Dynatronics Corp. (DYNT) filed Amended Quarterly Report for the period ended 2008-12-31.
DYNATRONICS CORP. is involved in the design manufacture and sale of medical devices for therapeutic use by medical practitioners. Dynatronics Corp. has a market cap of $11.8 million; its shares were traded at around $0.86 with and P/S ratio of 0.3.
Highlight of Business Operations:For the quarter ended December 31, 2008, the Company's sales were $8,718,893,
compared to $8,861,633 for the quarter ended December 31, 2007. Sales for the
six months ended December 31, 2008, were $16,715,042, compared to $16,753,063
for the six months ended December 31, 2007. Sales remained even in the current
period when compared with the prior year period, notwithstanding significant
turmoil in the credit and financial markets and the economic environment in the
United States during the three months ended December 31, 2008. These conditions
continued to deteriorate after December 31, 2008. We believe that one of the
reasons for the success in holding sales within two percent of the same period
in the prior year is the September 2008 introduction of our new product catalog
containing over 500 pages of products - more than double the size of the
Company's previous catalog. The expansion of our product offering is a direct
result of the acquisitions of six distributors completed in July 2007. The new
catalog is a major step in presenting the Company's new image to the market
after a year of assimilation and change. In conjunction with the new catalog, we
also implemented pricing incentives to reward customers for placing larger
For the quarter ended December 31, 2008, gross profit was $3,313,555, or 38.0%
of net sales, compared to $3,339,216, or 37.7% of net sales, for the quarter
ended December 31, 2007. Gross profit for the six months ended December 31, 2008
was $6,509,197, or 38.9% of net sales, compared to $6,271,528, or 37.4% of net
sales, for the six months ended December 31, 2007. Margins for the comparative
period in the prior fiscal year were negatively impacted (approximately 2.1
percentage points) because of a higher cost basis in inventory sold during the
period. This higher cost basis was the carrying cost of the inventory held by
the acquired dealers at the time of acquisition. Although the introduction of
the expanded catalog has helped maintain sales at the prior year levels, the new
catalog also has boosted sales of lower margin supplies and distributed goods
which have the effect of lowering the overall gross profit percentage. This
trend is expected to continue as demand for capital goods has softened in the
current challenging national economic environment.
Income tax provision for the quarter ended December 31, 2008 was $35,319
compared to an income tax benefit of $182,864 for the quarter ended December 31,
2007. The effective tax rate for the 2008 quarter was 39.3% compared to 35.1% in
2007. The higher effective tax rate for the quarter ended December 31, 2008
reflects franchise taxes required in certain states. Income tax benefit for the
six months ended December 31, 2008 was $16,559 compared to $579,904 for the
similar period of the prior year.
Net income for the quarter ended December 31, 2008 was $54,598 ($.00 per share),
compared to net loss of $338,792 ($.02 per share) for the quarter ended December
31, 2007. Net loss for the six months ended December 31, 2008 was $84,353 ($.01
per share), compared to a net loss of $1,050,995 ($.08 per share) for the six
months ended December 31, 2007. The primary components contributing to the
improvement and return to profitability in the current quarter were the sharp
reductions in SG&A expenses, together with lower R&D expenses, while maintaining
sales and gross profits at levels similar to the prior year's levels.
The Company has an $8,000,000 revolving line of credit with a commercial bank.
At December 31, 2008, we owed $6,208,338 on this line compared to $5,818,320 at
June 30, 2008. At December 31, 2008, the borrowing base was approximately $6.9
million, resulting in approximately $700,000 of borrowings available to the
Company under the line of credit. Interest on the line of credit is based on the
bank's prime rate plus 1%, which at December 31, 2008 equaled 4.25% per annum.
The line of credit is collateralized by accounts receivable and inventories as
well as a security interest in the Company's headquarters facility in Salt Lake
City, Utah. Borrowing limitations are based on approximately 45% of eligible
inventory and up to 80% of eligible accounts receivable. Interest payments on
the line are due monthly. The line of credit is renewable on October 31, 2009
and includes covenants requiring the Company to maintain certain financial
ratios. As of December 31, 2008, the Company was in compliance with its loan
Any modifications to estimates of inventory valuation reserves are reflected in
the cost of sales within the statements of operations during the period in which
such modifications are determined necessary by management. At December 31, 2008
and June 30, 2008, our inventory valuation reserve, which established a new cost
basis, was $439,466 and $337,718, respectively, and our inventories totaled
$7,039,074 and $6,283,068 net of reserves, respectively.