Dynatronics (DYNT) 10-Q 14 Nov 13 2014 Q1 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information	3 Months Ended
	Sep. 30, 2013	Nov. 12, 2013
Document and Entity Information	'	'
Entity Registrant Name	'DYNATRONICS CORP	'
Document Type	'10-Q	'
Document Period End Date	30-Sep-13	'
Amendment Flag	'false	'
Entity Central Index Key	'0000720875	'
Current Fiscal Year End Date	'--06-30	'
Entity Filer Category	'Smaller Reporting Company	'
Entity Current Reporting Status	'Yes	'
Entity Voluntary Filers	'No	'
Entity Well-known Seasoned Issuer	'No	'
Document Fiscal Year Focus	'2014	'
Document Fiscal Period Focus	'Q1	'
Entity Common Stock, Shares Outstanding	'	2,518,904

Consolidated_Balance_Sheets

Consolidated Balance Sheets (USD $)	Sep. 30, 2013	Jun. 30, 2013
Current assets:	'	'
Cash and cash equivalents	$220,660	$302,050
Trade accounts receivable, less allowance for doubtful accounts of $269,071 as of September 30, 2013 and $247,708 as of June 30, 2013	3,256,432	3,246,712
Other receivables	23,310	27,197
Inventories, net	6,255,317	6,407,553
Prepaid expenses and other	592,605	506,836
Prepaid income taxes	'	'
Current portion of deferred income tax assets	400,100	389,101
Total current assets	10,748,424	10,879,449
Other Assets:	'	'
Property and equipment, net	3,231,493	3,324,947
Intangible assets, net	268,918	280,078
Other assets	404,154	422,672
Deferred income tax assets, net of current portion	247,167	197,441
Total assets	14,900,156	15,104,587
Current liabilities:	'	'
Current portion of long-term debt	321,501	322,573
Line of credit	3,616,601	3,496,390
Warranty reserve	166,696	178,148
Accounts payable	2,453,441	2,751,894
Accrued expenses	388,855	347,221
Accrued payroll and benefits expense	325,318	216,266
Income tax payable	29,169	21,369
Total current liabilities	7,301,581	7,333,861
Long-Term Liabilities	'	'
Long-term debt, net of current portion	1,479,490	1,561,776
Total liabilities	8,781,071	8,895,637
Commitments and contingencies	'	'
Stockholders' equity:	'	'
Common stock, no par value: Authorized 50,000,000 shares; issued 2,518,904 shares as of September 30, 2013 and June 30, 2013	7,096,860	7,078,941
Accumulated deficit	-977,775	-869,991
Total stockholders' equity	6,119,085	6,208,950
Total liabilities and stockholders' equity	$14,900,156	$15,104,587

Consolidated_Balance_Sheets_Pa

Consolidated Balance Sheets Parenthetical (USD $)	Sep. 30, 2013	Jun. 30, 2013
Consolidated Balance Sheets Parenthetical	'	'
Allowance for doubtful accounts	$269,071	$247,708
Common stock par value	'	'
Common stock shares authorized	50,000,000	50,000,000
Common stock shares issued	2,518,904	2,518,904

Consolidated_Statements_of_Inc

Consolidated Statements of Income (USD $)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Consolidated Statements of Income	'	'
Net sales	$7,055,428	$7,206,025
Cost of sales	4,474,359	4,495,177
Gross profit	2,581,069	2,710,848
Selling, general, and administrative expenses	2,379,369	2,459,104
Research and development expenses	314,823	266,268
Operating loss	-113,123	-14,524
Other income (expense):	'	'
Interest income	3	329
Interest expense	-59,913	-66,767
Other income, net	4,524	7,353
Net other income (expense)	-55,386	-59,085
Loss before income taxes	-168,509	-73,609
Income tax benefit	60,725	22,464
Net loss	($107,784)	($51,145)
Basic and diluted net loss per common share	($0.04)	($0.02)
Weighted-average common shares outstanding:	'	'
Basic	2,518,904	2,537,730
Diluted	2,518,904	2,537,730

Consolidated_Statements_of_Cas

Consolidated Statements of Cash Flows (USD $)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities:	'	'
Net loss	($107,784)	($51,145)
Depreciation and amortization of property and equipment	106,422	109,167
Amortization of intangible and other assets	35,384	11,160
Stock-based compensation expense	17,919	24,812
Change in deferred income tax assets	-60,725	-22,464
Provision for doubtful accounts receivable	24,000	45,000
Provision for inventory obsolescence	30,000	30,000
Change in Receivables	-29,832	-80,206
Change in Inventories	122,236	-21,994
Change in Prepaid expenses and other assets	-83,052	-8,344
Change in Prepaid income taxes	20,248	27,771
Change in Accounts payable and accrued expenses	-171,668	-109,650
Net cash provided by operating activities	-96,852	-45,893
Cash flows from investing activities:	'	'
Purchase of property and equipment	-24,700	-25,602
Net cash used in investing activities	-24,700	-25,602
Cash flows from financing activities:	'	'
Principal payments on long-term debt	-80,049	-96,866
Net change in line of credit	120,211	175,737
Net cash provided by (used in) financing activities	40,162	78,871
Net change in cash and cash equivalents	-81,390	7,376
Cash and cash equivalents at beginning of the year	302,050	278,263
Cash and cash equivalents at end of the year	220,660	285,639
Supplemental disclosure of cash flow information:	'	'
Cash paid for interest	$60,459	$66,313

Note_1_Presentation

Note 1. Presentation	3 Months Ended
	Sep. 30, 2013
Notes	'
Note 1. Presentation	'
	NOTE 1.  PRESENTATION
	The condensed consolidated balance sheets as of September 30, 2013 and June 30, 2013, and the condensed consolidated statements of operations and cash flows for the three months ended September 30, 2013 and 2012 were prepared by Dynatronics Corporation (the “Company”) without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  Certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.  In the opinion of management, all necessary adjustments, which consist only of normal recurring adjustments, to the financial statements have been made to present fairly the Company’s financial position, results of operations and cash flows.  The results of operations for the three months ended September 30, 2013 are not necessarily indicative of the results of operations for the fiscal year ending June 30, 2014.  The Company previously filed with the SEC an annual report on Form 10-K which included audited financial statements for each of the two years ended June 30, 2013 and 2012.  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 Company’s most recent Form 10-K.
	On December 19, 2012, the Company completed a 1-for-5 reverse split of its common stock.  All common stock share and per share information in the accompanying condensed consolidated interim financial statements and notes thereto have been adjusted to reflect retrospective application of the reverse stock split, except for par value per share and the number of authorized shares, which were not affected by the reverse stock split.

Note_2_Net_Income_loss_Per_Com

Note 2. Net Income (loss) Per Common Share	3 Months Ended
	Sep. 30, 2013
Notes	'
Note 2. Net Income (loss) Per Common Share	'
	NOTE 2.  NET INCOME (LOSS) PER COMMON SHARE
	Net income (loss) per common share is computed based on the weighted-average number of common shares outstanding and, when appropriate, dilutive common stock equivalents outstanding during the period.  Stock options are considered to be common stock equivalents.  The computation of diluted net income (loss) per common share does not assume exercise or conversion of securities that would have an anti-dilutive effect.
	Basic net income (loss) per common share is the amount of net income (loss) for the period available to each weighted-average share of common stock outstanding during the reporting period. Diluted net income (loss) per common share is the amount of net income (loss) for the period available to each weighted-average share of common stock outstanding during the reporting period and to each common stock equivalent outstanding during the period, unless inclusion of common stock equivalents would have an anti-dilutive effect.
	The reconciliations between the basic and diluted weighted-average number of common shares outstanding for the three months ended September 30, 2013 and 2012 are as follows:
		Three Months Ended
		30-Sep
		2013	2012
	Basic weighted-average number of common shares outstanding during the period	2,518,904	2,537,730
	Weighted-average number of dilutive common stock options outstanding during the period	-	-
	Diluted weighted-average number of common and common equivalent shares outstanding during the period	2,518,904	2,537,730
	Outstanding options for common shares not included in the computation of diluted net income (loss) per common share, because they were anti-dilutive, for the three months ended September 30, 2013 and 2012 totaled 155,726 and 168,596.

Note_3_Stockbased_Compensation

Note 3. Stock-based Compensation	3 Months Ended
	Sep. 30, 2013
Notes	'
Note 3. Stock-based Compensation	'
	NOTE 3. STOCK-BASED COMPENSATION
	Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized over the employee’s requisite service period. The Company recognized $17,919 and $24,812 in stock-based compensation expense during the three months ended September 30, 2013 and 2012, respectively.  These expenses were recorded as selling, general and administrative expenses in the condensed consolidated statements of operations.
	Stock Options.  The Company maintains a 2005 equity incentive plan for the benefit of employees.  Incentive and nonqualified stock options, restricted common stock, stock appreciation rights, and other stock-based awards may be granted under the plan.  Awards granted under the plan may be performance-based.  As of September 30, 2013, there were 112,296 shares of common stock authorized and reserved for issuance, but not granted under the terms of the 2005 equity incentive plan, as amended.
	The following table summarizes the Company’s stock option activity during the three-month period ended September 30, 2013.
		Number of Options		Weighted-Average Exercise Price
	Outstanding at beginning of period	163,868	$	6.51
	Granted	3,598		2.42
	Exercised	-		-
	Cancelled	-6,707		5.99
	Outstanding at end of period	160,759		6.44
	Exercisable at end of period	139,548		7.12
	The Black-Scholes option-pricing model is used to estimate the fair value of options granted under the Company’s stock option plan. The weighted-average fair values of stock options granted under the plan for the three months ended September 30, 2013 were based on the following assumptions at the date of grant as follows:
			Three Months Ended September 30,
			2013
	Expected dividend yield		0%
	Expected stock price volatility		73.23%
	Risk-free interest rate		2.53%
	Expected life of options		10 years
	Weighted-average grant date fair value		$1.89
	Expected option lives and volatilities are based on historical data of the Company. The risk-free interest rate is based on the U.S. Treasury Bills rate on the grant date for constant maturities that correspond with the option life. Historically, the Company has not declared dividends and there are no future plans to do so.
	As of September 30, 2013, there was $436,307 of unrecognized stock-based compensation cost related to grants under the stock option plan that is expected to be expensed over a weighted-average period of four to ten years. There was $3,981 of intrinsic value for options outstanding as of September 30, 2013.

Note_4_Comprehensive_Income_lo

Note 4. Comprehensive Income (loss)	3 Months Ended
	Sep. 30, 2013
Notes	'
Note 4. Comprehensive Income (loss)	'
	NOTE 4.  COMPREHENSIVE INCOME (LOSS)
	For the three months ended September 30, 2013 and 2012, comprehensive loss was equal to the net loss as presented in the accompanying condensed consolidated statements of operations.

Note_5_Inventories

Note 5. Inventories	3 Months Ended
	Sep. 30, 2013
Notes	'
Note 5. Inventories	'
	NOTE 5.  INVENTORIES
	Inventories consisted of the following:
			30-Sep-13	June 30, 2013
	Raw materials	$	2,709,310	2,732,363
	Finished goods		3,905,443	4,002,709
	Inventory obsolescence reserve		-359,436	-327,519
		$	6,255,317	6,407,553

Note_6_Relatedparty_Transactio

Note 6. Related-party Transactions	3 Months Ended
	Sep. 30, 2013
Notes	'
Note 6. Related-party Transactions	'
	NOTE 6.  RELATED-PARTY TRANSACTIONS
	The Company currently leases office and warehouse space in Detroit, Michigan and Hopkins, Minnesota from two shareholders and former independent distributors on an annual basis under operating lease arrangements. During the first six months of the prior fiscal year the Company also leased office and warehouse space in Pleasanton, California from a shareholder and former independent distributor. In December, 2012, the Company moved its Pleasanton operation to a new, larger location in Livermore, California and entered into a lease agreement with an unaffiliated third party. Management believes the lease agreements are on an arms-length basis and the terms are equal to or more favorable than would be available to third parties. The expense associated with these related-party transactions totaled $17,250 and $37,800 for the three months ended September 30, 2013 and 2012, respectively.

Note_7_Line_of_Credit

Note 7. Line of Credit	3 Months Ended
	Sep. 30, 2013
Notes	'
Note 7. Line of Credit	'
	NOTE 7.  LINE OF CREDIT
	Interest on the line of credit is based on the 90-day LIBOR rate (.25% as of September 30, 2013) plus 3.5%.  The line of credit is collateralized by accounts receivable and inventories.  Borrowing limitations are based on approximately 45% of eligible inventory and up to 80% of eligible accounts receivable, up to a maximum credit facility of $7,000,000.  Interest payments on the line are due monthly.  As of September 30, 2013, the borrowing base was approximately $4,833,000 resulting in approximately $1,216,000 of available credit on the line. The line of credit agreement includes covenants requiring the Company to maintain certain financial ratios. As of September 30, 2013, the Company was not in compliance with one of the bank loan covenants. The line of credit is renewable on December 15, 2013.  However, if the line of credit is not extended, the Company will need to find additional sources of financing. Failure to obtain additional financing would have a material adverse effect on our business operations. All borrowings under the line of credit are presented as current liabilities in the accompanying condensed consolidated balance sheet.

Note_8_Recent_Accounting_Prono

Note 8. Recent Accounting Pronouncements	3 Months Ended
	Sep. 30, 2013
Notes	'
Note 8. Recent Accounting Pronouncements	'
	NOTE 8.  RECENT ACCOUNTING PRONOUNCEMENTS
	In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740) – Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.  This update indicates that an unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset except in circumstances where a net operating loss carryforward or tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction. This update is effective for years beginning after December 15, 2013 for public companies. The Company doesn’t expect this update to have a significant impact on its financials.  However, the Company will ensure the presentation of any unrecognized tax benefit is presented in accordance with the update.
	In April 2013, the FASB issued ASU 2013-07, Presentation of Financial Statements (Topic 205) – Liquidation Basis of Accounting. This update requires an entity to use the liquidation basis of accounting when liquidation is imminent. Liquidation is considered imminent if the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved or (b) a plan for liquidation is being imposed by other forces. The Update also indicates that asset should be measured and presented at the expected amount of cash proceeds to be received upon liquidation.  The entity should also present any assets not previously recognized but expects to sell in liquidation or use in settling liabilities (i.e. trademarks, etc.). This update is effective for periods beginning after December 15, 2013. The Company doesn’t expect this update to impact its financials since it does not expect liquidation to be imminent in the near future.

Note_2_Net_Income_loss_Per_Com1

Note 2. Net Income (loss) Per Common Share: Schedule of Earnings Per Share, Basic and Diluted (Tables)	3 Months Ended
	Sep. 30, 2013
Tables/Schedules	'
Schedule of Earnings Per Share, Basic and Diluted	'
		Three Months Ended
		30-Sep
		2013	2012
	Basic weighted-average number of common shares outstanding during the period	2,518,904	2,537,730
	Weighted-average number of dilutive common stock options outstanding during the period	-	-
	Diluted weighted-average number of common and common equivalent shares outstanding during the period	2,518,904	2,537,730

Note_3_Stockbased_Compensation1

Note 3. Stock-based Compensation: Summary of Stock Option Activity (Tables)	3 Months Ended
	Sep. 30, 2013
Tables/Schedules	'
Summary of Stock Option Activity	'
		Number of Options		Weighted-Average Exercise Price
	Outstanding at beginning of period	163,868	$	6.51
	Granted	3,598		2.42
	Exercised	-		-
	Cancelled	-6,707		5.99
	Outstanding at end of period	160,759		6.44
	Exercisable at end of period	139,548		7.12

Note_3_Stockbased_Compensation2

Note 3. Stock-based Compensation: Schedule of Fair Value Assumptions (Tables)	3 Months Ended
	Sep. 30, 2013
Tables/Schedules	'
Schedule of Fair Value Assumptions	'
		Three Months Ended September 30,
		2013
	Expected dividend yield	0%
	Expected stock price volatility	73.23%
	Risk-free interest rate	2.53%
	Expected life of options	10 years
	Weighted-average grant date fair value	$1.89

Note_5_Inventories_Schedule_of

Note 5. Inventories: Schedule of Inventories (Tables)	3 Months Ended
	Sep. 30, 2013
Tables/Schedules	'
Schedule of Inventories	'
			30-Sep-13	June 30, 2013
	Raw materials	$	2,709,310	2,732,363
	Finished goods		3,905,443	4,002,709
	Inventory obsolescence reserve		-359,436	-327,519
		$	6,255,317	6,407,553

Note_1_Presentation_Details

Note 1. Presentation (Details)	3 Months Ended
	Sep. 30, 2013
Details	'
Stockholders' Equity, Reverse Stock Split	'On December 19, 2012, the Company completed a 1-for-5 reverse split of its common stock. All common stock share and per share information in the accompanying condensed consolidated interim financial statements and notes thereto have been adjusted to reflect retrospective application of the reverse stock split, except for par value per share and the number of authorized shares, which were not affected by the reverse stock split.

Note_2_Net_Income_loss_Per_Com2

Note 2. Net Income (loss) Per Common Share: Schedule of Earnings Per Share, Basic and Diluted (Details)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Details	'	'
Basic weighted-average number of common shares outstanding during the year	2,518,904	2,537,730
Diluted weighted-average number of common and common equivalent shares outstanding during the year	2,518,904	2,537,730

Note_2_Net_Income_loss_Per_Com3

Note 2. Net Income (loss) Per Common Share (Details)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Details	'	'
Antidilutive Securities Excluded from Computation of Net Income	155,726	168,596

Note_3_Stockbased_Compensation3

Note 3. Stock-based Compensation (Details) (USD $)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Details	'	'
Allocated Share-based Compensation Expense	$17,919	$24,812
Common Stock, Capital Shares Reserved for Future Issuance	112,296	'
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	436,307	'
Employee Service Share Based Compensation Unrecognized Compensation Costs On Nonvested Awards Weighted Average Period Of Recognition	'four to ten years	'
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value	$3,981	'

Note_3_Stockbased_Compensation4

Note 3. Stock-based Compensation: Summary of Stock Option Activity (Details) (USD $)	3 Months Ended
	Sep. 30, 2013
Details	'
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Beginning Balance	163,868
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Beginning Balance	$6.51
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures	3,598
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price	$2.42
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period	-6,707
Share-based Compensation Arrangements by Share-based Payment Award, Options, Expirations in Period, Weighted Average Exercise Price	$5.99
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	160,759
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Ending Balance	$6.44
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Number of Exercisable Options	139,548
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price	$7.12

Note_3_Stockbased_Compensation5

Note 3. Stock-based Compensation: Schedule of Fair Value Assumptions (Details) (USD $)	3 Months Ended
	Sep. 30, 2013
Details	'
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate	0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate	73.23%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate	2.53%
Expected term, years	'10 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$1.89

Note_5_Inventories_Schedule_of1

Note 5. Inventories: Schedule of Inventories (Details) (USD $)	Sep. 30, 2013	Jun. 30, 2013
Details	'	'
Inventory, Raw Materials, Gross	$2,709,310	$2,732,363
Inventory, Finished Goods, Gross	3,905,443	4,002,709
Inventory Valuation Reserves	-359,436	-327,519
Inventories, net	$6,255,317	$6,407,553

Note_6_Relatedparty_Transactio1

Note 6. Related-party Transactions (Details) (USD $)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Details	'	'
Related Party Transaction, Expenses from Transactions with Related Party	$17,250	$37,800

Note_7_Line_of_Credit_Details

Note 7. Line of Credit (Details) (USD $)	3 Months Ended
	Sep. 30, 2013
Details	'
Line of Credit Facility, Interest Rate Description	'Interest on the line of credit is based on the 90-day LIBOR rate (.25% as of September 30, 2013) plus 3.5%
Line of Credit Facility, Collateral	'Borrowing limitations are based on approximately 45% of eligible inventory and up to 80% of eligible accounts receivable
Line of Credit Facility, Maximum Borrowing Capacity	$7,000,000
Line of Credit Facility, Amount Outstanding	4,833,000
Line of Credit Facility, Remaining Borrowing Capacity	$1,216,000