Dynatronics(DYNT) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The unaudited condensed consolidated financial statements for Q2 FY2021 reflect net losses, decreased sales, and balance sheet shifts, despite positive operating cash flow Condensed Consolidated Balance Sheets As of December 31, 2020, total assets remained stable, while current assets increased, total liabilities rose, and stockholders' equity decreased Balance Sheet Summary (as of December 31, 2020 vs. June 30, 2020) | Metric | Dec 31, 2020 ($) | June 30, 2020 ($) | | :--- | :--- | :--- | | Total Current Assets | $18,115,599 | $16,074,708 | | Cash and cash equivalents | $3,509,240 | $2,215,665 | | Inventories, net | $6,141,106 | $8,371,842 | | Total Assets | $37,557,309 | $37,596,317 | | Total Current Liabilities | $11,020,279 | $7,678,697 | | Line of credit | $0 | $1,012,934 | | Total Liabilities | $18,613,713 | $17,700,436 | | Total Stockholders' Equity | $18,943,596 | $19,895,881 | Condensed Consolidated Statements of Operations Net losses widened for both three and six-month periods ended December 31, 2020, primarily due to significant declines in net sales and gross profit Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended Dec 31, 2020 ($) | Three Months Ended Dec 31, 2019 ($) | Six Months Ended Dec 31, 2020 ($) | Six Months Ended Dec 31, 2019 ($) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $11,967,901 | $15,196,991 | $24,100,669 | $31,586,540 | | Gross Profit | $3,340,974 | $4,585,856 | $7,242,927 | $9,739,863 | | Operating (Loss) Income | ($596,865) | ($32,244) | ($940,538) | $197,071 | | Net Loss | ($672,832) | ($137,663) | ($1,050,536) | ($38,825) | | Net Loss per Share (Basic & Diluted) | ($0.06) | ($0.05) | ($0.10) | ($0.06) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased to $18.94 million by December 31, 2020, primarily due to a net loss, leading to an increased accumulated deficit - Total stockholders' equity declined by approximately $952,000 during the six months ended December 31, 2020, from $19,895,881 to $18,943,596[19] - The accumulated deficit grew from $(16,349,328) at June 30, 2020, to $(17,776,175) at December 31, 2020, reflecting the net losses incurred during the period[19] Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities was $2.63 million for the six months ended December 31, 2020, increasing cash and equivalents by $1.29 million Cash Flow Summary (Six Months Ended Dec 31) | Cash Flow Activity | 2020 ($) | 2019 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,631,676 | $2,916,239 | | Net cash used in investing activities | ($71,646) | ($183,731) | | Net cash used in financing activities | ($1,266,455) | ($2,456,543) | | Net change in cash | $1,293,575 | $275,965 | Notes to Condensed Consolidated Financial Statements The notes provide details on the company's medical device business, asset reclassifications, inventory changes, revenue disaggregation by product, and equity-related transactions - The company classified its Tennessee building and land, valued at $845,858, as assets held for sale, with an expected sale within the next year[30] Revenue by Product Category (Three Months Ended Dec 31) | Product Category | 2020 ($) | 2019 ($) | | :--- | :--- | :--- | | Orthopedic Soft Bracing Products | $5,082,484 | $5,833,972 | | Physical Therapy and Rehabilitation Products | $6,824,049 | $9,283,017 | | Other | $61,368 | $80,002 | | Total | $11,967,901 | $15,196,991 | - As of December 31, 2020, the company had no borrowings on its line of credit, with approximately $5.367 million available to borrow[42] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes decreased sales and gross profit to the COVID-19 pandemic, while maintaining positive operating cash flow and sufficient liquidity for the next 12 months Results of Operations Net sales and gross profit declined significantly due to COVID-19 impacts, despite reduced SG&A expenses, leading to a widened pre-tax loss Q2 FY2021 vs Q2 FY2020 Performance | Metric | Q2 FY2021 (ended Dec 31, 2020) ($) | Q2 FY2020 (ended Dec 31, 2019) ($) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $11,968,000 | $15,197,000 | -21.2% | | Gross Profit | $3,341,000 | $4,586,000 | -27.1% | | Gross Margin | 27.9% | 30.2% | -2.3 p.p. | | SG&A Expenses | $3,938,000 | $4,618,000 | -14.7% | | Pre-tax Loss | ($663,000) | ($138,000) | +380.4% | - The primary reason for the year-over-year sales decrease was the impact of COVID-19 precautions and deferred elective procedures, reducing product demand[56] Liquidity and Capital Resources Cash and equivalents increased to $3.61 million by December 31, 2020, supported by positive operating cash flow, providing sufficient liquidity for the next 12 months - The company's cash and cash equivalents increased by $1.29 million in the six months ended December 31, 2020, primarily due to $2.63 million in net cash provided by operating activities[66][74] - The company obtained a $3.48 million Paycheck Protection Program (PPP) loan in April 2020 and intends to apply for full forgiveness[70][71] - Inventories decreased by 26.6% to $6.1 million as of December 31, 2020, as part of working capital management in response to COVID-19 impacts[76] - The line of credit balance was reduced to $0 as of December 31, 2020, down from $1.01 million at June 30, 2020, with approximately $5.4 million available to borrow[78] Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in quantitative and qualitative disclosures about market risk since the fiscal year ended June 30, 2020 - There have been no material changes in quantitative and qualitative disclosures about market risk since the fiscal year ended June 30, 2020[88] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2020, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[90] - No changes occurred in the company's internal control over financial reporting during the quarter that would be reasonably likely to have a material effect[91] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings during the period - The company reports that there are no legal proceedings[92] Item 1A. Risk Factors The company states that the risk factors previously disclosed in its Annual Report on Form 10-K have not materially changed - There have been no material changes to the risk factors previously disclosed in the Annual Report for the year ended June 30, 2020[94] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - The company reports no unregistered sales of equity securities[95] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - The company reports no defaults upon senior securities[96] Item 4. Mine Safety Disclosures This item is not applicable to the company, thus no mine safety disclosures were reported - Not applicable[97] Item 5. Other Information The company reported no other information required to be disclosed under this item - The company reports no other information[98] Item 6. Exhibits This section lists the exhibits filed with the quarterly report, including officer certifications and XBRL data files - Exhibits filed include certifications from the principal executive officer and principal financial officer (Exhibits 31.1, 31.2, 32.1, 32.2) and XBRL Instance Documents[100]