DYNATRONICS
CORPORATION
7030 Park
Centre Drive
Salt Lake
City, Utah 84121
(801)
568-7000
October
14, 2008
Dear
Shareholder:
You are
cordially invited to attend the Annual Meeting of Shareholders of Dynatronics
Corporation that will be held on Tuesday, November 25, 2008 at 4:00 p.m., at the
corporate headquarters located at 7030 Park Centre Drive, Salt Lake City,
Utah.
An
outline of the business to be conducted at the meeting is given in the
accompanying Notice of Annual Meeting and the Proxy Statement. In
addition to the matters to be voted on, there will be a report on our progress
and an opportunity for shareholders to ask questions.
After
reading the Proxy Statement, please mark, date, sign and return at your earliest
convenience the enclosed proxy in the enclosed envelope to ensure that your
shares will be represented. YOUR SHARES CANNOT BE VOTED UNLESS YOU
SIGN, DATE, AND RETURN THE ENCLOSED PROXY OR ATTEND THE ANNUAL MEETING IN
PERSON.
A copy of
Dynatronics Corporation’s Annual Report to Shareholders is also enclosed, but is
not a part of the proxy solicitation materials, except to the extent it is
incorporated by reference therein.
I hope
you will be able to join us. The Board of Directors and management
look forward to seeing you at the meeting.
Sincerely
yours,
/s/
Kelvyn H. Cullimore, Jr.
Kelvyn H.
Cullimore, Jr.
Chairman,
President and CEO
DYNATRONICS
CORPORATION
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
be held November 25, 2008
TO
THE SHAREHOLDERS OF DYNATRONICS CORPORATION:
The Annual Meeting of Shareholders of
Dynatronics Corporation, a Utah corporation (the “Company” or “Dynatronics”),
will be held at the corporate headquarters located at 7030 Park Centre Drive,
Salt Lake City, Utah, on Tuesday, November 25, 2008, at 4:00 p.m. Mountain Time
for the following purposes, all as more fully described in the accompanying
Proxy Statement:
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1.
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To
elect seven directors to hold office until the next Annual Meeting of
Shareholders and thereafter until their respective successors have been
elected or appointed and qualified;
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2.
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To
ratify the appointment of Tanner LC as Dynatronics’ independent registered
public accounting firm for the fiscal year ending June 30, 2009;
and
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3.
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To
transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
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Shareholders of record owning shares of
common stock at the close of business on Tuesday, October 7, 2008, are entitled
to notice of and to vote at this Annual Meeting and any adjournment
thereof.
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BY
ORDER OF THE BOARD OF DIRECTORS
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/s/
Bob Cardon
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Bob
Cardon
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Vice
President of Administration
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and
Secretary/Treasurer
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Salt Lake
City, Utah
October
14, 2008
IMPORTANT
Whether
or not you expect to attend the Annual Meeting, we urge you to complete, date,
sign and return the enclosed proxy without delay in the enclosed envelope so
that your shares are represented at the Annual Meeting. Even if you
have given your proxy, you may still vote in person if you attend the meeting.
Please note, however, that if your shares are held of record by a broker, bank
or other nominee and you wish to vote at the meeting, you must obtain from the
record holder a proxy issued in your name. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
PROXY
STATEMENT
DYNATRONICS
CORPORATION
7030
Park Centre Drive
Salt
Lake City, Utah 84121
We are furnishing this Proxy Statement
to you and other shareholders of Dynatronics Corporation, a Utah corporation
(the “Company” or “Dynatronics”), pursuant to Regulation 14A under the Exchange
Act of 1934 in connection with the solicitation of proxies in the enclosed form
for use in voting at the Annual Meeting of Shareholders and any adjournment
thereof. The Annual Meeting is scheduled to be held at 4:00 p.m.
Mountain Time on Tuesday, November 25, 2008, at the corporate headquarters of
the Company located at 7030 Park Centre Drive, Salt Lake City,
Utah.
Solicitation
of Proxies
The
Company is soliciting the attached proxy on behalf of its Board of Directors
(the “Board of Directors” or “Board”) in connection with the Annual
Meeting. This Proxy Statement, the Notice of Annual Meeting, the
accompanying form of proxy, and the Annual Report to Shareholders were mailed on
or about October 22, 2008, to shareholders of record as of October 7, 2008, who
are entitled to vote at the meeting.
Dynatronics
will pay the cost of preparing and disseminating this information. In
addition to the solicitation of proxies by use of the mails, the directors,
officers and employees of Dynatronics may solicit proxies personally or by
telephone or facsimile or otherwise. Arrangements will be made with
brokerage firms and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of the shares of
common stock held by such persons, and we will reimburse such brokerage firms
and others for their expenses incurred in connection
therewith. Directors, officers, or employees of the Company will not
be additionally compensated for this solicitation but may be reimbursed for
out-of-pocket expenses they incur. The proxy statement will also be
made available on the Company’s website, www.dynatronics.com.
Each
proxy executed and returned by a shareholder may be revoked at any time
thereafter by written notice to the Company’s VP of Administration prior to the
Annual Meeting, by execution of a written proxy bearing a later date, or by
attending the Annual Meeting and voting in person. No such revocation
will be effective, however, with respect to any matter or matters upon which,
prior to such revocation, a vote shall have been cast pursuant to the authority
conferred by such proxy.
Voting
Your shares will be voted as you direct
on your signed proxy card. If you do not specify on your proxy card
how you want to vote your shares, we will vote signed returned
proxies:
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1.
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FOR
the election of the Board’s nominees for directors;
and
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2.
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FOR
ratification of the appointment of Tanner LC as the independent registered
public accountingfirm
of Dynatronics for the fiscal year ending June 30,
2009;
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We do not know of any other business
that may be presented at the meeting. If a proposal other than those
listed in the Notice is presented at the Annual Meeting, your signed proxy card
authorizes the persons named in the proxy to vote your shares on such matters in
their discretion.
Only those holders of our common stock
as of the close of business on October 7, 2008, which we have designated as the
“Record Date,” are entitled to receive notice of and to vote at the Annual
Meeting. At the close of business on the Record Date, there were 13,657,207
shares of the Company’s common stock, no par value, issued and outstanding, each
such share entitled to one vote.
A quorum
of shareholders, present in person or by proxy, consists of the holders of a
majority of the outstanding shares as of the Record Date for purposes of
conducting any business at the Annual Meeting. Abstentions and broker
non-votes will be counted as “represented” for the purpose of determining the
presence or absence of a quorum, but will not be counted for any other
purpose. Under Utah law, once a quorum is established, shareholder
approval with respect to a particular proposal is generally obtained when the
votes cast in favor of the proposal exceed the votes cast against the proposal,
except for the election of Directors which is determined by a simple plurality
of the votes cast.
PROPOSAL
1 - ELECTION OF DIRECTORS
Directors are elected at each Annual
Meeting of the Shareholders and hold office until the next Annual Meeting when
their respective successors are duly elected and qualified. The
persons named as proxies in the enclosed proxy intend to vote for the election
of each of the seven nominees listed below, unless instructions to the contrary
are given in the proxy. The seven nominees have indicated that they
are able and willing to continue to serve as directors. The Board of Directors
has no reason to believe that any nominee named herein will be unable or
unwilling to serve. However, if some unexpected occurrence should require the
substitution of some other person or persons for any one or more of the
nominees, the proxy holders will vote for such nominee or nominees as the Board
of Directors may select. A plurality of votes cast at the Annual
Meeting is required to elect each nominee.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH NOMINEE.
The
nominees are: Kelvyn H. Cullimore Jr., Kelvyn H. Cullimore, Larry K. Beardall,
Howard L. Edwards, Val J. Christensen, Joseph H. Barton and Mark A
Crockett.
Executive
Officers and Directors
The
following table contains information concerning the Company’s directors and
executive officers as of the date of this Proxy Statement:
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Director
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or
Officer
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Position
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Name
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Age
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Since
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with
Company
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Kelvyn
H. Cullimore, Jr.
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52
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1983
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Chairman,
President, and CEO
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Kelvyn
H. Cullimore
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73
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1983
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Vice
Chairman
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Larry
K. Beardall
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52
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1986
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Executive
Vice President of Sales and Marketing and Director
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Howard
L. Edwards**
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77
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1997
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Director
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Val
J. Christensen**
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55
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1999
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Director
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Joseph
H. Barton**
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80
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2004
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Director
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Mark
A. Crockett*
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43
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2008
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Director
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Ronald
J. Hatch
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64
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2002
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Vice
President of R&D
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Terry
M. Atkinson, CPA
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55
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2005
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Chief
Financial Officer
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Robert
J. Cardon
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45
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1992
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Vice
President of Administration, Secretary &
Treasurer
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* Member
of Compensation Committee.
** Member
of Audit and Compensation Committees.
Kelvyn H. Cullimore,
Jr. has been Chairman of the Board of Directors since January 2005 and
the Company’s President and Chief Executive Officer since 1992. He
served as Secretary/Treasurer from 1983 to 1992 and as Administrative Vice
President from 1988 to 1992. He has been a member of the Board of
Directors of the Company and its predecessors since 1979. Mr.
Cullimore graduated cum laude from Brigham Young University in 1980 with a
degree in Financial and Estate Planning. In addition to his
involvement with Dynatronics, Mr. Cullimore served as Executive VP and a
director of Dynatronics’ former parent company. He currently serves
on the Board of Directors of ITEC Attractions, Inc. (ITEC), an entertainment,
restaurant and retail mall operation in Branson, MO. Mr. Cullimore has served
previously on the Boards of a printing company, lumber company, and travel
agency. Mr. Cullimore is a member of the Board of the Medical Device
Manufacturer’s Association, a national medical device trade association
headquartered in Washington D.C. He also serves as the Mayor of
Cottonwood Heights, Utah, a suburb of Salt Lake City, where Dynatronics’
corporate headquarters are located.
Kelvyn H. Cullimore
was elected Vice Chairman in January 2007. Previously, he served as
Chairman of the Board from April 1983 until January 2005. From 1983
to 1992, Mr. Cullimore was President of Dynatronics. Mr. Cullimore
received a B.S. degree in Marketing from Brigham Young University in
1957. Following graduation, he worked for a number of years as a
partner in a family-owned home furnishings business in Oklahoma City,
Oklahoma. Mr. Cullimore has participated in the organization and
management of various enterprises, becoming the president or general partner in
several business entities, including real estate, motion picture, and equipment
partnerships. From 1979 until 1992, Mr. Cullimore served as Chairman of the
Board of American Consolidated Industries, the former parent company of
Dynatronics. From 1986 until 1999, Mr. Cullimore served as President
of ITEC and from 1986 to 1997 he served as ITEC’s Chairman, President and
CEO. Mr. Cullimore has served on the Board of Directors of ITEC since
1986. From January 2005 until October 2007, he took a leave of
absence from Dynatronics to do humanitarian work in Asia. Kelvyn H.
Cullimore is the father of Kelvyn H. Cullimore, Jr. No other family
relationships exist among officers and directors.
Larry K. Beardall was
appointed Executive Vice President of Dynatronics in December
1992. He has been a director and the Vice President of Sales and
Marketing of Dynatronics since July 1986. Mr. Beardall joined
Dynatronics in February of 1986 as Director of Marketing. He
graduated from Brigham Young University with a degree in Finance in
1979. Prior to his employment with Dynatronics, Mr. Beardall worked
with GTE Corporation in Durham, North Carolina as the Manager of Mergers and
Acquisitions and then with Donzis Protective Equipment, a supplier of protective
sports equipment in Houston, Texas, as National Sales Manager. He
also served on the Board of Directors of Nielsen & Nielsen, Inc., the
marketing arm for Donzis.
Howard L. Edwards was
elected a director of the Company in January 1997. From 1968 to 1995,
Mr. Edwards served in various capacities at Atlantic Richfield Company (ARCO)
and its predecessor, the Anaconda Company, including corporate secretary, vice
president, treasurer and general attorney. Prior to 1968, Mr. Edwards
was a partner in the law firm of VanCott, Bagley, Cornwall and McCarthy, in Salt
Lake City, Utah. He graduated from the George Washington University
School of Law in 1959 and received a bachelor’s degree in Finance and Banking
from Brigham Young University in 1955.
Val J. Christensen
joined the Board of Directors of the Company in January 1999. In
2007, Mr. Christensen became the Executive Vice President and General Counsel of
EnergySolutions LLC. He previously served as Executive Vice President
of Franklin Covey Company from 1996 to 2007, where he also was General Counsel
from 1990. He was a member of Franklin’s Board of Directors from 1991
to 1997. Prior to joining Franklin, Mr. Christensen practiced law
with the international law firm of LeBoeuf, Lamb, Leiby & MacRae,
specializing in general business and business litigation
matters. Following graduation from law school in 1980, Mr.
Christensen served as a law clerk to the Honorable James K. Logan of the United
States Tenth Circuit Court of Appeals. He is an honors graduate of
the J. Rueben Clark Law School at Brigham Young University and served as
articles editor of the BYU Law
Review.
Joseph H. Barton was
elected a director in September 2004. He previously served on the
Board of Directors from 1996 to 2002. Mr. Barton received a Civil
Engineering degree from the University of California at Berkeley and has held
various executive positions including President of J.H. Barton Construction
Company, Senior Vice President of Beverly Enterprises, and President of KB
Industries, a building and land development company. Most recently,
Mr. Barton served as Senior Vice President of GranCare, Inc. from 1989 to
1994.
Mark A. Crockett was
appointed to the Board of Directors in July 2008 to fill the vacancy created by
the passing of long-time Board member, Dr. E. Keith Hansen. Since
2005, Mr. Crockett has served as a principal of NightWatch Capital, a mid-sized
value-oriented hedge fund. Since 1999, he served as the director of
client services for Harvest Earnings, an operations improvement consulting firm
for banks and corporations. From 1999 to 2002, Mr. Crockett served as
CEO of Tax One, a chain of tax preparation centers. From 1994 to
1999, he worked with McKinsey & Company and from 1993 to 1994, he worked at
the law firm of Latham & Watkins. Mr. Crockett earned a
bachelor’s degree in economics from Brigham Young University in 1989 and a juris
doctorate degree from Stanford University in 1993.
Ronald J. Hatch has
served as Vice President of Production and R&D since 2002. Prior
to joining Dynatronics in June 2002, Mr. Hatch worked with Lineo, Inc. as a
Senior Project Manager from 1999 to 2002. From 1972 to 1998, he
served in various management responsibilities at Philips Semiconductors –
Signetics. He graduated from Brigham Young University with a degree in
Electronics Engineering Technology in 1970 and received an MBA degree from the
University of Phoenix (in Salt Lake City) in 1991.
Terry M. Atkinson,
CPA was appointed Chief Financial Officer in January 2005. He
previously served as the Company’s controller from 1994 to
2004. Prior to joining the Company, Mr. Atkinson worked as the
controller of Southern American Insurance Company from 1988 to
1994. From 1985 to 1988, he served as the controller at Doxey-Hatch
Medical Center. From 1980 to 1985, Mr. Atkinson worked as a certified
public accountant in public accounting with the accounting firms of Gothard and
Company and Wursten Lewis & Bunker in Salt Lake City. He received
his CPA license in Utah in 1983.
Robert J. Cardon was
appointed Vice President of Administration in March 2007. He has
served as the Company’s Corporate Secretary since 1992 and was named Treasurer
in 2004. From 1992 until 2005, Mr. Cardon also served as
Secretary/Treasurer of ITEC Attractions. From 1987 to 1988, Mr.
Cardon was employed as a registered representative of an investment-banking
firm. He received his BA degree in 1987 and his MBA degree in 1990,
both from Brigham Young University.
Directors hold office until the next
Annual Meeting of Shareholders and until their successors have been elected or
appointed and duly qualified. Executive officers are appointed by the
Board of Directors at the first Board meeting after each Annual Meeting of
Shareholders and hold office until their successors are elected or appointed and
duly qualified. Vacancies on the Board which are created by the
retirement, death, resignation or removal of a director, or by an increase in
the number of Directors, may be filled by the vote of the remaining members of
the Board, with such new director serving the remainder of the term or until his
successor shall be elected and qualify.
Independence
of the Board
The Board
of Directors has determined, after considering all of the relevant facts and
circumstances, that each of Mr. Edwards, Mr. Christensen, Mr. Barton and Mr.
Crockett is independent within the meaning of the applicable Nasdaq Marketplace
Rules. This means that the Board has determined that those directors
(1) are not officers or employees of the Company or its subsidiaries and (2)
have no direct or indirect relationship with the Company that would interfere
with the exercise of their independent judgment in carrying out the
responsibilities of a director. As a result, the Board of Directors has
determined that the Company has a majority of independent directors as required
by the Nasdaq Marketplace Rules.
Committees
of the Board of Directors
The Board
of Directors has two standing committees: the Compensation Committee and the
Audit Committee, each comprised solely of independent directors. The
Board does not have a standing nominating committee or other committee that
recommends qualified candidates to the Board of Directors for nomination or
election as directors. For further information on director
nominations, see “Director Nominations” below.
Compensation
Committee
The
Compensation Committee is responsible for reviewing and approving, where
required, the compensation, as well as evaluating the performance, of our
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. The Compensation
Committee does not have a separate charter. In exercising its
responsibilities, the Compensation Committee establishes and monitors policies
governing the compensation of executive officers, reviews the performance of and
determines salaries and incentive compensation for executive officers, and makes
option awards to those individuals. Additionally, the Compensation Committee
administers our stock plans and reviews and approves the structure of our bonus
plans. The following independent directors are the members of the
Compensation Committee: Val J. Christensen (committee chairman),
Howard L. Edwards, Joseph H. Barton and Mark A. Crockett. The
Compensation Committee held two meetings during the fiscal year ended June 30,
2008.
Audit
Committee
The Audit
Committee, which has been established in accordance with requirements of
Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (the “Exchange
Act”), is comprised of the following independent directors: Howard L. Edwards
(committee chairman), Joseph H. Barton and Val J. Christensen. The Board of
Directors has determined that each member of the Audit Committee (i) is
independent, (ii) meets the financial literacy requirements of the Nasdaq
Marketplace Rules, and (iii) meets the enhanced independence standards
established by the Securities and Exchange Commission (“SEC”) and that Mr.
Edwards qualifies as an “audit committee financial expert” as that term is
defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Exchange
Act by the SEC.
The Audit
Committee is primarily concerned with the integrity of our financial statements,
the independence, qualifications and performance of our independent registered
public accounting firm, and our compliance with legal requirements. The
Audit Committee operates under a written Audit Committee charter approved by the
Board that reflects standards and requirements adopted by the SEC and
Nasdaq. The Audit Committee Charter can be found on our website,
www.dynatronics.com,
in the Company Information, Investor Relations, Company Policies
section. The Audit Committee held four meetings during fiscal
year 2008. According to its charter, the Audit Committee’s duties
include selecting the independent registered public accounting firm; reviewing
the scope of the audit to be conducted by our independent registered public
accounting firm; overseeing our independent registered public accounting firm
and reviewing the results of their audit; reviewing our financial reporting
processes, including the accounting principles and practices followed
and the financial information provided to shareholders and others;
overseeing our internal control over financial reporting and disclosure controls
and procedures; and serving as our legal compliance committee.
Meetings
of the Board of Directors
There
were six regular meetings of the Board of Directors held during the fiscal year
ended June 30, 2008. No director attended fewer than 75% of all
meetings of the Board during the fiscal year and all meetings held by committees
on which such director served.
Although
the Board of Directors does not have a formal policy regarding director
attendance at the Annual Meeting of Shareholders, the Board encourages all
directors and director nominees to attend the Annual Meeting.
Executive
Sessions of Independent Directors
The
independent directors meet in executive session at scheduled times during the
year. Mr. Christensen presides at these meetings as lead independent
director. If Mr. Christensen is unable to participate, another non-management
director designated by the remaining independent directors will preside at these
meetings.
Communications
with the Board of Directors
Shareholders
may communicate directly with the Board of Directors by writing to them at Board
of Directors, c/o Vice President of Administration, Dynatronics Corporation,
7030 Park Centre Drive, Salt Lake City, Utah 84121. The VP of Administration
will forward the communication to the director or directors to whom it is
addressed, except for communications that are (1) advertisements or
promotional communications, (2) solely related to complaints with respect
to ordinary course of business customer service and satisfaction issues or (3)
clearly unrelated to the Company’s business, industry, management or Board or
committee matters.
Code
of Conduct and Ethics
The
Company has established a Code of Business Ethics that applies to its officers,
directors and employees. The Code of Business Ethics contains general guidelines
for conducting the business of the Company consistent with the highest standards
of business ethics, and is intended to qualify as a “code of ethics” within the
meaning of the Exchange Act and as a “code of business conduct and ethics”
within the meaning of the Nasdaq Marketplace Rules.
All of
our directors, officers and employees must act in accordance with our Code of
Business Ethics. Employees and directors are required to report any
conduct that they believe in good faith to be an actual or apparent violation of
the Code of Business Conduct and Ethics. In addition, the Company’s Audit
Committee has established procedures to receive, retain and treat complaints
received regarding accounting, internal accounting controls or auditing matters
and to allow for the confidential and anonymous submission by employees of
concerns regarding questionable accounting or auditing matters.
The Code
of Business Ethics is available on the Company’s website at www.dynatronics.com,
in the Company Information, Investor Relations, Company Policies
section. A copy may also be obtained by writing to the VP of
Administration at Dynatronics Corporation, 7030 Park Centre Drive, Salt Lake
City, Utah 84121.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The
Company rents office and/or warehouse space in Pleasanton, California; Detroit,
Michigan; and Girard, Ohio. These buildings are owned, respectively, by
the Rajala Family Trust, Steve Cyman and Tony Trolio who are the former owners
of three of the dealerships acquired on June 30 and July 2, 2007. As part
of the purchase price for their distribution companies, the Rajala Family Trust,
Steve Cyman and Tony Trolio were paid with shares of Dynatronics stock and are
currently 5% or greater shareholders of the Company. The rental payments
for each facility are comparable to or below market rates for similar
properties.
Except as
described above and in this Proxy Statement under the captions, “Employment
Contracts” and “Salary Continuation Plan,” during the two years ended June 30,
2008 Dynatronics was not a party to any transaction in which any director,
executive officer or shareholder holding more than 5% of the issued and
outstanding common stock had a direct or indirect material
interest.
Director
Nominations
The Board
of Directors does not have a nominating committee or other committee that
recommends qualified candidates to the Board for nomination or election as
directors. The Board of Directors believes that, because of the
Company’s relatively small size, and because of the historically few and
infrequent vacancies on the Board, it is in the best interest of the Company to
permit all of the independent directors to fully participate in the director
nomination process. The Board of Directors has adopted a nominations
process that provides that the Company’s independent directors, acting by a
majority vote, are authorized to recommend individuals as nominees to the Board
of Directors.
The
independent directors are responsible for reviewing and interviewing qualified
candidates to serve on the Board of Directors, for making recommendations to the
full Board for nominations to fill vacancies on the Board and for selecting the
nominees to the Board to be elected by the Company’s shareholders at each Annual
Meeting.
Director
Qualifications
The
independent directors have established certain criteria they consider as
guidelines in considering nominations to the Board of Directors. The criteria
include: (a) personal characteristics, including such matters as integrity, age,
education, diversity of background and experience, absence of potential
conflicts of interest with the Company or its operations, and the availability
and willingness to devote sufficient time to the duties of a director of the
Company; (b) experience in corporate management, such as serving as an officer
or former officer of a publicly held company; (c) experience in the Company’s
industry and with relevant social policy concerns; (d) experience as a Board
member of another publicly-held company; (e) academic expertise in an area of
the Company’s operations; and (f) practical and mature business
judgment. The criteria are not exhaustive and the independent
directors and the full Board of Directors may consider other qualifications and
attributes they believe are appropriate in evaluating the ability of an
individual to serve as a member of the Board of Directors. The
independent directors seek to assemble a Board of Directors that brings to the
Company a variety of perspectives and skills derived from high-quality business
and professional experience.
Identification
and Evaluation of Nominees
The
independent directors may use multiple sources for identifying and evaluating
nominees for directors, including referrals from the Company’s current directors
and management as well as input from third parties, including executive search
firms retained by the Board. The independent directors will obtain
background information about candidates, which may include information from
questionnaires and background and reference checks, and will then interview
qualified candidates. The Company’s other directors will also have an
opportunity to meet and interview qualified candidates. The
independent directors will then determine, based on the background information
and the information obtained in the interviews, whether to recommend to the
Board of Directors that a candidate be nominated to the Board.
Shareholder
Nominations
The
independent directors may from time to time consider qualified nominees
recommended by shareholders, who may submit recommendations to the independent
directors through a written notice as described under “Shareholder Proposals”
below. Nominees for director who are recommended by shareholders will
be evaluated in the same manner as any other nominee for director.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act
requires the executive officers and directors, and persons who own more than 10%
of the Company’s common stock (“Reporting Persons”) to file initial reports of
ownership and to report changes in ownership in reports filed with the
Securities and Exchange Commission. Reporting Persons are required by
regulation of the Securities and Exchange Commission to furnish Dynatronics with
copies of all Section 16(a) forms they file.
Based solely on review of the copies of
such forms furnished to Dynatronics during and with respect to the fiscal year
ended June 30, 2008, Dynatronics believes that during fiscal year 2008 all
Section 16(a) filings applicable to these Reporting Persons were timely
filed.
BENEFICIAL
OWNERSHIP OF SECURITIES
Voting
Securities and Principal Shareholders
The following table contains
information as of October 7, 2008 with respect to beneficial ownership of shares
of our common stock, for (1) all persons known to be holders of more than 5% of
our voting securities; (2) each director, (3) each executive officer named in
the Summary Compensation Table of this Proxy Statement (the “Named Executive
Officers”) holding office on October 7, 2008, and (4) all executive officers and
directors as a group. Unless noted otherwise, Dynatronics believes
each person named below has sole voting and investment power with respect to the
shares indicated. Unless otherwise indicated, the address of the
shareholder is Dynatronics’ principal executive offices, 7030 Park Centre Drive,
Salt Lake City, UT 84121.
Holders
of Greater than 5% of Voting Securities
|
Name of Beneficial
Owner
|
Number of
Shares(1)
|
Percent of
Class
|
|
|
|
|
|
John
Rajala
|
1,306,453 (2)
|
9.6%
|
|
12
Red Maple Place
|
|
|
|
Danville,
CA 94506
|
|
|
|
|
|
|
|
Donald
G. Whittington
|
840,000
|
6.2%
|
|
3707
Spring Hill Lane
|
|
|
|
Sugarland,
TX 77479
|
|
|
|
|
|
|
|
Stephen
Cyman
|
750,000
|
5.5%
|
|
50760
Metzen Dr.
|
|
|
|
Chesterfield,
MI 48051
|
|
|
|
|
|
|
|
Anthony
Trolio
|
700,000
|
5.1%
|
|
445
Fifth Ave
|
|
|
|
Hubbard,
OH 44425
|
|
|
|
(1)
|
Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission. Included in the computation of the number
of shares beneficially owned by a person and the percentage ownership of
that person are shares of common stock subject to options, warrants, or
other convertible instruments held by that person that are exercisable or
that become exercisable within 60 days of October 7, 2008. Such
shares, however, are not deemed outstanding for purposes of computing the
percentage ownership of any other
person.
|
|
(2)
|
Includes
12,097 shares owned directly, 96,775 shares owned by Mr. Rajala’s wife and
1,197,581 shares owned by a family
trust.
|
Security
Ownership of Management
|
Name of Beneficial
Owner
|
Number of
Shares(1)
|
Percent of
Class
|
|
|
|
|
|
|
|
Directors
|
|
|
|
|
|
|
|
|
|
|
|
Kelvyn
H. Cullimore, Jr.
|
644,780
|
|
(2) |
4.7%
|
|
Kelvyn
H. Cullimore
|
189,104
|
|
(3) |
1.4%
|
|
Larry
K. Beardall
|
240,588
|
|
(4) |
1.8%
|
|
Howard
L. Edwards
|
102,110
|
|
(5) |
*
|
|
Joseph
H. Barton
|
56,110
|
|
(6) |
*
|
|
Val
J. Christensen
|
47,110
|
|
(7) |
*
|
|
Mark
A. Crockett
|
15,000
|
|
(8) |
*
|
|
|
|
|
|
|
|
Other
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
J. Hatch
|
58,000
|
|
(9) |
*
|
|
Terry
M. Atkinson
|
50,000
|
|
(10) |
*
|
|
|
|
|
|
|
|
All
executive officers and
|
|
|
|
|
|
directors
as a group (10 persons)
|
1,097,302
|
|
|
10.6%
|
|
*
|
Represents
less than one percent of the outstanding shares of common stock including
shares issuable to such beneficial owner under options which are presently
exercisable or will become exercisable within 60
days.
|
|
(1)
|
Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission. Included in the computation of the number
of shares beneficially owned by a person and the percentage ownership of
that person are shares of common stock subject to options, warrants, or
other convertible instruments held by that person that are exercisable or
that become exercisable within 60 days of October 7, 2008. Such
shares, however, are not deemed outstanding for purposes of computing the
percentage ownership of any other
person.
|
|
(2)
|
Includes
481,780 shares owned directly, 93,000 shares owned by Mr. Cullimore Jr.’s
wife and daughter, and options for the purchase of 70,000
shares.
|
|
(3)
|
Includes
126,191 shares owned directly, 2,913 shares owned by Mr. Cullimore’s wife,
30,000 shares owned by a family corporation and options for the purchase
of 30,000 shares.
|
|
(4)
|
Includes
175,588 shares owned directly and options for the purchase of 65,000
shares.
|
|
(5)
|
Includes
75,110 shares owned directly and options for the purchase of 27,000
shares.
|
|
(6)
|
Includes
26,110 shares owned directly and options for the purchase of 30,000
shares.
|
|
(7)
|
Includes
23,110 shares owned directly and options for the purchase of 24,000
shares.
|
|
(8)
|
Includes
options for the purchase of 15,000
shares.
|
|
(9)
|
Includes
10,000 shares owned directly and options for the purchase of 48,000
shares.
|
|
(10)
|
Includes
10,000 shares owned directly and options for the purchase of 40,000
shares.
|
Litigation
Matters
There are no material legal proceedings
to which any director or executive officer is a party adverse to
Dynatronics.
COMPENSATION
OF DIRECTORS AND EXECUTIVE OFFICERS
Director
Compensation
Directors who are employed by and
receive remuneration as officers of the Company, are paid $100 per meeting for
attendance at regular and special meetings of the Board. Non-employee,
non-executive directors are paid an annual fee of $14,000. In
addition, independent directors receive $1,000 annually for participating on
each Board committee and receive $2,000 in restricted stock
awards. The chairman of the Audit Committee receives an additional
$2,000 for serving as the Committee Chairman and financial
expert. Dynatronics pays all expenses incurred by directors in
connection with their attendance at Board and committee meetings.
The following table summarizes the
compensation paid during the fiscal year ended June 30, 2008, to directors of
the Company other than those directors who are also Named Executive Officers
whose compensation is included in the Summary Compensation Table elsewhere in
this Proxy Statement.
2008
DIRECTOR COMPENSATION
|
Name
|
Fees
Earned or Paid in Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation
($)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
($)
|
All
Other Compensation
($)
|
Total
($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
|
E.
Keith Hansen*
|
$15,000
|
$2,000
|
0
|
0
|
0
|
0
|
$17,000
|
|
Howard
L. Edwards
|
$18,000
|
$2,000
|
0
|
0
|
0
|
0
|
$20,000
|
|
Val
J. Christensen
|
$16,000
|
$2,000
|
0
|
0
|
0
|
0
|
$18,000
|
|
Joseph
H. Barton
|
$16,000
|
$2,000
|
0
|
0
|
0
|
0
|
$18,000
|
* Dr.
Hansen died in 2008.
During the year ended June 30, 2008,
Dynatronics made no awards to executive officers or directors under any
long-term incentive plan. Dynatronics has never granted stock
appreciation rights.
Executive
Compensation
Compensation
Discussion and Analysis
The Compensation Committee oversees our
executive compensation program and reviews all compensation decisions relating
to our executive officers. The Compensation Committee evaluates both performance
and compensation to ensure that we are able to attract and retain the best
possible employees in key positions and that the compensation provided to key
employees remains competitive with the compensation provided to employees of our
peer group comprised of companies of comparable revenue and market
capitalization in the diversified high technology market. The
following is a discussion of the Company’s compensation program for compensation
of its named executive officers and directors.
Compensation
Program Objectives
Executive
compensation is determined by several factors. The following are the
main objectives of the executive compensation program of the Company as
determined by the Compensation Committee:
- Retention
of qualified officers.
|
|
-
|
Providing
overall corporate direction for the officers and also to provide direction
that is specific to officer’s respective areas of
authority. The level of compensation amongst the officer group,
in relation to one another, is also considered in order to maintain a high
level of satisfaction within the leadership group. We consider the
relationship that the officers maintain to be one of the most important
elements of the leadership group.
|
- Providing
a performance incentive for the officers.
The
compensation program is designed to reward the officers in the following
areas:
- Achievement
of specific goals
|
|
-
|
Creativity
in the form of innovative ideas and analysis for new programs and
projects
|
- New
program implementation
- Attainment
of Company goals, budgets, and objectives
- Results-oriented
determination and organization
- Positive
and supportive direction for company personnel
The
Compensation Committee determines the portion of compensation allocated to each
element for each individual executive officer. The discussions of
compensation practices and policies are of historical practices and
policies. Our Board of Directors and the Compensation Committee
expect to continue these policies and practices, but will reevaluate the
practices and policies as they consider advisable.
The principal elements of the Company’s
executive compensation program include:
- Base
salary
- Performance
bonus
- Stock
options and stock awards
- Employee
benefits in the form of:
health and dental
insurance
life insurance
- Other
benefits including use of company automobile and cell phone
Base
salary
Base
salary is intended to provide competitive compensation for job performance and
to attract and retain qualified named executive officers. The base
salary level is determined by considering several factors inherent in the market
place such as: the size of the company; the prevailing salary levels for the
particular office or position; prevailing salary levels in a given geographic
locale; and the qualifications and experience of the executive officer. In
determining the salary of the executive officers, the Compensation Committee
considered the comparable salary levels provided by various published executive
compensation survey reports for the medical device industry.
Performance
bonus
Bonuses
are based on company performance. A percentage formula based on the
Company’s pre-tax profit is used in determining the performance bonus for the
executive officers. In 2008, due to the pre-tax loss generated for the
year, no performance bonuses were paid. However, a bonus was paid to
company officers for the successful completion of the six acquisitions made at
the beginning of the fiscal year. (See column (d) of the Summary
Compensation Table on page 12, below.)
Stock
options and stock awards
Stock
ownership is provided to enable executive officers to participate in the success
of the Company. The direct or potential ownership of stock is
expected to provide the incentive to expand the involvement of the executive
officer to include, and therefore be mindful of, the perspective of shareholders
of the Company.
Employee
benefits
Employee
benefits for the executive officers are selected to provide
security. Most notably, insurance coverage for health, life, and
disability are intended to provide a level of protection that will enable the
executive officers to function without having the distraction of having to
manage undue risk. The health insurance also provides access to
preventative medical care which will help the executive officers function at a
high energy level, manage job related stress, and contribute to the overall well
being of the executive officers, all of which contribute to an enhanced job
performance.
Other
benefits
Other
employee benefits such as cell phones and auto usage are directly related
to job functions but contain a personal use element which is considered to be a
goodwill gesture that contributes to enhanced job performance.
As
discussed above, the Compensation Committee determines the portion of
compensation allocated to each element for each individual executive
officer. As a general rule, base salary is competitively based while
giving consideration to employee retention, qualifications, performance, and
general market conditions. Typically, stock options are based on the
current market value of the underlying common shares and how that will
contribute to the overall compensation of the executive
officer. Consideration is also given to the fact that the option has
the potential for an appreciated future value. As such this future
value may in fact be the most significant factor of the option, but it is also
more difficult to quantify as a benefit to the executive officer.
Accordingly,
in determining the compensation program for the Company, as well as setting the
compensation for each executive officer, the Compensation Committee attempts to
attract the interest of the executive officer within the constraints of a
compensation package that is fair and equitable to all parties
involved.
Compensation
Committee Report
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis with our management. Based on this review and discussion, the
Compensation Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this Proxy
Statement.
|
|
Respectfully
submitted,
|
|
|
|
|
|
Val
J. Christensen, Chairman
|
|
|
Howard
L. Edwards
|
|
|
Joseph
H. Barton
|
|
|
Mark
A. Crockett
|
Summary
of Executive Compensation
The following table summarizes
information concerning the compensation of the Company’s Chief Executive Officer
and the Company’s two most highly compensated executive officers other than the
CEO (collectively the “Named Executive Officers”) for the last two completed
fiscal years:
SUMMARY
COMPENSATION TABLE
|
Name
and Principal Position
|
Year
Ending
June
30,
|
Salary
($)
|
Bonus
($)
(Note
1)
|
Stock
Award
($)
|
Option
Grants
($)
|
Non-Equity
Incentive Plan Compen-sation
($)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
($)
|
All
Other Compen-sation ($)
(Note
2)
|
Total
($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
Kelvyn
H. Cullimore,
Jr.,
Chairman
and President
|
2008
2007
|
$175,000
$154,000
|
$20,000
$ 9,904
|
0
|
0
|
0
0
|
$11,695
$10,994
|
$25,512
$29,649
|
$232,207
$204,547
|
|
Larry
K Beardall,
Executive
Vice President
|
2008
2007
|
$160,000
$143,000
|
$15,000
$ 9,904
|
0
0
|
0
0
|
0
0
|
$11,695
$10,994
|
$21,445
$23,566
|
$208,140
$187,464
|
|
Kelvyn
H. Cullimore,
Vice
Chairman
|
2008
2007
|
$135,000
$
96,000
|
0
0
|
0
0
|
0
0
|
0
0
|
0
0
|
$14,124
$ 4,443
|
$149,124
$100,443
|
|
(1)
|
Bonus
in 2008 represents one-time bonus amounts paid to recognize the
executive’s assistance and contribution toward completion of six
acquisitions.
|
|
(2)
|
For
each of the individuals listed in the table above, “All Other
Compensation” includes but is not limited to perquisites including the
dollar value of insurance premiums paid with respect to health and dental
insurance, and life insurance for the benefit of the Named Executive
Officer, use of company paid automobile, and cellular
phone.
|
Employment
Contracts
The Company believes it is in the best
interests of the Company to secure the services of key executives and that it is
appropriate to provide these executives with protection should their employment
with Dynatronics be terminated under certain
circumstances. Therefore, Dynatronics has entered into written
employment contracts with Kelvyn H. Cullimore, Jr., its Chairman, President and
Chief Executive Officer, and Larry K. Beardall, its Executive Vice
President. The initial terms of these contracts run through June 30,
2009. Additional contract extensions would extend each contract
automatically for one-year terms unless terminated at the end of any renewal
period with at least 60 days prior written notice. These agreements
have been approved by the Compensation Committee of the Board of
Directors. The compensation package under each contract includes a
salary, an auto allowance, an annual bonus based on pre-tax operating profit (at
rates established by the Compensation Committee), and stock and/or stock options
granted under the Company’s 2005 Equity Incentive Plan and the 1992 Stock Option
Plan, as amended and restated. Each of these officers also
participates in the salary continuation plan described below and receives other
welfare and employee benefits that are standard in such agreements, including,
by way of example, health insurance and disability coverage, paid vacation and
Company-paid life insurance. The contracts also contain a provision
granting the executives certain rights and protections in the event of a change
in control.
As defined in the employment contracts,
a “change of control” will occur in transactions such as an acquisition of the
Company through a purchase of its shares or assets or by merger in which any
person is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities representing fifty percent
(50%) or more of the combined voting power of the Company's then outstanding
voting securities; or the composition of the Board of Directors of the Company
is changed such that the former members of such Board cease to constitute at
least a majority of the Board; or the shareholders of the Company approve an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
If a change of control occurs and the
employment of the executive is terminated voluntarily within six months of the
change in control or involuntarily within 12 months thereof, the executive is to
be paid an amount in cash equal to (1) one and one-half times the executive’s
annual base salary (as defined in the agreement) in effect at the time of such
termination, and (2) one and one-half times the average annual bonus paid by the
Company to the executive over the previous three complete fiscal
years. Fifty percent of the amount payable under the agreement is to
be paid within thirty days after termination and the balance is to be paid
ratably over the subsequent six months. In addition, the Company will
continue to provide and fund all other employee benefits for the executive for
18 months following termination. All stock options, warrants and
other similar rights granted by the Company to the executive prior to
termination will immediately and entirely vest and will be immediately delivered
to the executive without restriction or limitation of any kind (except for
normal transfer restrictions required by law). The agreement also
provides that the Company will pay the executive an amount equal to the cash
surrender value, if any, of certain life insurance policies provided for the
benefit of the executive under the agreement during his employment by the
Company for the purpose of funding the Company's obligations under the salary
continuation agreement and that the Company will transfer to the executive
title, free and clear of all encumbrances, to either (i) the Company-owned
vehicle used by the executive at the time of termination, or (ii) a vehicle of
substantially similar market value.
The employment contracts terminate upon
the death or disability of the executive or termination of employment for
cause. The contracts also contain covenants against competition by
the executives during the term of their employment and for a specified period
after the termination of their employment for any reason.
Salary
Continuation Plan
During fiscal year 1988, the Board of
Directors adopted a salary continuation agreement. Presently Kelvyn
H. Cullimore, Jr. and Larry K. Beardall are covered by this plan. The agreement
provides for a pre-retirement benefit to be paid to the officer’s designated
beneficiary in the event he dies before reaching age 65 and a retirement benefit
to be paid upon reaching age 65. The pre-retirement benefit provides
for payment of 50% of the officer’s annual compensation at the time of death up
to $75,000 annually for a period of 15 years, or until the officer would have
reached age 65, whichever is longer. The retirement benefit provides
the officer $75,000 annually for a period of 15 years.
Funding for obligations arising in
connection with the salary continuation agreement is provided by life insurance
policies on the lives of the participating officers. The Company is the owner
and beneficiary of these policies. The face amounts of the policies
have been determined so that sufficient cash values and death benefits under the
policies will meet the obligations as they occur. In fiscal year
2008, Dynatronics expensed $23,390 relating to salary continuation obligations
under the salary continuation agreement.
401(k)
Plan
Dynatronics has adopted a 401(k) Plan.
Employees who are 20 years of age or older and have completed at least six
months of service with the Company are eligible to participate in the 401(k)
Plan.
Eligible employees may make
contributions to the 401(k) Plan in the form of salary deferrals of up to 20% of
total compensation, not to exceed $15,500, the maximum allowable amount of
salary deferrals for calendar year 2008. Dynatronics matches annual
employee contributions at 25% of employee contributions, up to a maximum of $500
per employee per year.
Participants under the 401(k) Plan are
fully vested in their salary deferral contributions and vest 20% per year after
two years of participation in matching contributions by the
Company. Amounts deferred by Named Executive Officers under the
401(k) Plan, along with the 25% matching contributions made by the Company, are
included under “Other Compensation” in the Summary Compensation
Table.
Equity
Compensation
The
following table summarizes the equity compensation of the Named Executive
Officers as of June 30, 2008:
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
Option
Awards
|
Stock
Awards
|
|
Name
|
Number
of Securities Underlying Unexercised Options (#) Exercisable
|
Number
of Securities Under-lying Unexer-cised Options
(#)
Unexer-cisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
|
Option
Exercise Price ($)
|
Option
Expir-ation Date
|
Number
of Shares or Units of Stock That Have Not Vested (#)
|
Market
Value of Shares or Units of Stock That Have Not Vested ($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights
That Have Not Vested
(#)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units,
or Other Rights That Have Not Vested
($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
Kelvyn
H. Cullimore, Jr.
|
40,000
30,000
|
0
|
0
|
$1.72
$1.42
|
5/24/15
11/22/15
|
0
|
0
|
0
|
0
|
|
Larry
K Beardall
|
40,000
25,000
|
0
|
0
|
$1.72
$1.42
|
5/24/15
11/22/15
|
0
|
0
|
0
|
0
|
|
Kelvyn
H. Cullimore
|
30,000
|
0
|
0
|
$1.42
|
11/22/15
|
0
|
0
|
0
|
0
|
Equity
Compensation Plans
The Company has two equity compensation
plans including the Amended and Restated 1992 Stock Option Plan (the “1992
Plan”) and the 2005 Equity Incentive Plan (“2005 Plan”). Both plans
were approved by shareholders. Nonstatutory and statutory options and
other awards have been granted to employees, officers, directors and consultants
of the Company under these plans. The Compensation Committee of the
Board of Directors administers both plans. As of June 30, 2008,
options for the purchase of 1,101,603 shares are exercisable and outstanding
under these plans.
With the adoption of the 2005 Plan, the
Board of Directors determined that no further awards would be granted under the
1992 Plan. As of June 30, 2008, a total of 908,180 shares were available for
issuance under options or awards yet to be granted under the 2005
Plan. During fiscal year 2008, each of the four independent directors
received 1,941 shares of restricted common stock under the 2005
Plan.
The following table sets forth
information as of June 30, 2008, with respect to shares of common stock to be
issued upon the exercise, and the weighted-average exercise price, of all
outstanding options and rights granted under our equity compensation plans, as
well as the number of shares available for future issuance under those
plans.
Equity
Compensation Plans In Effect
| Plan Category
(1) |
|
Number of
Securities to be
Issued upon Exercise
of
Outstanding Options,
Warrants and Rights
|
|
Weighted-Average
Exercise Price of
Outstanding
Options,
Warrantsy and
Rights
|
|
Number of
Securities
Remaining Available
for
Future Issuance
Under
Equity Compensation
Plans
|
| |
|
|
|
|
|
|
|
2005
Equity Incentive Plan
and 1992 Stock Option Plan
|
|
1,101,603
|
|
$1.41
|
|
908,180
|
Stock
Options Exercised
The following table contains certain
information, including the fiscal year-end value of unexercised stock options,
held by the Named Executive Officers as of June 30, 2008.
|
Aggregated
Option Exercises in Last Fiscal Year
|
|
And
Fiscal Year-End Option Values
|
| |
|
Name
|
|
Shares
Acquired
on
Exercise (#)
|
|
Value
Realized
($)
|
|
Number
of Securities
Underlying
Unexercised
Options
At 6/30/2008
(#)
Exercisable /
Unexercisable
|
|
Value
of Unexercised
In-the-Money
Options
/
SARs At 6/30/2008
($)
Exercisable / Unexercisable (1)
|
|
Kelvyn
H. Cullimore, Jr.
|
100,000
|
|
$-
|
|
70,000
/ 0
|
|
$0
/ 0
|
|
|
|
|
|
|
|
|
|
|
|
Larry
K. Beardall
|
|
100,000
|
|
$-
|
|
65,000
/ 0
|
|
$0
/ 0
|
| |
|
|
|
|
|
|
|
|
|
Kelvyn
H. Cullimore
|
-
|
|
$-
|
|
30,000
/ 0
|
|
$0
/ 0
|
|
(1)
|
The
closing price of the common stock on June 30, 2008, the last trading date
in the Company’s fiscal year, as reported by NASDAQ, was $.70 per
share. The price of the options exercised in the table above
was $.78 per share. Thus, no value was realized from the
exercise of the options above. Value is based on the fair
market value of the common stock on June 30, 2008. The exercise
prices for the unexercised options listed above range between $1.42 and
$1.72 per share, thus, none of these options are
in-the-money.
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PROPOSAL
2 - RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Audit Committee has selected the
firm Tanner LC to serve as the Company’s independent registered public
accounting firm for the fiscal year ending June 30, 2009. The shareholders have
been asked to ratify this appointment. If the shareholders fail to ratify the
selection, the Audit Committee may reconsider its decision. Even if the
selection is ratified, the Audit Committee, in its discretion, may direct the
appointment of a different independent accounting firm at any time during the
year if the Audit Committee feels that such a change would be in the Company’s
and its shareholders’ best interests.
Representatives of Tanner LC will be
present at the Annual Meeting, will have the opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate
questions.
Financial
Information Systems Design and Implementation Fees
The
Company did not engage Tanner LC to provide any professional services in
connection with (i) operating or supervising the operation of its information
system or managing its local area network or (ii) designing or implementing a
hardware or software system that aggregates source data underlying the financial
statements or generates information that is significant to the Company’s
financial statements taken as a whole.
Auditor
Fees
The
aggregate fees billed by Tanner LC for professional services rendered in fiscal
year 2008 and fiscal year 2007 in connection with (i) the audit of the Company’s
annual financial statements set forth in its Annual Report on Form 10-KSB for
the fiscal years ended June 30, 2008 and June 30, 2007 and (ii) the review of
the Company’s quarterly financial statements set forth in its Quarterly Reports
on Form 10-QSB for each of its fiscal quarters, totaled approximately $127,000
and $109,000, respectively.
All
Other Fees
The
Company, with the approval of the Audit Committee, engaged Tanner LC to provide
accounting advice related to six acquisitions the Company made on June 30, 2007
and July 2, 2007, attend audit committee meetings and review the annual proxy
statement. Fees for these services totaled approximately $9,000 and
$10,000 for the fiscal years ended June 30, 2008 and 2007,
respectively.
The Audit
Committee has advised the Company that it has determined that the non-audit
services rendered by Tanner LC during its most recent fiscal year are compatible
with maintaining their independence.
Audit
Committee Policy Regarding Pre-Approval of Audit and Permissible Non-Audit
Services of the Company’s Independent Auditors
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 Company’s independent registered public
accountants. 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 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.
Report
of the Audit Committee
The Audit
Committee has prepared this report of its activities for the year ended June 30,
2008. This report shall not be deemed incorporated by reference by
any general statement incorporating this Proxy Statement into any other filing
under the Securities Act or under the Exchange Act, except to the extent
Dynatronics specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such statutes.
The Audit
Committee is composed entirely of independent directors, and operates under a
written charter adopted by the Board of Directors. The Audit
Committee assists the Board of Directors in fulfilling its responsibility to
shareholders, potential shareholders and the investment community relating to
accounting and financial reporting practices.
The Audit Committee meets with
management periodically to consider the adequacy of the Company's internal
controls and the objectivity of its financial reporting. The Audit
Committee discusses these matters with the independent auditors and with
appropriate financial personnel.
As
needed, the Audit Committee meets privately with both the independent registered
public accountants and the appropriate financial personnel, each of whom has
unrestricted access to the members of the Audit Committee. The Audit
Committee also selects and appoints the independent registered public
accountants and reviews periodically the auditors’ performance and independence
from management as well as the fees paid to the independent registered public
accountants for services provided to the Company.
All
members of the Audit Committee are "independent" for purposes of Rule
4200(a)(15) of The National Association of Securities Dealers’ listing standards
and applicable Marketplace Rules. That is, the Board of Directors has determined
that none of the members of the Audit Committee has a relationship to
Dynatronics that may interfere with his independence from Dynatronics and its
management.
Management
has primary responsibility for the Company's financial statements and the
overall reporting process, including the Company's system of internal
controls. The independent registered public accounting firm audits
the annual financial statements prepared by management, expresses an opinion as
to whether those financial statements fairly present the financial position,
results of operations and cash flows of Dynatronics in conformity with
accounting principles generally accepted in the United States of America and
discusses with us any issues they believe should be raised with the
Committee.
For the
fiscal year ended June 30, 2008, the Audit Committee reviewed the audited
financial statements and met with both management and Tanner LC, the independent
registered public accounting firm for fiscal year 2008, to discuss those
financial statements. Management has represented to us that the financial
statements were prepared in conformity with accounting principles generally accepted in
the United States of America.
In
discharging the Committee’s oversight responsibility for the audit process, we
have discussed with Tanner LC the matters required to be discussed by Auditing
Standards No. 61, as amended (Communications with Audit Committees), as adopted
by the Public Company Accounting Oversight Board (“AS 61”). AS 61
requires the Company’s independent registered public accounting firm to provide
the Committee with additional information regarding the scope and results of
their audit of the Company’s financial statements, including with respect to (i)
their responsibilities under generally accepted auditing standards, (ii)
significant accounting policies, (iii) management judgments and estimates, (iv)
any significant accounting adjustments, (v) any disagreements with management
and (vi) any difficulties encountered in performing the audit.
The
Committee has obtained from Tanner LC a letter providing the disclosures
required by Independence Standards Board Standard No. 1 (Independence Discussion
with Audit Committees) with respect to any relationship between Tanner LC and
the Company which in its professional judgment may reasonably be thought to bear
on independence. Tanner LC discussed its independence with the
Committee, and has confirmed in its letter to the Committee that, in its
professional judgment, it is independent of the Company within the meaning of
the United States securities laws.
Based on these reviews and discussions,
we recommended to the Board of Directors that Dynatronics’ audited consolidated
financial statements be included in the Company's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 2008.
During the Company’s fiscal years ended
June 30, 2008 and 2007, there were no disagreements between the Company and its
independent registered public accounting firm on any accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which,
if not resolved to the satisfaction of the independent accountants, would have
caused them to make reference to the subject matter of the disagreement in
connection with its report. None of the “reportable events”
described in Item 304(a)(1)(iv) of Regulation S-K have occurred during the
fiscal years ended June 30, 2008 and June 30, 2007, except for the material
weakness described under item 8A of our 10KSB for the year ended June
30,2008.
We did not consult with any independent
registered public accountants not formally engaged by the Company during fiscal
years ended June 30, 2008 or 2007, on any matter which was the subject of any
disagreement or any reportable event or on the application of accounting
principles to a specified transaction, either completed or
proposed.
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Presented
by the members of the Audit Committee:
|
|
|
|
|
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Howard
L. Edwards, Chairman
|
|
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Val
J. Christensen
|
|
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Joseph
H. Barton
|
THE
BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” PROPOSAL #2
RATIFYING
THE SELECTION OF TANNER LC AS AUDITORS
FOR
DYNATRONICS FOR THE FISCAL YEAR ENDING JUNE 30, 2009.
OTHER
MATTERS
The Board of Directors knows of no
other matters to be presented at the Annual Meeting. If, however, any
further business should properly come before the Annual Meeting, the persons
named as proxies in the accompanying form will vote on such business in
accordance with their best judgment.
SHAREHOLDER
PROPOSALS
Regulations adopted by the Securities
and Exchange Commission require that shareholder proposals must be furnished to
Dynatronics a reasonable time in advance of the meeting at which the action is
proposed to be taken. Shareholder proposals intended to be presented at next
year’s 2009 Annual Meeting of the Shareholders must be received by Dynatronics
at its corporate headquarters on or before June 25, 2009, in order to be
included in the Proxy Statement and Form of Proxy relating to that
meeting. Receipt of a shareholder proposal does not necessarily
guarantee that the proposal will be included in the proxy. If a
shareholder intends to propose any matter for a vote at the Annual Meeting of
Shareholders to be held in 2009, but fails to notify Dynatronics of such
intention prior to the date indicated above, then a proxy solicited by the Board
of Directors may be voted on such matter in the discretion of the proxy holder,
without discussion of the matter in the proxy statement soliciting such proxy
and without such matter appearing as a separate item on the proxy
card.
ADDITIONAL
INFORMATION
Dynatronics will provide, without
charge, to each shareholder to whom this Proxy Statement is delivered, upon
written or oral request, a copy of the Company’s annual report on Form 10-KSB
for the year ended June 30, 2008, including the financial statements, as filed
with the Securities and Exchange Commission. The requested document
will be sent by first class mail or other equally prompt
means. Written or oral requests for such information should be
directed to Mr. Bob Cardon, Vice President of Administration, Dynatronics
Corporation, 7030 Park Centre Drive, Salt Lake City, UT 84121.
|
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DYNATRONICS
CORPORATION
|
|
|
|
By
order of the Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Bob Cardon
|
|
|
|
Bob
Cardon
|
|
|
|
Vice
President of Administration
|
|
|
|
and
Secretary/Treasurer
|
|