Utah
|
87-0398434
|
(State or other
jurisdiction of incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
|
Large
accelerated filer
☐
|
Accelerated
filer
☐
|
Non-accelerated
filer
☐
(Do not check if a smaller
reporting company)
|
Smaller
reporting company
☑
|
|
Emerging
growth company
☐
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Page Number
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1
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1
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2
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3
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4
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11
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17
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17
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18
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19
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D
YNATRONICS CORPORATION
|
||
Condensed
Consolidated
B
alance
Sheets
|
||
(Unaudited)
|
||
|
|
|
Assets
|
December 31,
2017
|
June
30, 2017
|
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
3,652,342
|
$
254,705
|
Trade accounts
receivable, less allowance for doubtful accounts of $383,356 as of
December 31, 2017 and $382,333 as of June 30, 2017
|
7,385,608
|
5,281,348
|
Other
receivables
|
139,366
|
33,388
|
Inventories,
net
|
11,605,299
|
7,397,682
|
Prepaid
expenses
|
893,933
|
503,800
|
|
|
|
Total
current assets
|
23,676,548
|
13,470,923
|
|
|
|
Property and
equipment, net
|
5,970,836
|
4,973,477
|
Intangible assets,
net
|
7,516,028
|
2,754,118
|
Goodwill
|
7,872,863
|
4,302,486
|
Other
assets
|
532,611
|
562,873
|
|
|
|
Total
assets
|
$
45,568,886
|
$
26,063,877
|
|
|
|
Liabilities
and Stockholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$
4,451,050
|
$
2,334,563
|
Accrued payroll and
benefits expense
|
1,358,754
|
1,472,773
|
Accrued
expenses
|
878,300
|
656,839
|
Income tax
payable
|
9,654
|
8,438
|
Warranty
reserve
|
205,850
|
202,000
|
Line of
credit
|
6,742,979
|
2,171,935
|
Current portion of
long-term debt
|
158,954
|
151,808
|
Current portion of
capital lease
|
199,300
|
193,818
|
Current portion of
deferred gain
|
150,448
|
150,448
|
Current portion of
acquisition holdback
|
430,624
|
294,744
|
|
|
|
Total
current liabilities
|
14,585,913
|
7,637,366
|
|
|
|
Long-term debt, net
of current portion
|
386,632
|
461,806
|
Capital lease, net
of current portion
|
2,986,689
|
3,087,729
|
Deferred gain, net
of current portion
|
1,604,777
|
1,680,001
|
Acquisition
holdback and earn out liability, net of current
portion
|
2,716,667
|
750,000
|
Deferred
rent
|
138,513
|
122,585
|
|
|
|
Total
liabilities
|
22,419,191
|
13,739,487
|
Commitments and
contingencies
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
Preferred stock, no
par value: Authorized 50,000,000 shares; 4,889,000 shares and
3,559,000 shares issued and outstanding as of December 31, 2017 and
June 30, 2017, respectively
|
11,641,816
|
8,501,295
|
Common stock, no
par value: Authorized 100,000,000 shares; 7,864,715 shares and
4,653,165 shares issued and outstanding as of December 31, 2017 and
June 30, 2017, respectively
|
19,802,351
|
11,838,022
|
Accumulated
deficit
|
(8,294,472
)
|
(8,014,927
)
|
|
|
|
Total
stockholders' equity
|
23,149,695
|
12,324,390
|
|
|
|
Total
liabilities and stockholders' equity
|
$
45,568,886
|
$
26,063,877
|
|
|
|
See accompanying
notes to condensed consolidated financial statements.
|
|
|
DYNATRONICS
CORPORATION
|
||||
Condensed
Consolidated Statements of
O
perations
|
||||
(Unaudited)
|
||||
|
|
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Three Months
Ended
|
Six
Months Ended
|
||
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December
31
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December
31,
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||
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
Net
sales
|
$
18,081,333
|
$
8,713,355
|
$
30,879,304
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$
16,876,089
|
Cost of
sales
|
12,311,354
|
5,640,048
|
20,769,933
|
11,008,094
|
Gross
profit
|
5,769,979
|
3,073,307
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10,109,371
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5,867,995
|
|
|
|
|
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Selling, general,
and administrative expenses
|
5,109,809
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2,851,236
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8,932,511
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5,615,594
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Research and
development expenses
|
553,487
|
309,476
|
805,336
|
588,360
|
Operating profit
(loss)
|
106,683
|
(87,405
)
|
371,524
|
(335,959
)
|
|
|
|
|
|
|
|
|
|
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Other income
(expense):
|
|
|
|
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Interest
expense, net
|
(103,706
)
|
(63,408
)
|
(180,514
)
|
(122,728
)
|
Other
income, net
|
11,371
|
55,494
|
21,985
|
77,735
|
Net other
expense
|
(92,335
)
|
(7,914
)
|
(158,529
)
|
(44,993
)
|
|
|
|
|
|
Income (loss)
before income taxes
|
14,348
|
(95,319
)
|
212,995
|
(380,952
)
|
|
|
|
|
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Income tax
(provision) benefit
|
-
|
-
|
-
|
-
|
|
|
|
|
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Net income
(loss)
|
14,348
|
(95,319
)
|
212,995
|
(380,952
)
|
|
|
|
|
|
Deemed dividend on
convertible preferred stock and accretion of discount
|
(1,023,786
)
|
(375,858
)
|
(1,023,786
)
|
(375,858
)
|
Preferred stock
dividend, cash
|
(104,884
)
|
-
|
(104,884
)
|
-
|
Convertible
preferred stock dividend, in common stock
|
(200,594
)
|
(88,792
)
|
(387,655
)
|
(177,777
)
|
|
|
|
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Net loss
attributable to common stockholders
|
$
(1,314,916
)
|
$
(559,969
)
|
$
(1,303,330
)
|
$
(934,587
)
|
|
|
|
|
|
Basic and diluted
net loss per common share
|
$
(0.23
)
|
$
(0.19
)
|
$
(0.25
)
|
$
(0.33
)
|
|
|
|
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
5,735,159
|
2,881,111
|
5,241,604
|
2,861,299
|
|
|
|
|
|
See
accompanying notes to condensed consolidated financial
statements.
|
|
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|
DYNATRONICS
CORPORATION
|
||
Condensed
Consolidated Statements of
C
ash Flows
|
||
(Unaudited)
|
||
|
Six
Months Ended
|
|
|
December
31
|
|
|
2017
|
2016
|
Cash flows from
operating activities:
|
|
|
Net
income (loss)
|
$
212,995
|
$
(380,952
)
|
Adjustments
to reconcile net income (loss) to net cash provided by (used in)
operating activities:
|
|
|
Depreciation
and amortization of property and equipment
|
184,010
|
106,098
|
Amortization
of intangible assets
|
254,090
|
15,340
|
Amortization
of other assets
|
40,681
|
60,069
|
Amortization
of building capital lease
|
125,967
|
125,967
|
Gain
on sale of property and equipment
|
(5,197
)
|
(19,252
)
|
Stock-based
compensation expense
|
117,073
|
102,989
|
Change
in allowance for doubtful accounts receivable
|
(6,978
)
|
48,073
|
Change
in allowance for inventory obsolescence
|
49,739
|
42,751
|
Deferred
gain on sale/leaseback
|
(75,224
)
|
(75,224
)
|
Change
in operating assets and liabilities:
|
|
|
Receivables,
net
|
33,546
|
62,135
|
Inventories,
net
|
(120,175
)
|
(630,132
)
|
Prepaid
expenses
|
(297,144
)
|
(174,016
)
|
Other
assets
|
(10,419
)
|
(18,799
)
|
Income
tax payable
|
(1,236
)
|
1,066
|
Accounts
payable and accrued expenses
|
1,175,114
|
684,319
|
|
|
|
Net
cash provided by (used in) operating activities
|
1,676,842
|
(49,568
)
|
|
|
|
Cash flows from
investing activities:
|
|
|
Purchase
of property and equipment
|
(84,494
)
|
(36,818
)
|
Net
cash paid in acquisition, net of cash received - see Note
2
|
(9,063,017
)
|
-
|
Proceeds
from sale of property and equipment
|
10,355
|
32,000
|
|
|
|
Net
cash provided by (used in) investing activities
|
(9,137,156
)
|
(4,818
)
|
|
|
|
Cash flows from
financing activities:
|
|
|
Principal
payments on long-term debt
|
(68,028
)
|
(84,239
)
|
Principal
payments on long-term capital lease
|
(95,558
)
|
(90,373
)
|
Payment of
acquisition holdbacks
|
(44,744
)
|
-
|
Net
change in line of credit
|
4,571,044
|
-
|
Proceeds
from issuance of preferred stock, net
|
6,600,121
|
928,554
|
Preferred
stock dividends paid in cash
|
(104,884
)
|
-
|
|
|
|
Net
cash provided by (used in) financing activities
|
10,857,951
|
753,942
|
|
|
|
Net
change in cash and cash equivalents
|
3,397,637
|
699,556
|
|
|
|
Cash and cash
equivalents at beginning of the period
|
254,705
|
966,183
|
|
|
|
Cash and cash
equivalents at end of the period
|
$
3,652,342
|
$
1,665,739
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Cash
paid for interest
|
$
172,893
|
$
124,797
|
Supplemental
disclosure of non-cash investing and financing
activity:
|
|
|
Deemed
dividend on convertible preferred stock and accretion of
discount
|
$
1,023,786
|
$
375,858
|
Preferred stock dividends paid or to be paid in common
stock
|
387,655
|
187,901
|
Preferred
stock issued to acquire "Bird & Cronin"
|
4,000,000
|
-
|
Acquisition
holdback
|
2,147,291
|
-
|
Conversion
of preferred stock to common stock
|
7,459,600
|
-
|
Accrued
compensation paid in common stock
|
-
|
26,388
|
|
|
|
See accompanying
notes to condensed consolidated financial statements.
|
|
|
Cash and cash
equivalents
|
$
4,104
|
Trade accounts
receivable
|
2,232,703
|
Inventories
|
4,137,181
|
Prepaid
expenses
|
92,990
|
Property and
equipment
|
1,228,000
|
Intangible
assets
|
5,016,000
|
Goodwill
|
3,570,376
|
Warranty
reserve
|
(5,000
)
|
Accounts
payable
|
(607,084
)
|
Accrued
expenses
|
(265,732
)
|
Accrued payroll and
benefits
|
(189,579
)
|
Purchase
price
|
$
15,213,959
|
October 2,
2018
|
$
180,624
|
April 1,
2019
|
466,667
|
August 15,
2019
|
1,500,000
|
Acquisition
holdback
|
$
2,147,291
|
|
|
|
Net Sales
|
Net Income (loss)
|
Unaudited
supplemental pro forma July 1, 2017 to December 31,
2017
|
$
37,337,488
|
$
259,644
|
Unaudited
supplemental pro forma July 1, 2016 to June 30, 2017
|
$
60,027,677
|
$
(285,951
)
|
|
December
31, 2017
|
June
30, 2017
|
Raw
materials
|
$
6,332,413
|
$
3,766,940
|
Work in
process
|
421,861
|
470,721
|
Finished
goods
|
5,303,501
|
3,562,758
|
Inventory
obsolescence reserve
|
(452,476
)
|
(402,737
)
|
|
$
11,605,299
|
$
7,397,682
|
3.1(a)
|
|
|
|
3.1(b)
|
|
|
|
3.1(c)
|
|
|
|
3.1(d)
|
|
|
|
|
|
10.2
|
|
|
|
10.3
|
|
|
|
10.4
|
|
|
|
10.5
|
|
|
|
10.6
|
|
|
|
11
|
Computation
of Net Income per Share (included in Notes to Consolidated
Financial Statements)
|
|
|
31.1
|
|
|
|
31.2
|
|
|
|
32.1
|
|
|
|
101.INS
|
XBRL
Instance Document
|
|
|
101.CAL
|
XBRL
Taxonomy Extension Schema Document
|
|
|
101.SCH
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
|
101.DEF
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
|
|
101.LAB
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
|
101.PRE
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
|
DYNATRONICS
CORPORATION
|
|
|
|
|
|
|
Date: February 13,
2018
|
By:
|
/s/ Kelvyn H.
Cullimore, Jr.
|
|
|
|
Kelvyn H.
Cullimore, Jr.
|
|
|
|
President and Chief
Executive Officer
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
Date: February 13,
2018
|
By:
|
/s/
David
A. Wirthlin
|
|
|
|
David A.
Wirthlin
|
|
|
|
Chief
Financial Officer
(Principal Financial and Accounting Officer) |
|
1.
|
I have reviewed
this Quarterly Report on Form 10-Q of Dynatronics
Corporation;
|
|
|
|
|
2.
|
Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
|
|
|
|
|
3.
|
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
|
|
|
|
|
4.
|
The registrant's
other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
|
|
|
|
(a)
|
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
|
|
|
|
|
(b)
|
Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
|
|
|
(c)
|
Evaluated the
effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
|
|
|
|
(d)
|
Disclosed in this
report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
|
|
|
|
5.
|
The registrant's
other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the
equivalent functions):
|
|
|
|
|
|
(a)
|
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
|
|
|
|
|
(b)
|
Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant's internal control over
financial reporting.
|
|
|
|
|
Date: February 13,
2018
|
By:
|
/s/
Kelvyn H.
Cullimore, Jr.
|
|
|
|
Kelvyn H. Cullimore,
Jr.
|
|
|
|
President and Chief Executive
Officer
|
|
1.
|
I have reviewed
this Quarterly Report on Form 10-Q of Dynatronics
Corporation;
|
|
|
|
|
2.
|
Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
|
|
|
|
|
3.
|
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
|
|
|
|
|
4.
|
The registrant's
other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
|
|
|
|
(a)
|
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
|
|
|
|
|
(b)
|
Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
|
|
|
(c)
|
Evaluated the
effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
|
|
|
|
(d)
|
Disclosed in this
report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
|
|
|
|
5.
|
The registrant's
other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the
equivalent functions):
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(a)
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All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
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(b)
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Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant's internal control over
financial reporting.
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Date: February 13,
2018
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By:
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/s/
David
A. Wirthlin
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David A.
Wirthlin
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Chief
Financial Officer
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DYNATRONICS
CORPORATION
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Date: February 13,
2018
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By:
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/s/ Kelvyn H.
Cullimore, Jr.
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Kelvyn H.
Cullimore, Jr.
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President and Chief
Executive Officer
(Principal
Executive Officer)
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Date: February 13,
2018
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By:
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/s/
David
A. Wirthlin
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David A.
Wirthlin
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Chief
Financial Officer
(Principal Financial and Accounting Officer) |
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