Dynatronics (DYNT) 10-Q 12 Nov 20 2021 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Sep. 30, 2020	Nov. 05, 2020
Cover [Abstract]
Entity Registrant Name	DYNATRONICS CORP
Document Type	10-Q
Document Period End Date	Sep. 30, 2020
Amendment Flag	false
Entity Central Index Key	0000720875
Current Fiscal Year End Date	--06-30
Entity Common Stock, Shares Outstanding		14,719,711
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Interactive Data Current	Yes
Entity Incorporation State Country Code	UT
Entity File Number	0-12697
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2020	Jun. 30, 2020
Current assets:
Cash and cash equivalents	$ 2,189,954	$ 2,215,665
Restricted cash	100,636	100,636
Trade accounts receivable, less allowance for doubtful accounts of $218,279 and $184,713 as of September 30, 2020 and June 30, 2020, respectively	5,609,481	4,893,861
Other receivables	1,008,436	2,080
Inventories, net	6,168,574	8,371,842
Prepaid expenses	816,285	490,624
Total current assets	15,893,366	16,074,708
Property and equipment, net	4,695,602	4,941,517
Operating lease assets	3,126,778	3,347,378
Intangible assets, net	5,501,895	5,682,991
Goodwill	7,116,614	7,116,614
Other assets	419,553	433,109
Total assets	36,753,808	37,596,317
Current liabilities:
Accounts payable	3,257,805	3,013,949
Accrued payroll and benefits expense	1,565,038	1,204,964
Accrued expenses	1,037,340	768,117
Warranty reserve	221,854	221,854
Line of credit	0	1,012,934
Current portion of long-term debt	501,265	108,713
Current portion of finance lease liability	320,676	316,103
Current portion of deferred gain	150,448	150,448
Current portion of operating lease liability	858,146	852,419
Income tax payable	30,945	29,196
Total current liabilities	7,943,517	7,678,697
Long-term debt, net of current portion	3,060,706	3,496,222
Finance lease liability, net of current portion	2,515,374	2,597,525
Deferred gain, net of current portion	1,191,046	1,228,658
Operating lease liability, net of current portion	2,280,069	2,505,232
Other liabilities	197,449	194,102
Total liabilities	17,188,161	17,700,436
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par value: authorized 50,000,000 shares; 3,681,000 shares and 3,681,000 shares issued and outstanding as of September 30, 2020 and June 30, 2020, respectively	8,770,798	8,770,798
Common stock, no par value: authorized 100,000,000 shares; 14,096,252 shares and 13,803,855 shares issued and outstanding as of September 30, 2020 and June 30, 2020, respectively	27,716,107	27,474,411
Accumulated deficit	(16,921,258)	(16,349,328)
Total stockholders' equity	19,565,647	19,895,881
Total liabilities and stockholders' equity	$ 36,753,808	$ 37,596,317

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2020	Jun. 30, 2020
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 218,279	$ 184,713
Preferred stock, par value	$ .00	$ .00
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares issued	3,681,000	3,681,000
Preferred stock, shares outstanding	3,681,000	3,681,000
Common stock, par value	$ .00	$ .00
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	14,096,252	13,803,855
Common stock, shares outstanding	14,096,252	13,803,855

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Income Statement [Abstract]
Net sales	$ 12,132,768	$ 16,389,549
Cost of sales	8,230,815	11,235,542
Gross profit	3,901,953	5,154,007
Selling, general, and administrative expenses	4,245,627	4,924,692
Operating (loss) income	(343,674)	229,315
Other expense:
Interest expense, net	(39,943)	(130,992)
Other income, net	5,913	515
Net other expense	(34,030)	(130,477)
(Loss) income before income taxes	(377,704)	98,838
Income tax (provision) benefit	0	0
Net (loss) income	(377,704)	98,838
Preferred stock dividend, in common stock, issued or to be issued	(194,226)	(166,904)
Net loss attributable to common stockholders	$ (571,930)	$ (68,066)
Net loss per common share:
Basic and diluted	$ (0.04)	$ (0.01)
Weighted-average common shares outstanding:
Basic and diluted	14,080,361	8,576,961

Condensed Consolidated Statem_2

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)	Common Stock	Preferred Stock	Accumulated Deficit	Total
Beginning balance, shares at Jun. 30, 2019	8,417,793	4,899,000
Beginning balance at Jun. 30, 2019	$ 21,320,106	$ 11,641,816	$ (12,206,213)	$ 20,755,709
Stock-based compensation, shares	135,244
Stock-based compensation	$ 129,793			129,793
Preferred stock dividend, in common stock, issued or to be issued, shares	126,194
Preferred stock dividend, in common stock, issued or to be issued	$ 166,904		(166,904)	0
Net income (loss)			98,838	98,838
Ending balance, shares at Sep. 30, 2019	8,679,231	4,899,000
Ending balance at Sep. 30, 2019	$ 21,616,803	$ 11,641,816	(12,274,279)	20,984,340
Stock-based compensation, shares	5,446
Stock-based compensation	$ 58,238			58,238
Preferred stock dividend, in common stock, issued or to be issued, shares	165,251
Preferred stock dividend, in common stock, issued or to be issued	$ 202,249		(202,249)	0
Preferred stock converted to common stock, shares	760,000	(760,000)
Preferred stock converted to common stock	$ 1,791,320	$ (1,791,320)		0
Preferred stock beneficial conversion and accretion of discount		108,539		108,539
Dividend of beneficial conversion and accretion of discount		(108,539)		(108,539)
Net income (loss)			(137,663)	(137,663)
Ending balance, shares at Dec. 31, 2019	9,609,928	4,139,000
Ending balance at Dec. 31, 2019	$ 23,668,610	$ 9,850,496	(12,614,191)	20,904,915
Stock-based compensation, shares	96,195
Stock-based compensation	$ 45,343			45,343
Preferred stock dividend, in common stock, issued or to be issued, shares	243,652
Preferred stock dividend, in common stock, issued or to be issued	$ 168,356		(168,356)	0
Preferred stock converted to common stock, shares	458,000	(458,000)
Preferred stock converted to common stock	$ 1,079,698	$ (1,079,698)		0
Preferred stock beneficial conversion and accretion of discount		65,219		65,219
Dividend of beneficial conversion and accretion of discount		(65,219)		(65,219)
Net income (loss)			(1,091,202)	(1,091,202)
Ending balance, shares at Mar. 31, 2020	10,407,775	3,681,000
Ending balance at Mar. 31, 2020	$ 24,962,007	$ 8,770,798	(13,873,749)	19,859,056
Stock-based compensation	$ 45,342			45,342
Preferred stock dividend, in common stock, issued or to be issued, shares	195,495
Preferred stock dividend, in common stock, issued or to be issued	$ 180,123		$ (180,123)	0
Issuance of common stock, net of issuance costs, shares	3,200,585
Issuance of common stock, net of issuance costs	$ 2,286,939			$ 2,286,939
Reduction in equity retained for aquisition holdback			(2,295,456)	(2,295,456)
Ending balance, shares at Jun. 30, 2020	13,803,855	3,681,000
Ending balance at Jun. 30, 2020	$ 27,474,411	$ 8,770,798	$ (16,349,328)	$ 19,895,881
Stock-based compensation, shares	84,661
Stock-based compensation	$ 47,470			47,470
Preferred stock dividend, in common stock, issued or to be issued, shares	207,736
Preferred stock dividend, in common stock, issued or to be issued	$ 194,226		(194,226)	0
Net income (loss)			(377,704)	(377,704)
Ending balance, shares at Sep. 30, 2020	14,096,252	3,681,000
Ending balance at Sep. 30, 2020	$ 27,716,107	$ 8,770,798	$ (16,921,258)	$ 19,565,647

Condensed Consolidated Statem_3

Condensed Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2019	Sep. 30, 2019
Cash flows from operating activities:
Net (loss) income	$ (377,704)		$ (137,663)	$ 98,838
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization of property and equipment	244,353			246,890
Amortization of intangible assets	181,096			181,095
Amortization of other assets	6,402			11,218
Loss on sale of property and equipment	(6,240)			0
Stock-based compensation	47,470	$ 45,342	58,238	129,793
Change in allowance for doubtful accounts receivable	33,566			0
Change in allowance for inventory obsolescence	(76,246)			(1,740)
Amortization deferred gain on sale/leaseback	(37,612)			(37,611)
Change in operating assets and liabilities:
Trade accounts receivable and other receivables	(749,186)			191,301
Inventories	1,299,498			399,279
Prepaid expenses and other receivables	(327,001)			(10,900)
Other assets	7,154			(4,268)
Income tax payable	1,749			(18,100)
Accounts payable, accrued expenses, and other current liabilities	876,500			806,846
Net cash provided by operating activities	1,123,799			1,992,641
Cash flows from investing activities:
Purchase of property and equipment	(16,034)			(65,969)
Net cash used in investing activities	(16,034)			(65,969)
Cash flows from financing activities:
Principal payments on long-term debt	(42,964)			(46,617)
Principal payments on finance lease liability	(77,578)			(72,198)
Payment of acquisition earn-out liability and holdbacks	0			(125,000)
Net change in line of credit	(1,012,934)			(1,463,733)
Net cash used in financing activities	(1,133,476)			(1,707,548)
Net change in cash and cash equivalents and restricted cash	(25,711)			219,124
Cash and cash equivalents and restricted cash at beginning of the period	2,316,301		$ 475,154	256,030
Cash and cash equivalents and restricted cash at end of the period	2,290,590	$ 2,316,301		475,154
Supplemental disclosure of cash flow information:
Cash paid for interest	39,930			141,424
Supplemental disclosure of non-cash investing and financing activity:
Preferred stock dividend, in common stock, issued or to be issued	194,226			166,904
Finance lease obligations incurred to obtain ROU assets	$ 0			$ 3,086

Note 1. Presentation and Summar

Note 1. Presentation and Summary of Significant Accounting Policies	3 Months Ended
	Sep. 30, 2020
Accounting Policies [Abstract]
Presentation and Summary of Significant Accounting Policies	Business Dynatronics Corporation (“Company,” “Dynatronics”) is a leading medical device company committed to providing high-quality restorative products designed to accelerate optimal health. The Company designs, manufactures, and sells a broad range of restorative products for clinical use in physical therapy, rehabilitation, orthopedics, pain management, and athletic training. Through its distribution channels, Dynatronics markets and sells to orthopedists, physical therapists, chiropractors, athletic trainers, sports medicine practitioners, clinics, hospitals, and consumers. Basis of Presentation The accompanying unaudited condensed consolidated financial statements (the “Condensed Consolidated Financial Statements”) have been prepared by the Company in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. As such, these Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited financial statements and accompanying notes included in its Annual Report on Form 10-K for the fiscal year ended June 30, 2020 (the “Annual Report”) filed with the SEC on September 24, 2020. The Condensed Consolidated Balance Sheet at June 30, 2020, has been derived from the Annual Report. The accounting policies followed by the Company are set forth in Part II, Item 8, Note 1, Basis of Presentation and Summary of Accounting Policies, of the Notes to Financial Statements included in the Company’s Annual Report. In the opinion of management, the Condensed Consolidated Financial Statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position as of September 30, 2020 and its results of operations and its cash flows for the periods presented. The results of operations for the first three months of the fiscal year are not necessarily indicative of results for the full year or any future periods. The Company’s fiscal year begins on July 1 and ends on June 30 and references made to “fiscal year 2021” and “fiscal year 2020” refer to the Company’s fiscal year ending June 30, 2021 and the fiscal year ended June 30, 2020, respectively. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods presented. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates and assumptions. Recent Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Income Taxes Simplifying the Accounting for Income Taxes In August 2020, the FASB issued ASU 2020-06, Debt— Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

Note 2. Net Loss per Common Sha

Note 2. Net Loss per Common Share	3 Months Ended
	Sep. 30, 2020
Net loss per common share:
Net Loss per Common Share	Net loss per common share is computed based on the weighted-average number of common shares outstanding and, when appropriate, dilutive potential common stock outstanding during the period. Stock options, convertible preferred stock and warrants are considered to be potential common stock. The computation of diluted net loss per common share does not assume exercise or conversion of securities that would have an anti-dilutive effect. Basic net loss per common share is the amount of net income for the period available to each weighted-average share of common stock outstanding during the reporting period. Diluted net loss per common share is the amount of net loss for the period available to each weighted-average share of common stock outstanding during the reporting period and to each share of potential common stock outstanding during the period, unless inclusion of potential common stock would have an anti-dilutive effect. All outstanding options, warrants and convertible preferred stock for common shares are not included in the computation of diluted net loss per common share because they are anti-dilutive, which for the three months ended September 30, 2020, and 2019, totaled 11,777,500 and 11,887,083, respectively.

Note 3. Convertible Preferred S

Note 3. Convertible Preferred Stock and Common Stock Warrants	3 Months Ended
	Sep. 30, 2020
Equity [Abstract]
Convertible Preferred Stock	As of September 30, 2020, the Company had issued and outstanding a total of 1,992,000 shares of Series A 8% Convertible Preferred Stock (“Series A Preferred”) and 1,459,000 shares of Series B Convertible Preferred Stock ("Series B Preferred"). The Series A Preferred and Series B Preferred are convertible into a total of 3,451,000 shares of common stock. Dividends payable on these preferred shares accrue at the rate of 8% per year and are payable quarterly in stock or cash at the option of the Company. The Company generally pays the dividends on the preferred stock by issuing shares of its common stock. The formula for paying these dividends using common stock in lieu of cash can change the effective yield on the dividend to more or less than 8% depending on the market price of the common stock at the time of issuance. As of September 30, 2020, there were also issued and outstanding 230,000 shares of Series C Non-Voting Convertible Preferred Stock (“Series C Preferred”). The Series C Preferred shares are non-voting, do not receive dividends, and have no liquidation preferences or redemption rights. In November 2020, the Company issued 330,000 shares of common stock upon conversion of 230,000 shares of Series C Preferred and 100,000 shares of Series B Preferred. In October 2020, the Company paid approximately $194,000 of preferred stock dividends with respect to the Series A Preferred and Series B Preferred that accrued during the three months ended September 30, 2020, by issuing 276,519 shares of common stock.

Note 4. Comprehensive Income

Note 4. Comprehensive Income	3 Months Ended
	Sep. 30, 2020
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]
Comprehensive Income	For the three months ended September 30, 2020 and 2019, comprehensive income was equal to the net income as presented in the accompanying condensed consolidated statements of operations.

Note 5. Inventories

Note 5. Inventories	3 Months Ended
	Sep. 30, 2020
Inventory Disclosure [Abstract]
Inventories	Inventories consisted of the following: September 30, 2020 June 30, 2020 Raw materials $ 3,042,377 $ 4,798,489 Work in process 508,466 427,744 Finished goods 3,109,568 3,713,692 Inventory obsolescence reserve (491,837 ) (568,083 ) $ 6,168,574 $ 8,371,842

Note 6. Related-Party Transacti

Note 6. Related-Party Transactions	3 Months Ended
	Sep. 30, 2020
Related Party Transactions [Abstract]
Related-Party Transactions	The Company leases office, manufacturing and warehouse facilities in 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 $264,703 and $261,666 for the three months ended September 30, 2020 and 2019, respectively.

Note 7. Line of Credit

Note 7. Line of Credit	3 Months Ended
	Sep. 30, 2020
Line of Credit Facility [Abstract]
Line of Credit	Borrowings on the Line of Credit were $0 and $1,012,934 as of September 30, 2020 and June 30, 2020, respectively. As of September 30, 2020, there was approximately $5,750,000 available to borrow.

Note 8. Revenue

Note 8. Revenue	3 Months Ended
	Sep. 30, 2020
Disaggregation of Revenue [Abstract]
Revenue	As of September 30, 2020 and June 30, 2020, the rebate liability was $284,187 and $247,388, respectively. The rebate liability is included in accrued expenses in the accompanying condensed consolidated balance sheets. As of September 30, 2020 and June 30, 2020, the allowance for sales discounts was $14,500 and $8,000, respectively. The allowance for sales discounts is included in trade accounts receivable, less allowance for doubtful accounts in the accompanying condensed consolidated balance sheets. The following table disaggregates revenue by major product category for the three months ended September 30: 2020 2019 Orthopedic Soft Bracing Products $ 5,559,918 $ 6,279,026 Physical Therapy and Rehabilitation Products 6,497,230 10,037,720 Other 75,620 72,803 $ 12,132,768 $ 16,389,549

Note 1. Presentation and Summ_2

Note 1. Presentation and Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Sep. 30, 2020
Accounting Policies [Abstract]
Basis of Presentation	The accompanying unaudited condensed consolidated financial statements (the “Condensed Consolidated Financial Statements”) have been prepared by the Company in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. As such, these Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited financial statements and accompanying notes included in its Annual Report on Form 10-K for the fiscal year ended June 30, 2020 (the “Annual Report”) filed with the SEC on September 24, 2020. The Condensed Consolidated Balance Sheet at June 30, 2020, has been derived from the Annual Report. The accounting policies followed by the Company are set forth in Part II, Item 8, Note 1, Basis of Presentation and Summary of Accounting Policies, of the Notes to Financial Statements included in the Company’s Annual Report. In the opinion of management, the Condensed Consolidated Financial Statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position as of September 30, 2020 and its results of operations and its cash flows for the periods presented. The results of operations for the first three months of the fiscal year are not necessarily indicative of results for the full year or any future periods. The Company’s fiscal year begins on July 1 and ends on June 30 and references made to “fiscal year 2021” and “fiscal year 2020” refer to the Company’s fiscal year ending June 30, 2021 and the fiscal year ended June 30, 2020, respectively.
Use of Estimates	The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods presented. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates and assumptions.
Recent Accounting Pronouncements	In December 2019, the FASB issued ASU 2019-12, Income Taxes Simplifying the Accounting for Income Taxes In August 2020, the FASB issued ASU 2020-06, Debt— Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

Note 5. Inventories (Tables)

Note 5. Inventories (Tables)	3 Months Ended
	Sep. 30, 2020
Inventory Disclosure [Abstract]
Inventory	September 30, 2020 June 30, 2020 Raw materials $ 3,042,377 $ 4,798,489 Work in process 508,466 427,744 Finished goods 3,109,568 3,713,692 Inventory obsolescence reserve (491,837 ) (568,083 ) $ 6,168,574 $ 8,371,842

Note 8. Revenue (Tables)

Note 8. Revenue (Tables)	3 Months Ended
	Sep. 30, 2020
Disaggregation of Revenue [Abstract]
Disaggregation of revenue	2020 2019 Orthopedic Soft Bracing Products $ 5,559,918 $ 6,279,026 Physical Therapy and Rehabilitation Products 6,497,230 10,037,720 Other 75,620 72,803 $ 12,132,768 $ 16,389,549

Note 2. Net Loss per Common S_2

Note 2. Net Loss per Common Share (Details Narrative) - shares	3 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Net loss per common share:
Antidilutive securities excluded from computation of earnings per share	11,777,500	11,887,083

Note 5. Inventories (Details)

Note 5. Inventories (Details) - USD ($)	Sep. 30, 2020	Jun. 30, 2020
Inventory Disclosure [Abstract]
Raw materials	$ 3,042,377	$ 4,798,489
Work in process	508,466	427,744
Finished goods	3,109,568	3,713,692
Inventory obsolescence reserve	(491,837)	(568,083)
Inventories, net	$ 6,168,574	$ 8,371,842

Note 6. Related-Party Transac_2

Note 6. Related-Party Transactions (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Related Party Transactions [Abstract]
Related-party transaction expenses	$ 264,703	$ 261,666

Note 7. Line of Credit (Details

Note 7. Line of Credit (Details Narrative) - USD ($)	Sep. 30, 2020	Jun. 30, 2020
Line of Credit Facility [Abstract]
Line of credit	$ 0	$ 1,012,934
Line of credit facility, current borrowing capacity	$ 5,750,000

Note 8. Revenue (Details)

Note 8. Revenue (Details) - USD ($)	3 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Net sales	$ 12,132,768	$ 16,389,549
Orthopedic Soft Bracing Products
Net sales	5,559,918	6,279,026
Physical Therapy and Rehabilitation Products
Net sales	6,497,230	10,037,720
Other
Net sales	$ 75,620	$ 72,803

Note 8. Revenue (Details Narrat

Note 8. Revenue (Details Narrative) - USD ($)	Sep. 30, 2020	Jun. 30, 2020
Disaggregation of Revenue [Abstract]
Rebate liability	$ 284,187	$ 247,388
Allowance for sales discounts	$ 14,500	$ 8,000