Dynatronics Announces Fourth Quarter and Fiscal Year 2016 Financial Results

COTTONWOOD HEIGHTS, Utah, Sept. 26, 2016

Net sales for the quarter increased 2.8 percent to $8.1 million, compared to $7.9 million in the same period of the prior year. Gross profit for the quarter increased 45.1 percent representing 33.0 percent of sales, compared to 23.4 percent of sales for the quarter ended June 30, 2015. Included in the cost of sales were inventory write-offs for fiscal year 2016 and 2015 of $270,000 and $952,000 respectively.  Gross margins during the current quarter were positively impacted by a greater proportion of sales of proprietary therapeutic modalities which carry higher-than-average margins.

"The 2.8 percent increase in sales for the quarter continues a sustained upward trend in revenues that began in our fourth fiscal quarter in 2014," reported Jeff Gephart, senior vice president of sales at Dynatronics. "During 2016 we also made significant additions to our sales management team that should enable us to continue our upward trajectory."

Net loss for the quarter ended June 30, 2016, was $1.1 million, compared to a loss of $1.9 million for the quarter ended June 30, 2015. Due to factors discussed below, net loss applicable to common stockholders for the quarter ended June 30, 2016, was $1.2 million, compared to a loss of $4.8 million for the quarter ended June 30, 2015. Several factors resulted in the reported net loss applicable to common stockholders in each period. The following charges were of significance in the fiscal year 2016 quarter: (1) a severance expense of approximately $770,000; (2) an inventory write-off of $270,000; (3) a tax benefit related to the deferred tax asset valuation allowance of $65,000; and (4) non-cash dividends of $99,000 paid to holders of Series A Preferred Stock. Three notable charges impacted the fiscal year 2015 quarter: (1) a deferred tax asset valuation allowance of $1.4 million; (2) an inventory write-off of $952,000; and (3) the recording of a beneficial conversion feature of $2.9 million as a deemed dividend associated with the sale of the company's Series A Preferred Stock in June 2015.

"Fiscal 2016 has been a year of unprecedented change at Dynatronics," stated Kelvyn H. Cullimore Jr., company chairman and CEO. "We have significantly restructured senior management and sales management to facilitate new growth strategies. These changes have involved significant investment as reflected in the reported losses. However, they are changes that position us to execute on our strategic plans for continued growth – not only organically but also through acquisition in fiscal 2017 and beyond."

For the year ended June 30, 2016, net sales increased 4.4 percent to $30.4 million, compared to $29.1 million for fiscal year 2015. Net loss for the year was $1.9 million, compared to a net loss of $2.3 million for fiscal year 2015. Net loss applicable to common stockholders for the year ended June 30, 2016, was $2.3 million ($0.84 per common share), compared to a net loss of $5.1 million ($2.03 per common share) for fiscal year 2015. Net loss and net loss applicable to common stockholders for both fiscal years reflect the impact of the unique expenses incurred in the respective fourth quarters as outlined above.

Sales of proprietary and distributed capital equipment – especially the Solaris family of products – were Dynatronics' leading growth categories in 2016. "We believe the upward trend in sales indicates increased customer confidence in our markets," noted Cullimore. "We've developed plans for increasing organic sales growth through improved sales management, new product introductions, domestic and international expansion, and growth into post-acute care markets."