Item 1.01 Entry into a Material Definitive Agreement.
Effective
March 2, 2020, Dynatronics Corporation (the “Company”)
entered into a Master Supply Agreement (“Agreement”)
with Ascentron, Inc. (“Ascentron”) for the manufacture
and assembly of the Company’s electrotherapy products.
Pursuant to the Agreement, Ascentron will manufacture and assemble
the products to specifications provided by the Company and the
Company will purchase the finished products from Ascentron at
prices and on terms provided in the Agreement. The Agreement limits
price increases to 2.5% annually.
The
Company anticipates that product purchases from Ascentron under the
Agreement for the first nine months will total approximately
$1,500,000.00. The initial term of the Agreement is for 36 months
from the effective date. The Company retains the right in its sole
discretion to extend the Agreement for up to two additional
two-year terms upon written notice to Ascentron. The Company may
terminate the Agreement at any time and for any reason upon
365-days’ written notice. Either party may terminate in the
event of breach by the other party, following 60-days’
written notice and opportunity to cure, or in the event of the
failure to obtain or renew any necessary governmental permit,
license or approval, or in the event of the bankruptcy or
insolvency of the other party.
Management
believes the outsourcing of these manufacturing capabilities to
Ascentron is consistent with the Company’s objectives of
streamlining its operations, continues to align operating expenses
with current revenue levels and, where advantageous, produces
additional benefits from a reduction in workforce and related
costs. Concurrent with these activities, the Company plans to
continue its efforts to consolidate certain administrative
activities in its Minnesota operations.
The
foregoing summary of the terms and conditions of the Agreement is
qualified in its entirety by reference to the Agreement, to be
filed as an exhibit to the Company’s Quarterly Report on Form
10-Q for the quarter ending March 31, 2020.
Forward-Looking Statements
This
Current Report on Form 8-K contains forward-looking statements
within the meaning of the “Safe Harbor” provisions of
the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are those that describe future outcomes
or expectations that are usually identified by words such as
“will,” “should,” “could,”
“plan,” “intend,” “expect,”
“continue,” “forecast,”
“believe,” and “anticipate” and include,
for example, any statement made regarding the Company’s
future results. Actual results may differ materially as a result of
various risks and uncertainties, including circumstances or
developments that may make the Company unable to implement or
realize the anticipated benefits, or that may increase the costs,
of its current business initiatives, including the outsourcing of
manufacturing and assembly functions and any related reduction in
workforce; and those other risks and uncertainties expressed in the
cautionary statements and risk factors in the Company’s
annual report on Form 10-K, quarterly reports on Form 10-Q and
other filings with the Securities and Exchange Commission. The
Company may not be able to predict and may have little or no
control over many factors or events that may influence its future
results and, except as required by law, shall have no obligation to
update any forward-looking statements.