DYNATRONICS CORPORATION (NASDAQ:DYNT) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement
In connection with and upon consummation of its acquisition of
substantially all of the assets of Hausmann Industries, Inc.
(“HII”) on April 3, 2017 (the “Acquisition”) as described in
Item 2.01, below, Dynatronics Corporation (the “Company”)
entered into a Loan and Security Agreement (the “Loan
Agreement”) with Bank of the West (“Bank”) on March 31, 2017,
to provide asset-based financing to the Company to be used for
funding the Acquisition and for operating capital. Amounts
available under the Loan Agreement will be subject to a borrowing
base calculation of up to a maximum availability of $8,000,000
and will bear interest at LIBOR plus 2.25%. We paid a commitment
fee of .25% and the line is subject to an unused line fee of
.25%. The maturity date is two years from the date of the note.
substantially all of the assets of Hausmann Industries, Inc.
(“HII”) on April 3, 2017 (the “Acquisition”) as described in
Item 2.01, below, Dynatronics Corporation (the “Company”)
entered into a Loan and Security Agreement (the “Loan
Agreement”) with Bank of the West (“Bank”) on March 31, 2017,
to provide asset-based financing to the Company to be used for
funding the Acquisition and for operating capital. Amounts
available under the Loan Agreement will be subject to a borrowing
base calculation of up to a maximum availability of $8,000,000
and will bear interest at LIBOR plus 2.25%. We paid a commitment
fee of .25% and the line is subject to an unused line fee of
.25%. The maturity date is two years from the date of the note.
The Loan Agreement provides for revolving credit borrowings by
the Company in an amount up to the lesser of $8,000,000 and a
borrowing base. The borrowing base is computed monthly and is
equal to the sum of stated percentages of eligible accounts
receivable and inventory, less a reserve.
the Company in an amount up to the lesser of $8,000,000 and a
borrowing base. The borrowing base is computed monthly and is
equal to the sum of stated percentages of eligible accounts
receivable and inventory, less a reserve.
The obligations of the Company under the Loan Agreement are
required to be guaranteed by each of its subsidiaries, and are
(and the guaranty obligations of any such subsidiary guarantors
are required to be) secured by a first-priority security interest
in substantially all of the assets of the Company and any such
subsidiary guarantors, as applicable (including, without
limitation, accounts receivable, equipment, inventory and other
goods, intellectual property, contract rights and other general
intangibles, cash, deposit accounts, equity interests in
subsidiaries and joint ventures, investment property, documents
and instruments, real property, and proceeds of the foregoing).
required to be guaranteed by each of its subsidiaries, and are
(and the guaranty obligations of any such subsidiary guarantors
are required to be) secured by a first-priority security interest
in substantially all of the assets of the Company and any such
subsidiary guarantors, as applicable (including, without
limitation, accounts receivable, equipment, inventory and other
goods, intellectual property, contract rights and other general
intangibles, cash, deposit accounts, equity interests in
subsidiaries and joint ventures, investment property, documents
and instruments, real property, and proceeds of the foregoing).
The Loan Agreement contains affirmative and negative covenants,
including covenants that restrict the ability of the Company and
its subsidiaries to, among other things, incur or guarantee
indebtedness, incur liens, dispose of assets, engage in mergers
and consolidations, make acquisitions or other investments, make
changes in the nature of its business, and engage in transactions
with affiliates. The Loan Agreement also contains financial
covenants applicable to the Company and its subsidiaries,
including a maximum monthly consolidated leverage ratio through
May 2018 of 7.0 to 1.0 and from June 2018 and thereafter, of 6.0
to 1.0; a minimum monthly consolidated fixed charge coverage
ratio beginning April 2017 and on the last day of each month
thereafter of not less than 1.10 to 1.0; and limitation of excess
availability to not less than 20% of the borrowing base.
including covenants that restrict the ability of the Company and
its subsidiaries to, among other things, incur or guarantee
indebtedness, incur liens, dispose of assets, engage in mergers
and consolidations, make acquisitions or other investments, make
changes in the nature of its business, and engage in transactions
with affiliates. The Loan Agreement also contains financial
covenants applicable to the Company and its subsidiaries,
including a maximum monthly consolidated leverage ratio through
May 2018 of 7.0 to 1.0 and from June 2018 and thereafter, of 6.0
to 1.0; a minimum monthly consolidated fixed charge coverage
ratio beginning April 2017 and on the last day of each month
thereafter of not less than 1.10 to 1.0; and limitation of excess
availability to not less than 20% of the borrowing base.
The Bank is entitled to accelerate repayment of the loans and to
terminate its revolving credit commitment under the Loan
Agreement upon the occurrence of any of various customary events
of default, which include, among other events, the following
(which are subject, in some cases, to certain grace periods):
failure to pay when due any principal, interest or other amounts
in respect of the loans, breach of any of the Company’s
covenants or representations under the loan documents, default
under any other of the Company’s or its subsidiaries’
significant indebtedness agreements, a bankruptcy, insolvency or
similar event with respect to the Company or any of its
subsidiaries, a significant unsatisfied judgment against the
Company or any of its subsidiaries, or a change of control of the
Company.
terminate its revolving credit commitment under the Loan
Agreement upon the occurrence of any of various customary events
of default, which include, among other events, the following
(which are subject, in some cases, to certain grace periods):
failure to pay when due any principal, interest or other amounts
in respect of the loans, breach of any of the Company’s
covenants or representations under the loan documents, default
under any other of the Company’s or its subsidiaries’
significant indebtedness agreements, a bankruptcy, insolvency or
similar event with respect to the Company or any of its
subsidiaries, a significant unsatisfied judgment against the
Company or any of its subsidiaries, or a change of control of the
Company.
The foregoing description of the Loan Agreement does not purport
to be complete and is subject to and qualified in its entirety by
the full text of the Loan Agreement which is filed as Exhibit
10.1 hereto and incorporated by reference herein.
to be complete and is subject to and qualified in its entirety by
the full text of the Loan Agreement which is filed as Exhibit
10.1 hereto and incorporated by reference herein.
Item 1.02 Termination of a Material Definitive Agreement.
In connection with the Company’s entry into the asset lending
facility with the Bank, as described above in Item 1.01 of this
Current Report on Form 8-K, on March 31, 2017, the Company
terminated its existing credit agreement with Access Business
Finance LLC (the “Existing Credit Agreement”). At the time of
termination, the Company paid the total outstanding loan balance
of $15,000, which included the full balance of principal,
interest and legal fees in connection with the Existing Credit
Agreement.
facility with the Bank, as described above in Item 1.01 of this
Current Report on Form 8-K, on March 31, 2017, the Company
terminated its existing credit agreement with Access Business
Finance LLC (the “Existing Credit Agreement”). At the time of
termination, the Company paid the total outstanding loan balance
of $15,000, which included the full balance of principal,
interest and legal fees in connection with the Existing Credit
Agreement.
Item 2.01 Completion of Acquisition or Disposition of Assets
Acquisition of Hausmann Industries, Inc.
On April 3, 2017, the Company closed the purchase of
substantially all of the assets of Hausmann Industries, Inc., a
New Jersey corporation (“HII”), for $10.0 million in cash,
subject to adjustment, as provided in an Asset Purchase Agreement
dated March 21, 2017 (the “Asset Purchase Agreement”). The
Acquisition was effected through Hausmann Enterprises, LLC, a
newly formed Utah limited liability company, wholly owned by the
Company (the “Acquisition Subsidiary”).
substantially all of the assets of Hausmann Industries, Inc., a
New Jersey corporation (“HII”), for $10.0 million in cash,
subject to adjustment, as provided in an Asset Purchase Agreement
dated March 21, 2017 (the “Asset Purchase Agreement”). The
Acquisition was effected through Hausmann Enterprises, LLC, a
newly formed Utah limited liability company, wholly owned by the
Company (the “Acquisition Subsidiary”).
Financing for the Acquisition was provided by proceeds from a
private placement of the Company’s equity securities as
described in Item 3.02 of this Current Report (the “Private
Placement”) and borrowings under the Loan Agreement described in
Item 1.01, above. Closing of the Private Placement and the
lending facility occurred concurrently with the consummation of
the Acquisition.
private placement of the Company’s equity securities as
described in Item 3.02 of this Current Report (the “Private
Placement”) and borrowings under the Loan Agreement described in
Item 1.01, above. Closing of the Private Placement and the
lending facility occurred concurrently with the consummation of
the Acquisition.
In connection with the Acquisition, the Acquisition Subsidiary
entered into an agreement with HII to lease the 60,000
square-foot manufacturing and office facility in Northvale, New
Jersey (the “Facility”) effective as of the closing date (the
“Lease”) with an initial two-year term, with annual lease
payments of $360,000 for the first year, and 2% increases in
each subsequent year. The Lease grants the Acquisition
Subsidiary two options to extend the term of the lease for two
years per extension term, subject to annual 2% per year
increases in base rent, and a third option at the end of the
second option term for an additional five-years at fair market
value.
entered into an agreement with HII to lease the 60,000
square-foot manufacturing and office facility in Northvale, New
Jersey (the “Facility”) effective as of the closing date (the
“Lease”) with an initial two-year term, with annual lease
payments of $360,000 for the first year, and 2% increases in
each subsequent year. The Lease grants the Acquisition
Subsidiary two options to extend the term of the lease for two
years per extension term, subject to annual 2% per year
increases in base rent, and a third option at the end of the
second option term for an additional five-years at fair market
value.
At the closing of the Acquisition, the Company paid HII $9.0
million of the $10.0 million purchase price. A holdback of $1.0
million will be retained for purposes of satisfying adjustments
to the purchase price as may be required by the Asset Purchase
Agreement and indemnification claims, if any. Subject to
adjustments or claims as provided by the Asset Purchase
Agreement, 25% of the holdback amount will be released to HII
on January 1, 2018, and the balance of the remaining holdback
amount will be released to HII 18 months after closing. As part
of the Acquisition transaction, we will pay and discharge
certain liabilities and obligations of HII related to its
ongoing business (primarily trade accounts and similar
obligations in the ordinary course).
million of the $10.0 million purchase price. A holdback of $1.0
million will be retained for purposes of satisfying adjustments
to the purchase price as may be required by the Asset Purchase
Agreement and indemnification claims, if any. Subject to
adjustments or claims as provided by the Asset Purchase
Agreement, 25% of the holdback amount will be released to HII
on January 1, 2018, and the balance of the remaining holdback
amount will be released to HII 18 months after closing. As part
of the Acquisition transaction, we will pay and discharge
certain liabilities and obligations of HII related to its
ongoing business (primarily trade accounts and similar
obligations in the ordinary course).
Employees of HII were offered employment with Dynatronics at
closing. In addition, David Hausmann entered into an employment
agreement with the Company (the “Employment Agreement”) and
will assist in the transition of the acquired business,
reporting to Kelvyn Cullimore, CEO of Dynatronics. Mr.
Hausmann’s annual salary is $150,000 and we will pay him an
annual bonus in an amount between $25,000 and $35,000 as
determined by Mr. Cullimore, and provide him with other
employee benefits provided to our employees generally at his
level of management at the Acquisition Subsidiary (including,
e.g., paid time off and paid holidays, medical/dental/vision
insurance, Section 125 Flexible Spending Account (FSA), and
401(k)). In addition to the restrictive covenants applicable to
him under the Asset Purchase Agreement described in the next
paragraph below, as a condition of his employment, Mr. Hausmann
executed a confidentiality and non-compete agreement, which
limits his ability to be employed by a competitor of, or
otherwise to compete with, Dynatronics for a one-year period
following the later of (i) termination of employment, and (ii)
the latest date upon which Dynatronics makes any severance
payment to Mr. Hausmann.
closing. In addition, David Hausmann entered into an employment
agreement with the Company (the “Employment Agreement”) and
will assist in the transition of the acquired business,
reporting to Kelvyn Cullimore, CEO of Dynatronics. Mr.
Hausmann’s annual salary is $150,000 and we will pay him an
annual bonus in an amount between $25,000 and $35,000 as
determined by Mr. Cullimore, and provide him with other
employee benefits provided to our employees generally at his
level of management at the Acquisition Subsidiary (including,
e.g., paid time off and paid holidays, medical/dental/vision
insurance, Section 125 Flexible Spending Account (FSA), and
401(k)). In addition to the restrictive covenants applicable to
him under the Asset Purchase Agreement described in the next
paragraph below, as a condition of his employment, Mr. Hausmann
executed a confidentiality and non-compete agreement, which
limits his ability to be employed by a competitor of, or
otherwise to compete with, Dynatronics for a one-year period
following the later of (i) termination of employment, and (ii)
the latest date upon which Dynatronics makes any severance
payment to Mr. Hausmann.
The Asset Purchase Agreement contains customary
representations, warranties and covenants by HII and the
Company, as well as customary indemnification provisions among
the parties. Post-closing covenants include a covenant that for
a period of five years (the “Restrictive Period”), HII and
its stockholders (including Mr. Hausmann) will refrain from
solicitation of employees, customers and business of HII or the
Company and from other competitive activity as defined in the
Asset Purchase Agreement, and requires them and their
representatives (as defined in the Asset Purchase Agreement) to
maintain (other than in connection with performing obligations
to the Lease or the Employment Agreement, as applicable), the
confidentiality of, and not use, confidential information
relating to the acquired business or purchased assets, except
as permitted by the Asset Purchase Agreement.
representations, warranties and covenants by HII and the
Company, as well as customary indemnification provisions among
the parties. Post-closing covenants include a covenant that for
a period of five years (the “Restrictive Period”), HII and
its stockholders (including Mr. Hausmann) will refrain from
solicitation of employees, customers and business of HII or the
Company and from other competitive activity as defined in the
Asset Purchase Agreement, and requires them and their
representatives (as defined in the Asset Purchase Agreement) to
maintain (other than in connection with performing obligations
to the Lease or the Employment Agreement, as applicable), the
confidentiality of, and not use, confidential information
relating to the acquired business or purchased assets, except
as permitted by the Asset Purchase Agreement.
The foregoing description of the Asset Purchase Agreement does
not purport to be complete and is subject to, and qualified in
its entirety by, the full text of the Asset Purchase Agreement,
a copy of which was filed as Exhibit 10.1 to the Company’s
Current Report on Form 8-K on March 22, 2017 and is
incorporated herein by reference.
not purport to be complete and is subject to, and qualified in
its entirety by, the full text of the Asset Purchase Agreement,
a copy of which was filed as Exhibit 10.1 to the Company’s
Current Report on Form 8-K on March 22, 2017 and is
incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an
Obligation under an Off- Balance Sheet Arrangement of a
Registrant.
Obligation under an Off- Balance Sheet Arrangement of a
Registrant.
The information contained in Item 1.01 of this
Current Report on Form 8-K is incorporated by reference herein
and made a part hereof.
Current Report on Form 8-K is incorporated by reference herein
and made a part hereof.
Item 3.02 Unregistered Sales of Equity Securities.
In connection with the Acquisition, on April 3, 2017, we closed
on the sale of equity securities for gross proceeds of
$7,795,000 (the “Private Placement”) to the terms of a
Securities Purchase Agreement dated March 21, 2017 (the
“Securities Purchase Agreement”) entered into with certain
accredited investors, including institutional investors (the
“Investors”). In the Private Placement, we sold 1,559,000
Units at $5.00 per Unit, each Unit made up of one share of our
common stock, no par value per share (“Common Stock”) at
$2.50 per share, one share of Series B Convertible Preferred
Stock, no par value per share (“Series B Preferred Stock”) at
$2.50 per share, and a warrant to purchase 1.5 shares of Common
Stock, exercisable at $2.75 per share for six years.
on the sale of equity securities for gross proceeds of
$7,795,000 (the “Private Placement”) to the terms of a
Securities Purchase Agreement dated March 21, 2017 (the
“Securities Purchase Agreement”) entered into with certain
accredited investors, including institutional investors (the
“Investors”). In the Private Placement, we sold 1,559,000
Units at $5.00 per Unit, each Unit made up of one share of our
common stock, no par value per share (“Common Stock”) at
$2.50 per share, one share of Series B Convertible Preferred
Stock, no par value per share (“Series B Preferred Stock”) at
$2.50 per share, and a warrant to purchase 1.5 shares of Common
Stock, exercisable at $2.75 per share for six years.
The Units and their component and underlying securities were
offered and will be issued in reliance upon exemptions from the
registration requirements of the Securities Act of 1933, as
amended (the “Securities Act”), including Section 4(a)(2) of
the Securities Act and Regulation D promulgated thereunder,
relating to sales by an issuer not involving any public
offering, and in reliance on similar exemptions under
applicable state laws. Each Investor represented that it is an
accredited investor and that it is acquiring the securities for
investment purposes only and not with a view to any resale,
distribution or other disposition of such securities in
violation of the United States federal securities laws.
Securities issued in the Private Placement are “restricted
securities” under the Securities Act and may not be
transferred, sold or otherwise disposed of unless they are
subsequently registered or an exemption is available under the
Securities Act. Neither this Current Report on Form 8-K, nor
the exhibits attached hereto, is an offer to sell or the
solicitation of an offer to buy the securities described
herein.
offered and will be issued in reliance upon exemptions from the
registration requirements of the Securities Act of 1933, as
amended (the “Securities Act”), including Section 4(a)(2) of
the Securities Act and Regulation D promulgated thereunder,
relating to sales by an issuer not involving any public
offering, and in reliance on similar exemptions under
applicable state laws. Each Investor represented that it is an
accredited investor and that it is acquiring the securities for
investment purposes only and not with a view to any resale,
distribution or other disposition of such securities in
violation of the United States federal securities laws.
Securities issued in the Private Placement are “restricted
securities” under the Securities Act and may not be
transferred, sold or otherwise disposed of unless they are
subsequently registered or an exemption is available under the
Securities Act. Neither this Current Report on Form 8-K, nor
the exhibits attached hereto, is an offer to sell or the
solicitation of an offer to buy the securities described
herein.
Certain of our officers and directors and significant
shareholders, as well as Mr. Hausmann and members of his
family, invested in the Private Placement. Certain of the
Investors in the Private Placement are deemed to be insiders
(officers, directors, employees or consultants of the
Company) under applicable rules of The NASDAQ Stock Market
(“NASDAQ”). In addition, certain Investors entered into
agreements with the Company in connection with the offering
to defer receipt of the securities purchased in the Private
Placement. to the terms of the Securities Purchase Agreement,
until we have obtained Shareholder Approval, we will not
issue any shares of Common Stock as part of the Units or
otherwise in an amount that exceeds 19.9% of the issued and
outstanding shares of Common Stock of the Company. In
addition, until we have obtained Shareholder Approval, we
will not issue any shares of Common Stock to any insider or
to any Investor who has agreed to defer the issuance of such
Investor’s Common Stock. Consequently, at the closing of the
Private Placement we issued a total of 600,000 shares of
Common Stock to two Investors, which represents approximately
19.7% of our issued and outstanding Common Stock.
shareholders, as well as Mr. Hausmann and members of his
family, invested in the Private Placement. Certain of the
Investors in the Private Placement are deemed to be insiders
(officers, directors, employees or consultants of the
Company) under applicable rules of The NASDAQ Stock Market
(“NASDAQ”). In addition, certain Investors entered into
agreements with the Company in connection with the offering
to defer receipt of the securities purchased in the Private
Placement. to the terms of the Securities Purchase Agreement,
until we have obtained Shareholder Approval, we will not
issue any shares of Common Stock as part of the Units or
otherwise in an amount that exceeds 19.9% of the issued and
outstanding shares of Common Stock of the Company. In
addition, until we have obtained Shareholder Approval, we
will not issue any shares of Common Stock to any insider or
to any Investor who has agreed to defer the issuance of such
Investor’s Common Stock. Consequently, at the closing of the
Private Placement we issued a total of 600,000 shares of
Common Stock to two Investors, which represents approximately
19.7% of our issued and outstanding Common Stock.
Our Common Stock is currently listed on The NASDAQ Capital
Market and we are subject to NASDAQ rules governing listing
requirements and corporate governance of companies with
securities listed on NASDAQ (collectively, the “NASDAQ
Listing Rules”). to the terms of both the Asset Purchase
Agreement and the Securities Purchase Agreement, we have
covenanted to obtain approval of our shareholders
(“Shareholder Approval”) as may be required by the NASDAQ
Listing Rules to issue the shares of Common Stock included in
the Units and underlying the conversion, payment of dividends
and redemption of the Series B Preferred, and execution of
the Warrants, as follows:
Market and we are subject to NASDAQ rules governing listing
requirements and corporate governance of companies with
securities listed on NASDAQ (collectively, the “NASDAQ
Listing Rules”). to the terms of both the Asset Purchase
Agreement and the Securities Purchase Agreement, we have
covenanted to obtain approval of our shareholders
(“Shareholder Approval”) as may be required by the NASDAQ
Listing Rules to issue the shares of Common Stock included in
the Units and underlying the conversion, payment of dividends
and redemption of the Series B Preferred, and execution of
the Warrants, as follows:
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NASDAQ Listing Rule 5635(a), which requires shareholder
approval prior to the issuance of securities in connection with an acquisition of the stock or assets of another company where the total number of shares of common stock to be issued is or will be equal to or in excess of 20% of the total number of shares of common stock outstanding before the issuance of the stock or securities; |
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NASDAQ Listing Rule 5635(b), which requires prior
shareholder approval for issuances of securities that could result in a “change of control” of the issuer – NASDAQ may deem a change of control to occur when, as a result of an issuance, an Investor or a group would own, or have the right to acquire, 20% or more of the outstanding shares of Common Stock or voting power, and such ownership or voting power of an issuer would be the largest ownership position of the issuer; |
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NASDAQ Rule 5635(c), requiring shareholder approval
when common stock may be issued to “insiders” (directors, officers, employees or consultants) of the issuer in transactions at prices less than market value, which includes sales deemed to be “equity compensation” paid to insiders, as well as the issuance of common stock at less than market prices in payment of dividends or for redemption of other securities or payment of debt; and |
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NASDAQ Rule 5635(d), which requires shareholder
approval prior to the issuance of common stock in connection with certain non-public offerings involving the sale, issuance or potential issuance of common stock (and/or securities convertible into or exercisable for common stock) equal to 20% or more of common stock outstanding before the issuance. |
We intend to hold a meeting of shareholders for the purpose
of obtaining Shareholder Approval as described above. Certain
key shareholders of the Company (officers, directors and
certain shareholders) holding in the aggregate approximately
35% of our voting securities have entered into voting
agreements with the Company and the Investors to vote all
voting securities of the Company over which such persons have
voting control as of the record date for such meeting of
shareholders, in favor of the Shareholder Approvals described
above.
of obtaining Shareholder Approval as described above. Certain
key shareholders of the Company (officers, directors and
certain shareholders) holding in the aggregate approximately
35% of our voting securities have entered into voting
agreements with the Company and the Investors to vote all
voting securities of the Company over which such persons have
voting control as of the record date for such meeting of
shareholders, in favor of the Shareholder Approvals described
above.
The Warrants included in the Units may not be exercised until
we have obtained Shareholder Approval. The Warrants have an
exercise price of $2.75 per share of Common Stock and are
exercisable for a term of six years from the date of
issuance. At the election of the holder of the Warrant, the
holder may be restricted from the exercise of the Warrant or
any portion of the Warrant held by such holder, to the extent
that, after giving effect to the conversion, such holder
(together with such holder’s affiliates, and any persons
acting as a group together with such holder or any of such
holder’s affiliates) would beneficially own in excess of
4.99% (or 9.99%, as such holder may elect) of the number of
shares of the Common Stock outstanding immediately after
giving effect to the exercise.
we have obtained Shareholder Approval. The Warrants have an
exercise price of $2.75 per share of Common Stock and are
exercisable for a term of six years from the date of
issuance. At the election of the holder of the Warrant, the
holder may be restricted from the exercise of the Warrant or
any portion of the Warrant held by such holder, to the extent
that, after giving effect to the conversion, such holder
(together with such holder’s affiliates, and any persons
acting as a group together with such holder or any of such
holder’s affiliates) would beneficially own in excess of
4.99% (or 9.99%, as such holder may elect) of the number of
shares of the Common Stock outstanding immediately after
giving effect to the exercise.
Ladenburg Thalmann Co. Inc. (“Ladenburg”) acted as
placement agent in connection with the Private Placement
and we will pay Ladenburg fees for its services for
introducing Investors to the Company, in accordance with
applicable FINRA rules and regulations. No compensation,
fees, or discounts will be paid or given to any other
person in connection with the offer and sale of the
securities.
placement agent in connection with the Private Placement
and we will pay Ladenburg fees for its services for
introducing Investors to the Company, in accordance with
applicable FINRA rules and regulations. No compensation,
fees, or discounts will be paid or given to any other
person in connection with the offer and sale of the
securities.
In connection with the closing of the Private Placement,
the Company and the Investors entered into a Registration
Rights Agreement, obligating us to file a registration
statement with the SEC to register all shares of Common
Stock issuable as part of the Units, as well as all shares
of Common Stock underlying conversion of the Series B
Preferred Stock or payment of Series B Dividends or
issuable upon exercise of the Warrants, within 45 days of
the closing.
the Company and the Investors entered into a Registration
Rights Agreement, obligating us to file a registration
statement with the SEC to register all shares of Common
Stock issuable as part of the Units, as well as all shares
of Common Stock underlying conversion of the Series B
Preferred Stock or payment of Series B Dividends or
issuable upon exercise of the Warrants, within 45 days of
the closing.
The foregoing descriptions of the Securities Purchase
Agreement and the related transaction documents, including
the Registration Rights Agreement, Voting Agreement, and
Warrant, do not purport to be complete and are subject to,
and are qualified in their entirety by, the full text of
the Securities Purchase Agreement, Registration Rights
Agreement, Voting Agreement, and Warrant, as the case may
be, filed as Exhibits 10.3, 10.4, 9.1, and 4.2,
respectively, to the Company’s Current Report on Form 8-K
on March 22, 2017, and incorporated herein by reference.
Agreement and the related transaction documents, including
the Registration Rights Agreement, Voting Agreement, and
Warrant, do not purport to be complete and are subject to,
and are qualified in their entirety by, the full text of
the Securities Purchase Agreement, Registration Rights
Agreement, Voting Agreement, and Warrant, as the case may
be, filed as Exhibits 10.3, 10.4, 9.1, and 4.2,
respectively, to the Company’s Current Report on Form 8-K
on March 22, 2017, and incorporated herein by reference.
Item 3.03 Material Modification to Rights of Security
Holders.
Holders.
The information regarding limitations and restrictive
covenants under the Loan Agreement contained in Item 2.03,
above, and the description of the preferences of the Series
B Preferred Stock contained in Item 5.03, below, are hereby
incorporated by reference.
covenants under the Loan Agreement contained in Item 2.03,
above, and the description of the preferences of the Series
B Preferred Stock contained in Item 5.03, below, are hereby
incorporated by reference.
Possible Effects on Rights of Existing Stockholders
Existing shareholders will suffer dilution in ownership
interests and voting rights as a result of the issuance of
the Units, including the Common Stock and Series B
Preferred Stock contained in the Units, and the Dividend
Shares (as defined below), and may suffer additional
dilution upon the issuance of shares of our Common Stock
upon the conversion of the Series B Preferred Stock or the
exercise of the Warrants. The Series B Preferred Stock will
be senior to our Common Stock with respect to dividends and
liquidation preferences, the holders of Series B Preferred
Stock will vote with the holders of Common Stock in any
vote on an adjusted, as-converted basis, and the holders
thereof will be entitled to 8.0% cumulative annual
dividends, which may be paid in shares of Common Stock at
the option of the Company. The sale into the public market
of these shares also could materially and adversely affect
the market price of our Common Stock
interests and voting rights as a result of the issuance of
the Units, including the Common Stock and Series B
Preferred Stock contained in the Units, and the Dividend
Shares (as defined below), and may suffer additional
dilution upon the issuance of shares of our Common Stock
upon the conversion of the Series B Preferred Stock or the
exercise of the Warrants. The Series B Preferred Stock will
be senior to our Common Stock with respect to dividends and
liquidation preferences, the holders of Series B Preferred
Stock will vote with the holders of Common Stock in any
vote on an adjusted, as-converted basis, and the holders
thereof will be entitled to 8.0% cumulative annual
dividends, which may be paid in shares of Common Stock at
the option of the Company. The sale into the public market
of these shares also could materially and adversely affect
the market price of our Common Stock
Item 5.03 Amendments to Articles of Incorporation or
Bylaws, Change in Fiscal Year.
Bylaws, Change in Fiscal Year.
On March 29, 2017, the Company filed a Certificate of
Designations, Rights and Preferences of Series B
Convertible Preferred Stock (“Certificate of
Designation”) with the State of Utah Division of
Corporations and Commercial Code (the “Utah Division”).
Designations, Rights and Preferences of Series B
Convertible Preferred Stock (“Certificate of
Designation”) with the State of Utah Division of
Corporations and Commercial Code (the “Utah Division”).
The following is a summary of the terms of the Series B
Preferred Stock under the Certificate of Designation filed
with the Utah Division. A copy of the Certificate of
Designation as filed with the Utah Division is included as
an Exhibit with this Current Report and incorporated herein
by this reference; we encourage you to read the Certificate
of Designation thoroughly. The following summary is
qualified by the terms contained in the Certificate of
Designation.
Preferred Stock under the Certificate of Designation filed
with the Utah Division. A copy of the Certificate of
Designation as filed with the Utah Division is included as
an Exhibit with this Current Report and incorporated herein
by this reference; we encourage you to read the Certificate
of Designation thoroughly. The following summary is
qualified by the terms contained in the Certificate of
Designation.
Voting. The Series B Preferred Stock votes on an
as-converted basis, subject to the Beneficial Ownership
Limitation, described below, one vote for each share of
Common Stock issuable upon conversion of such Series B
Preferred Stock held by such holder that exceeds the
quotient of (x) the aggregate purchase price paid by such
holder of Series B Preferred Stock for its Series B
Preferred Stock, divided by (y) the greater of (i) $2.50
and (ii) the closing bid price of the Common Stock on the
trading day immediately prior to the date of issuance of
such holder’s Series B Preferred Stock. However, until
such time as Shareholder Approval is obtained, the Series B
Preferred Stock will not be convertible into shares of
Common Stock and therefore will not have voting rights.
as-converted basis, subject to the Beneficial Ownership
Limitation, described below, one vote for each share of
Common Stock issuable upon conversion of such Series B
Preferred Stock held by such holder that exceeds the
quotient of (x) the aggregate purchase price paid by such
holder of Series B Preferred Stock for its Series B
Preferred Stock, divided by (y) the greater of (i) $2.50
and (ii) the closing bid price of the Common Stock on the
trading day immediately prior to the date of issuance of
such holder’s Series B Preferred Stock. However, until
such time as Shareholder Approval is obtained, the Series B
Preferred Stock will not be convertible into shares of
Common Stock and therefore will not have voting rights.
Certain Amendments and Changes. Without the consent of
holders of at least a majority of the then outstanding
shares of Series B Preferred Stock, the Company may not:
(i) alter or change adversely the powers, preferences or
rights given to the Series B Preferred Stock or alter or
amend the Certificate of Designation, (ii) authorize or
create any class of stock ranking as to dividends,
redemption or distribution of assets upon a liquidation
senior to, or otherwise pari passu with, the
Series B Preferred Stock, (iii) amend the Articles of
Incorporation in any manner that adversely affects any
rights of the holders of the Series B Preferred Stock, or
(iv) enter into any agreement with respect to any of the
foregoing. In addition, without the consent of all of the
holders of the Series B Preferred Stock, the number of
authorized shares of Series B Preferred Stock may not be
increased.
holders of at least a majority of the then outstanding
shares of Series B Preferred Stock, the Company may not:
(i) alter or change adversely the powers, preferences or
rights given to the Series B Preferred Stock or alter or
amend the Certificate of Designation, (ii) authorize or
create any class of stock ranking as to dividends,
redemption or distribution of assets upon a liquidation
senior to, or otherwise pari passu with, the
Series B Preferred Stock, (iii) amend the Articles of
Incorporation in any manner that adversely affects any
rights of the holders of the Series B Preferred Stock, or
(iv) enter into any agreement with respect to any of the
foregoing. In addition, without the consent of all of the
holders of the Series B Preferred Stock, the number of
authorized shares of Series B Preferred Stock may not be
increased.
Dividends. Prior to conversion, each share of Series B
Preferred Stock carries an annual dividend at a rate of 8%
of $2.50, plus all accrued but unpaid dividends thereon
(“Series B Dividends”). Series B Dividends may be paid at
the discretion of the Company in cash or in shares of
Common Stock, subject to Shareholder Approval. If the Board
of Directors declares a dividend payable upon the Common
Stock, whether in cash, in kind or in other securities or
property, the holders of the outstanding shares of Series B
Preferred Stock are entitled to the amount of dividends
that would be payable in respect of the number of shares of
Common Stock into which the shares of Series B Preferred
Stock could be converted.
Preferred Stock carries an annual dividend at a rate of 8%
of $2.50, plus all accrued but unpaid dividends thereon
(“Series B Dividends”). Series B Dividends may be paid at
the discretion of the Company in cash or in shares of
Common Stock, subject to Shareholder Approval. If the Board
of Directors declares a dividend payable upon the Common
Stock, whether in cash, in kind or in other securities or
property, the holders of the outstanding shares of Series B
Preferred Stock are entitled to the amount of dividends
that would be payable in respect of the number of shares of
Common Stock into which the shares of Series B Preferred
Stock could be converted.
Liquidation. The Series B Preferred Stock ranks senior to
the Common Stock with respect to distributions upon our
deemed dissolution, liquidation or winding-up, and has a
per share liquidation preference equal to $2.50 plus all
accrued but unpaid dividends thereon.
the Common Stock with respect to distributions upon our
deemed dissolution, liquidation or winding-up, and has a
per share liquidation preference equal to $2.50 plus all
accrued but unpaid dividends thereon.
Conversion. Each share of Series B Preferred Stock is
convertible into Common Stock at a conversion price of
$2.50 per share, subject to the Beneficial Ownership
Limitation, described below; but not until such time as
Shareholder Approval is received.
convertible into Common Stock at a conversion price of
$2.50 per share, subject to the Beneficial Ownership
Limitation, described below; but not until such time as
Shareholder Approval is received.
Beneficial Ownership Limitation. Unless an Investor
elects at the time of issuance that it shall not apply,
the Certificate of Designation provides that the Company
shall not effect any conversion of such holder’s shares
of Series B Preferred Stock, and such holder shall not
have the right to convert any portion of the Series B
Preferred Stock, to the extent that, after giving effect
to the conversion of the holder’s Series B Preferred
Stock such holder (together with such holder’s
affiliates, and any persons acting as a group together
with such holder or any of such holder’s affiliates)
would beneficially own in excess of 4.99% of the number
of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common
Stock issuable upon conversion of shares of Series B
Preferred Stock held by the applicable holder (the
“Beneficial Ownership Limitation”). A holder, upon
prior notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions applicable to
its shares of Series B Preferred Stock, provided that the
Beneficial Ownership Limitation in no event exceeds 9.99%
of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares
of Common Stock upon conversion of the shares of Series B
Preferred Stock held by the holder.
elects at the time of issuance that it shall not apply,
the Certificate of Designation provides that the Company
shall not effect any conversion of such holder’s shares
of Series B Preferred Stock, and such holder shall not
have the right to convert any portion of the Series B
Preferred Stock, to the extent that, after giving effect
to the conversion of the holder’s Series B Preferred
Stock such holder (together with such holder’s
affiliates, and any persons acting as a group together
with such holder or any of such holder’s affiliates)
would beneficially own in excess of 4.99% of the number
of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common
Stock issuable upon conversion of shares of Series B
Preferred Stock held by the applicable holder (the
“Beneficial Ownership Limitation”). A holder, upon
prior notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions applicable to
its shares of Series B Preferred Stock, provided that the
Beneficial Ownership Limitation in no event exceeds 9.99%
of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares
of Common Stock upon conversion of the shares of Series B
Preferred Stock held by the holder.
Forced Conversion. The Company has the right to convert
one-half of the then outstanding Series B Preferred Stock
into Common Stock on a 1:1 basis if all of the following
conditions have been met: (1) the Common Stock has a
daily volume weighted average price (“VWAP”) as defined
in the Certificate of Designation of at least $7.50 per
share on each of the 40 trading days prior to the date in
question; (2) the daily trading volume for the prior 90
trading days exceeds 30,000 shares; and (3) the Company
is listed in good compliance on the NASDAQ (or another
national exchange) at the time of conversion, and certain
other conditions have been met. The Company will have the
right to convert the remaining outstanding Series B
Preferred Stock into Common Stock on a 1:1 basis if all
of the following conditions have been met: (1) the Common
Stock has a VWAP price of at least $10.00 per share on
each of the 40 trading days prior to the date in
question; (2) the daily trading volume for the prior 90
trading days exceeds 50,000 shares; and (3) the Company
is listed in good compliance on the NASDAQ (or another
national exchange) at the time of conversion and certain
other conditions have been met.
one-half of the then outstanding Series B Preferred Stock
into Common Stock on a 1:1 basis if all of the following
conditions have been met: (1) the Common Stock has a
daily volume weighted average price (“VWAP”) as defined
in the Certificate of Designation of at least $7.50 per
share on each of the 40 trading days prior to the date in
question; (2) the daily trading volume for the prior 90
trading days exceeds 30,000 shares; and (3) the Company
is listed in good compliance on the NASDAQ (or another
national exchange) at the time of conversion, and certain
other conditions have been met. The Company will have the
right to convert the remaining outstanding Series B
Preferred Stock into Common Stock on a 1:1 basis if all
of the following conditions have been met: (1) the Common
Stock has a VWAP price of at least $10.00 per share on
each of the 40 trading days prior to the date in
question; (2) the daily trading volume for the prior 90
trading days exceeds 50,000 shares; and (3) the Company
is listed in good compliance on the NASDAQ (or another
national exchange) at the time of conversion and certain
other conditions have been met.
Item 7.01. Regulation FD Disclosure.
Updated Disclosure to Investors
In connection with the closing of the Private Placement,
the Company provided the Investors a copy of the audited
financial statements of HII as of and for the years ended
December 31, 2016 and 2015 (the “HII Audits”). A copy
of the HII Audits is furnished with this Current Report
as Exhibit 99.1. In connection with the closing of the
Acquisition, the Company issued a press release on April
4, 2017. A copy of the press release is furnished with
this Current Report as Exhibit 99.2.
the Company provided the Investors a copy of the audited
financial statements of HII as of and for the years ended
December 31, 2016 and 2015 (the “HII Audits”). A copy
of the HII Audits is furnished with this Current Report
as Exhibit 99.1. In connection with the closing of the
Acquisition, the Company issued a press release on April
4, 2017. A copy of the press release is furnished with
this Current Report as Exhibit 99.2.
Cautionary Statement Regarding Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking
statements that involve risks and uncertainties. These
statements relate to future periods, future events or our
future operating or financial performance. All statements
other than statements of historical fact, including
statements identified by words such as “may,” “will,”
“could,” “expect,” “anticipate,” “continue,”
“plan,” “intend,” “estimate,” “project,”
“believe” and similar expressions or variations, are
forward-looking statements. Forward-looking statements
include but are not limited to statements regarding our
strategy, future operations, financial condition, results
of operations, projected costs, and plans and objectives
of management. Actual results may differ materially from
those contemplated by the forward-looking statements due
to, among others, the risks and uncertainties described
in our reports and filings with the Securities and
Exchange Commission. We undertake no obligation to update
any forward-looking statement or statements to reflect
events or circumstances that occur after the date on
which the statement is made or to reflect the occurrence
of unanticipated events.
statements that involve risks and uncertainties. These
statements relate to future periods, future events or our
future operating or financial performance. All statements
other than statements of historical fact, including
statements identified by words such as “may,” “will,”
“could,” “expect,” “anticipate,” “continue,”
“plan,” “intend,” “estimate,” “project,”
“believe” and similar expressions or variations, are
forward-looking statements. Forward-looking statements
include but are not limited to statements regarding our
strategy, future operations, financial condition, results
of operations, projected costs, and plans and objectives
of management. Actual results may differ materially from
those contemplated by the forward-looking statements due
to, among others, the risks and uncertainties described
in our reports and filings with the Securities and
Exchange Commission. We undertake no obligation to update
any forward-looking statement or statements to reflect
events or circumstances that occur after the date on
which the statement is made or to reflect the occurrence
of unanticipated events.
Item 9.01 Financial Statements and Exhibits.
|
(a)
|
Financial Statements of Business Acquired
|
The audited financial statements of Hausmann
Industries, Inc. for the years ended December 31, 2016
and 2015 are filed with this Current Report as Exhibit
99.2.
Industries, Inc. for the years ended December 31, 2016
and 2015 are filed with this Current Report as Exhibit
99.2.
|
(b)
|
Pro Forma Financial Information
|
The pro forma financial information
required by this item is not being filed herewith. The
Company will file the required pro forma financial
information as an amendment to this Current Report on
Form 8-K within the time permitted by Item 9.01(b).
required by this item is not being filed herewith. The
Company will file the required pro forma financial
information as an amendment to this Current Report on
Form 8-K within the time permitted by Item 9.01(b).
|
(d)
|
Exhibits
|
|
Number
|
Description
|
|
|
|
|
3.1
|
Certificate of Designation of Rights and
Preferences of Series B Convertible Preferred Stock filed with the Utah Division of Corporations and Commercial Code March 29, 2017 |
|
4.2
|
Form of Warrant*
|
|
9.1
|
Form of Voting Agreement*
|
|
10.1
|
Loan and Security Agreement dated March 31, 2017
|
|
|
|
|
10.2
|
Asset Purchase Agreement dated March 21, 2017*
|
|
|
|
|
10.3
|
Securities Purchase Agreement dated March 21,
2017* |
|
|
|
|
10.4
|
Form of Registration Rights Agreement*
|
|
|
|
|
23.1
|
Consent of Tanner LLC
|
|
|
|
|
99.1
|
Press Release dated April 4, 2017
|
|
99.2
|
Financial Statements of Business Acquired –
Audited Financial Statements of Hausmann Industries, Inc. as of and for the years ended December 31, 2016 and 2015 |
________________________
* Incorporated by reference to Company’s Current
Report on Form 8-K, filed March 22, 2017
Report on Form 8-K, filed March 22, 2017
About DYNATRONICS CORPORATION (NASDAQ:DYNT)
Dynatronics Corporation is a manufacturer and distributor of physical medicine products. The Company’s products include a line of medical equipment for physical medicine applications, including therapy devices, medical supplies and soft goods, treatment tables and rehabilitation equipment. Its products are used by physical therapists, chiropractors, sports medicine practitioners, podiatrists, physicians and other physical medicine professionals. Its physical medicine products include therapeutic modalities, such as Dynatron Solaris, including electrotherapy and thermal therapy, and 25 Series, including electrotherapy and ultrasound; manufactured capital products, including traction systems and wood furniture; manufactured supplies, including cold packs, straps, wedges, bolsters and mats; distributed capital products, including hydrotherapy, weight training equipment and pilates, and distributed supplies, including clinical accessories, sports med and taping products, lotions and gels. DYNATRONICS CORPORATION (NASDAQ:DYNT) Recent Trading Information
DYNATRONICS CORPORATION (NASDAQ:DYNT) closed its last trading session up +0.10 at 2.85 with 1,125 shares trading hands.
