote on this
proposal, your broker will not have authority to vote your shares.
Abstentions and broker non-votes will be counted as present for
purposes of determining the presence of a quorum, but will not have
any effect on the outcome of the election.
Nominees
for Director
As
indicated above, our Board of Directors currently is comprised of
seven members. Following the Annual Meeting, the Board will have
six members. Three incumbent directors are standing for
re-election. All of our directors have one-year terms.
Each person nominated for election
has agreed to serve if elected. We have no reason to believe that
any nominee will be unable to serve. Our policy is to encourage
directors and nominees for director to attend the Annual
Meeting.
Nominees to be
considered for election at the Annual Meeting include two
independent directors, Mr. Klosterman and Dr. Ward, as defined by
the rules and regulations of NASDAQ, and our Chief Executive
Officer, Brian D. Baker. Because of applicable NASDAQ Stock Market
Rules, Mr. Baker is not considered independent. If elected at the
Annual Meeting, these nominees would serve until the 2020 Annual
Meeting of Shareholders and until a successor has been duly elected
and qualified, or, if sooner, until the director
’
s death, resignation or
removal.
Vacancies on the
Board of Directors may be filled by persons elected by a majority
of the remaining directors or appointed by the Nominating and
Governance Committee of the Board. A director elected by the Board
of Directors or appointed by the Nominating and Governance
Committee to fill a vacancy, including vacancies created by an
increase in the number of directors, serve for the remainder of the
full term and until the director
’
s successor is duly elected and
qualified.
Business Experience and Qualifications of Nominees
|
Brian D. Baker
Director, Chief Executive Officer
Age 52
Director Since August 2019
|
|
Mr.
Baker is our Chief Executive Officer since August 2019. He was our
Chief Operating Officer from May 2019 until August 26, 2019. From
February 2018 to May 2019, Mr. Baker served as the President of our
Therapy Products Division. Prior to joining Dynatronics, he was
Vice President of Global Operations of Seaspine Holdings
Corporation from July 2015 to January 2018, where he also worked as
Vice President of Operations of the SeaSpine business within
Integra LifeSciences Corporation from March 2015 to July 2015. From
November 2013 until March 2015, he was an industry consultant
providing mergers and acquisitions and business process
optimization services. He holds a B.A. degree in business from the
University of Phoenix.
|
|
|
|
|
|
Scott A. Klosterman
Director
Age 61
Director since 2016
Independent Director
|
|
Mr.
Klosterman is Chief Financial Officer at HNI Healthcare since May
2017, where he previously served as Executive Vice President of
Financial Operations (2016-2017). From 2010 to 2015, he was Vice
President and General Manager, Post-Operative Products and Services
at Hanger, Inc., a leading provider of prosthetic, orthotic, and
therapeutic solutions. From 2009 to 2010, he was an executive
consultant, providing consulting services to healthcare businesses,
advising on product development and new product launches. He was
Division President of Chattanooga Group from 2003 to 2008, where he
previously served as Chief Operating Officer (1997-2003) and Chief
Financial Officer, Secretary, and Treasurer (1994 -1997). He was a
licensed certified public accountant in Pennsylvania from 1982
until 1994 and has an M.B.A. degree from Baylor University and a
B.S. degree in Accounting (with highest honors) from the University
of Delaware. Based on Mr. Klosterman
’
s extensive experience in the
medical industry and as a finance executive, the Nominating and
Governance Committee believes that he is well qualified to serve on
our Board of Directors.
|
|
|
|
|
|
R. Scott Ward, Ph.D.
Director
Age 63
Director since 2013
Independent Director
|
|
Dr.
Ward serves as the chairman of the Department of Physical Therapy
at the University of Utah. He is the past president of the American
Physical Therapy Association, a position he held from 2006 to 2012.
In addition, Dr. Ward served as chair of the rehabilitation
committee of the American Burn Association. He has published
extensive research studies related to wound care and burn
rehabilitation. Dr. Ward received a B.A. degree in Physical Therapy
and a Ph.D. degree in Physiology from the University of Utah. Based
on Dr. Ward
’
s prominence
in his field, and his extensive experience and expertise in
physical therapy, the Nominating and Governance Committee believes
that Dr. Ward is well qualified to serve as a member of our Board
of Directors.
|
Recommendation of the Board
The
Board of Directors recommends a vote
FOR
each of the named
nominees.
9
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE
GOVERNANCE
General Information
Directors elected
at the Annual Meeting of shareholders serve until the earlier of
their resignation or removal, or until their successors are elected
and qualified. Three members of the Board are Preferred Directors
appointed under the provisions of the Certificate of Designations,
Preferences and Rights of the Series A 8% Convertible Preferred
Stock (the
“
Series A
Certificate of Designations
”
) as discussed in the following
section of this Proxy Statement.
Director Attendance at the Annual Meeting
We
believe the Annual Meeting provides a good opportunity for our
directors to hear any feedback that our shareholders may desire to
share with the Board and with us. As a result, directors are
encouraged to attend the Annual Meeting if their schedules permit.
Five
of our directors attended
the 2018 Annual Meeting of Shareholders. We reimburse our directors
for the reasonable expenses they may incur in attending the Annual
Meeting.
Preferred Directors
Under
our Bylaws as amended and restated, the Board of Directors can
include up to seven members. The Series A Certificate of
Designations grants to the holders of the Series A Preferred
certain rights, referred to as “
Director Rights
”, to appoint up
to three members of the Board – the Preferred Directors
– for as long as the original Series A Preferred investors
own or would directly or indirectly beneficially own at least 28.6%
of our common stock (the
“
Threshold Ownership
Percentage
”
). This
period of ownership is known as the “
Director Rights Period
”. Excluded
from the calculation of the Threshold Ownership Percentage are any
shares of common stock issuable upon the exercise of the warrants
held by these investors. In compliance with NASDAQ Rule 5640, the
number of Preferred Directors will be reduced pro rata with any
reduction in ownership by the preferred investors below the
Threshold Ownership Percentage, so that the number of Preferred
Directors is approximately proportionate to the preferred
investors
’
direct or
indirect ownership of our common stock. By agreement the Series A
Preferred shareholders and Dynatronics, the Director Rights may be
exercised at the discretion of certain affiliates of Prettybrook
Partners, LLC, a private investment firm (collectively referred to
as “
Prettybrook
”) for as long as
Prettybrook owns at least 50% of the outstanding Series A
Preferred.
The
Director Rights are not exercisable unless the preferred investors
are the beneficial owners of at least 10% of our common stock,
including shares issuable upon conversion of the Series A
Preferred, but excluding shares issuable upon exercise of any
warrants to purchase common stock. Common stock has no voting,
nomination, election or other rights with respect to the Preferred
Directors. Each Preferred Director serves as a member of the Board
during the Director Rights Period or until his or her successor is
appointed by the holders of the Series A Preferred (or Prettybrook,
exercising such rights, as discussed above) during the Director
Rights Period.
The
current Preferred Directors are Erin S. Enright, who is also the
Chairman of our Board of Directors, David B. Holtz, and Brian M.
Larkin. Their business experience and other qualifications are as
follows:
Erin S.
Enright
. Ms. Enright, 58, currently serves as a Managing
Member of Prettybrook Partners LLC, a family office dedicated to
investing in healthcare companies. Prettybrook has approximately 20
active investments in a variety of companies, typically as a
co-investor with institutional private equity. She serves as the
Chairman of the Board, Chair of the Nominating and Governance
Committee and member of the Audit Committee and Compensation
Committee of Dynatronics Corporation (NASDAQ: DYNT), and as a
member of the Board of Directors and Audit Committee and Investment
Committee of Medical Facilities Corporation (TSX: DR) and a member
of the Board and Chair of the Audit Committee of Keystone Dental,
Inc., a private company controlled by the private equity firm
Accelmed. Previously, she served on the Board of Directors and the
Audit Committee of Biolase, Inc. (NASDAQ: BIOL) during 2013, was a
member of the Board of Directors of Tigerlabs, a Princeton-based
business accelerator, from 2012 to 2018, and from 2010 to 2015
served on the Board of Directors of Ceelite Technologies, LLC. She
was the President of Lee Medical, a medical device manufacturer
based in Plainsboro, New Jersey, from 2004-13. She was Chief
Financial Officer of InfuSystem, Inc. (NASDAQ:INFU) from 2005 to
2007. From 1993 to 2003, Ms. Enright was with Citigroup, most
recently as a Managing Director in its Equity Capital Markets
group. While at Citigroup, Ms. Enright was Chairperson of the
firm's Institutional Investors' Committee, responsible for
screening and approving the firm's participation in equity
underwritings and a member of the Citigroup Global Equity
Commitment Committee, responsible for reviewing and approving the
firm's underwritings. From 1989 until 1993, Ms. Enright was an
attorney with Wachtell, Lipton, Rosen & Katz in the firm's New
York office. Ms. Enright received her A.B. degree from the Woodrow
Wilson School of Public and International Affairs at Princeton
University and J.D. degree from the University of Chicago Law
School.
10
David B.
Holtz
. Mr. Holtz, 53, has been a principal of Provco Group
Ltd. (
“
Provco
”
) since 2012. Provco became a
preferred shareholder of Dynatronics in 2015. He serves as part of
Provco
’
s executive
management group responsible for managing investment portfolios and
the accounting function. From 2011 to 2012, Mr. Holtz was executive
manager of Grey Street Holdings, a property investment holding
company. From 2008 to 2010, he served as Chief Financial Officer
and then Interim President of Nucryst Pharmaceuticals Corp. From
1993 to 2006, Mr. Holtz worked at Integra LifeSciences in various
capacities including Vice President, Finance and Treasurer, and
Senior Vice President, Finance and Treasurer. Before joining
Integra, Mr. Holtz was an associate with Coopers & Lybrand,
L.L.P. in Philadelphia and Cono Leasing Corporation, a private
leasing company. He received a B.S. degree in Business
Administration from Susquehanna University and was a certified
public accountant in Pennsylvania until 1998.
Brian M.
Larkin
.
Mr. Larkin, 50, is
President and CEO of SP Industries, Inc., a privately held provider
of laboratory equipment, supplies and specialty glassware and
aseptic processing drug manufacturing solutions headquartered in
Pennsylvania. From May 2017 to February 2018, he served as the Vice
President and General Manager of the Diabetes Care business at
Becton Dickinson (NYSE: BDX). From May 2015 to May 2017, he served
as Senior Vice President and General Manager for the LifeCell
Regenerative Medicine business at Acelity L.P., Inc. Prior to
joining Acelity, Mr. Larkin was Corporate Vice President of Integra
Lifesciences Holdings Corporation, where he served as President of
the Global Spine and Orthobiologics businesses, and Head of
Strategic Development. His responsibilities included executive
oversight and leadership of Integra
’
s worldwide Spine and Orthobiologics
businesses, in addition to executive oversight of several of
Integra
’
s corporate
functions, including corporate marketing and strategic planning.
Mr. Larkin joined Integra in January 2000, as a Regional Sales
Manager. He was promoted to National Sales Manager in 2003, Vice
President, North American Sales in 2005, and President of
Integra
’
s Neurosurgery
business in 2007. In 2010, he was appointed President, Global Spine
& Orthobiologics, and Head of Strategic Development. Mr. Larkin
has over 25 years of sales, marketing, and executive management
experience in the medical technology industry. Prior to joining
Integra, he was the National Sales Manager for Connell
Neurosurgical. Mr. Larkin received a B.S. degree in Chemistry from
the University of Richmond and completed the Advanced Management
Program at Harvard Business School.
In
addition to the Director Rights, the holders of the Series A
Preferred have the right to appoint one observer (who is not a
Preferred Director) who may attend any meetings of the Board of
Directors and participate in discussions among the Board members,
but who does not have any voting rights on any matters. So long as
Prettybrook owns at least 50% of the outstanding Series A
Preferred, Prettybrook has the right to choose this observer.
Prettybrook has appointed Stuart M. Essig as the observer to the
Board. Mr. Essig is a significant shareholder of Dynatronics and is
the husband of Ms. Enright, Chairman of our Board of Directors. Mr.
Essig and Ms. Enright are managers of Prettybrook.
Family Relationships
There
are no family relationships among the members of the Board of
Directors and our executive officers.
Independence of the Board of Directors
The
Board of Directors has determined that a majority of the members of
the Board should consist of
“
independent directors,
”
determined in accordance with the
applicable NASDAQ Stock Market Rules as in effect from time to
time. Directors who are also our employees are not considered to be
independent for this purpose. Our Board of Directors determines the
independence of our directors by applying the rules, regulations
and listing standards of NASDAQ and the rules and regulations of
the SEC. The NASDAQ Stock Market Rules provide that a director is
independent only if the Board affirmatively determines that the
director does not have a relationship with us that would interfere
with the exercise of his or her independent judgment in carrying
out the responsibilities of a director. They also specify certain
relationships that preclude a determination of director
independence, including certain business, professional and personal
relationships.
11
Our
Board annually reviews the independence of our directors according
to these standards, taking into account all relevant facts and
circumstances. In its most recent review of information collected
from our directors, the Board determined that the non-employee
members of our Board are
“
independent directors
”
under the NASDAQ standards and the
SEC
’
s rules. The Board
has determined that Ms. Enright, Mr.
Klosterman, Mr. Holtz, Mr. Larkin and
Dr. Ward are independent and that these independent directors have
no relationship with Dynatronics that would interfere with the
exercise of their independent judgment in carrying out the
responsibilities of a director.
None of
our directors is a party to any agreement or arrangement that would
require disclosure pursuant to NASDAQ Rule 5250(b)(3).
The
Board has also determined that all members of the Compensation
Committee are independent and meet the additional independence
criteria required under NASDAQ Rule 5605(a)(2), and that each
member of the Audit Committee: (i) is independent, (ii) meets the
financial literacy requirements of the NASDAQ Stock Market Rules,
and (iii) meets the enhanced independence standards under Section
10A(m)(3) of the Securities Exchange Act of 1934, as amended
(
“
Exchange Act
”
). In connection with its
determination regarding the independence of our directors, the
Board found that none of the nominees for director had a material
or other disqualifying relationship with us.
Board Leadership Structure
In
February 2018, our Board of Directors determined to
separate
the role of
Chairman of the Board from the role of Chief Executive Officer, and
appointed Erin Enright as Chairman. The Board believes that
separating these roles allows us to efficiently develop and
implement corporate strategy that is consistent with the
Board
’
s oversight role,
while facilitating strong day-to-day leadership.
In
making the decision to separate the roles of Chief Executive
Officer and Chairman of the Board, the Board cited the demands of
and differences between each role. The Chief Executive Officer is
responsible for setting our strategic direction, with guidance from
the Board. The Chief Executive Officer is responsible for
leadership and for the over-all performance of Dynatronics pursuant
to the policies of the Board, while providing guidance to the Chief
Executive Officer, and setting the agenda for Board meetings, and
presiding over meetings of the Board.
Ms.
Enright brings considerable skills and experience to the role of
Chairman. In this capacity, she has significant responsibilities,
including those described above, as well as calling and presiding
over Board meetings, including meetings of the independent
directors, setting meeting agendas and determining materials to be
distributed to the Board. As Chairman, she has substantial ability
to shape the work of the Board of Directors. We believe that having
an independent Chairman creates an environment that is more
conducive to objective evaluation and oversight of
management
’
s performance,
increases management accountability and improves the ability of the
Board of Directors to monitor whether management
’
s actions are in our best interests
those of our shareholders. As a result, we believe that having an
independent chairman and a separate chief executive can enhance the
effectiveness of the Board of Directors as a whole. The active
involvement of our independent directors, combined with the
qualifications and significant responsibilities of our Chairman,
provide balance on the Board and promote strong, independent
oversight of our management and affairs.
Role of the Board in Risk Oversight
The
Board of Directors has an active role, both as a whole and at the
committee level, in overseeing management of our risks. The Board
regularly reviews information regarding our credit, liquidity and
operations, as well as the risks associated with each. The Audit
Committee
’
s charter
mandates it to review and discuss with management and our
independent registered public accounting firm, as appropriate, our
major financial risk exposures and the steps taken by management to
monitor and control these exposures. The Compensation Committee is
responsible for overseeing the management of risks relating to our
executive compensation plans and arrangements. The Nominating and
Governance Committee manages risks associated with the independence
of the Board of Directors and potential conflicts of interest.
While each committee is responsible for evaluating certain risks
and overseeing the management of such risks, the entire Board of
Directors is informed regularly through committee reports about
such risks.
12
Comm
unications with the Board of
Directors
The
Board desires that the Board and its committees and individual
directors hear the views of shareholders and that appropriate
responses are provided to shareholders on a timely basis.
Shareholders wishing to formally communicate with the Board, the
independent directors as a group or any individual director may
send communications directly to Dynatronics Corporation, Board of
Directors, Attn: Jim Ogilvie, Vice President of Corporate
Development, 7030 Park Centre Drive, Cottonwood Heights, Utah
84121. All clearly marked written communications, other than
unsolicited advertising or promotional materials, are logged and
copied, and forwarded to the director to whom the communication was
addressed.
Please
note that the foregoing communication procedure does not apply to:
(1) shareholder proposals pursuant to Exchange Act Rule 14a-8 and
communications made in connection with such proposals; (2) service
of process or any other notice in a legal proceeding; (3)
advertisements, promotions of a product or service, patently
offensive material or matters deemed inappropriate for the Board of
Directors; (4) items solely related to complaints with respect to
ordinary course of business, customer service and satisfaction
issues; or (5) material clearly unrelated to our business,
industry, management, Board of Directors, or related committee
matters.
Meetings of the Board of Directors
Our
Board of Directors met
six
times during fiscal year 2019. Each member of the Board attended
75% or more of the meetings of the Board of Directors and at least
75% of the meetings of the committees on which he or she served,
during the portion of fiscal year 2019 for which he or
she
was
a director or committee member.
Executive Sessions
The
Board holds regular executive sessions of the non-employee
directors without the presence of management, as required under
applicable NASDAQ Stock Market Rules. In fiscal 2019, the
independent directors met
five
times in executive sessions at which only independent and
non-employee directors were present.
Information Regarding Committees of the Board of
Directors
The
Board of Directors has
established
an Audit Committee, a
Compensation Committee and a Nominating and Governance Committee.
The Board has adopted a written charter for each committee, copies
of which are available to shareholders on the Investors section of
our website at
https://irdirect.net/DYNT/corporate_governance
.
The
following table provides membership information for fiscal year
2019 for each of the committees of the Board:
|
Name
|
|
Audit
|
|
Compensation
|
|
Nominating and Governance
|
|
|
|
|
|
|
|
|
|
Brian
D. Baker
(1)
|
|
|
|
|
|
|
|
Kelvyn
H. Cullimore
(2)
|
|
|
|
|
|
|
|
Erin S.
Enright
|
|
X
|
|
X
|
|
*
|
|
David
B. Holtz
|
|
*
|
|
|
|
X
|
|
Scott
A. Klosterman
|
|
X
|
|
*
|
|
X
|
|
Brian
M. Larkin
|
|
|
|
X
|
|
X
|
|
Christopher R. von
Jako, Ph.D.
(3)
|
|
|
|
|
|
|
|
R.
Scott Ward, Ph.D.
|
|
|
|
X
|
|
|
*Committee
Chair
(1)
Appointed to the Board in August 2019 to fill
vacancy created by resignation of Christopher von Jako,
Ph.D.
(2)
Resigned as
Chairman in February 2018. Stepped down as Chief Executive Officer
in June 2018; continues as Director until the Annual Meeting. Mr.
Cullimore is not standing for re-election at the Annual Meeting. As
a former executive officer of the Company, Mr. Cullimore did not
serve as member of any committees during his tenure on the
Board.
(3)
Appointed to the
Board upon his hiring as Chief Executive Officer in June 2018.
Stepped down as Chief Executive Officer and Director in August 2019
and is not a nominee for election at the Annual
Meeting.
13
Below
is a description of the Board committees. Each of the committees
has authority to engage legal counsel or other experts or
consultants as it deems appropriate to carry out its
responsibilities.
Audit Committee
The
Audit Committee, was established in accordance with requirements of
Section 3(a)(58)(A) of the Exchange Act, and is comprised of the
following independent directors: David B. Holtz (Chairman), Erin S.
Enright, and Scott A. Klosterman. The NASDAQ Stock Market Rules
regarding corporate governance require that at least one member of
the Audit Committee have past employment experience in finance or
accounting, requisite professional certification in accounting, or
comparable experience or background which results in the
individual
’
s
“
financial
sophistication.
”
This
financial sophistication may derive from the person being or having
been a chief executive officer, chief financial officer or other
senior officer with financial oversight responsibilities. Our Board
believes that all three members meet the NASDAQ requirements for
financial sophistication. Our Board further believes that each of
committee members is an independent director as defined in the
NASDAQ Stock Market Rules. The Board has also determined that the
members of the Audit Committee qualify as “audit committee
financial experts” (“
Audit Committee Financial
Experts
”) as defined by applicable SEC
’
s rules. The SEC rules define an
Audit Committee Financial Expert as a person who has all of the
following attributes:
●
Understanding of
accounting principles generally accepted in the United States of
America, or GAAP, and financial statements.
●
Ability to assess
the general application of GAAP in connection with accounting for
estimates, accruals and reserves.
●
Experience in
preparing, auditing, analyzing or evaluating financial statements
that present a breadth and level of complexity of accounting issues
that are generally comparable to the breadth and complexity of
issues that can reasonably be expected to be raised by our
financial statements, or experience actively supervising one or
more persons engaged in such activities.
●
Understanding of
internal control over financial reporting.
●
Understanding of
audit committee functions.
The
Audit Committee is concerned primarily with the integrity of our
financial statements, the selection, independence, qualifications
and performance of our independent registered public accounting
firm, and our compliance with legal requirements. The Audit
Committee charter approved by the Board of Directors reflects the
standards and requirements adopted by the SEC and
NASDAQ.
The
Audit Committee met
four
times
during fiscal year 2018. Each member of the Audit Committee
attended at least 75% of the Audit Committee
’
s meetings.
Report of the Audit Committee of the Board of
Directors
The
following is the report of the
Audit Committee with respect to the audited consolidated
financial statements for the fiscal year ended June 30, 2019
included in the Company’s Annual Report on Form
10-K.
Our
management is responsible for the Company’s financial
reporting process, including its systems of internal control over
financial reporting, and for the preparation of its financial
statements in accordance with generally accepted accounting
principles. Our independent registered public accounting firm,
Tanner, is responsible for performing an independent audit of our
consolidated financial statements and issuing opinions on the
conformity of those audited financial statements with United States
generally accepted accounting principles (“
GAAP
”) and the effectiveness of
our internal control over financial reporting. The role and
responsibility of the Committee is to monitor and oversee these
financial processes on behalf of the Board.
The
members of the Audit Committee are not employees of Dynatronics and
are not, nor do they represent themselves to be, accountants or
auditors by profession, and they do not undertake to conduct
auditing or accounting reviews or procedures. Therefore, in
performing the Audit Committee’s oversight role, the Audit
Committee necessarily must rely on management’s
representations that it has maintained appropriate accounting and
financial reporting principles and policies, and appropriate
internal control over financial reporting and disclosure controls
and procedures designed to ensure compliance with accounting
standards and applicable laws and regulations, and that the
Company’s financial statements have been prepared with
integrity and objectivity and in conformity with GAAP, and on the
representations of our independent registered public accounting
firm included in its reports on the Company’s financial
statements.
14
In this
context, the Audit Committee hereby reports as
follows:
1. The
Audit Committee has reviewed and discussed our consolidated audited
financial statements with our management.
2. The
Audit Committee has discussed with the independent registered
public accounting firm the matters required to be discussed by
Auditing Standard No. 1301, “Communications with Audit
Committees,” as adopted by the Public Company Accounting
Oversight Board (the “
PCAOB
”).
3. The
Audit Committee has received the written disclosures and the letter
from the independent registered public accounting firm required by
the applicable requirements of the PCAOB regarding the independent
registered public accounting firm’s communications with the
Audit Committee concerning independence, and the Audit Committee
has discussed with the independent registered public accounting
firm its independence.
4.
Based on the review and discussions referred to above in
this report, the Audit Committee recommended to the
Company’s Board, and the Board approved, that the
consolidated audited financial statements be included in our Annual
Report on Form 10-K for the year ended June 30, 2019 for filing
with the SEC.
The
Audit Committee of the Board of Directors:
David
B. Holtz, Chairman
Erin S.
Enright
Scott
A. Klosterman
The information contained in the above report shall not be deemed
to be “soliciting material” or to be
“filed” with the SEC, nor shall such information be
incorporated by reference into any future filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended, except to the extent that the Company
specifically incorporates it by reference in such
filing.
Compensation Committee
The
Compensation Committee is responsible for reviewing and approving,
where required, the compensation, as well as evaluating the
performance, of our principal executive officer and other executive
officers, and advising and assisting management in developing our
overall compensation strategy to assure that it promotes
shareholder interests, supports our strategic and tactical
objectives, and provides for appropriate rewards and incentives for
our management and employees. Each member of the Compensation
Committee is an
“
independent director
”
as defined by the federal
securities laws and in Rule
5605(a)(2) of the NASDAQ Stock Market
Rules.
The
Compensation Committee is empowered to advise management and make
recommendations to the Board of Directors with respect to the
compensation and other employment benefits of our executive
officers and key employees. In exercising its responsibilities, the
Compensation Committee establishes and monitors policies governing
the compensation of executive officers, reviews the performance of
and determines salaries and incentive compensation for executive
officers, and makes option or other equity-based awards to those
individuals. Additionally, the Compensation Committee administers
our stock plans.
The
Compensation Committee meets as often as it deems necessary,
without the presence of any executive officer whose compensation it
is then approving. Neither the Compensation Committee nor the
Company engaged or received advice from any compensation consultant
during fiscal year 2019. As of the date of this Proxy Statement,
the following independent directors are members of the Compensation
Committee: Scott A. Klosterman, (Chairman), Erin S. Enright, Brian
M. Larkin and R. Scott Ward.
15
The
Compensation Committee held
four
meetings during fiscal year
2019. All committee members attended at least 75% of these
meetings.
The
charter of the Compensation Committee grants the committee full
access to all our books, records, facilities and personnel. In
addition, under the charter, the Compensation Committee has the
authority to obtain, at our expense, advice and assistance from
compensation consultants and internal and external legal,
accounting or other advisors and other external resources that the
Compensation Committee considers necessary or appropriate in the
performance of its duties. The Compensation Committee has direct
responsibility for the oversight of the work of any consultants or
advisers engaged for the purpose of advising the committee. In
particular, the Compensation Committee has the sole authority to
retain, in its sole discretion, compensation consultants to assist
in its evaluation of
executive and
director compensation, including the authority to approve the
consultant
’
s reasonable
fees and other retention terms.
Nominating and Governance Committee
The
Nominating and Governance Committee is responsible for overseeing,
reviewing and making periodic recommendations concerning our
corporate governance policies, and for recommending to the full
Board of Directors candidates for election to the Board of
Directors. The committee is comprised of the following directors:
Erin S. Enright (Chairman), David B. Holtz, Brian M. Larkin and
Scott A. Klosterman. Each member of this committee is an
independent director under applicable NASDAQ Stock Market Rules.
The Nominating and Governance Committee did not meet during fiscal
year 2019.
Nominees for the
Board of Directors should be committed to enhancing long-term
shareholder value and must possess a high level of personal and
professional ethics, sound business judgment and integrity. The
Nominating and Governance Committee encourages selection of
directors who will contribute to our corporate governance,
including: responsibility to its shareholders, technology
leadership, effective execution, high customer satisfaction and
superior employee working environment.
The
Nominating and Governance Committee from time to time reviews the
appropriate skills and characteristics required of Board members,
including factors that it seeks in Board members such as diversity
of business experience, viewpoints and personal background, and
diversity of skills in technology, finance, marketing,
international business, financial reporting and other areas that
are expected to contribute to an effective Board of Directors. In
evaluating potential candidates for the Board of Directors, the
Nominating and Governance Committee considers these factors in
light of the specific needs of the Board of Directors at that time.
The brief biographical information for each nominee set forth in
the section under the heading
“
Business Experience and
Qualifications of Nominees
” on
page 9
above, includes the primary individual experience,
qualifications, attributes and skills of each of our directors
nominated for election at this Annual Meeting that led the
Nominating and Governance Committee to conclude that each nominee
should serve as a member of the Board of Directors.
Shareholders may
recommend a director nominee to the Nominating and Governance
Committee. In recommending candidates for election to the Board of
Directors, the committee considers nominees recommended by
directors, officers, employees, shareholders and others, using the
same criteria to evaluate all candidates. The Nominating and
Governance Committee reviews each candidate
’
s qualifications, including whether
a candidate possesses any of the specific qualities and skills
desirable in certain members of the Board of Directors. Evaluations
of candidates generally involve a review of background materials,
internal discussions and interviews with selected candidates as
appropriate. The Nominating and Governance Committee may, but is
not required to, engage consultants or third-party search firms to
assist in identifying and evaluating potential
nominees.
16
To
recommend a prospective nominee for the Nominating and Governance
Committee
’
s
consideration, submit the candidate
’
s name and qualifications to us in
writing to the following address: Dynatronics Corporation, Attn:
Jim Ogilvie, Vice President of Corporate Development, 7030 Park
Centre Drive, Cottonwood Heights, Utah 84121. When submitting
candidates for nomination to be elected as directors, shareholders
must also follow the notice procedures and provide the information
required by our bylaws. In particular, for the Nominating and
Governance Committee to consider a candidate recommended by a
shareholder for nomination at the 2020 Annual Meeting of
Shareholders, the recommendation must be delivered or mailed to and
received by us as indicated above between July 2, 2020 and August
1, 2020 (or, if the 2020 Annual Meeting is not held within 30
calendar days of the anniversary of the date of the 2019 Annual
Meeting, within 10 calendar days after our public announcement of
the date of the 2020 Annual Meeting). The recommendation must
include the following information:
●
The
shareholder
’
s name and
address and the beneficial owner, if any, on whose behalf the
nomination is proposed;
●
The
shareholder
’
s reason for
making the nomination at the Annual Meeting, and the signed consent
of the nominee to serve if elected;
●
The number of
shares owned by, and any material interest of, the record owner and
the beneficial owner, if any, on whose behalf the record owner is
proposing the nominee;
●
A description of
any arrangements or understandings between the shareholder, the
nominee and any other person regarding the nomination;
and
●
Information
regarding the nominee that would be required to be included in our
Proxy Statement by the SEC
’
s rules, including the
nominee
’
s age, business
experience for the past five years and any directorships held by
the nominee, including directorships held during the past five
years.
Code of Ethics
We have
adopted a Code of Business Ethics that applies to all officers,
directors and employees. The Code of Business Ethics is available
on the Investors section of our website at
https://irdirect.net/DYNT/corporate_governance
. If
we make any substantive amendments to the Code of Business Ethics
or grant any waiver from a provision of our Code to any executive
officer or director, we will promptly disclose the nature of the
amendment or waiver on our website.
Corporate Governance Guidelines
The
Board of Directors has not adopted formal written corporate
governance guidelines. Given the experience and qualifications our
directors contribute to the Board of Directors
’
activities, we have implemented a
number of practices designed to encourage effective corporate
governance. These practices include:
●
the requirement
that at least a majority of the directors meet standards of
independence determined by NASDAQ and our Board;
●
holding regular
executive sessions of the independent members of the Board of
Directors;
●
holding committee
meetings which include individual sessions with representatives of
the our independent registered public accounting firm, as well as
with our Chief Financial Officer and our Chief Executive Officer;
and
●
completion of
“
360
”
performance evaluations of each
director by the other members of the Board of
Directors.
Our
Board of Directors is actively involved in the oversight and
management of the material risks that could affect us. The Board of
Directors carries out its risk oversight and management
responsibilities by monitoring risk directly as a full board and,
where appropriate, through its committees. Effective risk oversight
is a priority of the Board of Directors. These duties are
accomplished through the effective use of Board committees that
function under written charters adopted by the Board.
17
DIRECTOR COMPENSATION
Our
directors play a critical role in guiding our strategic direction
and overseeing our management. Ongoing developments in corporate
governance and financial reporting have resulted in an increased
demand for such highly qualified and productive public company
directors. The many responsibilities and risks and the substantial
time commitment of being a director of a public company require
that we provide adequate incentives for our directors’
continued performance by paying compensation commensurate with our
directors’ workload. Our non-employee directors are
compensated based upon their respective levels of Board
participation and responsibilities, including service on Board
committees. Our employee directors receive no separate compensation
for their service as directors.
Our
director compensation is reviewed by the Compensation Committee,
which makes recommendations to the Board of Directors on the
appropriate structure for our non-employee director compensation
program and the appropriate amount of compensation. Our Board of
Directors is responsible for final approval of our non-employee
director compensation program and the compensation paid to our
non-employee directors. Our non-employee directors are entitled to
reimbursement for their reasonable travel and lodging expenses for
attending Board and committee meetings.
In
fiscal year 2019, we authorized payment to our non-employee
directors of an annual cash retainer of $
15,000
and an equity retainer of
10,000
shares of common stock
under our 2018 Equity Incentive Plan (the “
2018 Plan
”). Committee chairs
were authorized to receive an additional retainer of $
10,000
for the year. The Board subsequently
determined that the above retainers would be paid in the form of
common stock in lieu of cash for the six month period ended June
30, 2019. All retainer payments were pro-rated for the portion of
the year served if a director’s service began after the start
of the fiscal year. The following table summarizes the total
compensation paid to the non-employee and independent directors
during the fiscal year ended June 30, 2019.
Director Compensation Table 2019
|
Name
(a)
|
Fees earned or paid in cash
($)
(b)
|
Stock awards
($)
(c)
(1)
|
Total
($)
(h)
|
|
Kelvyn H.
Cullimore, Jr.
|
7,500
|
31,100
|
38,600
|
|
Erin S.
Enright
|
12,500
|
36,100
|
48,600
|
|
David B.
Holtz
|
12,500
|
36,100
|
48,600
|
|
Scott A.
Klosterman
|
12,500
|
36,100
|
48,600
|
|
Brian M.
Larkin
|
7,500
|
31,100
|
38,600
|
|
R.
Scott Ward, Ph.D.
|
7,500
|
31,100
|
38,600
|
_________________
(1)
Columns (d) through
(g) are omitted from this table as no items of compensation
referenced in those columns were paid to the directors during the
period covered by the table. Dr. von Jako, our Chief Executive
Officer in 2019, who was also a director, received no additional
compensation for service as a director during fiscal year 2019 and
is therefore omitted from this table.
Director Compensation – Equity
There
were no outstanding unvested RSUs or other option awards held by
any of our non-employee directors as of June 30, 2019.
18
PROPOSAL NO. 2 RATIFICATION OF
SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
What am I voting on?
At the
Annual Meeting, our shareholders will be asked to ratify the
appointment of Tanner LLC (“
Tanner
”) as our independent
registered public accounting firm for the fiscal year ending June
30, 2020. Representatives of Tanner are expected to be present at
the Annual Meeting, and will have the opportunity to make
statements if they desire to do so and to respond to appropriate
questions. Tanner has served as our independent registered public
accounting firm since
October 24,
2016.
Vote Required
If a quorum is present, the affirmative vote of a
majority of the votes cast at the 2019 Annual Meeting is
required
for ratification of
our independent registered public accounting firm. Abstentions will
be counted as present
for
purposes of determining the presence of a quorum, but will not be
considered as votes cast
for
or
against the proposal and
will therefore have no effect on the outcome of the
vote.
Neither
our Bylaws nor other governing documents or law require shareholder
ratification of the selection of Tanner as our independent
registered public accounting firm. However, the Audit Committee is
submitting the selection of Tanner to the shareholders for
ratification as a matter of good corporate practice. If the
shareholders fail to ratify the selection, the Audit Committee will
reconsider whether or not to retain that firm. Even if the
shareholders ratify the selection, the Audit Committee in its
discretion may direct the appointment of different independent
auditors at any time during the year if they determine that such a
change would be in our best interests and in the best interests of
our shareholders.
Independence
Tanner
has advised us that it has no direct or indirect financial interest
in us or in any of our subsidiaries and that during 2019, it had no
connection with us or any of our subsidiaries, other than as our
independent registered public accounting firm or in connection with
certain other services, as described below.
Principal Accountant Fees and Services
During
fiscal year 2019, we entered into an engagement agreement with
Tanner, which sets forth the terms by which Tanner agreed to
perform audit services for us. Those services consisted of the
audit of our annual consolidated financial statements and review of
the quarterly financial statements.
During
fiscal year 2018, Tanner performed services consisting of the audit
of our annual consolidated financial statements, review of the
quarterly financial statements, and accounting consultations,
consents, and other services related to our SEC
filings.
The
following table summarizes the fees paid by us to Tanner during
fiscal years 2018 and 2019.
|
Type of Service and
Fee
|
2018
|
2019
|
|
Audit
Fees
|
$
202,000
|
$
217,050
|
|
Audit Related
Fees
|
7,000
|
|
|
Tax
Fees
|
-
|
|
|
All Other
Fees
|
20,000
|
|
|
Total
Fees
|
$
229,000
|
$
217,050
|
Pre-approval
Policies and Procedures
The
Audit Committee has established a policy that all audit and
permissible non-audit services provided by the independent
registered public accounting firm will be pre-approved by the Audit
Committee. These services may include audit services, audit-related
services, tax services and other services. The Audit Committee
considers whether the provision of each non-audit service is
compatible with maintaining the independence of the independent
registered public accounting firm. Pre-approval is detailed as to
the particular service or category of services and is generally
subject to a specific budget. The independent registered public
accounting firm and our management are required to periodically
report to the Audit Committee regarding the extent of services
provided in accordance with this pre-approval, and the fees for the
services performed to date.
The
Audit Committee has determined that the rendering of services other
than audit services by Tanner is compatible with maintaining the
principal accountant
’
s
independence.
Recommendation of the Board
The
Board of Directors recommends a vote
“FOR”
Proposal No. 2
ratifying the selection of Tanner as our independent registered
public accounting firm for the year ending June 30,
2020.
19
PROPOSAL NO. 3
ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED
EXECUTIVE
OFFICERS
The
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
(the “
Dodd-Frank
Act
”) enables a corporation’s shareholders to
vote to approve, on a non-binding advisory basis, the compensation
of the corporation’s executive officers. We are providing
such an opportunity to our shareholders at the Annual Meeting to
vote on an advisory basis to approve the compensation paid to our
Named Executive Officers as disclosed in this Proxy Statement in
accordance with the Dodd-Frank Act and the SEC rules promulgated
under the Dodd-Frank Act.
This
proposal, commonly known as a
“
Say-on-Pay
”
proposal, gives you, as a
shareholder, the opportunity to endorse or not endorse our
executive compensation program and the compensation paid to our
Named Executive Officers as reported in this Proxy
Statement.
In accordance
with the advisory vote of a majority of shareholders received at
our 2013 Annual Meeting of Shareholders, during the past six years,
the Board has provided the shareholders an opportunity to approve
executive compensation at our Annual Meetings every three
years.
The
Say-on-Pay vote is advisory, and therefore it is not binding on the
Compensation Committee or the Board. Although the vote is
non-binding, the Compensation Committee and the Board will review
the voting results, seek to determine the cause or causes of any
significant negative voting, and take them into consideration when
making future decisions regarding executive
compensation.
The
Compensation Committee and the Board have designed our executive
compensation program to attract and retain talented executives, to
motivate them to achieve our key financial, operational, and
strategic goals, and to reward them for superior performance. They
also designed our compensation program to align our executive
officers
’
interests with
those of our shareholders by rewarding their achievement of the
specific corporate and individual goals approved by our
Compensation Committee. The performance goals set by the
Compensation Committee are focused on achieving our
commercialization objectives, increasing long-term shareholder
value, and advancing our product development and technology
platform. Shareholders are encouraged to read the Compensation
Discussion and Analysis and Executive Compensation sections of this
Proxy Statement for a more detailed discussion of how our
compensation program reflects our core objectives and aligns our
executive officers
’
interests with those of our shareholders.
Vote Required
The
Board believes our executive compensation program uses appropriate
structures and sound pay practices that are effective in achieving
our core compensation objectives. Accordingly, the Board recommends
that you vote
in favor
of
the following resolution:
“
RESOLVED, that the shareholders of
Dynatronics Corporation approve, on an advisory basis, the
compensation of the Company
’
s Named Executive Officers as
disclosed in the Company
’
s 2019 Proxy Statement pursuant to
the Securities and Exchange Commission
’
s compensation disclosure rules,
including the Executive Compensation section.
”
If a
quorum is present, the proposal to approve, on an advisory basis,
the compensation of our Named Executive Officers requires the
affirmative vote of a majority of the votes cast at the 2019 Annual
Meeting on the proposal. Abstentions and broker non-votes will be
counted as present for purposes of determining the presence of a
quorum. Abstentions and broker non-votes will not be considered as
votes cast for or against the proposal and will therefore have no
effect on the outcome of the vote.
Recommendation of the Board
The Board of Directors unanimously recommends that
the shareholders vote
“FOR”
the approval, on an advisory basis, of
the compensation of our
Named
Executive Officers as stated in the resolution contained in the
Proxy Statement
for the
2019
Annual Meeting of
Shareholders.
20
PROPOSAL NO. 4
ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON
EXECUTIVE
COMPENSATION
The
Dodd-Frank Act also enables shareholders to vote, on a non-binding
advisory basis, on the frequency on which they would prefer to cast
a non-binding advisory vote on the compensation of the
corporation’s named executive officers
(“Say-When-on-Pay”). Section 14A of the Exchange Act
requires that we conduct a shareholder advisory Say-When-on-Pay
vote at least once every six years. We conducted the last such
advisory vote in 2013. At that time, a majority of our shareholders
voted, on an advisory basis, to submit the matter of shareholder
approval of executive compensation to an advisory vote every three
years.
In
accordance with the above rules, we are again submitting this
proposal to our shareholders and ask you to consider the resolution
below. This proposal provides our shareholders with the opportunity
to cast an advisory vote indicating their preference on how often
we should include an advisory Say-on-Pay vote on executive
compensation in our proxy materials for future shareholder
meetings. By voting on this proposal, shareholders may indicate
their preference for us to conduct the Say-on-Pay vote every year,
every two years or every three years, or shareholders may abstain
from voting, as follows:
“RESOLVED,
that the shareholders determine, on an advisory basis, that the
preferred frequency of an advisory vote on the executive
compensation of the Company’s Named Executive Officers as set
forth in the Company’s Proxy Statement for the 2019 Annual
Meeting of Shareholders should be every [year] [two years] [three
years].”
The
Board recommends that you vote for every three years as the desired
frequency for us to hold a non-binding, advisory vote of the
shareholders on executive compensation. We believe this frequency
is appropriate for the reasons set forth below:
●
We strive to ensure
management’s interests are aligned with shareholders’
interests to support long-term value creation through our equity
compensation program. To that end, we grant equity awards to vest
over multi-year periods of service to encourage our Named Executive
Officers to focus on long-term performance, and recommend a vote
every three years, which would allow the equity compensation to be
evaluated over a similar time-frame and in relation to long-term
performance.
●
A vote every three
years will provide the Board and the Compensation Committee with
the time to thoughtfully consider and thoroughly respond to
shareholders’ sentiments and to implement any necessary
changes in light of the timing required therefor. The Board and the
Compensation Committee will carefully review changes to the
executive compensation to maintain the effectiveness and
credibility of the program, which is important for aligning
interests and for motivating and retaining our Named Executive
Officers.
●
We are open to
input from shareholders regarding board and governance matters, as
well as the equity compensation program. We believe that the
shareholders’ ability to contact us and the Board at any time
to express specific views on executive compensation holds us
accountable to shareholders and reduces the need for and value of
more frequent advisory votes on executive
compensation.
Pursuant to the
Exchange Act and the rules promulgated thereunder, this vote on the
frequency of future advisory votes on Named Executive Officer
compensation is non-binding on the Board and its committees. This
vote may not be construed as overruling a decision by the Board or
its committees, creating or implying any change to the fiduciary
duties of the Board or its committees or any additional fiduciary
duty by the Board or its committees or restricting or limiting the
ability of shareholders to make proposals for inclusion in proxy
materials related to executive compensation. Notwithstanding the
Board’s recommendation and the outcome of the vote on this
matter, the Board may, in the future, decide to conduct advisory
votes on a more or less frequent basis and may vary its practice
based on factors such as discussions with shareholders and the
adoption of material changes to compensation programs.
21
Vote Required
Please
mark your proxy card to reflect your preference on this proposal or
your decision to abstain. A plurality of votes cast on this
proposal will determine the frequency selected by
shareholders.
The
approval of this proposal is not a condition to the approval of any
other proposals submitted to the shareholders.
Recommendation of the Board
The Board of Directors unanimously recommends that
the shareholders vote, on an advisory basis,
for holding an advisory vote on executive
compensation
every three
years
.
EXECUTIVE OFFICERS
The
following table sets forth certain information with respect to our
executive officers as of the date of this Proxy
Statement.
|
Name
|
|
Age
|
|
Position
|
|
Brian
D. Baker
(1)
|
|
52
|
|
President,
Chief Executive Officer, and Director
|
|
David
A. Wirthlin
(2)
|
|
58
|
|
Chief
Financial Officer and Secretary
|
|
James
N. Ogilvie
|
|
33
|
|
Vice
President Corporate Development
|
|
Skyler
Black
|
|
36
|
|
Corporate
Controller
|
(1)
Principal Executive Officer
. Mr. Baker became our President and Chief
Executive Officer on August 26, 2019. He replaced Christopher von
Jako,
Ph.D., who served in that
capacity from June 2018 until his resignation on August 26, 2019.
Mr. Baker’s biographical information and other credentials,
including his employment history, are summarized in the section of
this Proxy Statement that discusses the nominees
for director under
Proposal No. 1
Election of Directors.
(2)
Principal
Financial Officer and Principal Accounting Officer.
David A.
Wirthlin
joined us
and was appointed Chief Financial Officer in October 2016 and
Corporate Secretary in October 2016. He previously worked with
ArmorWorks Enterprises, LLC, a privately-held military armor
technology company located in Arizona, where he served in several
capacities: Chief Financial Officer from June 2004 until January
2016, and consultant on a contract basis to ArmorWorks from January
2016 until May 2016. Mr. Wirthlin served as Chief Financial Officer
for Integrated Information Systems, Inc. and SkyMall, Inc., where
he led the initial public offering process for each company and
subsequently was directly responsible for all SEC-related
functions. He is a CPA in the State of Utah (inactive status) and
worked in public accounting and consulting for seven years at
Arthur Andersen LLP. Mr.
Wirthlin holds an M.B.A. degree from
the University of Chicago and a B.S. degree in Accounting from the
University of Utah.
James N.
Ogilvie
was appointed Vice President of Corporate
Development in December of 2016; he joined us in August 2015,
initially as Director of Business Development. Mr. Ogilvie worked
previously at Evolent Health, Inc. (NYSE: EVH) where he developed
strategic business cases for hospital systems.
He started his career in the
investment banking division of Robert W. Baird, where he provided
analytical support on equity offerings, mergers and acquisitions,
and other financial advisory services.
Mr. Ogilvie graduated from Brigham
Young University, School of Accountancy, receiving an M.S. degree
and B.S. degree in Accounting. He is also a CPA, licensed in
Wisconsin.
Skyler Black
joined us
as Corporate Controller in January 2018. He was previously with
PricewaterhouseCoopers, LLP where he spent 12 years in their
assurance practice. He is a CPA in the state of Colorado and holds
a B.S. degree in Accounting from Brigham Young University
–
Idaho.
22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth certain information regarding the
ownership of our common stock and voting securities as of October
4
, 2019, by (1) each person
known by us to be the beneficial owner of more than 5% of the
issued and outstanding common stock, based upon their most recent
filings or correspondence with the SEC, (2) our Named Executive
Officers and directors individually, and (3) the Named Executive
Officers and directors as a group.
Under
SEC rules,
“
Named
Executive Officers
”
include (i) all individuals serving as our principal executive
officer or acting in a similar capacity during the last completed
fiscal year, regardless of compensation level; (ii) our two most
highly compensated executive officers other than the principal
executive officer who were serving as executive officers at the end
of the last completed fiscal year; and (iii) up to two additional
individuals for whom disclosure would have been provided pursuant
to the rule but for the fact that the individual was not serving as
an executive officer at the end of the last completed fiscal year.
Pursuant to these rules, we have identified as our Named Executive
Officers for purposes of this Proxy Statement: (1) Dr. Christopher
von Jako, who served as our principal executive officer for all of
fiscal year 2019; (2) David A. Wirthlin, who is also our principal
financial and accounting officer; (3)
Brian D. Baker,
who served as our
Chief Operating Officer until his
appointment in August 2019 as our Chief Executive Officer; and (4)
Kelvyn H. Cullimore, Jr., who served as our principal executive
officer during fiscal year 2018. Mr. Wirthlin and
Mr.
Baker
were our two most highly compensated
executive officers other than our principal executive officer
during the fiscal year ended June 30, 2019. Unless otherwise
indicated in the notes below the table, the address of each
beneficial owner listed in the table below is c/o Dynatronics
Corporation, 7030 Park Centre Dr., Cottonwood Heights, Utah
84121.
23
Beneficial Ownership Table
|
Name/Address
of Beneficial Owner
(1)
|
Title of
Class
|
No. of Shares of each Class Beneficially
Owned
|
Percent of Class
Beneficially
Owned
|
Total No. of Shares Beneficially
Owned
|
Percent of Total Voting
Power
|
|
Greater than 5% Shareholders:
|
|
|
|
|
|
|
Stuart M. Essig
(2)
|
Common
|
2,982,415
|
27.7
%
|
4,122,415
|
16.9
%
|
|
|
Series
A
|
880,000
|
44.0
%
|
|
|
|
|
Series
B
|
260,000
|
17.8
%
|
|
|
|
Stuart M. Essig
2007 Family Trust
(3)
|
Common
|
445,102
|
4.8
%
|
673,902
|
2.8
%
|
|
|
Series
A
|
188,800
|
9.4
%
|
|
|
|
|
Series
B
|
40,000
|
2.7
%
|
|
|
|
Provco Ventures I,
LP
(4)
|
Common
|
1,907,017
|
19.0
%
|
2,591,017
|
11.1
%
|
|
|
Series
A
|
484,000
|
24.2
%
|
|
|
|
|
Series
B
|
200,000
|
13.7
%
|
|
|
|
Armistice Capital,
LLC
(5)
|
Common
|
1,237,676
|
12.4
%
|
1,237,676
|
9.0
%
|
|
|
Series
B
|
500,000
|
34.3
%
|
|
|
|
Nancy K. Cronin
(6)
|
Common
|
978,161
|
11.1
%
|
978,161
|
8.3
%
|
|
|
|
|
|
|
|
|
Named Executive Officers and Directors:
|
|
|
|
|
|
|
Brian D. Baker
(CEO/Director)
(7)
|
Common
|
219,147
|
2.4
%
|
315,147
|
*
|
|
|
Series
A
|
96,000
|
4.8
%
|
|
|
|
Kelvyn H.
Cullimore, Jr. (Director)
(8)
|
Common
|
189,214
|
2.1
%
|
189,214
|
1.6
%
|
|
Erin S. Enright
(Director)
(9)
|
Common
|
496,440
|
5.4
%
|
|
3.2
%
|
|
|
Series A
|
188,800
|
9.4
%
|
|
|
|
|
Series
B
|
40,000
|
2.7
%
|
|
|
|
David B. Holtz
(Director)
(10)
|
Common
|
50,566
|
*
|
50,566
|
*
|
|
Scott A. Klosterman
(Director)
(11)
|
Common
|
50,566
|
*
|
50,566
|
*
|
|
Brian M. Larkin
(Director)
(12)
|
Common
|
246,141
|
2.7
%
|
314,141
|
1.5
%
|
|
|
Series A
|
48,000
|
2.4
%
|
|
|
|
|
Series
B
|
20,000
|
1.4
%
|
|
|
|
|
Common
|
219,697
|
2.5
%
|
293,697
|
1.5
%
|
|
|
Series
A
|
48,000
|
2.4
%
|
|
|
|
|
Series
B
|
26,000
|
1.8
%
|
|
|
|
R. Scott Ward
(Director)
(14)
|
Common
|
44,520
|
*
|
44,520
|
*
|
|
David A.
Wirthlin
(15)
|
Common
|
19,023
|
*
|
23,023
|
*
|
|
|
Series
A
|
4,000
|
*
|
|
|
|
All Names Executive
Officers and directors as a group (nine
persons)
|
Common
|
1,535,314
|
16.0
%
|
2,006,114
|
9.9
%
|
|
|
Series
A
|
384,800
|
19.2
%
|
|
|
|
|
Series
B
|
86,000
|
5.9
%
|
|
|
__________________
(1)
The table assumes
8,849,928 shares of common stock issued and outstanding as of
October 4, 2019. The amount in the “Percent of Total Voting
Power” column includes the impact of any applicable Voting
Cutback as to the indicated beneficial owner. Subject to the Voting
Cutback, the Series A Preferred and the Series B Preferred vote on
an as-converted basis one vote per share with the common stock. For
purposes of the table, we determined the number of shares of each
class as beneficially owned by each person under Rule 13d-3(d)(1)
of the Exchange Act. Under this rule, shares of voting stock not
outstanding that are subject to issuance pursuant to options,
warrants, rights or conversion privileges exercisable by a person
within 60 days of the date indicated are deemed outstanding for the
purpose of calculating the number and percentage beneficially owned
by such person but are not deemed outstanding for the purpose of
calculating the number or percentage beneficially owned by each any
other person listed in the table. Except where otherwise noted, we
believe that each individual or entity named has sole investment
and voting power with respect to the shares of indicated as
beneficially owned by such person, subject to community property
laws, where applicable. Beneficial ownership representing less than
one percent of the outstanding shares of a class is denoted with an
asterisk (*). If an individual or person disclaims beneficial
ownership, that is noted in the notes below the table.
(2)
Mr. Essig is an
observer to our Board of Directors and the husband of Erin Enright,
a Preferred Director and the Chairman of our Board of Directors.
The amount of common stock beneficially owned includes:
(a)
1,073,410
shares of
common stock owned of record and (b)
1,909,005
shares of common stock issuable
upon the exercise of warrants. Mr. Essig has sole voting and
dispositive power over the shares of stock indicated. He has no
voting or dispositive power over securities that are beneficially
owned of record by The Stuart M. Essig 2007 Family Trust
(“
Essig Trust
,”
see
, Note (3), below) or by
Ms. Enright (
see
,
Note
(9), below). The
address for this beneficial owner is 512 West MLK Jr. Blvd #320,
Austin, Texas 78701.
24
(3)
Mr. Essig is the
settlor/grantor of the Essig Trust. His wife, Ms. Enright, is
Trustee of the Essig Trust. Shares of common stock beneficially
owned include: (a)
101,902
shares of common stock owned of record and (b)
343,200
shares of common stock
issuable upon exercise of warrants. Ms. Enright and the Essig Trust
have shared voting and dispositive power over the shares of stock
owned of record by the Essig Trust. Amount indicated also
includes
51,338
shares of
common stock owned of record by Ms. Enright personally, over which
Ms.
Enright has sole
voting and dispositive power. (
See
, Note (9), below.) The address for
this beneficial owner is 512 West MLK Jr. Blvd #320, Austin, Texas
78701.
(4)
The address of this
beneficial owner is 795 E. Lancaster Ave. Suite 200, Villanova, PA
19085. The general partner of this shareholder is Provco, LLC. The
sole member of Provco, LLC is Richard E. Caruso, Ph.D. The amount
of common stock beneficially owned includes: (a)
731,017
shares of common stock owned
of record, and (b)
1,176,000
shares of common stock
issuable upon the exercise of warrants.
(5)
Amount of common
stock beneficially owned includes: (a)
107,676
shares of common stock owned
of record and (b)
1,130,000
shares of common stock
issuable upon the exercise of warrants. The Series A Preferred and
Series B Preferred, as well as the warrants held by this
shareholder include provisions that limit the exercise or
conversion thereof, as applicable, to the extent such exercise
would cause the holder, together with its affiliates and any other
person acting together with it and its affiliates, to beneficially
own a number of shares of common stock which would exceed 9.99% of
our then outstanding common stock following such exercise or
conversion, excluding for purposes of such determination shares of
common stock issuable upon the exercise of the warrant or
conversion of the preferred stock which have not been exercised or
converted. The shareholder may increase or decrease its beneficial
ownership limitation upon giving notice to us, which such increase
or decrease will not be effective until the 61st day after the
notice is delivered to us. As a consequence of this beneficial
ownership conversion cap and related limitation on the conversion
and exercise of the warrants, the beneficial ownership of this
shareholder is limited as indicated in the table. The address for
this beneficial owner is c/o Steven Boyd, 510 Madison Ave, 22nd
Floor, New York, New York 10022.
(6)
Ms. Cronin received
these shares upon conversion of shares of our Series D Non-Voting
Convertible Preferred Stock issued in connection with our
acquisition of Bird & Cronin, Inc. (“
Bird & Cronin
”), of which she
was a majority beneficial owner. The address for this beneficial
owner is 6101 Mt. Normandale Dr., Bloomington, Minnesota
55438.
(7)
Mr. Baker became
our Chief Executive Officer and a director on August 26, 2019.
Amount of common stock beneficially owned includes (a) 50,000 RSUs
granted at the time of his promotion as CEO, (b)
25,147
shares of common stock owned of
record,
and (c) 144,000 shares of
common stock issuable upon exercise of
warrants.
(8)
Mr. Cullimore is a
director. Amount indicated includes 189,214 shares of common stock
owned of record by Mr.
Cullimore and 10,000 shares of common
stock owned of record by Mr. Cullimore
’
s wife.
(9)
The amount of
common stock beneficially owned includes: (a)
51,338
shares of common stock owned of
record and (b)
445,102
shares of common stock beneficially owned by the Essig Trust
(
see
, Note (3), above). Ms.
Enright has no voting and dispositive power over the shares
beneficially owned by her husband; she has shared voting and
dispositive power as Trustee over the shares beneficially owned by
the Essig Trust.
(10)
Mr. Holtz is an
executive officer of Provco, LLC, the general partner of Provco
Ventures I LP.
He does not have
sole voting or dispositive power of shares beneficially owned by
Provco.
(11)
All amounts
indicated are shares of common stock owned of record by Mr.
Klosterman.
(12)
The amount of
common stock beneficially owned includes: (a)
124,141
shares of common stock owned
of record and (b)
122,000
shares issuable upon the exercise of warrants.
(13)
Dr. von Jako was our principal executive officer
(CEO) and a director until August 26, 2019. Amount of common stock
beneficially owned includes: (a) 108,697
shares of common stock owned of record and
(b) 111,000
shares of
common stock issuable upon exercise of
warrants.
(14)
All amounts
indicated are shares of common stock owned of record by Dr.
Ward.
(15)
Mr. Wirthlin is
included as a Named Executive Officer due to his compensation paid
to him as Chief Financial Officer. The amount of common stock
beneficially owned includes: (a)
1,023
shares of common stock owned of
record, (b) 6,000 shares issuable upon the exercise of warrants,
and (c)
12,000
shares of
common stock issuable upon exercise of options held by Mr.
Wirthlin.
25
Delinquent
Section 16(a) Reports
Section 16(a) of the Exchange Act requires our
executive officers and directors, and persons who own more than 10%
of a registered class of our equity securities
(“
Reporting
Persons
”), to file
reports of ownership and changes in ownership with the SEC and with
NASDAQ. Reporting Persons are required by SEC regulations to
furnish us with copies of all forms they file pursuant to
Section 16(a).
Based solely on our review of the copies of such
reports we received, and written representations from certain
Reporting Persons that no other reports were required
for those persons, to the best of our
knowledge, we believe that during the year ended June 30, 2019,
each of the Reporting Persons met all applicable
Section 16(a) filing requirements and
filed all required filings on a timely basis, except for one report
filed on Form 4 on behalf of Dr. von Jako on September 19, 2019, to
report the vesting of 12,500 restricted shares granted to him on
June 26, 2018, which vested on June 26, 2019, which report should
have been filed on June 28, 2019.
EXECUTIVE COMPENSATION
The
Compensation Committee operates under a written charter that
establishes its responsibilities. The Compensation Committee
reviews the charter annually to ensure that its scope is consistent
with the Compensation Committee’s expected role and meets
regulatory requirements. Under the charter, the Compensation
Committee is charged with general responsibility for the oversight
and administration of our executive compensation program. The
charter gives the Compensation Committee the sole responsibility
for determining the compensation of the Chief Executive Officer
based on the Committee’s evaluation of his performance. The
charter also authorizes the committee to engage consultants and
other professionals without management approval to the extent
deemed necessary to discharge its responsibilities.
Decisions regarding
other executives are made by the Compensation Committee considering
recommendations from the Chief Executive Officer and with input
from other executive officers and management. Decisions by the
Compensation Committee with respect to compensation of the Chief
Executive Officer are ratified by the non-executive members of the
Board of Directors.
The
compensation of our executive officers includes base salary and
equity components. The ultimate goal of our compensation philosophy
is to create long-term shareholder value by rewarding performance
that furthers our strategic goals and growth. At the same time, the
Compensation Committee seeks to maintain an executive compensation
program that is competitive with comparably-sized organizations
within our industry.
Dynatronics does
not target a specific pay mix; however, each Named Executive
Officer has a significant percentage of their bonus determined by
performance goals established by the Compensation Committee. Each
executive’s compensation opportunity is designed to provide
pay below targeted pay levels if annual and/or long-term
performance goals are not achieved. The compensation program is
designed to provide pay at or above targeted pay levels if
performance meets or exceeds goals. The Company provides a
competitive base salary and benefits with limited equity awards.
There is not an expectation of future equity awards for our
executives, beyond the Chief Executive Officer.
The
following table summarizes information concerning the compensation
paid to our Named Executive Officers for the last two fiscal years
[columns (g) and (h) have been intentionally omitted]:
26
Summary Compensation Table
|
Name and principal
position
(a)
|
Year
(b)
|
Salary
($)
(c)
|
Bonus
($)
(d)
|
Stock awards
($)
(e)
|
Option awards
($)
(f)
|
All other compensation
($)
(i)
|
Total
($)
(j)
|
|
Kelvyn
H. Cullimore, Jr.
|
2018
|
$
200,000
|
-
|
$
192,931
|
-
|
$
764,412
|
$
1,157,343
|
|
CEO
(1)
|
2019
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Christopher
R. von Jako
|
2018
|
$
4,230
|
-
|
$
147,500
|
$
56,881
|
-
|
$
208,611
|
|
CEO
(2)
|
2019
|
$
264,424
|
-
|
$
41,700
|
-
|
$
9,144
|
$
332,449
|
|
David
A. Wirthlin
|
2018
|
$
175,000
|
-
|
-
|
-
|
$
15,136
|
$
190,136
|
|
Chief Financial Officer
(3)
|
2019
|
$
188,000
|
-
|
-
|
-
|
$
16,058
|
$
204,558
|
|
Brian
Baker
|
2018
|
$
60,289
|
-
|
|
$
17,181
|
$
482
|
$
77,952
|
|
President
and CEO
|
2019
|
$
166,731
|
-
|
|
|
$
1,165
|
$
167,896
|
__________________
(1)
Mr. Cullimore is
included in this table, which covers the last two fiscal years
because he served as our principal executive officer in fiscal year
2018 until his termination in June 2018. Amounts in column (e) for
fiscal year 2018 include the value of restricted stock awards, the
vesting of which was accelerated upon termination of his
employment. Amounts in column (i) for fiscal year 2018 include
amounts paid or accrued for severance to Mr. Cullimore pursuant to
the terms of his employment agreement, including (A)
$700,000 as future
severance payments in cash following termination, (B) $31,512 as
the fair market value of a vehicle transferred to Mr. Cullimore,
and (C) $87,283 fair market value of shares withheld to reimburse
us for payment of the withholding tax in connection with the
restricted shares delivered as reported in column (e). Amounts in
column (i) also include amounts paid for Mr. Cullimore
’
s medical benefits.
(2)
Dr. von Jako became
our principal executive officer in June 2018 and resigned on August
26, 2019.
(3)
Mr. Wirthlin is our
principal financial and principal accounting officer.
27
Outstanding Equity Awards at June 30, 2019
The
following table presents information regarding outstanding equity
awards held by each of the Named Executive Officers as of June 30,
2019.
|
|
Option awards
|
Stock awards
|
||||
|
Name
|
Number of securities underlying unexercised options (#)
exercisable
|
Number of securities underlying unexercised options (#)
unexercis-able
|
Option exercise price ($)
|
Option expiration date
|
Number of shares or units of stock that have not vested
(#)
|
Market value of shares of units of stock that have not vested
($)
|
|
(a)
|
(b)
|
(c)
|
(e)
|
(f)
|
(g)
|
(h)
|
|
Kelvyn
H. Cullimore, Jr.
|
-
|
-
|
-
|
|
-
|
-
|
|
Christopher
von Jako
|
12,500
|
37,500
|
$
2.95
|
6/26/2024
|
40,000
|
66,000
|
|
David
A. Wirthlin
|
12,000
|
12,000
|
$
2.65
|
10/31/2024
|
-
|
-
|
|
Brian
Baker
|
5,000
|
35,000
|
$
2.70
|
2/27/2027
|
-
|
-
|
Employment Agreements
Christopher von
Jako
.
We entered into an
employment agreement with our former Chief Executive Officer, Dr.
von Jako on May 24, 2018, which became effective upon its approval
by the Board on June 26, 2018. The employment agreement provided
for the following: (1) an annual base salary of $275,000; (2) a
target annual cash bonus up to a maximum of 30% of base salary
(provided that quantitative and qualitative objectives established
by the Compensation Committee of the Board were met); (3) a grant
of a stock option for the purchase of 50,000 shares of common stock
at a purchase price of $2.95 per share, which was the market price
of the common stock on the date of grant; (4) a grant of 50,000
shares of restricted stock, with the stock option and the
restricted stock each vesting in four annual installments at a rate
of 25% per annum, commencing on the first anniversary date of the
date of grant; and (5) annual grants of stock options and
restricted stock awards having an aggregate fair market value on
date of grant of between $150,000 and $200,000 at the discretion of
the Compensation Committee, with such fair market values determined
with reference to a Black-Scholes Model as to the options and the
trading prices of our common stock as of the grant date as to the
restricted stock awards.
Dr. von
Jako also executed our standard form of indemnification agreement
for executives and directors and a restrictive covenant agreement,
which are part of his employment agreement. Among other things,
these agreements impose certain restrictions on Dr. von Jako,
including compliance with post-employment covenants to (i) protect
our confidential information; (ii) not accept employment with or
provide services to a competitor for one year after termination;
(iii) not solicit our employees or customers for two years after
termination; and (iv) not disparage or otherwise impair our
reputation or goodwill.
Bria
n D.
Baker
.
On August 26,
2019, we entered into an employment agreement with our new
President and Chief Executive Officer, Brian D. Baker. Pursuant to
the agreement, Mr. Baker’s salary is $275,000 per year and he
is eligible for an annual bonus targeted at a maximum payout of
$100,000, as determined by the Compensation Committee of the Board
of Directors based on results of operations and Mr. Baker’s
performance against goals established by the Compensation
Committee. Mr. Baker will also receive annual equity grants of RSUs
valued at a maximum of $100,000, as determined by the Compensation
Committee, with such grants vesting 50% upon the date of grant and
50% on the first anniversary of the date of grant. In connection
with the execution of his employment agreement, Mr. Baker received
a grant of 50,000 RSUs, vesting in four equal annual installments
commencing on the first anniversary of the grant date. Upon
vesting, Mr. Baker will receive a number of shares of common stock
equal to the number of RSUs that have vested. Also upon his hire
date, Mr. Baker received a grant of a stock option to purchase
50,000 shares of common stock in accordance with the terms of the
2018 Plan, exercisable at a price of $1.39 per share, which was the
closing price of our common stock on the date of grant, August 26,
2019. The option also vests in four equal annual installments,
commencing on the first anniversary of the date of grant. The Board
has determined that it is in the Company’s best interests
that the principal executive officer should operate from our Eagan,
Minnesota location and we therefore will pay certain relocation
expenses for Mr. Baker, not to exceed $25,000.
28
Mr.
Baker is also subject to a non-solicitation, non-competition and
confidentiality agreement with post-termination restrictive
covenants. We also entered into an indemnification agreement with
Mr. Baker on the same terms that we have entered into with our
other directors and executive officers.
Payments upon Termination
Mr.
Baker’s employment agreement continues until terminated by
either Mr. Baker or us in accordance with the terms of the
agreement. If we terminate Mr. Baker’s employment during the
first 12 months without cause as defined under the agreement, we
must pay Mr. Baker an amount equal to three months base salary. In
addition, in such event, one-half of the initial equity
compensation awards granted to him at the time of his appointment
as CEO will automatically vest, subject to his execution of a
release of all claims against the Company. In the event we are
involved in a change in control transaction, which generally means
the transfer of ownership of more than 50% of our voting control,
subject to the execution of a general release satisfactory to us,
all unvested equity awards held by Mr. Baker at such date shall
become fully vested and exercisable for the remainder of their full
term.
We
entered into a Separation and Release Agreement (the
“
Separation
Agreement
”) with Dr. von Jako, dated August 26, 2019
in connection with his separation from Dynatronics. Under the
Separation Agreement, we will pay Dr. von Jako a cash payment (less
applicable withholding taxes) equal to three months of base salary
(excluding bonus or any pro ration thereof) in installments with
our regular payroll services over the three months following his
final day of employment, September 1, 2019. The severance payment
is in consideration of a release of all claims against us given by
Dr. von Jako.
Under
his employment agreement dated May 1, 2015, Kelvyn H. Cullimore,
Jr., who was employed as our Chief Executive Officer, Mr. Cullimore
was entitled to severance payments in the event of termination of
his employment under certain circumstances. In June 2018, we
terminated Mr. Cullimore
’
s service as Chief Executive Officer
to facilitate a change in management, triggering the severance
rights under his employment agreement. Mr. Cullimore executed a
Separation and Release Agreement that includes a customary release
of claims against us in consideration for which we paid Mr.
Cullimore the following: (1) a severance payment equal to $200,000,
which represents 12 months of base salary in effect as of his
separation date, paid 50% on the 30th day following the separation
date and 50% in equal installments over the following six months;
(2) additional severance consideration in the total amount of
$500,000, to be paid in quarterly installments over a two-year
period following his separation date, (3) full acceleration of
vesting of previously granted and unvested restricted stock awards
totaling 72,000 shares, (4) earned but unpaid bonuses, if any, with
respect to fiscal year 2018, (5) the transfer of a vehicle, and (6)
accrued and unpaid salary through the last day of employment. (See
the
“
Summary Compensation
Table
”
above.)
Retirement Benefits
We do
not provide pension arrangements or post-retirement health coverage
for executive officers or employees. Our executive officers and
other eligible employees may participate in one of our 401(k)
defined contribution plans. In fiscal year 2019, we maintained two
separate 401(k) plans for our employees: (1) the Dynatronics
Corporation Plan (the
“
Dynatronics Plan
”
) covers employees at our Utah,
Tennessee, and Minnesota locations; and (2) the Hausmann
Enterprises, LLC Plan (the
“
Hausmann Plan
”
) covers employees at our New Jersey
location.
Dynatronics Plan
.
Under the Dynatronics Plan, employees who are 21 years of age or
older and have completed six months of service with Dynatronics
Corporation are eligible to participate. Eligible employees may
contribute to the Dynatronics Plan in the form of salary deferrals
of up to $19,000, the maximum allowable for calendar year 2019.
Eligible employees who are over 50 years old may contribute an
additional $6,000 in catchup contributions during calendar year
2019. We match either: (1) employee contributions at 25% of the
first 5% of employee compensation, up to a maximum of $1,500 per
employee per year; or (2) employee contributions at 100% of up to
the first 5% of employee compensation, up to a maximum of $3,000
per employee per year. Participants in the Dynatronics Plan are
fully vested in their salary deferral contributions, and employer
matching contributions vest 10% after year one, 10% after year two,
and 20% each year thereafter (100% vested after six
years).
29
Hausmann Plan
. Under
the Hausmann Plan, employees who are 21 years of age or older and
have completed a year of service with 1,000 hours worked with
Hausmann are eligible to participate. Eligible employees may
contribute to the Hausmann Plan in the form of salary deferrals of
up to 60% of their salary or $19,000 (whichever is less) if under
50 years of age, the maximum allowable for calendar year 2019.
Eligible employees who are over 50 years old may contribute up to
100% of their salary or $24,500, which includes $6,000 in catchup
contributions during calendar year 2019. We match employee
contributions at 50%, up to the first 5% of employee compensation.
Participants in the Hausmann Plan are fully vested in their salary
deferral contributions, and employer matching contributions vest
10% after year one, 10% after year two, and 20% each year
thereafter (100% vested after six years).
Equity Compensation Plans at June 30, 2019
As of
June 30, 2019, we had equity awards outstanding under two plans:
the 2005 Dynatronics Equity Incentive Award Plan (the
“
2005 Plan
”
), and the Dynatronics 2015 Equity
Incentive Plan (the “
2015
Plan
”). Dynatronics has also put into place the 2018
Plan. Outstanding awards under these plans expire (if not
exercised) on the expiration date indicated in the respective
awards, or, if no expiration date is indicated in such award, on
the tenth anniversary of the grant date of the award. Nonqualified
and incentive stock options and other awards have been granted
under these three plans to our employees, officers, directors and
consultants. The Compensation Committee administers these
plans.
The
following table sets forth information as of June 30, 2019, about
these plans and any equity compensation plans that have not been
approved by our shareholders under which our equity securities may
be issued.
Equity Compensation Plan Information
|
Plan Category
|
Number of securities to be issued upon exercise of outstanding
options, warrants and rights
(a)
|
Weighted-average exercise price of outstanding options, warrants
and rights
(b)
|
Number of securities remaining
available
for
future issuance under equity compensation
plans
(excluding securities
reflected in column
(a))
(c)
|
|
Equity compensation plans approved by security holders
|
|
|
|
|
2005
Plan
(1)
|
4,577
|
$
4.00
|
-
|
|
2015
Plan
(2)
|
102,000
|
$
2.81
|
182,367
|
|
2018 Plan
(3)
|
20,000
|
$
2.07
|
580,000
|
|
Equity compensation plans not approved by security
holders
|
-
|
-
|
-
|
|
Total
|
126,577
|
|
762,367
|
(1)
No further awards
will be granted under the 2005 Plan or the 2015 Plan.
(2)
Upon the adoption
of the 2018 Plan, shares remaining available under the 2015 Plan
became eligible for use under the 2018 Plan.
(3)
The 2018 Plan was
adopted and approved by our shareholders in 2018.
30
RELATED-PARTY TRANSACTIONS POLICY AND PROCEDURES
We have
adopted a policy that any transactions with directors, executive
officers or entities of which they are also officers or directors
or in which they have a financial interest, will only be on terms
consistent with industry standards and approved by a majority of
the disinterested members of our Board of Directors. In addition,
interested directors may be counted in determining the presence of
a quorum at a meeting of our Board of Directors or a committee
thereof that approves such transactions. If there are no
disinterested directors, we shall obtain a majority vote of the
shareholders approving the transaction.
SHAREHOLDER PROPOSALS FOR 2020 ANNUAL MEETING OF
SHAREHOLDERS
Shareholders may
submit proposals on matters appropriate for shareholder action at
meetings of our shareholders in accordance with Rule 14a-8
promulgated under the Exchange Act. For such proposals to be
included in our proxy materials relating to our 2020 Annual Meeting
of Shareholders, all applicable requirements of Rule 14a-8 must be
satisfied and such proposals must be received by us no later than
June 2, 2020. Such proposals should be delivered to Dynatronics
Corporation, 7030 Park Centre Drive, Cottonwood Heights, Utah
84121, Attention: Jim Ogilvie, Vice President of Corporate
Development, telephone (801) 727-1755.
Our
Board has determined that, except in the case of proposals made in
accordance with Rule 14a-8, for shareholder nominations to the
Board of Directors or other proposals to be considered at an Annual
Meeting of shareholders, the shareholder must have given timely
notice thereof in writing to our Corporate Secretary not less than
60 nor more than 90 calendar days prior to the anniversary of the
date on which we first mailed our proxy materials for our
immediately preceding Annual Meeting of shareholders (as specified
in the proxy materials for the immediately preceding Annual Meeting
of shareholders). To be timely for the 2020 Annual Meeting of
Shareholders, a shareholder
’
s notice must be delivered or mailed
to and received by our Corporate Secretary at our principal
executive offices between July 11, 2020 and August 11, 2020.
However, in the event that the 2020 Annual Meeting is called for a
date that is not within 30 calendar days of the anniversary of the
date that the 2019 Annual Meeting was called, to be timely, notice
by the shareholder must be received by us not later than the close
of business on the tenth calendar day following the date on which
public announcement of the date of the 2020 Annual Meeting is first
made. In no event will the public announcement of an adjournment of
an Annual Meeting of shareholders commence a new time period for
the giving of a shareholder
’
s notice as provided above. A
shareholder
’
s notice to
our Corporate Secretary must set forth the information required by
the bylaws with respect to each matter the shareholder proposes to
bring before the Annual Meeting.
In
addition, the proxy solicited by the Board of Directors for the
2020 Annual Meeting of Shareholders will confer discretionary
authority to vote on (i) any proposal presented by a shareholder at
that meeting for which we have not been provided with notice on or
prior to August 11, 2020, and (ii) any proposal made in accordance
with the bylaw provisions, if the 2020 Proxy Statement briefly
describes the matter and how management
’
s proxy holders intend to vote on
it, if the shareholder does not comply with the requirements of
Rule 14a-4(c)(2) under the Exchange Act.
HOUSEHOLDING OF PROXY MATERIALS
The SEC
has adopted rules that permit companies and intermediaries (e.g.,
brokers) to satisfy the delivery requirements for Notices of
Internet Availability of Proxy Materials or other Annual Meeting
materials with respect to two or more shareholders sharing the same
address by delivering a single Notice of Internet Availability of
Proxy Materials or other Annual Meeting materials addressed to
those shareholders. This process, which is commonly referred to as
“
householding
,
”
potentially means extra convenience
for shareholders and cost savings for companies.
This
year, a number of brokers with account holders who are Dynatronics
shareholders will be householding our proxy materials. A single
Notice of Internet Availability of Proxy Materials will be
delivered to multiple shareholders sharing an address unless
contrary instructions have been received from the affected
shareholders. Once you have received notice from your broker that
they will be householding communications to your address,
householding will continue until you are notified otherwise or
until you revoke your consent. If, at any time, you no longer wish
to participate in householding and would prefer to receive a
separate Notice of Internet Availability of Proxy Materials, please
notify your broker. Shareholders who currently receive multiple
copies of the Notices of Internet Availability of Proxy Materials
at their addresses and would like to request householding of their
communications should contact their brokers.
31
OTHER MATTERS
The
Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are
properly brought before the meeting, it is the intention of the
persons named in the accompanying proxy to vote on such matters in
accordance with their best judgment.
By
Order of the Board of Directors
/s/
David A. Wirthlin
David
A. Wirthlin
Chief
Financial Officer and Corporate Secretary
October
11, 2019
A copy of
our
Annual
Report on Form 10-K
for the
fiscal year ended June 30, 2019, is available without charge upon
written request to: Attn: Corporate Secretary, Dynatronics
Corporation, 7030 Park Centre Dr., Cottonwood Heights, Utah
84121.
To the extent the rules and
regulations adopted by the SEC state that certain information
included in this Proxy Statement is not deemed
“
soliciting
material” or “
filed” with the SEC or subject to
Regulation 14A promulgated by the SEC
or to the liabilities of
Section 18 of the Exchange Act, such information
shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any
filing under the
Securities Act
of 1933, as amended, or under the
Exchange Act.
32
TABLE OF CONTENTS