Utah
|
87-0398434
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification No.)
|
|
Title of each class
|
Trading symbol
|
Name of each exchange on which registered
|
Common
Stock, no par value per share
|
DYNT
|
Nasdaq
Capital Market
|
Large
accelerated filer ☐
|
Accelerated
filer ☐
|
Non-accelerated
filer ☐
|
Smaller
reporting company ☑
|
|
Emerging
growth company ☐
|
|
Page
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3
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4
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5
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10
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10
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13
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14
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14
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14
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14
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14
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14
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14
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14
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15
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DYNATRONICS
CORPORATION
|
||||
Condensed
Consolidated Statements of
Operations
|
||||
(Unaudited)
|
||||
|
|
|
|
|
|
Three
Months Ended
|
Six
Months Ended
|
||
|
December
31,
|
December
31,
|
||
|
2019
|
2018
|
2019
|
2018
|
|
|
|
|
|
Net
sales
|
$15,196,991
|
$15,439,966
|
$31,586,540
|
$32,505,801
|
Cost of
sales
|
10,611,135
|
10,760,093
|
21,846,677
|
22,278,704
|
Gross
profit
|
4,585,856
|
4,679,873
|
9,739,863
|
10,227,097
|
|
|
|
|
|
Selling, general,
and administrative expenses
|
4,618,100
|
4,772,678
|
9,542,792
|
10,269,300
|
Operating (loss)
income
|
(32,244)
|
(92,805)
|
197,071
|
(42,203)
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
Interest
expense, net
|
(110,289)
|
(141,788)
|
(241,281)
|
(262,630)
|
Other
income, net
|
4,870
|
(2,288)
|
5,385
|
383,553
|
Net other (expense)
income
|
(105,419)
|
(144,076)
|
(235,896)
|
120,923
|
|
|
|
|
|
(Loss) income
before income taxes
|
(137,663)
|
(236,881)
|
(38,825)
|
78,720
|
|
|
|
|
|
Income tax
(provision) benefit
|
-
|
(203,949)
|
-
|
(203,949)
|
|
|
|
|
|
Net
loss
|
(137,663)
|
(440,830)
|
(38,825)
|
(125,229)
|
|
|
|
|
|
Deemed dividend on
convertible preferred stock and accretion of discount
|
(108,539)
|
-
|
(108,539)
|
-
|
Preferred stock
dividend, in common stock, issued or to be
issued
|
(202,249)
|
(203,268)
|
(369,153)
|
(389,905)
|
|
|
|
|
|
Net loss
attributable to common stockholders
|
$(448,451)
|
$(644,098)
|
$(516,517)
|
$(515,134)
|
|
|
|
|
|
Net loss per common
share
|
|
|
|
|
Basic and
diluted
|
$(0.05)
|
$(0.08)
|
$(0.06)
|
$(0.06)
|
|
|
|
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
Basic and
diluted
|
9,023,406
|
8,193,324
|
8,800,184
|
8,176,877
|
|
|
|
|
|
See
accompanying notes to condensed consolidated financial
statements.
|
|
|
|
DYNATRONICS
CORPORATION
|
||||||
Condensed
Consolidated Statements of Stockholders'
Equity
|
||||||
(Unaudited)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Common
stock
|
Preferred
stock
|
Accumulated
|
stockholders'
|
||
|
Shares
|
Amount
|
Shares
|
Amount
|
deficit
|
equity
|
Balance
at June 30, 2018
|
8,089,398
|
$20,225,107
|
4,899,000
|
$11,641,816
|
$(10,490,141)
|
$21,376,782
|
|
|
|
|
|
|
|
Stock-based
compensation
|
5,000
|
43,658
|
-
|
-
|
-
|
43,658
|
|
|
|
|
|
|
|
Preferred stock
dividend, in common stock, issued or to be issued
|
66,631
|
186,637
|
-
|
-
|
(186,637)
|
-
|
|
|
|
|
|
|
|
Net
income
|
-
|
-
|
-
|
-
|
315,601
|
315,601
|
|
|
|
|
|
|
|
Balance
at September 30, 2018
|
8,161,029
|
20,455,402
|
4,899,000
|
11,641,816
|
(10,361,177)
|
21,736,041
|
|
|
|
|
|
|
|
Stock-based
compensation
|
-
|
56,082
|
-
|
-
|
-
|
56,082
|
|
|
|
|
|
|
|
Preferred stock
dividend, in common stock, issued or to be issued
|
65,494
|
203,268
|
-
|
-
|
(203,268)
|
-
|
|
|
|
|
|
|
|
Reduction in equity
retained for acquisition holdback
|
(37,708)
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
(440,830)
|
(440,830)
|
|
|
|
|
|
|
|
Balance
at December 31, 2018
|
8,188,815
|
20,714,752
|
4,899,000
|
11,641,816
|
(11,005,275)
|
21,351,293
|
|
|
|
|
|
|
|
Stock-based
compensation
|
58,998
|
85,566
|
-
|
-
|
-
|
85,566
|
|
|
|
|
|
|
|
Preferred stock
dividend, in common stock, issued or to be issued
|
74,731
|
196,240
|
-
|
-
|
(196,240)
|
-
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
(563,387)
|
(563,387)
|
|
|
|
|
|
|
|
Balance
at March 31, 2019
|
8,322,544
|
$20,996,558
|
4,899,000
|
$11,641,816
|
$(11,764,902)
|
$20,873,472
|
|
|
|
|
|
|
|
Stock-based
compensation
|
-
|
115,343
|
-
|
-
|
-
|
115,343
|
|
|
|
|
|
|
|
Preferred stock
dividend, in common stock, issued or to be issued
|
95,249
|
208,205
|
-
|
-
|
(208,205)
|
-
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
(233,106)
|
(233,106)
|
|
|
|
|
|
|
|
Balance
at June 30, 2019
|
8,417,793
|
$21,320,106
|
4,899,000
|
$11,641,816
|
$(12,206,213)
|
$20,755,709
|
|
|
|
|
|
|
|
Stock-based
compensation
|
135,244
|
129,793
|
-
|
-
|
-
|
129,793
|
|
|
|
|
|
|
|
Preferred stock
dividend, in common stock, issued or to be issued
|
126,194
|
166,904
|
-
|
-
|
(166,904)
|
-
|
|
|
|
|
|
|
|
Net
income
|
-
|
-
|
-
|
-
|
98,838
|
98,838
|
|
|
|
|
|
|
|
Balance
at September 30, 2019
|
8,679,231
|
$21,616,803
|
4,899,000
|
$11,641,816
|
$(12,274,279)
|
$20,984,340
|
|
|
|
|
|
|
|
Stock-based
compensation
|
5,446
|
58,238
|
-
|
-
|
-
|
58,238
|
|
|
|
|
|
|
|
Preferred stock
converted to common stock
|
760,000
|
1,791,320
|
(760,000)
|
(1,791,320)
|
-
|
-
|
|
|
|
|
|
|
|
Preferred stock
dividend, in common stock, issued or to be issued
|
165,251
|
202,249
|
-
|
-
|
(202,249)
|
-
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
(137,663)
|
(137,663)
|
|
|
|
|
|
|
|
Balance
at December 31, 2019
|
9,609,928
|
$23,668,610
|
4,139,000
|
$9,850,496
|
$(12,614,191)
|
$20,904,915
|
|
|
|
|
|
|
|
See
accompanying notes to condensed consolidated financial
statements.
|
|
|
|
|
|
DYNATRONICS
CORPORATION
|
||
Condensed
Consolidated Statements of Cash
Flows
|
||
(Unaudited)
|
||
|
|
|
|
Six
Months Ended
|
|
|
December
31,
|
|
|
2019
|
2018
|
Cash flows from
operating activities:
|
|
|
Net
loss
|
$(38,825)
|
$(125,229)
|
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
|
|
Depreciation
and amortization of property and equipment
|
495,000
|
418,289
|
Amortization
of intangible assets
|
362,191
|
362,192
|
Amortization
of other assets
|
20,064
|
21,074
|
Loss
on sale of property and equipment
|
-
|
1,813
|
Stock-based
compensation expense
|
188,031
|
99,740
|
Change
in allowance for doubtful accounts receivable
|
-
|
(178,800)
|
Change
in allowance for inventory obsolescence
|
(13,532)
|
(35,147)
|
Amortization
deferred gain on sale/leaseback
|
(75,223)
|
(75,224)
|
Deferred
income taxes
|
-
|
203,949
|
Change
in fair value of earn-out liability
|
-
|
(375,000)
|
Change
in operating assets and liabilities:
|
|
|
Trade
accounts receivable and other receivables
|
506,759
|
1,109,182
|
Inventories
|
157,085
|
348,392
|
Prepaid
expenses
|
(109,644)
|
247,630
|
Other
assets
|
(8,725)
|
(12,483)
|
Income
tax receivable
|
(14,350)
|
(768)
|
Accounts
payable and accrued expenses
|
1,447,408
|
(881,881)
|
|
|
|
Net
cash provided by operating activities
|
2,916,239
|
1,127,729
|
|
|
|
Cash flows from
investing activities:
|
|
|
Purchase
of property and equipment
|
(183,731)
|
(52,463)
|
|
|
|
Net
cash used in investing activities
|
(183,731)
|
(52,463)
|
|
|
|
Cash flows from
financing activities:
|
|
|
Principal
payments on long-term debt
|
(89,231)
|
(83,049)
|
Principal
payments on finance lease liability
|
(145,779)
|
(114,283)
|
Payment
of acquisition earn-out liability and holdbacks
|
(500,000)
|
(912,845)
|
Net
change in line of credit
|
(1,721,533)
|
(1,137,681)
|
|
|
|
Net
cash used in financing activities
|
(2,456,543)
|
(2,247,858)
|
|
|
|
Net
change in cash and cash equivalents and restricted
cash
|
275,965
|
(1,172,592)
|
|
|
|
Cash and cash
equivalents and restricted cash at beginning of the
period
|
256,030
|
1,696,116
|
|
|
|
Cash and cash
equivalents and restricted cash at end of the period
|
$531,995
|
$523,524
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Cash
paid for interest
|
$256,262
|
$265,251
|
Supplemental
disclosure of non-cash investing and financing
activities:
|
|
|
Deemed
dividend on convertible preferred stock and accretion of
discount
|
108,539
|
-
|
Preferred stock
dividend, in common stock, issued or to be
issued
|
369,153
|
389,905
|
Inventory
reclassified to demonstration equipment
|
-
|
239,106
|
Finance lease obligations incurred to obtain ROU
assets
|
3,086
|
-
|
Operating lease obligations incurred to obtain ROU
assets
|
3,749,809
|
-
|
Conversion of preferred stock to common stock
|
1,791,320
|
-
|
|
|
|
See accompanying
notes to condensed consolidated financial statements.
|
|
|
|
December 31, 2019
|
June 30, 2019
|
Raw
materials
|
$5,805,374
|
$5,830,140
|
Work in
process
|
681,322
|
706,128
|
Finished
goods
|
5,063,534
|
5,129,806
|
Inventory
obsolescence reserve
|
(166,262)
|
(138,553)
|
|
$11,383,968
|
$11,527,521
|
|
December 31, 2019
|
Weighted Average Remaining Lease Term
|
|
Operating
leases
|
3.5
years
|
Finance
leases
|
9.1
years
|
|
|
Weighted Average Discount Rate
|
|
Operating
leases
|
4.6%
|
Finance
leases
|
5.8%
|
|
Classification on the Statement of Operations
|
Three Months Ended
December 31, 2019
|
Six Months Ended
December 31, 2019
|
Operating lease cost
|
|
|
|
Operating
lease cost
|
Cost
of sales
|
$70,515
|
$141,030
|
Operating
lease cost
|
Selling,
general, and administrative expenses
|
188,531
|
375,932
|
Short
term lease cost
|
Selling,
general, and administrative expenses
|
15,750
|
31,500
|
|
|
|
|
Finance lease cost
|
|
|
|
Amortization
of finance lease assets
|
Cost
of sales
|
$35,670
|
$71,340
|
Amortization
of finance lease assets
|
Selling,
general, and administrative expenses
|
49,098
|
97,955
|
Interest
on finance lease liabilities
|
Interest
expense, net
|
45,222
|
90,089
|
Total
lease cost
|
|
$404,786
|
$807,846
|
|
Three Months Ended
December 31, 2019
|
Six Months Ended
December 31, 2019
|
ROU
assets obtained in exchange for lease liabilities:
|
|
|
Operating
leases
|
-
|
3,749,809
|
Financing
leases
|
-
|
3,086
|
|
Three Months Ended
December 31
|
Six Months Ended
December 31
|
||
|
2019
|
2018
|
2019
|
2018
|
Orthopedic Soft
Bracing Products
|
$ 5,833,972
|
$5,799,711
|
$12,112,998
|
$11,671,879
|
Physical Therapy
and Rehabilitation Products
|
9,283,017
|
9,558,772
|
19,320,737
|
20,603,613
|
Other
|
80,002
|
81,483
|
152,805
|
230,309
|
|
$15,196,991
|
$15,439,966
|
$31,586,540
|
$32,505,801
|
10.1
|
|
|
|
31.1
|
|
|
|
31.2
|
|
|
|
32.1
|
|
|
|
32.2
|
|
|
|
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 11, 2020
|
By:
|
/s/
Brian D. Baker
|
|
|
|
Brian
D. Baker
|
|
|
|
President
and Chief Executive Officer (Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
Date:
February 11, 2020
|
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
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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 11,
2020
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By:
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/s/
Brian D.
Baker
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Brian D. Baker
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President and Chief Executive
Officer
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(Principal Executive
Officer)
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1.
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I have reviewed this Quarterly
Report on Form 10-Q of Dynatronics
Corporation;
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2.
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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;
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3.
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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;
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4.
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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:
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|
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(a)
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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;
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(b)
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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;
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(c)
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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
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|
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(d)
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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.
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5.
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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 11,
2020
|
By:
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/s/ David A.
Wirthlin
|
|
|
|
David A.
Wirthlin
|
|
|
|
Chief Financial
Officer
|
|
|
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(Principal Financial and Accounting
Officer)
|
|
|
DYNATRONICS
CORPORATION
|
|
|
|
|
|
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Date: February 11,
2020
|
By:
|
/s/ Brian D.
Baker
|
|
|
|
Brian D.
Baker
|
|
|
|
President and Chief Executive
Officer
(Principal Executive
Officer)
|
|
|
|
|
|
|
|
|
|
Date: February 11,
2020
|
By:
|
/s/ David A.
Wirthlin
|
|
|
|
David A.
Wirthlin
|
|
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
|