DYNATRONICS CORP
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
of the
Securities Exchange Act of
1934
Filed
by the Registrant
☑
Filed
by a Party other than the Registrant
☐
Check
the appropriate box:
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☐
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Preliminary
Proxy Statement
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☐
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Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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☑
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Definitive
Proxy Statement
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☐
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Definitive
Additional Materials
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☐
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Soliciting
Material Pursuant to
§
240.14a-12
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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)
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☑
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No fee
required.
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☐
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1.
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Title
of each class of securities to which transaction
applies:
________________________________________
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2.
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Aggregate
number of securities to which transaction applies:
_______________________________________
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3.
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Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was
determined):
__________________
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4.
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Proposed
maximum aggregate value of transaction:
_______________________________________________
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5.
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Total
fee paid:
____________________________________________________________________________
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☐
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Fee
paid previously with preliminary materials.
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☐
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
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1.
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Amount
Previously Paid:
____________________________________________________________________
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2.
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Form,
Schedule or Registration Statement No:
___________________________________________________
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3.
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Filing
Party:
______________________________________________________________________________
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4.
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Date
Filed:
_______________________________________________________________________________
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DYNATRONICS CORPORATION
1200 Trapp Road
Eagan, MN 55121
October
5, 2022
Dear
Dynatronics Shareholders:
On
behalf of Dynatronics Corporation, a Utah corporation, I cordially
invite you to attend the Annual Meeting of Shareholders on
Thursday, November 17, 2022 at 8:00 a.m. Central Time at our
principal executive offices located at 1200 Trapp Road, Eagan,
Minnesota 55121. All attendees may be required to wear a face mask,
be subject to temperature testing and a COVID-19 self-assessment.
Social distancing will be observed. In addition, prior to the
Meeting, we encourage you to vote online by following the
instructions provided on the Notice of Internet Availability of
Proxy Materials described below.
In
response to the COVID-19 pandemic and as part of our efforts to
conserve environmental resources and prevent unnecessary corporate
expense, we are using the “Notice and Access” method of
providing proxy materials to you via the Internet pursuant to the
regulations promulgated by the U.S. Securities and Exchange
Commission. We believe that this process will provide you with a
safe, convenient and efficient way to access your proxy materials
and vote your shares, while also allowing us to conserve natural
resources and reduce the costs of printing and distributing the
proxy materials for the Annual Meeting by postal mail. On or about
October 5, 2022 we are mailing to our shareholders a one-page
Notice of Internet Availability of Proxy Materials (the
“
Notice
”)
containing instructions on how to access our Proxy Statement and
vote electronically via the Internet or by telephone. The Notice
will also contain instructions on how to receive a paper copy of
your proxy materials.
We will
be conducting the business outlined and described in detail in the
Notice and the accompanying Proxy Statement. We have also made a
copy of our Annual Report on Form 10-K for the year ended June 30,
2022 (“
Annual
Report
”) available with the Proxy Statement. We
encourage you to read our Annual Report. It includes our audited
financial statements and provides information about our
business.
Your vote is very important to us. Whether or
not you plan to attend the Annual Meeting, please carefully review
the accompanying Proxy Statement and then cast your vote by
Internet, telephone or postal mail as promptly as possible so that
your shares will be represented and voted at the Meeting. Please
refer to the Notice for instructions on submitting your
vote
. Our Board of Directors has unanimously approved the
proposals set forth in the accompanying Proxy Statement and we
recommend that you vote in favor of each such
proposal.
Thank
you for your support of Dynatronics. We look forward to your
participation at the Annual Meeting.
Sincerely,
/s/ John A.
Krier
John A. Krier
President, Chief Executive Officer, and Chief Financial
Officer
i
DYNATRONICS CORPORATION
Annual
Meeting of Shareholders
November
17, 2022
8:00
a.m. Central Time
1200
Trapp Road
Eagan,
Minnesota 55121
To the Shareholders
of Dynatronics Corporation:
Notice of
Meeting
– We are pleased to invite
you to attend the 2022 Annual Meeting of Shareholders (the
“
Annual
Meeting
” or “
Meeting
”) of Dynatronics
Corporation, a Utah corporation (the “
Company
,” “
us
,” “
we
” or “
our
”) on November 17, 2022, at
8:00 a.m. Central Time. The Annual Meeting will be held at our
principal executive offices located at 1200 Trapp Road, Eagan,
Minnesota 55121.
Items of
Business –
At the Annual Meeting,
we will conduct the following business:
1.
Elect the three
director nominees named in the accompanying Proxy Statement to the
board of directors, each to serve until our next annual meeting of
shareholders and until her or his successor is duly elected and
qualified, or until the director’s earlier resignation,
removal or death;
2.
Ratify the
appointment of Tanner LLC as our independent registered public
accounting firm for the fiscal year ending June 30,
2023;
3.
Approve a
resolution authorizing our
board of directors to
effect a reverse stock split of our common stock at a ratio of not
less than one-for-two and not more than one-for-five at any time
within one year from the date of shareholder approval, in the sole
discretion of the board of directors, pursuant to an amendment to
our Articles of Incorporation;
4.
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;
and
5.
Consider and
transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The
foregoing proposals are more fully described in the attached Proxy
Statement.
The
board of directors recommends that you vote your shares
“
FOR
” each of
the director nominees included in Proposal 1 and
“
FOR
” Proposals
2, 3 and 4.
Notice and Access –
We have
elected to provide access to our proxy materials primarily
electronically via the Internet, pursuant to the “Notice and
Access” method regulations promulgated by the U.S. Securities
and Exchange Commission (the “
SEC
”). We believe this method
expedites our shareholders’ safe receipt of proxy materials
while the COVID-19 pandemic remains a concern, conserves natural
resources and significantly reduces the costs of the Annual
Meeting. On or about October 5, 2022, we began mailing a one-page
Notice of Internet Availability of Proxy Materials (the
“Notice”
) to
each of our shareholders entitled to notice of and to vote at the
Annual Meeting, which Notice contains instructions for accessing
the attached Proxy Statement, our Annual Report on Form 10-K for
our fiscal year ended June 30, 2022 (the “
Annual Report
”) via the Internet,
as well as voting instructions. The Notice also includes
instructions on how you can receive a paper copy of your proxy
materials.
The Proxy Statement and
the Annual Report are both available on the Internet at:
www.proxyvote.com.
Record
Date and
Notice –
You are entitled to
receive notice of and to vote at the Meeting if you were a
shareholder of record holding shares of any of our voting
securities (our common stock, Series A 8% Convertible Preferred
Stock, or Series B Convertible Preferred Stock) as of the close of
business on September 20, 2022 (the date fixed as the record date
for determining those shareholders eligible to receive notice of
and entitled to vote at the Annual Meeting or any adjournment or
postponement thereof) (the "
Record
Date
"). 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 principal executive offices located at 1200 Trapp Road, Eagan,
Minnesota 55121. This list will also be available for examination
by shareholders of record during the Meeting.
You are
entitled to attend the Annual Meeting only if you were a
shareholder as of the close of business on the Record Date or hold
a valid proxy for the Annual Meeting. If you are a shareholder of
record, your ownership as of the Record Date will be verified prior
to admittance into the Annual Meeting. If you are not a shareholder
of record but hold shares through a broker, trustee or nominee, you
must provide proof of beneficial ownership as of the Record Date,
such as an account statement or similar evidence of ownership, to
attend the Annual Meeting. Further information about how to attend
the Annual Meeting and vote your shares is included in the
accompanying Proxy Statement. For instructions on how to vote your
shares, please refer to the instructions on the Notice you received
by postal mail, the section titled “Voting” beginning
on page 2 of
the Proxy Statement or, if you requested to receive printed proxy
materials, your enclosed proxy card.
Voting –
Your vote is very
important to us. Whether or not you expect to attend the Annual
Meeting, we urge you to vote your shares in advance of the Meeting,
as promptly as possible, online via the Internet, by telephone or
by postal mail so that your shares may be represented and voted at
the Meeting. If your shares are held in the name of a bank, broker,
brokerage firm or other fiduciary, please follow the instructions
on the voting instruction card furnished by the record holder.
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. 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.
ii
Important Notice – Health and Safety
Considerations; Contingent Virtual Meeting.
The health
and safety of our employees and our shareholders is of highest
priority to us. All attendees at the Annual Meeting may be required
to wear face coverings covering the nose and mouth, be subject to
temperature testing and a COVID-19 self-assessment and observe safe
physical/social distancing as directed. Anyone who refuses or fails
to cooperate will not be permitted to participate. We are closely
monitoring the developments regarding the coronavirus (COVID-19)
and its variants. Although we currently intend to hold our Annual
Meeting in person and observe applicable and recommended health
guidelines, we are sensitive to the public health and travel
concerns shareholders may have as well as the protocols that
federal, state, and local governments have imposed and may continue
to impose. In the event we determine in our discretion that we need
to conduct our Annual Meeting solely by means of remote
communication, we will announce the change and provide instructions
on how shareholders can participate in the Annual Meeting. These
communications will be made via press release and by filing
additional solicitation materials with the Securities and Exchange
Commission. The press release will also be available on the
Investors section of our website at www.dynatronics.com. If you
currently plan to attend the Annual Meeting in person, please check
our website prior to the Annual Meeting and prior to travel, for
any updates regarding any change to a virtual meeting.
By Order of the
Board of Directors,
/s/ John A.
Krier
John A.
Krier
President,
Chief Executive Officer, and Chief Financial Officer
iii
CONTENTS
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NOTICE
OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY
STATEMENT
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ii
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IMPORTANT
NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
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1
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Record
Date and Shares Outstanding
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1
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Quorum
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1
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Important
Notice - Contingent Virtual Meeting
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1
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Shareholder
List
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2
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Attendance
at Annual Meeting
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2
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Voting
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2
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Proposals
and Required Vote for Approval
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3
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Abstentions
and Broker Non-Votes
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3
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Proxies and Revocation of Proxie
s
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3
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Solicitation
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4
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Voting
Results
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4
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Questions
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4
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PROPOSAL
NO. 1 ELECTION OF DIRECTORS
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4
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General
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4
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Vote
required
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4
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Nominees
for Director
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4
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Business
Experience and Qualifications of Nominees
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5
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Recommendation
of the Board
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5
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INFORMATION
REGARDING THE BOARD OF DIRECTORS
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6
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General
Information
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6
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Preferred
Directors
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6
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Family
Relationships
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7
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Director
Attendance at the Annual Meeting
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7
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Director
Compensation
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7
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Director
Compensation Table - Fiscal 2022
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7
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CORPORATE
GOVERNANCE
|
8
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Independence
of the Board of Directors
|
8
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Board
Leadership Structure
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8
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Role
of the Board in Risk Oversight
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9
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Communications
with the Board of Directors
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9
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Meetings
of the Board of Directors
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9
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Executive
Sessions
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9
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Information
Regarding Committees of the Board of Directors
|
9
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Audit
Committee
|
9
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Compensation
Committee
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10
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Nominating
and Governance Committee
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10
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Code
of Ethics
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11
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Prohibition
against Pledging Dynatronics Securities and Hedging
Transactions
|
11
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Corporate
Governance Guidelines
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11
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Board
Diversity Matrix
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11
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Audit
Committee Report for Fiscal 2022
|
11
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REPORT
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
|
11
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iv
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PROPOSAL
NO. 2 – RATIFICATION OF SELECTION OF TANNER LLC AS THE
COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
FISCAL 2023
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13
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General
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13
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Vote
Required
|
13
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Independence
|
13
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Principal
Accountant Fees and Services
|
13
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Pre-approval
Policies and Procedures
|
13
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Recommendation
of the Board
|
13
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PROPOSAL NO. 3 –APPROVAL OF A REVERSE STOCK
SPLIT
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14
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General
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14
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Vote Required
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14
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Reasons for the Reverse Split Proposal
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14
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Board Discretion to Implement the Reverse Stock
Split
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15
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Effect of a Reverse Stock Split
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15
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Anti-Takover and Dilutive Effects
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18
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Certain Risks Associated with the Reverse Stock
Split
|
18
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Fractional Shares
|
20
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No Dissenters' Rights
|
20
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U.S. Federal Income Tax Consideration
|
20
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Accounting Consequences
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20
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Procedure for Effecting the Reverse Stock
Split
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21
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Exchange of Stock Certificates
|
21
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Book-Entry
|
21
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Interests of Directors and Executive
Officers
|
21
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Recommendation of the Board
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21
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PROPOSAL NO.4 - ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED
EXECUTIVE OFFICERS
|
22
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Vote Required
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22
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Recommendation of the Board
|
22
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EXECUTIVE
COMPENSATION
|
22
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Executive
Officers
|
22
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Summary
Compensation Table
|
22
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Our
Compensation Objectives
|
23
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2022
Summary Compensation Table
|
23
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Outstanding
Equity Awards at June 30, 2022
|
23
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Employment
Agreements
|
24
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Payments
upon Termination
|
24
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Retirement
Benefits
|
24
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDERS MATTERS
|
25
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Security
Ownership of Certain Beneficial Owners and
Management
|
25
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Beneficial
Ownership Table
|
26
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Securities
Authorized for Issuance Under Equity Compensation
Plans
|
27
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Certain
Relationships and Related Transactions
|
28
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SHAREHOLDER
PROPOSALS FOR 2023 ANNUAL MEETING OF
SHAREHOLDERS
|
29
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HOUSEHOLDING
OF PROXY MATERIALS
|
29
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OTHER
MATTERS
|
29
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v
DYNATRONICS CORPORATION
1200 Trapp Road
Eagan, Minnesota 55121
Telephone (801) 568-7000
PROXY STATEMENT
FOR THE 2022 ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 17, 2022
The enclosed proxy is solicited on behalf of the
Board of Directors (the “
Board
”) of
Dynatronics Corporation, a Utah corporation
(sometimes referred to as the “
Company
,” “
we
,” “
us
,” or “
our
”), for use at our 2022 Annual Meeting of
Shareholders (the “
Annual
Meeting
” or the
“
Meeting
”) at 8:00 a.m. Central Time on
November 17, 2022. The Annual Meeting will be held
at the Company’s corporate headquarters,
located at 1200 Trapp Road, Eagan, Minnesota
55121.
IMPORTANT
NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
We have elected to provide access to the proxy
materials for the Annual Meeting primarily over the Internet in
accordance with the U.S. Securities and Exchange Commission’s
(“
SEC
”) “Notice and Access” rules. On
or about October 5, 2022, we began mailing a one-page Notice of
Internet Availability of Proxy Materials (the
“
Notice
”) to each of our shareholders entitled to
notice of and to vote at the Annual Meeting. The Notice contains
instructions for accessing this Proxy Statement, our Annual Report
on Form 10-K for our fiscal year ended June 30, 2022
(“
Annual
Report
”) and Annual
Meeting voting instructions. The Notice also includes instructions
on how you can receive a paper copy of your proxy materials by
postal mail.
This Proxy Statement and the
Annual Report are available on the Internet at:
www.proxyvote.com.
References in this
Proxy Statement to fiscal years refer to our
fiscal year ended June 30 of the referenced year.
For example, “fiscal 2021”
refers to the fiscal year ended June 30, 2021, “fiscal
2022” refers to the fiscal year ended June 30, 2022, and
“fiscal 2023” refers to the fiscal year ending June 30,
2023.
Record Date and Shares
Outstanding
. The specific
proposals to be considered and acted upon at the Annual Meeting are
each described in this Proxy Statement. Only holders of our voting
securities (common stock, Series A 8% Convertible Preferred Stock
(“
Series A
Preferred
”), or Series B
Convertible Preferred Stock (“
Series B
Preferred
”)) as of the
close of business on September 20, 2022 (the
“
Record Date
”) are entitled to notice of and to vote at
the Annual Meeting. On the Record Date, there were 21,413,024
shares of common stock 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 393 holders of record.
The Series A Preferred and Series B Preferred are sometimes
referred to in this Proxy Statement collectively as the
“
Voting Convertible Preferred
Stock
.”
Quorum.
In order for any business to be conducted at the
Annual Meeting, the holders of more than 50% of the shares entitled
to vote must be represented at the Meeting, either in person or by
properly executed proxy. This is a “quorum.” If a
quorum is not present at the scheduled time of the Annual Meeting,
the shareholders who are present may adjourn the Meeting until a
quorum is present. The time and place of the adjourned Annual
Meeting will be announced at the time the adjournment is taken, and
no other notice will be given. An adjournment will have no effect
on the business that may be conducted at the Annual
Meeting.
Important Notice - Contingent Virtual Meeting.
We are closely
monitoring the developments regarding the coronavirus (COVID-19)
and its variants. Although we currently intend to hold our Annual
Meeting in person, we are sensitive to the public health and travel
concerns shareholders may have and the protocols that federal,
state, and local governments have imposed
and may continue to
impose
.
In the event we determine that we need to conduct our Annual
Meeting solely by means of remote communication, we will announce
the change and provide instructions on how shareholders can
participate in the Annual Meeting via press release and by filing
additional solicitation materials with the SEC. Any such press
release will also be available on the
Investors section of
our website at www.dynatronics.com. If you currently plan to attend
the Annual Meeting in person, please check our website
prior
to the Annual Meeting and prior to travel, for any updates
regarding any change to a virtual meeting.
1
Shareholder
List.
A list of registered
shareholders as of the close of business on the Record Date will be
open for examination by any shareholder for a period of 10 days
prior to the Annual Meeting for a purpose pertaining to the Annual
Meeting at our corporate headquarters at 1200 Trapp Road, Eagan,
Minnesota 55121.
Attendance
at Annual Meeting.
The Annual Meeting will
be held at our corporate headquarters at 1200 Trapp Road, Eagan,
Minnesota 55121, at 8:00 a.m., Central Time on November 17,
2022.
Voting.
Shareholders may vote
using one of the following four methods:
●
over the Internet – if you are a shareholder as of the Record
Date, you may vote over the Internet by following the instructions
provided in the Notice, which you are encouraged to do if you have
access to the Internet;
●
by telephone – if you are a shareholder as of the Record
Date, you may vote by telephone by following the instructions in
the Notice;
●
by mail – if you requested printed copies of proxy materials
and are a shareholder as of the Record Date, you may vote by
mailing your proxy as described in the proxy materials;
or
●
during the Annual Meeting – by attending the Annual Meeting
and voting in person.
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 ensure your shares are
voted according to your directions. 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 vote at the Annual Meeting if you owned shares of any of
our common stock or Voting Convertible Preferred Stock as of the
close of business on the Record Date. These shares vote as
follows:
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.
Voting Convertible Preferred Stock
. Holders of record of
shares of Voting Convertible Preferred Stock vote those shares on
an as-converted to common stock basis, one vote for each share of
common stock issuable upon an assumed conversion of the Voting
Convertible Preferred Stock;
provided
,
however
,
that the voting rights of some holders of the Voting Convertible
Preferred Stock 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
such shareholder to the number of shares of common stock issuable
upon conversion of the Voting Convertible Preferred Stock held by
such holder that equals the quotient of (x) the aggregate purchase
price paid by such holder of the Voting Convertible Preferred Stock
for the shares of Voting Convertible 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 Voting Convertible Preferred
Stock.
As of the Record Date, the total number of shares of common stock
issued and outstanding (including as-converted Voting Convertible
Preferred Stock) entitled to vote at the Annual Meeting is
21,413,024 shares (after taking into consideration the applicable
Voting Cutback). This number includes 18,549,429 shares of common
stock, 1,992,000 shares of Series A Preferred (1,628,133 shares
“as-converted” voting power after the applicable Voting
Cutback), and 1,359,000 shares of Series B Preferred (1,235,462
shares “as-converted” voting power after the 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.
2
●
Proposal No. 1: Election of Directors. The
election of three nominees to serve as directors
on our Board
for a one-year term of office, or until his
successor is duly elected and qualified;
●
Proposal
No. 2: Ratification of the Appointment of our Independent
Registered Public Accounting Firm;
●
Proposal
No. 3: Approval of a resolution authorizing our Board to effect a
reverse stock split of our common stock at a ratio of not less than
one-for-two and not more than one-for-five at any time within one
year from the date of shareholder approval, in the sole discretion
of the Board, pursuant to an amendment of our Articles of
Incorporation; and
●
Proposal No. 4:
Approval, on an advisory basis, of 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.
The
required vote for each of these proposals is as
follows:
Proposal No. 1: Election of
Directors.
The three director
nominees who receive the greatest number of votes cast at the
Annual Meeting by the shares present, either in person or by proxy,
and entitled to vote will be elected to serve on our Board until
our 2023 Annual Meeting of Shareholders, or until her or his
successor is duly elected and qualified. The election of directors
requires the affirmative vote of a plurality of the voting shares
present or represented by proxy and entitled to vote at the Annual
Meeting. Unless otherwise instructed or unless authority to vote is
withheld, shares represented by executed proxies will be voted
“FOR” the election of the nominees. Abstentions will
not count as votes cast for purposes of this proposal and, as a
result, abstentions will have no effect on the outcome of this
proposal.
Proposal No. 2: Ratification
of Appointment of our Independent Registered Public Accounting
Firm.
The affirmative
“FOR” vote of a majority of the shares present in
person or by proxy at the Annual Meeting and entitled to vote is
required for the ratification of the selection of Tanner LLC
(“
Tanner
”) as our independent registered public
accounting firm for our current fiscal year.
Abstentions will not count as votes cast for
purposes of this proposal and, as a result, abstentions will have
no effect on the outcome of this proposal.
Broker
non-votes are not considered entitled to vote on this proposal and,
as a result, broker-non-votes will have no effect on the outcome of
this proposal.
Proposal No. 3: Approval of a
Resolution Authorizing the Board to Effect Revers Stock
Split.
The affirmative “FOR” vote of a
majority of the shares present in person or by proxy at the Annual
Meeting and entitled to vote is required for the
approval of a resolution authorizing the Board to effect a reverse
stock split of the Company’s common stock at a ratio of not
less than one-for-two and not more than one-for-five at any time
within one year from the date of shareholder approval, in the sole
discretion of the Board, pursuant to amendment to our Articles of
Incorporation.
Abstentions will not count as votes cast for
purposes of this proposal and, as a result, abstentions will have
no effect on the outcome of this
proposal.
Proposal No. 4: Approval, on an Advisory
Basis, of the Compensation of our Named Executive Officers
.
The affirmative “FOR” vote of a majority of the shares
present in person or by proxy at the Annual Meeting and entitled to
vote is required to approve, on an advisory basis, the compensation
of our Named Executive Officers. Although the advisory vote is
non-binding, the Compensation Committee and the Board will review
the voting results and take them into consideration when making
future decisions regarding executive compensation. Abstentions will
not count as votes cast for purposes of this proposal and, as a
result, abstentions will have no effect on the outcome of this
proposal. Broker non-votes are not considered entitled to vote on
this proposal and, as a result, broker-non-votes will have no
effect on the outcome of this proposal.
As of the date of this
Proxy Statement, the Board knows of no other
matters to be brought before the Annual
Meeting.
Abstentions and Broker Non-Votes.
Shares
of common stock for which we have received proxies from a
street-name record holder, but with respect to which the beneficial
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 transaction
of business at the Annual Meeting, but such shares will not count
as votes cast in respect of the election of directors, or the
approval, on an advisory basis, of the compensation of our Named
Executive Officers, or any other non-routine 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 proposals
and, therefore, will have no effect on such
proposals.
Brokers
are prohibited in connection with non-routine proposals 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 such non-routine proposals. 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 do have discretionary
authority to vote on the ratification of our independent registered
public accounting firm ad the approval of the reverse stock split,
and may choose to do so.
All
votes will be tabulated by the inspector of election appointed for
the Annual Meeting, who will separately tabulate affirmative and
negative votes, abstentions and broker non-votes. An abstention is
the voluntary act of not voting by a shareholder who is present at
a meeting and entitled to vote.
As noted above, the
three director nominees identified under Proposal No. 1 who receive
the most votes at the Annual Meeting will be elected to serve on
our Board until our 2023 Annual Meeting of Stockholders, or until
his successor is duly elected and qualified, thus abstentions and
broker non-votes will have no effect on the outcome of Proposal No.
1. Furthermore, with respect to the approval, on an advisory basis,
of the compensation of our Named Executive Officers, abstentions
and broker non-votes will have no effect on the outcome of Proposal
No. 4.
Under
Utah law and our Amended and Restated Bylaws, each other matter
will be determined by the vote of the holders of a majority of the
voting power present or represented by proxy at the Annual Meeting.
For these matters, abstentions and any broker non-votes with
respect to matters as to which brokers do not have discretionary
authority, will not be counted as votes in favor of such proposals,
and will also not be counted as shares voting on such
matters.
Proxies and Revocation of
Proxies.
If you return a signed
and dated proxy card or otherwise vote without marking voting
selections, your shares will be voted by us “FOR” each
of the nominees for director, “FOR” ratification of the
appointment of Tanner as our independent registered public
accounting firm, “FOR” approval of the resolution
authorizing the Board to effect the reverse stock split, and
“FOR” approval, on an advisory basis, the compensation
of our Named Executive Officers, according to the recommendation of
the Board 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.
How can I change or revoke my vote?
You may
revoke a proxy given by you at any time before the final vote at
the Annual 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
Corporate Secretary at 1200 Trapp Road, Eagan, Minnesota
55121.
●
You may attend the
Annual Meeting and vote during the Meeting. Simply attending the
Annual Meeting will not, by itself, revoke your proxy.
3
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.
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.
If you
receive more than one Notice, that is an indication that 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. You may
contact our transfer agent, Direct Transfer, LLC, by telephone at
(919) 744-2722.
Solicitation.
We will pay for the entire
cost of soliciting proxies,
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
.
Except as described above, we do not presently
intend to solicit proxies other than by the Internet, telephone,
email and postal mail.
Voting
Results.
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. 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.
Questions
. You can contact our
President, Chief Executive Officer and Chief Financial Officer,
John A. Krier, by telephone, at (651) 683-8020 or by writing to
Dynatronics Corporation, 1200 Trapp Road, Eagan, Minnesota 55121,
Attn: President, Chief Executive Officer and Chief Financial
Officer, with any questions about the proposals described in this
Proxy Statement or how to execute your
vote.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Under
our Bylaws, as amended and restated, our Board may consist of up to
seven directors. Up to four of the directors (the
“
Common
Directors
”) may be elected annually by the holders of
our common stock voting as a group, including holders of the Voting
Convertible Preferred Stock voting on an as-converted basis. The
remaining three directors are referred to as the
“
Preferred
Directors
” and are elected and hold office at the
pleasure of the holders of the Series A Preferred.
In
2022, the Board decreased the number of Board members from seven
members to six members when Brian Baker became Chief Operating
Officer of the Company and resigned from the Board. Currently, the
Board consists of three Common Directors – Scott Klosterman,
John Krier, and Dr. Scott Ward, and three Preferred Directors
– Erin S. Enright, who is also the Chairman of the Board,
David B. Holtz, and Brian M. Larkin.
The
nominees identified below have been selected and recommended by the
Nominating and Governance Committee of the Board to serve as Common
Directors for one-year terms until the 2023 Annual Meeting of
shareholders and until their respective successors are elected or
appointed, or until such director’s earlier resignation,
termination or death.
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 at the Annual Meeting
(even if they receive less than a majority) will be elected to the
Board. Since the nominees are running unopposed, a nominee only
needs one vote to be elected if there is a quorum present at the
Annual Meeting.
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 of
directors.
Three
incumbent directors are standing for re-election. Each nominee
named below 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.
The
Board has determined that two of the nominees to be considered for
election at the Annual Meeting, Mr. Klosterman and Dr. Ward,
qualify as “independent” as defined by the rules and
regulations of NASDAQ. The other nominee is our current President,
Chief Executive Officer, and Chief Financial Officer, John Krier.
Because of applicable NASDAQ Rules, Mr. Krier is not considered
independent.
4
Business Experience and Qualifications of Nominees
|
John A. Krier
Director, President, Chief Executive Officer, and Chief Financial
Officer
Age 45
Director Since July 2020
|
Mr. Krier has been
the Chief Executive Officer since July 2020. He joined Dynatronics
in March of 2020 and served as Chief Financial Officer until he was
named the Chief Executive Officer. Since July 2022, Mr. Krier has
also served as the Chief Financial Officer. Prior to joining the
Company, Mr. Krier was Vice President of Marketing and Commercial
Operations at Breg, Inc., a significant Dynatronics customer, where
his work included executive leadership for Breg’s bracing
product and technology marketing teams, including integrated
applications with healthcare systems, service solutions with
third-party payer reimbursement, and customer experience. Mr. Krier
received a B.S. degree in Business Administration from the
University of South Dakota. He is a Certified Public Accountant
(inactive), and a member of the American Institute of Certified
Public Accountants and Minnesota Society of Certified Public
Accountants. We selected Mr. Krier to serve as a member of the
Board because of his many years of experience in our industry at
executive levels and the Nominating and Governance Committee
believes it is important to have our Chief Executive Officer also
serve as a member of the Board.
|
|
|
|
|
Scott A. Klosterman
Director
Age 64
Director since 2016
Independent Director
|
Mr. Klosterman is Chief of Staff at
HNI Healthcare, a technology-enabled
physician management
company,
since April 2020 where he previously served as Chief Financial
Officer (2018-2020) and
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. We
selected Mr. Klosterman to serve on our Board based on his
extensive experience in the medical industry and as a finance
executive.
|
|
|
|
|
R. Scott Ward, Ph.D.
Director
Age 66
Director since 2013
Independent Director
|
Dr.
Ward serves as the interim Dean of the College of Health and served
as 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. We selected Dr. Ward to
serve as a member of our Board based on his prominence in his
field, and his extensive experience and expertise in physical
therapy.
|
|
|
|
Recommendation of the Board
5
INFORMATION REGARDING THE BOARD
Members
of the Board elected at the Annual Meeting of shareholders serve
until our next annual meeting of shareholders and until their
successors are elected and qualified, or their earlier resignation
or removal. Three members of the Board are Preferred Directors
appointed under the provisions of the Certificate of Designations,
Preferences and Rights of the Series A Preferred (the
“
Series A
Certificate of Designations
”
) as discussed in the following
section of this Proxy Statement.
Under
our Bylaws as amended and restated, the Board 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 among 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 (with its
affiliates, collectively referred to as “
Prettybrook
”) for as long as
Prettybrook owns at least 50% of the outstanding Series A
Preferred.
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 the Board, David B. Holtz, and Brian M. Larkin. Their
business experience and other qualifications are as
follows:
Erin S.
Enright
. Ms. Enright, 61, 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. In addition to her
service as Chairman, Ms. Enright is Chair of the Nominating and
Governance Committee and a member of the Audit Committee and
Compensation Committee of the Board. She is a member of the Board
of Directors, Chair of the Investment Committee and member of the
Audit Committee of Medical Facilities Corporation (TSX: DR), a
member of the Board of Directors and Chair of the Audit Committee
of Amarin Corporation, plc (NASDAQ:AMRN), 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 was on the Board of Directors and Chair of the
Audit Committee of Brooklyn Immuno Therapeutics, Inc. (NASDAQ: BTX)
during 2022, 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 2004-2013. She was Chief Financial Officer of
InfuSystem, Inc. (NASDAQ:INFU) from 2005 to 2007. From 1993 to
2003, Ms. Enright was with Citigroup, where she was 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 School of Public and
International Affairs at Princeton University and J.D. degree from
the University of Chicago Law School. We believe that Ms.
Enright’s extensive experience in various capacities within
our industry and her legal background qualify her to serve as a
member of our Board.
David B.
Holtz
. Mr. Holtz, 56, 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. We believe Mr.
Holtz’s extensive financial experience and background qualify
him to serve as a member of our Board.
Brian M.
Larkin
.
Mr. Larkin, 53, is
President and CEO of Comar, Inc, a privately held manufacturer of
devices and rigid packaging used in the medical, pharmaceutical and
consumer industries, where he has held the position since April of
2022. From February of 2018 to March of 2022, he served as
President of CEO of privately held SP Industries, Inc. From
May 2017 to February 2018, he served as the Vice President and
General Manager of the Diabetes Care business at Becton
Dickinson and from May 2015 to May 2017, he served as Senior Vice
President and General Manager for LifeCell, Inc., a
Division of Acelity L.P., Inc. Prior to joining Acelity, Mr.
Larkin was Corporate Vice President of Integra Lifesciences
Holdings Corporation, which he joined in January of 2000 and where
he served most recently as President of the Global Spine and
Orthobiologics business and Head of Strategic
Development. Mr. Larkin received a B.S. degree
in Chemistry from the University of Richmond and
completed the Advanced Management Program at Harvard Business
School. We believe that Mr. Larkin’s extensive and varied
business background and executive experience qualify him to serve
as a member of our Board.
6
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 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. Mr. Essig and Ms. Enright are
managers of Prettybrook.
There
are no family relationships among the members of the Board and our
executive officers.
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.
All our directors attended the 2021 Annual Meeting of Shareholders,
either in person or via video conference. We reimburse our
directors for the reasonable expenses they may incur in attending
the Annual Meeting.
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 or
additional compensation for their service as
directors.
Our
director compensation is reviewed by the Compensation Committee,
which makes recommendations to the Board on the appropriate
structure for our non-employee director compensation program and
the appropriate amount of compensation. Our Board 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 2022, we authorized payment to our non-employee
directors of an annual equity retainer of
10,000
shares of common stock under our
2020 Equity Incentive Plan (the “
2020 Plan
”) (5,000 to be awarded
on January 1 and 5,000 on July 1 of each fiscal year based on
service), plus $15,000 cash ($7,500 on July 1st and $7,500 on January
1st). Committee chairs were authorized to receive an additional
$10,000 cash
($5,000 on July
1st and
$5,000 on January 1st)
. All retainer payments were pro-rated
for the portion of the year served if a director’s service
began after the start of the fiscal year. The following table
summarizes the total compensation paid to the non-employee and
independent directors during the fiscal year ended June 30,
2022.
|
Name
(a)
|
Fees Earned or
Paid in Cash
($)
(b)
(1
)
|
Stock Awards
($)
(c)
(1)
|
All other Compensation
($)
(g)
(2)
|
Total
($)
(h)
|
|
Brian Baker
(3)
|
$
15,000
|
$
11,000
|
$
208,824
|
$
234,824
|
|
Erin S.
Enright
|
$
25,000
|
$
11,000
|
$
-
|
$
36,000
|
|
David B.
Holtz
|
$
25,000
|
$
11,000
|
$
-
|
$
36,000
|
|
Scott A.
Klosterman
|
$
25,000
|
$
11,000
|
$
-
|
$
36,000
|
|
Brian M.
Larkin
|
$
15,000
|
$
11,000
|
$
-
|
$
26,000
|
|
R.
Scott Ward, Ph.D.
|
$
15,000
|
$
11,000
|
$
-
|
$
26,000
|
_________________
(1)
Columns (d) through
(f) 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.
(2)
Other compensation
paid to Brian Baker included $108,933 for consulting services from
July 2021 through January 2022 and $99,891 for salary and benefits
as our Chief Operating Officer since January 2022.
(3)
Mr. Baker was a
non-employee director until being hired as our Chief Operating
Officer and resigning from the Board in January 2022.
7
The
table below provides information regarding the equity awards we
granted to our non-employee directors during our fiscal year ended
June 30, 2022.
|
|
July 1, 2021
|
January 1, 2022
|
Total
|
|
Mr.
Baker (1)
|
$
6,000
|
$
5,000
|
$
11,000
|
|
Ms.
Enright
|
$
6,000
|
$
5,000
|
$
11,000
|
|
Mr.
Holtz
|
$
6,000
|
$
5,000
|
$
11,000
|
|
Mr.
Larkin
|
$
6,000
|
$
5,000
|
$
11,000
|
|
Mr.
Klosterman
|
$
6,000
|
$
5,000
|
$
11,000
|
|
Dr.
Ward
|
$
6,000
|
$
5,000
|
$
11,000
|
|
Grant
date stock price
|
$
1.20
|
$
1.00
|
|
|
Aggregate
share value
|
$
36,000
|
$
30,000
|
$
66,000
|
(1)
Mr. Baker was a
non-employee director until being hired as our Chief Operating
Officer and resigning from the Board in January 2022.
CORPORATE GOVERNANCE
The
Board has determined that a majority of the members of the Board
should consist of
“
independent directors,
”
determined in accordance with the
applicable NASDAQ Rules as in effect from time to time. Members of
the Board who are also our employees are not considered to be
independent for this purpose. Our Board 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 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. Subject to some
exceptions, these standards generally provide that a director will
not be independent if (a) the director is, or in the past three
years has been, an employee of ours; (b) a member of the
director’s immediate family is, or in the past three fiscal
years has been, an executive officer of ours; (c) the director or a
member of the director’s immediate family has received more
than $200,000 per year in direct compensation from us other than
for service as a director (or for a family member, as a
non-executive employee); (d) the director or a member of the
director’s immediate family is, or in the past three years
has been, employed in a professional capacity by our independent
public accountants, or has worked for such firm in any capacity on
our audit; (e) the director or a member of the director’s
immediate family is, or in the past three years has been, employed
as an executive officer of a company where one of our executive
officers serves on the compensation committee; or (f) the director
or a member of the director’s immediate family is an
executive officer of a company that makes payments to, or receives
payments from, us in an amount which, in any twelve-month period
during the past three years, exceeds the greater of $1,000,000 or
two percent of that other company’s consolidated gross
revenues.
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 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.
In
February 2018, our Board 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 Chairman of the Board 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. 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 to monitor
whether management
’
s
actions are in our best interests and 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
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.
8
The
Board 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 that the committee 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 and potential conflicts of interest.
While each committee is responsible for evaluating certain risks
and overseeing the management of such risks, the entire Board is
informed regularly through committee reports about such
risks.
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: Legal Department, 1200 Trapp Road, Eagan,
Minnesota 55121. 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;
(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, or related committee matters.
Our
Board met five times during fiscal year 2022. Our Audit Committee
met four times. Our Compensation Committee met two times. Our
Nominating and Governance Committee met two times. Each director
serving during our fiscal year ended June 30, 2022 attended at
least 75% of the aggregate of the total number of the meetings of
the Board and the total number of meetings held by all committees
of the Board upon which such director served that were held during
the fiscal year.
The
Board holds regular executive sessions of the non-employee
directors without the presence of management, as required under
applicable NASDAQ Rules. In fiscal 2022, five executive sessions
were convened at which only independent directors were
present.
The
Board has
established
an Audit
Committee, a Compensation Committee and a Nominating and Governance
Committee and adopted a written charter for each committee, copies
of which are available to shareholders on the Investors section of
our website at
https://investors.dynatronics.com/governance-documents
.
The
following table provides membership information for fiscal year
2022 for each of these committees of the Board:
|
Name
|
|
Audit
|
|
Compensation
|
|
Nominating and Governance
|
|
Erin S.
Enright
|
|
X
|
|
X
|
|
*
|
|
David
B. Holtz
|
|
*
|
|
|
|
X
|
|
Scott
A. Klosterman
|
|
X
|
|
*
|
|
X
|
|
Brian
M. Larkin
|
|
|
|
X
|
|
X
|
|
R.
Scott Ward, Ph.D.
|
|
|
|
X
|
|
|
|
Brian
D. Baker
|
|
|
|
|
|
|
*Committee
Chairman
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.
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 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 of its Audit Committee meet the
NASDAQ requirements for financial sophistication. Our Board further
believes that each of the committee members is an independent
director as defined in the NASDAQ 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:
9
●
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 reflects the standards and requirements adopted
by the SEC and NASDAQ.
The
Compensation Committee is responsible for reviewing and approving
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
Rules.
The
Compensation Committee is empowered to advise management and make
recommendations to the Board 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 approves 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 2021. 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.
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.
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 candidates and nominees for election to the Board. 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 Rules.
Nominees to the
Board 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 director candidates, the Nominating and
Governance Committee considers these factors in light of the
specific needs of the Board 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
5
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.
Shareholders may
recommend a director nominee to the Nominating and Governance
Committee. In recommending candidates for election to the Board,
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. 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.
10
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:
Legal Department, 1200 Trapp Road, Eagan, Minnesota 55121. 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 2023 Annual
Meeting of Shareholders, the recommendation must be delivered or
mailed to and received by us as indicated above between July 7,
2023 and August 6, 2023 (or, if the 2023 Annual Meeting is not held
within 30 calendar days of the anniversary of the date of the 2022
Annual Meeting, within 10 calendar days after our public
announcement of the date of the 2023 Annual Meeting). The
recommendation must include the same information as is specified in
our bylaws for shareholder nominees to be considered at an annual
meeting, including the following:
●
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.
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://investors.dynatronics.com/governance-documents
. 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.
Prohibition against Pledging Dynatronics Securities and Hedging
Transactions
Consistent with our
Insider Trading Policy, we prohibit our executive officers and
members of the Board from pledging our common stock or other
securities and engaging in hedging or monetization transactions or
similar arrangements with respect to our securities that could be
used to hedge or offset any decrease in the value of our
securities. Our policies also specifically prohibit our executive
officers and non-employee directors from engaging in short sales of
our stock, or holding our securities in any margin account for
investment purposes or otherwise using our securities as collateral
for a loan.
The
Board has not adopted formal written corporate governance
guidelines. Given the experience and qualifications our directors
contribute to the Board’s 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;
●
holding committee
meetings which include individual sessions with representatives of
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.
Our
Board is actively involved in the oversight and management of the
material risks that could affect us. The Board 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.
These duties are accomplished through the effective use of Board
committees that function under written charters adopted by the
Board.
The Company is committed to diversity and inclusion, and believes
it is important that the Board is composed of individuals
representing the diversity of the communities and customers we
serve. The Nominating and Governance Committee seeks director
nominees with a diverse range of experience, skills, knowledge and
backgrounds. The Board Diversity Matrix set forth below reports
self-identified diversity statistics for the current Board as of
the date of this proxy statement in the format required by
NASDAQ’s rules.
|
Board Diversity Matrix ( As of October 5,
2022)
|
||||
|
|
|
|
|
|
|
Board Size:
|
|
|
|
|
|
Total
Number of Directors
|
6
|
|
|
|
|
Gender:
|
Female
|
Male
|
Non-Binary
|
Gender Undisclosed
|
|
Number
of Directors Based on Gender Identity
|
1
|
5
|
|
|
|
Number of Directors Who Identify in Any of the Categories
Below:
|
|
|
|
|
|
African
American or Black
|
-
|
-
|
-
|
-
|
|
Alaskan
Native or American Indian
|
-
|
-
|
-
|
-
|
|
Asian
|
-
|
-
|
-
|
-
|
|
Hispanic
or Latinx
|
-
|
-
|
-
|
-
|
|
Native
Hawaiian or Pacific Islander
|
-
|
-
|
-
|
-
|
|
White
|
1
|
5
|
-
|
-
|
|
Two
or More Races or Ethnicities
|
-
|
-
|
-
|
-
|
|
LGBTQ+
|
-
|
-
|
-
|
-
|
|
Demographic
Background Undisclosed
|
-
|
-
|
-
|
-
|
Audit Committee Report for Fiscal 2022
The
following is the report of the
Audit Committee with respect to the audited consolidated
financial statements for the fiscal year ended June 30, 2022
included in the Company’s Annual Report on Form
10-K.
Our
management is responsible for preparing our financial statements
and implementing our financial reporting process, including our
system of internal controls over financial reporting pursuant to
Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and has
the primary responsibility for assuring their accuracy,
effectiveness and completeness. 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 Audit Committee is to monitor and oversee
these financial processes on behalf of the Board.
11
The
Audit Committee meets periodically with the independent registered
public accountants, with and without management present, to discuss
the results of the independent registered public accountants’
examinations and evaluations of our internal controls and the
overall quality of our financial reporting, and, as appropriate,
initiates inquiries into various aspects of our financial affairs.
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.
The
Audit Committee currently consists of three directors, all of whom
qualify as “independent” and meet the financial
literacy and other requirements under the current NASDAQ listing
standards and SEC rules regarding audit committee membership: David
B Holtz, Erin S. Enright, and Scott A. Klosterman.
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 Tanner 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 Tanner
required by the applicable requirements of the PCAOB regarding
Tanner’s communications with the Audit Committee concerning
independence, and the Audit Committee has discussed with Tanner its
independence.
(4)
Based on the review
and discussions referred to above in (1) through (3), 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, 2022 for filing with the SEC.
Respectfully
Submitted by:
MEMBERS
OF THE AUDIT COMMITTEE
David B. Holtz, Chairman
Erin S. Enright
Scott A. Klosterman
Dated:
September 22, 2022
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.
12
RATIFICATION OF SELECTION OF TANNER
LLC AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING
FIRM FOR
FISCAL
2023
At the
Annual Meeting you 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, 2023. 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
2016.
If a quorum is present, the affirmative vote of a
majority of the shares present in person or by proxy at the Annual
Meeting and is entitled to vote 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
either
“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.
Tanner
has advised us that it has no direct or indirect financial interest
in us or in any of our subsidiaries and that during fiscal year
2022, 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.
During
fiscal year 2022, 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 2021, Tanner performed services consisting of the audit
of our annual consolidated financial statements and review of the
quarterly financial statements.
Tanner
did not perform any financial information systems design and
implementation services for us or our subsidiaries in fiscal years
2022 or 2021.
The
following table summarizes the fees paid by us to Tanner during
fiscal years 2022 and 2021.
|
Type of Service and
Fee
|
2022
|
2021
|
|
Audit Fees
(1)
|
$
190,600
|
$
244,912
|
|
Audit Related Fees
(2)
|
$
9,560
|
$
11,650
|
|
Tax
Fees
|
|
|
|
All Other
Fees
|
|
|
|
Total
Fees
|
$
200,160
|
$
256,562
|
(1)
Audit fees
represent fees for professional services provided in connection
with the audit of our financial statements and internal control
over financial reporting, the review of our quarterly financial
statements, and audit services provided in connection with other
statutory or regulatory filings.
(2)
Audit-related fees
primarily included fees related to accounting consultation and
attestation services.
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
UNANIMOUSLY
RECOMMENDS A VOTE “FOR” PROPOSAL NO. 2 RATIFYING THE
SELECTION OF TANNER AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR FISCAL YEAR ENDING JUNE 30, 2023
13
PROPOSAL NO. 3
–APPROVAL OF A REVERSE STOCK
SPLIT
General
The Board has
unanimously adopted a resolution approving, and recommending that
our shareholders approve a resolution authorizing our Board to
effect a reverse stock split of our outstanding common stock, at
any time within one year from the date of shareholder approval, by
a ratio of not less than 1-for-2 and not more than 1-for-5 shares
(the “
Exchange
Ratio
”), with the specific ratio, timing and terms to
be determined by our Board, in its discretion (the
“
Reverse Stock
Split
”), pursuant to an amendment (the
“
Amendment
”) to
our Amended and Restated Articles of
Incorporation.
If this
proposal is approved by the shareholders, the Board will be granted
the discretionary authority to select any ratio not less than 1 for
2 and not greater than 1 for 5, should it decide to proceed with
the Reverse Stock Split, and will be authorized to file the
Amendment and effect the Reverse Stock Split at any time within one
year from the date of shareholder approval. The Board’s
decision whether or not (and when) to file the Amendment and effect
the Reverse Stock Split (and at what ratio to effect the Reverse
Stock Split) will also be based on a number of factors, as further
explained herein.
If the
shareholders adopt the resolution and approve the Amendment, the
Company reserves the right not to file the Amendment and effect the
Reverse Stock Split if the Board does not deem it to be in the best
interests of the Company and our shareholders. The form of the
Amendment is provided in substantially the form attached hereto as
Appendix A
. The
text of the Amendment is subject to modification to include such
changes as may be required by the Division of Corporations and
Commercial Code of the State of Utah (the “
Utah Division
”) and as the Board
deems necessary and advisable to effect the Reverse Stock Split,
including the Exchange Ratio.
Vote Required
If a
quorum is present, the affirmative vote of a majority of the votes
cast at the Annual Meeting is required for the approval of a
resolution authorizing the Board to effect the Reverse Stock
Split.
Reasons for the Reverse Split Proposal
The
Board believes that it is in the best interests of the Company and
our shareholders to authorize the Board, in its discretion, to
effect a reverse stock split of our outstanding common stock for
the following reasons:
●
The primary purpose of the Reverse Stock Split is
to increase proportionately the per share trading price of our
common stock. Our common stock is listed
for trading on NASDAQ under the symbol
“DYNT”. On February 24, 2022, we were notified by
NASDAQ (the “
Deficiency
Notice
”) that
for 30 consecutive business days, the
bid price of the common stock had closed below $1.00 per share, in
violation of
NASDAQ Listing
Rule 5550(a)(2) (the “
Minimum Bid Price
Requirement
”).
O
n August 24, 2022,
we received notice from NASDAQ
indicating that while we had not regained compliance with the
Minimum Bid Price Requirement, the Listing Qualifications
Department (the "
Staff
")
has determined that we are eligible for an additional 180 calendar
day period to regain compliance
(the
“
Second
180 Day Compliance Period
”)
.
The Staff indicated that its determination is based on the Company
meeting the continued listing requirement for market value of
publicly held shares, and all other applicable requirements for
initial listing
on
The
NASDAQ
Capital Market
with the exception of the bid price
requirement, and the Company's written notice of its intention to
cure the deficiency during the Second 180 Day Compliance Period by
effecting a reverse stock split, if necessary. If at any time
during the Second 180 Day Compliance Period the closing bid price
of our common stock is at least $1.00 per share for a minimum of 10
consecutive business days, the Staff will provide written
confirmation of compliance.
●
If we do not regain compliance with
the Minimum Bid Price Requirement by the end of the
Second 180 Day Compliance Period our common stock will be subject
to delisting. At such time, we may appeal NASDAQ’s delisting
determination. Delisting could have a material adverse effect on
our business, liquidity and on the trading of our common stock. If
our common stock were delisted, our common stock could be quoted on
the OTCQB market or on the “
pink
sheets
” maintained by
the
OTC Markets Group. However,
such alternatives are generally considered to be less efficient
markets. Further, delisting from NASDAQ could also have other
negative effects, including potential loss of confidence by
partners, lenders, suppliers and employees, and could also trigger
various defaults under our lending agreements and other outstanding
agreements. Delisting could make it more difficult
for the Company to attract qualified
Board candidates and potential strategic and collaborative
partners. Finally, delisting could make it harder
for us to raise capital and sell
securities as we would no longer be eligible to use
Form S-3 short form registration
statements
for such
purposes.
14
●
The Board is asking the shareholders to grant it
the authority, at its discretion, to effect a
reverse stock split, which the Board believes is
an effective way to increase the minimum bid price of our common
stock proportionately and put us in a position to regain compliance
with
NASDAQ Listing Rule
5550
(a)(2).
●
The Board believes that maintaining the listing of
the Company’s common stock on NASDAQ is in the best interests
of the Company and our shareholders. The Board believes that the
delisting of the common stock from NASDAQ would impair our ability
to raise additional funds and result in lower prices and larger
spreads in the bid and ask prices
for the common stock, among other things. See
“
Certain Risk Factors
Associated with the Reverse Stock Split”
for more information.
●
If
the common stock is delisted from NASDAQ, it will be subject to SEC
rules governing “penny stocks,” which impose additional
disclosure requirements on broker-dealers. The regulations relating
to penny stocks, coupled with the typically higher cost per trade
to the investor of penny stocks due to factors such as broker
commissions generally representing a higher percentage of the price
of a penny stock than of a higher-priced stock, will further limit
the ability of investors to trade in the common stock and may limit
the willingness of individual investors and institutions to
purchase the common stock.
Board Discretion to Implement the Reverse Stock Split
The Board only intends to implement the Reverse
Stock Split to the extent it believes necessary to maintain our
listing on NASDAQ
for the
future. The Board believes that shareholder approval of a range of
Exchange Ratios (rather than a single ratio) is in the best
interests of our shareholders because it provides the Board with
the flexibility to achieve the desired results of the Reverse Stock
Split and because it is not possible to predict market conditions
at the time the Reverse Stock Split would be implemented. If
shareholders approve this
Proposal, the Board would carry out a Reverse
Stock Split only upon the
Board’s determination that a Reverse Stock
Split would be in the best interests of our shareholders at that
time. The Board would then select the Exchange Ratio it determines
to be advisable and in the best interests of the shareholders
considering relevant market conditions at the time the Reverse
Stock Split is to be implemented. In determining
the
Exchange Ratio, following receipt of shareholder approval, the
Board may consider numerous factors including:
|
●
|
the
historical and projected performance of our common
stock;
|
|
●
|
general
economic and other related conditions prevailing in our industry
and in the marketplace;
|
|
●
|
the projected impact of the Reverse Stock Split
and the Exchange Ratio on trading liquidity in our common stock and
our ability to maintain continued listing on
The
NASDAQ
Capital Market;
|
|
●
|
our
capitalization (including the number of shares of common stock
issued and outstanding);
|
|
●
|
the
then-prevailing trading price and trading volume of our common
stock;
|
|
●
|
the
potential devaluation of our market capitalization as a result of
the Reverse Stock Split;
|
|
●
|
the
anticipated impact of the Reverse Stock Split on our ability to
raise additional financing; and
|
|
●
|
business developments affecting the Company.
|
The
Board intends to select an Exchange Ratio that it believes would be
most likely to achieve the anticipated benefits of the Reverse
Stock Split.
If our Board determines that effecting the Reverse
Stock Split is in our best interest, the Reverse Stock Split will
become effective upon the filing of the
Amendment with the Utah Division.
(
See
, “Procedure
for Effecting the Reverse Split,” below.)
The Amendment filed thereby will set forth the number of shares to
be combined into one share of our common stock within the limits
set forth in this proposal, but will not have any effect on the
number of shares of common stock or preferred stock currently
authorized, the ability of our Board to designate preferred stock,
the par value of our common or preferred stock, or any series of
preferred stock previously authorized (except to the extent such
Reverse Stock Split adjusts the conversion ratio of such previously
designated preferred stock).
Effect of a Reverse Stock Split
If approved by our shareholders and implemented by
the Board, as of the effective time of the Amendment, each issued
and outstanding share of our common stock would immediately and
automatically be reclassified and reduced into a fewer number of
shares of our common stock. However, except
for adjustments that may result from the treatment
of fractional shares, as described below, the Reverse Stock Split
will not affect any shareholder’s percentage ownership or
proportionate voting power. Fractional shares will not be issued.
All fractional shares that would otherwise result from the
implementation of the Reverse Stock Split shall be automatically
rounded up to the next whole share.
15
Except
to the extent that the Reverse Stock Split would result in any
shareholder receiving an additional whole share of common stock in
connection with the rounding of fractional shares or any dilution
to other shareholders in connection therewith, as described below,
the Reverse Stock Split will not:
●
affect any
shareholder’s percentage ownership interest
in us;
●
affect any
shareholder’s proportionate voting
power;
●
substantially
affect the voting rights or other privileges of any shareholder;
or
●
alter
the relative rights of common shareholders, preferred shareholders,
warrant holders or holders of equity compensation plan awards and
options.
Depending
upon the Exchange Ratio selected by the Board, the principal
effects of the Reverse Stock Split are:
●
the
number of shares of common stock issued and outstanding will be
reduced by a factor ranging between 2 and 5, notwithstanding any
rounding;
●
the per share exercise price will be increased by
a factor from and including 2 and 5, and the number of shares
issuable upon exercise or conversion shall be decreased by the same
factor,
for all outstanding
options, warrants and other convertible or exercisable equity
instruments entitling the holders to purchase or acquire shares of
our common stock;
●
the number of shares authorized and
reserved
for issuance under our
existing equity compensation plans will be reduced proportionately;
and
●
the conversion rates
for holders of our preferred stock and other
outstanding securities will be adjusted
proportionately.
The bullets below contain approximate information
relating to our outstanding common stock,
Series A Preferred Stock,
and Series B Preferred Stock
(all of which Voting Convertible Preferred Stock,
prior to the Reverse Stock Split, is convertible into shares of
common stock on the basis of one share of common stock for each
share of Voting Convertible Preferred Stock), outstanding
debentures and warrants held by investors, and our outstanding
warrants and options under our stock plans.
Based on the Company’s capitalization as of
September 30, 2022, the principal effect of the Reverse Stock Split
(at a ratio between 1-
for-2 and
1-
for-5), not taking into
account the treatment of fractional shares described above, would
be that:
16
The following table contains approximate
information relating to our common stock immediately following
the Reverse Stock Split under certain possible
exchange ratios, based on share
information as of September 30, 2022. All share numbers are rounded
up to the nearest whole share.
|
|
|
|
Pre-Reverse
Split
|
|
1-for-2
|
|
1-for-3
|
|
1-for-4
|
|
1-for-5
|
|
Number
of
authorized
shares of
common
stock
|
|
|
100,000,000
|
|
100,000,000
|
|
100,000,000
|
|
100,000,000
|
|
100,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
outstanding
shares of
common
stock
|
|
|
18,581,255
|
|
9,290,8
|
|
6,193,752
|
|
4,645,314
|
|
3,716,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
authorized
shares of
preferred
stock
|
|
|
50,000,000
|
|
50,000,000
|
|
50,000,000
|
|
50,000,000
|
|
50,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of shares
of
common stock
issuable
upon
conversion
of outstanding shares of preferred stock
|
|
|
3,351,000
|
|
1,675,500
|
|
1,117,000
|
|
837,750
|
|
670,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of shares of common stock issuable upon exercise of outstanding
stock options, restricted stock units and warrants
|
|
|
4,548,382
|
|
2,274,191
|
|
1,516,127
|
|
1,137,096
|
|
909,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares of common stock reserved
for issuance in connection with future
awards under the Company’s 2018 Plan
|
|
|
170,654
|
|
85,327
|
|
56,885
|
|
42,664
|
|
34,131
|
|
Number
of shares of common stock reserved for issuance in connection with
future awards under the Company’s 2020
Plan
|
|
|
1,000,000
|
|
500,000
|
|
333,333
|
|
250,000
|
|
200,000
|
See also “
Certain Risks Associated with the Reverse Stock
Split” below
for
additional information regarding the potential impact of the
Reverse Stock Split.
If the Reverse Stock Split is implemented, the
Amendment will not reduce the number of shares of our common stock
or preferred stock authorized under our
Articles of Incorporation, as amended, the right
of our Board to designate preferred stock, the par value of
our
Common or preferred stock,
or otherwise affect our designated series of preferred stock,
except to affect the conversion prices thereof.
Our common stock is currently registered
under
Section 12(b) of the
Exchange Act, and we are subject to the periodic reporting and
other requirements thereof. We presently do not have any intent to
seek any change in our status as a reporting
company under the
Exchange Act either before or after the Reverse
Stock Split.
Additionally, as of the date of this
Proxy Statement, we do not have any
current plans, agreements, or understandings with respect to the
additional authorized shares that will become available
for issuance after the Reverse Stock
Split has been implemented.
17
Anti-Takeover and Dilutive Effects
The total number of authorized shares of our
common stock and preferred stock will not be changed as a result of
the Reverse Stock Split. The common stock and preferred stock that
is authorized but unissued provide the Board with flexibility to
effect, among other transactions, public or private financings,
acquisitions, stock dividends, stock splits and the granting of
equity incentive awards. However, these authorized but unissued
shares may also be used by the Board, consistent with and subject
to its fiduciary duties, to deter future attempts to gain control
of
the Company or make such
actions more expensive and less desirable. The Reverse Stock Split
is not being recommended in response to any specific effort to
obtain control of the Company, nor does our Board have any present
intent to use the authorized but unissued common stock or preferred
stock to impede a takeover attempt.
Except
for the
Company’s obligation to issue common stock upon the exercise
of outstanding options and warrants or the conversion of our
outstanding shares of preferred stock, we have no specific plan,
commitment, arrangement, understanding or agreement, either oral or
written, regarding the issuance of common stock subsequent to the
Reverse Stock Split at this time, and we have not allocated any
specific portion of the authorized number of shares to any
particular purpose.
Certain Risks Associated with the Reverse Stock Split
Before voting on this
Proposal 4, shareholders should consider the
following risks associated with effecting a Reverse Stock
Split:
A
reverse stock split may negatively impact the market
for our common stock
.
Although we expect that the Reverse
Stock Split will result in an increase in the market price of our
common stock, we cannot assure you that a Reverse Stock Split, if
effected, will increase the market price of our common stock in
proportion to the reduction in the number of shares of our common
stock outstanding, or result in a permanent increase in the market
price. The effect that a Reverse Stock Split may have upon the
market price of our common stock cannot be predicted with any
certainty, and the history of similar
reverse stock splits
for
companies
in similar circumstances to ours is varied. The market price of our
common stock is dependent on many factors, including our business
and financial performance, general market conditions,
prospects
for future growth and
other factors detailed from time to time in the reports we file
with the SEC. Accordingly, the total market capitalization of our
common stock after a Reverse Stock Split may be lower than the
total market capitalization before a Reverse Stock Split and, in
the future, the market price of our common stock following a
Reverse Stock Split may not exceed or remain higher than the market
price prior to a Reverse Stock Split.
NASDAQ may
delist our common stock from its exchange which could limit your
ability to make transactions in our securities and subject us to
additional trading restrictions
.
Even if our shareholders approve a
Reverse Stock Split and the Reverse Stock Split is effected, we
cannot assure you that we will continue to meet the listing
requirements of NASDAQ. We have been monitoring the
closing bid price of our common stock through the Initial
Compliance Period. We may request an extension of 180 days to
regain compliance with the Minimum Bid Price Requirement under
the
NASDAQ Listing Rules,
however there can be no assurance that we will be granted an
extension to regain compliance.
If our common stock is delisted, our common stock
would likely then trade only in the over-the-counter market. If our
common stock were to trade on the over-the-counter market, selling
our common stock could be more difficult because smaller quantities
of shares would likely be bought and sold, transactions could be
delayed, and we could face significant material adverse
consequences, including: a limited availability of market
quotations
for our securities;
reduced liquidity with respect to our securities; a determination
that our shares are a “penny stock,” which will require
brokers trading in our securities to adhere to more stringent
rules, possibly resulting in a reduced level of trading activity in
the secondary trading market
for our securities; a reduced amount of news and
analyst coverage
for our
Company; and a decreased ability to issue additional securities or
obtain additional financing in the future. These factors could
result in lower prices and larger spreads in the bid and
ask prices
for our common stock
and would substantially impair our ability to raise additional
funds and could result in a loss of institutional investor interest
and fewer development opportunities
for us.
18
In addition to the foregoing, if our common stock
is delisted from NASDAQ and it trades on the over-the-counter
market, the application of the “penny stock” rules
could adversely affect the market price of our common stock and
increase the transaction costs to sell those shares. The SEC has
adopted regulations which generally define a “penny
stock” as an equity security that has a market price of less
than $5.00 per share, subject to specific exemptions. If our common
stock is delisted from NASDAQ and it trades on the over-the-counter
market at a price
of less than
$5.00 per share, our common stock would be considered a penny
stock. The SEC’s penny stock rules require a broker-dealer,
before a transaction in a penny stock not otherwise exempt from the
rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the risks in the penny
stock market. The broker-dealer must also provide the customer with
current bid and offer quotations
for the penny stock, the compensation of the
broker-dealer and the salesperson in the transaction, and monthly
account statements showing the market value of each penny stock
held in the customer’s account. In addition, the penny stock
rules generally require that before a transaction in a penny stock
occurs, the broker-dealer must make a special written determination
that the penny stock is a suitable investment
for the purchaser and receive the
purchaser’s agreement to the transaction. If applicable in
the future, these rules may restrict the ability of brokers-dealers
to sell our common stock and may affect the ability of investors to
sell their shares, until our common stock no longer is considered a
penny stock.
You may end
up holding an “
odd
lot” or less than 100 shares of common stock as a result of
the Reverse Stock Split, making it more difficult
for you to
sell your shares.
A Reverse
Stock Split may result in some shareholders owning “odd
lots” of less than 100 shares of common stock on a post-split
basis. A purchase or sale of less than 100 shares of common stock
(an “odd lot” transaction) may result in incrementally
higher trading costs through certain brokers, particularly
“full service” brokers, and generally may be more
difficult than a “round lot” sale. Therefore, those
shareholders who own less than 100 shares of common stock following
the Reverse Stock Split may be required to pay
somewhat higher transaction costs and may experience some
difficulties or delays should they then determine to sell their
shares of common stock.
The market
price of our common stock may not rise after the Reverse Stock
Split
.
Although the Board believes that the
decrease in the number of shares of common stock outstanding as a
consequence of a Reverse Stock Split and the anticipated increase
in the market price of common stock could encourage interest in our
common stock and possibly promote greater liquidity
for shareholders, such liquidity could
also be adversely affected by the reduced number of shares
outstanding after the Reverse Stock Split. It is possible that the
per share price of our common stock after the
Reverse Stock Split will not rise in proportion to
the reduction in the number of shares of our common stock
outstanding resulting from the Reverse Stock Split,
and the market price per
post-Reverse Stock Split share may
not exceed or remain in excess of the $1.00 minimum bid
price
for a sustained period of
time, and the Reverse Stock Split may not result in
a per share price that would attract brokers and investors who do
not trade in lower priced stocks. Even if we effect the
Reverse Stock Split, the market price of our common stock
may decrease due to factors unrelated to the
Reverse Stock Split. In any case, the market price of our
common stock may also be based on other factors which may be
unrelated to the number of shares outstanding, including our future
performance. If the Reverse Stock Split is
consummated and the trading price of the common stock declines, the
percentage decline as an absolute number and as a percentage of our
overall market capitalization may be greater than would occur in
the absence of the Reverse Stock Split. Even if the
market price per
post-Reverse
Stock Split share of our common stock remains in excess of $1.00
per share, we may be delisted due to a failure to meet other
continued listing requirements, including NASDAQ requirements
related to the minimum shareholders’ equity,
the minimum number of shares that must be in the public
float, the minimum market value of the public float and
the minimum number of round lot
holders
.
The
Reverse Stock Split may decrease the liquidity of
our common stock.
The liquidity
of our common stock may be harmed by the
Reverse Stock Split given the reduced number of
shares of common stock that would be outstanding after the
Reverse Stock Split, particularly if the stock price does
not increase as a result of the Reverse Stock Split. In
addition, investors might consider the increased proportion of
unissued authorized shares of common stock to issued shares to have
an anti-takeover effect under certain circumstances, because the
proportion allows
for dilutive
issuances which could prevent certain shareholders from changing
the composition of the Board or render tender offers
for a combination with another entity
more difficult to successfully complete. The Board does not
intend
for the
Reverse Stock Split to have any anti-takeover
effects
.
The number
of authorized but unissued shares will not change, while the number
of issued shares decreases, effectively increasing the number of
shares of common stock available
for future
issuance and potential dilution to existing
shareholders.
Our
Articles of Incorporation presently authorize 100,000,000 shares of
common stock and 50,000,000 shares of blank check preferred stock,
no par value per share. The Reverse Stock Split would not change
the number of authorized shares of the common stock, although the
Reverse Stock Split would decrease the number of
issued and outstanding shares of common stock. Therefore, because
the number of issued and outstanding shares of common stock would
decrease, the number of shares of common stock remaining
available
for issuance by us in
the future would increase.
19
Such additional shares of common stock would be
available
for issuance from
time to time
for corporate
purposes such as issuances of common stock in connection with
capital-raising transactions and acquisitions of
companies or other assets, as well
as
for issuance upon conversion
or exercise of securities such as convertible preferred stock,
convertible debt, warrants or options convertible into or
exercisable
for common stock.
We believe that the availability of the additional shares of common
stock will provide us with the flexibility to meet business needs
as they arise, to take advantage of favorable opportunities and to
respond effectively in a changing corporate environment.
For example, we may elect to issue
shares of common stock to raise equity capital, to make
acquisitions through the use of stock, to establish strategic
relationships with other
companies, to adopt additional employee benefit
plans or reserve additional shares of common stock
for issuance under such plans, where
the Board determines it advisable to do so, without the necessity
of soliciting further shareholder approval, subject to applicable
shareholder vote requirements under Utah law and NASDAQ rules. If
we issue additional shares of common stock
for any of these purposes, the aggregate ownership
interest of our current shareholders, and the interest of each such
existing shareholder, would be diluted, possibly
substantially.
The additional shares of our common stock that
would become available
for
issuance upon an effective Reverse Stock Split could
also be used by us to oppose a hostile takeover attempt or delay or
prevent a change of control or changes in or removal of our
management, including any transaction that may be favored by a
majority of our shareholders or in which our shareholders might
otherwise receive a premium
for
their shares of common stock over then-current market prices or
benefit in some other manner. Although the increased proportion of
authorized but unissued shares of common stock to issued shares of
common stock could, under certain circumstances, have an
anti-takeover effect, the Reverse Stock Split is not
being proposed in order to respond to a hostile takeover attempt or
to an attempt to obtain control of the Company.
Fractional Shares
We will not issue fractional certificates
for
post-Reverse Stock Split shares of
common stock in connection with the Reverse Stock Split.
To the extent any holders of
pre-Reverse Stock Split shares of common stock are
entitled to fractional shares of common stock as a result of the
Reverse Stock Split, we will issue an additional share to all
holders of fractional shares of common stock.
No Dissenters’ Rights
Under
Utah law, our shareholders would not be entitled to
dissenters’ rights or rights of appraisal in connection with
the implementation of the Reverse Stock Split, and we
will not independently provide our shareholders with any such
rights.
U.S. Federal Income Tax Considerations
The following is a summary of certain United
States federal income tax consequences of the Reverse
Stock Split. It does not address any state, local or foreign
income or other tax consequences, which, depending upon the
jurisdiction and the status of the shareholder/taxpayer, may vary
from the United States federal income tax consequences. It applies
to you only if you held
pre-Reverse Stock Split shares of common
stock as capital assets
for
United States federal income tax purposes. This discussion does not
apply to you if you are a member of a class of our shareholders
subject to special rules, such as (a) a dealer in securities or
currencies, (b) a trader in securities that elects to use a
mark-to-market method of accounting
for your securities holdings, (c) a bank,
(d) a life insurance
company, (e) a tax-exempt
organization, (f) a person that owns shares of common stock that
are a hedge, or that are hedged,
against interest rate risks,
(g) a person who owns shares of common stock as
part of a straddle or conversion transaction
for tax purposes or
(h) a person whose functional currency
for tax purposes is not the U.S.
dollar. The discussion is based on the
Internal Revenue Code of 1986, as amended (the
“
Internal Revenue
Code
”), its legislative
history, existing, temporary and proposed regulations under
the
Internal Revenue Code,
published rulings and court decisions, all as of the date hereof.
These laws, regulations and other guidance are subject to change,
possibly on a retroactive basis. We have not sought and will not
seek an opinion of counsel or a ruling from the Internal Revenue
Service regarding the United States federal income tax consequences
of the Reverse Stock Split.
PLEASE CONSULT YOUR OWN TAX ADVISOR
CONCERNING THE CONSEQUENCES OF THE REVERSE STOCK SPLIT IN YOUR
PARTICULAR CIRCUMSTANCES UNDER THE
INTERNAL REVENUE CODE AND THE LAWS OF ANY OTHER
TAXING JURISDICTION.
Tax Consequences to United States Holders of common
stock.
A United States holder, as used herein, is a
shareholder who or that is,
for
United States federal income tax purposes: (a) a citizen or
individual resident of the United States, (b) a domestic
corporation, (c) an estate whose income is subject to United States
federal income tax regardless of its source, or (d) a trust, if a
United States court can exercise primary supervision over the
trust’s administration and one or more United States persons
are authorized to control all substantial decisions of the trust.
This discussion applies only to United States
holders.
Except
for
adjustments that may result from the treatment of fractional shares
of common stock as described above, no gain or loss should be
recognized by a shareholder upon such shareholder’s exchange
of
pre-Reverse Stock
Split shares of
common
stock
for post-Reverse Stock
Split shares of common stock pursuant to the Reverse Stock
Split, and the aggregate adjusted basis of the
post-Reverse Stock Split shares of common
stock received will be the same as the aggregate adjusted basis of
the common stock exchanged
for
such new shares. The shareholder’s holding period
for the
post-Reverse Stock Split shares of common
stock will include the period during which the shareholder held
the
pre-Reverse Stock
Split shares of common stock surrendered.
Accounting Consequences
Following the
Effective Date of the Reverse Stock Split (as
defined below under “
Procedure
for
Effecting the Reverse Stock Split”), if any, the net income
or loss and net book value per share of common stock will be
increased because there will be fewer shares of the common stock
outstanding. We do not anticipate that any other accounting
consequences would arise as a result of the Reverse Stock
Split.
20
Procedure
for Effecting the Reverse Stock
Split
When and if the Board decides to implement
the Reverse Stock Split, the Company will promptly
file the
Amendment with
the Utah Division. The Reverse Stock Split will become effective on
the date of filing the Amendment, which is referred to as the
“
Effective Date”.
Beginning on the
Effective
Date, each certificate representing
pre-Reverse Stock Split shares will be
deemed
for all corporate
purposes to evidence ownership of
post-Reverse Stock
Split shares.
After the
Effective Date, our common stock will have a new
CUSIP number, which is a number used to identify our securities,
and any stock certificates with the old CUSIP number will need to
be exchanged
for stock
certificates with the new CUSIP number using the procedures
described below.
Exchange of Stock Certificates
As of the
Effective Date, each certificate representing
shares of our common stock outstanding before the Reverse Stock
Split will be deemed,
for
all corporate purposes, to evidence ownership of the reduced number
of shares of our common stock resulting from the Reverse Stock
Split. All shares underlying options, warrants and other securities
exchangeable or exercisable
for
or convertible into common stock also automatically will be
adjusted on the
Effective
Date.
Our transfer agent,
Direct Transfer, LLC,
will act as the exchange agent
for purposes of exchanging stock
certificates subsequent to the Reverse Stock Split. Shortly after
the
Effective Date,
shareholders of record will receive written instructions requesting
them to complete and return a letter of transmittal and surrender
their old stock certificates
for new stock certificates reflecting the adjusted
number of shares as a result of the Reverse Stock Split.
Certificates representing shares of common stock issued in
connection with the Reverse Stock Split will continue to bear
the same restrictive legends, if any, set forth in the surrendered
certificates representing the shares of common stock outstanding
prior to the Reverse Stock Split. No new certificates will be
issued until such shareholder has surrendered any outstanding
certificates, together with the properly completed and executed
letter of transmittal, to the exchange agent. Until surrendered,
each certificate representing shares of common stock outstanding
before the Reverse Stock Split would continue to be valid and
would represent the adjusted number of shares of common stock,
based on the Exchange Ratio.
Any shareholder whose stock certificates are lost,
destroyed or stolen will be entitled to a new certificate or
certificates representing
post-Reverse Stock Split shares of common
stock upon compliance with the requirements that we and our
transfer agent customarily apply in connection with lost, destroyed
or stolen certificates. Instructions as to lost, destroyed or
stolen certificates will be included in the letter of instructions
from the exchange agent.
Upon the Reverse Stock Split, we intend to treat
shareholders holding our common stock in “street name”,
through a bank, broker or other nominee, in the same manner as
registered shareholders whose shares of common stock are registered
in their names. Banks, brokers and other nominees will be
instructed to effect the Reverse Stock
Split
for their beneficial
holders holding our common stock in “street name”.
However, such banks, brokers and other nominees may have different
procedures than registered shareholders
for processing the Reverse Stock Split. If you
hold your shares in “street name” with a bank, broker
or other nominee, and if you have any questions in this regard, we
encourage you to contact your bank, broker or
nominee.
YOU SHOULD NOT DESTROY YOUR STOCK CERTIFICATES AND YOU SHOULD NOT
SEND THEM NOW. YOU SHOULD SEND YOUR STOCK CERTIFICATES ONLY AFTER
YOU HAVE RECEIVED INSTRUCTIONS FROM THE EXCHANGE AGENT AND IN
ACCORDANCE WITH THOSE INSTRUCTIONS.
If any certificates
for shares of common stock are to be issued in a
name other than that in which the certificates
for shares of common stock surrendered are
registered, the shareholder requesting the reissuance will be
required to pay to us any transfer taxes or establish to our
satisfaction that such taxes have been paid or are not payable and,
in addition, (a) the transfer must comply with all applicable
federal and state securities laws, and (b) the surrendered
certificate must be properly endorsed and otherwise be in proper
form
for
transfer.
Book-Entry
The
Company’s registered shareholders may hold some or all of
their shares electronically in book-entry form with our transfer
agent. These shareholders do not have stock certificates evidencing
their ownership of common stock. They are, however, provided with a
statement reflecting the number of shares of common stock
registered in their accounts.
●
If you hold registered shares of common stock in
book-entry form, you do not need to take any action to receive
your
post-Reverse Stock Split
shares of common stock in registered book-entry
form.
●
If you are entitled to
post-Reverse Stock Split shares of common stock, a
transaction statement will automatically be sent to your address of
record by our transfer agent as soon as practicable after
the
Effective Date indicating
the number of shares of common stock that you
hold.
Interests of Directors and Executive Officers
Our
directors and executive officers have no substantial interests,
directly or indirectly, in the matters set forth in this proposal
except to the extent of their ownership of shares of our common
stock, preferred stock, warrants, or equity awards granted to them
under our equity incentive plans.
Recommendation of the Board
THE
BOARD
UNANIMOUSLY
RECOMMENDS A VOTE “FOR” PROPOSAL NO.
3.
21
PROPOSAL NO. 4
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 2019 Annual Meeting of Shareholders, during the past nine
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
Executive Compensation section 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 2022 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 2022 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
UNANIMOUSLY
RECOMMENDS A VOTE “FOR” PROPOSAL NO. 4, APPROVING, ON
AN ADVISORY BASIS, THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
AS STATED IN THE RESOLUTION CONTAINED IN THE PROXY STATEMENT FOR
THE 2022 ANNUAL
MEETING.
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
|
|
John A.
Krier
(1)
|
|
45
|
|
President,
Chief Executive Officer, Chief Financial Officer, and
Director
|
|
Brian
Baker
|
|
56
|
|
Chief
Operating Officer
|
|
|
|
|
|
|
(1)
Principal Executive Officer
and
Principal
Financial Officer
.
John A. Krier.
Mr. Krier is a nominee for director at
the Annual Meeting. His personal information is detailed above on
page
5
of this Proxy Statement.
Brian D. Baker
rejoined us as
Chief Operating Officer in January 2022. Mr. Baker served as our
Chief Executive Officer from August 2019 to July 2020 and as our
Chief Operating Officer from May 2019 until August 2019. Following
his resignation as Chief Executive Officer due to health issues
relating to the COVID-19 virus, Mr. Baker continued as an employee
of the Company until October 8, 2020 and then became a consultant
to the Company and member of the Board until rejoining us full-time
in January 2022. 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, and 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.
22
Our Compensation Objectives
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.
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 (d), (g) and (h) have been intentionally
omitted):
The
following table shows information regarding the compensation of our
Named Executive Officers for services performed in the fiscal years
ended June 30, 2022 and 2021.
|
Name and principal
position
(a)
|
Year
(b)
|
Salary
($)
(c)
|
Bonus
($) (d)
|
Stock awards ($) (e)
|
Option awards
($)
(f)
|
All other
compensation
($)
(i)
(1)
|
Total
|
|
John A.
Krier
|
2022
|
$
274,481
|
$
56,250
|
$
56,250
|
$
-
|
$
26,338
|
$
413,319
|
|
President and Chief Executive
Officer
(3)
|
2021
|
$
249,179
|
$
-
|
$
46,370
|
$
6,498
|
$
20,872
|
$
322,919
|
|
Brian
D. Baker
|
2022
|
$
90,644
|
$
-
|
$
-
|
$
-
|
$
144,179
|
$
234,824
|
|
Chief Operating
Officer
(2)
|
2021
|
$
82,500
|
$
-
|
$
-
|
$
-
|
$
48,737
|
$
131,237
|
|
Norman Roegner
III
|
2022
|
$
239,690
|
$
19,354
|
$
19,354
|
$
-
|
$
27,093
|
$
305,491
|
|
Chief Financial Officer
(4)
|
2021
|
$
141,563
|
$
-
|
$
7,768
|
$
-
|
$
12,706
|
$
162,037
|
__________________
(1)
“All other
compensation” includes employer contributions to the 401K,
medical, dental, and life insurance benefits.
(2)
Mr. Baker was our
President and Chief Executive Officer from August 2019 through July
2020 and has been our Chief Operating Officer since January 2022.
Mr.
Baker was a non-employee member of our Board of Directors from
October 2020 through January 2022. During the year ended June 30,
2022, “All other compensation” includes $15,500 for
director fees paid in cash, $11,000 for director fees paid in stock
awards, and $108,933 for consulting fees.
During the year
ended June 30, 2021, “All other compensation” includes
$7,500 for director fees paid in cash, $4,350 for director fees
paid in stock awards, and $34,280 for consulting fees.
(3)
Mr. Krier has been
our Chief Financial Officer since July 2022, and has been our
President and Chief Executive Officer since July 2020.
(4)
Mr. Roegner was our
Chief Financial Officer through July 2022.
The
following table presents information regarding outstanding equity
awards held by each of the Named Executive Officers as of June 30,
2022.
|
|
Option awards
|
Stock awards
|
||||
|
Name
|
Number of securities underlying
unexercised options (#) exercisable
|
Number of securities underlying
unexercised options (#) unexercis-able
|
Option exercise price ($)
|
Option expiration date
|
Number of shares or units of stock that have not vested
(#)
|
Market value of shares or units of stock that have not vested
($)
|
|
(a)
|
(b)
|
(c)
|
(e)
|
(f)
|
(g)
|
(h)
|
|
John A. Krier
|
21,250
|
28,750
|
$
0.93 to 1.12
|
3/22/2027
to 7/6/2027
|
59,822
|
36,497
|
|
Brian
D. Baker
|
60,000
|
30,000
|
$
1.39 to $2.70
|
2/27/2026
to 8/25/2027
|
25,000
|
15,253
|
|
Norman
Roegner III
|
-
|
-
|
-
|
-
|
15,180
|
9,261
|
23
Employment Agreements
John A. Krier
. On
July 7, 2020, we entered into an employment agreement with
John
Krier
as our President and Chief Executive Officer. Pursuant
to the agreement, we will pay Mr. Krier an annual base salary of
$250,000 per year and he will be eligible for an annual bonus
targeted at a maximum payout of $75,000, and an annual equity award
of restricted stock units, or RSUs, up to a maximum value of
$75,000, which amount will be determined by the Compensation
Committee of the Board, based on results of operations and Mr.
Krier’s performance against goals established by the
Compensation Committee. On the date of his appointment, Mr. Krier
received a grant of 50,000 RSUs under the 2018 Plan, vesting in
four equal annual installments commencing on the first anniversary
of the grant date. Upon vesting, Mr. Krier will receive a number of
shares of common stock equal to the number of RSUs that have
vested. Also, upon his appointment date, the Company granted Mr.
Krier a stock option under the 2018 Plan for the purchase of 15,000
shares of common stock, vesting over a four-year period with
one-fourth of the shares vesting annually on the anniversary of the
grant date. The exercise price of the stock option is the market
price of the common stock on the date of grant.
The
employment agreement continues until terminated by the Company or
by Mr. Krier in accordance with the terms of the agreement. If the
Company terminates Mr. Krier’s employment during the first 12
months without cause as defined under the agreement, we must pay
Mr. Krier 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.
Mr.
Krier 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. Krier on the same terms as the agreements entered into with our
other directors and executive officers.
Bria
n D.
Baker
.
On August 26,
2019, we entered into a letter agreement with Brian D. Baker as our
Chief Operating Officer (the “
Baker Employment Letter
”).
Pursuant to the Baker Employment Letter, we will pay Mr. Baker a
salary of $250,000 per year and is eligible for an annual bonus
targeted at a maximum payout of $43,500, as determined by the
Compensation Committee of the Board, based on results of operations
and Mr. Baker’s performance against goals established by the
Compensation Committee. Mr. Baker is also entitled to annual equity
grants of RSUs valued at a maximum of $43,500, as determined by the
Compensation Committee, such grants to vest 50% upon the date of
grant and 50% on the first anniversary of the date of
grant.
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 as the agreements entered into with our other directors
and executive officers.
Norman Roegner III
. On July 6, 2022, the
Company announced that the Company and Norman Roegner mutually
determined that Mr. Roegner’s services as Chief Financial
Officer (Principal Financial Officer) of the Company would be
terminated, effective July 22, 2022. In connection with Mr.
Roegner’s termination, the Company and Mr. Roegner entered
into a Separation and Release Agreement (the “
Roegner Separation Agreement
”).
The Roegner Separation Agreement provides that Mr. Roegner will
receive separation pay equal to eight (8) weeks of his annual base
salary. In addition, the Roegner Separation Agreement provides for
the accelerated vesting of 15,180 shares of Restricted Stock Units,
the vesting of which occured on July 22, 2022. The Roegner
Separation Agreement includes a general release of claims and
waivers customary in such agreements.
Brian D. Baker.
On
July 7, 2020, Brian Baker, citing the need for a reduced work
schedule to allow more flexibility to address health issues
relating to the COVID-19 virus, stepped down as Chief Executive
Officer. Mr. Baker continued to serve as a member of the Board.
Subject to the conditions and provisions of the Company’s
equity incentive plans, equity awards held by Mr. Baker will
continue to vest and be exercisable according to their respective
terms. In connection with Mr. Baker’s resignation, the
Company and Mr. Baker entered into a Separation and Pay
Continuation Agreement (“
Baker Separation Agreement
”). The
Baker Separation Agreement provided that through October 7, 2020
(the “
Separation
Date
”), Mr. Baker would receive the same compensation
and benefits, including continued vesting of outstanding equity
awards, as under his employment agreement as in effect on August
19, 2019. The Baker Separation Agreement includes a general release
of claims and waivers customary in such agreements. Mr.
Baker’s departure was not the result of any disagreement with
us on any matter relating to the Company’s operations,
policies or practices. We also entered into a Consulting Agreement
with Mr. Baker effective October 8, 2020, pursuant to which Mr.
Baker provided consulting services to the Company on a part-time
basis following the Separation Date for up to 20 hours per
week.
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 depending on the location of their
employment. In fiscal year 2022, we maintained two separate 401(k)
plans for our employees: (1) the Dynatronics Corporation Plan (the
“
Dynatronics Plan
”
) covers its Bird & Cronin, LLC
and Dynatronics Corporation employees; 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 are eligible to participate on the first day of the month
following their hire date. Eligible employees may contribute to the
Dynatronics Plan in the form of salary deferrals of up to $19,500,
the maximum allowable for calendar year 2022. Eligible employees
who are over 50 years old may contribute an additional $6,000 in
catchup contributions during calendar year 2022. We match employee
contributions at 50% of the first 6% 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 25% after
year one, 25% each year thereafter (100% vested after four
years).
24
Hausmann Plan
. Under
the Hausmann Plan, employees who are 21 years of age or older are
eligible to participate on the first day of the month following
their hire date. Eligible employees may contribute to the Hausmann
Plan in the form of salary deferrals of up to $19,500, the maximum
allowable for calendar year 2022. Eligible employees who are over
50 years old may contribute an additional $6,000 in catchup
contributions during calendar year 2022. We match employee
contributions at 50% of the first 6% of employee compensation, up
to a maximum of $3,000 per employee per year. Participants in the
Hausmann Plan are fully vested in their salary deferral
contributions, and employer matching contributions vest 25% after
year one, 25% each year thereafter (100% vested after four
years).
Security Ownership of Certain Beneficial Owners and
Management
The
following table sets forth certain information regarding the
ownership of our voting securities as of September 20, 2022,
for:
●
each shareholder
known by us to be the beneficial owner of more than 5% of any class
of our voting securities;
●
each of our
directors;
●
each of our Named
Executive Officers; and
●
all of our
directors and executive officers as a group.
Applicable
ownership is based on 18,581,255 shares of common stock outstanding
at September 20, 2022. In computing the percentage of shares of
common stock beneficially owned, we deemed to be outstanding all
shares of common stock subject to options, warrants or other equity
awards and all shares of our Series A Preferred, and Series B
Preferred held by that person or entity that are currently
exercisable or exchangeable or that will become exercisable or
convertible within 60 days.
Under
SEC rules,
“
Named Executive Officers
”
or “
NEO
” include (i) all persons who
served as principal executive officer 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 as of the
end of the last completed fiscal year; and (iii) up to two
additional individuals who would have been deemed to be Named
Executive Officers except that they were not serving as officers at
the end of the fiscal year. Pursuant to these rules, we have
identified as our Named Executive Officers for purposes of this
Proxy Statement the following: (1) Mr. Krier, who is our Chief
Executive Officer; (2) Mr. Baker, who is our Chief Operating
Officer; and (3) Mr. Roegner, who was our Chief Financial Officer
at the end of fiscal 2022. 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, 1200 Trapp Road, Eagan,
Minnesota 55121.
25
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
|
2,442,508
|
12.8%
|
3,582,508
|
12.9%
|
|
|
Series
A
|
880,000
|
44.2%
|
|
|
|
|
Series
B
|
260,000
|
19.1%
|
|
|
|
Stuart
M. Essig 2007 Family Trust
(3)
|
Common
|
712,275
|
3.8%
|
941,075
|
2.8%
|
|
|
Series
A
|
188,800
|
9.5%
|
|
|
|
|
Series
B
|
40,000
|
2.9%
|
|
|
|
Provco
Ventures I, LP
(4)
|
Common
|
1,775,082
|
9.3%
|
2,459,082
|
8.3%
|
|
|
Series
A
|
484,000
|
24.3%
|
|
|
|
|
Series
B
|
200,000
|
14.7%
|
|
|
|
Armistice
Capital, LLC
(5)
|
Common
|
2,760,000
|
14.0%
|
3,260,000
|
9.7%
|
|
|
Series
B
|
500,000
|
36.8%
|
|
|
|
|
|
|
|
|
|
|
Directors and Named Executive Officers:
|
|
|
|
|
|
|
Brian
D. Baker (COO)
(6)
|
Common
|
224,123
|
1.2%
|
320,123
|
1.0%
|
|
|
Series
A
|
96,000
|
4.8%
|
|
|
|
John A.
Krier (CEO/CFO/Director)
(7)
|
Common
|
94,644
|
*
|
94,644
|
*
|
|
Erin S. Enright (Director)
(8)
|
Common
|
712,275
|
3.8%
|
941,075
|
2.8%
|
|
|
Series A
|
188,800
|
9.5%
|
|
|
|
|
Series
B
|
40,000
|
2.9%
|
|
|
|
David
B. Holtz (Director)
(9)
|
Common
|
109,829
|
*
|
109,829
|
*
|
|
Scott
A. Klosterman (Director)
(10)
|
Common
|
109,829
|
*
|
109,829
|
*
|
|
Brian M. Larkin (Director)
(11)
|
Common
|
280,244
|
1.5%
|
348,244
|
1.3%
|
|
|
Series A
|
48,000
|
2.4%
|
|
|
|
|
Series
B
|
20,000
|
1.5%
|
|
|
|
R.
Scott Ward (Director)
(12)
|
Common
|
92,078
|
*
|
92,078
|
*
|
|
Norman
Roegner III (CFO)
(13)
|
Common
|
24,472
|
*
|
24,472
|
*
|
|
|
|
|
|
|
|
|
All executive officers and directors as a group (8
persons)
|
Common
|
1,632,526
|
8.8%
|
2,025,326
|
6.8%
|
|
|
Series
A
|
332,800
|
16.7%
|
|
|
|
|
Series
B
|
60,000
|
4.4%
|
|
|
(1)
The
table assumes 18,549,429 shares of common stock issued and
outstanding as of September 20, 2022. 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 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 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 and the husband of Erin Enright, a Preferred
Director and the Chairman of our Board. The amount of common stock
beneficially owned includes: (a) 1,853,503 shares of common stock
owned of record and (b) 589,005 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.
26
(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) 258,474 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 110,601 shares of
common stock owned of record by Ms. Enright personally, over which
Ms. Enright has sole voting and dispositive power. (See, Note (8),
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) 1,199,082 shares
of common stock owned of record, and (b) 576,000 shares of common
stock issuable upon the exercise of warrants.
(5)
The address for
this beneficial owner is c/o Steven Boyd, 510 Madison Ave, 22nd
Floor, New York, New York 10022. With respect to information
relating to Armistice Capital, LLC, we have relied solely on
information supplied by such entity on a Schedule 13G/A filed with
the SEC
on February 16,
2021. Per the Schedule 13G/A, Armistice Capital, LLC held shared
voting power over 1,630,000 shares and shared dispositive power
over 1,630,000 shares. Amount of common stock beneficially owned
includes 1,130,000 shares of common stock issuable upon the
exercise of warrants.
(6)
Amount of common
stock beneficially owned includes (a) 72,500 exercisable options,
(b) 127,623 shares of common stock owned of record, and (c) 24,000
shares of common stock issuable upon exercise of
warrants.
(7)
Amount of common
stock beneficially owned includes (a) 25,000 exercisable options
and (b) 69,644 shares of common stock owned of record.
(8)
The amount of
common stock beneficially owned includes: (a) 110,601 shares of
common stock owned of record and (b) 643,500 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.
(9)
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.
(10)
All amounts
indicated are shares of common stock owned of record by Mr.
Klosterman.
(11)
The amount of
common stock beneficially owned includes: (a) 218,244 shares of
common stock owned of record and (b) 62,000 shares issuable upon
the exercise of warrants.
(12)
All amounts
indicated are shares of common stock owned of record by Dr.
Ward.
(13)
All amounts
indicated are shares of common stock owned of record by Mr.
Roegner.
Securities Authorized for Issuance Under Equity Compensation
Plans
Equity Grants
As of
June 30, 2022, options to purchase a total of 140,000 registered
shares of our common stock were outstanding at a weighted average
exercise price of $1.56 per share, of which options to purchase
81,250 shares of our common stock were vested and exercisable at a
weighted average exercise price of $1.72 per share and options to
purchase 58,750 shares were unvested and not exercisable at a
weighted average exercise price of $1.28 per share. These options
were issued under our Dynatronics 2018 Equity Incentive Award Plan
(the “
2018
Plan
”) and under our Dynatronics Corporation 2020
Equity Incentive Plan (the “
2020 Plan
”). At June 30, 2022, an
additional 1,000,000 shares remained available for future equity
grants under our 2020 Plan, and 170,653 shares remained available
for future equity grants under our 2018 Plan.
The
following table summarizes awards outstanding under the 2018 Plan
and the 2020 Plan as of June 30, 2022. The following information
does not reflect issuances or exercises under the 2018 Plan or the
2020 Plan subsequent to June 30, 2022.
27
|
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
|
|
|
|
|
2020 Plan
|
-
|
-
|
1,000,000
|
|
2018 Plan
|
140,000
|
$1.56
|
1,170,653
|
|
Total
|
140,000
|
|
1,170,653
|
Description of the 2018 Plan
Our
Board unanimously approved the Company’s 2018 Plan on
September 10, 2018, and the 2018 Plan was approved by our
shareholders at our 2018 Annual Meeting of Shareholders on December
3, 2018. The Board also determined to keep the 2018 Plan in effect
upon adoption of the 2020 Plan, and to grant awards under the 2018
Plan until the remaining shares available for awards and issuance
under the 2018 Plan have been exhausted. The 2018 Plan reserved for
issuance pursuant to awards under the 2018 Plan, 600,000 shares of
common stock, plus the number of shares of common stock reserved
and available for issuance under our prior plan (the 2015 Plan) as
of the date of shareholder approval of the 2018 Plan. For purposes
of this limitation, the shares of stock underlying any awards that
are forfeited, are canceled, expire or are terminated (other than
by exercise) under (i) the 2018 Plan or (ii) from and after
shareholder approval of the 2018 Plan, the shares remaining
available under our 2015 Equity Incentive Award Plan (the
“
2015 Plan
”)
were added to the shares of stock available for issuance under the
2018 Plan. Shares tendered or held back upon exercise of an option
or settlement of an award to cover the exercise price or tax
withholding were not be available for future issuance under the
2018 Plan. As of June 30, 2022, 170,653 shares remain authorized
for issuance under the 2018 Plan and awards covering 140,000 of
shares of common stock remain outstanding as of June 30, 2022 and
remain operative under the terms of the respective
grants.
Description of the 2020 Plan
The
maximum number of shares of stock reserved and available for
issuance under the 2020 Plan is 1,000,000 shares of common stock
(without giving effect to any subsequent adjustments resulting from
stock splits or other transactions), plus the number of shares of
common stock underlying any award granted under our 2018 Plan that
are forfeited, are canceled, expire or are terminated (other than
by exercise). Shares tendered or held back upon exercise of an
option or settlement of an award to cover the exercise price or tax
withholding shall not be available for future issuance under the
2020 Plan.
The
2020 Plan provides for the grant of various types of awards,
including, for example: (i) incentive stock options; (ii)
nonqualified stock options; (iii) stock appreciation rights; (iv)
restricted stock awards; (v) deferred stock awards; and (vi) other
stock-based and cash-based awards to eligible individuals. The
terms of the awards will be set forth in an award agreement,
consistent with the terms of the 2020 Plan.
As of
June 30, 2022, 1,000,000 shares remain authorized for issuance
under the 2020 Plan and no awards remain outstanding as of June 30,
2021.
Certain Relationships and Related Transactions
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. In addition, interested
directors may be counted in determining the presence of a quorum at
a meeting of our Board 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.
28
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 2023 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 7, 2023. Such proposals should be delivered to Dynatronics
Corporation, 1200 Trapp Road, Eagan, Minnesota 55121, Attention:
Legal Department, telephone (801) 568-7000.
Our
Board has determined that, except in the case of proposals made in
accordance with Rule 14a-8, for shareholder nominations to the
Board 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 2023 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 7, 2023 and August
6, 2023. However, in the event that the 2023 Annual Meeting is
called for a date that is not within 30 calendar days of the
anniversary of the date that the 2023 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
2023 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 for the 2023 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
6, 2023, and (ii) any proposal made in accordance with the bylaw
provisions, if the 2023 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.
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.
The
Board 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/ John A. Krier
John A.
Krier
President, Chief
Executive Officer, and Chief Financial Officer
October
5, 2022
A copy of
our
Annual
Report on Form 10-K
for the
fiscal year ended June 30, 2022, is available without charge upon
written request to: Attn: Corporate Secretary, Dynatronics
Corporation, 1200 Trapp Road, Eagan, Minnesota
55121.
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.
29
Appendix
A to Proxy Statement
ARTICLES
OF AMENDMENT
TO
THE
AMENDED
AND RESTATED ARTICLES OF INCORPORATION OF
DYNATRONICS
CORPORATION
Pursuant to and in
accordance with the provisions of Section 16-10a-1006 of the Utah
Revised Business Corporation Act, as amended (the
“
Act
”), the
undersigned, Dynatronics Corporation (the “
Corporation
”) hereby declares and
certifies the following Articles of Amendment (“
Articles of Amendment
”) to its
Amended and Restated Articles of Incorporation (“
Articles of
Incorporation
”).
|
|
1.
|
The name of the
Corporation is Dynatronics Corporation.
|
|
|
2.
|
The text of the
amendment to the Articles of Incorporation adopted is as
follows:
|
Following the final
paragraph of ARTICLE III of the Articles of Incorporation, the
following text is inserted (the “
Amendment
”):
“Upon the
filing of these Articles of Amendment to the Articles of
Incorporation, each share of common stock of the Corporation issued
and outstanding immediately prior to the filing of these Articles
of Amendment, without further action, will be automatically split
and converted into one-[_________] ([_____]) of one (1) share of
fully paid and nonassessable shares of common stock of the
Corporation (the “
Reverse
Stock Split
”). No fractional shares shall be issued
upon the Reverse Stock Split; rather, each fractional share
resulting from the Reverse Stock Split shall be rounded up to the
nearest whole number. Each outstanding stock certificate of the
Corporation, which prior to the filing of these Articles of
Amendment represented one or more shares of common stock, shall
immediately after such filing represent that number of shares of
common stock equal to the product of (i) the number of shares of
common stock represented on such certificates divided by (ii)
[_______] ([_____]) (such adjusted shares, the “
Reclassified Shares
”), with any
resulting fractional shares rounded up to the nearest whole share
as set forth above. Any options, warrants, conversion, or other
purchase or conversion rights, which prior to the filing of these
Articles of Amendment represented the right to acquire one or more
shares of the Corporation’s common stock, shall immediately
after such filing represent the right to acquire one-[_______]
([____]) of one (1) share of the Corporation’s common stock
for each share of the Corporation’s common stock that such
option, warrant, conversion or other purchase or conversion right
previously represented the right to acquire. The exercise or
conversion price of such options, warrants or conversion rights
shall be adjusted by multiplying the existing exercise or
conversion price by [________] ([___]).
The number of
authorized shares of common stock of the Corporation and the par
value of such shares will not be affected by these Articles of
Amendment.
The Corporation
shall, upon the request of each record holder of a certificate
representing shares of common stock issued and outstanding
immediately prior to the filing of these Articles of Amendment to
the Articles of Incorporation, issue and deliver to such holder in
exchange for such certificate a new certificate or certificates
representing the Reclassified Shares.”
3. The
general form of the Articles of Amendment was adopted as of
[_________,
20___,]
by Written Action of the Board of Directors of the
Corporation, and was finalized by the Board of Directors [at a
meeting of the Board held on _________, 20___,] and in accordance
with the requirements of the Act and the Bylaws of the Corporation.
The Board of Directors unanimously recommended approval of the
Amendment by the shareholders of the Corporation.
4. The
Amendment was authorized and approved pursuant to sections
16-10a-1003 and 1004 of the Act by: (i) a majority of the votes
cast at the meeting by the holders of shares of common stock voting
separately as a voting group and entitled to vote at [the Annual
Meeting of the shareholders of the Corporation held on
_________,
20___,]
(the “
Annual
Meeting
”), and (ii) a majority of the votes cast at
the Annual Meeting by the holders of shares of common stock, Series
A Preferred Stock, and Series B Preferred Stock, voting together as
a single class and entitled to vote at the Annual
Meeting:
(a) The
number of issued and outstanding shares of common stock, Series A
Preferred Stock, and Series B Preferred Stock, voting together as a
single class and entitled to vote on the foregoing Amendment was
[____________________] of which [__________________] (or
approximately [_____]% of the issued and outstanding) voting shares
were represented in person or by proxy at the Annual Meeting,
constituting a quorum of such issued and outstanding
shares.
1
Appendix
A to Proxy Statement
(b) The
shares of common stock present at the Annual Meeting in person or
by proxy with respect to the Amendment and voting separately as a
voting group were voted as set forth in the following
table.
(c) The
shares of common stock, Series A Preferred Stock, and Series B
Preferred Stock present at the Annual Meeting in person or by proxy
with respect to the Amendment and voting together as a single
voting group were voted as set forth in the following
table:
|
DESIGNATION
OF STOCK
|
NO.
OF SHARES REPRESENTED AT THE ANNUAL MEETING AND ENTITLED TO
VOTE
|
VOTES
CAST IN FAVOR OF AMENDMENT
|
VOTES
CAST AGAINST AMENDMENT
|
VOTES
ABSTAINING
|
|
common stock voting
separately as a voting group
|
[____________]
|
[____________]
|
[___________]
|
[______________]
|
|
common
stock,
Series A Preferred,
and
Series B Preferred
together as a voting group
|
[___________]
|
[____________]
|
[____________]
|
[_______________]
|
(d) Such
votes cast were sufficient for approval of the Amendment and the
filing of these Articles of Amendment.
IN WITNESS WHEREOF,
these Articles of Amendment are executed as of
[_______________________], 20[___].
|
|
Dynatronics
Corporation,
|
|
|
a Utah
corporation
|
|
|
|
|
|
|
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By:
_________________________________________
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Name: John A.
Krier
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Title: President,
Chief Executive Officer, and Chief Financial Officer
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TABLE OF CONTENTS