Dynatronics Narrows Loss Amid Sales Dip, Flags Going Concern Risk

TL;DR

**DYNTQ is a speculative bet; improved loss is overshadowed by a 'going concern' warning and declining sales, making it a hard pass for risk-averse traders.**

AI Summary

Dynatronics Corp. (DYNTQ) reported a net loss of $201,857 for the three months ended September 30, 2025, a significant improvement from the $366,648 net loss in the same period of 2024. Despite this, net sales decreased by 7.6% to $7,024,027 from $7,602,249 year-over-year. The company's operating loss narrowed to $88,463 in Q1 2026 from $250,996 in Q1 2025, indicating improved operational efficiency. Cash and cash equivalents increased substantially to $761,748 as of September 30, 2025, from $326,344 as of June 30, 2025, driven by a net change in the line of credit of $607,451. However, net working capital decreased from $718,110 to $592,564, and the company explicitly states 'substantial doubt about the Company's ability to continue as a going concern within one year.' Strategic initiatives include transitioning production in-house to reduce costs, pursuing new revenue streams, and reducing excess inventory through discounted prices. The company also faces risks from potential universal tariffs between the U.S. and China, which could significantly increase costs of revenue.

Why It Matters

This 10-Q reveals Dynatronics is in a precarious financial state, explicitly stating 'substantial doubt about the Company's ability to continue as a going concern.' While the net loss improved, declining sales and working capital are red flags for investors. The strategic shift to in-house production and inventory reduction are critical for survival, but their success is uncertain. Competitors in the medical device sector, like Zimmer Biomet or Stryker, operate with far greater stability, making DYNTQ a high-risk play. Employees face job insecurity, and customers might question long-term product support if the company's financial health doesn't stabilize.

Risk Assessment

Risk Level: high — The company explicitly states 'substantial doubt about the Company's ability to continue as a going concern within one year' due to recurring operating losses, negative cash flows, and reduced liquidity. Net working capital decreased from $718,110 to $592,564, and net sales declined by 7.6% to $7,024,027, providing specific evidence of financial distress.

Analyst Insight

Investors should exercise extreme caution and consider avoiding DYNTQ given the explicit 'going concern' warning and declining sales. Those with a high-risk tolerance might monitor the success of their cost-reduction and in-house production strategies, but significant uncertainty remains.

Financial Highlights

debt To Equity

3.90

revenue

$7,024,027

operating Margin

-1.26%

total Assets

$15,003,901

total Debt

$11,943,554

net Income

-$201,857

eps

N/A

gross Margin

24.65%

cash Position

$761,748

revenue Growth

-7.6%

Key Numbers

• $201,857 — Net loss for Q1 2026 (Improved from $366,648 in Q1 2025)
• $7,024,027 — Net sales for Q1 2026 (Decreased by 7.6% from $7,602,249 in Q1 2025)
• $88,463 — Operating loss for Q1 2026 (Narrowed from $250,996 in Q1 2025)
• $761,748 — Cash and cash equivalents as of Sep 30, 2025 (Increased from $326,344 as of Jun 30, 2025)
• $592,564 — Net working capital as of Sep 30, 2025 (Decreased from $718,110 as of Jun 30, 2025)
• 16,048,734 — Shares of common stock outstanding (As of November 12, 2025)
• $607,451 — Net change in line of credit (Provided cash in Q1 2026)

Key Players & Entities

• Dynatronics Corporation (company) — registrant
• SEC (regulator) — Securities and Exchange Commission
• U.S. (regulator) — country imposing tariffs
• China (regulator) — country imposing tariffs
• FASB (regulator) — Financial Accounting Standards Board
• Zimmer Biomet (company) — competitor
• Stryker (company) — competitor

FAQ

Risk Factors

• Going Concern Uncertainty [high — financial]: The company explicitly states 'substantial doubt about the Company's ability to continue as a going concern within one year.' This is underscored by a decrease in net working capital to $592,564 as of September 30, 2025, from $718,110 as of June 30, 2025, despite an increase in cash. This indicates significant short-term liquidity challenges.
• Declining Revenue [medium — financial]: Net sales decreased by 7.6% to $7,024,027 for the three months ended September 30, 2025, compared to $7,602,249 in the same period of 2024. This revenue decline, coupled with a narrowed operating loss, suggests cost-cutting measures are in place but top-line growth remains a challenge.
• Inventory Management [medium — operational]: The company is pursuing strategies to reduce excess inventory through discounted prices. While this may improve cash flow, it could also negatively impact gross margins in the short term if not managed carefully.
• Potential Tariffs [medium — regulatory]: The company faces risks from potential universal tariffs between the U.S. and China, which could significantly increase costs of revenue. This is a significant external risk that could further pressure already tight margins.
• In-house Production Transition [low — operational]: Dynatronics is transitioning production in-house to reduce costs. While this is a strategic initiative aimed at improving efficiency, the transition period itself can introduce operational risks and potential disruptions.

Industry Context

Dynatronics operates in the medical device sector, specifically focusing on products for the foot, ankle, and leg. This industry is characterized by innovation, regulatory oversight (FDA), and competition from both large established players and smaller specialized firms. Trends include a growing demand for minimally invasive procedures and advancements in materials and technology.

Regulatory Implications

The company must comply with FDA regulations for its medical devices. Additionally, potential universal tariffs between the U.S. and China present a significant regulatory and economic risk that could impact the cost of goods sold and overall profitability.

What Investors Should Do

1. Monitor inventory reduction strategies: Assess the impact of discounted sales on gross margins and the effectiveness of clearing excess stock.
2. Evaluate cost-saving initiatives: Track the success of in-house production transitions and other SG&A reductions in improving operational efficiency and narrowing losses.
3. Assess liquidity and going concern: Closely watch cash flow generation and the company's ability to manage its debt obligations given the explicit going concern warning.
4. Analyze revenue drivers: Understand the reasons behind the 7.6% sales decline and the prospects for future revenue growth from new streams or existing products.

Key Dates

• 2025-09-30: End of Q1 2026 — Reported net loss of $201,857 on $7,024,027 in net sales. Cash increased to $761,748, but working capital decreased to $592,564.
• 2025-06-30: End of Q4 2025 — Cash and cash equivalents were $326,344 and net working capital was $718,110.
• 2024-09-30: End of Q1 2025 — Reported a net loss of $366,648 on $7,602,249 in net sales, with a higher operating loss.

Glossary

Going Concern

An accounting assumption that a business will continue to operate for the foreseeable future. If there is substantial doubt about this, it must be disclosed. (The company explicitly states substantial doubt about its ability to continue as a going concern within one year, highlighting significant financial distress.)

Net Working Capital

Current assets minus current liabilities. It represents the company's short-term financial health and operational liquidity. (A decrease in net working capital to $592,564 indicates a tightening of short-term liquidity, despite an increase in cash.)

Operating Loss

The loss a company incurs from its normal business operations before accounting for interest and taxes. (The narrowing of the operating loss to $88,463 from $250,996 suggests improved operational efficiency or cost controls.)

Cost of Sales

The direct costs attributable to the production or purchase of the goods sold by a company. (A decrease in cost of sales from $5,621,442 to $5,292,398 accompanied the revenue decline, but gross profit still fell.)

Line of Credit

A flexible loan that allows a borrower to draw funds up to a certain limit, repay them, and borrow them again. (A net change in the line of credit of $607,451 contributed significantly to the increase in cash and cash equivalents.)

Year-Over-Year Comparison

Compared to the prior year's comparable quarter, Dynatronics Corp. (DYNTQ) reported a narrower net loss ($201,857 vs. $366,648) and a reduced operating loss ($88,463 vs. $250,996), indicating improved operational control. However, net sales declined by 7.6% to $7,024,027, and net working capital decreased from $718,110 to $592,564, raising concerns about liquidity despite a significant increase in cash driven by the line of credit. New risks related to potential tariffs have emerged as a concern.

Key Financial Figures

• $1,000,000 — 1.0 if excess availability is less than $1,000,000 of the borrowing base. On September 1

Filing Documents

• form10q.htm (10-Q) — 539KB
• exhibit31-1.htm (EX-31.1) — 7KB
• exhibit31-2.htm (EX-31.2) — 7KB
• exhibit32-1.htm (EX-32.1) — 3KB
• 0001062993-25-016938.txt ( ) — 2771KB
• dynt-20250930.xsd (EX-101.SCH) — 23KB
• dynt-20250930_cal.xml (EX-101.CAL) — 31KB
• dynt-20250930_def.xml (EX-101.DEF) — 28KB
• dynt-20250930_lab.xml (EX-101.LAB) — 261KB
• dynt-20250930_pre.xml (EX-101.PRE) — 118KB
• form10q_htm.xml (XML) — 264KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Item 1.

Financial Statements

Financial Statements 2 Condensed Consolidated Balance Sheets (Unaudited) 2 Condensed Consolidated Statements of Operations (Unaudited) 3 Condensed Consolidated Statements of Stockholders' Equity (Unaudited) 4 Condensed Consolidated Statements of Cash Flows (Unaudited) 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6 Cautionary Note Regarding Forward-Looking Statements 10 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 13 Item 4.

Controls and Procedures

Controls and Procedures 13

OTHER INFORMATION

PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 14 Item 1A.

Risk Factors

Risk Factors 14 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 14 Item 3. Defaults Upon Senior Securities 14 Item 4. Mine Safety Disclosures 14 Item 5. Other Information 14 Item 6. Exhibits 15

Signatures

Signatures 16 1 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements DYNATRONICS CORPORATION Condensed Consolidated Balance Sheets (Unaudited) September 30, 2025 June 30, 2025 Assets Current assets: Cash and cash equivalents $ 761,748 $ 326,344 Restricted cash 50,410 50,410 Trade accounts receivable, less allowance for credit losses of $ 42,185 and $ 60,347 as of September 30, 2025 and June 30, 2025, respectively 2,721,285 2,800,900 Other receivables 57,040 186,403 Inventories, net 4,824,123 5,074,348 Prepaid expenses 603,549 515,780 Total current assets 9,018,155 8,954,185 Property and equipment, net 1,406,035 1,513,872 Operating lease assets 2,938,284 3,195,211 Intangible assets, net 1,327,439 1,431,382 Other assets 313,988 344,292 Total assets $ 15,003,901 $ 15,438,942 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 3,167,812 $ 3,404,121 Accrued payroll and benefits expense 242,595 360,893 Accrued expense 776,857 878,874 Warranty reserve 100,548 105,664 Line of credit 2,604,407 1,996,956 Current portion of finance lease liability 324,933 320,423 Current portion of deferred gain 150,448 150,448 Current portion of operating lease liability 1,057,991 1,018,696 Total current liabilities 8,425,591 8,236,075 Finance lease liability, net of current portion 1,025,503 1,108,448 Deferred gain, net of current portion 438,806 476,418 Operating lease liability, net of current portion 1,889,848 2,185,998 Other liabilities 163,806 169,799 Total liabilities 11,943,554 12,176,738 Commitments and contingencies Stockholders' equity: Preferred stock, no par value: Authorized 50,000,000 shares; 3,351,000 shares issued and outstanding as of September 30, 2025 and June 30, 2025 7,980,788 7,980,788 Common stock, no par value: Authorized 100,000,000 shares; 13,177,495 shares and 10,619,543 shares issued and out

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View this 10-Q filing on SEC EDGAR