Dynatronics (DYNT) 10-Q 13 Feb 18 2018 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Dec. 31, 2017	Feb. 02, 2018
Document and Entity Information:
Entity Registrant Name	DYNATRONICS CORP
Document Type	10-Q
Document Period End Date	Dec. 31, 2017
Trading Symbol	dynt
Amendment Flag	false
Entity Central Index Key	720,875
Current Fiscal Year End Date	--06-30
Entity Common Stock, Shares Outstanding		7,934,262
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	2,018
Document Fiscal Period Focus	Q2

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($)	Dec. 31, 2017	Jun. 30, 2017
Current assets:
Cash and cash equivalents	$ 3,652,342	$ 254,705
Trade accounts receivable, less allowance for doubtful accounts of $383,356 as of December 31, 2017 and $382,333 as of June 30, 2017	7,385,608	5,281,348
Other receivables	139,366	33,388
Inventories, net	11,605,299	7,397,682
Prepaid expenses	893,933	503,800
Total current assets	23,676,548	13,470,923
Property and equipment, net	5,970,836	4,973,477
Intangible assets, net	7,516,028	2,754,118
Goodwill	7,872,863	4,302,486
Other assets	532,611	562,873
Total assets	45,568,886	26,063,877
Current liabilities:
Accounts payable	4,451,050	2,334,563
Accrued payroll and benefits expense	1,358,754	1,472,773
Accrued expenses	878,300	656,839
Income tax payable	9,654	8,438
Warranty reserve	205,850	202,000
Line of credit	6,742,979	2,171,935
Current portion of long-term debt	158,954	151,808
Current portion of capital lease	199,300	193,818
Current portion of deferred gain	150,448	150,448
Current portion of acquisition holdback	430,624	294,744
Total current liabilities	14,585,913	7,637,366
Long-term debt, net of current portion	386,632	461,806
Capital lease, net of current portion	2,986,689	3,087,729
Deferred gain, net of current portion	1,604,777	1,680,001
Acquisition holdback, net of current portion	2,716,667	750,000
Deferred rent	138,513	122,585
Total liabilities	22,419,191	13,739,487
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par value: Authorized 50,000,000 shares; 4,889,000 shares and 3,559,000 shares issued and outstanding as of December 31, 2017 and June 30, 2017, respectively	11,641,816	8,501,295
Common stock, no par value: Authorized 100,000,000 shares; 7,864,715 shares and 4,653,165 shares issued and outstanding as of December 31, 2017 and June 30, 2017, respectively	19,802,351	11,838,022
Accumulated deficit	(8,294,472)	(8,014,927)
Total stockholders' equity	23,149,695	12,324,390
Total liabilities and stockholders' equity	$ 45,568,886	$ 26,063,877

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Dec. 31, 2017	Jun. 30, 2017
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 383,356	$ 382,333
Preferred stock shares authorized	50,000,000	5,000,000
Preferred stock shares issued	4,889,000	3,559,000
Preferred stock shares outstanding	4,889,000	3,559,000
Common stock shares authorized	100,000,000	50,000,000
Common stock shares issued	7,864,715	4,653,165
Common stock shares outstanding	7,864,715	4,653,165

Condensed Consolidated Statemen

Condensed Consolidated Statements of Income - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Income Statement [Abstract]
Net sales	$ 18,081,333	$ 8,713,355	$ 30,879,304	$ 16,876,089
Cost of sales	12,311,354	5,640,048	20,769,933	11,008,094
Gross profit	5,769,979	3,073,307	10,109,371	5,867,995
Selling, general, and administrative expenses	5,109,809	2,851,236	8,932,511	5,615,594
Research and development expenses	553,487	309,476	805,336	588,360
Operating profit (loss)	106,683	(87,405)	371,524	(335,959)
Other income (expense):
Interest expense	(103,706)	(63,408)	(180,514)	(122,728)
Other income, net	11,371	55,494	21,985	77,735
Net other expense	(92,335)	(7,914)	(158,529)	(44,993)
Income (loss) before income taxes	14,348	(95,319)	212,995	(380,952)
Income tax (provision) benefit	0	0	0	0
Net income (loss)	14,348	(95,319)	212,995	(380,952)
Deemed dividend on convertible preferred stock and accretion of discount	(1,023,786)	(375,858)	(1,023,786)	(375,858)
Preferred stock dividend, cash	(104,884)	0	(104,884)	0
8% Convertible preferred stock dividend, in common stock	(200,594)	(88,792)	(387,655)	(177,777)
Net loss attributable to common stockholders	$ (1,314,916)	$ (559,969)	$ (1,303,330)	$ (934,587)
Basic and diluted net loss per common share	$ (0.23)	$ (0.19)	$ (0.25)	$ (0.33)
Weighted-average common shares outstanding:
Basic and diluted	5,735,159	2,881,111	5,241,604	2,861,299

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Cash flows from operating activities:
Net income (loss)	$ 212,995	$ (380,952)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment	184,010	106,098
Amortization of intangible assets	254,090	15,340
Amortization of other assets	40,681	60,069
Amortization of building capital lease	125,967	125,967
Gain on sale of property and equipment	(5,197)	(19,252)
Stock-based compensation expense	117,073	102,989
Change in allowance for doubtful accounts receivable	(6,978)	48,073
Change in allowance for inventory obsolescence	49,739	42,751
Deferred gain on sale/leaseback	(75,224)	(75,224)
Change in operating assets and liabilities:
Receivables, net	33,546	62,135
Inventories, net	(120,175)	(630,132)
Prepaid expenses	(297,144)	(174,016)
Other assets	(10,419)	(18,799)
Income tax payable	(1,236)	1,066
Accounts payable and accrued expenses	1,175,114	684,319
Net cash provided by (used in) operating activities	1,676,842	(49,568)
Cash flows from investing activities:
Purchase of property and equipment	(84,494)	(36,818)
Net cash paid in acquisition, net of cash received - see Note 2	(9,063,017)	0
Proceeds from sale of property and equipment	10,355	32,000
Net cash provided by (used in) investing activities	(9,137,156)	(4,818)
Cash flows from financing activities:
Principal payments on long-term debt	(68,028)	(84,239)
Principal payments on long-term capital lease	(95,558)	(90,373)
Payment of acquisition holdbacks	(44,744)	0
Net change in line of credit	4,571,044	0
Proceeds from issuance of preferred stock, net	6,600,121	928,554
Preferred stock dividends paid in cash	(104,884)	0
Net cash provided by (used in) financing activities	10,857,951	753,942
Net change in cash and cash equivalents	3,397,637	699,556
Cash and cash equivalents at beginning of the period	254,705	966,183
Cash and cash equivalents at end of the period	3,652,342	1,665,739
Supplemental disclosure of cash flow information:
Cash paid for interest	172,893	124,797
Supplemental disclosure of non-cash investing and financing activity:
Deemed dividend on convertible preferred stock and accretion of discount	1,023,786	375,858
Preferred stock dividends paid or to be paid in common stock	387,655	187,901
Preferred stock issued to acquire "Bird & Cronin"	4,000,000	0
Acquisition holdback	2,147,291	0
Conversion of preferred stock to common stock	7,459,600	0
Accrued compensation paid in common stock	$ 0	$ 26,388

Note 1. Presentation and Summar

Note 1. Presentation and Summary of Significant Accounting Policies	6 Months Ended
	Dec. 31, 2017
Disclosure Text Block [Abstract]
Note 1. Presentation and Summary of Significant Accounting Policies	Basis of Presentation The condensed consolidated balance sheets as of December 31, 2017 and June 30, 2017, the condensed consolidated statements of operations for the three and six months ended December 31, 2017 and 2016, and condensed consolidated statements of cash flows for the three and six months ended December 31, 2017 and 2016, were prepared by Dynatronics Corporation and its subsidiaries (collectively, the “ Company SEC U.S. GAAP 2017 Form 10-K 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, allowance for doubtful accounts, stock-based compensation and valuation allowance for deferred income taxes. 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

Note 2. Acquisitions	6 Months Ended
	Dec. 31, 2017
Note 2. Acquisitions
Note 2. Acquisitions	On October 2, 2017, the Company acquired substantially all of the assets of Bird & Cronin, Inc. (“ B&C At the Closing of the Acquisition, the Company paid B&C cash of $9,063,017 and delivered 1,397,375 shares of its Series D Non Voting Convertible Preferred Stock (“Series D Preferred”) to B&C 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. The balance of the earn-out liability at December 31, 2017 is $1,500,000. A holdback of cash totaling $647,291 and 184,560 shares of Series D Preferred valued at approximately $466,667 has been retained for purposes of satisfying adjustments to the purchase price. In connection with the Acquisition, the Company completed a private placement of Series C Non Voting Convertible Preferred Stock (“Series C Preferred”) and common stock warrants to raise cash proceeds of $7,000,000 pursuant to the terms and conditions of a Securities Purchase Agreement entered into September 26, 2017 (the “Private Placement”). See Note 4 for details of the Private Placement. Also in connection with the Acquisition, the Company entered into a lease with Trapp Road Limited Liability Company, a Minnesota limited liability company controlled by the former owners of B&C, to occupy the facility housing the B&C operations for a term 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 increase 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 B&C employment with Dynatronics at Closing including the Co-Presidents of B&C, 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. 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 relate to customer relationships of $4,313,000 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 relate to trade names of $620,000. 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 December 31, 2017, the Acquisition earn out liability and holdbacks of $2,147,291 comes due, contingent upon the terms set forth in the purchase agreement, as follows: October 2, 2018 $ 180,624 April 1, 2019 466,667 August 15, 2019 1,500,000 Acquisition holdback $ 2,147,291 The amounts of B&C’s net sales and net income included in the Company's consolidated statement of operations for the period from October 2, 2017 to December 31, 2017, were $5,701,507 and $455,052 respectively. Pro forma net sales and net loss of the combined operations had the acquisition date been July 1, 2016 are: Net Sales Net Income (loss) Unaudited supplemental pro forma July 1, 2017 to December 31, 2017 $ 37,337,488 $ 259,644 Unaudited supplemental pro forma July 1, 2016 to June 30, 2017 $ 60,027,677 $ (285,951 ) 2017 supplemental pro forma earnings were adjusted to exclude $70,000 of acquisition-related costs incurred in 2017.

Note 3. Net Income (Loss) Per C

Note 3. Net Income (Loss) Per Common Share	6 Months Ended
	Dec. 31, 2017
Disclosure Text Block [Abstract]
Note 3. 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 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 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 share of potential common stock outstanding during the period, unless inclusion of potential common stock would have an anti-dilutive effect. Outstanding options, warrants and convertible preferred stock for common shares not included in the computation of diluted net loss per common share because they were anti-dilutive, for the three months ended December 31, 2017, and 2016, totaled 13,838,859 and 5,148,398, respectively, and for the six months ended December 31, 2017, and 2016, totaled 12,114,132 and 5,148,398, respectively.

Note 4. Convertible Preferred S

Note 4. Convertible Preferred Stock and Common Stock Warrants	6 Months Ended
	Dec. 31, 2017
Disclosure Text Block [Abstract]
Note 4. Convertible Preferred Stock and Common Stock Warrants	During quarter ended December 31, 2017, the Company issued 25,000 shares of common stock upon conversion of 25,000 shares of Series B Convertible Preferred Stock (the “ Series B Preferred Series A Preferred In connection with the Acquisition of B&C on October 2, 2017, the Company issued 2,800,000 shares of Series C Preferred with common stock warrants (“Series C Warrants”) and 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. They may not be exercised unless and until shareholder approval has been obtained. Each share of Series C Preferred and Series D Preferred was convertible into one share of common stock of the Company automatically upon, but not before receipt of shareholder approval required under applicable Nasdaq Marketplace Rules. A holder of Series C Preferred was able elect to retain the Series C Preferred and not convert, subject to future beneficial ownership limitations and loss of preferential rights. At the Company’s 2017 Annual Meeting of Shareholders, held on November 29, 2017, the Company sought and obtained shareholder approval as described above. On November 29, 2017, the Company issued 1,360,000 shares of Common Stock in conversion of a portion of the Series C Preferred and 1,581,935 shares of Common Stock in conversion of all of the Series D Preferred. As of December 31, 2017, the Company had 1,440,000 shares of Series C Preferred outstanding. The Series C Preferred shares are non-voting, do not receive dividends, 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.

Note 5. Comprehensive Loss

Note 5. Comprehensive Loss	6 Months Ended
	Dec. 31, 2017
Disclosure Text Block [Abstract]
Note 5. Comprehensive Income (Loss)	For the three and six months ended December 31, 2017 and 2016, comprehensive income (loss) was equal to the net income (loss) as presented in the accompanying condensed consolidated statements of operations.

Note 6. Inventories

Note 6. Inventories	6 Months Ended
	Dec. 31, 2017
Disclosure Text Block [Abstract]
Note 6. Inventories	Inventories consisted of the following: December 31, 2017 June 30, 2017 Raw materials $ 6,332,413 $ 3,766,940 Work in process 421,861 470,721 Finished goods 5,303,501 3,562,758 Inventory obsolescence reserve (452,476 ) (402,737 ) $ 11,605,299 $ 7,397,682

Note 7. Related-party Transacti

Note 7. Related-party Transactions	6 Months Ended
	Dec. 31, 2017
Disclosure Text Block [Abstract]
Note 7. Related-party Transactions	The Company leases office, manufacturing and warehouse facilities in Detroit, Michigan, Hopkins, Minnesota, Northvale, New 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 $257,400 and $17,700 for the three months ended December 31, 2017 and 2016, respectively, and $365,400 and $35,400 for the six months ended December 31, 2017 and 2016, respectively. Certain significant shareholders, officers and directors 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. Pursuant to the Company’s acquisition of Hausmann Industries, Inc. (“Hausmann”) in April 2017, the Company held back approximately$1,045,000 of the purchase price. As of December 31, 2017, and June 30, 2017, the holdback liability to Hausmann under the purchase agreement was $1,000,000 and $1,045,000, respectively. 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 B&C 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 B&C, totaling approximately $2,147,000, are liabilities on the Company’s balance sheet as of December 31, 2017. In addition, the Company withheld approximately 467,000 shares of common stock to be released to B&C pursuant to the holdback provisions in the Asset Purchase Agreement. These shares are included in common stock on the Company’s balance sheet at December 31, 2017. Certain principals of B&C are holders of the Company’s common stock and two of the principals, Michael Cronin and Jason Anderson, are employees of the Company.

Note 8. Line of Credit

Note 8. Line of Credit	6 Months Ended
	Dec. 31, 2017
Disclosure Text Block [Abstract]
Note 8. Line of Credit	On September 28, 2017, the Company modified its credit agreement with Bank of the West and entered into an Amended Credit Facility (the “ Amended Credit Facility

Note 9. Income Taxes

Note 9. Income Taxes	6 Months Ended
	Dec. 31, 2017
Note 9. Income Taxes
Note 9. Income Taxes	On December 22, 2017, the U.S. government enacted comprehensive tax 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 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%.

Note 10. Recent Accounting Pron

Note 10. Recent Accounting Pronouncements	6 Months Ended
	Dec. 31, 2017
Disclosure Text Block [Abstract]
Note 10. Recent Accounting Pronouncements	On December 22, 2017, the U.S. government enacted comprehensive tax 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 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 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 9. In November 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-14, Income Statement – Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606): Amendments to SEC Paragraphs Pursuant to the Staff Accounting Bulletin (“SAB”) No. 116 and SEC Release No. 33-10403 In July 2017, the FASB issued ASU 2017-11 – Earnings per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity 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 recharacterize 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. In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business 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 Leases (Topic 842,) 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. is currently evaluating the impact that this guidance will have on the consolidated financial statements. In January 2016, the FASB issued Financial Instruments 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. is currently evaluating the impact that the standard will have on the consolidated financial statements. In May 2014, the FASB issued Revenue from Contracts with Customer (Topic 606). 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.

Note 11. Subsequent Events

Note 11. Subsequent Events	6 Months Ended
	Dec. 31, 2017
Disclosure Text Block [Abstract]
Note 11. Subsequent Events	In January 2018, the Company paid approximately $201,000 of preferred stock dividends with respect to the Series A Preferred and Series B Preferred that were accrued during the three months ended December 31, 2017. The Company paid the dividends by issuing 69,574 shares of common stock.

Note 1. Presentation and Summ17

Note 1. Presentation and Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Dec. 31, 2017
Policy Text Block [Abstract]
Basis of Presentation	The condensed consolidated balance sheets as of December 31, 2017 and June 30, 2017, the condensed consolidated statements of operations for the three and six months ended December 31, 2017 and 2016, and condensed consolidated statements of cash flows for the three and six months ended December 31, 2017 and 2016, were prepared by Dynatronics Corporation and its subsidiaries (collectively, the “ Company SEC U.S. GAAP 2017 Form 10-K
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, allowance for doubtful accounts, stock-based compensation and valuation allowance for deferred income taxes.
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 (Tables)

Note 2. Acquisitions (Tables)	6 Months Ended
	Dec. 31, 2017
Note 2. Acquisitions Tables
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
Acquisition earn out liability and holdbacks	October 2, 2018 $ 180,624 April 1, 2019 466,667 August 15, 2019 1,500,000 Acquisition holdback $ 2,147,291
Pro forma net sales and net loss	Net Sales Net Income (loss) Unaudited supplemental pro forma July 1, 2017 to December 31, 2017 $ 37,337,488 $ 259,644 Unaudited supplemental pro forma July 1, 2016 to June 30, 2017 $ 60,027,677 $ (285,951 )

Note 6. Inventories (Tables)

Note 6. Inventories (Tables)	6 Months Ended
	Dec. 31, 2017
Table Text Block Supplement [Abstract]
Schedule of Inventory, Current	December 31, 2017 June 30, 2017 Raw materials $ 6,332,413 $ 3,766,940 Work in process 421,861 470,721 Finished goods 5,303,501 3,562,758 Inventory obsolescence reserve (452,476 ) (402,737 ) $ 11,605,299 $ 7,397,682

Note 2. Acquisitions (Details)

Note 2. Acquisitions (Details)	6 Months Ended
	Dec. 31, 2017USD ($)
Note 2. Acquisitions Details
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

Note 2. Acquisitions (Details 1

Note 2. Acquisitions (Details 1) - USD ($)	6 Months Ended		12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017
Acquisition holdbacks	$ 2,147,291	$ 0	$ 2,147,291
October 2, 2018
Acquisition holdbacks			180,264
April 1, 2019
Acquisition holdbacks			466,667
August 15, 2019
Acquisition holdbacks			$ 1,500,000

Note 2. Acquisitions (Details 2

Note 2. Acquisitions (Details 2)	12 Months Ended
	Dec. 31, 2017USD ($)
July 1, 2017 to December 31, 2017
Pro forma Net Sales	$ 37,337,488
Pro Forma Net Income (loss)	259,644
July 1, 2016 to June 30, 2017
Pro forma Net Sales	60,027,677
Pro Forma Net Income (loss)	$ (285,951)

Note 2. Acquisitions (Details N

Note 2. Acquisitions (Details Narrative)	Dec. 31, 2017USD ($)
Note 2. Acquisitions Details Narrative
Earn out liability	$ 1,500,000

Note 3. Net Income (Loss) Per24

Note 3. Net Income (Loss) Per Common Share (Details Narrative) - shares	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Text Block [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	13,838,859	5,148,398	12,114,132	5,148,398

Note 4. Convertible Preferred25

Note 4. Convertible Preferred Stock and Common Stock Warrants (Details Narrative) - shares	6 Months Ended
	Dec. 31, 2017	Jun. 30, 2017
Text Block [Abstract]
Stock Issued During Period, Shares, New Issues	25,000
Preferred stock shares outstanding	4,889,000	3,559,000

Note 6. Inventories_ Schedule o

Note 6. Inventories: Schedule of Inventory, Current (Details) - USD ($)	Dec. 31, 2017	Jun. 30, 2017
Text Block [Abstract]
Raw Materials	$ 6,332,413	$ 3,766,940
Inventory, Work in Process, Gross	421,861	470,721
Finished Goods	5,303,501	3,562,758
Inventory Reserves	(452,476)	(402,737)
Inventories, net	$ 11,605,299	$ 7,397,682

Note 7. Related-party Transac27

Note 7. Related-party Transactions (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Text Block [Abstract]
Related Party Transaction, Expenses from Transactions with Related Party	$ 257,400	$ 17,700	$ 365,400	$ 35,400

Note 8. Line of Credit (Details

Note 8. Line of Credit (Details Narrative)	6 Months Ended
	Dec. 31, 2017USD ($)
Text Block [Abstract]
Line of Credit Facility, Description	On September 28, 2017, the Company modified its credit agreement with Bank of the West and entered into an Amended Credit Facility (the “ Amended Credit Facility
Line of Credit Facility, Current Borrowing Capacity	$ 11,000,000