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<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
[Fee Required] for the fiscal year ended June 30, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
[No Fee Required] for the transition period from -----------
to ---------.
Commission file number 0-12697
DYNATRONICS CORPORATION
Utah 87-0398434
- ------------------------ ------------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
7030 Park Centre Drive
Salt Lake City, Utah 84121
(801) 568-7000
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or Section
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X or No .
The aggregate market value of the voting stock held by non-
affiliates of the registrant was approximately $7,400,000 as
of September 26, 1996.
The number of shares outstanding of each of the registrant's
classes of common stock as of September 26, 1996:
Class Shares Outstanding
- -------------------------- ------------------
Common Stock, no par value 8,424,747
The Company hereby incorporates the following document by
reference into this Report as indicated: (1) The Company's
1996 Proxy and Information Statement, incorporated by
reference into Items 11 and 12 of this Report on Form 10-K.
The statement will be provided to shareholders subsequent to
the filing of this Report.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
______________________________________________________________
Exhibit index at page 19.
<PAGE>
PART I
Item 1. Description of the Business
---------------------------
Dynatronics Corporation, formerly Dynatronics Laser
Corporation ("Dynatronics" or the "Company"), a Utah
corporation, was organized April 29, 1983 to acquire its
affiliates, Dynatronics Research Corporation, and Dynatronics
Marketing Company, which were incorporated in Utah in 1979 and
1980, respectively. The principal business of the Company is
the design, manufacture and sale of medical devices for
therapeutic use by medical practitioners. Over the years, the
Company has grown to become a leader in sales of
electrotherapy and therapeutic ultrasound equipment which are
two of the most common device modalities used by physical
medicine practitioners. The Company distributes its products
through independent dealers nationwide and internationally.
On May 1, 1996, the Company acquired the assets of Superior
Orthopaedics Supplies, Inc. ("Superior"), a manufacturer of
medical soft goods and supplies for the physical medicine
market. Superior is located in Ooltewah, Tennessee, a suburb
of Chattanooga, Tennessee. The addition of Superior's
products to the Company's existing line of capital equipment
significantly broadens the Company's product line and
strengthens channels of distribution allowing for greater
market penetration both domestically and internationally.
With facilities in Salt Lake City and Chattanooga, the Company
is better positioned to service a nationwide market.
On August 15, 1996, the Company announced the signing of a
five-year agreement with Life-Tech, Inc. which appoints the
Company as exclusive distributor of Life-Tech's iontophoresis
products to the physical medicine market throughout the United
States and Canada and as a non-exclusive distributor
internationally. Iontophoresis is a process by which anti-
inflammatory drugs and local anesthetics are delivered
transdermally without the use of injection needles. The
acceptance of iontophoresis as a method of treatment among
physical therapists has grown significantly over the past
decade.
Description of Products Manufactured
and Distributed by the Company
The Company's product line can be divided into two primary
segments: (1) Therapy Devices including Electrotherapy and
Therapeutic Ultrasound; and (2) Medical Supplies and Soft
Goods. These products are used primarily by physical
therapists, chiropractors, sports medicine doctors and other
physical medicine practitioners.
Therapy Devices
- ---------------
Electrotherapy - The therapeutic effects of electrical
energy have occupied an important position in physical
medicine for over three decades. There has been an evolution
through the years to use the most effective and painless wave
forms and frequencies for patient comfort and for success in
the treatment of pain and related physical ailments.
<PAGE>
Medium frequency alternating currents ("AC"), which are used
in the the Company's electrotherapy devices, are believed to
be the most effective and comfortable for patients.
Electrotherapy is commonly used for treating chronic,
intractable pain and/or acute, post-traumatic pain, increasing
local blood circulation, relaxation of muscle spasms,
prevention or retardation of disuse atrophy, and muscle re-
education.
Therapeutic Ultrasound - Ultrasound therapy is a process
of providing therapeutic deep heat to muscle tissues through
the introduction of soundwaves into the body. It is the most
common device modality used in physical therapy today for the
treatment of pain relief, muscles spasms and joint
contractures.
"50 Series" Products
With recent industry trends toward managed care, the
Company anticipated an increased market demand for lower cost
devices that did not sacrifice important features. The result
was the introduction of the "50 Series" product line which
incorporates the latest in technology allowing the Company to
reduce the size of devices by 50% compared to their
predecessor devices and also reduce the price without
forfeiting key features.
The first "50 Series" device, the Dynatron 150, was
introduced in February 1994. In August 1994, the Dynatron 550
and 850 were introduced. During fiscal 1996, the Company
introduced two additional products, the Dynatron 650 and
Dynatron 950. The "50 Series" product line has been very well
received by the market as evidenced by sales increases of 25%
and 11% in fiscal 1995 and 1996 respectively. Dynatronics
intends to continue development of the "50 Series" and remain
a leader in the design, manufacture and sale of therapy
devices. Therapy devices accounted for the majority of sales
revenue in fiscal 1996.
Iontophoresis
The Company recently added Life-Tech's line of
iontophoresis products to its family of therapy devices
offered to practitioners. These products include the
Iontophor II and Microphor devices which are used in physical
medicine applications primarily for treating inflammation.
The chart below lists the therapy products marketed
by the Company which materially contributed to total Company
sales.
Schedule of Therapy Products
Manufactured and Distributed by the Company
Fiscal Year
Product Name Description Introduced
- ------------ ----------- --------
Dynatron 100 Plus Electrotherapy 4th quarter 1993
Dynatron 500 Plus Multi-modality 2nd quarter 1994
Electrotherapy
Dynatron 800 Combination 3rd quarter 1993
Electrotherapy/Ultrasound
Dynatron 150* Ultrasound 3rd quarter 1994
Dynatron 550* Multi-modality 1st quarter 1995
Electrotherapy
Dynatron 850* Combination 1st quarter 1995
Electrotherapy/Ultrasound
Dynatron 650* Multi-modality 2nd quarter 1996
Electrotherapy
Dynatron 950* Combination 2nd quarter 1996
Electrotherapy/Ultrasound
New Products Scheduled for Introduction in the First Quarter of Fiscal 1997
- ---------------------------------------------------------------------------
Dynatron 125**+ Ultrasound 1st quarter 1997
Dynatron 525** Electrotherapy 1st quarter 1997
Iontophor II & Iontophoresis 1st quarter 1997
Microphor ++
Dynatron is a registered trademark (#1280629) owned by Dynatronics
* "50 Series" Product Line
** "Dynamite Series" Product Line
+ Scheduled for introduction late September, 1996
++ Manufactured by Life-Tech
<PAGE>
Allocation of Sales Among Key Products
- --------------------------------------
The Dynatron 950, which was introduced in October, 1995
represented 25% of consolidated revenues in fiscal 1996. The
Dynatron 850, which was introduced during fiscal 1995,
represented 27% of consolidated revenues in fiscal 1995. The
Dynatron 500 and Dynatron 500 Plus combined represented
approximately 17 percent of revenues in fiscal 1994. The
Dynatron 800 represented approximately 24 percent of
consolidated revenues in 1994. No other product accounted
for more than 15 percent of the Company's revenues during any
of the last three fiscal years.
Medical Supplies and Soft Goods
- -------------------------------
The Company's product line of therapy devices has been
significantly expanded by more than 200 new products through
the acquisition of Superior Orthopaedics Supplies in May 1996.
The Company now offers nearly every major category of supplies
and equipment used in physical therapy clinics. These product
categories include orthopedic soft goods, cervical supports,
exercise products, lumbar supports, hot and cold therapy
equipment, patient care supplies, neoprene supports, treatment
tables, whirlpool products, and various additional supplies
and soft goods.
As a result of the introduction of the above-mentioned
products and the acquisition of Superior Orthopaedic Supplies,
the Company has become a broad line supplier in the physical
medicine market. The target markets for the Company are
physical therapy, chiropractic, podiatry, sports medicine,
industrial medicine, family practice, and the sub-groups of
each of these specialties.
Medical supplies and soft goods now manufactured by the
Company include: hot and cold packs, therapy wraps, wrist
splints, neoprene braces and supports, lumbar supports,
cervical collars, slings, cervical pillows, back cushions,
weight racks, and treatment tables. Products distributed by
the Company include: skin cleanser, lotions and gels, paper
products, athletic tape, canes and crutches, reflex hammers,
stethoscopes, splints, elastic wraps, exercise weights,
theraband tubing, hydrocollators, whirlpools, gloves,
electrodes, tens devices, and traction equipment. The Company
is continually seeking additional new products to manufacture
or distribute.
Other Products
- --------------
In addition to the therapy products and medical supplies
and soft goods already mentioned, the Company continues to
sell on a limited basis other products such as the Dynatron
2000 Patient Testing and Management System, Dynatron 360 Range
of Motion Inclinometer, Dynatron 320 Grip Strength Analyzer,
Dynatron 330 Body Composition Analyzer, Dynatron 200
Microcurrent device, and the Dynatron 400 Electrotherapy
device.
Low Power Laser
- ---------------
The use of low-power laser stimulation (biostimulation) in
medicine is in sharp contrast to the surgical, cauterizing, or
cutting uses for which laser has been most commonly known in
the past. In biostimulation, the power output of the laser
emitting device is reduced to a point of providing a mild
stimulation to body tissues and functions. Biostimulation is
a claimed therapeutic application of laser as opposed to the
surgical or burning effect achieved by higher-power units.
Low-power laser therapy is used extensively in countries
around the world as an adjunctive therapy in pain management,
wound healing and certain immune system responses. However,
the United States Food and Drug Administration has not cleared
these devices for general sale in the United States. The
process by which such clearance is granted is known as Pre-
market Approval (PMA). Obtaining a PMA requires a significant
investment of time and resources.
<PAGE>
In the 1980's, Dynatronics filed a PMA with the FDA for its
Dynatron 1120 low-power laser device. After the expenditure
of substantial effort and resources, the FDA refused to clear
the laser for general marketing due to inconclusive evidence
of the effectiveness of the device. Consequently, due to the
subjective nature of the process and the required commitment
of human and monetary resources, the Company is not currently
seeking FDA clearance of its low-power laser device. Instead,
the Company continues to seek indications of efficacy that can
be more easily demonstrated in a PMA. Should such an
indication of efficacy be identified, the Company would again
give consideration to actively seeking FDA approval of its low-
power laser devices.
The Dynatron 1120 was the primary low-power laser device
manufactured by the Company in the 1980's and early 1990's.
The Dynatron 1120 emits a red beam of light at 632.8 nanometer
wavelength with a power of approximately one milliwatt at the
probe tip. It also incorporates the capability of delivering
low-power, electrical stimulation. This device was
discontinued in 1994.
In recent years, the Company has developed the Dynatron
1650 laser device. This device is smaller and more compact in
keeping with the "50 Series" design of products. The Dynatron
1650 has the ability to deliver multiple wavelengths by simply
changing the probe. Presently, the device is offered in 3 mW
and 15 mW power outputs at 633 nm wavelength (red) and at 50
mW and 100 mW power outputs at 830 nm wavelengths (infrared).
Since no low-power laser has been cleared for marketing in
the United States, the Dynatron 1650 is only sold domestically
for research purposes under approved Investigational Device
Exemptions pursuant to FDA guidelines. There is growing
interest, however, in the Dynatron 1650 in foreign markets.
Recent changes in FDA export regulations of investigational
medical devices eases the regulatory burden for accessing
these foreign markets. However, the Company does not expect
these changes to materially affect sales in the next fiscal
year.
Description of the Company's
Marketing and Manufacturing Operations
Patents and Trademarks
- ----------------------
The Company currently holds a patent on the "Target"
feature of its electrotherapy products which will remain in
effect until July 18, 2006 and a patent on the Company's multi-
frequency ultrasound technology which will remain in effect
until June, 2013. In addition, the Company is seeking
international patent rights to protect its proprietary
ultrasound technology in foreign countries. A design patent is
also held on the Dynatron Equalizer which will remain in
effect until July 21, 2006. This design patent covers the
device's appearance. No other patents exist on the Company's
devices. The trademark "Dynatron" has been registered with
the United States Patent and Trademark Office and the
appropriate government offices in Japan. The Company's other
copyrightable material is protected under U.S. copyright laws.
<PAGE>
Warranty Service
- ----------------
The Company warrants all products it manufactures for time
periods ranging in length from 90 days to one year after the
sale. The Company also sells accessory items supplied by
other manufacturers. These accessory products carry
warranties similar to those offered by the Company. All sales
are serviced from the Salt Lake City and Chattanooga
facilities. These warranty policies are comparable to
warranties generally available in the industry.
Customers/Market
- ----------------
With the acquisition of Superior Orthopaedic Supplies, the
Company has expanded its dealer network to over 250 wholesale
dealers throughout the United States and internationally.
These dealers are the primary customers of the Company. The
dealers actually purchase and take title to the products.
Existing dealers sell primarily to chiropractors, podiatrists,
physical therapists, sports medicine specialists, medical
doctors, hospitals and other medical institutions.
During fiscal 1996, 1995, and 1994, no single customer
accounted for more than 10 percent of total revenues.
The Company has exported product to approximately 20
different countries. Excluding North American sales,
international sales did not exceed 10 percent of the Company's
total sales in any of the last three years. In May, 1995 the
Company signed an agreement for distribution of its "50
Series" products in Japan, which is one of the largest medical
device markets in the world. The Company believes that sales
to Japan will commence in early 1997 provided that all
government approvals are obtained. Efforts are also underway
to obtain marketing clearance for the European Union.
However, access to foreign markets is sometimes barred or made
more difficult for devices such as those manufactured by the
Company because of tariff restrictions, foreign currency
fluctuations, currency control regulations, competing or
conflicting manufacturing standards, governmental regulation
and approval policies for medical testing and therapy devices
and licensing requirements. The Company has no foreign
manufacturing operations.
Competition
- -----------
Despite significant competition, the Company has
distinguished its products by using the latest technology as
evidenced by its patented Target feature and patented multi-
frequency ultrasound technology. These features, along with
the new "50 Series" concept, have made the Company a leader in
technologically advanced electrotherapy and ultrasound
devices.
Electrotherapy/Ultrasound. The competition in the
electrotherapy and ultrasound markets is from both domestic
and foreign companies. No fewer than a dozen companies
produce devices similar to those of the Company. Few
companies, domestic or foreign, provide multiple-modality
devices, and
<PAGE>
none offer all the features of the Dynatron 950. No
competitor offers the ultrasound feature of three frequencies
on multiple-sized soundheads for which the Company holds a
patent. Some of the Companies which provide competitive
products are: Chattanooga Group, Excel-Tech, Rich-Mar,
Mettler Electronics, and Williams Healthcare.
Medical Supplies & Soft Goods. The Company competes
against various manufacturers and distributors of medical
supplies and soft goods, some of which are larger, more
established and have greater resources than the Company.
Excellent customer service along with providing value to
customers is of key importance in this segment of the market.
While there are many specialized manufacturers in this area,
only a few such as Chattanooga Group and Bailey Manufacturing
actually manufacture as broad a line of products as
Dynatronics. All other competitors are primarily distributors
such as EMPI, Graham Fields, Sammons Preston, Meyers
Distributing and AliMed Inc.
Iontophoresis. Competition in the iontophoresis market is
from two primary companies, IOMED and EMPI. Both of these
competitors have a much larger market share than Life-Tech.
The Company believes that Dynatronics' strong distribution
network will be essential in order to compete against these
two companies.
Information necessary to determine or reasonably estimate
the Company's, and its competitors', market share in any of
these markets is not available.
Manufacturing and Quality Assurance
- -----------------------------------
Manufacturing is conducted at the Company's facilities in
Salt Lake City, Utah and Chattanooga, Tennessee. The Company
sub-contracts the production of certain components, but all
work is performed to Dynatronics' specifications. Sub-
assembly, final assembly and quality assurance procedures are
all performed by trained staff at the Company's manufacturing
facilities in Salt Lake City and Chattanooga. All component
parts used in Dynatronics' device designs and all raw
materials for medical supplies and soft goods manufacturing
are readily available from suppliers.
Dynatronics conforms to Good Manufacturing Practices as
outlined by the U.S. Food and Drug Administration. This
includes a comprehensive program for processing customer
feedback and analyzing product performance trends. By
insuring prompt processing of timely information, the Company
is better able to respond to customer needs and insure proper
operation of its products. All products are marketed pursuant
to FDA clearance regulations.
In 1994, the Company introduced the Quality First Program,
a concept for total quality management designed to involve
each employee in the quality assurance process. Under this
program, employees are not only expected to inspect for
quality, but they are empowered to stop any process and make
any changes necessary to insure that quality is not
<PAGE>
compromised. An incentive program is established to insure
the continual flow of ideas and to reward those who show
extraordinary commitment to the Quality First concept.
Quality First has not only become the Company motto, but it is
the standard by which all decisions are made. The results of
this program have been manifest in the low warranty expense
associated with the Company's "50 Series" products. The
Quality First Program has instilled renewed employee pride,
increased customer satisfaction, and improved overall
operations of the Company.
Research and Development
- ------------------------
The Company has historically been very committed to
research and development. In 1994, 1995, and 1996 the Company
expended $664,250, $566,891, and $565,697 respectively, for
research and development which represented approximately 8.3
to 13.6 percent of the gross revenues of the Company in those
years. Substantially all of the research and development
expenditures were for the development of new products or the
upgrading of existing products. Because of its strong
commitment to the future and to providing the most current
technology in its medical devices, the Company projects it
will continue to invest in research and development at amounts
similar to those indicated above.
Environment
- -----------
The Company's operations are not subject to material
compliance with Federal, State and Local provisions enacted or
relating to protection of the environment or discharge of
materials into the environment.
Seasonality
- -----------
The Company has not been materially impacted by seasonality
factors in its business operations.
Employees
- ---------
On June 30, 1996, the Company had a total of 72 full-time
employees, as compared to 46 as of June 30, 1995. This
increase in number of employees is primarily the result of the
acquisition of Superior Orthopaedic Supplies.
Other Information
Investment in Affiliates
- ------------------------
Pursuing a course of diversification, on June 3, 1986 the
Company formed International Tourist Entertainment Corporation
("ITEC Attractions" or "ITEC") to develop tourist destination,
giant screen theater complexes. ITEC's first theater and
retail mall located in Branson, Missouri opened
<PAGE>
in October, 1993. Its second facility was planned to be
located in St. Thomas in the United States Virgin Islands.
Dynatronics owned 36% of the outstanding common stock of ITEC.
Unfortunately, projected revenue figures did not
materialize and sufficient financing was not provided to the
operation. On January 25, 1996, ITEC filed a voluntary
petition for reorganization under Chapter 11 of the U.S.
Bankruptcy code. As a result, Dynatronics wrote-off $720,103,
of which $228,824 represented a receivable due from ITEC,
while the balance of $491,279 was related to Dynatronics'
guarantee of an ITEC bank loan. These write-offs fully
expense all costs associated with the Company's investment in
ITEC.
Forward-Looking Statements
- --------------------------
When used in the Annual Report on Form 10-K, the words
"believes", "anticipates", "expects", and similar expressions
are intended to identify forward-looking statements. Such
statements are subject to certain risks, and uncertainties
that could cause actual results to differ materially from
those projected. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only
as of the date hereof. The Company undertakes no obligation
to publicly release the results of any revisions to these
forward-looking statements that may be made to reflect events
or circumstances after the date of this Report or to reflect
the occurrence of unanticipated events.
Item 2. Properties
----------
The Company's headquarters and principal place of business
is located at 7030 Park Centre Drive, Salt Lake City, Utah
84121. The Company's headquarters consist of administrative
offices and a plant facility combined totaling approximately
36,000 square feet. The Company owns the land and building
housing its headquarters, subject to a mortgage requiring a
monthly payment of approximately $19,700. The Company also
leases approximately 25,000 square feet of office and
manufacturing space in Chattanooga, Tennessee which houses the
operations of the recently acquired Superior Orthopaedic
Supplies. While management believes the Salt Lake facilities
are adequate to accommodate presently expected growth and
needs of the Company for the Salt Lake operations, management
anticipates the growth at its Tennessee operations will
require leasing or building additional space in the near
future.
Equipment used in the manufacture and assembly of the
Company's products is owned by the Company. The manufacturing
and assembly equipment owned by the Company, as well as the
production capacity of the Company, is considered adequate to
meet current levels of demand; however, increased demand may
necessitate additional expenditures. The nature of this
equipment is not specialized and may be readily obtained from
any of a number of suppliers. The Company also owns and
leases computer equipment and engineering and design equipment
necessary for its research and development programs.
<PAGE>
Item 3. Legal Proceedings.
-----------------
There are no material pending legal proceedings to which
the Company is a party or of which any of its property is the
subject.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
No matter was submitted to a vote of security holders
through the solicitation of proxies or otherwise during the
fourth quarter of the fiscal year covered by this report.
PART II
Item 5. Market for the Company's Common Equity and Related
--------------------------------------------------
Stockholder Matters.
-------------------
Market Information. The common stock of the Company is
listed on the Nasdaq Small Cap Market (symbol: DYNT). The
following table shows the range of high and low bid prices for
the Company's common stock as quoted on the NASDAQ system for
the quarterly periods indicated. The quotations reflect inter-
dealer prices, without retail mark-up, mark-down or
commissions and may not represent actual transactions.
Fiscal Fiscal
1996 1995
Bid Prices Bid Prices
High Low High Low
---------------------------------
1st Quarter (July-September) $1.31 $.94 $2.56 $1.62
2nd Quarter (October-December) 1.31 1.25 2.06 .87
3rd Quarter (January-March) 1.53 .94 1.31 1.00
4th Quarter (April-June) 1.50 .75 1.31 .94
Holders. The approximate number of shareholders of record
as of September 26, 1996 of the Company's common stock, was
550. This number does not include beneficial owners of shares
held in "nominee" or "street" name.
Dividends. The Company has not paid cash dividends on its
common stock during the past two fiscal years. At the present
time, the Company's anticipated capital requirements are such
that it intends to follow a policy of retaining earnings in
order to finance the development of its business.
Item 6. Selected Financial Data
-----------------------
The table listed below summarizes selected financial data
for the Company and is qualified in its entirety by the more
detailed financial statements included herein.
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Fiscal Year Ended June 30
1996 1995 1994 1993 1992
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $6,784,748 $6,112,241 $4,900,408 $5,970,379 $6,581,802
Net income (loss) (193,892) 217,083 290,059 326,621 320,799
Net income (loss) per (.02) .03 .04 .04 .04
share
Working capital 2,616,464 3,319,272 2,899,196 2,608,604 2,883,349
Total assets 8,508,609 7,187,328 7,176,641 5,617,775 4,122,527
Long-term obligations 2,856,302 2,399,371 2,454,148 1,287,189 128,754
</TABLE>
<PAGE>
Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Fiscal 1996 Compared to Fiscal 1995
Results of Operations
- ---------------------
During fiscal 1996, the Company introduced two new
products to the market, the Dynatron 650 Electrotherapy device
and Dynatron 950 Combination Electrotherapy/ Ultrasound
Therapy device. Sales of these two products represented 12
percent and 25 percent of total sales for fiscal 1996,
respectively. The "50 Series" products have been the main
contributor to the Company's improved sales and operating
profits over the past two years.
On May 1, 1996, the Company acquired substantially all of
the assets and certain liabilities of Superior Orthopaedic
Supplies, Inc. a Tennessee-based manufacturer and marketer of
medical soft goods and supplies. This acquisition has allowed
the Company to instantly expand its product line by over 200
medical supply-type products. From a strategic viewpoint, the
acquisition enables the Company to provide virtually all of
the physical medicine practitioner's clinical needs for
medical devices and products.
The Company plans to introduce the new "DynaMite Series"
product line in the first quarter of fiscal 1997. The two
products comprising this product line are the new Dynatron 125
Ultrasound and Dynatron 525 Electrotherapy device. These
devices will be similar to the Dynatron 150 and Dynatron 550
but will target the low-priced segment of the market, a market
segment in which Dynatronics has not participated in years
past.
Sales for the fiscal year ended June 30, 1996 increased
11 percent to $6,784,748 as compared to $6,112,241 in fiscal
1995. This increase was due primarily to the acquisition of
Superior Orthopaedics along with the introduction of the new
Dynatron 650 and Dynatron 950 products. With several new
products scheduled for introduction in upcoming quarters,
management believes that sales of the Company will continue to
improve in fiscal 1997 and beyond.
The Company's gross margins as a percent of sales
increased slightly to 42.8 percent in fiscal 1996 compared to
42.4 percent in fiscal 1995. During the reporting year, the
Company booked a one-time charge of $183,101 related to the
write-off of certain obsolete inventories. Exclusive of this
write-off, gross margins in 1996 equaled 45.5 percent of
sales. This increase is attributed to the higher margins
associated with the Dynatron 650 and Dynatron 950 introduced
during the reporting year.
The Company's 1996 selling, general and administrative
(SG&A) expenses equaled $2,073,223 as compared to $1,704,723
in fiscal 1995. The primary reason for this increase is
related to the additional SG&A and other
<PAGE>
expenses associated with the acquisition of Superior
Orthopaedic Supplies, along with increased labor expenses
associated with production of the new "50 Series" products.
During fiscal 1996, the Company maintained its commitment
to research and development (R&D), expending approximately 8.3
percent of total sales, or $565,697, for the year in this
effort as compared to 9.3 percent or $566,891 in fiscal 1995.
R&D expenses for fiscal 1996 were related not only to the
development of the new products introduced during the fiscal
year, but also to development of the new "DynaMite Series"
product line, which is scheduled to begin shipping in the
first quarter of fiscal 1997.
During fiscal 1996, the Company recognized $720,103 in
non-operating charges in connection with the bankruptcy of
ITEC Attractions, a 36 percent owned affiliate of the Company.
The recognition of these non-recurring charges fully expenses
all cost associated with the investment in ITEC. As a result
of the ITEC write-offs and obsolete inventory charges of
$183,101, the Company reported a loss before income taxes for
fiscal 1996 in the amount of $426,866 as compared to income
before income taxes of $359,570 in 1995.
In 1996 the Company's income tax benefit was $232,974 as
compared to $142,487 in income tax expense for fiscal 1995.
The 1996 tax benefit was related to the operating losses
incurred and the carry back of those losses to prior years
which will generate tax refunds.
The net loss for the 1996 fiscal year totaled $193,892 as
compared to net income of $217,083 in the prior year.
Exclusive of the non-recurring charges discussed above, net
income would have increased 50 percent to approximately
$335,000 as compared to fiscal 1995.
Fiscal 1995 Compared To Fiscal 1994
Results of Operations
- ---------------------
During fiscal 1995, the Company expanded its product line
by introducing two major products to the market -- the
Dynatron 550 Electrotherapy device and the Dynatron 850
Combination Electrotherapy/Ultrasound Therapy device. Sales
of these two products represented 13.6 percent and 27 percent
of total sales, respectively. These new devices, part of the
new "50 Series" line of products, incorporate new "microsize"
technology which not only allows the size of the device to be
reduced significantly, but the costs of manufacturing to be
significantly reduced as well.
Sales for the fiscal year ended June 30, 1995 increased
25 percent to $6,112,241 as compared to $4,900,408 in fiscal
1994. This increase was due primarily to the introduction of
the new Dynatron 550 and Dynatron 850 products.
<PAGE>
The Company's gross margins as a percent of sales
decreased by one percent from 43 percent in fiscal 1994 to 42
percent in fiscal 1995 due primarily to lower overall net
selling prices driven by increased competition, and a greater
percentage of sales from the Company's ultrasound products
which generated lower margins.
The Company's 1995 SG&A expenses equaled $1,704,723 as
compared to $1,979,032 in fiscal 1994. Included in the fiscal
1994 SG&A expense was a one-time $180,000 bonus declared by
the Board of Directors payable to the Chairman of the Board in
recognition of his efforts in the development of ITEC
Attractions. To fund this bonus, the Company sold 20,000
shares (approximately one percent of the Company's holdings)
of ITEC stock. Exclusive of this bonus, SG&A expenses in 1995
decreased by over 5 percent compared to 1994.
During fiscal 1995, the Company expended approximately 9
percent of total sales, or $566,891, for the year on Research
and Development as compared to 13.6 percent or $664,250 in
fiscal 1994. This approximate $97,000 decrease is R&D
expenses was due to a reduction in personnel during the year.
R&D expenses for fiscal 1995 were related not only to the
development of the new products introduced, but also to
continued development of the "50 Series" product line, part of
which (the Dynatron 650 and 950) are scheduled to begin
shipping in the first quarter of fiscal 1996.
Interest expense increased from $104,258 in fiscal 1994
to $164,925 in fiscal 1995 primarily due to the mortgage
payments on the Company's new facility. During fiscal 1994,
the Company moved into its new office and manufacturing
facility. This new facility is 80 percent larger than the
previous leased facility. The 1995 figure reflects a full
year of mortgage interest payments whereas the 1994 amount
reflects a partial year.
In fiscal year 1994, the Company realized gains from the
sale of ITEC stock in the amounts of $403,743. No amounts were
recognized in fiscal 1995. Of the amount in fiscal 1994,
$180,000 was used to pay the bonus to the Chairman of the
Board referred to above.
Pre-tax income for fiscal 1995 equaled $359,570 as
compared to a loss of $105,275 in the previous year. The main
contributing factors to this increase were the 25 percent
increase in sales revenue and the reduction of SG&A and R&D
expenses.
In 1995 the Company's income tax expense was $142,487 as
compared to $93,732 in income tax benefits for fiscal 1994.
The 1994 tax benefit was a result of three factors including:
the reported operating loss for fiscal 1994; the filing of
amended tax returns for prior years; and the recognition of
tax credits related to R&D expenses.
Net income for the 1995 fiscal year totaled $217,083 as
compared to $290,059 in the prior year.
During fiscal 1994 the Company was required to adopt a
new method of accounting for deferred taxes known as Financial
Accounting Standards
<PAGE>
Board Statement No. 109, which resulted in recognizing a one-
time cumulative benefit of $301,602.
Liquidity and Capital Resources
The Company expects that revenues from operations,
together with available sources of borrowing, will be adequate
to meet the Company's working capital needs related to its
business and its planned capital expenditures for the upcoming
operating period.
On May 1, 1996, the Company acquired the assets of
Superior Orthopaedic Supplies, Inc. for approximately $1.75
million which was financed through a combination of cash,
Company stock, assumed liabilities, and notes. At closing,
the Company paid to the sellers approximately $700,000 in cash
and in addition paid an estimated $100,000 in fees and
expenses related to the acquisition.
The acquisition of Superior, along with the cash
requirements to meet Company obligations related to ITEC
Attractions (see section entitled "Investment in Affiliate" on
page 8), had a significant impact on cash balances and current
asset levels. The Company's current ratio at June 30, 1996
was 3.1:1 as compared to 7.3:1 at June 30, 1995. Current
assets actually increased during the year by $28,048 but
current liabilities increased by $730,856 due primarily to the
acquisition of Superior.
The Company maintains a revolving line of credit with a
commercial bank. In July, 1996, this line of credit was
increased from $1 million to $1.5 million. Interest on the
line of credit is based on the bank's index rate plus one-half
percent which at June 30, 1996, equalled 8.75 percent. The
line of credit is collateralized by the Company's accounts
receivable and inventories. As of June 30, 1996, $285,911 was
outstanding on the line of credit.
Accounts receivable represent amounts due from the
Company's dealer network and a few select medical
practitioners. The historical relationship with these dealers
indicates that the allowance for doubtful accounts is
adequate. Accounts receivable are generally collected within
30 days of the terms extended.
Inventory levels at June 30, 1996 equaled $1,617,835 as
compared to $1,767,030 at June 30, 1995. This reduction is
due in part to the $183,101 of obsolete inventory expensed at
the end of fiscal 1996. With the introduction of several new
products related to the "50 Series" and "DynaMite" product
lines, as well as the inventories of additional products from
the Company's acquisition of Superior Orthopaedics, and the
agreement with Life-Tech, it is expected that inventory levels
will increase during fiscal 1997.
For additional information with respect to sources and
uses of cash, refer to the statements of cash flows included
in the Company's financial statements.
<PAGE>
The Company's revenues and net income from continuing
operations have not been unusually impacted by inflation or
price increases for raw materials and parts from vendors.
Item 8. Financial Statements
--------------------
Financial statements follow immediately and are listed in
Item 14 of Part IV of this form 10K.
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
Dynatronics Corporation:
We have audited the financial statements of Dynatronics
Corporation as listed in the accompanying index. In
connection with our audits of the financial statements, we
also have audited the financial statement schedule as listed
in the accompanying index. These financial statements and
financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Dynatronics Corporation as of June 30, 1996 and
1995, and the results of its operations and its cash flows for
each of the years in the three-year period ended June 30,
1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG Peat Marwick LLP
Salt Lake City, Utah
August 14, 1996
<PAGE>
DYNATRONICS CORPORATION
Balance Sheets
June 30, 1996 and 1995
[CAPTION]
<TABLE>
1996 1995
---------- ----------
<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 416,854 779,054
Trade accounts receivable, less allowance for doubtful
accounts of $67,955 in 1996 and $50,729 in 1995 (note 6) 1,387,353 941,017
Income tax refund receivable 231,523 19,095
Related party and other receivables (note 10) 109,461 236,021
Inventories (notes 3 and 6) 1,617,835 1,767,030
Prepaid expenses 46,943 48,300
Deferred tax asset - current (note 11) 61,602 53,006
---------- ----------
Total current assets 3,871,571 3,843,523
Property and equipment, net (notes 4 and 7) 2,635,821 2,663,171
Excess of cost over fair value of net assets acquired, net
of accumulated amortization of $127,142 in 1996 and
$105,348 in 1995 1,307,631 158,014
Deferred tax asset - noncurrent (note 11) 259,655 178,123
Other assets 433,931 344,497
---------- ----------
$ 8,508,609 7,187,328
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current installments of long-term debt (note 7) $ 148,772 101,345
Current installments of capital lease obligations (note 8) 17,703 44,742
Line of credit (note 6) 285,911 -
Accounts payable 455,664 131,138
Accrued expenses (note 9) 347,057 247,026
----------- ----------
Total current liabilities 1,255,107 524,251
Long-term debt, excluding current installments (note 7) 2,484,488 2,086,438
Capital lease obligations, excluding current installments
(note 8) 4,968 22,671
Deferred compensation (note 15) 366,846 290,262
----------- ----------
Total liabilities 4,111,409 2,923,622
Stockholders' equity:
Common stock, no par value. Authorized 50,000,000 shares;
issued and outstanding 8,424,747 in 1996 and 7,943,897
shares in 1995 1,981,204 1,653,818
Retained earnings 2,415,996 2,609,888
---------- ----------
Total stockholders' equity 4,397,200 4,263,706
Commitments and contingencies (notes 5, 8, and 15)
---------- ----------
$ 8,508,609 7,187,328
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DYNATRONICS CORPORATION
Statements of Operations
Years ended June 30, 1996, 1995, and 1994
[CAPTION]
<TABLE>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $6,784,748 6,112,241 4,900,408
Cost of sales 3,882,901 3,518,076 2,774,432
---------- ---------- ----------
Gross profit 2,901,847 2,594,165 2,125,976
Selling, general, and administrative expenses 2,073,223 1,704,723 1,979,032
Research and development expense 565,697 566,891 664,250
---------- ---------- ----------
Operating income (loss) 262,927 322,551 (517,306)
Other income (expense):
Interest income 35,006 17,566 17,862
Interest expense (163,223) (164,925) (104,258)
Gain on sale of unconsolidated subsidiary stock - - 403,743
Loss on write off of related party notes receivable
(note 5) (720,103) - -
Other income, net (note 10) 158,527 184,378 94,684
---------- ---------- ----------
Total other income (expense), net (689,793) 37,019 412,031
---------- ---------- ----------
Income (loss) before income taxes (426,866) 359,570 (105,275)
Income tax expense (benefit) (note 11) (232,974) 142,487 (93,732)
---------- ---------- ----------
Income (loss) before cumulative effect of
accounting change (193,892) 217,083 (11,543)
Cumulative effect at July 1, 1993 of change in
accounting for income taxes (note 11) - - 301,602
---------- ---------- ----------
Net income (loss) $ (193,892) 217,083 290,059
========== ========== ==========
Net income (loss) per share:
Before cumulative effect of change in
accounting for income taxes $ (0.02) 0.03 -
Cumulative effect of accounting change - - 0.04
---------- ---------- ----------
Net income (loss) per share $ (0.02) 0.03 0.04
========== ========== ==========
Weighted average number of common shares and common
share equivalents outstanding 8,040,710 7,928,818 8,316,294
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DYNATRONICS CORPORATION
Statements of Stockholders' Equity
Years ended June 30, 1996, 1995, and 1994
[CAPTION]
<TABLE>
Total
stock-
Common Retained holders'
stock earnings equity
----------- ---------- ----------
<S> <C> <C> <C>
Balances at June 30, 1993 $ 1,439,590 2,102,746 3,542,336
Issuance of 263,000 shares of common stock upon
exercise of employee stock options (note 13) 89,420 - 89,420
Income tax benefit from nonemployee exercise of
stock options 25,131 - 25,131
Net income - 290,059 290,059
----------- ---------- ----------
Balances at June 30, 1994 1,554,141 2,392,805 3,946,946
Issuance of 26,940 shares of common stock upon
exercise of employee stock options (note 13) 23,572 - 23,572
Income tax benefit from nonemployee exercise of
stock options 76,105 - 76,105
Net income - 217,083 217,083
----------- ---------- ----------
Balances at June 30, 1995 1,653,818 2,609,888 4,263,706
Issuance of 40,850 shares of common stock upon
exercise of employee stock options (note 13) 35,744 - 35,744
Income tax benefit from nonemployee exercise of
stock options 5,642 - 5,642
Issuance of 440,000 shares of common stock for
business acquired 286,000 - 286,000
Net loss - (193,892) (193,892)
----------- ---------- ----------
Balances at June 30, 1996 $ 1,981,204 2,415,996 4,397,200
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DYNATRONICS CORPORATION
Statements of Cash Flows
Years ended June 30, 1996, 1995, and 1994
[CAPTION]
<TABLE>
1996 1995 1994
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (193,892) 217,083 290,059
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Cumulative effect of accounting change - - (301,602)
Depreciation and amortization of property and
equipment 177,211 193,202 165,965
Other amortization 22,628 8,779 8,779
Loss on disposal of assets - - 125
Write off of related party receivable 720,103 - -
Write off of inventory 183,101 - -
Gain on sale of investment in ITEC stock - - (403,743)
Provision for doubtful accounts 12,000 12,000 21,331
Provision for inventory obsolescence 99,000 96,000 93,822
Provision for warranty reserve 107,749 159,636 106,244
Deferred compensation 76,584 73,260 70,188
Decrease (increase) in operating assets, net of
effects of business acquisition:
Receivables (179,897) (173,910) 389,956
Inventories 141,818 (67,671) (539,117)
Prepaid expenses and other assets (63,910) (84,583) 12,011
Deferred tax assets (90,128) 84,293 (13,820)
Income taxes (206,786) 191,112 (46,303)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses (23,421) (360,372) (81,440)
---------- ----------- ----------
Net cash provided by (used in) operating
activities 782,160 348,829 (227,545)
---------- ----------- ----------
Cash flows from investing activities:
Loan to affiliates (591,278) (228,824) -
Proceeds from sale of investment in ITEC stock - - 403,743
Capital expenditures (73,300) (78,150) (164,076)
Refund from construction funding - - 230,690
Payment for business acquisition (652,172) - -
Proceeds from sale of assets - - 125
---------- ----------- ----------
Net cash provided by (used in)
investing activities (1,316,750) (306,974) 470,482
---------- ----------- ----------
Cash flows from financing activities:
Principal payments under capital lease obligations (44,742) (63,288) (71,612)
Principal payments on long-term debt (104,523) (94,093) (147,865)
Net change in line of credit 285,911 - -
Proceeds from issuance of long-term debt - - 57,000
Proceeds from issuance of common stock 35,744 23,572 89,420
---------- ----------- ----------
Net cash provided by (used in)
financing activities 172,390 (133,809) (73,057)
---------- ----------- ----------
Net increase (decrease) in cash and cash equivalents (362,200) (91,954) 169,880
Cash and cash equivalents at beginning of year 779,054 871,008 701,128
---------- ----------- ----------
Cash and cash equivalents at end of year $ 416,854 779,054 871,008
========== =========== ==========
</TABLE>
<PAGE>
DYNATRONICS CORPORATION
Statements of Cash Flows (continued)
Years ended June 30, 1996, 1995, and 1994
[CAPTION]
<TABLE>
1996 1995 1994
---------- ----------- ----------
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
<S> <C> <C> <C>
Cash paid during the period for interest $ 163,223 164,925 104,258
Cash paid during the year for income taxes 88,900 250 103,000
Supplemental Disclosure of Noncash Investing and Financing Activities
- ---------------------------------------------------------------------
Long-term debt incurred for fixed assets $ - - 1,179,131
Capital lease obligations incurred for
property and equipment - 19,990 88,912
Income tax benefit from nonemployee
exercise of stock options 5,642 76,105 25,131
Business acquisition (note 2)
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DYNATRONICS CORPORATION
Notes to Financial Statements
June 30, 1996, 1995, and 1994
(1) Basis of Presentation and Summary of Significant
Accounting Policies
(a) Basis of Presentation
Dynatronics Corporation (the Company) manufactures
and markets products for the physical medicine market,
which constitutes a single line of business. The
products are distributed primarily through dealers in
the United States and Canada, with increasing
distribution in foreign countries.
(b) Cash Equivalents
Cash equivalents include all cash and investments
with original maturities to the Company of three months
or less.
(c) Inventories
Finished goods inventories are stated at the lower
of standard cost, which approximates actual costs
(first-in, first-out), or market. Raw materials are
stated at the lower of cost (first-in, first-out) or
market.
(d) Property and Equipment
Property and equipment are stated at cost and are
depreciated using the straight-line method over the
estimated useful lives of related assets. The building
and its component parts are being depreciated over
their estimated useful lives that range from 5 to 31. 5
years. Estimated lives for all other depreciable
assets range from three to seven years. Equipment
under capital leases is amortized using the straight-
line method over the lesser of the term of the related
leases or the estimated useful lives of the assets.
(e) Excess of Cost Over Fair Value of Net Assets Acquired
The excess of cost over fair value of net assets
acquired is being amortized on the straight-line method
over 15 and 30 years.
(f) Revenue Recognition
Sales revenues are generally recorded at the time
products are shipped to the customer.
<PAGE>
(g) Research and Development Costs
Research and development costs are expensed as
incurred.
(h) Product Warranty Reserve
Anticipated costs estimated to be incurred in
connection with the Company's product warranty programs
are charged to expense as products are sold.
(i) Income Taxes
The Company accounts for income taxes using the
asset and liability method as prescribed by the
Financial Accounting Standards Board Statement No. 109,
Accounting for Income Taxes (Statement 109). Under the
asset and liability method, deferred tax assets and
liabilities are recognized for the future tax
consequences attributable to differences between the
financial statement carrying amounts of existing assets
and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are
expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that
includes the enactment date.
Effective July 1, 1993, the Company adopted
Statement 109 and has reported the cumulative effect of
that change in the method for accounting of income
taxes in the 1994 statement of income.
(j) Net Income (Loss) Per Share
Per share amounts are computed by dividing net
income or loss by the weighted average number of common
shares outstanding and common share equivalents
outstanding (if dilutive).
(k) Reclassifications
Certain reclassifications have been made in the
1995 and 1994 financial statements to conform to
classifications adopted in 1996.
(l) Use of Estimates
Management of the Company has made a number of
estimates and assumptions relating to the reporting of
assets and liabilities and the disclosure of contingent
assets and liabilities to prepare these financial
statements in conformity with generally accepted
accounting principles. Actual results could differ
from those estimates.
(m) Financial Instruments
The carrying value of accounts receivable,
accounts payable, accrued expenses, and notes payable
approximates their estimated fair value due to the relative
short maturity of these instruments.
The carrying value of long-term debt approximates its
estimated fair value due to recent issuance of the
debt.
<PAGE>
(2) Business Combinations
On May 1, 1996, the Company purchased most of the assets
and assumed some of the liabilities of Superior Orthopedic
Supplies, Inc. (Superior). Superior manufactures and
sells orthopedic and other medical supplies throughout the
United States. The cost of the acquisition is as follows:
Fair value of assets $ 1,828,401
Liabilities assumed (340,229)
Note payable (550,000)
Common stock (286,000)
---------------
Cash paid $ 652,172
===============
The acquisition has been accounted for as a purchase and,
accordingly, the results of operations of Superior have
been included in the Company's financial statements from
May 1, 1996. The excess of the purchase price over the
fair value of the net identifiable assets acquired of
$1,171,412 has been recorded as goodwill and is being
amortized on a straight-line basis over 15 years.
The following unaudited pro forma financial information
presents the combined results of operations of the Company
and Superior as if the acquisition had occurred as of the
beginning of 1996 and 1995, after giving effect to certain
adjustments, including amortization of goodwill,
additional depreciation expense, increased interest
expense on debt related to the acquisition, and related
income tax effects. The pro forma financial information
does not necessarily reflect the results of operations
that would have occurred had the Company and Superior
constituted a single entity during such periods.
Year ended June 30,
-------------------
1996 1995
---- ----
(unaudited)
Net sales $ 8,523,232 8,133,430
=========== ==========
Net income (loss) $ (257,490) 164,876
=========== ==========
Earnings (loss) per share $ (.03) .02
=========== ==========
<PAGE>
(3) Inventories
Inventories consisted of the following at June 30:
1996 1995
---------- ----------
Raw materials $ 893,096 1,201,587
Finished goods 770,450 611,207
Inventory reserve (45,711) (45,764)
---------- ----------
$ 1,617,835 1,767,030
========== ==========
(4) Property and Equipment
Property and equipment consist of the following at June 30:
1996 1995
--------- ----------
Land $ 589,920 589,920
Building 1,935,297 1,935,297
Machinery and equipment 572,947 358,172
Office equipment 128,802 102,284
Equipment under capital leases 144,496 238,050
Vehicles 8,219 7,969
---------- ----------
3,379,681 3,231,692
Less accumulated depreciation and
amortization 743,860 568,521
---------- ----------
$ 2,635,821 2,663,171
========== ==========
<PAGE>
(5) Investment
The Company owns approximately 36 percent of the common
stock of International Tourist Entertainment Corporation
(ITEC) which operates a tourist-oriented giant screen
theater complex in Branson, Missouri. At June 30, 1995,
the Company reported no investment in ITEC due to
previously recognized losses. The Company's unrecorded
share of ITEC's losses through June 30, 1995 is
approximately $1.5 million. On January 25, 1996, ITEC
filed for Chapter 11 bankruptcy. As a result of this
filing, the Company discontinued accounting for this
investment using the equity method because it is no longer
in a position to exercise significant influence over the
operations of ITEC. At the time of the bankruptcy, the
Company was guarantor on a $500,000 bank loan for ITEC.
The Company incurred a loss of $491,279 from payments made
to the commercial bank in performance on its guarantee,
which represented the total obligation under the guarantee
including principal, interest, and bank charges. Included
in related party and other receivables at June 30, 1995 is
$228,824 due from ITEC related to unpaid amounts under a
service agreement and other expenses. Due to ITEC's
Chapter 11 bankruptcy filing, the $228,824 note receivable
was written off in 1996. Summarized financial information
for ITEC for 1995 and 1994, are presented below:
Balance Sheets
June 30,
------------------------
1995 1994
---------- ----------
Current assets $ 554,804 548,648
Noncurrent assets 13,304,842 10,300,332
----------- -----------
$13,859,646 10,848,980
=========== ===========
Current liabilities $ 2,465,912 523,480
Noncurrent liabilities 6,291,850 5,661,364
Stockholders' equity 5,101,884 4,664,136
----------- -----------
$13,859,646 10,848,980
=========== ===========
Statements of Operations
Year ended June 30,
-----------------------------
1995 1994
------------ -----------
Revenues $ 2,834,670 1,263,505
Operating loss (927,930) (1,311,413)
Other expense (609,694) (311,511)
Net loss (1,537,624) (1,622,924)
<PAGE>
(6) Line of Credit
The Company has available with a commercial bank a
revolving line of credit agreement totaling $1,000,000 at
June 30, 1996, secured by accounts receivable and
inventories. In July 1996, the line of credit was
increased to $1,500,000, and extended to November 30,
1997. The line requires the monthly payment of interest
on outstanding balances at prime plus one-half percent
(8.75 percent at June 30, 1996). Draws in June 1996 on the
line of credit resulted in an outstanding balance of
$285,911 as of June 30, 1996. Prior to June 1996 there
had been no draws on the line of credit.
(7) Long-term Debt
Long-term debt consisted of the following at June 30:
[CAPTION]
<TABLE>
1996 1995
----------- -----------
<S> <C> <C>
7.64% promissory note secured by a trust deed on real
property, payable in monthly installments of $12,155
through November 1998 then adjusted through November 2003 $ 1,167,557 1,221,937
6.21% promissory note secured by a trust deed on real
property, maturing November 2013, payable in
decreasing installments beginning at $7,545 monthly 898,203 926,216
7% promissory note secured by fixed assets, payable
in monthly installments of $6,386 through April
1999, then a balloon payment of $427,012 546,822 -
8.6% promissory note secured by equipment, payable in
monthly installments of $1,806 through June 1997 20,678 39,630
---------- ---------
Total long-term debt 2,633,260 2,187,783
Less current installments 148,772 101,345
---------- ---------
Long-term debt, excluding current installments $2,484,488 2,086,438
========== =========
</TABLE>
The aggregate maturities of long-term debt for each of the
years subsequent to June 30, 1996 are as follow: 1997,
$148,772; 1998, $137,505; 1999, $566,810; 2000,
$109,633; 2001, $117,761; and thereafter $1,552,779.
<PAGE>
(8) Leases
The Company leases equipment and vehicles under
noncancelable operating lease agreements. The Company
leased office space through August 1993. Rent expense for
the years ended June 30, 1996, 1995, and 1994 was $25,682,
$24,354, and $28,840, respectively. A schedule of future
minimum rental payments required under operating leases
that have initial or remaining noncancelable lease terms
in excess of one year as of June 30, 1996, appears in the
table below.
The Company is the lessee of computer and office equipment
with a cost of $144,496 under capital leases that expire
at various times through October 1997. At June 30, 1996,
accumulated amortization on such equipment totaled
$123,511. Related amortization charges are included in
depreciation expense.
A summary of noncancelable long-term lease commitments follows:
Capi- Oper-
talized ating
leases leases
----------- -----------
Years ending June 30:
1997 $ 18,732 60,706
1998 5,154 50,400
1999 - 52,000
2000 - 52,800
2001 - 44,000
------------ ----------
Total minimum lease payments 23,886 $ 259,906
==========
Less amount representing interest 1,215
------------
Present value of net minimum
capital lease payments 22,671
Less current installments of
capital lease obligations 17,703
------------
Capital lease obligations,
excluding current installments $ 4,968
============
<PAGE>
(9) Accrued Expenses
Accrued expenses consist of the following at June 30:
1996 1995
---------- ----------
Warranty reserve $ 64,000 64,000
Bonuses payable 9,857 20,214
Commissions payable 9,807 6,620
Dealer costs and incentives 60,100 24,552
Payroll related accruals 101,352 78,251
Real property tax accrual 19,174 18,770
Professional fees accrued 20,747 14,466
Other 62,020 20,153
---------- ----------
$ 347,057 247,026
========== ==========
(10) Related Party Transactions
Included in other receivables is a promissory note for
$100,000 due to the Company from ITEC. This note
represents a "D.I.P." (Debtor in Possession) Loan which is
a super priority loan positioned before all other
liabilities including the first mortgage on ITEC's
building.
The Company shares certain office facilities, management,
and accounting personnel with ITEC. Each entity bearing
responsibility for payment of the related costs, charges
the other entity for its share of such expenses.
Estimated costs for services are prorated based upon
personnel time, facilities, and services used. Management
believes the method used to allocate the shared costs is
reasonable. Such charges resulted in other income to the
Company of $84,000, $72,000, and $60,000 in 1996, 1995,
and 1994, respectively.
(11) Income Taxes
As discussed in note 1(i), the Company adopted Statement
109 as of July 1, 1993. The cumulative effect of this
change in accounting for income taxes of $301,602 is
determined as of July 1, 1993 and is reported separately
in the statement of income for the year ended June 30,
1994.
<PAGE>
Income tax expense (benefit) for the years ended June 30
consists of:
Stock
option
Current Deferred benefit Total
------- -------- ------- -------
1996:
U.S. federal $(122,554) (81,466) 4,886 (199,134)
State and local (25,934) (8,662) 756 (33,840)
--------- -------- ------- --------
$(148,488) (90,128) 5,642 (232,974)
========= ======== ======= ========
1995:
U.S. federal $ (24,318) 83,004 65,907 124,593
State and local 6,407 1,289 10,198 17,894
--------- -------- ------- --------
$ (17,911) 84,293 76,105 142,487
========= ======== ======= ========
1994:
U.S. federal $ (94,265) (12,597) 21,762 (85,100)
State and local (10,778) (1,223) 3,369 (8,632)
--------- -------- ------- --------
$(105,043) (13,820) 25,131 (93,732)
========= ======== ======= ========
Actual income tax expense (benefit) differs from the "expected" tax
expense (benefit) (computed by applying the U.S. federal corporate
income tax rate of 34 percent to income (loss) before income taxes)
as follows:
[CAPTION]
<TABLE>
1996 1995 1994
----------- --------- ----------
<S> <C> <C> <C>
Expected tax expense (benefit) $(145,134) 122,254 (35,794)
Refunds from amended returns - - (27,802)
State taxes, net of federal tax benefit (22,334) 11,810 (5,697)
Amortization of goodwill not deductible 2,985 2,985 2,985
Research and development credits - (16,050) (25,108)
Write off of ITEC stock (68,487) - -
Other, net (4) 21,488 (2,316)
---------- -------- ---------
$ (232,974) 142,487 (93,732)
========== ======== =========
</TABLE>
<PAGE>
(11) Income Taxes (continued)
Deferred income tax assets related to the tax effects of temporary
differences have been offset by a valuation allowance as presented below:
1996 1995
---------- ----------
Net deferred tax asset - current:
Inventory capitalization for income tax purposes $ 6,946 7,716
Obsolete inventory reserve 17,050 17,070
Vacation reserve 3,730 3,730
Warranty reserve 23,872 23,872
Bad debt reserve 25,347 18,922
Valuation allowance (15,343) (18,304)
--------- --------
Total deferred tax asset - current $ 61,602 53,006
========= ========
Net deferred tax asset - noncurrent:
Salary continuation agreements $ 136,834 108,268
Net operating loss carryforwards 233,911 208,060
Property and equipment, principally
due to differences in depreciation (80,235) (58,459)
Unutilized capital loss 28,163 -
R&D credit carryforward 25,433 -
Valuation allowance (84,657) (81,696)
Other 206 1,950
--------- ---------
Total deferred tax asset - noncurrent $ 259,655 178,123
========= =========
The valuation allowance for deferred tax assets as of June 30, 1996
and June 30, 1995 was $100,000. In assessing the realizability of
deferred tax assets, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will
not be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during
the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. In order to fully
realize the gross deferred tax assets, the Company will need to
generate future taxable income of approximately $1,239,000 in
increments sufficient to recognize net operating loss carryforwards
prior to expiration as described below. Based upon the level of
historical taxable income and projections for future taxable
income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible differences,
net of the existing valuation allowance at June 30, 1996.
The Company benefits from the tax net operating loss carryover
generated in fiscal 1996 of $69,157. The Company also benefits
from the tax net operating loss (NOL) carryovers acquired in
the merger with ACI. There is an annual limitation on the use
of the NOL carryovers which is $88,356. Amounts and expiration
dates of carryforwards are as follows:
Expiration Amount
---------- ----------
2001 $ 80,601
2002 437,153
2004 63,383
2005 1,899
2006 60
2007 29,007
----------
$ 612,103
==========
12. Major Customers
During the fiscal years ended June 30, 1996, 1995, and 1994, sales
to any single customer did not exceed ten percent of total revenues.
<PAGE>
13. Stock Options
The Company has had activity under two qualified stock option plans
(the 1987 plan and the 1992 plan) whereby options are granted to
officers, directors, and employees to acquire shares of the Company's
common stock. The options are to be granted at not less than 100
percent of the market price of the stock at the date of grant. Option
terms are determined by the Board of Directors, and exercise dates
may range from six months to five years from the date of grant.
Summary of activity follows:
[CAPTION]
<TABLE>
1996 1995 1994
---------------------- ---------------------- ----------------------
Number Price per Number Price per Number Price per
of shares share of shares share of shares share
--------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year 403,175 $ .875 448,895 $ .875 263,000 $ .34
Options granted 166,026 1.08 - - 456,300 .875
Options exercised 40,850 .875 26,940 .875 263,000 .34
Options canceled or
expired 2,710 .875 18,780 .875 7,405 .875
-------- -------- --------
Options outstanding at
end of year 525,641 .875-1.08 403,175 .875 448,895 .875
======== ======== ========
Options exercisable at
end of year 354,830 .875 388,735 .875 - -
======== ======== ========
</TABLE>
Under the terms of the stock option plans, 569,885 shares of common stock
were authorized and reserved for issuance, but were not granted at
June 30, 1996.
In addition to the stock option plans mentioned above, in 1994 the Board
of Directors granted options to a nonemployee of which 150,075 remain
outstanding and are exercisable at a price of $.875 per share.
14. Employee Benefit Plan
During 1991, the Company established a deferred savings plan which
qualifies under Internal Revenue Code Section 401(k). The Plan
covers all employees of the Company who have at least six months
of service and who are age 20 or older. For 1996, 1995, and 1994,
the Company made matching contributions of 25 percent of the first
$2,000 of each employee's contribution. The Company's contributions
to the plan for 1996, 1995, and 1994 were $9,146, $13,517, and
$11,180, respectively. Company matching contributions for future
years are at the discretion of the Board of Directors.
<PAGE>
15. Salary Continuation Agreements
The Company has Salary Continuation Agreements (the Agreements)
with three key employees. The Agreements provide for a
pre-retirement salary continuation income to the employee's
designated beneficiary in the event that the employee dies
before reaching age 65. This death benefit amount is the
lesser of $75,000 per year or 50 percent of the employee's
salary at the time of death, and continues until the
employee would have reached age 65. The Agreements also
provide the employee with a supplemental retirement
benefit if the employee remains in the employment of
the Company until age 65. Estimated amounts to be paid
under the Agreements are being accrued over the period
of the employees' active employment. As of June 30,
1996, the Company has accrued $366,846 of deferred
compensation under the terms of the Agreements.
<PAGE>
16. Accounting Standards Not Yet Adopted
In October of 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensation (FASB 123). The
Company is required to adopt the provisions of this statement
for years beginning after December 15, 1995. This statement
encourages all entities to adopt a fair value based method
of accounting for employee stock options or similar equity
instruments. However, it also allows an entity to continue
to measure compensation cost for those plans using the
intrinsic-value method of accounting prescribed by APB
option No. 25, Accounting for Stock Issued to Employees
(APB 25). Entities electing to remain with the accounting
in APB 25 must make pro forma disclosures of net income and
earnings per share as if the fair value based method of
accounting defined in this statement had been applied. It
is currently anticipated that the Company will continue
to measure compensation costs in accordance with APB 25 and
provide the disclosures required by FASB 123.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
During the Company's two most recent fiscal years and the
subsequent interim period, there have been no disagreements
with and no resignation by or dismissal of the independent
accountants engaged by the Company.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Company
The directors and executive officers of the Company at September
26, 1996, are:
Director
or Officer
Name Age Since Position with Company
- ---- --- ----- ---------------------
Kelvyn H. Cullimore 61 1983 Chairman of the Board
Kelvyn H. Cullimore, Jr. 40 1983 President, CEO and Director
Larry K. Beardall 40 1986 Executive Vice President of
Sales and Marketing
and Director
E. Keith Hansen, M.D. 51 1983 Director
V. LeRoy Hansen 58 1987 Director
Joseph H. Barton 68 1996 Director
John S. Ramey 45 1992 Sr. Vice President of
Operations
Kelvyn H. Cullimore is the father of Kelvyn H. Cullimore, Jr.
LeRoy Hansen and Keith Hansen are cousins.
Directors of the Company hold office until the next annual meeting
of the Company's shareholders and until their successors have been
elected and duly qualified. In the event of the resignation of a
Board Member, the Board of Directors elects an individual to fill
the remainder of the term. Executive officers are elected by the
Board of Directors of the Company at the first meeting after each
annual meeting of shareholders and hold office until their
successors are elected and duly qualified. The Company has a
compensation committee composed of the outside directors of the
board which reviews and approves compensation matters for
executive officers of the Company.
Kelvyn H. Cullimore has served as Chairman of the Board of the
Company since its incorporation in April, 1983. From 1983
until 1992, Mr. Cullimore served as President and CEO of the
Company. Mr. Cullimore received a B.S. in Marketing from Brigham
Young University in 1957, and following graduation, worked for
a number of years as a partner in a family-owned home furnishings
business in Oklahoma City, Oklahoma. Mr. Cullimore has participated
in the organization and management of various enterprises, becoming
the president or general partner in several business entities,
including real estate, motion picture, and equipment partnerships.
Since 1986, Mr. Cullimore has served as Chairman and President
of ITEC Attractions. From 1979 until 1992, Mr. Cullimore served
as Chairman of the Board of American Consolidated Industries (ACI),
the former parent company of Dynatronics.
<PAGE>
Kelvyn H. Cullimore, Jr. was elected President and Chief Executive
Officer of the Company in December of 1992. He has been a Director
since the incorporation of the Company. He served as Secretary/
Treasurer of the Company from 1983 until 1992 and Administrative
Vice President from 1988 until 1992. Mr. Cullimore graduated from
Brigham Young University with a degree in Financial and Estate
Planning in 1980. Since graduation, Mr. Cullimore has served on the
Board of Directors of several businesses, including Dynatronics
Marketing Company and ACI. In addition, he has served as Secretary/
Treasurer of ACI and Dynatronics Marketing Company. From 1983 until
1992, Mr. Cullimore served as Executive Vice President and Chief
Operating Officer of ACI. Mr. Cullimore is a director of ITEC,
an affiliate of the Company.
Larry K. Beardall was elected Executive Vice President of the Company
in December of 1992. He has served as a Director and the Vice President
of Sales and Marketing for the Company since July of 1986. Mr.
Beardall joined Dynatronics in February of 1986 as Director of
Marketing. He graduated from Brigham Young University with a degree
in Finance in 1979. Prior to his employment with Dynatronics, Mr.
Beardall worked with GTE Corporation in Durham, North Carolina as
the Manager of Mergers and Acquisitions and subsequently with Donzis
Protective Equipment in Houston, Texas as National Sales Manager.
He also served on the Board of Directors of Nielsen & Nielsen, Inc.,
the marketing arm for Donzis, a supplier of protective sports
equipment.
E. Keith Hansen, M.D. has been a Director of the Company since 1983.
Dr. Hansen obtained a Bachelor of Arts degree from the University of
Utah in 1966 and an M.D. from Temple University in 1972. He has been
in private practice in Sandy, Utah since 1976. Dr. Hansen was also
a Director of ACI until 1992; and he is Vice President and Director
of Mountain Resources Corporation and a Director of Accent Publishers,
each of which is based in Salt Lake City, Utah.
V. LeRoy Hansen has been a Director of the Company since 1987. Mr.
Hansen received a Bachelor of Science degree in Economics from the
University of Utah in 1965. From 1960-1980, Mr. Hansen was employed
by AT&T in numerous management positions. From 1976-1978, he served
at AT&T headquarters in Market Management Concept Development and
Implementation as well as Long Range Financial Planning. From 1980
to 1988, he co-founded Mountain Resources Corporation, an energy
development company and served as Vice President. From 1988 to 1996,
Mr. Hansen founded and served as President of Associated Enterprises,
Inc., a corporation providing management and business development
consulting services. In May of 1992, Mr. Hansen founded Silver
Summit, L.C., a real estate development company.
Joseph H. Barton was elected a Director in November, 1995 and began
serving in January, 1996. Mr. Barton received a Civil Engineering
degree from the University of California at Berkeley and has held
various executive positions including President of J.H. Barton
Construction Company, Senior Vice President of Beverly Enterprises,
and President of KB Industries, a building and land development
company. Most recently, Mr. Barton served as Senior Vice President
of GranCare, Inc. from 1989 to 1994 and currently is a consultant
for Covenant Care and GranCare, Inc.
<PAGE>
John S. Ramey joined the Company in December, 1992 as Vice President
of Research and Development and currently serves as Senior Vice
President of Operations. Prior to joining the Company, Mr. Ramey
worked for 16 years with Phillips Semi-conductors--Signetics, an
integrated circuit manufacturing company as Manager of Product
Engineering. From 1983 to 1989 Mr. Ramey also served as President
of Enertronix, a small public corporation. Since 1989 Mr. Ramey
has served as Vice President of JRH Technology, a private engineering
firm. Mr. Ramey earned his MBA degree in 1991 from the University
of Phoenix (in Salt Lake City, Utah) and a BS degree in electronics
in 1977 from Brigham Young University.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities,
to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and
greater than ten-percent shareholders are required by regulation
of the Securities and Exchange Commission to furnish the Company
with copies of all Section 16(a) forms which they file.
Based solely on review of the copies of such forms furnished to
the Company, the Company believes that during its 1996 fiscal
year all Section 16(a) filings applicable to its officers,
directors and greater than ten-percent beneficial owners were
filed.
Item 11. Executive Compensation. The Company hereby incorporates
by reference into and makes a part of this Report the information
and disclosure set forth under Item 8 of Schedule 14A, "Compensation
of Directors and Executive Officers," contained in the Company's
definitive proxy statement for 1996, to be sent to shareholders of
the Company subsequent to the filing of this Report on Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and
Management. The Company hereby incorporates by reference into and
makes a part of this Report the information and disclosure set
forth under Item 6 of Schedule 14A, "Voting Securities and Principal
Holders Thereof," contained in the Company's definitive proxy
statement for 1996, to be sent to shareholders of the Company
subsequent to the filing of this Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions
The Company provides ITEC, an affiliate, with office space and
administrative services at the Company's headquarters in Salt
Lake City, Utah. Office space consists of two offices totalling
approximately 1,000 square feet and allocated use of common
and conference areas. Administrative services include secretarial,
administrative and accounting functions. During fiscal 1996 the
Company charged ITEC $84,000 for the space and services provided
by the Company. In fiscal 1996 the Company wrote-off $720,103
related to a bank loan to ITEC which was guaranteed by Dynatronics
and a note receivable. See "Investment in Affiliate" for
additional information.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Report
on Form 8-K
(a) Documents filed as part of Form 10-K:
1. Financial Statements (included in Part II, Item 8):
Independent Auditors' Report F-1
Balance Sheets at June 30, 1996, and 1995 F-2
Statements of Income for years ended
June 30, 1996, 1995, and 1994 F-3
Statements of Stockholders' Equity for years
ended June 30, 1996, 1995, and 1994 F-4
Statements of Cash Flows for years ended
June 30, 1996, 1995, and 1994 F-5
Notes to Financial Statements F-7
2. Financial Statement Schedule (Included in Part IV
of this report):
Schedule II--Valuation and Qualifying Accounts F-24
3. Exhibits:
Reg. S-K
Exhibit No. Description
----------- -----------
3 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 Securities and Exchange Commission
and effective November 2, 1984, as amended by
Articles of Amendment dated November 18, 1993.
<PAGE>
4 Form of certificate representing Dynatronics Laser
Corporation common shares, no par value. Incorporated
by reference to a Registration Statement on Form
S-1 (No. 2-85045) filed with the Securities and
Exchange Commission and effective November 2, 1984.
13 1995 Annual Report to Shareholders
28.1 "Business and "Use of Proceeds" sections from
Registration Statement of International Tourist
Entertainment Corporation (Registration No. 33-48630)
28.2 The Financial Statements of International Tourist
Entertainment Corporation as of June 30, 1991 and 1992,
and for each of the years in the three-year period
ended June 30, 1992.
(b) Reports on Form 8-K: On May 16, 1996, the Company filed a
Current Report on Form 8-K that included Item 2 (Acquisition
or Disposition of Assets). The Current Report described the
Company's acquisition of substantially all of the assets of
Superior Orthopaedic Supplies, Inc., a Tennessee corporation
("Superior"), pursuant to a Definitive Asset Purchase
Agreement ("Purchase Agreement") dated as of April 29, 1996
and effective as of May 1, 1996. The Current Report was
amended on July 15, 1996 to include Item 7 (Financial
Statements). The following financial information and pro
forma financial information was filed as part of that
Current Report:
Superior Orthopaedic Supplies, Inc., Independent Auditor's
Report for the nine months ended March 31, 1996 and the
fiscal year ended June 30, 1995.
Superior Orthopaedic Supplies, Inc., Audited Balance
Sheets as of June 30, 1996, and the nine-month period
ended March 31, 1996.
Superior Orthopaedic Supplies, Inc., Statements of
Earnings and Retained Earnings, fiscal year ended June
30, 1995 and the nine months ended March 31, 1996.
Superior Orthopaedic Supplies, Inc., Statements of Cash
Flows, fiscal year ended June 30, 1995 and the nine
months ended March 31, 1996.
Notes to Audited Financial Statements of Superior
Orthopaedic Supplies, Inc.
Unaudited Pro Forma Combined Balance Sheets of Dynatronics
Corporation and Superior Orthopaedic Supplies, Inc., as of
March 31, 1996.
Unaudited Pro Forma Combined Income Statements of
Dynatronics Corporation and Superior Orthopaedic Supplies,
Inc., for the nine-month period ended March 31, 1996.
Unaudited Pro Forma Combined Income Statements of Dynatronics
Corporation and Superior Orthopaedic Supplies, Inc. for
the year ended June 30, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By /s/ Kelvyn H. Cullimore, Jr.
----------------------------
Kelvyn H. Cullimore, Jr.
President
Date: September 24, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ Kelvyn H. Cullimore Chairman of the Board 9/24 , 1996
- ---------------------------- ---------
/s/ Kelvyn H. Cullimore, Jr. Director, President, 9/24 , 1996
- ---------------------------- (Principal Executive ---------
Officer)
/s/ Keith E. Turner Treasurer, Principal 9/30 , 1996
- ----------------------------- Financial and Accounting --------
Officer
/s/ Larry K. Beardall Director, Executive 9/24 , 1996
- ----------------------------- Vice President ---------
/s/ E. Keith Hansen, M.D. Director 9/24 , 1996
- ------------------------------ ---------
/s/ V. LeRoy Hansen Director 9/24 , 1996
- ------------------------------ ---------
/s/ Joseph H. Barton Director 9/24 , 1996
- ------------------------------ ---------
<PAGE>
Schedule II
[CAPTION]
<TABLE>
DYNATRONICS CORPORATION
Valuation and Qualifying Accounts
Additions Receivables
charged charged
Balance, (credited) (credited) Balance,
beginning to to end of
Allowance for doubtful accounts receivable of year expenses allowance year
- ------------------------------------------ ----------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended June 30, 1996 $ 50,729 12,000 (5,226) 67,955
========== ========= ======== ==========
Year ended June 30, 1995 $ 45,844 12,000 7,115 50,729
========== ========= ======== ==========
Year ended June 30, 1994 $ 59,307 21,331 34,794 45,844
========== ========= ======== ==========
Costs
Additions incurred
Balance, charged for product Balance,
beginning to warranty end of
Warranty Reserve of year expenses provisions year
- ------------------------------------------ ---------- --------- ---------- ---------
Year ended June 30, 1996 $ 64,000 107,749 107,749 64,000
========== ========= ========== =========
Year ended June 30, 1995 $ 70,000 159,636 165,636 64,000
========== ========= ========== =========
Year ended June 30, 1994 $ 70,000 106,244 106,244 70,000
========== ========= ========== =========
Additions
Balance, charged Balance,
beginning to end of
Reserve for obsolete inventory or year expenses Deductions year
- ----------------------------------------- ----------- ---------- ---------- --------
Year ended June 30, 1996 $ 45,764 99,000 99,053 45,711
=========== ========= ========= ========
Year ended June 30, 1995 $ 43,386 96,000 93,622 45,764
=========== ========= ========= ========
Year ended June 30, 1994 $ 34,076 93,822 84,512 43,386
=========== ========= ========= ========
</TABLE>
