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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________________________
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
Date of
Report (Date of Earliest Event Reported): February 19, 2018
DYNATRONICS CORPORATION
(Exact
name of registrant as specified in its charter)
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Utah
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0-12697
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87-0398434
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(State
or Other Jurisdiction of Incorporation)
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Commission
File Number
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(IRS
Employer Identification Number)
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7030 Park Centre Dr., Cottonwood Heights, Utah
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84121
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's
telephone number, including area code: (801)
568-7000
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
☐ Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under
the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
☐ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule
12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this
chapter).
Emerging
growth company ☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Item 5.02 Departures of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
On
February 19, 2018, the Board of Directors (the “Board”)
of Dynatronics Corporation, a Utah corporation (the
“Company”), voted to separate
the role of Chairman of the Board from the role
of Chief Executive Officer and appointed Ms. Erin Enright as
Chairman of the Board. Ms. Enright has been a director of the
Company and member of the Board since June 2015. The Board also
acted to implement a succession plan for senior management of the
Company and appointed a special committee of the Board to commence
a search to identify a successor for Mr. Cullimore as the CEO of
the Company. The committee members are directors Enright, Scott
Klosterman and Brian Larkin. Ms. Enright will chair the committee,
which intends to complete its search, if practicable, prior to the
end of the Company’s current fiscal year on June 30, 2018.
After appointment of a new CEO, it is expected that Mr. Cullimore
will continue to serve as a non-employee director and member of the
Board.
Mr.
Cullimore continues as CEO until his successor has been appointed
and qualified. He had also previously served as President of the
Company. That position will not be filled, due to a recent
realignment of the legacy Dynatronics therapy and modality products
operations completed earlier in February. The Company announced in
a press release on February 21, 2018, that it had formed a new
Therapy Products Division operating out of the Company’s Utah
and Tennessee facilities, where it will continue to develop,
design, manufacture and distribute the innovative modalities and
other products that have distinguished the Company in the industry
for many years. The Board has appointed Brian D. Baker as President
of the division. With this new alignment, the Company is now
organized with three operating divisions, the Hausmann, Bird &
Cronin, and Therapy Products Divisions, with the Presidents of each
Division reporting directly to Mr. Cullimore as the CEO, who now
reports to an independent Chairman.
In
connection with the termination of Mr. Cullimore’s employment
upon the naming of a successor CEO (the “Separation
Date”), the Company and Mr. Cullimore will enter into a
Separation and Release Agreement (the “Separation
Agreement”). The Separation Agreement includes a customary
release by Mr. Cullimore of certain claims against the Company that
are or may be held by Mr. Cullimore and entitles Mr. Cullimore to
(i) a severance payment equal to $200,000, which represents 12
months of Mr. Cullimore’s base salary in effect as of
immediately prior to the Separation Date, paid 50% on the 30th day
following the Separation Date and 50% in equal installments over
the following six months; (ii) payment of additional severance in
the total amount of $500,000, payable in quarterly installments
over a two-year period following the Separation Date, (iii) full
acceleration of vesting of Mr. Cullimore’s previously granted
and unvested restricted stock awards totaling 72,000 shares, (iv)
earned but unpaid bonuses, if any, with respect to the fiscal year
in which termination occurs, (v) transfer to him of the Company
vehicle used by him at the Separation Date (or a vehicle of
substantially similar market value), and (vi) accrued and unpaid
salary through the Separation Date. As a result of Mr.
Cullimore’s anticipated departure, the Company expects to
record a charge of approximately $900,000, or approximately $.11
per share in the Company’s third fiscal quarter ending March
31, 2018, for the future severance payments to be made and related
expenses incurred under his Employment Agreement dated May 1, 2015.
This includes a non-cash compensation expense of $140,000 in
connection with the acceleration of the vesting of the restricted
stock awards. The Company will also pay withholding and related
employer tax expense of approximately $72,000 in cash during the
quarter, which will be settled by withholding shares of stock from
the awards having an equivalent value and result in the delivery to
Mr. Cullimore of approximately 45,000 net shares of common
stock.
The
foregoing summary of the Separation Agreement is not complete, and
is qualified in its entirety by reference to the full text of the
Separation Agreement that is attached as Exhibit 10.1 of this
Current Report on Form 8-K. You should review the Separation
Agreement for a more complete understanding of its terms and
conditions.
Biographical
information regarding Ms. Enright and Mr. Baker is provided below.
Upon the hiring of his successor and ultimate separation from the
Company, Mr. Cullimore will receive severance under the terms of
his current employment agreement.
Ms.
Enright, 56, is a Managing Member of Prettybrook Partners LLC and a
general partner and member of the Board of Tigerlabs, a
Princeton-based business accelerator. She was the President of Lee
Medical, a medical device manufacturer based in Plainsboro, New
Jersey, from 2004-13. She served on the Board of Directors and the
Audit Committee of Biolase, Inc. (NASDAQ: BIOL) during 2013, and
from 2010 to 2015 served on the Board of Directors of Ceelite
Technologies, LLC. She was Chief Financial Officer of InfuSystem,
Inc. from 2005 to 2007. From 1993 to 2003, Ms. Enright was with
Citigroup, most recently as a Managing Director in its Equity
Capital Markets group. While at Citigroup, Ms. Enright was
Chairperson of the firm’s Institutional Investors’
Committee, responsible for screening and approving the firm’s
participation in equity underwritings and a member of the Citigroup
Global Equity Commitment Committee, responsible for reviewing and
approving the firm’s underwritings. From 1989 until 1993, Ms.
Enright was an attorney with Wachtell, Lipton, Rosen & Katz in
the firm’s New York office. Ms. Enright received her A.B.
from the Woodrow Wilson School of Public and International Affairs
at Princeton University and J.D. from the University of Chicago Law
School.
Brian
D. Baker was Vice President, Global Operations of Seaspine Holdings
Corporation from July 2015 to January 2018; from March 2015 to July
2015, he was Vice President, Operations of the SeaSpine business
within Integra LifeSciences Corporation. From November 2013 until
March 2015, Mr. Baker was an industry consultant providing mergers
and acquisitions and business process optimization services.
Beginning in 2007, Mr. Baker was with Integra following its
acquisition of Physician Industries, Inc., a company which sold
pain management products and of which Mr. Baker was President and
Chief Executive Officer from 1994 until 2007. At Integra, Mr. Baker
served as President of Integra’s Pain Management division
from May 2007 to September 2011 and as Vice President, Operations
from September 2011 until November 2013. Mr. Baker received a B.A.
in business administration from the University of
Phoenix.
ITEM 7.01
REGULATION FD DISCLOSURE
In accordance with General Instruction B.2. to Form 8-K, the
following information shall not be deemed “filed” for
purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, nor shall it be deemed incorporated by reference in any
filing under the Securities Act of 1933, as amended, except as
shall be expressly set forth by specific reference in such a
filing.
Prior
to market opening on February 21, 2018, the Company issued a press
release announcing the appointment of Erin S. Enright as Chairman
of the Board and Brian D. Baker as President of the newly created
Therapy Products Division. The Company also announced that it had
commenced the search for a new CEO to ultimately replace Kelvyn H.
Cullimore, who will step down on or about the end of the current
fiscal year ending June 30, 2018. Mr. Cullimore will remain as CEO
until his successor is appointed and he will continue as a member
of the Board of Directors. The press release is attached as Exhibit
99.1 to this Current Report on Form 8-K and is incorporated by
reference herein.
ITEM 99.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits.
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Exhibit No.
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Description
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Form of
Separation and Release Agreement By and Between Dynatronics
Corporation and Kelvyn H. Cullimore, Jr., Dated [●],
2018
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Press
Release – February 21, 2018
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SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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DYNATRONICS CORPORATION
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By: /s/ Kelvyn H. Cullimore
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Kelvyn
H. Cullimore, Jr.
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Chief
Executive Officer
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Date:
February 21, 2018