Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Mar. 31, 2014 | 7-May-14 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'DYNATRONICS CORP | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
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 | 'Q3 | ' |
Entity Common Stock, Shares Outstanding | ' | 2,520,389 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Mar. 31, 2014 | Jun. 30, 2013 |
Current assets: | ' | ' |
Cash and cash equivalents | $132,394 | $302,050 |
Trade accounts receivable, less allowance for doubtful accounts of $306,985 as of March 31, 2014 and $247,708 as of June 30, 2013 | 2,905,918 | 3,246,712 |
Other receivables | 14,647 | 27,197 |
Inventories, net | 6,237,266 | 6,407,553 |
Prepaid expenses and other | 711,416 | 506,836 |
Current portion of deferred income tax assets | 426,676 | 389,101 |
Total current assets | 10,428,317 | 10,879,449 |
Other Assets: | ' | ' |
Property and equipment, net | 3,070,195 | 3,324,947 |
Intangible assets, net | 246,600 | 280,078 |
Other assets | 383,890 | 422,672 |
Deferred income tax assets, net of current portion | 284,196 | 197,441 |
Total assets | 14,413,198 | 15,104,587 |
Current liabilities: | ' | ' |
Current portion of long-term debt | 308,400 | 322,573 |
Line of credit | 3,672,793 | 3,496,390 |
Warranty reserve | 158,244 | 178,148 |
Accounts payable | 2,308,611 | 2,751,894 |
Accrued expenses | 260,729 | 347,221 |
Accrued payroll and benefits expense | 304,681 | 216,266 |
Income tax payable | 33,203 | 21,369 |
Total current liabilities | 7,046,661 | 7,333,861 |
Long-Term Liabilities | ' | ' |
Long-term debt, net of current portion | 1,329,759 | 1,561,776 |
Total liabilities | 8,376,420 | 8,895,637 |
Commitments and contingencies | ' | ' |
Stockholders' equity: | ' | ' |
Common stock, no par value: Authorized 50,000,000 shares; 2,520,389 shares and 2,518,904 shares issued and outstanding at March 31, 2014 and June 30, 2013, respectively | 7,132,210 | 7,078,941 |
Accumulated deficit | -1,095,432 | -869,991 |
Total stockholders' equity | 6,036,778 | 6,208,950 |
Total liabilities and stockholders' equity | $14,413,198 | $15,104,587 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets Parenthetical (USD $) | Mar. 31, 2014 | Jun. 30, 2013 |
Consolidated Balance Sheets Parenthetical | ' | ' |
Allowance for doubtful accounts | $306,985 | $247,708 |
Common stock par value | ' | ' |
Common stock shares authorized | 50,000,000 | 50,000,000 |
Common stock shares issued | 2,520,389 | 2,518,904 |
Consolidated_Statements_of_Inc
Consolidated Statements of Income (USD $) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Consolidated Statements of Income | ' | ' | ' | ' |
Net sales | $6,185,642 | $7,070,292 | $20,387,856 | $22,274,637 |
Cost of sales | 3,929,523 | 4,450,528 | 12,873,138 | 13,845,110 |
Gross profit | 2,256,119 | 2,619,764 | 7,514,718 | 8,429,527 |
Selling, general, and administrative expenses | 2,245,595 | 2,383,871 | 6,940,427 | 7,408,257 |
Research and development expenses | 212,905 | 271,735 | 766,438 | 812,382 |
Operating income (loss) | -202,381 | -35,842 | -192,147 | 208,888 |
Other income (expense): | ' | ' | ' | ' |
Interest income | 4 | 225 | 41 | 672 |
Interest expense | -59,038 | -64,242 | -174,996 | -197,123 |
Other income, net | 6,569 | 4,462 | 17,331 | 18,701 |
Net other income (expense) | -52,465 | -59,555 | -157,624 | -177,750 |
Income (loss) before income taxes | -254,846 | -95,397 | -349,771 | 31,138 |
Income tax benefit (provision) | 93,094 | 34,276 | 124,330 | -2,420 |
Net income (loss) | ($161,752) | ($61,121) | ($225,441) | $28,718 |
Basic and diluted net income (loss) per common share | ($0.06) | ($0.02) | ($0.09) | $0.01 |
Weighted-average common shares outstanding: | ' | ' | ' | ' |
Basic | 2,519,779 | 2,511,348 | 2,519,191 | 2,529,067 |
Diluted | 2,519,779 | 2,511,348 | 2,519,191 | 2,529,619 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 9 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Cash flows from operating activities: | ' | ' |
Net income (loss) | ($225,441) | $28,718 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ' | ' |
Depreciation and amortization of property and equipment | 323,172 | 325,666 |
Amortization of intangible and other assets | 109,526 | 70,677 |
Gain on sale of assets | ' | -2,993 |
Stock-based compensation expense | 53,269 | 68,373 |
Change in deferred income tax assets | -124,330 | 4,397 |
Provision for doubtful accounts receivable | 72,000 | 135,000 |
Provision for inventory obsolescence | 90,000 | 90,000 |
Change in operating assets and liabilities: | ' | ' |
Change in Receivables | 281,344 | -103,171 |
Change in Inventories | 80,287 | -178,964 |
Change in Prepaid expenses and other assets | -197,922 | -39,087 |
Change in Prepaid income taxes | 20,248 | 23,615 |
Change in Accounts payable and accrued expenses | -469,678 | -386,821 |
Net cash provided by operating activities | 12,475 | 35,410 |
Cash flows from investing activities: | ' | ' |
Purchase of property and equipment | -115,653 | -81,004 |
Proceeds from sale of property and equipment | ' | 345 |
Net cash used in investing activities | -115,653 | -80,659 |
Cash flows from financing activities: | ' | ' |
Principal payments on long-term debt | -242,881 | -339,388 |
Net change in line of credit | 176,403 | 376,688 |
Proceeds from issuance of common stock | ' | 364 |
Purchase and retirement of common stock | ' | -99,997 |
Net cash used in financing activities | -66,478 | -62,333 |
Net change in cash and cash equivalents | -169,656 | -107,582 |
Cash and cash equivalents at beginning of the year | 302,050 | 278,263 |
Cash and cash equivalents at end of the year | 132,394 | 170,681 |
Supplemental disclosure of cash flow information: | ' | ' |
Cash paid for interest | 174,569 | 194,684 |
Cash paid for income taxes | ' | $16,408 |
Note_1_Presentation
Note 1. Presentation | 9 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 1. Presentation | ' |
NOTE 1. PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | |
The condensed consolidated balance sheets as of March 31, 2014 and June 30, 2013, and the condensed consolidated statements of operations and cash flows for the three and nine months ended March 31, 2014 and 2013 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 and nine months ended March 31, 2014 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. | |
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. | |
Use of Estimates | |
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, stock-based compensation and valuation allowance for deferred income taxes. | |
Liquidity and Capital Resources | |
For the three months ended March 31, 2014 and 2013, the Company incurred a net loss of $161,752 and $61,121, respectively. The Company incurred a net loss of $225,441 for the nine months ended March 31, 2014 compared to net income of $28,718 for the nine months ended March 31, 2013. The Company had an accumulated deficit of $1,095,432 and $869,991 at March 31, 2014 and June 30, 2013, respectively. As discussed further in Note 7, we were not in compliance with one of the loan covenants. If the line of credit is not renewed, we will need to find additional sources of financing. In order to assure adequate availability of operating capital under our line of credit and to more fully take advantage of accumulated deferred tax assets, we have undertaken a strategy to sell the building that currently houses our operations in Utah and to lease back the premises. Management is confident that the sale of this property will generate significant resources to reduce debt and generate a significant profit in the quarter in which the transaction occurs. The amount of cash to be generated is expected to be between $3,000,000 and $4,000,000 which will be used to meet debt obligations of the Company and will generate a profit of $2,500,000 to $3,000,000 which will be sufficient to utilize the majority, if not all of our deferred tax assets. Failure to successfully implement these strategies could result in a full valuation allowance being recorded on the Company’s deferred tax assets and failure to obtain additional financing would have a material adverse effect on our business operations. There is no assurance that the Company will be able to successfully complete this transaction. | |
Significant Accounting Policies | |
There have been no significant changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013. | |
Note_2_Net_Income_loss_Per_Com
Note 2. Net Income (loss) Per Common Share | 9 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
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 and nine months ended March 31, 2014 and 2013 are as follows: | ||||||||
Three Months Ended | Nine Months Ended | |||||||
31-Mar | 31-Mar | |||||||
2014 | 2013 | 2014 | 2013 | |||||
Basic weighted-average number of common shares outstanding during the period | 2,519,779 | 2,511,348 | 2,519,191 | 2,529,067 | ||||
- | - | - | 552 | |||||
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 | 2,519,779 | 2,511,348 | 2,519,191 | 2,529,619 | ||||
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 March 31, 2014 and 2013 totaled 144,609 and 162,645, respectively, and for the nine months ended March 31, 2014 and 2013 totaled 146,728 and 162,645, respectively. |
Note_3_Stockbased_Compensation
Note 3. Stock-based Compensation | 9 Months Ended | |||
Mar. 31, 2014 | ||||
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 $17,622 and $20,326 in stock-based compensation expense during the three months ended March 31, 2014 and 2013, respectively, and recognized $53,269 and $68,737 in stock-based compensation expense during the nine months ended March 31, 2014 and 2013, 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 March 31, 2014, there were 116,294 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 nine-month period ended March 31, 2014. | ||||
Number of Options | Weighted-Average Exercise Price | |||
Outstanding at beginning of period | 163,868 | $ | 6.51 | |
Granted | 3,598 | 2.42 | ||
Exercised | - | - | ||
Cancelled | -10,705 | 6.18 | ||
Outstanding at end of period | 156,761 | 6.44 | ||
Exercisable at end of period | 135,633 | 7.13 | ||
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 nine months ended March 31, 2014 were based on the following assumptions at the date of grant as follows: | ||||
Nine Months Ended | ||||
March 31, 2014 | ||||
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 March 31, 2014, there was $429,257 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 $2,874 of intrinsic value for options outstanding as of March 31, 2014. |
Note_4_Comprehensive_Income_lo
Note 4. Comprehensive Income (loss) | 9 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 4. Comprehensive Income (loss) | ' |
NOTE 4. COMPREHENSIVE INCOME (LOSS) | |
For the three and nine months ended March 31, 2014 and 2013, comprehensive income (loss) was equal to the net income (loss) as presented in the accompanying condensed consolidated statements of operations. | |
Note_5_Inventories
Note 5. Inventories | 9 Months Ended | ||||
Mar. 31, 2014 | |||||
Notes | ' | ||||
Note 5. Inventories | ' | ||||
NOTE 5. INVENTORIES | |||||
Inventories consisted of the following: | |||||
31-Mar-14 | June 30, 2013 | ||||
Raw materials | $ | 2,880,637 | 2,732,363 | ||
Finished goods | 3,746,091 | 4,002,709 | |||
Inventory obsolescence reserve | (389,462) | -327,519 | |||
$ | 6,237,266 | 6,407,553 |
Note_6_Relatedparty_Transactio
Note 6. Related-party Transactions | 9 Months Ended |
Mar. 31, 2014 | |
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 $17,700 and $12,000 for the three months ended March 31, 2014 and 2013, respectively, $52,200 and $81,300 for the nine months ended March 31, 2014 and 2013, respectively. | |
Note_7_Line_of_Credit
Note 7. Line of Credit | 9 Months Ended |
Mar. 31, 2014 | |
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 (.234% as of March 31, 2014) 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 $4,500,000. Interest payments on the line are due monthly. As of March 31, 2014, the borrowing base was approximately $4,500,000 resulting in approximately $827,000 of available credit on the line. The line of credit is renewable on October 15, 2014. The line of credit agreement includes covenants requiring us to maintain certain financial ratios. As of March 31, 2014, we were not in compliance with one of the loan covenants and we have not obtained a waiver from the bank for the period. If the line of credit is not renewed, we will need to find additional sources of financing. 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 | 9 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 8. Recent Accounting Pronouncements | ' |
NOTE 8. RECENT ACCOUNTING PRONOUNCEMENTS | |
In March 2014, the FASB issued ASU 2014-07, Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements. Under the amendments in this update, a private company could elect, when certain conditions exist, not to apply VIE guidance to a lessor entity under common control. This update is not applicable to public business entities; therefore, the update is not applicable to our Company. | |
In March 2014, the FASB issued ASU 2014-06, Technical Corrections and Improvements Related to Glossary Terms. The amendments in this update represent changes to clarify the Master Glossary of the Codification, consolidate multiple instances of the same term into a single definition, or make minor improvements to the Master Glossary that are not expected to result in substantive changes to the application of existing guidance or create a significant administrative cost to most entities. Additionally, the amendments will make the Master Glossary easier to understand, as well as reduce the number of terms appearing in the Master Glossary. The amendments in this update are effective immediately. The Company reviewed and noted the changes made in this update, which can be categorized into four sections: 1) Deletion of Master Glossary Terms, 2) Addition of Master Glossary Term Links, 3) Duplicate Master Glossary Terms, and 4) Other Technical Corrections Related to Glossary Terms. The Company implemented the update upon issuance, but the changes did not have a significant impact on our financial statements. | |
In January 2014, the FASB issued ASU 2014-05, Service Concession Arrangements (Topic 853) a consensus of the FASB Emerging Issues Task Force. Current U.S. GAAP does not contain specific guidance for the accounting for service concession arrangements. Depending on the terms of a service concession arrangement, an operating entity may or may not conclude that a service concession arrangement meets the lease criteria in Topic 840. Consequently, the amendments in this update improve financial reporting by clarifying that a service concession arrangement within the scope of this update should not be accounted for as a lease in accordance with Topic 840 and, thereby, alleviates the confusion that arises for preparers when determining whether a service concession arrangement is a lease. A service concession arrangement is an arrangement between a public-sector entity grantor and an operating entity under which the operating entity operates the grantor’s infrastructure (for example, airports, roads, and bridges). The operating entity also may provide the construction, upgrading, or maintenance services of the grantor’s infrastructure. The update is effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015. The Company does not receive any service concession arrangements from any public-sector entity; therefore, the Company does not believe this update will have a significant impact on our financial statements. | |
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 adoption of this pronouncement had no significant effect on the Company’s financial statements. |
Note_1_Presentation_Basis_of_P
Note 1. Presentation: Basis of Presentation (Policies) | 9 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Basis of Presentation | ' |
Basis of Presentation | |
The condensed consolidated balance sheets as of March 31, 2014 and June 30, 2013, and the condensed consolidated statements of operations and cash flows for the three and nine months ended March 31, 2014 and 2013 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 and nine months ended March 31, 2014 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. |
Note_1_Presentation_Reverse_St
Note 1. Presentation: Reverse Stock Split (Policies) | 9 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Reverse Stock Split | ' |
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_1_Presentation_Use_of_Est
Note 1. Presentation: Use of Estimates (Policies) | 9 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Use of Estimates | ' |
Use of Estimates | |
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, stock-based compensation and valuation allowance for deferred income taxes. |
Note_1_Presentation_Liquidity_
Note 1. Presentation: Liquidity and Capital Resources (Policies) | 9 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Liquidity and Capital Resources | ' |
Liquidity and Capital Resources | |
For the three months ended March 31, 2014 and 2013, the Company incurred a net loss of $161,752 and $61,121, respectively. The Company incurred a net loss of $225,441 for the nine months ended March 31, 2014 compared to net income of $28,718 for the nine months ended March 31, 2013. The Company had an accumulated deficit of $1,095,432 and $869,991 at March 31, 2014 and June 30, 2013, respectively. As discussed further in Note 7, we were not in compliance with one of the loan covenants. If the line of credit is not renewed, we will need to find additional sources of financing. In order to assure adequate availability of operating capital under our line of credit and to more fully take advantage of accumulated deferred tax assets, we have undertaken a strategy to sell the building that currently houses our operations in Utah and to lease back the premises. Management is confident that the sale of this property will generate significant resources to reduce debt and generate a significant profit in the quarter in which the transaction occurs. The amount of cash to be generated is expected to be between $3,000,000 and $4,000,000 which will be used to meet debt obligations of the Company and will generate a profit of $2,500,000 to $3,000,000 which will be sufficient to utilize the majority, if not all of our deferred tax assets. Failure to successfully implement these strategies could result in a full valuation allowance being recorded on the Company’s deferred tax assets and failure to obtain additional financing would have a material adverse effect on our business operations. There is no assurance that the Company will be able to successfully complete this transaction. |
Note_1_Presentation_Significan
Note 1. Presentation: Significant Accounting Policies (Policies) | 9 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Significant Accounting Policies | ' |
Significant Accounting Policies | |
There have been no significant changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013. |
Note_2_Net_Income_loss_Per_Com1
Note 2. Net Income (loss) Per Common Share: Schedule of Earnings Per Share, Basic and Diluted (Tables) | 9 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Tables/Schedules | ' | |||||||
Schedule of Earnings Per Share, Basic and Diluted | ' | |||||||
Three Months Ended | Nine Months Ended | |||||||
31-Mar | 31-Mar | |||||||
2014 | 2013 | 2014 | 2013 | |||||
Basic weighted-average number of common shares outstanding during the period | 2,519,779 | 2,511,348 | 2,519,191 | 2,529,067 | ||||
- | - | - | 552 | |||||
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 | 2,519,779 | 2,511,348 | 2,519,191 | 2,529,619 |
Note_3_Stockbased_Compensation1
Note 3. Stock-based Compensation: Summary of Stock Option Activity (Tables) | 9 Months Ended | |||
Mar. 31, 2014 | ||||
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 | -10,705 | 6.18 | ||
Outstanding at end of period | 156,761 | 6.44 | ||
Exercisable at end of period | 135,633 | 7.13 |
Note_3_Stockbased_Compensation2
Note 3. Stock-based Compensation: Schedule of Fair Value Assumptions (Tables) | 9 Months Ended | |||
Mar. 31, 2014 | ||||
Tables/Schedules | ' | |||
Schedule of Fair Value Assumptions | ' | |||
Nine Months Ended | ||||
March 31, 2014 | ||||
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 Inventory, Current (Tables) | 9 Months Ended | ||||
Mar. 31, 2014 | |||||
Tables/Schedules | ' | ||||
Schedule of Inventory, Current | ' | ||||
31-Mar-14 | June 30, 2013 | ||||
Raw materials | $ | 2,880,637 | 2,732,363 | ||
Finished goods | 3,746,091 | 4,002,709 | |||
Inventory obsolescence reserve | (389,462) | -327,519 | |||
$ | 6,237,266 | 6,407,553 |
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 | 9 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Details | ' | ' | ' | ' |
Basic weighted-average number of common shares outstanding during the year | 2,519,779 | 2,511,348 | 2,519,191 | 2,529,067 |
Weighted-average number of dilutive common stock options outstandings during the year | ' | ' | ' | 552 |
Diluted weighted-average number of common and common equivalent shares outstanding during the year | 2,519,779 | 2,511,348 | 2,519,191 | 2,529,619 |
Note_2_Net_Income_loss_Per_Com3
Note 2. Net Income (loss) Per Common Share (Details) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Details | ' | ' | ' | ' |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 144,609 | 162,645 | 146,728 | 162,645 |
Note_3_Stockbased_Compensation3
Note 3. Stock-based Compensation: Stock-based compensation expense (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Details | ' | ' | ' | ' |
Allocated Share-based Compensation Expense | $17,622 | $20,326 | $53,269 | $68,737 |
Note_3_Stockbased_Compensation4
Note 3. Stock-based Compensation (Details) (USD $) | Mar. 31, 2014 |
Details | ' |
Common Stock, Capital Shares Reserved for Future Issuance | 116,294 |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $429,257 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value | $2,874 |
Note_3_Stockbased_Compensation5
Note 3. Stock-based Compensation: Summary of Stock Option Activity (Details) (USD $) | 9 Months Ended |
Mar. 31, 2014 | |
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 | -10,705 |
Share-based Compensation Arrangements by Share-based Payment Award, Options, Expirations in Period, Weighted Average Exercise Price | $6.18 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 156,761 |
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 | 135,633 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price | $7.13 |
Note_3_Stockbased_Compensation6
Note 3. Stock-based Compensation: Schedule of Fair Value Assumptions (Details) (USD $) | 9 Months Ended |
Mar. 31, 2014 | |
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 Inventory, Current (Details) (USD $) | Mar. 31, 2014 | Jun. 30, 2013 |
Details | ' | ' |
Inventory, Raw Materials, Gross | $2,880,637 | $2,732,363 |
Inventory, Finished Goods, Gross | 3,746,091 | 4,002,709 |
Inventory Valuation Reserves | -389,462 | -327,519 |
Inventories, net | $6,237,266 | $6,407,553 |
Note_6_Relatedparty_Transactio1
Note 6. Related-party Transactions (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Details | ' | ' | ' | ' |
Related Party Transaction, Expenses from Transactions with Related Party | $17,700 | $12,000 | $52,200 | $81,300 |
Note_7_Line_of_Credit_Details
Note 7. Line of Credit (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Details | ' |
Line of Credit Facility, Interest Rate Description | 'Interest on the line of credit is based on the 90-day LIBOR rate (.234% as of March 31, 2014) 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 | $4,500,000 |
Line of Credit Facility, Current Borrowing Capacity | 4,500,000 |
Line of Credit Facility, Remaining Borrowing Capacity | $827,000 |