Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Mar. 31, 2018 | May 02, 2018 | |
Document and Entity Information: | ||
Entity Registrant Name | DYNATRONICS CORP | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Trading Symbol | dynt | |
Amendment Flag | false | |
Entity Central Index Key | 720,875 | |
Current Fiscal Year End Date | --06-30 | |
Entity Common Stock, Shares Outstanding | 8,089,398 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Mar. 31, 2018 | Jun. 30, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 1,497,455 | $ 254,705 |
Trade accounts receivable, less allowance for doubtful accounts of $388,772 as of March 31, 2018 and $382,333 as of June 30, 2017 | 7,117,194 | 5,281,348 |
Other receivables | 111,071 | 33,388 |
Inventories, net | 12,389,387 | 7,397,682 |
Prepaid expenses | 720,868 | 503,800 |
Total current assets | 21,835,975 | 13,470,923 |
Property and equipment, net | 5,839,436 | 4,973,477 |
Intangible assets, net | 7,312,854 | 2,754,118 |
Goodwill | 7,872,863 | 4,302,486 |
Other assets | 522,621 | 562,873 |
Total assets | 43,383,749 | 26,063,877 |
Current liabilities: | ||
Accounts payable | 3,320,322 | 2,334,563 |
Accrued payroll and benefits expense | 2,019,218 | 1,472,773 |
Accrued expenses | 654,920 | 656,839 |
Income tax payable | 6,994 | 8,438 |
Warranty reserve | 205,850 | 202,000 |
Line of credit | 6,542,690 | 2,171,935 |
Current portion of long-term debt | 161,458 | 151,808 |
Current portion of capital lease | 202,099 | 193,818 |
Current portion of deferred gain | 150,448 | 150,448 |
Current portion of acquisition holdback | 180,624 | 294,744 |
Total current liabilities | 13,444,623 | 7,637,366 |
Long-term debt, net of current portion | 345,316 | 461,806 |
Capital lease, net of current portion | 2,935,103 | 3,087,729 |
Deferred gain, net of current portion | 1,567,165 | 1,680,001 |
Acquisition holdback, net of current portion | 2,716,667 | 750,000 |
Other liabilities | 407,937 | 122,585 |
Total liabilities | 21,416,811 | 13,739,487 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock, no par value: Authorized 50,000,000 shares; 4,889,000 shares and 3,559,000 shares issued and outstanding as of March 31, 2018 and June 30, 2017, respectively | 11,641,816 | 8,501,295 |
Common stock, no par value: Authorized 100,000,000 shares; 8,023,236 shares and 4,653,165 shares issued and outstanding as of March 31, 2018 and June 30, 2017, respectively | 20,087,549 | 11,838,022 |
Accumulated deficit | (9,762,427) | (8,014,927) |
Total stockholders' equity | 21,966,938 | 12,324,390 |
Total liabilities and stockholders' equity | $ 43,383,749 | $ 26,063,877 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2018 | Jun. 30, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 388,772 | $ 382,333 |
Preferred stock shares authorized | 50,000,000 | 5,000,000 |
Preferred stock shares issued | 4,889,000 | 3,559,000 |
Preferred stock shares outstanding | 4,889,000 | 3,559,000 |
Common stock shares authorized | 100,000,000 | 50,000,000 |
Common stock shares issued | 8,023,236 | 4,653,165 |
Common stock shares outstanding | 8,023,236 | 4,653,165 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||||
Net sales | $ 16,634,067 | $ 7,715,955 | $ 47,513,371 | $ 24,592,043 |
Cost of sales | 11,342,518 | 5,014,175 | 32,112,451 | 16,022,269 |
Gross profit | 5,291,549 | 2,701,780 | 15,400,920 | 8,569,774 |
Selling, general, and administrative expenses | 6,213,490 | 3,153,257 | 15,146,001 | 8,768,851 |
Research and development expenses | 242,306 | 230,594 | 1,047,642 | 818,954 |
Operating loss | (1,164,247) | (682,071) | (792,723) | (1,018,031) |
Other income (expense): | ||||
Interest expense, net | (118,045) | (74,992) | (298,559) | (198,084) |
Other income, net | 4,859 | 2,332 | 26,845 | 80,431 |
Net other expense | (113,186) | (72,660) | (271,714) | (117,653) |
Loss before income taxes | (1,277,433) | (754,731) | (1,064,437) | (1,135,684) |
Income tax (provision) benefit | 0 | 0 | 0 | 0 |
Net loss | (1,277,433) | (754,731) | (1,064,437) | (1,135,684) |
Deemed dividend on convertible preferred stock and accretion of discount | 0 | 0 | (1,023,786) | (375,858) |
Preferred stock dividend, cash | 0 | 0 | (104,884) | 0 |
Convertible preferred stock dividend, in common stock | (190,523) | (93,979) | (578,178) | (271,756) |
Net loss attributable to common stockholders | $ (1,467,956) | $ (848,710) | $ (2,771,285) | $ (1,783,298) |
Basic and diluted net loss per common share | $ (0.18) | $ (0.28) | $ (0.45) | $ (0.61) |
Weighted-average common shares outstanding: | ||||
Basic and diluted | 7,962,179 | 3,022,443 | 6,135,224 | 2,914,229 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (1,064,437) | $ (1,135,684) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization of property and equipment | 298,973 | 161,961 |
Amortization of intangible assets | 457,265 | 23,010 |
Amortization of other assets | 56,433 | 92,323 |
Amortization of building capital lease | 188,950 | 188,950 |
Gain on sale of property and equipment | (7,002) | (19,252) |
Stock-based compensation expense | 211,747 | 171,798 |
Change in allowance for doubtful accounts receivable | (1,561) | 70,650 |
Change in allowance for inventory obsolescence | 162,528 | 7,028 |
Deferred gain on sale/leaseback | (112,836) | (112,836) |
Change in operating assets and liabilities: | ||
Receivables, net | 324,838 | 509,154 |
Inventories, net | (1,017,052) | (793,101) |
Prepaid expenses | (124,079) | 35,722 |
Other assets | (16,181) | (205,570) |
Income tax payable | (3,896) | (3,967) |
Accounts payable and accrued expenses | 750,894 | 255,194 |
Net cash provided by (used in) operating activities | 104,584 | (754,620) |
Cash flows from investing activities: | ||
Purchase of property and equipment | (131,040) | (164,181) |
Net cash paid in acquisition, net of cash received - see Note 2 | (9,063,017) | 0 |
Proceeds from sale of property and equipment | 12,160 | 32,000 |
Net cash used in investing activities | (9,181,897) | (132,181) |
Cash flows from financing activities: | ||
Principal payments on long-term debt | (106,840) | (42,561) |
Principal payments on long-term capital lease | (144,345) | (136,513) |
Payment of acquisition holdbacks | (294,744) | 2,540,073 |
Net change in line of credit | 4,370,755 | 928,554 |
Proceeds from issuance of preferred stock, net | 6,600,121 | (16,241) |
Preferred stock dividends paid in cash | (104,884) | 0 |
Net cash provided by financing activities | 10,320,063 | 3,273,312 |
Net change in cash and cash equivalents | 1,242,750 | 2,386,511 |
Cash and cash equivalents at beginning of the period | 254,705 | 966,183 |
Cash and cash equivalents at end of the period | 1,497,455 | 3,352,694 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 284,437 | 198,572 |
Supplemental disclosure of non-cash investing and financing activity: | ||
Deemed dividend on convertible preferred stock and accretion of discount | 1,023,786 | 375,858 |
Preferred stock dividends paid or to be paid in common stock | 578,178 | 276,693 |
Preferred stock issued to acquire "Bird & Cronin" | 4,000,000 | 0 |
Acquisition holdback | 2,147,291 | 0 |
Conversion of preferred stock to common stock | 7,459,600 | 0 |
Accrued severance paid in common stock | $ 0 | $ 185,000 |
Note 1. Presentation and Summar
Note 1. Presentation and Summary of Significant Accounting Policies | 9 Months Ended |
Mar. 31, 2018 | |
Disclosure Text Block [Abstract] | |
Note 1. Presentation and Summary of Significant Accounting Policies | Basis of Presentation The condensed consolidated balance sheets as of March 31, 2018 and June 30, 2017, the condensed consolidated statements of operations for the three and nine months ended March 31, 2018 and 2017, and condensed consolidated statements of cash flows for the nine months ended March 31, 2018 and 2017, were prepared by Dynatronics Corporation and its subsidiaries (collectively, the “ Company SEC U.S. GAAP 2017 Form 10-K Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Some of the more significant estimates relate to inventory, allowance for doubtful accounts, stock-based compensation and valuation allowance for deferred income taxes. Significant Accounting Policies There have been no changes to the Company’s significant accounting policies as described in the 2017 Form 10-K. |
Note 2. Acquisitions
Note 2. Acquisitions | 9 Months Ended |
Mar. 31, 2018 | |
Note 2. Acquisitions | |
Note 2. Acquisitions | Bird & Cronin On October 2, 2017, the Company acquired substantially all of the assets of Bird & Cronin, Inc. (“ Bird & Cronin Acquisition At the closing of the Acquisition, the Company paid Bird & Cronin cash of $9,063,017 and delivered 1,397,375 shares of its Series D Non Voting Convertible Preferred Stock (“ Series D Preferred In connection with the Acquisition, the Company completed a private placement of Series C Non Voting Convertible Preferred Stock (“ Series C Preferred Private Placement Also in connection with the Acquisition, the Company entered into a lease with Trapp Road Limited Liability Company, a Minnesota limited liability company controlled by the former owners of Bird & Cronin, to occupy the facility housing the Bird & Cronin operations for a term of three years at annual rental payments of $600,000, payable in monthly installments of $50,000. The lease term will automatically be extended for two additional periods of two years each, without any increase in the lease payment, subject to the Company’s right to terminate the lease or to provide notice not to extend the lease prior to the end of the term. The Company also offered employees of Bird & Cronin employment with Dynatronics at closing including the Co-Presidents of Bird & Cronin, Mike Cronin and Jason Anderson, who entered into employment agreements to serve as Co-Presidents of Bird & Cronin, LLC, the Company’s wholly-owned subsidiary that conducts the operations acquired in the Acquisition. The Acquisition has been accounted for under the purchase method as prescribed by applicable accounting standards. Under this method, the Company has allocated the purchase price to the assets acquired and liabilities assumed at estimated fair values. The total consideration transferred or to be transferred, totaled $15,213,959. The following table summarizes the preliminary estimated fair value of the assets acquired and liabilities assumed as of the date of acquisition: Cash and cash equivalents $ 4,104 Trade accounts receivable 2,232,703 Inventories 4,137,181 Prepaid expenses 92,990 Property and equipment 1,228,000 Intangible assets 5,016,000 Goodwill 3,570,376 Warranty reserve (5,000 ) Accounts payable (607,084 ) Accrued expenses (265,732 ) Accrued payroll and benefits (189,579 ) Purchase price $ 15,213,959 The estimates of fair value of identifiable assets acquired and liabilities assumed are preliminary, pending finalization of a valuation, and are subject to revisions that may result in adjustments to the values presented above. Intangible assets subject to amortization include $4,313,000 that relate to customer relationships with a useful life of ten years and other intangible assets of $83,000 with a useful life of five years. Intangible assets not subject to amortization of $620,000 relate to trade names. The goodwill recognized from the Acquisition is estimated to be attributable, but not limited to, the acquired workforce and expected synergies that do not qualify for separate recognition. The full amount of goodwill and intangible assets are expected to be deductible for tax purposes. As of March 31, 2018, the Acquisition earn-out liability and holdbacks of $2,147,291 come due, contingent upon the terms set forth in the purchase agreement, as follows: October 2, 2018 $ 180,624 April 1, 2019 466,667 August 15, 2019 1,500,000 Acquisition holdback $ 2,147,291 The amounts of Bird & Cronin’s net sales and net income included in the Company's consolidated statement of operations for the period from October 2, 2017 to March 31, 2018, were $11,384,235 and $879,349 respectively. Pro forma net sales and net loss of the combined operations had the acquisition date been July 1, 2016 are: Net Sales Net Loss Unaudited supplemental pro forma July 1, 2017 to March 31, 2018 $ 53,968,355 $ (1,017,788 ) Unaudited supplemental pro forma July 1, 2016 to June 30, 2017 $ 60,027,677 $ (285,951 ) The unaudited pro forma consolidated results are not to be considered indicative of the results if the Acquisition occurred in the periods mentioned above, or indicative of future operations or results. The unaudited supplemental pro forma earnings were adjusted to exclude $70,000 of acquisition-related costs incurred in fiscal year 2017. Hausmann On April 3, 2017, the Company acquired substantially all of the assets of Hausmann Industries, Inc. (“ Hausmann Cash and cash equivalents $ 600 Trade accounts receivable 1,691,420 Inventories 2,117,430 Prepaid expenses 136,841 Property and equipment 512,950 Intangible assets 2,689,000 Goodwill 4,302,486 Warranty reserve (50,000 ) Accounts payable (544,625 ) Accrued expenses (33,981 ) Accrued payroll and benefits (661,288 ) Purchase price $ 10,160,833 The estimated purchase price included a holdback of cash totaling $1,044,744 for purposes of satisfying adjustments to the purchase price and indemnification claims, if any. In the second and third fiscal quarters of 2018, the Company released $45,000 and $250,000, respectively, of the holdback to the sellers. As of March 31, 2018, the Company retained a holdback of $750,000 due to be paid to the seller on October 3, 2018. |
Note 3. Net Income (Loss) Per C
Note 3. Net Income (Loss) Per Common Share | 9 Months Ended |
Mar. 31, 2018 | |
Disclosure Text Block [Abstract] | |
Note 3. 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 loss 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. Outstanding options, warrants and convertible preferred stock for common shares not included in the computation of diluted net loss per common share because they were anti-dilutive, for the three months ended March 31, 2018, and 2017, totaled 11,772,349 and 5,165,008, respectively, and for the nine months ended March 31, 2018 and 2017, totaled 12,003,052 and 5,165,798, respectively. |
Note 4. Convertible Preferred S
Note 4. Convertible Preferred Stock and Common Stock Warrants | 9 Months Ended |
Mar. 31, 2018 | |
Disclosure Text Block [Abstract] | |
Note 4. Convertible Preferred Stock and Common Stock Warrants | In connection with the Acquisition of Bird & Cronin on October 2, 2017, the Company issued 2,800,000 shares of Series C Preferred and warrants to purchase 1,400,000 shares of common stock (“ Series C Warrants The Company determined that the Series C Preferred contain a beneficial conversion feature resulting in a deemed dividend of $829,559. Upon conversion of a portion of the Series C Preferred during the three months ended December 31, 2017, accretion of $194,227 in discounts was recognized. During quarter ended September 30 2017, the Company issued 75,000 shares of common stock upon conversion of 75,000 shares of Series B Convertible Preferred Stock (“ Series B Preferred Series A Preferred |
Note 5. Comprehensive Loss
Note 5. Comprehensive Loss | 9 Months Ended |
Mar. 31, 2018 | |
Disclosure Text Block [Abstract] | |
Note 5. Comprehensive Loss | For the three and nine months ended March 31, 2018 and 2017, comprehensive loss was equal to the net loss as presented in the accompanying condensed consolidated statements of operations. |
Note 6. Inventories
Note 6. Inventories | 9 Months Ended |
Mar. 31, 2018 | |
Disclosure Text Block [Abstract] | |
Note 6. Inventories | Inventories consisted of the following: March 31, 2018 June 30, 2017 Raw materials $ 6,458,466 $ 3,766,940 Work in process 644,412 470,721 Finished goods 5,826,774 3,562,758 Inventory obsolescence reserve (540,265 ) (402,737 ) $ 12,389,387 $ 7,397,682 |
Note 7. Related-party Transacti
Note 7. Related-party Transactions | 9 Months Ended |
Mar. 31, 2018 | |
Disclosure Text Block [Abstract] | |
Note 7. Related-party Transactions | The Company leases office, manufacturing and warehouse facilities in Detroit, Michigan, Hopkins, Minnesota, Northvale, New Jersey and Eagan, Minnesota from employees, shareholders and entities controlled by shareholders, who were previously principals of businesses acquired by the Company. The combined expenses associated with these related-party transactions totaled approximately $259,980 and $17,700 for the three months ended March 31, 2018 and 2017, respectively, and $626,140 and $53,100 for the nine months ended March 31, 2018 and 2017, respectively. Certain significant shareholders, officers and directors of the Company participated as investors in the private placements of the Company’s Series A Preferred, Series B Preferred, and Series C Preferred. The terms of these offerings were reviewed and approved by disinterested members of the Company’s Board of Directors who did not invest in the private placements and who do not own any shares of Series A Preferred, Series B Preferred or Series C Preferred. The affiliated investors participated in these offerings on terms that were no more favorable than the terms granted to unaffiliated investors. Pursuant to the Company’s acquisition of Hausmann in April 2017, the Company held back approximately$1,045,000 of the purchase price. As of March 31, 2018, and June 30, 2017, the holdback liability to Hausmann under the purchase agreement was $750,000 and $1,045,000, respectively. In the second and third quarters of 2018, the Company released $45,000 and $250,000, respectively, of the holdback. Certain principals of Hausmann are holders of the Company’s Series B Preferred and one of the principals, David Hausmann, is an employee of the Company. In connection with the Acquisition of Bird & Cronin in October 2017, the Company held back approximately $647,000 in cash plus an earn-out payment of a minimum of $500,000 up to $1,500,000. These obligations to Bird & Cronin, totaling approximately $2,147,000, are liabilities on the Company’s balance sheet as of March 31, 2018. In addition, the Company withheld approximately 185,000 shares of common stock to be released to Bird & Cronin pursuant to the holdback provisions in the Asset Purchase Agreement. These shares are included in common stock on the Company’s balance sheet at March 31, 2018. Certain principals of Bird & Cronin are holders of the Company’s issued and outstanding common stock and two of the principals, Michael Cronin and Jason Anderson, are employees of the Company. |
Note 8. Line of Credit
Note 8. Line of Credit | 9 Months Ended |
Mar. 31, 2018 | |
Disclosure Text Block [Abstract] | |
Note 8. Line of Credit | On September 28, 2017, the Company modified its credit agreement with Bank of the West and entered into an Amended Credit Facility (the “ Amended Credit Facility As of March 31, 2018, the Company had borrowed $6,542,690 under the Amended Credit Facility compared to $2,171,935 as of June 30, 2017. There was approximately $2,273,000 available to borrow under the original loan and security agreement as of March 31, 2018. |
Note 9. Accrued Payroll and Ben
Note 9. Accrued Payroll and Benefits Expense | 9 Months Ended |
Mar. 31, 2018 | |
Note 9. Accrued Payroll And Benefits Expense | |
Note 9. Accrued Payroll and Benefits Expense | As of March 31, 2018 and June 30, 2017, accrued payroll and benefits expense was $2,019,218 and $1,472,773, respectively. Included in the balance as of March 31, 2018 and 2017 was $577,788 and $200,000, respectively, of accrued severance expense for Company personnel including one executive officer. As of March 31, 2018 and June 30, 2017, long-term severance accrual included in other liabilities was $262,020 and $0, respectively. Payments will be made in cash over a two year period. The Company recognized $839,807 in severance expense during the three and nine months ended March 31, 2018 related to the termination of Company personnel including one executive officer. The Company recognized $2,304 in severance expense during the three and nine months ended March 31, 2017. Severance expense is included in selling, general, and administrative expenses. On May 7, 2018, the Company implemented a reduction of its workforce by 10 employees to better align its resources with the needs of its business and focus on improving profitability. The Company expects that it will incur severance expense of approximately $140,000, which will be recorded during the fourth fiscal quarter of 2018. |
Note 10. Income Taxes
Note 10. Income Taxes | 9 Months Ended |
Mar. 31, 2018 | |
Note 10. Income Taxes | |
Note 10. Income Taxes | On December 22, 2017, the U.S. government enacted comprehensive tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (“ Tax Act As a result of the reduction in the corporate income tax rate from 35% to 21% under the Act, the Company revalued its net deferred tax assets at December 31, 2017. As of March 31, 2018 and June 30, 2017, a full valuation allowance has been established against net deferred tax assets. This resulted in no reported income tax expense associated with the operating profit reported during the three and nine months ended March 31, 2018. The final transition impacts of the Tax Act may vary from the current estimate, possibly materially, due to, among other things, further clarification and changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, and the completion of the Company’s consolidated financial statements as of and for the year ending June 30, 2018. In accordance with SAB 118, any necessary measurement adjustments will be recorded and disclosed within one year from the enactment date within the period the adjustments are determined. |
Note 11. Recent Accounting Pron
Note 11. Recent Accounting Pronouncements | 9 Months Ended |
Mar. 31, 2018 | |
Disclosure Text Block [Abstract] | |
Note 11. Recent Accounting Pronouncements | On December 22, 2017, the U.S. government enacted comprehensive tax reform legislation commonly referred to as the Tax Cuts and Jobs Act. The Tax Act provides for significant changes to the U.S. Internal Revenue Code of 1986, as amended. Among other items, the Tax Act permanently reduces the federal corporate tax rate to 21% effective January 1, 2018. Additionally, the SEC released Staff Accounting Bulletin No. 118 (“ SAB 118 ASC 740 In November 2017, the Financial Accounting Standards Board (“ FASB ASU Income Statement – Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606): Amendments to SEC Paragraphs Pursuant to the Staff Accounting Bulletin (“SAB”) No. 116 and SEC Release No. 33-10403 In July 2017, the FASB issued ASU 2017-11 – Earnings per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity The amendments in Part I of this update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round features no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments in Part II of this update re-characterize the indefinite deferral of certain provisions of Topic 48 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. The Company is currently evaluating the impact the adoption of this update will have on its consolidated financial statements and disclosures. This amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business 1. require that a business set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output, and 2. remove the evaluation of whether a market participant could replace missing elements. The amendments provide a framework for evaluating whether both an input and a substantive process are present. Lastly, the amendments in this update narrow the definition of the term output so that the term is consistent with how outputs are described in Topic 606. This amendment will be effective for the Company in its fiscal year (including interim periods) beginning July 1, 2018. The Company is currently evaluating the impact the adoption of ASU 2017-01 will have on its consolidated financial statements and disclosures. In February 2016, the FASB issued Leases (Topic 842,) new guidance on leases. This guidance replaces the prior lease accounting guidance in its entirety. The underlying principle of the new standard is the recognition of lease assets and lease liabilities by lessees for substantially all leases, with an exception for leases with terms of less than twelve months. The standard also requires additional quantitative and qualitative disclosures. The guidance is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The standard requires a modified retrospective approach, which includes several optional practical expedients. Accordingly, the standard is effective for the Company on July 1, 2019. is currently evaluating the impact that this guidance will have on the consolidated financial statements. In January 2016, the FASB issued Financial Instruments guidance related to financial instruments - overall recognition and measurement of financial assets and financial liabilities. The guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The update to the standard is effective for public companies for interim and annual periods beginning after December 15, 2017. Accordingly, the standard is effective for the Company on July 1, 2018. is currently evaluating the impact that the standard will have on the consolidated financial statements. In May 2014, the FASB issued Revenue from Contracts with Customer (Topic 606). authoritative accounting guidance related to revenue from contracts with customers. This guidance is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2017. Accordingly, the Company will adopt this guidance on July 1, 2018. Companies may use either a full retrospective or a modified retrospective approach to adopt this guidance. The Company is evaluating which transition approach to use and its impact, if any, on its consolidated financial statements. |
Note 12. Subsequent Events
Note 12. Subsequent Events | 9 Months Ended |
Mar. 31, 2018 | |
Disclosure Text Block [Abstract] | |
Note 12. Subsequent Events | In April 2018, the Company paid approximately $191,000 of preferred stock dividends with respect to the Series A Preferred and Series B Preferred that were accrued during the three months ended March 31, 2018. The Company paid the dividends by issuing 65,709 shares of common stock. |
Note 1. Presentation and Summ18
Note 1. Presentation and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Mar. 31, 2018 | |
Policy Text Block [Abstract] | |
Basis of Presentation | The condensed consolidated balance sheets as of March 31, 2018 and June 30, 2017, the condensed consolidated statements of operations for the three and nine months ended March 31, 2018 and 2017, and condensed consolidated statements of cash flows for the nine months ended March 31, 2018 and 2017, were prepared by Dynatronics Corporation and its subsidiaries (collectively, the “ Company SEC U.S. GAAP 2017 Form 10-K |
Use of Estimates | The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Some of the more significant estimates relate to inventory, allowance for doubtful accounts, stock-based compensation and valuation allowance for deferred income taxes. |
Significant Accounting Policies | There have been no changes to the Company’s significant accounting policies as described in the 2017 Form 10-K. |
Note 2. Acquisitions (Tables)
Note 2. Acquisitions (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
Note 2. Acquisitions Tables | |
Acquisition | Cash and cash equivalents $ 4,104 Trade accounts receivable 2,232,703 Inventories 4,137,181 Prepaid expenses 92,990 Property and equipment 1,228,000 Intangible assets 5,016,000 Goodwill 3,570,376 Warranty reserve (5,000 ) Accounts payable (607,084 ) Accrued expenses (265,732 ) Accrued payroll and benefits (189,579 ) Purchase price $ 15,213,959 Cash and cash equivalents $ 600 Trade accounts receivable 1,691,420 Inventories 2,117,430 Prepaid expenses 136,841 Property and equipment 512,950 Intangible assets 2,689,000 Goodwill 4,302,486 Warranty reserve (50,000 ) Accounts payable (544,625 ) Accrued expenses (33,981 ) Accrued payroll and benefits (661,288 ) Purchase price $ 10,160,833 |
Acquisition earn out liability and holdbacks | October 2, 2018 $ 180,624 April 1, 2019 466,667 August 15, 2019 1,500,000 Acquisition holdback $ 2,147,291 |
Pro forma net sales and net loss | Net Sales Net Loss Unaudited supplemental pro forma July 1, 2017 to March 31, 2018 $ 53,968,355 $ (1,017,788 ) Unaudited supplemental pro forma July 1, 2016 to June 30, 2017 $ 60,027,677 $ (285,951 ) |
Note 6. Inventories (Tables)
Note 6. Inventories (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
Table Text Block Supplement [Abstract] | |
Schedule of Inventory, Current | March 31, 2018 June 30, 2017 Raw materials $ 6,458,466 $ 3,766,940 Work in process 644,412 470,721 Finished goods 5,826,774 3,562,758 Inventory obsolescence reserve (540,265 ) (402,737 ) $ 12,389,387 $ 7,397,682 |
Note 2. Acquisitions (Details)
Note 2. Acquisitions (Details) | 9 Months Ended |
Mar. 31, 2018USD ($) | |
Bird & Cronin | |
Cash and cash equivalents | $ 4,104 |
Trade accounts receivable | 2,232,703 |
Inventories | 4,137,181 |
Prepaid expenses | 92,990 |
Property and equipment | 1,228,000 |
Intangible assets | 5,016,000 |
Goodwill | 3,570,376 |
Warranty reserve | (5,000) |
Accounts payable | (607,084) |
Accrued expenses | (265,732) |
Accrued payroll and benefits | (189,579) |
Purchase price | 15,213,959 |
Hausmann | |
Cash and cash equivalents | 600 |
Trade accounts receivable | 1,691,420 |
Inventories | 2,117,430 |
Prepaid expenses | 136,841 |
Property and equipment | 512,950 |
Intangible assets | 2,689,000 |
Goodwill | 4,302,486 |
Warranty reserve | (50,000) |
Accounts payable | (544,625) |
Accrued expenses | (33,981) |
Accrued payroll and benefits | (661,288) |
Purchase price | $ 10,160,833 |
Note 2. Acquisitions (Details 1
Note 2. Acquisitions (Details 1) - USD ($) | 9 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Acquisition holdbacks | $ 2,147,291 | $ 0 | $ 2,147,291 |
October 2, 2018 | |||
Acquisition holdbacks | 180,624 | ||
April 1, 2019 | |||
Acquisition holdbacks | 466,667 | ||
August 15, 2019 | |||
Acquisition holdbacks | $ 1,500,000 |
Note 2. Acquisitions (Details 2
Note 2. Acquisitions (Details 2) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
July 1, 2017 to December 31, 2017 | |
Pro forma Net Sales | $ 53,968,355 |
Pro Forma Net Loss | (1,017,788) |
July 1, 2016 to June 30, 2017 | |
Pro forma Net Sales | 60,027,677 |
Pro Forma Net Loss | $ (285,951) |
Note 3. Net Loss Per Common Sha
Note 3. Net Loss Per Common Share (Details Narrative) - shares | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Text Block [Abstract] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 11,772,349 | 5,165,008 | 12,003,052 | 5,165,798 |
Note 4. Convertible Preferred25
Note 4. Convertible Preferred Stock and Common Stock Warrants (Details Narrative) - shares | Mar. 31, 2018 | Jun. 30, 2017 |
Text Block [Abstract] | ||
Preferred stock shares outstanding | 4,889,000 | 3,559,000 |
Note 6. Inventories_ Schedule o
Note 6. Inventories: Schedule of Inventory, Current (Details) - USD ($) | Mar. 31, 2018 | Jun. 30, 2017 |
Text Block [Abstract] | ||
Raw Materials | $ 6,458,466 | $ 3,766,940 |
Inventory, Work in Process, Gross | 644,412 | 470,721 |
Finished Goods | 5,826,774 | 3,562,758 |
Inventory Reserves | (540,265) | (402,737) |
Inventories, net | $ 12,389,387 | $ 7,397,682 |
Note 7. Related-party Transac27
Note 7. Related-party Transactions (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Text Block [Abstract] | ||||
Related Party Transaction, Expenses from Transactions with Related Party | $ 626,140 | $ 53,100 | $ 259,980 | $ 17,700 |
Note 8. Line of Credit (Details
Note 8. Line of Credit (Details Narrative) | 9 Months Ended |
Mar. 31, 2018USD ($) | |
Text Block [Abstract] | |
Line of Credit Facility, Description | On September 28, 2017, the Company modified its credit agreement with Bank of the West and entered into an Amended Credit Facility (the “ Amended Credit Facility |
Line of Credit Facility, Current Borrowing Capacity | $ 11,000,000 |