UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2018~~2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 0-12697

Dynatronics Corporation

(Exact name of registrant as specified in its charter)

Utah	87-0398434
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7030 Park Centre Drive, Cottonwood Heights, Utah 84121

(Address of principal executive offices, Zip Code)

(801) 568-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T ~~(§ 232.405 of this chapter)~~ during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). ☑Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one)~~

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☑
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock	DYNT	Nasdaq Capital Market

As of May ~~2, 2018, there were 8,089,398~~3, 2019, the registrant had 8,417,793 shares of ~~the registrant’s~~ common stock, no par value per share, outstanding.

DYNATRONICS CORPORATION

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, ~~2018~~2019

TABLE OF CONTENTS

	Page ~~Number~~
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements	1

Condensed Consolidated Balance Sheets (Unaudited)	1

Condensed Consolidated ~~Statement~~Statements of Operations (Unaudited)	2

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	3

Condensed Consolidated Statements of Cash Flows (Unaudited)	3 5

Notes to Condensed Consolidated Financial Statements (Unaudited)	4 6

Cautionary Note Regarding Forward-Looking Statements	10 11

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	10 11

Item 3. Quantitative and Qualitative Disclosures About Market Risk	16 14

Item 4. Controls and Procedures	16 15

PART II. OTHER INFORMATION

Item 6. Exhibits	17 15

Signatures	18 16

DYNATRONICS CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

Assets

March 31, 2018

June 30, 2017

     Current assets:

Cash and cash equivalents
$1,497,455
$254,705
Trade accounts receivable, less allowance for doubtful accounts of $388,772 as of March 31, 2018 and $382,333 as of June 30, 2017
  7,117,194
  5,281,348
Other receivables
  111,071
  33,388
Inventories, net
  12,389,387
  7,397,682
Prepaid expenses
  720,868
  503,800



          Total current assets
  21,835,975
  13,470,923



Property and equipment, net
  5,839,436
  4,973,477
Intangible assets, net
  7,312,854
  2,754,118
Goodwill
  7,872,863
  4,302,486
Other assets
  522,621
  562,873



          Total assets
$43,383,749
$26,063,877



Liabilities and Stockholders' Equity


     Current liabilities:


Accounts payable
$3,320,322
$2,334,563
Accrued payroll and benefits expense
  2,019,218
  1,472,773
Accrued expenses
  654,920
  656,839
Income tax payable
  6,994
  8,438
Warranty reserve
  205,850
  202,000
Line of credit
  6,542,690
  2,171,935
Current portion of long-term debt
  161,458
  151,808
Current portion of capital lease
  202,099
  193,818
Current portion of deferred gain
  150,448
  150,448
Current portion of acquisition holdback
  180,624
  294,744
          Total current liabilities
  13,444,623
  7,637,366
Long-term debt, net of current portion
  345,316
  461,806
Capital lease, net of current portion
  2,935,103
  3,087,729
Deferred gain, net of current portion
  1,567,165
  1,680,001
Acquisition holdback and earn out liability, net of current portion
  2,716,667
  750,000
Other liabilities
  407,937
  122,585



          Total liabilities
  21,416,811
  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 March 31, 2018 and June 30, 2017, respectively
  11,641,816
  8,501,295
Common stock, no par value: Authorized 100,000,000 shares; 8,023,236 shares and 4,653,165 shares issued and outstanding as of March 31, 2018 and June 30, 2017, respectively
  20,087,549
  11,838,022
Accumulated deficit
  (9,762,427)
  (8,014,927)



          Total stockholders' equity
  21,966,938
  12,324,390



          Total liabilities and stockholders' equity
$43,383,749
$26,063,877



See accompanying notes to condensed consolidated financial statements.

DYNATRONICS CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)

Assets	March 31, 2019	June 30, 2018
Current assets:
Cash and cash equivalents	$414,255	$1,696,116
Trade accounts receivable, less allowance for doubtful accounts of $89,500 as of March 31, 2019 and $370,300 as of June 30, 2018	6,853,624	7,810,846
Other receivables	5,659	52,819
Inventories, net	11,218,935	10,987,855
Prepaid expenses	706,584	778,654
Income tax receivable	59,983	95,501

Total current assets	19,259,040	21,421,791

Property and equipment, net	5,814,836	5,850,899
Intangible assets, net	6,588,466	7,131,758
Goodwill	7,116,614	7,116,614
Other assets	516,345	532,872

Total assets	$39,295,301	$42,053,934

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$4,248,740	$3,412,960
Accrued payroll and benefits expense	1,468,821	1,929,465
Accrued expenses	1,147,296	830,243
Warranty reserve	205,850	205,850
Line of credit	4,793,505	6,286,037
Current portion of long-term debt	171,715	164,003
Current portion of capital lease obligations	282,415	226,727
Current portion of deferred gain	150,448	150,448
Current portion of acquisition holdback and earn-out liability	966,667	1,379,512

Total current liabilities	13,435,457	14,585,245

Long-term debt, net of current portion	173,601	303,348
Capital lease obligations, net of current portion	2,987,736	2,972,540
Deferred gain, net of current portion	1,416,717	1,529,553
Acquisition holdback and earn-out liability, net of current portion	-	875,000
Deferred tax liabilities, net	236,829	-
Other liabilities	171,489	411,466

Total liabilities	18,421,829	20,677,152
Commitments and contingencies

Stockholders' equity:
Preferred stock, no par value: Authorized 50,000,000 shares; 4,899,000 shares and 4,899,000 shares issued and outstanding as of March 31, 2019 and June 30, 2018, respectively	11,641,816	11,641,816
Common stock, no par value: Authorized 100,000,000 shares; 8,322,544 shares and 8,089,398 shares issued and outstanding as of March 31, 2019 and June 30, 2018, respectively	20,996,558	20,225,107
Accumulated deficit	(11,764,902)	(10,490,141)

Total stockholders' equity	20,873,472	21,376,782

Total liabilities and stockholders' equity	$39,295,301	$42,053,934

See accompanying notes to condensed consolidated financial statements.

DYNATRONICS CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

Three Months Ended

Nine Months Ended

March 31,

March 31,

2018

2017

2018

2017

Net sales
$16,634,067
$7,715,955
$47,513,371
$24,592,043
Cost of sales
  11,342,518
  5,014,175
  32,112,451
  16,022,269
Gross profit
  5,291,549
  2,701,780
  15,400,920
  8,569,774





Selling, general, and administrative expenses
  6,213,490
  3,153,257
  15,146,001
  8,768,851
Research and development expenses
  242,306
  230,594
  1,047,642
  818,954
Operating loss
  (1,164,247)
  (682,071)
  (792,723)
  (1,018,031)





Other income (expense):




   Interest expense, net
  (118,045)
  (74,992)
  (298,559)
  (198,084)
   Other income, net
  4,859
  2,332
  26,845
  80,431
Net other expense
  (113,186)
  (72,660)
  (271,714)
  (117,653)





Loss before income taxes
  (1,277,433)
  (754,731)
  (1,064,437)
  (1,135,684)





Income tax (provision) benefit
  -
  -
  -
  -





Net loss
  (1,277,433)
  (754,731)
  (1,064,437)
  (1,135,684)





Deemed dividend on convertible preferred stock and accretion of discount
  -
  -
  (1,023,786)
  (375,858)
Preferred stock dividend, cash
  -
  -
  (104,884)
  -
Convertible preferred stock dividend, in common stock
  (190,523)
  (93,979)
  (578,178)
  (271,756)





Net loss attributable to common stockholders
$(1,467,956)
$(848,710)
$(2,771,285)
$(1,783,298)





Basic and diluted net loss per common share
$(0.18)
$(0.28)
$(0.45)
$(0.61)





Weighted-average common shares outstanding:









Basic and diluted
  7,962,179
  3,022,443
  6,135,224
  2,914,229






See accompanying notes to condensed consolidated financial statements.

DYNATRONICS CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)

	Three Months Ended		Nine Months Ended
	March 31,		March 31,
	2019	2018	2019	2018

Net sales	$14,551,519	$16,634,067	$47,057,320	$47,513,371
Cost of sales	10,146,361	11,342,518	32,425,066	32,112,451
Gross profit	4,405,158	5,291,549	14,632,254	15,400,920

Selling, general, and administrative expenses	4,818,093	6,455,796	15,087,393	16,193,643
Operating loss	(412,935)	(1,164,247)	(455,139)	(792,723)

Other income (expense):
Interest expense, net	(124,477)	(118,045)	(387,107)	(298,559)
Other income, net	6,905	4,859	390,459	26,845
Net other (expense) income	(117,572)	(113,186)	3,352	(271,714)

Loss before income taxes	(530,507)	(1,277,433)	(451,787)	(1,064,437)

Income tax provision	(32,880)	-	(236,829)	-

Net loss	(563,387)	(1,277,433)	(688,616)	(1,064,437)

Deemed dividend on convertible preferred stock and accretion of discount	-	-	-	(1,023,786)
Preferred stock dividend, cash	-	-	-	(104,884)
Convertible preferred stock dividend, in common stock	(196,240)	(190,523)	(586,145)	(578,178)

Net loss attributable to common stockholders	$(759,627)	$(1,467,956)	$(1,274,761)	$(2,771,285)

Basic and diluted net loss per common share	$(0.09)	$(0.18)	$(0.16)	$(0.45)

Weighted-average common shares outstanding:
Basic and diluted	8,307,117	7,962,179	8,189,890	6,135,224

See accompanying notes to condensed consolidated financial statements.

DYNATRONICS CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended

March 31,

2018

2017

Cash flows from operating activities:

       Net loss
$(1,064,437)
$(1,135,684)
       Adjustments to reconcile net loss to net cash provided by (used in) operating activities:


             Depreciation and amortization of property and equipment
  298,973
  161,961
             Amortization of intangible assets
  457,265
  23,010
             Amortization of other assets
  56,433
  92,323
             Amortization of building capital lease
  188,950
  188,950
             Gain on sale of property and equipment
  (7,002)
  (19,252)
             Stock-based compensation expense
  211,747
  171,798
             Change in allowance for doubtful accounts receivable
  (1,561)
  70,650
             Change in allowance for inventory obsolescence
  162,528
  7,028
             Deferred gain on sale/leaseback
  (112,836)
  (112,836)
             Change in operating assets and liabilities net of acquisitions:


                  Receivables, net
  324,838
  509,154
                  Inventories, net
  (1,017,052)
  (793,101)
                  Prepaid expenses
  (124,079)
  35,722
                  Other assets
  (16,181)
  (205,570)
                  Income tax payable
  (3,896)
  (3,967)
                  Accounts payable and accrued expenses
  750,894
  255,194



                              Net cash provided by (used in) operating activities
  104,584
  (754,620)



Cash flows from investing activities:


       Purchase of property and equipment
  (131,040)
  (164,181)
       Net cash paid in acquisition - see Note 2
  (9,063,017)
  -
       Proceeds from sale of property and equipment
  12,160
  32,000



                              Net cash used in investing activities
  (9,181,897)
  (132,181)



Cash flows from financing activities:


       Principal payments on long-term debt
  (106,840)
  (42,561)
       Principal payments on long-term capital lease
  (144,345)
  (136,513)
Payment of acquisition holdbacks
  (294,744)
  2,540,073
       Net change in line of credit
  4,370,755
  928,554
       Proceeds from issuance of preferred stock, net
  6,600,121
  (16,241)
       Preferred stock dividends paid in cash
  (104,884)
  -



                              Net cash provided by financing activities
  10,320,063
  3,273,312



                              Net change in cash and cash equivalents
  1,242,750
  2,386,511



Cash and cash equivalents at beginning of the period
  254,705
  966,183



Cash and cash equivalents at end of the period
$1,497,455
$3,352,694



Supplemental disclosure of cash flow information:


       Cash paid for interest
$284,437
$198,572
Supplemental disclosure of non-cash investing and financing activities:


       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
  578,178
  276,693
       Preferred stock issued to acquire Bird & Cronin, Inc.
  4,000,000
  -
       Acquisition holdback
  2,147,291
  -
       Conversion of preferred stock to common stock
  7,459,600
  -
       Accrued severance paid in common stock
  -
  185,000



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, 2017	4,653,165	$11,838,022	3,559,000	$8,501,295	$(8,014,927)	$12,324,390

Stock-based compensation	12,382	71,786	-	-	-	71,786

Preferred stock dividend, in common stock, issued or to be issued	72,042	187,061	-	-	(187,061)	-

Preferred stock converted to common stock	75,000	187,500	(75,000)	(187,500)	-	-

Net income	-	-	-	-	198,647	198,647

Balance at September 30, 2017	4,812,589	12,284,369	3,484,000	8,313,795	(8,003,341)	12,594,823

Stock-based compensation	2,044	45,287	-	-	-	45,287

Issuance of preferred stock and warrants, net of issuance costs of $399,879	-	-	4,381,935	10,600,121	-	10,600,121

Preferred stock dividend, in cash	-	-	-	-	(104,884)	(104,884)

Preferred stock dividend, in common stock, issued or to be issued	83,147	200,595	-	-	(200,595)	-

Preferred stock converted to common stock	2,966,935	7,272,100	(2,966,935)	(7,272,100)	-	-

Preferred stock beneficial conversion and accretion of discount	-	-	-	1,023,786	-	1,023,786

Dividend of beneficial conversion and accretion of discount	-	-	-	(1,023,786)	-	(1,023,786)

Net income	-	-	-	-	14,348	14,348

Balance at December 31, 2017	7,864,715	19,802,351	4,899,000	11,641,816	(8,294,472)	23,149,695

Stock-based compensation	88,974	94,676	-	-	-	94,676

Preferred stock dividend, in common stock, issued or to be issued	69,547	190,522	-	-	(190,522)	-

Net loss	-	-	-	-	(1,277,433)	(1,277,433)

Balance at March 31, 2018	8,023,236	$20,087,549	4,899,000	$11,641,816	$(9,762,427)	$21,966,938

						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

See accompanying notes to condensed consolidated financial statements.

DYNATRONICS CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)

	Nine Months Ended
	March 31,
	2019	2018
Cash flows from operating activities:
Net loss	$(688,616)	$(1,064,437)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of property and equipment	397,095	298,973
Amortization of intangible assets	543,292	457,265
Amortization of other assets	32,219	56,433
Amortization of capital lease assets	253,194	188,950
Loss (gain) on sale of property and equipment	2,177	(7,002)
Stock-based compensation expense	185,306	211,747
Change in allowance for doubtful accounts receivable	(280,800)	(1,561)
Change in allowance for inventory obsolescence	(58,268)	162,528
Amortization deferred gain on sale/leaseback	(112,836)	(112,836)
Deferred income taxes	236,829	-
Change in fair value of earn-out liability	(375,000)	-
Change in operating assets and liabilities:
Trade accounts receivable	1,285,182	324,838
Inventories	(411,918)	(1,017,052)
Prepaid expenses	72,070	(124,079)
Other assets	(15,692)	(16,181)
Income tax receivable	35,518	(3,896)
Accounts payable and accrued expenses	452,212	750,894

Net cash provided by operating activities	1,551,964	104,584

Cash flows from investing activities:
Purchase of property and equipment	(124,804)	(131,040)
Net cash paid in acquisitions	-	(9,063,017)
Proceeds from sale of property and equipment	-	12,160

Net cash used in investing activities	(124,804)	(9,181,897)

Cash flows from financing activities:
Principal payments on long-term debt	(122,035)	(106,840)
Principal payments on long-term capital lease	(181,609)	(144,345)
Payment of acquisition holdback	(912,845)	(294,744)
Net change in line of credit	(1,492,532)	4,370,755
Proceeds from issuance of preferred stock, net	-	6,600,121
Preferred stock dividends paid in cash	-	(104,884)

Net cash (used in) provided by financing activities	(2,709,021)	10,320,063

Net change in cash and cash equivalents	(1,281,861)	1,242,750

Cash and cash equivalents at beginning of the period	1,696,116	254,705

Cash and cash equivalents at end of the period	$414,255	$1,497,455

Supplemental disclosure of cash flow information:
Cash paid for interest	$392,039	$284,437
Supplemental disclosure of non-cash investing and financing activity:
Deemed dividend on convertible preferred stock and accretion of discount	-	1,023,786
Preferred stock dividends paid or to be paid in common stock	586,145	578,178
Inventory reclassified to demonstration equipment	239,106	-
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
Capital lease obligations incurred to acquire property and equipment	252,493	-

See accompanying notes to condensed consolidated financial statements.

DYNATRONICS CORPORATION

~~NOTES~~NOTES TO CONDENSED CONSOLIDATED ~~FINANCIAL~~FINANCIAL STATEMENTS

(Unaudited)

March 31, ~~2018~~2019

~~NOTE~~Note 1. ~~PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated balance sheets as of March 31, ~~2018~~2019 and June 30, ~~2017, the~~2018, condensed consolidated statements of operations for the three and nine months ended March 31, ~~2018~~2019 and ~~2017,~~2018, and condensed consolidated statements of stockholders' equity and cash flows (“Financial Statements”) of Dynatronics Corporation and its wholly-owned subsidiaries (the “Company”) for the nine months ended March 31, 2019 and 2018, should be read in conjunction with the audited financial statements and ~~2017, were~~notes thereto as of and for the year ended June 30, 2018 included in the Company’s Annual Report on Form 10-K (“Annual Report”) filed with the U.S. Securities and Exchange Commission (the “SEC”) on September 27, 2018. In the opinion of management, the accompanying Financial Statements have been prepared by ~~Dynatronics Corporation~~us in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and ~~its subsidiaries (collectively, the “Company”) without audit pursuant to~~in accordance with the instructions to Form 10-Q and ~~the rules~~Article 10 of Regulation S-X. Accordingly, certain information and ~~regulations of the Securities and Exchange Commission (“SEC”). Certain information and~~footnote disclosures normally included in financial statements prepared in accordance with ~~U.S. generally accepted accounting principles (“U.S.~~ GAAP”) have been condensed or ~~omitted pursuant to such rules and regulations.~~omitted. In the opinion of the Company's management, the Financial Statements for the periods presented reflect all ~~necessary~~ adjustments, ~~which consist~~consisting of only of normal, recurring adjustments, necessary to ~~the financial statements have been made to present~~ fairly ~~the Company’s~~state our financial position, results of operations, and cash flows. The March 31, 2019 condensed consolidated balance sheet was derived from audited financial statements, but does not include all GAAP disclosures. The results of operations for the first nine months of the fiscal year are not necessarily indicative of results for the full year or any future periods.

The preparation of these Financial Statements requires the Company's management to make estimates and judgments that affect the amounts reported in the Financial Statements and the accompanying notes. The Company’s actual results may differ from these estimates under different assumptions or conditions.

Research and Development Costs

Research and development ("R&D") costs are expensed as incurred. R&D expense for the three and nine months ended March 31, 2019 totaled $14,000 and $40,000, respectively. R&D expense for the three and nine months ended March 31, 2018 ~~are~~totaled $242,000 and $1,048,000, respectively. R&D expense is included in selling, general, and administrative expenses in the condensed consolidated statements of operations.

Reclassification

Certain amounts in the prior year's condensed consolidated statements of operations have been reclassified for comparative purposes to conform to the presentation in the current year's condensed consolidated statements of operations.

Recent Accounting Pronouncements

In August 2018, the SEC adopted a final rule under SEC Release No. 33-10532, Disclosure Update and Simplification that amends certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. The amendments also expanded the disclosure requirements on the analysis of shareholders’ equity for interim financial statements, in which registrants must now analyze changes in shareholders’ equity, in the form of reconciliation, for the current and comparative year-to-date periods, with subtotals for each interim period. This final rule was effective on November 5, 2018. The Company has adopted all relevant disclosure requirements. The adoption of these SEC amendments did not ~~necessarily indicative of~~have a material impact on the Company’s financial position, results of operations, ~~that may be expected~~cash flows or stockholders’ equity.

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842,) a new guidance on leases. This guidance replaces the prior lease accounting guidance in its entirety. The underlying principle of the new standard is the recognition of lease assets and lease liabilities by lessees for substantially all leases, with an exception for leases with terms of less than twelve months. The standard also requires additional quantitative and qualitative disclosures. The guidance is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The standard requires a modified retrospective approach, which includes several optional practical expedients. Accordingly, the standard is effective for the Company for the fiscal year ~~ending June 30, 2018.~~begining on July 1, 2019. The Company ~~previously filed with~~is currently evaluating the ~~SEC an Annual Report~~impact that this guidance will have on ~~Form 10-K (the “2017 Form 10-K”) which included audited~~the consolidated financial statements for each of the years ended June 30, 2017 and 2016. It is suggested that the financial statements contained in this Form 10-Q be read in conjunction with the financial statements and notes thereto contained in the 2017 Form 10-K.statements.

~~Use~~In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This authoritative accounting guidance related to revenue from contracts with customers. This guidance is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of ~~Estimates~~goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2017. Companies may use either a full retrospective or a modified retrospective approach to adopt this guidance. The Company adopted this updated accounting guidance beginning July 1, 2018, using the modified retrospective method. This adoption did not have a material impact on the Company’s consolidated financial statements other than additional disclosures (see Note 10) as the timing of revenue recognition under the new standard is not materially different from our previous revenue recognition policy. Based on our analysis of open contracts as of July 1, 2018, the cumulative effect of applying the new standard was not material.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Some of the more significant estimates relate to inventory, allowance for doubtful accounts, stock-based compensation and valuation allowance for deferred income taxes.

Note 2. Acquisitions

~~Significant Accounting Policies~~

~~There have been no changes to the Company’s significant accounting policies as described in the 2017 Form 10-K.~~

~~NOTE 2. ACQUISITIONS~~

Bird & Cronin

On October 2, 2017, the Company, ~~acquired~~through its wholly-owned subsidiary Bird & Cronin, LLC, completed the purchase of substantially all of the assets of Bird & Cronin, Inc. (“Bird & ~~Cronin~~”Cronin”), a manufacturer and distributor of orthopedic soft goods and specialty patient care products. The ~~transaction is referred to as the “Acquisition”. The Acquisition will expand the Company’s sales in the orthopedic and patient care markets by leveraging the products and distribution network offered by Bird & Cronin.~~

~~At the closing of the Acquisition, the Company paid Bird & Cronin cash of $9,063,017 and delivered 1,397,375 shares of its Series D Non Voting Convertible Preferred Stock (“Series D Preferred”) to Bird & Cronin valued at approximately $3,533,333. The~~ purchase price is subject to ~~customary representations, warranties, indemnities, working capital adjustment and~~ an earn-out payment ranging from $500,000 to $1,500,000, based on ~~future sales. As of March 31, 2018, there has been no change to the acquisition date~~sales in fiscal year 2019. The amount recognized for the earn-out ~~liability.~~liability was $875,000 as of June 30, 2018. The ~~balance~~earn-out liability was reduced by $375,000 in the first fiscal quarter of 2019. The change in the fair value of the earn-out liability atis included in other income in the accompanying condensed consolidated statements of operations. As of March 31, ~~2018~~2019, the earn-out liability was $500,000. The earn-out liability is ~~$1,500,000.~~ combined with the acquisition holdback in the accompanying condensed consolidated balance sheets.

A holdback of $647,291 cash ~~totaling $647,291~~ and 184,560 shares of common stock ~~(converted from Series D Preferred) valued at approximately $466,667 have been~~was retained by the Company for purposes of satisfying adjustments to the purchase ~~price.~~price, if any.

~~In connection with the Acquisition,~~On October 2, 2018, the Company ~~completed a private placement~~released to Bird & Cronin cash of ~~Series C Non Voting Convertible Preferred Stock (“Series C Preferred~~”)$162,845 and 54,572 shares of common stock ~~warrants to raise cash proceeds of $7,000,000~~ pursuant to the ~~terms and conditions of a Securities Purchase Agreement entered into on September 26, 2017 (“Private Placement”). See Note 4 for details~~holdback provisions of the ~~Private Placement.~~purchase agreement.

~~Also in connection with the Acquisition,~~ In addition, the Company ~~entered into a lease with Trapp Road Limited Liability Company, a Minnesota limited liability company controlled by~~canceled 37,708 shares of common stock held back for the ~~former owners~~benefit of Bird & Cronin, pursuant to ~~occupy~~ the ~~facility housing the Bird & Cronin operations for a term~~settlement of three years at annual rental payments of $600,000, payable in monthly installments of $50,000. The lease term will automatically be extended for two additional periods of two years each, without any increaseworking capital adjustments as provided in the lease payment, subject to the Company’s right to terminate the lease or to provide notice not to extend the lease prior to the end of the term. The Company also offered employees of Bird & Cronin employment with Dynatronics at closing including the Co-Presidents of Bird & Cronin, Mike Cronin and Jason Anderson, who entered into employment agreements to serve as Co-Presidents of Bird & Cronin, LLC, the Company’s wholly-owned subsidiary that conducts the operations acquired in the Acquisition.purchase agreement.

The Acquisition has been accounted for under the purchase method as prescribed by applicable accounting standards. Under this method, the Company has allocated the purchase price to the assets acquired and liabilities assumed at estimated fair values. The total consideration transferred or to be transferred, totaled $15,213,959. The following table summarizes the preliminary estimated fair value of the assets acquired and liabilities assumed as of the date of acquisition:

~~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~~

The estimates of fair value of identifiable assets acquired and liabilities assumed are preliminary, pending finalization of a valuation, and are subject to revisions that may result in adjustments to the values presented above.

Intangible assets subject to amortization include $4,313,000 that relate to customer relationships with a useful life of ten years and other intangible assets of $83,000 with a useful life of five years. Intangible assets not subject to amortization of $620,000 relate to trade names. The goodwill recognized from the Acquisition is estimated to be attributable, but not limited to, the acquired workforce and expected synergies that do not qualify for separate recognition. The full amount of goodwill and intangible assets are expected to be deductible for tax purposes.

As of March 31, ~~2018,~~2019, the ~~Acquisition~~remaining earn-out liability and ~~holdbacks of $2,147,291 come due,~~holdback payable, contingent upon the terms set forth in the purchase agreement, and the maturity dates for such payments, are as follows:

~~October~~April 2, ~~2018~~2019	$~~180,624~~
~~April 1, 2019~~	466,667
August 15, 2019	~~1,500,000~~500,000
Acquisition holdback and earn-out liability	$~~2,147,291~~966,667

~~The amounts of~~On April 2, 2019, the Company released to Bird & Cronin~~’s net sales~~ cash of $466,667 and ~~net income included in~~92,280 shares of common stock pursuant to the ~~Company's consolidated statement of operations for the period from October 2, 2017 to March 31, 2018, were $11,384,235 and $879,349 respectively. Pro forma net sales and net loss~~holdback provisions of the ~~combined operations had the acquisition date been July 1, 2016 are:~~purchase agreement.

Net Sales

Net Loss

Unaudited supplemental pro forma July 1, 2017 to March 31, 2018
$53,968,355
$(1,017,788)
Unaudited supplemental pro forma July 1, 2016 to June 30, 2017
$60,027,677
$(285,951)

The unaudited pro forma consolidated results are not to be considered indicative of the results if the Acquisition occurred in the periods mentioned above, or indicative of future operations or results. The unaudited supplemental pro forma earnings were adjusted to exclude $70,000 of acquisition-related costs incurred in fiscal year 2017.

Hausmann

On April 3, 2017, the Company, ~~acquired~~through its wholly-owned subsidiary Hausmann Enterprises, LLC, completed the purchase of substantially all of the assets of Hausmann Industries, Inc. (“~~Hausmann~~”Hausmann”)~~. In the third fiscal quarter~~, a manufacturer of ~~2018, the Company finalized its valuation of the Hausmann assets acquired and liabilities assumed and determined that no material adjustments to any of the balances were required.~~physical therapy rehabilitation equipment.

~~The following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of acquisition:~~

~~Cash and cash equivalents~~	$~~600~~
~~Trade accounts receivable~~	~~1,691,420~~
~~Inventories~~	~~2,117,430~~
~~Prepaid expenses~~	~~136,841~~
~~Property and equipment~~	~~512,950~~
~~Intangible assets~~	~~2,689,000~~
~~Goodwill~~	~~4,302,486~~
~~Warranty reserve~~	~~(50,000~~)
~~Accounts payable~~	~~(544,625~~)
~~Accrued expenses~~	~~(33,981~~)
~~Accrued payroll and benefits~~	~~(661,288~~)
~~Purchase price~~	$~~10,160,833~~

The ~~estimated~~ purchase price included a holdback of cash totaling $1,044,744 for purposes of satisfying adjustments to the purchase price and indemnification claims, if any. In the second and third fiscal quarters of 2018, the Company released ~~$45,000~~$44,744 and $250,000, respectively, of the holdback to ~~the sellers. As of March 31,~~Hausmann. On October 3, 2018, the Company ~~retained a~~released the remaining holdback ~~of $750,000 due to be paid to the seller on October 3, 2018.~~amount totaling $750,000.

~~NOTE~~Note 3. ~~NET LOSS PER COMMON SHARE~~Net Loss per Common Share

Net loss per common share is computed based on the weighted-average number of common shares outstanding and, when appropriate, dilutive potential common stock outstanding during the period. Stock options, convertible preferred stock, and warrants are considered to be potential common stock. The computation of diluted net loss per common share does not assume exercise or conversion of securities that would have an anti-dilutive effect.

Basic net loss per common share is the amount of net loss for the period available to each weighted-average share of common stock outstanding during the reporting period. Diluted net loss per common share is the amount of net loss for the period available to each weighted-average share of common stock outstanding during the reporting period and to each share of potential common stock outstanding during the period, unless inclusion of potential common stock would have an anti-dilutive effect.

~~Outstanding~~Certain outstanding options, warrants and ~~convertible~~shares of preferred stock ~~for~~convertible into common shares are not included in the computation of diluted net loss per common share because they were anti-dilutive, which for the three months ended March 31, 2019, and 2018, ~~and 2017,~~ totaled ~~11,772,349~~11,744,083 and ~~5,165,008~~11,772,349, respectively and for the nine months ended March 31, 2019, and 2018, ~~and 2017,~~ totaled ~~12,003,052~~11,744,083 and ~~5,165,798~~12,003,052, respectively.

~~NOTE~~Note 4. ~~CONVERTIBLE PREFERRED STOCK AND COMMON STOCK WARRANTS~~Convertible Preferred Stock and Common Stock Warrants

~~In connection with the Acquisition of Bird & Cronin on October 2, 2017, the Company issued 2,800,000 shares of Series C Preferred and warrants to purchase 1,400,000 shares of common stock (“Series C Warrants~~”), as well as 1,581,935 shares of its Series D Preferred. The Series C Warrants have an exercise price of $2.75 per share of common stock and a term of six years. The exercise of the Series C Warrants and the conversion of the Series C Preferred and Series D Preferred was subject to the prior approval of the Company’s shareholders as required under applicable Nasdaq Marketplace Rules. At the Company’s 2017 Annual Meeting of Shareholders, held on November 29, 2017, the Company sought and obtained that shareholder approval. Upon the receipt of the shareholder approval, each share of Series C Preferred and each share of Series D Preferred was automatically convertible into one share of common stock; provided, however, that the holders of the Series C Preferred were permitted to elect retain the Series C Preferred and not convert, subject to future beneficial ownership limitations and forfeiture of preferential rights of Series C Preferred. On November 29, 2017, the Company issued 1,360,000 shares of common stock in conversion of 1,360,000 shares of Series C Preferred and 1,581,935 shares of common stock in conversion of all outstanding shares of the Series D Preferred. As of March 31, ~~2018,~~2019, the Company had ~~1,440,000 shares of Series C Preferred outstanding. The Series C Preferred shares are non-voting, do not receive dividends,~~issued and ~~have no liquidation preferences or redemption rights.~~

The Company determined that the Series C Preferred contain a beneficial conversion feature resulting in a deemed dividend of $829,559. Upon conversion of a portion of the Series C Preferred during the three months ended December 31, 2017, accretion of $194,227 in discounts was recognized.

~~During quarter ended September 30 2017, the Company issued 75,000 shares of common stock upon conversion of 75,000 shares of Series B Convertible Preferred Stock (“Series B Preferred”). During quarter ended December 31, 2017, the Company issued 25,000 shares of common stock upon conversion of 25,000 shares of Series B Preferred. As of March 31, 2018, the Company had~~outstanding a total of 2,000,000 shares of Series A 8% Convertible Preferred Stock (“Series A ~~Preferred~~”Preferred”) and 1,459,000 shares of Series B 8% Convertible Preferred ~~outstanding,~~Stock ("Series B Preferred"). The Series A Preferred and Series B Preferred are convertible into a total of 3,459,000 shares of common stock. Dividends payable on these preferred shares accrue at the rate of 8% per year and are payable quarterly in stock or cash at the option of the Company. The Company generally pays the dividends inon the preferred stock by issuing shares of our common stock. The formula for paying ~~this dividend~~these dividends using common stock in ~~common stock~~lieu of cash can change the effective yield on the dividend to more or less than 8% depending on the market price of the common stock at the time of issuance. As of March 31, 2019, there were also issued and outstanding 1,440,000 shares of Series C Non-Voting Convertible Preferred Stock (“Series C Preferred”). The Series C Preferred shares are non-voting, do not receive dividends, and have no liquidation preferences or redemption rights.

~~NOTE~~Note 5. ~~COMPREHENSIVE LOSS~~Comprehensive Loss

For the three and nine months ended March 31, ~~2018~~2019 and ~~2017,~~2018, comprehensive loss was equal to the net loss as presented in the accompanying condensed consolidated statements of operations.

~~NOTE~~Note 6. ~~INVENTORIES~~Inventories

Inventories consisted of the following:

	March 31, 2018	June 30, 2017	March 31, 2019	June 30, 2018
Raw materials	$6,458,466	$3,766,940	$5,484,244	$6,216,150
Work in process	644,412	470,721	664,516	625,830
Finished goods	5,826,774	3,562,758	5,470,296	4,604,264
Inventory obsolescence reserve	(540,265)	(402,737)	(400,121)	(458,389)
	$12,389,387	$7,397,682	$11,218,935	$10,987,855

~~NOTE~~Note 7. ~~RELATED-PARTY TRANSACTIONS~~Related-Party Transactions

The Company leases office, manufacturing and warehouse facilities in Detroit, ~~Michigan,~~Michigan; Hopkins, ~~Minnesota,~~Minnesota; Northvale, New ~~Jersey~~Jersey; and Eagan, Minnesota from employees, shareholders, and entities controlled by shareholders, who were previously principals of businesses acquired by the Company. The combined expenses associated with these related-party transactions totaled ~~approximately~~$261,792 and $259,980 ~~and $17,700~~ for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$626,140~~$785,353 and $~~53,100~~$626,140 for the nine months ended March 31, 2019 and 2018, ~~and 2017,~~ respectively.

~~Certain significant shareholders, officers and directors~~Note 8. Line of the Company participated as investors in the private placements of the Company’s Series A Preferred, Series B Preferred, and Series C Preferred. The terms of these offerings were reviewed and approved by disinterested members of the Company’s Board of Directors who did not invest in the private placements and who do not own any shares of Series A Preferred, Series B Preferred or Series C Preferred. The affiliated investors participated in these offerings on terms that were no more favorable than the terms granted to unaffiliated investors.Credit

~~Pursuant to the Company’s acquisition of Hausmann in April~~On March 31, 2017, the Company ~~held back approximately$1,045,000 of the purchase price. As of March 31, 2018,~~entered into an $8,000,000 loan and June 30, 2017, the holdback liability to Hausmann under the purchase agreement was $750,000 and $1,045,000, respectively. In the second and third quarters of 2018, the Company released $45,000 and $250,000, respectively, of the holdback. Certain principals of Hausmann are holders of the Company’s Series B Preferred and one of the principals, David Hausmann, is an employee of the Company.

In connection with the Acquisition of Bird & Cronin in October 2017, the Company held back approximately $647,000 in cash plus an earn-out payment of a minimum of $500,000 up to $1,500,000. These obligations to Bird & Cronin, totaling approximately $2,147,000, are liabilities on the Company’s balance sheet as of March 31, 2018. In addition, the Company withheld approximately 185,000 shares of common stock to be released to Bird & Cronin pursuant to the holdback provisions in the Asset Purchase Agreement. These shares are included in common stock on the Company’s balance sheet at March 31, 2018. Certain principals of Bird & Cronin are holders of the Company’s issued and outstanding common stock and two of the principals, Michael Cronin and Jason Anderson, are employees of the Company.

~~NOTE 8. LINE OF CREDIT~~

~~On September 28, 2017, the Company modified its credit~~security agreement with Bank of the West ~~and entered into an Amended Credit Facility (the “Amended Credit Facility~~”) to provide asset-based financing to the Company ~~to be used~~ for funding ~~the Acquisition (see Note 2)~~acquisitions and for ~~operating capital.~~working capital (“Line of Credit”). The ~~Amended~~Line of Credit ~~Facility provides~~provided for revolving credit borrowings by the Company in an amount up to the lesser of ~~$11,000,000~~$8,000,000 or the calculated 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. Amounts outstanding bear interest at LIBOR plus 2.25%.

On September 28, 2017, the Company modified the Line of Credit to provide additional capital for funding the Bird & Cronin acquisition and for operating capital. The Line of Credit, as amended, provides for revolving credit borrowings by the Company ~~paid a commitment fee~~in an amount up to the lesser of ~~.25% and~~$11,000,000 or the ~~line is subject~~calculated borrowing base. On July 13, 2018, the Company further amended the Line of Credit to ~~an unused line fee of .25%. The maturity date is September 30, 2019. The Company’s obligations under~~modify the Amended Credit Facility are secured by a first-priority security interest in substantially all of its assets, including those of its subsidiaries. The Amended Credit Facility includes financial covenants, such as ratios formaximum monthly consolidated leverage and a minimum monthly consolidated fixed charge coverage ratio. An additional modification was executed on November 9, 2018, to extend the maturity date to December 15, 2020.

Borrowings on the Line of Credit were $4,793,505 and ~~customary affirmative~~$6,286,037 as of March 31, 2019 and ~~negative covenants for a credit facility~~June 30, 2018, respectively. As of ~~this type, including, among others, the provision of annual, quarterly~~March 31, 2019, there was approximately $2,600,000 available to borrow.

Note 9. Accrued Payroll and monthly financial statements and compliance certificates, maintenance of property, insurance, compliance with laws and environmental matters, restrictions on incurrence of indebtedness, granting of liens, making investments and acquisitions, paying dividends, entering into affiliate transactions and asset sales. The Amended Credit Facility also contains penalties in connection with customary events of default, including, among others, payment, bankruptcy, representation and warranty, covenant, change in control, judgment and events or conditions that have a Material Adverse Effect (as defined in the Amended Credit Facility).Benefits Expense

As of March 31, 2018, the Company had borrowed $6,542,690 under the Amended Credit Facility compared to $2,171,935 as of June 30, 2017. There was approximately $2,273,000 available to borrow under the original loan and security agreement as of March 31, 2018.

~~NOTE 9. ACCRUED PAYROLL AND BENEFITS EXPENSE~~

~~As of March 31, 2018~~2019 and June 30, ~~2017,~~2018, the accrued payroll and benefits expense ~~was $2,019,218~~balance included $358,654 and ~~$1,472,773, respectively. Included in the balance as of March 31, 2018 and 2017 was $577,788 and $200,000,~~$473,146, respectively, of accrued severance expense ~~for Company personnel including~~maturing in less than one ~~executive officer.~~year. As of March 31, ~~2018~~2019 and June 30, ~~2017,~~2018, long-term severance accrual included in other liabilities was ~~$262,020~~$0 and ~~$0,~~$258,145, respectively. ~~Payments will be made~~ The Company recognized $54,778 and $185,831 in ~~cash over a two year period.~~severance expense during the three and nine months ended March 31, 2019, respectively. The Company recognized $839,807 in severance expense during the three and nine months ended March 31, ~~2018 related to the termination of~~ ~~Company personnel including one executive officer. The Company recognized $2,304 in severance expense during the three and nine months ended March 31, 2017.~~2018. Severance expense is included in selling, general, and administrative expenses.

Note 10. Revenue

On ~~May 7,~~July 1, 2018, the Company ~~implemented a reduction~~adopted ASC 606,Revenue from Contracts with Customers, which establishes principles for recognizing revenue and reporting information about the nature, amount, timing and uncertainty of ~~its workforce by 10 employees to better align its resources~~revenue and cash flows arising from contracts with customers. The guidance was applied using the ~~needs~~modified retrospective transition method. The adoption of ~~its business~~this guidance had no material impact on the amount and ~~focus on improving profitability. The Company expects that it will incur severance expense~~timing of ~~approximately $140,000, which will be~~revenue recognized, therefore, no adjustments were recorded ~~during the fourth fiscal quarter of 2018.~~

~~NOTE 10. INCOME TAXES~~

~~On December 22, 2017, the U.S. government enacted comprehensive tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). The Tax Act provides for significant changes~~ to the U.S. Internal Revenue Code of 1986, as amended. Among other items, the Tax Act permanently reduces the federal corporate tax rate to 21% effective January 1, 2018. As the Company’s fiscal year end falls on June 30, the statutory federal corporate tax rate for fiscal 2018 will be prorated to 27.5%, with the statutory rate for fiscal 2019 and beyond at 21%.

As a result of the reduction in the corporate income tax rate from 35% to 21% under the Act, the Company revalued its net deferred tax assets at December 31, 2017. As of March 31, 2018 and June 30, 2017, a full valuation allowance has been established against net deferred tax assets. This resulted in no reported income tax expense associated with the operating profit reported duringconsolidated financial statements upon adoption. For the three and nine months ended March 31, ~~2018.~~

~~The final transition impacts of the Tax Act may vary from the current estimate, possibly~~2019, revenue recognized pursuant to ASC 606 would not have differed materially ~~due~~had revenue continued to among other things, further clarification and changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, and the completion of the Company’s consolidated financial statements as of and for the year ending June 30, 2018. In accordance with SAB 118, any necessary measurement adjustments will be ~~recorded and disclosed within one year from the enactment date within the period the adjustments are determined.~~

~~NOTE 11. RECENT ACCOUNTING PRONOUNCEMENTS~~

On December 22, 2017, the U.S. government enacted comprehensive tax reform legislation commonly referred to as the Tax Cuts and Jobs Act. The Tax Act provides for significant changes to the U.S. Internal Revenue Code of 1986, as amended. Among other items, the Tax Act permanently reduces the federal corporate tax rate to 21% effective January 1, 2018.

~~Additionally, the SEC released Staff Accounting Bulletin No. 118 (“SAB 118”) which provides guidance on accounting for the Act’s impact~~recognized under ASC ~~Topic 740, Income Taxes (“ASC 740~~”). The guidance in SAB 118 addresses certain fact patterns where the accounting for changes in tax laws or tax rates under ASC 740 is incomplete upon issuance of an entity's financial statements for the reporting period in which the Act is enacted. Under the staff guidance in SAB 118, in the financial reporting period in which the Act is enacted, the income tax effects of the Act (i.e., only for those tax effects in which the accounting under ASC 740 is incomplete) would be reported as a provisional amount based on a reasonable estimate (to the extent a reasonable estimate can be determined), which would be subject to adjustment during a “measurement period” until the accounting under ASC 740 is complete. The measurement period is limited to no more than one year beyond the enactment date under the staff's guidance. SAB 118 also describes supplemental disclosures that should accompany the provisional amounts, including the reasons for the incomplete accounting, the additional information or analysis that is needed, and other information relevant to why the registrant was not able to complete the accounting required under ASC 740 in a timely manner. For discussion of the impacts of the Tax Act, refer to Note 10.605.

~~In November 2017,~~Revenue is recognized when performance obligations under the ~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-14,~~terms of a contract with a customer are satisfied which occurs upon the transfer of control of a product. This occurs either upon shipment or delivery of goods, depending on whether the contract is FOB origin or FOB destination. ~~Income Statement – Reporting Comprehensive Income (Topic 220),~~ Revenue ~~Recognition (Topic 605),~~is measured as the amount of consideration expected to be received in exchange for transferring products to a customer.

Contracts sometimes allow for forms of variable consideration including rebates and incentives. In these cases, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring products to customers utilizing the most likely amount method. Rebates and incentives are estimated based on contractual terms or historical experience and a liability is maintained for rebates and incentives that have been earned but are unpaid. As of March 31, 2019 and June 30, 2018, the rebate liability was $254,144 and $243,758, respectively. The rebate liability is included in accrued expenses in the accompanying condensed consolidated balance sheets.

Revenue ~~from Contracts with Customers (Topic 606): Amendments~~is reduced by estimates of potential future contractual discounts including prompt payment discounts. Provisions for contractual discounts are recorded as a reduction to ~~SEC Paragraphs Pursuant to~~revenue in the ~~Staff Accounting Bulletin (“SAB”) No. 116 and SEC Release No. 33-10403~~. This ASU amended, superseded and added certain SEC paragraphs in Topic 220, Topic 605 and Topic 606 to reflect the August 2017 issuance of SAB 116 and SEC Release No. 33-10403. The SEC staff issued SAB 116 to align its revenue guidance with Accounting Standards Codification (“ASC”) 606. For public business entities, this update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the impactperiod sales are recognized. Estimates are made of the ~~adoption~~contractual discounts that will eventually be incurred. Contractual discounts are estimated based on negotiated contracts and historical experience. As of ~~this update on its~~March 31, 2019 and June 30, 2018, the allowance for sales discounts was $14,500 and $0, respectively. The allowance for sales discounts is included in trade accounts receivable, less allowance for doubtful accounts in the accompanying condensed consolidated ~~financial statements.~~balance sheets.

~~In July 2017, the FASB issued ASU 2017-11 –~~The Company made an accounting policy election to account for shipping and handling activities as fulfillment activities. As such, shipping and handling are not considered promised services to our customers. ~~Earnings per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives~~Costs for shipping and ~~Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement~~handling of ~~the Indefinite Deferral for Mandatorily Redeemable Financial Instruments~~products to customers are recorded as cost of ~~Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception.~~sales.
Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Stakeholders asserted that accounting for freestanding and embedded instruments with down round features as liabilities subject to fair value measurement on an ongoing basis creates a significant reporting burden and unnecessary income statement volatility associated with changes in value of an entity’s own share price. That is, current accounting guidance requires changes in fair value of an instrument with a down round feature to be recognized in earnings for both increases and decreases in share price, even though an increase in share price will not cause a down round feature to be triggered and a decrease will cause an adjustment to the strike price only if and when an entity engages in a subsequent equity offering.

~~Part II of this update addresses the difficulty of navigating Topic 480,~~ ~~Distinguishing Liabilities from Equity~~, because of the existence of the extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable non-controlling interests.

The amendments in Part I of this update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round features no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments in Part II of this update re-characterize the indefinite deferral of certain provisions of Topic 48 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. The Company is currently evaluating the impact the adoption of this update will have on its consolidated financial statements and disclosures. This amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.following table disaggregates revenue by major product category:

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.~~ The amendment in this update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. An entity should apply the amendments in this update on a prospective basis. This amendment will be effective for the Company in its fiscal year beginning July 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has early adopted this standard as of July 1, 2017. The Company does not believe the adoption of this standard will have a material impact on its financial reporting.

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Business Combinations (Topic 805), Clarifying the Definition of a Business~~. The Board issued this update to clarify the definition of a business with the objective of assisting entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under Topic 805, there are three elements of a business—inputs, processes, and outputs (collectively referred to as a “set”) although outputs are not required as an element of a business set. The amendments in this update provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business, reducing the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this update:

1.	~~require that a business set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output, and~~

2.	~~remove the evaluation of whether a market participant could replace missing elements.~~

The amendments provide a framework for evaluating whether both an input and a substantive process are present. Lastly, the amendments in this update narrow the definition of the term output so that the term is consistent with how outputs are described in Topic 606. This amendment will be effective for the Company in its fiscal year (including interim periods) beginning July 1, 2018. The Company is currently evaluating the impact the adoption of ASU 2017-01 will have on its consolidated financial statements and disclosures.

In ~~February 2016, the FASB issued~~ ~~ASU No. 2016-02,~~ ~~Leases (Topic 842,)~~ a new guidance on leases. This guidance replaces the prior lease accounting guidance in its entirety. The underlying principle of the new standard is the recognition of lease assets and lease liabilities by lessees for substantially all leases, with an exception for leases with terms of less than twelve months. The standard also requires additional quantitative and qualitative disclosures. The guidance is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The standard requires a modified retrospective approach, which includes several optional practical expedients. Accordingly, the standard is effective for the Company on July 1, 2019. ~~The Company~~ ~~is currently evaluating the impact that this guidance will have on the consolidated financial statements.~~

~~In January 2016, the FASB issued~~ ~~ASU 2016-01,~~ ~~Financial Instruments, a~~ guidance related to financial instruments - overall recognition and measurement of financial assets and financial liabilities. The guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The update to the standard is effective for public companies for interim and annual periods beginning after December 15, 2017. Accordingly, the standard is effective for the Company on July 1, 2018. ~~The Company~~ ~~is currently evaluating the impact that the standard will have on the consolidated financial statements.~~

~~In May 2014, the FASB issued~~ ~~ASU 2014-09,~~ ~~Revenue from Contracts with Customer (Topic 606).~~ ~~This~~ authoritative accounting guidance related to revenue from contracts with customers. This guidance is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2017. Accordingly, the Company will adopt this guidance on July 1, 2018. Companies may use either a full retrospective or a modified retrospective approach to adopt this guidance. The Company is evaluating which transition approach to use and its impact, if any, on its consolidated financial statements.

	Three Months Ended March 31		Nine Months Ended March 31
	2019	2018	2019	2018
Orthopedic Soft Bracing Products	$ 5,510,461	$5,681,928	$17,182,340	$11,380,235
Physical Therapy and Rehabilitation Products	8,973,207	10,694,000	29,576,820	35,479,422
Other	67,851	258,139	298,160	653,714
	$14,551,519	$16,634,067	$47,057,320	$47,513,371

NOTE ~~12.~~11. SUBSEQUENT EVENTS

In April ~~2018,~~2019, the Company ~~paid~~issued 95,249 shares of common stock as payment of dividends with a total value of approximately ~~$191,000 of preferred stock dividends~~$196,000 with respect to the Series A Preferred and Series B Preferred that ~~were~~ accrued during the three months ended March 31, ~~2018. The Company paid the dividends by issuing 65,709 shares of common stock.~~2019.

CAUTIONARY NOTE REGARDING ~~FORWARD-LOOKING~~FORWARD-LOOKING STATEMENTS

~~Information contained in this Form 10-Q, particularly in the following~~This report, including “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations, includes statements considered to be~~Operations” in Part I, Item 2, contains “forward-looking statements” within the ~~safe harbors provided by~~meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “~~Securities Act~~”“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“~~Exchange Act~~”(the “Exchange Act”). ~~These~~The Company may also make forward-looking statements ~~refer~~in other reports filed with the SEC, in materials delivered to shareholders and in press releases. In addition, the Company’s representatives may from time to time make oral forward-looking statements. Forward-looking statements relate to future events and typically address our expected future business and financial performance, referring to our expectations, hopes, beliefs, anticipations, commitments, intentions and strategies regarding the future. They may be identified by the use of words or phrases such as “believes,” “expects,” “anticipates,” “should,” “plans,” “estimates,” “intends,” and “potential,” among others. Forward-looking statements include, but are not limited to, statements ~~regarding~~relating to product development, market acceptance, financial performance, revenue and expense levels in the future, the scope, nature or impact of acquisition, strategic alliance and divestiture activities, and the sufficiency of existing assets to fund future operations and capital spending needs. Actual results could differ materially from the anticipated results or other expectations expressed in such forward-looking statements. The forward-looking statements contained in this report are made as of the date of this report and we assume no obligation to update them or to update the reasons why actual results could differ from those projected in such forward-looking statements, except as required by law.

We have based our forward-looking statements on management’s current expectations and ~~projections~~assumptions about future events and trends affecting our business and industry that are subject to risks and ~~other future events.~~uncertainties. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Forward-looking statements are subject to substantial risks and uncertainties that could cause our future business, financial condition, results of operations or performance to differ materially from our historical results or those expressed or implied in any forward-looking statement contained in this report. Some of the risks and uncertainties that may cause actual results to differ from those expressed or implied in the forward-looking statements are described in the section “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017,~~2018, filed with the ~~Securities and Exchange Commission, or the~~ SEC, ~~or the Form 10-K,~~ as well as in our other public filings with the SEC. In addition, actual results may differ as a result of additional risks and uncertainties of which we are currently unaware or which we do not currently view as material to our business.

You should read this report in its entirety, together with the documents that we file as exhibits to this report and the documents that we incorporate by reference into this report, with the understanding that our future results may be materially different from what we currently expect. The forward-looking statements ~~we make speak only~~contained in this report are made as of the date ~~on which they are made. We expressly disclaim any intent or~~of this report and we assume no obligation to update ~~any forward-looking statements~~them after the date hereof to revise or conform such statements to actual results or to changes in our opinions or ~~expectations, except as required by applicable law or the rules of The Nasdaq Stock Market, LLC.~~expectations. If we do update or correct any forward-looking statements, investors should not conclude that we will make additional updates or corrections.

We qualify all of our forward-looking statements by these cautionary statements.

Dynatronics®,Bird & Cronin®, and Hausmann® are registered trademarks of the Company.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Overview~~

~~Dynatronics Corporation~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations (“~~Company,” “Dynatronics,” “~~we”MD&A”) ~~designs, manufactures~~is designed to provide a reader of our Unaudited Condensed Consolidated Financial Statements and distributes advanced-technology therapeutic medical devices, therapeutic and medical treatment tables, rehabilitation equipment, custom athletic training treatment tables and equipment, institutional cabinetry, orthopedic soft goods, as well as other rehabilitation and therapy products and supplies. Through our various distribution channels, we market and sell our products to physical therapists, chiropractors, athletic trainers, sports medicine practitioners, orthopedists, and other medical professionals, hospitals, and institutions. We operate onNotes thereto that are contained in this quarterly report, with a ~~fiscal year ending June 30. For example, reference to fiscal year 2018 refers to the year ending June 30, 2018.~~

~~Recent Events~~

~~On February 19, 2018, our Board of Directors (“Board”) voted to separate the role of Chairman of the Board~~narrative from the ~~role~~perspective of ~~Chief Executive Officer and appointed Erin Enright as Chairman of~~management. You should also consider this information with the Board. Ms. Enright has been a director of our Company and member of the Board since June 2015. The Board also acted to implement a succession plan for our senior management and appointed a special Board committee to commence a search to identify a successor for Mr. Cullimore as our CEO. The directors who are committee members are Ms. Enright, who is chair of the committee, Scott Klosterman and Brian Larkin. The committee intends to complete its search, if practicable, prior to June 30, 2018, the end of our current fiscal year. After appointment of a new CEO, Mr. Cullimore will continue to serve as a non-employee director and member of the Board.

Mr. Cullimore is continuing to serve as CEO until his successor is appointed and qualified. He had also previously served as President of the Company. That position will not be filled due to a realignment of the legacy Dynatronics modality and therapy products operations completedinformation included in our ~~third fiscal quarter. We announced in a press release~~Annual Report on February 21, 2018, that we had formed a new Therapy Products Division (“TPD”) consisting of our Utah and Tennessee operations. This division will continue to develop, design, manufacture, and distribute innovative modalities and other products that have distinguished us in the industry for many years. We hired Brian D. Baker as President of the TPD division in February 2018. With this new alignment, we are now organized in three divisions, Hausmann, Bird & Cronin, and TPD, with the Presidents of each division reporting directly to the CEO, who now reports to the Chairman of the Board.

~~In connection with the termination of Mr. Cullimore’s employment upon the naming of a successor CEO (“Separation Date”), we and Mr. Cullimore will enter into a Separation and Release Agreement (“Separation Agreement~~”). The Separation Agreement includes a customary release by Mr. Cullimore of certain claims against us that are or may be held by Mr. Cullimore and entitles him to compensation pursuant to certain provision of his employment agreement dated May 1, 2015, including (i) a severance payment equal to $200,000, which represents 12 months of Mr. Cullimore’s base salary in effect immediately prior to the Separation Date, to be paid 50% on the 30th day following the Separation Date and 50% in equal installments over the following six months; (ii) payment of additional severance in the total amount of $500,000, payable in quarterly installments over a two-year period following the Separation Date, (iii) full acceleration of vesting of Mr. Cullimore’s previously granted and unvested restricted stock awards totaling 72,000 shares, (iv) earned but unpaid bonuses, if any, with respect to the fiscal year in which termination occurs, (v) transfer to him of the corporate vehicle used by him at the Separation Date, and (vi) accrued and unpaid salary through the Separation Date. As a result of Mr. Cullimore’s anticipated departure, we recorded a charge of approximately $900,000 in the third fiscal quarter ended March 31, 2018, to accrue the anticipated severance payments and related expenses incurred under his employment agreement. This includes a non-cash compensation expense of $140,000 in connection with the acceleration of the vesting of the restricted stock awards. The Company also paid withholding and related employer tax expense of approximately $87,000 in cash during the quarter, which was settled by withholding shares of stock from the awards having an equivalent value and resulted in the delivery to Mr. Cullimore of approximately 40,000 net shares of common stock.

On May 7, 2018, we implemented a reduction of our workforce by 10 employees to better align our resources with the needs of our business and to focus on improving profitability. We expect to incur a severance charge of approximately $140,000 in our fourth quarter of fiscal 2018.

~~Business Outlook~~

~~Our strategic objective is to accelerate growth both organically and by acquisition. We acquired the assets of Hausmann Industries, Inc. (“Hausmann”) in April 2017 and we acquired the assets of Bird & Cronin, Inc. (“Bird & Cronin”) in October 2017. We believe that these acquisitions have enhanced our market position and improved our operating results, positioning us for positive cash flow.~~

The debt and equity financings completed in connection with these acquisitions strengthened our financial position and provided operating capital. We believe our relationships with Prettybrook Partners LLC and Bank of the West provide us with strategic and financial resources that we expect will facilitate the execution of our strategic objectives.

In the past three years we have invested in executive talent and infrastructure to organize and prepare for additional significant growth. We have added executive talent across the organization including sales, operations, finance, and information technology. The management additions have bolstered our capacity to successfully acquire and integrate additional acquisition targets and to drive improvement in operating results in our current operations.

Our acquisition strategy is focused on acquiring complementary businesses that meet our investment criteria and broaden our product offerings. We continue to evaluate a variety of acquisition opportunities.

Organic growth is also an essential element of our strategic plan. Each division has established strategic plans to stimulate growth through expansion of distribution channels, product innovation or specific initiatives with existing customer base. While organic growth is an essential element of our strategic plan, so is working to improve operating profitability. Our strategic plan for organic growth will be tempered by our emphasis to improve operating profits division by division.

As delivery of healthcare in the United States progresses under legislative reform, we believe there will be increasing demand for rehabilitation and physical therapy products and services. There is increasing pressure to find alternatives to the surgical suite. We believe this will lead to more demand for physical therapy services as a method for avoiding, preventing or delaying the need for surgical interventions. There are orthopedic clinics now embedding physical therapy and rehabilitation within their offering of services in order to better address patient needs in a pre-surgical as well as post-surgical environment. Third-party payers are also demanding better outcomes and structuring reimbursement conventions to reward practitioners who show identifiably improved outcomes. Physical therapy and rehabilitation has always figured prominently in the post-surgical environment to achieve the best outcomes following orthopedic surgical procedures. With the new reimbursement paradigms, the importance of physical therapy should increase. The concept of “pre-habilitation” to avoid, prevent or delay surgical interventions, combined with traditional rehabilitation to achieve the best post-surgical outcomes provides a positive environment for growth of physical therapy and rehabilitation services and products in the future.

We also service the athletic training market. The growth of college athletics – particularly in the “Power Five” conferences – is creating a demand for the best and most impressive training facilities. We are working to tap into that demand by offering our custom designed furniture and proprietary products. The acquisition of Hausmann boosts this effort as its ProTeam™ line of products addresses this same market.

~~In summary, based on our defined strategic initiatives we are focusing our resources in the following areas:~~

●	~~Joining resources of the acquired entities to maximize cross-selling opportunities without disrupting each entity’s current channels of distribution;~~

●	~~Exploring operating synergies with acquired companies while respecting established operating paradigms at each operation;~~

●	~~Seeking to improve distribution of our products through expansion of sales channels;~~

●	~~Working to rationalize unprofitable product lines and improve operating profits on profitable product lines;~~

●	~~Improving gross profit margins by, among other initiatives, increasing market share of manufactured products with emphasis on our high margin products;~~

●	~~Maintaining our position as a leader and innovator in our markets through the promotion of new products;~~

●	Exploring strategic business acquisitions to leverage and complement our competitive strengths, increase market reach, and allow us to ultimately broaden our footprint in the physical medicine markets; and

●	~~Attending appropriate investor conferences to better publicize our strategic plans, attract new capital to support the business development strategy and identify other acquisition targets.~~

~~Results of Operations~~

~~The following discussion and analysis of our financial condition and results of operations for the three and nine months ended~~ ~~March 31, 2018, should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto appearing in Part I, Item 1 of this report, and our~~ Form 10-K for the ~~fiscal~~ year ended June 30, ~~2017, which includes audited consolidated financial statements for~~2018, and our other filings with the ~~year then ended. We~~SEC, including our quarterly and current reports that we have filed since June 30, 2018 through the date of this report. In the following MD&A, we have rounded many numbers to the nearest one thousand ~~dollars in this analysis.~~dollars. These numbers should be read as approximate. All inter-company transactions have been eliminated. Our fiscal year ends on June 30. For example, reference to fiscal year 2019 refers to the year ending June 30, 2019. This report covers the three and nine months ended March 31, 2019. Results of operations for the ~~third fiscal quarter~~three and nine months ended March 31, ~~2018~~,2019 are not necessarily indicative of the results that may be achieved for the full fiscal year ending June 30, ~~2018. This quarterly report includes the financial results~~2019.

Overview

Dynatronics Corporation (“Company,” “Dynatronics,” “we”) is a medical device company committed to providing high-quality restorative products designed to accelerate one to their optimal health. The Company designs, manufactures, and sells a broad range of ~~the newly acquired Bird & Cronin division. In connection with that acquisition, we filed a Current Report on Form 8-K on October 6, 2017, which includes additional information about the transaction~~products for clinical use in physical therapy, rehabilitation, pain management, and ~~about the business of Bird & Cronin.~~athletic training. Through its distribution channels, Dynatronics markets and sells to orthopedists, physical therapists, chiropractors, athletic trainers, sports medicine practitioners, clinics, hospitals, and consumers.

Results of Operations

Net Sales

Net sales ~~increased $8,918,000,~~decreased $2,082,000, or ~~115.6%~~12.5%, to ~~$16,634,000~~$14,552,000 for the quarter ended March 31, ~~2018~~,2019, compared to net sales of ~~$7,716,000 for the quarter ended~~ $~~March 31, 2017. The year-over-year increase in net sales for the quarter ended~~ ~~March 31, 2018~~16,634,000 ~~was driven by our acquisitions of Hausmann in April 2017 and Bird & Cronin in October 2017, that together contributed a combined $9,690,000 in net sales in~~for the quarter ended March 31, 2018. ~~These increases were partially offset by a decline of approximately $772,000, or 9.5%,~~The year-over-year decrease in net sales ~~at TPD,~~was driven primarily ~~due~~by lower sales of physical therapy and rehabilitation products of approximately $1,721,000 compared to athe prior year period. The lower ~~volume~~sales are reflective of ~~therapeutic modality~~general softness in demand primarily in our direct sales channel, transitions in our sales force, and ~~distributed supplies sales.~~our product rationalization strategy.

~~For~~Net sales decreased $456,000, or 1.0%, to $47,057,000 for the nine months ended March 31, ~~2018, net sales increased $22,921,000, or 93.2%, to $47,513,000,~~2019, compared to net sales of ~~$24,592,000~~ $47,513,000for ~~the corresponding period ended~~ ~~March 31, 2017. The year-over-year increase in net sales was attributable primarily to the acquisitions of Hausmann and Bird & Cronin, which contributed a combined $24,428,000 in net sales in~~ the nine months ended March 31, ~~2018. These increases were partially offset by a decline of approximately $1,506,000, or 6.1%,~~2018. The year-over-year decrease in net sales ~~at TPD,~~included an increase of $5,803,000 attributable to the acquisition of Bird & Cronin offset primarily ~~due~~by lower sales of physical therapy and rehabilitation equipment products of approximately $5,903,000 compared to athe prior year period. The lower ~~volume~~sales are reflective of ~~distributed capital~~general softness in demand primarily in our direct sales channel, transitions in our sales force, and ~~distributed supplies sales.~~our product rationalization strategy.

Gross Profit

Gross profit for the quarter ended March 31, ~~2018~~2019 decreased ~~increased~~ ~~$2,590,000,~~$887,000, or about ~~95.9%~~16.8%, to ~~$5,292,000,~~$4,405,000, or ~~31.8%~~ 30.3% of net sales. By comparison, gross profit for the quarter ended March 31, ~~2017~~2018 was ~~$2,702,000,~~$5,292,000, or ~~35.0%~~31.8% of net sales. ~~The year-over-year increase in gross~~Gross profit ~~was attributable to the acquisitions of Hausmann and Bird & Cronin that contributed a combined $3,117,000 in gross profit in~~for the quarter ended March 31, ~~2018. These increases were partially offset~~2019 was primarily adversely affected by ~~a decrease of approximately $527,000 in gross profit from TPD, primarily attributable to~~ lower sales, which accounted for approximately ~~$296,000~~$631,000 in lower gross profit, and by reduced gross margin percentage, ~~resulting~~which resulted in ~~$231,000~~$255,000 in lower gross profit. The year-over-year decrease in gross margin percentage to 30.3% from 31.8% ~~from 35.0%~~ was ~~due~~caused primarily ~~to inclusion of Hausmann~~by a change in channel mix for our physical therapy and rehabilitation products as sales ~~which had a lower gross margin percentage~~ in ~~the quarter, as well as reduced gross margin at TPD, primarily attributable to reduced margins on freight charged to customers and a write-down of inventory due to obsolescence.~~our direct channels decreased proportionally more than in our distribution channels.

Gross profit for the nine months ended March 31, ~~2018~~2019 decreased ~~increased~~ ~~$6,831,000,~~$769,000, or about ~~79.7%~~5.0%, to ~~$15,401,000,~~$14,632,000, or ~~32.4%,~~31.1% of net sales~~, compared to~~. By comparison, gross profit for the nine months ended March 31, ~~2017~~2018 was $of15,401,000, or 32.4 ~~$8,570,000, or 34.9%~~% of net sales. The year-over-year ~~increase~~decrease in gross profit ~~was driven by~~included an increase of $1,844,000 attributable to the ~~acquisitions~~acquisition of ~~Hausmann and~~ Bird & Cronin, ~~that contributed a combined $7,883,000 in gross profit in the nine months ended~~ ~~March 31, 2018. These increases were partially~~ offset by ~~a decrease of approximately $1,052,000 in gross profit at TPD, primarily attributable to~~ lower sales, which accounted for approximately ~~$477,000~~$1,963,000 in lower gross profit, and by reduced gross margin percentage resulting in ~~$575,000~~$650,000 in lower gross profit. The year-over-year decrease in gross margin percentage to ~~32.4%~~31.1% from ~~34.9%~~32.4 % was ~~due~~caused primarily ~~to the inclusion of Hausmann~~by a change in channel mix for our physical therapy and rehabilitation products as sales which had a lower gross margin percentage as well as reduced gross margin at TPD, primarily attributable to reduced margins on freight charged to customers and a write-down of inventory due to obsolescence.in our direct channels decreased proportionally more than in our distribution channels.

Selling, General and Administrative Expenses

Selling, general, and administrative (“SG&A”&A”) expenses ~~increased $3,060,000,~~decreased $1,638,000, or ~~97.0%~~25.4%, to ~~$6,213,000~~$4,818,000 for the quarter ended March 31, ~~2018~~,2019, compared to ~~$3,153,000~~$6,456,000 for the quarter ended March 31, ~~2017~~.2018. Selling expenses represented $460,000 of the decrease in SG&A expenses, primarily due to lower fixed sales management salaries and expenses and reduced commissions on lower sales in the quarter. General and administrative (“G&A”) expenses decreased $950,000 compared to the prior year period. The primary components of the decrease in G&A expenses included decreases of $785,000 in severance expense and $165,000 in other G&A expenses. Research and development (“R&D”) expenses for the quarter ended March 31, 2019 decreased $228,000, or 94.1%, to $14,000 from $242,000in the quarter ~~included $917,000~~ended March 31, 2018. The decrease is primarily due to the re-purposing of our engineering resources to operational improvements.

SG&A expenses ~~associated with Hausmann and Bird & Cronin operations. This increase in selling~~decreased $1,107,000, or 6.8%, to $15,087,000 for the nine months ended March 31, 2019, compared to $16,194,000 for the nine months ended March 31, 2018. Selling expenses decreased $791,000 compared to the prior year period, ~~was partially~~which included an increase of $444,000 associated with the addition of Bird & Cronin operations, offset by ~~$167,000~~$1,235,000 in lower selling ~~costs at TPD~~expenses due primarily to lower ~~commissions on lower~~fixed sales ~~at the division during the quarter. This resulted in selling expenses in the current quarter accounting for $750,000 of the $3,060,000 increase in SG&A expenses. General~~management salaries and ~~administrative (“G&A”) expenses represented $2,310,000 of the $3,060,000 increase in SG&A expenses for the quarter ended~~ ~~March 31, 2018. Increases in~~reduced commissions. G&A expenses ~~included $1,672,000 from operations at Hausmann and~~increased $692,000 compared to the prior-year period, driven primarily by: (1) a $1,265,000 increase associated with the addition of Bird & Cronin ~~$840,000~~operations, (2) a $362,000 increase in other G&A expenses, (3) a decrease of $658,000 in severance ~~expense,~~expenses, and ~~$140,000 in stock-based compensation, partially offset by $342,000 in decreased G&A expenses primarily attributable to~~(4) a ~~reduction~~decrease of $277,000 in acquisition ~~expenses compared to the prior year period.~~

~~SG&A expenses for the nine months ended~~ ~~March 31, 2018~~ ~~increased $6,377,000, or 72.7%, to $15,146,000, compared to $8,769,000 for the nine months ended~~ ~~March 31, 2017~~. Selling expenses included $2,087,000 of selling expenses associated with Hausmann and Bird & Cronin operations. This increase in selling expenses compared to the prior year period was partially offset by $370,000 lower selling costs at TPD due primarily to lower commissions on lower sales at the division during the fiscal year. This resulted in selling expenses in the current quarter accounting for $1,718,000 of the $6,377,000 increase in SG&A expenses. ~~G&A expenses represented $4,659,000 of the $6,377,000 increase in SG&A expenses for the nine months ended~~ ~~March 31, 2018~~. Increases in G&A expenses included $3,935,000 from operations at Hausmann and Bird & Cronin, $840,000 in severance expense and $140,000 in stock based compensation, partially offset by $256,000 in decreased G&A expenses primarily attributable to a reduction in acquisition expenses compared to the prior year period.

~~Research and Development Expenses~~

~~Research and development (“R&D”) expenses for the quarter ended~~ ~~March 31, 2018~~ ~~increased $11,000, or 5.1%, to $242,000 from approximately $231,000 in the quarter ended~~ ~~March 31, 2017~~. R&D expenses for the nine months ended March 31, ~~2018~~ ~~increased $229,000,~~2019 decreased $1,008,000, or ~~27.9%~~96.2%, to ~~$1,048,000~~$40,000 from ~~approximately $819,000~~$1,048,000 in the nine months ended March 31, ~~2017~~.2018. The ~~increase in~~decrease is primarily due to the ~~nine months ended~~ ~~March 31, 2018~~ ~~was driven by $325,000 in costs incurred on a project which was abandoned during the quarter ended December 31, 2017, offset by a reduction in other R&D expenses~~re-purposing of ~~approximately $96,000 for the nine months ended~~ ~~March 31, 2018~~.our engineering resources to operational improvements.

Net Loss Before Income Tax Provision

Pre-tax loss for the quarter ended March 31, ~~2018~~2019 was ~~approximately $1,277,000,~~$531,000 compared to a pre-tax loss of ~~$755,000~~$1,277,000 for the quarter ended March 31, ~~2017~~.2018. The ~~$522,000 increase~~$746,000 improvement in pre-tax loss ~~for the quarter~~ was primarily attributable to ~~$2,590,000 higher gross profit,~~a decrease of $1,638,000 in SG&A expenses, partially offset by ~~$3,060,000 increased SG&A expenses and $11,000 higher research and development expenses.~~a reduction of $886,000 in gross profit. Pre-tax loss for the nine months ended March 31, ~~2018~~2019 was ~~approximately $1,064,000,~~$452,000 compared to ~~a pre-tax loss of $1,136,000~~$1,064,000 for the nine months ended March 31, ~~2017~~.2018. The ~~$72,000~~$612,000 improvement in pre-tax loss ~~for the nine months~~ was ~~primarily~~ attributable to ~~$6,831,000 higher gross profit, offset by $6,377,000~~a decrease of $1,107,000 in ~~increased~~ SG&A expenses and ~~$229,000~~a $375,000 gain on revaluation of the Bird & Cronin acquisition earn-out liability, offset by a decrease of $769,000 in gross profit and an increase of $89,000 in interest expense caused primarily by higher ~~research~~borrowings on our line of credit.

Income Tax Provision

Income tax provision was $33,000 and ~~development expenses. These changes in both~~$237,000 for the quarter and nine months ended March 31, ~~2018 compared~~2019, respectively. This compares to ~~the prior year~~ were primarily attributable to the addition of the operations of Hausmann and Bird & Cronin during the nine months ended March 31, 2018, as well as the impact of (i) R&D costs of $325,000 related to the project abandoned in the second quarter of fiscal year 2018, (ii) severance expense of $840,000 in the third quarter of fiscal year 2018, (iii) stock-based compensation expense of $140,000 in the third quarter of fiscal year 2018, and (iv) transaction-related costs of $314,000 in the nine months ended ~~March 31, 2018~~.

~~Income Tax Provision (Benefit)~~

~~On December 22, 2017, the U.S. government enacted comprehensive tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act~~”). The Tax Act makes significant changes to the U.S. Internal Revenue Code of 1986, as amended. Among other items, the Tax Act permanently reduces the federal corporate tax rate to 21% effective January 1, 2018. As our fiscal year end falls on June 30, the statutory federal corporate tax rate for fiscal 2018 will be prorated to 27.5%, with the statutory rate for fiscal 2019 and beyond at 21%.

~~Income~~income tax provision ~~was~~of $0 for both the quarter and nine months ended March 31, ~~2018, respectively. This compares to income tax provision of $0~~2018. See Liquidity and Capital Resources - Deferred Income Taxes below for the quarter and nine months ended March 31, 2017, respectively. As a consequence of the Tax Act, we decreased the valuation allowance on our net deferred income tax assets equal to the one-time revaluation of our net deferred tax assets at the lower tax rate.more information.

Net Loss

Net loss was ~~$1,277,000~~$563,000 for the quarter ended March 31, ~~2018,~~2019, compared to a net loss of ~~$755,000~~$1,277,000 for the quarter ended March 31, ~~2017.~~2018. Net loss was ~~$1,064,000~~$689,000 for the nine months ended March 31, ~~2018,~~2019, compared to a net loss of ~~$1,136,000~~$1,064,00 for the nine months ended March 31, ~~2017.~~2018. The reasons for the ~~changes~~change in net loss are the same as those ~~for pre-tax losses above~~given under the heading Net Loss Before Income Tax and Income Tax Provision.

Net Loss Attributable to Common Stockholders

Net loss attributable to common stockholders ~~increased $619,000~~decreased $708,000 to ~~$1,468,000~~$760,000 for the quarter ended March 31, ~~2018,~~2019, compared to ~~$849,000~~net loss attributable to common stockholders of $1,468,000 for the quarter ended March 31, ~~2017.~~2018. The ~~$619,000 year-over-year increase~~decrease in net loss attributable to common stockholders for the quarter is due to approximately $97,000 of additional preferred stock dividends associated with 390,000 shares of Series A Preferred issued in December 2016 and 1,559,000 shares of Series B Preferred issued in April 2017. The increase was also attributableprimarily to a ~~$522,000 increase~~$714,000 decrease in net ~~loss in the quarter ended March 31, 2018, compared to the same quarter of the prior year.~~loss. On a per share basis, net loss attributable to common stockholders was ~~$0.18~~$0.09 per share for the quarter ended March 31, ~~2018,~~2019, compared to ~~$0.28~~$0.18 per share for the quarter ended March 31, ~~2017.~~

2018. Net loss attributable to common stockholders ~~increased $988,000~~decreased $1,497,000 to ~~$2,771,000 ($0.45 per share)~~$1,275,000 for the nine months ended March 31, ~~2018,~~2019, compared to ~~$1,783,000 ($0.61 per share)~~net loss attributable to common stockholders of $2,771,000 for the nine months ended March 31, ~~2017.~~2018. The ~~increase~~decrease in net loss attributable to common stockholders for the nine months is due toprimarily to: (1) a ~~reduction~~$97,000 decrease in preferred stock dividends; and (2) a $1,024,000 decrease in deemed dividends and accretion of discounts partially offset by a $375,000 decrease in net loss. On a per share basis, net loss ~~of approximately $71,000 in~~attributable to common stockholders was $0.16 per share for the nine months ended March 31, ~~2018,~~2019, compared to $0.45 per share for the same period of the prior year, offset by $411,000 of additional preferred stock dividends associated with 390,000 shares of Series A Preferred issued in December 2016, 1,559,000 shares of Series B Preferred issued in April 2017 and 2,800,000 shares of Series C Preferred and 1,581,935 shares of Series D Preferred issued in October 2017. The increase was also attributable to an increase of approximately $454,000 in additional deemed dividends and approximately $194,000 in accretion of discounts associated with the Series C Preferred shares and associated common stock purchase warrants issued in connection with the Bird & Cronin Acquisition in comparison to deemed dividends associated with Series A Preferred in December 2016.nine months ended March 31, 2018.

The deemed dividends reflect the difference between the underlying common stock value of the issued preferred shares as if converted, based on the closing price of our common stock on the date of the issuance, less the amount of the purchase price assigned to the preferred shares in an allocation of the purchase price between the preferred shares and the common stock warrants that were issued with the preferred shares.

Liquidity and Capital Resources

We have historically financed operations through cash from operating activities, available cash reserves, borrowings under a line of credit facility (see, Line of Credit, below) and ~~the~~ proceeds from the ~~sales~~sale of our equity securities. During the quarter and nine months ended March 31, 2019, we had positive cash flows from operating activities. We ~~expect~~believe that our existing revenue stream, cash flows from operating activities, current capital resources, and borrowing availability under the line of credit provide sufficient liquidity to ~~obtain capital for future acquisitions using borrowings and proceeds from debt and equity offerings.~~ fund operations through at least May 15, 2020.

Working capital was ~~$8,391,000~~$5,824,000 as of March 31, ~~2018,~~2019, compared to working capital of ~~$5,834,000~~$6,837,000 as of June 30, ~~2017.~~2018. The current ratio was ~~1.6~~1.4 to 1 as of March 31, ~~2018~~2019 and ~~1.8~~1.5 to 1 as of June 30, ~~2017.~~2018.

Cash and Cash Equivalents

Our cash and cash equivalents position ~~increased $1,243,000~~decreased $1,282,000 to ~~$1,497,000~~$414,000 as of March 31, ~~2018,~~2019, compared to ~~$255,000~~$1,696,000 as of June 30, ~~2017.~~2018. The primary ~~sources~~source of cash in the nine months ended March 31, ~~2018, were (i) net proceeds of~~2019, was approximately $6,600,000 from the sale of our Series C Preferred and warrants in connection with the acquisition of Bird & Cronin, (ii) net borrowings of $4,371,000 under our line of credit, and (iii) approximately $105,000$1,552,000 of net cash provided by operating activities. The primary use of cash in the nine months ended March 31, 2019 was approximately $1,493,000 in net payments on the line of credit and $913,000 in payments of acquisition holdbacks.

Accounts Receivable

Trade accounts receivable, net of allowance for doubtful accounts, ~~increased~~decreased approximately ~~$1,836,000,~~$957,000, or ~~34.8%~~12.3%, to ~~$7,117,000~~$6,854,000 as of March 31, ~~2018,~~2019, from ~~$5,281,000~~$7,811,000 as of June 30, ~~2017. The increase was primarily due to the acquisition of Bird & Cronin that added $2,064,000 in~~2018. Trade accounts receivable ~~as of March 31, 2018.~~represents amounts due from our customers including dealers and distributors, medical practitioners, clinics, hospitals, colleges, universities and sports teams. We believe that our estimate of the allowance for doubtful accounts is adequate based on our historical experience and relationships with our customers. Accounts receivable are generally collected within approximately 3040 days of invoicing.

Inventories

Inventories, net of reserves, increased ~~$4,992,000~~$231,000 or ~~67.5%~~2.1%, to ~~$12,389,000~~$11,219,000 as of March 31, ~~2018,~~2019, compared to ~~$7,398,000~~$10,988,000 as of June 30, ~~2017. The increase was driven by the acquisition of Bird & Cronin, which added approximately $4,853,000 of net inventory as of March 31,~~ 2018. Inventory levels fluctuate based on timing of large inventory purchases from domestic and overseas suppliers as well as variations in sales and production activities. We believe that our allowance for inventory obsolescence is adequate based on our analysis of inventory, sales trends, and historical experience.

Accounts Payable

Accounts payable increased approximately ~~$986,000~~$836,000 or ~~42.2%~~24.5%, to ~~$3,320,000~~$4,249,000 as of March 31, ~~2018,~~2019, from ~~$2,335,000~~$3,413,000 as of June 30, ~~2017.~~2018. The increase in accounts payable was driven primarily by the ~~acquisition~~timing of ~~Bird & Cronin, which added approximately $860,000 of accounts payable at March 31, 2018.~~purchases and payments.

Line of Credit

Our line of credit balance ~~increased $4,371,000~~decreased $1,493,000 to ~~$6,543,000~~$4,793,000 as of March 31, ~~2018,~~2019, compared to ~~$2,172,000~~$6,286,000 as of June 30, ~~2017.~~2018. The ~~increase~~decrease was driven primarily by the use of ~~approximately $2,350,000 for the acquisition of Bird & Cronin on October 2, 2017 and an increase in our~~positive cash ~~balance by approximately $1,243,000 with the remaining increase being used to fund working capital requirements.~~flows from operating activities.

Debt

Long-term debt, excluding current installments, decreased ~~$116,000~~$129,000 to ~~$345,000~~$174,000 as of March 31, ~~2018,~~2019, compared to ~~$462,000~~$303,000 as of June 30, ~~2017.~~2018. Our long-term debt is primarily comprised of the mortgage loan on our office and manufacturing facility in Tennessee and also includes loans related to equipment and a vehicle. ~~The principal balance on the mortgage loan was approximately $412,000 of which $275,000 is classified as long-term debt, with monthly principal and interest payments of $13,278 through January 2021.~~

In conjunction with the sale and leaseback of our corporate headquarters in August 2014, we entered into a $3,800,000 lease for a 15-year term with an investor group. That sale generated a profit of $2,300,000 which was deferred and is being recognized monthly over the life of the lease at $13,000 per month, or approximately $150,000 per year. The building lease ~~that we treated~~is recorded as a capital lease ~~valued at $3,800,000. We are amortizing~~with the ~~capital lease asset~~related amortization being recorded on a straight line basis over 15 years at approximately ~~$21,000~~$252,000 per month, or $63,000 per quarter. Accumulated amortization of the capital lease asset was approximately $924,000 at March 31, 2018. The building sale resulted in a profit of $2,300,000 that is treated as a deferred gain that is amortized as an offset to amortization expense over the life of the lease at $12,500 per month, or approximately $37,500 per quarter. The balance of the deferred gain at March 31, 2018 was approximately $1,718,000.year. Lease payments, currently approximately ~~$29,000,~~$27,000, are payable monthly and increase annually by approximately 2% per year over the life of the lease. ~~The balance of~~Total accumulated amortization related to the ~~capital lease liability was~~leased building is approximately ~~$3,137,000~~$1,176,000 at March 31, ~~2018.~~2019. Imputed interest for the quarter ended March 31, ~~2018,~~2019, was approximately ~~$44,000.~~$42,000.

Deferred Income ~~Tax Assets~~Taxes

A valuation allowance is required when there is significant uncertainty as to the realizability of deferred income tax assets. The ability to realize deferred income tax assets is dependent upon our ability to generate sufficient taxable income within the carryforward periods provided for in the tax law for each tax jurisdiction. We have determined that we do not meet the “more likely than not” threshold that deferred income tax assets will be realized. Accordingly, a valuation allowance is required. Any reversal of the valuation allowance in future periods will favorably impact our results of operations in the period of reversal. As of March 31, ~~2018~~2019 and June 30, ~~2017,~~2018, we recorded a full valuation allowance against our net deferred income tax assets. ~~This resulted in no reported income~~As a result of a temporary book to tax ~~expense~~difference associated with the ~~operating profit reported during~~amortization of goodwill for tax purposes, income tax expense is $33,000 for the three months and $237,000 for the nine months ended March 31, ~~2018~~.

~~Inflation~~

~~Our revenues~~2019 and ~~net loss have not been unusually affected by inflation or price increases for raw materials and parts from vendors.~~the balance of a related deferred tax liability is $237,000 as of March 31, 2019.

Stock Repurchase Plans

We have a stock repurchase plan available to us at the discretion of the Board of Directors. Approximately $449,000 remained of this authorization as of March 31, ~~2018.~~2019. No purchases have been made under this plan since September 28, 2011.

Off-Balance Sheet Arrangements

As of March 31, ~~2018,~~2019, we had no off-balance sheet arrangements.

Critical Accounting Policies

The preparation of our financial statements requires that we make estimates and judgments. We base these on historical experience and on other assumptions that we believe to be reasonable. Our critical accounting policies are discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Form 10-K for the year ended June 30, ~~2017.~~2018. There have been no material changes to the critical accounting policies previously disclosed in that report.

I tem 3. Quantitative and Qualitative Disclosures ~~About~~about Market Risk

There have been no material changes tofrom the information ~~from that~~ presented ~~in our Form 10-K~~ for the year ended June 30, ~~2017.~~2018.

Item 4.4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information that is required to be disclosed in our reports that we file with the SEC under the Exchange Act is recorded, processed, summarized, and reported within the time periods that are specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial and accounting officer), as appropriate, to allow timely decisions regarding any required disclosure. In designing and evaluating these disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

~~Under the supervision and with the participation~~As of ~~our management, including our Chief Executive Officer and Chief Financial Officer,~~March 31, 2019, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) asunder the supervision and with the participation of ~~March 31, 2018.~~our management, including our Chief Executive Officer and Chief Financial Officer. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, ~~2018.~~2019.

Changes in Internal Control over Financial Reporting

On October 2, 2017 we acquired the assets of Bird & Cronin. We have established oversight, procedures, and controls over financial reporting to accurately consolidate the financial statements of Bird & Cronin and to properly reflect acquisition-related accounting and disclosures. We are continuing to evaluate the design of internal controls over financial reporting for the Bird & Cronin subsidiary.

~~Except as described above, there~~There were no changes in our internal control over financial reporting (as defined in ~~Rule~~Rules 13a-15(f) ~~under~~and 15d-15(f) of the Exchange Act) during the quarter ended March 31, ~~2018~~2019 that ~~have~~ materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

I~~tem~~Item 6. Exhibits

(a) Exhibits.Unless indicated below, all exhibits are provided with this filing

~~3.1(a)~~ Exhibit Number	~~Amended and Restated Articles of Incorporation of Dynatronics Corporation, incorporated by reference to~~ Exhibit ~~3.1 to Registration Statement on Form S-3 filed January 27, 2017~~

~~3.1(b)~~	Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock of Dynatronics Corporation, incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K, filed April 4, 2017

~~3.1(c)~~	Certificate of Designation of Rights and Preferences of Series C Non-Voting Convertible Preferred Stock as filed with the Utah Division of Corporations and Commercial Code September 29, 2017, incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed October 6, 2017

~~3.1(d)~~	Certificate of Designation of Rights and Preferences of Series D Non-Voting Convertible Preferred Stock as filed with the Utah Division of Corporations and Commercial Code September 29, 2017, incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K filed October 6, 2017

~~10.1~~	Asset Purchase Agreement, dated September 26, 2017, by and between Dynatronics Corporation and Bird & Cronin, Inc., incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed September 27, 2017)

~~10.2~~	Lease Agreement, dated October 2, 2017, by and between Dynatronics Corporation and Trapp Road Limited Liability Company, incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed October 6, 2017

~~10.3~~	Securities Purchase Agreement dated September 26, 2017, by and between Dynatronics Corporation and each of the Investors signatory thereto, incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed September 27, 2017

~~10.4~~	Form of Registration Rights Agreement to be entered into by and between Dynatronics Corporation and each Investor signatory thereto, incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K filed September 27, 2017

~~10.5~~	Form of Registration Rights Agreement to be entered into by and between Dynatronics Corporation and Bird & Cronin, Inc., incorporated by reference to Exhibit 10.5 to Current Report on Form 8-K filed September 27, 2017

~~10.6~~	Modification Agreement, dated October 2, 2017 among Dynatronics Corporation, Hausmann Enterprises, LLC and Bird & Cronin, LLC as Borrowers and Bank of the West, incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K filed October 6, 2017

11	~~Computation of Net Income per Share (included in Notes to Consolidated Financial Statements)~~
	Description
31.1	Certification under Rule 13a-14(a)/15d-14(a) of principal executive officer

31.2	Certification under Rule 13a-14(a)/15d-14(a) of principal financial officer and principal accounting officer

32.1	~~Certifications under Section~~Certificate pursuant to section 18 U.S.C. Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 ~~(18~~of principal executive officer*

32.2	Certificate pursuant to section 18 U.S.C. ~~Section 1350)~~Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 of principal financial officer and principal accounting officer*

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

*This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the registrant specifically incorporates it by reference

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DYNATRONICS CORPORATION

Date: ~~May15, 2018~~May 14, 2019	By:	/s/ ~~Kelvyn H. Cullimore, Jr.~~Christopher R. von Jako, Ph.D.
		~~Kelvyn H. Cullimore, Jr.~~Christopher R. von Jako, Ph.D.
		~~President and~~ Chief Executive Officer ~~(Principal~~ (Principal Executive Officer)



Date: May ~~15, 2018~~14, 2019	By:	/s/ David A. Wirthlin
		David A. Wirthlin
		Chief Financial ~~Officer(Principal~~Officer (Principal Financial and Accounting Officer)

1816

	Net Sales	Net Loss
Unaudited supplemental pro forma July 1, 2017 to March 31, 2018	$53,968,355	$(1,017,788)
Unaudited supplemental pro forma July 1, 2016 to June 30, 2017	$60,027,677	$(285,951)