16
[ARTICLE] 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM BALANCE SHEET AND STATEMENT OF INCOME 9-30-95
AND IS QUALIFIED IN ITS ENTIRETY BY SUCH FINANCIAL
STATEMENTS.
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] JUN-30-1995
[PERIOD-START] JUL-01-1995
[PERIOD-END] SEP-30-1995
[CASH] 555,914
[SECURITIES] 0
[RECEIVABLES] 1,108,232
[ALLOWANCES] 54,797
[INVENTORY] 1,856,608
[CURRENT-ASSETS] 3,855,328
[PP&E] 3,245,419
[DEPRECIATION] 610,967
[TOTAL-ASSETS] 7,183,792
[CURRENT-LIABILITIES] 513,701
[BONDS] 2,163,148
[COMMON] 1,675,082
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 2,612,785
[TOTAL-LIABILITY-AND-EQUITY] 7,183,792
[SALES] 1,329,939
[TOTAL-REVENUES] 1,329,939
[CGS] 716,008
[TOTAL-COSTS] 716,008
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 39,674
[INCOME-PRETAX] 4,211
[INCOME-TAX] 1,314
[INCOME-CONTINUING] 2,897
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 2,897
[EPS-PRIMARY] 0
[EPS-DILUTED] 0
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended September 30, 1995.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from --------- to --------
Commission File Number: 0-12697
Dynatronics Corporation
- ------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Utah 87-0398434
- -------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification
No.)
7030 Park Centre Drive, Salt Lake City, UT 84121
- ------------------------------------------ ----------
(Address of principal executive offices) (ZIP
Code)
(801) 568-7000
- ------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
X Yes No
------ ------
The number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date
is:
Class Outstanding at September 30,
1995
- -------------------------- --------------------------------
Common Stock, No Par Value 7,964,397 shares
DYNATRONICS CORPORATION
TABLE OF CONTENTS
Page Number
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets
September 30, 1995, and June 30, 1995 3
Condensed Statements of Income
Three Months Ended September 30, 1995,
and September 30, 1994 4
Condensed Statement of Stockholders Equity
Three Months Ended September 30, 1995 5
Condensed Statements of Cash Flows
Three Months Ended September 30, 1995,
and September 30, 1994 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 10
Part II. OTHER INFORMATION 14
DYNATRONICS CORPORATION
Condensed Balance Sheets
(Unaudited)
September 30 June 30
1995 1995
ASSETS ----------- ------------
Current assets:
Cash and cash equivalents $ 555,914 779,054
Trade accounts receivable, less allowance
for doubtful accounts of $54,797 in
September and $50,729 in June 1,053,435 941,017
Income tax refund receivable 17,563 19,095
Related party and other receivables 255,691 236,021
Inventories (note 3) 1,856,608 1,767,030
Prepaid expenses 60,276 48,300
Deferred tax asset-current 55,841 53,006
----------- -----------
Total current assets 3,855,328 3,843,523
Net property and equipment (note 4) 2,634,452 2,663,171
Excess of cost over book value of minority interest
acquired, net of accumulated amortization of
$107,543 in September and $105,348 in June 155,819 158,014
Deferred tax asset-noncurrent 178,833 178,123
Other assets 359,360 344,497
----------- -----------
$ 7,183,792 7,187,328
=========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Current installments of long-term debt $ 103,245 101,345
Current installments of
capital lease obligations 42,274 44,742
Accounts payable 174,263 131,138
Accured expenses 193,919 247,026
----------- -----------
Total current liabilities 513,701 524,251
Long-term debt, excluding current installments 2,059,903 2,086,438
Capital lease obligations, excluding current
installments 12,913 22,671
Deferred compensation 309,408 290,262
----------- -----------
Total long-term liabilities, excluding
current installments 2,382,224 2,399,371
----------- -----------
Total liabilities 2,895,925 2,923,622
Stockholders equity:
Common stock, no par value. Authorized
50,000,000 shares; issued and outstanding
7,964,397 shares in September and 7,943,897
in June 1,675,082 1,653,818
Retained earnings 2,612,785 2,609,888
----------- -----------
Total stockholders equity 4,287,867 4,263,706
----------- -----------
$ 7,183,792 7,187,328
=========== ===========
See accompanying notes to condensed financial statements.
DYNATRONICS CORPORATION
Condensed Statements of Income
(Unaudited)
Three Months Ended
September 30
1995 1994
----------- -----------
Net Sales $ 1,329,939 1,772,416
Cost of sales 716,008 1,007,203
----------- -----------
Gross profit 613,931 765,213
Selling, general,
and administrative expenses 465,304 466,973
Research and development expenses 156,812 170,053
----------- -----------
Operating income (loss) (8,185) 128,187
Other income (expense):
Interest income 9,318 3,702
Interest expense (39,674) (42,548)
Other income, net 42,752 38,331
----------- -----------
Total other income (expense) 12,396 (515)
Income before income taxes 4,211 127,672
Income tax expense (benefit) 1,314 52,044
----------- -----------
Net income $ 2,897 75,628
=========== ===========
Net income per common share and common
share equivalents (note 2) $ 0.00 0.01
=========== ===========
Weighted average number of common
shares and common share equivalents
outstanding (note 6) 7,945,011 8,260,366
See accompanying notes to condensed financial statements.
DYNATRONICS CORPORATION
Condensed Statement of Stockholders Equity
Three Months ended September 30, 1995
(Unaudited)
Total
Common Retained stockholders
stock earnings equity
----------- ---------- -------------
Balances at June 30, 1995 $ 1,653,818 2,609,888 4,263,706
Issuance of 20,500 shares of common
stock upon exercise of employee
stock options 17,938 - 17,938
Income tax benefit from nonemployee
exercise of stock options 3,326 - 3,326
Net income - 2,897 2,897
----------- ----------- ------ ----
Balances at September 30, 1995 $ 1,675,082 2,612,785 4,287,867
=========== =========== ===========
See accompanying notes to condensed financial statements.
DYNATRONICS CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
Three Months Ended
September 30
1995 1994
---------- ----------
Cash flows from operating activities:
Net income $ 2,897 75,628
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization of property and
equipment 42,445 45,725
Other amortization 2,195 2,195
Provision for doubtful accounts 3,000 3,000
Provision for inventory obsolescence 24,000 24,000
Provision for warranty reserve 24,790 31,615
Decrease (increase) in deferred tax assets (3,545) 9,138
Decrease (increase) in operating assets:
Receivables (135,088) (838,996)
Inventories (113,578) (40,833)
Prepaid expenses and other assets (26,839) (48,549)
Increase (decrease) in operating liabilities:
Trade accounts payable and accrued expenses (34,772) 2,743
Deferred compensation 19,146 18,315
Income taxes payable 4,858 77,906
---------- ----------
Net cash provided by (used in) operating
activities (190,491) (638,113)
---------- ----------
Cash flows from investing activities:
Capital (expenditures) source (13,726) (24,227)
Net cash provided by (used in) investing
activities (13,726) (24,227)
---------- ----------
Cash flows from financing activities:
Principal payments under capital lease obligations (12,226) (19,032)
Principal payments on long-term debt (24,635) (22,871)
Proceeds from sale of common stock 17,938 -
---------- ----------
Net cash provided by (used in) financing
activities (18,923) (41,903)
---------- ----------
Net increase (decrease) in cash and cash equivalents (223,140) (704,243)
Cash and cash equivalents at beginning of period 779,054 871,008
---------- ----------
Cash and cash equivalents at end of period $ 555,914 166,765
=========== =========
Supplemental cash flow information
Cash paid for interest (net of amounts capitalized) 39,674 42,548
Cash paid for income taxes - 100
Supplemental disclosure of non-cash investing and
financing activities
Long-term debt incurred for fixed assets - -
Capital lease obligations incurred for property and
equipment - -
See accompanying notes to condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
NOTE 1. PRESENTATION
The financial statements as of September 30, 1995 and for
the three months then ended were prepared by the Company
without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of
management, all necessary adjustments to the financial
statements have been made to present fairly the financial
position and results of operations and cash flows. All
adjustments were of a normal recurring nature. The results
of operations for the respective periods presented are not
necessarily indicative of the results for the respective
complete years. The Company has previously filed with the
SEC an Annual Report on Form 10-K under the name of
Dynatronics Corporation and/or Dynatronics Laser Corporation
which included audited financial statements for the three
years ending June 30, 1995, 1994, and 1993. It is suggested
that the financial statements contained in this filing be
read in conjunction with the statements and notes thereto
contained in the Company's 10-K filing.
NOTE 2. EARNINGS PER SHARE
Earnings per common share and common share equivalents are
computed by dividing net income by the weighted average
number of shares of common stock and common stock
equivalents outstanding during the period. Common stock
equivalents include shares issuable upon exercise of the
Company's stock options.
NOTE 3. INVENTORIES
Inventories consisted of the following:
September 30 June 30
1995 1995
------------ --------------
Raw Materials $1,519,190 $ 1,201,587
Finished Goods 383,682 611,207
Inventory Reserve (46,264) (45,764)
---------- ---------
$1,856,608 $1,767,030
============ ===========
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment were as follows:
September 30 June 30
1995 1995
------------- ----------
Land $ 589,920 589,920
Building 1,935,297 1,935,297
Machinery and equipment, and
equipment under capital lease 720,202 706,475
------------- ----------
3,245,419 3,231,692
Less accumulated depreciation
and amortization 610,967 568,521
------------- ----------
$2,634,452 2,663,171
============= ==========
NOTE 5. INCOME TAXES
The Company reports the income tax expense (benefit) after
considering the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
Statement 109 requires the recognition of deferred tax
liabilities and assets for the temporary differences between
the financial reporting basis and tax basis of the Company's
assets and liabilities at enacted tax rates expected to be
in effect when such amounts are realized or settled.
NOTE 6. STOCK OPTIONS GRANTED
During 1994, 448,895 options under the 1992 plan were
granted to employees, officers and directors of the Company
with an exercise price of $0.875 which are exercisable after
August 19, 1994 and expire five years from date of grant.
As of September 30, 1995 of the above options 47,440 were
exercised. Under the terms of the plan 68,425 options for
shares of common stock were available for issuance, but were
not granted as of September 30, 1995.
Also in 1994, the Board of Directors granted 1,350,075
options to a nonemployee, 150,075 are exercisable at a price
of $0.875 per share. In 1995 the remaining 1,200,000
options were canceled.
NOTE 7. GUARANTEE OF PROMISSORY NOTE
In fiscal 1995 the board of directors voted to approve the
guarantee of a $500,000 bank loan to ITEC Attractions, the
Company's 36 percent owned subsidiary. At September 30,
1995 the loan balance of $500,000 and the loan guarantee
remain outstanding.
NOTE 8. OTHER RECEIVABLES
Included in the $255,691 of related party and other
receivables is $242,711 due from ITEC Attractions related to
unpaid amounts under services agreement, loan guarantee fee,
and other miscellaneous expenses.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Sales for the quarter ended September 30, 1995 decreased to
$1,329,939 as compared to $1,772,416 in the same quarter
last year. During the first quarter of fiscal 1994, the
Company introduced the Dynatron 550 and Dynatron 850 which
added significantly to the sales for that quarter. The
Company had planned to introduce the Dynatron 650
Electrotherapy Device and the Dynatron 950 Combination
Electrotherapy/Ultrasound Device, early in the first quarter
of fiscal 1995 but their introduction was delayed until the
end of September, 1995. Within the first 30 days of
shipment of these new devices, the Company had received in
excess of $1,000,000 in orders for these new units.
Unfortunately, the delay in introducing the products only
allowed $325,000 of these orders to be shipped in the
quarter ended September 30, 1995. In addition, market
anticipation of these new products led to lower sales of
other Company products as dealers reduced inventories of
older models and customers waited for the new products to be
available before placing orders for similar equipment. As a
result, management anticipates that the second quarter of
fiscal 1996 will be well ahead of last years second quarter
figures.
Gross Margins as a percentage of sales were 46.2 percent in
the reporting quarter compared to 43.2 percent in the same
period of the previous year. This increase is directly
attributable to the increase in sales of "50 Series"
products which carry higher margin percentages on average as
compared to the Company's other products.
Selling, general and administrative (SG&A) expenses for the
reporting quarter were comparable to the same quarter last
year.
Research and development expenses in the reporting quarter
decreased by $13,241 over the same period last year. This
decrease is mostly due to internal company restructuring.
The Company continues to remain committed to developing new
products as well as technologically improving existing
devices in order to maintain the Company's competitive edge
in the marketplace.
Income before income tax for the reporting quarter equalled
$4,211, as compared to $127,672 during the same quarter of
the prior year while net income equalled $2,897 as compared
to $75,628 in the same quarter of the prior year. These
decreases were the direct result of the delays in shipping
the new products and the resultant 25 percent decrease in
sales.
Liquidity and Capital Resources
- -------------------------------
The Company expects that revenues from operations, cash
balances, together with available sources of borrowing, will
be adequate to meet working capital needs related to its
business and its planned capital expenditures for the
upcoming operating period.
The Company continues to maintain a liquid position. The
current ratio at September 30, 1995 was 7.5 to 1 and at June
30, 1995 was 7.3 to 1. Current assets represent 54% of
total assets.
Trade accounts receivable are mostly from the Company's
dealer network and are generally considered to be within
term. All accounts payable are within term with the Company
continuing its policy of taking advantage of any and all
payment discounts available.
The Company maintains a revolving line of credit of
$1,000,000 with a commercial bank. No amounts were
outstanding on this line of credit at September 30, 1995.
However, $500,000 of the line of credit is restricted in
relation to a guarantee by Dynatronics of a loan from the
commercial bank to ITEC Attractions, the Company's 36
percent owned subsidiary.
Inventory levels increased 5 percent (or $89,578) to
$1,856,608 on September 30, 1995 as compared to $1,767,030
at June 30, 1995. This increase can be directly attributed
to the introduction of the Dynatron 650 and 950 which
occurred at the end of September, 1995. Management expects
inventories will remain at current levels through the
balance of the current fiscal year.
Cash balances equalled $555,914 at September 30, 1995 as
compared to $779,054 at June 30, 1995. Part of this
reduction is due to the increases in inventory associated
with the introductions of the new Dynatron 650 and 950.
Another contributing factor was the increase in receivables
which occurred as extended terms were offered to certain
credit worthy customers as an incentive to increase sales
during the quarter.
Business Plan
- -------------
The Company developed the new "50 Series" product line to
address the specific market need for lower cost, high value
products. The first in this series, the Dynatron 150
Ultrasound device, was introduced in February, 1994. The
next two devices, the Dynatron 550 and Dynatron 850 were
introduced in August, 1994. At the end of September 1995,
the Dynatron 650 and 950 were introduced. As anticipated,
over the last 20
months, the "50 Series" devices have dramatically improved
sales and operating profits.
The "50 Series" has also been a particularly attractive
product line for the international market. Due to its low
price and compact size, the Company has received inquiries
from around the world. Some of the new markets to which
product has been shipped include South Africa, Mexico,
Philippines, Argentina, Brazil, Chile, Israel, Kuwait,
Lebanon, Vietnam and Australia. While international markets
are slower to cultivate and develop, the Company feels it
can expand its international presence significantly with the
"50 Series". Hence, the Company has pursued international
marketing contacts particularly in Japan and Europe for the
purpose of establishing importers and distributors. In May,
1995 the Company announced the signing of a distribution
agreement with a Japanese Company. It is anticipated sales
to Japan will begin in March 1996. Other international
markets are being planned and the Company expects
international sales will increase significantly over last
year.
The Company recognizes the need to continually upgrade and
re-engineer existing products as well as introduce new
products.
The ongoing effort to accomplish these objectives is
reflected in the Research and Development expenditures which
are running at approximately 11.8 percent of sales this
fiscal year. As a result, the Company anticipates being
able to reduce costs of manufacturing without sacrificing
value or features. The continuing commitment to Research
and Development enables Dynatronics to be a technological
leader in the market.
The Company remains committed to the concept of Quality
First. No cost reductions have been implemented that would
negatively impact quality of product or customer service.
Efforts to improve quality in every aspect of the Company is
an ongoing quest that involves every employee.
Another of the Company's objectives is to evaluate potential
acquisitions that would favorably enhance shareholder value
and Company growth. Strict criteria for such acquisitions
have been set and management continues to evaluate
acquisition candidates fitting the stated criteria.
Exploring research opportunities into areas of potential
efficacy of the Company's low-power laser device remains the
focus for development of laser products. To that end,
Company engineers have developed a new 50 series laser
product named the Dynatron 1650, which provides varying
wavelengths of laser light. While this device may only be
used for research purposes in the United States, the Company
is currently exploring international markets for this
product. Should any research provide evidence deemed
sufficient for submission to the U.S. Food and Drug
Administration, the Company would give consideration to
submitting a Pre-Market Approval Application
for the laser to the FDA to obtain marketing clearance for
its laser device in the United States.
The Company currently owns approximately 2.3 million shares
of ITEC Attractions (ITEC) common stock which, based on the
current trading price as quoted on NASDAQ as of November 3,
1995, was valued at approximately $1.4 million. ITEC opened
its first facility in Branson, Missouri, in October, 1993.
During its 1995 fiscal year, ITEC completed production of
its theme film "Ozarks: Legacy and Legend" for the Branson
facility. The film was well received by patrons and the
reviews were positive. "Ozarks: Legacy and Legend" will be
exhibited continuously at the theater. Due primarily to a
failed secondary offering of stock last year, ITEC is in
arrears on certain lease payments and current liabilities
exceed current assets. In addition recurring losses from
operations have negatively impacted working capital that was
anticipated to be replenished by the failed stock offering.
These factors raise substantial doubt about ITEC's ability
to continue as a going concern. However, ITEC is currently
in negotiations to restructure debt and secure additional
capital.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
There are no material legal proceedings
pending to which the Company or any of its
subsidiaries is a party or of which any of their
property is the subject which require disclosure
in this statement.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security
Holders
--------------------------------------------------
- -
Not applicable.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A) Not applicable.
B) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
DYNATRONICS CORPORATION
Registrant
Date 11/13/95 /s/ Kelvyn H. Cullimore, Jr.
---------------------- ----------------------------
Kelvyn H. Cullimore, Jr.
President
Chief Executive Officer
Date 11/13/95 /s/ Keith E. Turner
---------------------- ----------------------------
Keith E. Turner
Treasurer
Chief Accounting Officer and
Principal Financial Officer