Attached files
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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 December 31, 2009
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, Cottonwood Heights, UT 84121
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(Address of principal executive offices, Zip Code)
(801) 568-7000
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(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
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). [ ] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
The number of shares outstanding of the registrant's common stock, no par value,
as of January 22, 2010 is approximately 13.6 million.
DYNATRONICS CORPORATION
FORM 10-Q
QUARTER ENDED DECEMBER 31, 2009
TABLE OF CONTENTS
Page Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements................................................1
Condensed Consolidated Balance Sheets
December 31, 2009 and June 30, 2009 (Unaudited) .............................1
Condensed Consolidated Statements of Operations (Unaudited)
Three and Six Months Ended December 31, 2009 and 2008........................2
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended December 31, 2009 and 2008..................................3
Notes to Condensed Consolidated Financial Statements.........................4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................7
Item 3. Quantitative and Qualitative Disclosures About Market Risk.........14
Item 4. Controls and Procedures............................................14
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders................15
Item 5. Other Information..................................................15
Item 6. Exhibits...........................................................16
DYNATRONICS CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, June 30,
2009 2009
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 362,763 141,714
Trade accounts receivable, less allowance
for doubtful accounts of $450,123 as of
December 31, 2009 and $398,610 as of
June 30, 2009 4,449,808 4,739,727
Other receivables 109,985 99,110
Inventories, net 5,971,500 6,199,251
Prepaid expenses 254,915 333,273
Prepaid income taxes - 23,210
Deferred income tax asset - net of
long-term portion 503,809 466,783
------------- -------------
Total current assets 11,652,780 12,003,068
Property and equipment, net 3,439,791 3,349,239
Intangible asset, net 497,214 541,870
Other assets 293,612 359,171
Deferred income tax asset 620,987 833,941
------------- -------------
Total assets $ 16,504,384 17,087,289
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $ 350,777 323,713
Line of credit 4,338,752 4,602,651
Warranty reserve 191,047 191,047
Accounts payable 1,517,461 1,795,520
Accrued expenses 454,503 446,327
Accrued payroll and benefits expenses 249,895 426,623
------------- -------------
Total current liabilities 7,102,435 7,785,881
Long-term debt, net of current portion 2,712,476 2,881,659
------------- -------------
Total liabilities 9,814,911 10,667,540
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Commitments and contingencies
Stockholders' equity:
Common stock, no par value. Authorized
50,000,000 shares; issued 13,659,387
shares as of December 31, 2009 and
13,675,387 shares as of June 30, 2009 7,929,500 7,916,699
Accumulated deficit (1,240,027) (1,496,950)
------------- -------------
Total stockholders' equity 6,689,473 6,419,749
------------- -------------
Total liabilities and stockholders' equity $ 16,504,384 17,087,289
============= =============
See accompanying notes to condensed consolidated financial statements.
1
DYNATRONICS CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
December 31 December 31
2009 2008 2009 2008
------------- -------------- ------------- -------------
Net sales $ 8,501,437 8,718,893 16,783,900 16,715,042
Cost of sales 5,174,060 5,405,338 10,277,181 10,205,845
------------- -------------- ------------- -------------
Gross profit 3,327,377 3,313,555 6,506,719 6,509,197
Selling, general, and administrative expenses 2,699,357 2,827,427 5,411,726 5,804,074
Research and development expenses 206,882 265,718 422,850 527,747
------------- -------------- ------------- -------------
Operating income 421,138 220,410 672,143 177,376
------------- -------------- ------------- -------------
Other income (expense):
Interest income 2,264 1,390 5,063 1,797
Interest expense (120,833) (139,556) (239,827) (290,628)
Other income, net 7,633 7,673 14,597 10,543
------------- -------------- ------------- -------------
Net other income (expense) (110,936) (130,493) (220,167) (278,288)
------------- -------------- ------------- -------------
Income (loss) before income tax provision
(benefit) 310,202 89,917 451,976 (100,912)
Income tax provision (benefit) 121,903 35,319 195,053 (16,559)
------------- -------------- ------------- -------------
Net income (loss) $ 188,299 54,598 256,923 (84,353)
============= ============== ============= =============
Basic and diluted net income (loss) per common
share $ 0.01 0.00 0.02 (0.01)
============= ============== ============= =============
Weighted-average basic and diluted common shares
outstanding (note 2)
Basic 13,659,517 13,657,207 13,667,387 13,657,752
Diluted 13,671,397 13,657,207 13,680,563 13,657,752
See accompanying notes to condensed consolidated financial statements.
2
DYNATRONICS CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
December 31
2009 2008
------------- -------------
Cash flows from operating activities:
Net income (loss) $ 256,923 (84,353)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization of property
and equipment 145,504 178,154
Amortization of intangible asset 44,656 44,656
Stock-based compensation expense 25,684 31,099
Change in deferred income tax asset, net 175,928 (38,310)
Provision for doubtful accounts receivable 54,000 24,000
Provision for inventory obsolescence 60,000 72,000
Provision for warranty reserve 90,252 144,106
Deferred compensation - 18,900
Change in operating assets and liabilities:
Receivables 225,044 (194,331)
Inventories 167,751 (828,006)
Prepaid expenses and other assets 143,917 (208,008)
Accounts payable and accrued expenses (536,863) 558,255
Income tax payable 23,211 94,082
------------- -------------
Net cash provided by (used in)
operating activities 876,007 (187,756)
------------- -------------
Cash flows from investing activities:
Capital expenditures (236,056) (98,299)
------------- -------------
Net cash used in investing
activities (236,056) (98,299)
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 18,630 -
Principal payments on long-term debt (160,750) (142,598)
Net change in line of credit (263,899) 390,018
Redemption of common stock (12,883) (10,138)
------------- -------------
Net cash provided by (used in)
financing activities (418,902) 237,282
------------- -------------
Net change in cash and cash
equivalents 221,049 (48,773)
Cash and cash equivalents at beginning of period 141,714 288,481
------------- -------------
Cash and cash equivalents at end of period $ 362,763 239,708
============= =============
Supplemental disclosures of cash flow information:
Cash paid for interest $ 260,442 295,754
Cash paid for income taxes 8,400 20,886
See accompanying notes to condensed consolidated financial statements.
3
DYNATRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. PRESENTATION
The condensed consolidated balance sheets as of December 31, 2009 and June 30,
2009, the condensed consolidated statements of operations for the three and six
months ended December 31, 2009 and 2008, and the condensed consolidated
statements of cash flows for the six months ended December 31, 2009 and 2008
were prepared by Dynatronics Corporation 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 accounting principles generally accepted in the United States
of America 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 six
months ended December 31, 2009 are not necessarily indicative of the results for
the fiscal year ending June 30, 2010. The Company has 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, 2009 and 2008. It is suggested that the
financial statements contained in this Form 10-Q be read in conjunction with the
statements and notes thereto contained in the Company's most recent Form 10-K.
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, as appropriate, dilutive common stock
equivalents outstanding during the period. Stock options are considered to be
common stock equivalents. The computation of diluted earnings per 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 net income (loss) per common share was the same for both the basic and
diluted calculation for the three and six months ended December 31, 2009 and
2008. The reconciliation between the basic and diluted weighted-average number
of common shares outstanding for the three and six months ended December 31,
2009 and 2008 is as follows:
Three Months Ended Six Months Ended
December 31, December 31,
2009 2008 2009 2008
---------- ---------- ---------- ----------
Basic weighted-average
number of common shares
outstanding during the
period 13,659,517 13,657,207 13,667,387 13,657,752
Weighted-average number
of dilutive common stock
options outstanding during
the period 11,880 - 13,176 -
---------- ---------- ---------- ----------
Diluted weighted-average
number of common and
common equivalent shares
outstanding during the
period 13,671,397 13,657,207 13,680,563 13,657,752
========== ========== ========== ==========
Outstanding options not included in the computation of diluted net income (loss)
per common share, because they were anti-dilutive, for the three and six-month
periods ended December 31, 2009 and 2008 totaled 929,986 and 1,095,547,
respectively.
4
NOTE 3. STOCK-BASED COMPENSATION
Stock-based compensation cost is measured at the grant date, based on the fair
value of the award, and is recognized over the employee's requisite service
period. The Company recognized $13,046 and $15,675 in stock-based compensation
during the three months ended December 31, 2009 and 2008, respectively, and
recognized $25,684 and $31,099 in stock-based compensation during the six months
ended December 31, 2009 and 2008, respectively, 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 share-based awards may be
granted under the plan. Awards granted under the plan may be performance-based.
As of December 31, 2009, there were 1,010,405 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
six-month period ended December 31, 2009. There were no options granted during
the three month period ended December 31, 2009:
Weighted-
Average
Number of Exercise
options Price
------------- -------------
Outstanding at beginning of period 960,104 $ 1.39
Granted 58,120 .84
Exercised - -
Cancelled (55,697) 1.35
-------------
Outstanding at end of period 962,527 1.36
=============
Exercisable at end of period 557,196 1.65
=============
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
value of stock options granted under the plan for the six months ended December
31, 2009 and 2008 were based on the following assumptions at the date of grant
as follows:
Three Months Ended
December 31,
2009 2008
------------- -------------
Expected dividend yield 0% 0%
Expected stock price volatility 58 - 59% 57 - 59%
Risk-free interest rate 3.31 - 3.72% 3.85 - 4.14%
Expected life of options 10 years 10 years
Weighted-average grant date fair value $ .59 .45
Expected option lives and volatilities are based on historical data of the
Company. The risk-free interest rate is based on the US Treasury Bill 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.
No options were exercised during the three and six months ended December 31,
2009. As of December 31, 2009, there was approximately $115,807 of total
unrecognized stock-based compensation cost related to grants under the stock
option plan that will be expensed over a weighted-average period of 5 years.
There was $14,803 of intrinsic value for options outstanding as of December 31,
2009.
NOTE 4. COMPREHENSIVE INCOME (LOSS)
For the three and six months ended December 31, 2009 and 2008, comprehensive
income (loss) was equal to the net income (loss) as presented in the
accompanying condensed consolidated statements of operations.
5
NOTE 5. INVENTORIES
Inventories consisted of the following:
December 31, June 30,
2009 2009
------------- -------------
Raw materials $ 2,184,401 2,523,375
Finished goods 4,212,638 4,014,664
Inventory obsolescence reserve (425,539) (338,788)
------------- -------------
$ 5,971,500 6,199,251
============= =============
NOTE 6. RELATED PARTY TRANSACTIONS
The Company leases office and warehouse space in Girard, Ohio; Detroit,
Michigan; Hopkins, Minnesota; and Pleasanton, California from four significant
shareholders and former independent distributors on an annual basis under
operating lease arrangements. 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 other third parties. The expense associated with these related
party transactions total $52,238 and $102,652 for the three and six months ended
December 31, 2009, respectively.
NOTE 7. SUBSEQUENT EVENTS
The Company evaluated subsequent events through the time of filing these
financial statements with the SEC on February 1, 2010.
NOTE 8. RECENT ACCOUNTING PRONOUNCEMENTS
Recent Accounting Pronouncements Not Yet Adopted
In October 2009, the FASB issued Accounting Standards Update No. 2009-13 (FASB
ASU 09-13), "Revenue Recognition (Topic 605): Multiple-Deliverable Revenue
Arrangements (a consensus of the FASB Emerging Issues Task Force)." FASB ASU
09-13 updates the existing multiple-element arrangement guidance currently in
FASB Topic 605-25 (Revenue Recognition - Multiple-Element Arrangements). This
new guidance eliminates the requirement that all undelivered elements have
objective evidence of fair value before a company can recognize the portion of
the overall arrangement fee that is attributable to the items that have already
been delivered. Further, companies will be required to allocate revenue in
arrangements involving multiple deliverables based on the estimated selling
price of each deliverable, even though such deliverables are not sold separately
by either the Company itself or other vendors. This new guidance also
significantly expands the disclosures required for multiple-element revenue
arrangements. The revised guidance will be effective for the first annual period
beginning on or after June 15, 2010. The Company may elect to adopt the
provisions prospectively to new or materially modified arrangements beginning on
the effective date or retrospectively for all periods presented. The Company is
currently evaluating the impact FASB ASU 09-13 will have on its consolidated
financial statements.
In October 2009, the FASB issued Accounting Standards Update No. 2009-14 (FASB
ASU 09-14), "Certain Revenue Arrangements That Include Software Elements--a
consensus of the FASB Emerging Issues Task Force," that reduces the types of
transactions that fall within the current scope of software revenue recognition
guidance. Existing software revenue recognition guidance requires that its
provisions be applied to an entire arrangement when the sale of any products or
services containing or utilizing software when the software is considered more
than incidental to the product or service. As a result of the amendments
included in FASB ASU No. 2009-14, many tangible products and services that rely
on software will be accounted for under the multiple-element arrangements
revenue recognition guidance rather than under the software revenue recognition
guidance. Under this new guidance, the following components would be excluded
from the scope of software revenue recognition guidance: the tangible element of
the product, software products bundled with tangible products where the software
components and non-software components function together to deliver the
product's essential functionality, and undelivered components that relate to
software that is essential to the tangible product's functionality. FASB ASU
09-14 also provides guidance on how to allocate transaction consideration when
an arrangement contains both deliverables within the scope of software revenue
guidance (software deliverables) and deliverables not within the scope of that
guidance (non-software deliverables). This guidance will be effective for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. The Company may elect to adopt the
provisions prospectively to new or materially modified arrangements beginning on
the effective date or retrospectively for all periods presented. However, the
Company must elect the same transition method for this guidance as that chosen
for FASB ASU No. 2009-13. The Company is currently evaluating the impact FASB
ASU 09-14 will have on its consolidated financial statements.
6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Our principal business is the design, manufacture, marketing, distribution
and sale of physical medicine products and aesthetic products. We manufacture
and distribute a broad line of medical equipment including therapy devices,
medical supplies and soft goods, treatment tables and rehabilitation equipment.
Our line of aesthetic equipment includes aesthetic massage and microdermabrasion
devices, as well as skin care products. Our products are sold to and used
primarily by physical therapists, chiropractors, sports medicine practitioners,
podiatrists, plastic surgeons, dermatologists, aestheticians and other aesthetic
services providers. We operate on a fiscal year ending June 30. For example,
reference to fiscal year 2010 refers to the year ended June 30, 2010.
Recent Developments
We introduced the new V-Force vibration therapy device to the market in
the fourth fiscal quarter of fiscal year 2009. This new unit employs powerful,
whole-body vibration technology, which provides neuromuscular training to
increase strength, improve balance and enhance flexibility. Whole-body vibration
therapy has been the subject of extensive research for many years with numerous
clinical studies demonstrating how neuromuscular training is effective in the
areas of balance/fall prevention, circulation, knee rehabilitation, low back
pain, range of motion and a host of other neuromuscular conditions.
We expanded our direct sales team from 36 sales representatives in fiscal
year 2008 to 51 sales representatives by January 2010. Our expanded sales force
now consists of 27 direct sales employees and 24 independent sales
representatives, extending our reach into direct sales to the market. We intend
to recruit additional seasoned direct sales representatives as well as stable
independent distributors in geographical areas where distribution has been
diminished due to consolidation activities in our industry.
Over the past year, we have undertaken an aggressive internal campaign to
improve operating efficiencies. We identified a number of opportunities to
improve cash flows and operational efficiencies, as well as strengthen margins
and reduce manufacturing and other costs. These changes are specifically
targeted at lowering transaction costs, obtaining better pricing and terms from
vendors and service providers, streamlining customer service and production
processes, and improving our sales support functions. Implementation of all
ideas generated through this campaign is projected to yield net economic
benefits of approximately $2,000,000 annually. Some of the results of the
campaign had been implemented as of December 31, 2009 and the remaining ideas
are expected to be implemented by the end of fiscal year 2010.
Results of Operations
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the condensed
consolidated financial statements and notes thereto appearing in Part I, Item 1
of this report, and our Annual Report on Form 10-K for the year ended June 30,
2009, which includes audited financial statements for the year then ended.
Results of operations for the partial year ended December 30, 2009 are not
necessarily indicative of the results that will be achieved for the full fiscal
year ending June 30, 2010.
Net Sales
Net sales were $8,501,437 for the quarter ended December 31, 2009,
compared to $8,718,893 for the quarter ended December 31, 2008. Net sales were
$16,783,900 for the six months ended December 31, 2009, compared to $16,715,042
for the same period in 2008. Despite the difficult economic conditions in the
United States, we were able to maintain sales within 2% of last year's results
for the quarter and we generated a small increase in sales compared to last
year's six months results. Recessionary pressures have resulted in reduced
demand for capital equipment over the past 12 months. However, sales of
manufactured capital equipment for the rehabilitation market experienced a
$287,739 increase in the quarter ended December 31, 2009, compared to the
quarter ended December 31, 2008. That 10% increase in sales of higher margin
manufactured equipment marks the first quarter in the last six quarters that
this category experienced an increase. This is a positive indicator that the
recessionary pressures are starting to abate. This increase was offset by a
$505,195 decrease in sales of medical supplies, treatment tables and aesthetic
products during the quarter ended December 31, 2009. This was an 8% overall
decline in this product category reflecting a sluggish start to the quarter.
7
Gross Profit
Gross profit was $3,327,377, or 39.1% of net sales, for the quarter ended
December 31, 2009, compared to $3,313,555, or 38.0% of net sales, for the
quarter ended December 31, 2008. Gross profit was $6,506,719, or 38.8% of net
sales, for the six months ended December 31, 2009, compared to $6,509,197, or
38.9% of net sales, for the six months ended December 31, 2008. The increase in
gross margin as a percentage of sales for the quarter ended December 31, 2009 is
attributable to product mix more favorable to higher-margin medical devices than
the lower margin supply business when compared to the same quarter last year. As
economic conditions gradually improve, demand for higher margin capital products
is expected to increase, which would improve gross margins in future periods.
Selling, General, and Administrative Expenses
Selling, general, and administrative ("SG&A") expenses decreased $128,070,
or 4.5%, to $2,699,357, or 31.8% of net sales, for the quarter ended December
31, 2009, from $2,827,427, or 32.4% of net sales, for the fiscal second quarter
ended December 31, 2008. SG&A expenses decreased $392,348, or 6.8%, to
$5,411,726, or 32.2% of net sales, for the six months ended December 31, 2009,
from $5,804,074, or 34.7% of net sales, for the six months ended December 31,
2008. The decrease in SG&A expenses for the quarter and six months ended
December 31, 2009 is primarily the result of our internal cost reduction
campaign to improve efficiencies. We targeted lowering transaction costs,
obtaining better pricing and terms from service providers, streamlining customer
service and production processes, and improving our sales support functions. The
impact of these changes in SG&A expenses for the quarter ended December 31,
2009, included:
o $50,879 in lower selling expenses
o $127,486 in lower labor and operating costs
o $50,295 in higher general and administrative expenses (primarily
related to fees paid to a consultant)
For the six months ended December 31, 2009, the changes on SG&A
expenses included:
o $258,885 in lower selling expenses
o $247,617 in lower labor and operating costs
o $114,154 in higher general and administrative expenses (primarily
related to fees paid to a consultant)
Our campaign to reduce costs and streamline operations was conducted in
conjunction with Vici Capital Partners who provided key consulting services.
Vici Capital Partners received $275,000 in compensation for consulting services
with $125,000 earned in the fourth quarter of fiscal year 2009, $100,000 in the
first quarter of fiscal year 2010, and $50,000 in the second quarter of fiscal
year 2010.
Research and Development Expenses
Research and development ("R&D") expenses decreased $58,836, or 22.1%, to
$206,882 for the quarter ended December 31, 2009, from $265,718 for the quarter
ended December 31, 2008. R&D expenses also decreased as a percentage of net
sales for the quarter ended December 31, 2009, to 2.4 % from 3.0% of net sales
for the quarter ended December 31, 2008. R&D expenses decreased $104,897, or
19.9%, to $422,850 for the six months ended December 31, 2009, from $527,747 for
the six months ended December 31, 2008. R&D costs are expensed as incurred. We
expect to continue our commitment to developing innovative products for the
physical medicine market in fiscal year 2010 and in future periods in order to
position us for growth. We anticipate that R&D expenses as a percentage of net
sales and in absolute terms will increase modestly over the coming quarters
based on the schedule of new products currently under development. Current year
decreases reflect a strategy shift to outsourcing some R&D functions, thus
eliminating some personnel costs.
8
Income (Loss) Before Income Taxes
Pre-tax income more than tripled for the quarter ended December 31, 2009,
to $310,202 compared to $89,917 for the quarter ended December 31, 2008. Pre-tax
income for the six months ended December 31, 2009, increased to $451,976
compared to a pre-tax loss of $100,912 for the six months ended December 31,
2008. The improvement in pre-tax income was primarily a result of the reduction
in SG&A and R&D expenses for the fiscal 2010 periods compared to the prior year
results. Lower interest expenses also contributed to the improved operating
results for the quarter ended December 31, 2009, compared to the prior year
period.
Income Tax Provision (Benefit)
Income tax provision was $121,903 for the quarter ended December 31, 2009,
compared to $35,319 for the quarter ended December 31, 2008. Income tax
provision was $195,053 for the six months ended December 31, 2009, compared to
an income tax benefit of $16,559 for the six months ended December 31, 2008. The
effective tax rate for the second fiscal quarters of 2009 and 2008 was 39.3%.
The effective tax rate for the six months ended December 31, 2009, was 43.2%
compared to 16.4% for the prior year period. The increase in the effective tax
rate for the six months ended December 31, 2009 to 43.2% from 39.3% is
attributable to a lower than expected refund rate on a loss carry back. The
lower effective tax rate in 2008 was a result of the permanent non-deductibility
of certain stock-based compensation.
Net Income (Loss)
Net income increased to $188,299, or $.01 per share, for the quarter ended
December 31, 2009, compared to $54,598, or $.00 per share, for the quarter ended
December 31, 2008. Net income increased to $256,923, or $.02 per share, for the
six months ended December 31, 2009, compared to a net loss of $84,353, or ($.01
per share), for the six months ended December 31, 2008. The main factors
contributing to the improvement in net income for the quarter and six months
ended December 31, 2009 were the reduction in SG&A expenses and lower R&D and
interest expenses.
Liquidity and Capital Resources
We have financed operations through available cash reserves and borrowings
under a line of credit with a bank. Working capital was $4,403,745 as of
December 31, 2009 inclusive of the current portion of long-term obligations and
credit facilities, compared to working capital of $4,217,187 as of June 30,
2009.
Accounts Receivable
Trade accounts receivable, net of allowance for doubtful accounts,
decreased $289,919, or 6.1%, to $4,449,808 as of December 31, 2009, compared to
$4,739,727 as of June 30, 2009. Trade accounts receivable represent amounts due
from our dealer network as well as from medical practitioners and clinics. We
believe that our estimate of the allowance for doubtful accounts is adequate
based on our historical knowledge and relationship with these customers.
Accounts receivable are generally collected within 30 days of the agreed terms.
Inventories
Inventories, net of reserves, decreased $227,751, or 3.7%, to $5,971,500
as of December 31, 2009, compared to $6,199,251 as of June 30, 2009. While the
amount of inventory we carry fluctuates each period based on the timing of large
inventory purchases from overseas suppliers, the Company is working to reduce
inventory levels modestly while still meeting customer needs.
Accounts Payable
Accounts payable decreased $278,059, or 15.5%, to $1,517,461 as of
December 31, 2009, compared to $1,795,520 as of June 30, 2009. The decrease in
accounts payable is a result of the timing of our weekly payments to suppliers
and the timing of purchases of product components. Accounts payable are
generally not aged beyond the terms of our suppliers. We take advantage of
available early payment discounts when offered by our vendors.
Accrued Expenses
Accrued expenses increased $8,176, or 1.8%, to $454,503 as of December 31,
2009, compared to $446,327 as of June 30, 2009. Accrued expenses consist of
accrued real and personal property taxes, sales tax liabilities, accrued
royalties, commissions, professional fees, directors fees, product liability
deductions, interest expense and miscellaneous other expenses.
9
Accrued Payroll and Benefits Expenses
Accrued payroll and benefits expenses decreased $176,728, or 41.4%, to
$249,895 as of December 31, 2009, compared to $426,623 as of June 30, 2009. The
decrease in accrued payroll and benefits expenses is related to the number of
days within a pay period that require accrual as of the end of our reporting
period and a decrease in personnel as part of our cost reduction initiatives.
Cash and Cash Equivalents
Our cash position as of December 31, 2009 was $362,763, an increase of
156.0%, or $221,049, from cash of $141,714 as of June 30, 2009. We believe that
improved cash flows from operating activities will continue through higher sales
and margins, improved management of accounts receivable, reduction of current
inventory levels and reduction of operating expenses. We expect that cash flows
from operating activities, together with amounts available through an existing
line of credit facility, will be sufficient to cover operating needs in the
ordinary course of business for the next twelve months. If we experience an
adverse operating environment, including a further worsening of the general
economy in the United States, or unusual capital expenditure requirements,
additional financing may be required. However, no assurance can be given that
additional financing, if required, would be available on terms favorable to the
Company, or at all.
Line of Credit
The outstanding balance on our line of credit with a bank decreased
$263,899, to $4,338,752 as of December 31, 2009, compared to $4,602,651 as of
June 30, 2009, and $6,208,338 as of December 31, 2008. Interest on the line of
credit is based on the 90-day LIBOR rate (0.25% as of December 31, 2009) plus 4%
with a minimum interest rate of 4.5% per annum. The line of credit is
collateralized by accounts receivable and inventories, as well as a security
interest in our headquarters facility in Cottonwood Heights, Utah. Borrowing
limitations are based on approximately 45% of eligible inventory and up to 80%
of eligible accounts receivable, up to a maximum credit facility of $7,000,000.
Interest payments on the line are due monthly. As of December 31, 2009, the
borrowing base was approximately $6,177,000, resulting in approximately
$1,800,000 available on the line. The line of credit is renewable in December
2010 and includes covenants requiring us to maintain certain financial ratios.
As of December 31, 2009, we were in compliance with the loan covenants.
The current ratio was 1.6 to 1 as of December 31, 2009, compared to 1.5 to
1 as of June 30, 2009. Current assets represented 70% of all assets as of
December 31, 2009 and June 30, 2009.
Debt
Long-term debt, excluding current portion, totaled $2,712,476 as of
December 31, 2009, compared to $2,881,659 as of June 30, 2009. Long-term debt is
comprised primarily of the mortgage loans on our office and manufacturing
facilities in Utah and Tennessee. The principal balance on the mortgage loans is
approximately $2,848,000 with monthly principal and interest payments of
$32,039.
Inflation and Seasonality
Our revenues and net income from continuing operations have not been
unusually affected by inflation or price increases for raw materials and parts
from vendors.
Our business operations are not materially affected by seasonality
factors.
Critical Accounting Policies
The preparation of financial statements requires management to make
estimates and judgments that affect the reported amounts of our assets,
liabilities, net sales and expenses. Management bases these estimates on
historical experience and other assumptions it believes to be reasonable given
the circumstances and evaluates these estimates on an ongoing basis. Actual
results may differ from these estimates. We believe that the following critical
accounting policies involve a high degree of judgment and complexity. They
reflect the significant estimates and judgments used in the preparation of our
condensed consolidated financial statements.
10
Inventory Reserves
The nature of our business requires that we maintain sufficient inventory
on hand at all times to meet the requirements of our customers. We record
finished goods inventory at the lower of standard cost, which approximates
actual costs (first-in, first-out) or market. Raw materials are recorded at the
lower of cost (first-in, first-out) or market. Inventory valuation reserves are
maintained for the estimated impairment of the inventory. Impairment may be a
result of slow-moving or excess inventory, product obsolescence or changes in
the valuation of the inventory. In determining the adequacy of reserves, we
analyze the following, among other things:
o Current inventory quantities on hand;
o Product acceptance in the marketplace;
o Customer demand;
o Historical sales;
o Forecasted sales;
o Product obsolescence;
o Technological innovations; and
o Character of the inventory as a distributed item, finished
manufactured item or raw material.
Any modifications to estimates of inventory valuation reserves are
reflected in cost of goods sold within the statements of operations during the
period in which such modifications are determined necessary by management. As of
December 31, 2009 and June 30, 2009, our inventory valuation reserve balance,
which established a new cost basis, was $425,539 and $338,788, respectively, and
our inventory balance was $5,971,500 and $6,199,251, net of reserves,
respectively.
Revenue Recognition
Prior to fiscal year 2008, the majority of our product sales were to
customers who were independent distributors. Beginning in fiscal year 2008, as a
result of acquiring six of our top distributors, a significant portion of our
sales were generated through our new direct sales force. Our sales force and
distributors sell our products to end users, including physical therapists,
professional trainers, athletic trainers, chiropractors, medical doctors and
aestheticians. With the acquisition of the key distributors, we effectively
reduced our dependence on sales by independent distributors. Sales revenues are
recorded when products are shipped FOB shipping point under an agreement with a
customer, risk of loss and title have passed to the customer, and collection of
any resulting receivable is reasonably assured. Amounts billed for shipping and
handling of products are recorded as sales revenue. Costs for shipping and
handling of products to customers are recorded as cost of sales.
Allowance for Doubtful Accounts
We must make estimates of the collectability of accounts receivable. In
doing so, we analyze historical bad debt trends, customer credit worthiness,
current economic trends and changes in customer payment patterns when evaluating
the adequacy of the allowance for doubtful accounts. Our trade accounts
receivable balance was $4,449,808 and $4,739,727, net of allowance for doubtful
accounts of $450,123 and $398,610, as of December 31, 2009 and June 30, 2009,
respectively.
Deferred Income Tax Assets
In August 2009 and August 2008, our management performed an in-depth
analysis of the deferred income tax assets and their recoverability. Based on
several factors, including our history of income before income taxes averaging
over $500,000 per year in 16 of the last 19 fiscal years and the fact that the
principal causes of the loss in fiscal year 2008 (goodwill impairment and
expenses resulting from six acquisitions) are considered to be unusual and are
not expected to recur in the near future, we believe that it is more likely than
not that all of the net deferred income tax assets will be realized.
Business Plan and Outlook
In fiscal year 2010, we continue to pursue a focused strategy to improve
sales and overall operations that includes the following elements:
11
o strengthening distribution channels by adding direct sales
representatives and dealers in key locations
o developing sales with large chains of clinics and national accounts
o refining operations by continuing to reduce overhead costs and
automating processes
o enhancing product profit margins through improved manufacturing
processes and negotiating better pricing of components with vendors
o developing and introducing new, state-of-the-art products for
future growth
Our goal in implementing this strategy is to improve short-term profitability
without jeopardizing long-term growth.
The landscape of our primary market, the physical medicine marketplace,
continues to change. Past years saw consolidation among manufacturers and
distributors including our own acquisitions completed in fiscal years 2007 and
2008. More recently, two additional significant changes have taken place.
According to its filings under the Securities Exchange Act of 1934, DJO, Inc.
has closed its Chattanooga Group operations and undertaken the redistribution of
those manufacturing, R&D and support functions to other DJO facilities, in and
out of the United States. Chattanooga Group has been a primary competitor of the
Company for many years. The effect of this announcement is that the full
operations of the former Chattanooga Group have been reduced to a product brand
sold by DJO through non-proprietary distribution channels. In addition, DJO,
Inc. has disclosed that it has sold its Empi Therapy Solutions catalog division
to Patterson Medical (Sammons Preston), another competitor of the Company. This
will essentially eliminate Empi as a significant catalog competitor and further
reduce competition in our market. These consolidations combined with prior year
consolidations and continuing declines in the number of independent distributors
has significantly narrowed distribution channels in our market. At the present
time, we believe that there remain only two companies with a national direct
sales force selling proprietary and distributed products: Dynatronics and
Patterson Medical (through its Sammons Preston subsidiary). All other
distribution in our market is directed through catalog companies with no direct
sales force, or through independent local dealers. However, the network of local
independent dealers is rapidly diminishing due to consolidation efforts and
increased competition from Dynatronics, Sammons Preston and catalog companies.
In the past year, we have reinforced our direct sales team to include 27 direct
sales employees and 24 independent sales representatives. In addition to these
direct sales representatives, we continue to enjoy a strong relationship with
scores of local dealers. We believe we have the best trained and most
knowledgeable combined sales force in the industry. The recent changes within
our market provide a unique opportunity for us to grow market share in the
coming years through recruitment of the best sales representatives and dealers.
With the broad line of products we now offer and a strong sales force that
we expect will only grow stronger in the coming year, we believe that we are
well positioned to develop relationships with large chains of clinics and
hospitals, national accounts and Group Purchasing Organizations (GPO's) that
purchase only on contract. This is a segment of business which was previously
closed to us because we were not an approved vendor with the various GPO's and
national or regional chains of care facilities. With the broader offering of
products now available through our catalog, we are better able to compete for
this high volume business.
To further our efforts to recruit the best direct sales representatives
and dealers as well as to better appeal to the large GPO's and national
customers, we will continue to improve efficiencies of our operations and the
sales support for the industry. Chief among those changes will be the
introduction of our first true e-commerce solution. This launch is scheduled to
occur in the third quarter of fiscal year 2010. With the introduction of this
e-commerce solution, customers will be able to more easily place orders and
obtain information about their accounts. Sales representatives will be more
effective with an abundance of information available to them electronically. Not
only is our e-commerce solution expected to improve sales, but it will
significantly reduce our transactional costs thus enabling us to accommodate
higher sales without significantly increasing overhead.
We will also continue to focus on new product innovation. The introduction
of V-Force in fiscal year 2009 once again demonstrates our commitment to
innovation as we are the first to introduce this technology to the
rehabilitation markets we serve. Several new products are currently under
development and are scheduled for introduction in the next 12 to 15 months. The
commitment to innovation of high quality products has been a hallmark of
Dynatronics and will continue throughout the coming year.
Economic pressures from the current recession not only have affected
available credit that would facilitate large capital purchases, but have also
reduced demand for discretionary services such as those provided by our
aesthetic products. As a result, we trimmed back our expenses in the Synergie
division to be more reflective of the current environment. Fortunately, the
Synergie Elite aesthetic product line introduced in April 2008 continues to have
appeal due to its design and price point. We believe that our aesthetic devices
remain the best value on the market. We are seeking innovative ways to market
our products including strategic partnerships, both domestic and international,
to help regain sales momentum. As the economy begins to improve over the coming
year, we expect to see increased sales of these higher margin products.
12
We have long believed that international markets present an untapped
potential for growth and expansion. Adding new distributors in several countries
will be the key to this expansion effort. Our past efforts to improve
international marketing have yielded only marginal improvements. We remain
committed, however, to finding the most cost effective ways to expand our
markets internationally. Over the coming year our efforts will be focused on
partnering with key manufacturers and distributors interested in our product
line or technology. Our Cottonwood Heights operation, where all electrotherapy,
ultrasound, traction, light therapy and Synergie products are manufactured, is
certified to ISO 13485, an internationally recognized standard of excellence in
medical device manufacturing. This designation is an important requirement in
obtaining the CE Mark certification, which allows us to market our products in
the European Union and other foreign countries.
Refining our business model for supporting sales representatives and
distributors also will be a focal point of operations. We will continue to
evaluate the most efficient ways to maintain our satellite sales offices and
warehouses. In addition, more emphasis is being placed on pricing management to
protect margins for both manufactured and distributed products. The ongoing
refinement of this model is expected to yield further efficiencies that will
better achieve sales goals while at the same time reduce expenses. We have
identified over $2,000,000 of efficiency improvements that either have already
been implemented or that we plan to implement during fiscal year 2010 to drive
greater profitability.
With the sale of our manufactured capital equipment being the largest
contributor to margin generation, we have placed renewed emphasis on improving
manufacturing operations, including considering more offshore manufacturing of
components as well as streamlining manufacturing operations in Utah and
Tennessee. Past experience has shown that when recessionary pressures start to
subside, the pent up demand for capital equipment may be significant.
Expectations of the recessionary grip loosening during calendar 2010 lead us to
believe that capital equipment sales will start to rebound during the year. The
most recent quarter was the first in more than a year in which sales of capital
equipment increased over the comparable quarter. Our efforts to prudently reduce
costs during these difficult times should make us a leaner operation when demand
ramps up once again.
Based on our defined strategic initiatives, we are focusing our resources
in the following areas:
o Reinforcing distribution through a strategy of recruiting
direct sales representatives and working closely with the most
successful distributors of capital equipment.
o Improving sales by focusing sales strategies on pursuing
business opportunities with large chains of clinics, national
and regional accounts, and Group Purchasing Organizations.
o Introducing and refining our first e-commerce solution in
order to facilitate business opportunities and reduce
transactional costs.
o Significantly improving operational efficiencies through
implementation of ideas generated by the recently completed
operational analysis conducted with the help of Vici Capital
Partners. These ideas include lowering manufacturing and
transactional costs, automating processes, redefining policies
and procedures and working to make every customer a profitable
customer.
o Strengthening pricing management and procurement
methodologies.
o Minimizing expense associated with the Synergie product line
until the economy improves and demand for capital equipment
re-emerges, and, in the meantime, seeking additional
independent distributors and strategic partnerships.
o Focusing international sales efforts on identifying key
distributors and strategic partners who could represent the
Company's product line, particularly in Europe.
13
o Continuing development of new, state-of-the-art products, both
high-tech and commodity, in fiscal year 2010, for both the
rehabilitation and aesthetic markets.
o Exploring strategic business alliances that will leverage and
complement the Company's competitive strengths, increase
market reach and supplement capital resources.
Cautionary Statement Concerning Forward-Looking Statements
----------------------------------------------------------
The statements contained in this Form 10-Q, particularly the foregoing
discussion in Part I, Item 2, Management's Discussion and Analysis of Financial
Condition and Results of Operations, that are not purely historical, are
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934. These statements refer to our expectations, hopes,
beliefs, anticipations, commitments, intentions and strategies regarding the
future. They may be identified by the use of words or phrases such as
"believes," "expects," "anticipates," "should," "plans," "estimates," "intends,"
and "potential," among others. Forward-looking statements include, but are not
limited to, statements regarding product development, market acceptance,
financial performance, revenue and expense levels in the future and the
sufficiency of existing assets to fund future operations and capital spending
needs. Actual results could differ materially from the anticipated results or
other expectations expressed in such forward-looking statements for the reasons
detailed under the headings "Risk Factors" in our Annual Report on Form 10-K for
the year ended June 30, 2009. The forward-looking statements contained in this
report are made as of the date of this report and we assume no obligation to
update them or to update the reasons why actual results could differ from those
projected in such forward-looking statements, except as required by law.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risks. Market risk is the potential risk
of loss arising from adverse changes in market prices and rates. We do not enter
into derivative or other financial instruments for trading or speculative
purposes. There have been no material changes in our market risk during the
quarter ended December 31, 2009, although the general weakness in the U.S.
economy is expected to lead to greater discounting market-wide to stimulate
sales in a declining economic environment. In addition, further weakening of the
economy could result in greater risks of collections of accounts receivable.
Our primary market risk exposure is interest rate risk. As of December 31,
2009, approximately $5,600,000 of our debt bore interest at variable rates.
Accordingly, our net income (loss) is affected by changes in interest rates. For
every one hundred basis point change in the average interest rate under our
existing debt, our annual interest expense would change by approximately
$56,000.
In the event of an adverse change in interest rates, we could take actions
to mitigate our exposure. However, due to the uncertainty of the actions that
would be taken and their possible effects, this analysis assumes no such
actions.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our reports under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.
As required by SEC Rule 13a-15(b), an evaluation was performed under the
supervision and with the participation of our management, including our
principal executive officer and our principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934) as of the end of the period covered by this report. Based
upon that evaluation, our Chief Executive Officer and Chief Financial Officer
have concluded that our disclosure controls and procedures were effective as of
December 31, 2009.
14
There has been no change in our internal control over financial reporting
during the quarter ended December 31, 2009 that has materially affected, or that
is reasonably likely to materially affect, our internal controls over financial
reporting and we believe that our internal controls over financial reporting are
effective.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Our Annual Meeting of Shareholders was held in Salt Lake City, Utah on
November 24, 2009. At this meeting, the following actions were submitted and
approved by vote of the shareholders:
(1) Election of five directors; and
(2) Ratification of the Board's selection of Tanner LC as our
independent registered public accounting firm for the fiscal
year ending June 30, 2010.
A total of 10,554,082 shares (approximately 77.3%) of the issued and
outstanding shares of the Company were represented by proxy or in person at the
meeting. These shares were voted on the matters described above as follows:
1. For the nominees for director as follows:
Number of Shares Number of Shares
Name For Abstaining/Withheld
Kelvyn H. Cullimore, Jr. 10,053,089 432,664
Larry K. Beardall 10,109,287 432,664
Howard L. Edwards 10,121,418 432,664
Val J. Christensen 10,121,418 432,664
Joseph H. Barton 10,121,418 432,664
2. For the ratification of Tanner LC as the Company's independent registered
public accounting firm, as follows:
Number of Shares Number of Shares Number of Shares
For Against Abstaining/Withheld
10,348,372 101,046 104,845
Item 5. Other Information
NASDAQ Minimum Bid Requirement
On January 29, 2010, we received a Letter of Compliance from the NASDAQ
Stock Market, notifying us that the prior deficiency in the minimum bid
requirement has been cured and we are now in compliance with the minimum bid
requirement for continued inclusion under Marketplace Rule 4310(c)(4).
Related Party Transaction
We lease office and distribution facilities in California owned by John
Rajala, a shareholder and our director of business development. Mr. Rajala also
beneficially owns 9.6% of our outstanding common stock. The rental paid to Mr.
Rajala for the leased facilities is $120,000 per year under a written lease
agreement. The term of the lease is 12 months with annual renewal periods and we
believe that the rental payments are in line with the market prices for similar
facilities in the area in which the leased premises are located. This
transaction with a related party has been approved by the audit committee of the
Company's Board of Directors.
In addition, the Company leases office and warehouse space in Girard,
Ohio; Detroit, Michigan; and Hopkins, Minnesota; from three shareholders and
former independent distributors on an annual basis under operating lease
arrangements. 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
other third parties. The expense associated with these related party
transactions total $22,238 and $42,652 for the three and six months ended
December 31, 2009, respectively.
15
Item 6. Exhibits
(a) Exhibits
--------
3.1 Articles of Incorporation and Bylaws of Dynatronics Laser Corporation.
Incorporated by reference to a Registration Statement on Form S-1 (No.
2-85045) filed with the SEC and effective November 2, 1984
3.2 Articles of Amendment dated November 21, 1988 (previously filed)
3.3 Articles of Amendment dated November 18, 1993 (previously filed)
10.1 Employment contract with Kelvyn H. Cullimore, Jr. (previously filed)
10.2 Employment contract with Larry K. Beardall (previously filed)
10.3 Loan Agreement with Zions Bank (previously filed)
10.5 Amended Loan Agreement with Zions Bank (previously filed)
10.6 1992 Amended and Restated Stock Option Plan (previously filed)
10.7 Dynatronics Corporation 2006 Equity Incentive Award Plan (previously
filed as Annex A to the Company's Definitive Proxy Statement on
Schedule 14A filed on October 27, 2006)
10.8 Form of Option Agreement for the 2006 Equity Incentive Plan for
incentive stock options (previously filed as Exhibit 10.8 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 2006)
10.9 Form of Option Agreement for the 2006 Equity Incentive Plan for
non-qualified options (previously filed as Exhibit 10.9 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 2006)
10.10 Building Lease Agreement with The Rajala Family Trust dated June 30,
2009
11 Computation of Net Income per Share (included in Notes to Consolidated
Financial Statements)
31.1 Certification under Rule 13a-14(a)/15d-14(a) of principal executive
officer (filed herewith)
31.2 Certification under Rule 13a-14(a)/15d-14(a) of principal financial
officer (filed herewith)
32 Certifications under Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350) (filed herewith)
16
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 February 1, 2010 /s/ Kelvyn H. Cullimore, Jr.
-------------------- -----------------------------
Kelvyn H. Cullimore, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
Date February 1, 2010 /s/ Terry M. Atkinson, CPA
-------------------- ---------------------------
Terry M. Atkinson, CPA
Chief Financial Officer
(Principal Financial and Accounting Officer)
17
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