UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB

(Mark One)
[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934
                    For the fiscal year ended June 30, 2003.

[  ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

         For the transition period from ____________ to ____________.

         Commission file number 0-12697

                             DYNATRONICS CORPORATION
                 (Name of small business issuer in its charter)

            Utah                                        87-0398434
 ----------------------------              ------------------------------------
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization)

                             7030 Park Centre Drive
                         Salt Lake City, Utah 84121-6618
               (Address of principal executive offices, Zip Code)

Issuer's telephone number  (801) 568-7000

Securities registered under Section 12(b) of the Exchange Act:   None

Securities  registered under Section 12(g) of the Exchange Act: Common Stock, no
par value

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [ x ]

The issuer's revenues for the fiscal year ended June 30, 2003 were $16,896,992.
The aggregate market value of the voting common stock held by non-affiliates of
the issuer was approximately $11,384,000 as of September 22, 2003, based on the
average bid and asked price on that date.

As of September 22, 2003, there were 8,819,935 shares of the issuer's common
stock outstanding.

                       Documents Incorporated by Reference

The issuer hereby incorporates information required by Part III (Items 11 and
12) of this report by reference to the issuer's definitive proxy statement to be
filed pursuant to Regulation14A and provided to shareholders subsequent to the
filing of this report.

Transitional Small Business Disclosure Format (Check one): Yes        No     X
                                                              -----       -----


<PAGE>


                                TABLE OF CONTENTS

                                     PART I

Item 1.       Description of Business..........................................1
Item 2.       Description of Property..........................................8
Item 3.       Legal Proceedings................................................8
Item 4.       Submission of Matters to a Vote of Security Holders..............8

                                     PART II

Item 5.       Market for Common Equity and Related Stockholder Matters.........8
Item 6.       Management's Discussion and Analysis or Plan of Operations.......9
Item 7.       Financial Statements...........................................F-1
Item 8.       Changes in and Disagreements With Accountants on Accounting
              and Financial Disclosure........................................18
Item 8A.      Controls and Procedures.........................................18

                                    PART III

Item 9.       Directors and Executive Officers; Compliance with Section 16(a) of
              the Exchange Act................................................18
Item 10.      Executive Compensation..........................................20
Item 11.      Security Ownership of Certain Beneficial Owners and Management..20
Item 12.      Certain Relationships and Related Transactions..................20
Item 13.      Exhibits and Reports on Form 8-K................................20
Signatures    ................................................................22
Certifications  ..............................................................23

Unless the context otherwise requires, all references in this report to "we,"
"us," "our," "Dynatronics" or the "Company" include Dynatronics Corporation, a
Utah corporation.

                                       ii
<PAGE>


                                     PART I


Item 1. Description of the Business

         Dynatronics was organized as a Utah corporation on April 29, 1983. The
principal business of the Company is the design, manufacture, market and
distribution of physical medicine products and aesthetic products.

         Dynatronics currently sells more than 1,600 physical medicine and
aesthetic products. We manufacture approximately 25% of the physical medicine
products and 16% of the aesthetic products in our product line. The remainder of
the products are manufactured by third parties for whom Dynatronics acts as a
distributor.

         Sales of manufactured physical medicine products in fiscal year 2003
and 2002 represented approximately 66% and 68%, respectively of the Company's
physical medicine product sales with the balance each year sold by the Company
as a distributor. Sales of manufactured aesthetic products in fiscal year 2003
and 2002 represented approximately 92% and 88%, respectively of the Company's
aesthetic product sales with the balance each year sold by the Company as a
distributor.

         We distribute our products in three ways: 1) through a network of
independent dealers nationwide and internationally, 2) through direct
relationships with certain national accounts, and 3) through a full-line
catalog.

         On May 1, 1996, the Company acquired the assets of Superior
Orthopaedics Supplies, Inc. ("Superior"), a manufacturer and distributor of
medical soft goods, supplies, wood therapy tables and rehabilitation products
for the physical medicine market. The Company retained the former location of
Superior in Ooltewah, a suburb of Chattanooga, Tennessee. The addition of
Superior's products to our existing line of capital equipment significantly
broadened our product offerings and strengthened channels of distribution,
allowing for greater market penetration both domestically and internationally.

         In July 1998, the Company expanded into the aesthetic products market
with the introduction of the Synergie(TM) AMS device. This product incorporates
therapeutic massage technology to achieve, among other things, a temporary
reduction in the appearance of cellulite--a claim for which we received
clearance by the U.S. Food and Drug Administration ("FDA") during fiscal year
1999. This claim is supported by a Company-sponsored research study in which 91%
of participants reported favorable reductions in the appearance of cellulite. In
addition, this product is indicated for the temporary reduction in
circumferential body measurements of cellulite treated areas. This benefit was
also validated in the research study as participants reported cumulative
reductions of six inches in treated areas.

         In February 2000, the Company expanded its offering of aesthetic
products with the introduction of the Synergie Peel(TM) microdermabrasion
device. The Synergie Peel device reduces fine lines, wrinkles, and other
superficial skin damage by gently peeling away the top layers of skin, exposing
smoother, softer skin. Microdermabrasion is quickly becoming the new standard of
care in the aesthetics industry because of its distinct advantages over
traditional chemical and laser peels. In conjunction with the Synergie Peel
device, during fiscal year 2000 Dynatronics introduced Calisse(TM) - a unique
line of skin care products designed to enhance the effects of the Synergie Peel
treatments.

         In August 2000, Dynatronics signed an agreement with Alan Neuromedical
Technologies (ANT) naming Dynatronics the exclusive licensee of ANT's patented
technology for treating chronic pain. Developed by doctors in Texas, this unique
technology has been incorporated into three unique electrotherapy devices - the
Dynatron STS (Sympathetic TherapyTM System), a dual patient device designed for
clinical use, the Dynatron STSi introduced in November 2002 for clinical use
offering standard interferential therapy on one channel and STS therapy on the
other channel, and the Dynatron STS Rx, a single channel prescription unit for
home use. According to the American Pain Society, over 70 million Americans
suffer from moderate to severe chronic pain. The STS technology offers a form of
relief to many suffering with chronic or sub-acute pain.

         In September 2003, the Company introduced its new Dynatron Solaris(TM)
Series combination therapy devices. The Solaris product line consists of five
combination devices, four of which were part of the initial release. The devices
offer varying combinations of electrotherapy modalities and ultrasound, and all
feature new infrared light therapy technology. Various forms of infrared and
visible light therapy have been used for decades in Europe and Asia for treating
pain as well as a wide variety of soft tissue conditions. Light therapy has also
been used in tissue regeneration applications accelerating the body's healing
process. The Solaris Series devices are engineered to utilize any number of
Dynatronics' laser or light therapy probes that may be developed in the future.

                                       1
<PAGE>
Description of Products Manufactured and/or Distributed by Dynatronics

         Dynatronics manufactures and distributes a broad line of medical
equipment including therapy devices, medical supplies and soft goods, treatment
tables and rehabilitation equipment. In addition, we manufacture and distribute
a line of aesthetic equipment including aesthetic massage and microdermabrasion
devices as well as skin care products. Our products are used primarily by
physical therapists, chiropractors, sports medicine practitioners, podiatrists,
plastic surgeons, dermatologists, estheticians and other aesthetic services
providers.

Physical Medicine Products

         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 waveforms and frequencies for patient comfort and for success in the
treatment of pain and related physical ailments. Medium frequency alternating
currents, which are used primarily in the Company's electrotherapy devices, are
believed to be the most effective and comfortable for patients. Electrotherapy
is effective in 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 soft tissues through the introduction of sound waves
into the body. It is one of the most common modalities used in physical therapy
today for the treatment of pain relief, muscle spasms and joint contractures.

         Dynatronics markets twelve devices that include electrotherapy,
ultrasound or a combination of both modalities in a single device. The Dynatron
125 ultrasound device and the Dynatron 525 electrotherapy device target the
low-priced segment of the market. The "50 Series Plus" products target the
mid-range market segment while the new Solaris products cater to the high-end
market. (See "Schedule of Therapy Products" below.) Dynatronics intends to
continue development of its electrotherapy and ultrasound technology and remain
a leader in the design, manufacture and sale of therapy devices.

         Light Therapy - The Company's four new Dynatron Solaris(TM) units
feature light therapy technology. These units are capable of powering a cluster
probe containing 32 infrared superluminous diodes ("SLD") at 880 nanometers
("nm") wavelength along with four red colored SLD's in the 640 to 660 nm
wavelength range. Light therapy delivers 500 mW of energy to the body's cells to
produce a therapeutic effect. Numerous clinical research studies have documented
the benefits of light therapy for patients.

         STS Therapy - STS Therapy is a patented method of administering
therapeutic electrical current via peripheral nerves that are accessed through
the lower legs and feet as well as the arms and hands creating a unique form of
stimulation of the autonomic or sympathetic nervous system. It is a highly
effective, non-invasive and non-addictive treatment for many chronic pain
conditions. Doctors theorize that STS Therapy has a modulating effect on the
autonomic nervous system, thus resulting in symptomatic relief of chronic
intractable pain.

         Iontophoresis - Since 1997, we have distributed Life-Tech's line of
iontophoresis products which are used in physical medicine applications
primarily for treating inflammation. The devices use electrical current to
deliver drugs such as lidocaine transdermally for localized treatment of
inflammation without the use of needles. In August 2003, the formal contract
between Dynatronics and Life Tech, Inc, expired. While Dynatronics continues to
distribute the Life Tech products on essentially the same terms as provided for
in the contract, it no longer is the exclusive distributor of the Life Tech
products. The Company is currently considering developing its own proprietary
line of iontophoresis products which would be scheduled for introduction toward
the end of fiscal year 2004.

         The following chart lists the therapy device products manufactured
and/or distributed by the Company.


                                       2
<PAGE>


<TABLE>
<CAPTION>
                          Schedule of Therapy Products
                 Manufactured and/or Distributed by Dynatronics

                Product Name                                 Description

              <S>                                              <C>
              Dynatron(R)125                                   Ultrasound
              Dynatron(R)525                                   Electrotherapy
              Iontophor II(R)& Microphor(R)+                   Iontophoresis
              Dynatron(R)150 Plus**                            Ultrasound
              Dynatron(R)550 Plus**                            Multi-modality Electrotherapy
              Dynatron(R)650 Plus**                            Multi-modality Electrotherapy
              Dynatron(R)850 Plus**                            Combination Electrotherapy/Ultrasound
              Dynatron(R)950 Plus**                            Combination Electrotherapy/Ultrasound
              Dynatron(R)STS                                   STS Chronic Pain Therapy
              Dynatron(R)STS Rx                                STS Chronic Pain Therapy
              Dynatron(R)STSi                                  Combination Electrotherapy/STS Chronic Pain Therapy
              Dynatron Solaris(TM)705                          Electrotherapy with Light Therapy
              Dynatron Solaris(TM)706                          Electrotherapy with Light Therapy
              Dynatron Solaris(TM)708                          Combination Electrotherapy/Ultrasound with Light Therapy
              Dynatron Solaris(TM)709                          Combination Electrotherapy/Ultrasound with Light Therapy
---------------------
</TABLE>

Dynatron(R) is a registered trademark (#1280629) owned by Dynatronics Iontophor
II(R) and Microphor(R) are registered trademarks owned by Life Tech, Inc.

** "50 Series Plus" Product Line
+ Both manufactured by Life-Tech

         Medical Supplies and Soft Goods - Dynatronics markets its products
through independent dealers and through a product catalog containing an
extensive line of more than 1,600 products. This broad-line catalog has created
a virtual "one-stop shop" for rehabilitation professionals.

         We manufacture the following medical supplies and soft goods: hot
packs, cold packs, therapy wraps, wrist splints, ankle weights, lumbar supports,
cervical collars, slings, cervical pillows, back cushions, weight racks, and
parallel bars. We also distribute products such as: hot and cold therapy
products, exercise balls, lotions and gels, paper products, athletic tape, canes
and crutches, reflex hammers, stethoscopes, splints, elastic wraps, exercise
weights, Thera-Band(R) (a registered mark of Hygenic Corp.) tubing, walkers,
treadmills, stair climbers, heating units for hot packs, whirlpools, gloves,
electrodes, TENS devices, and traction equipment.

         We continually seek to update our line of manufactured and distributed
medical supplies and soft goods.

         Treatment Tables and Rehabilitation Equipment - In January 1997,
Dynatronics acquired a metal treatment table manufacturing operation in
Columbia, South Carolina. In July 1999, we consolidated this operation into our
Chattanooga facilities, a move that improved efficiencies. We now manufacture
and distribute motorized and manually operated physical therapy treatment
tables, rehabilitation parallel bars, and other specialty rehabilitation
products.

         With the acquisition of Superior and the treatment table manufacturing
operation, Dynatronics became a broad-line supplier to the physical medicine
market which includes physical therapy, chiropractic, podiatry, sports medicine,
industrial and occupational medicine, family practice, long-term care
facilities, and the sub-groups of each of these specialties.

Aesthetic Products

         In July 1998, Dynatronics began shipments of our Synergie Aesthetic
Massage System (AMS). The Synergie AMS device applies therapeutic vacuum massage
to skin and subcutaneous tissues to achieve a temporary reduction in the
appearance of cellulite as well as the circumferential body measurements of the
cellulite treated areas.
                                       3
<PAGE>
         In December 1999, we released the results of a Company-sponsored study
reporting that 91% of participants experienced a reduction in the appearance of
cellulite. In addition, participants on average reported a cumulative reduction
of six-inches in girth around the hips, thighs, and waist.

         In February 2000, we introduced the Synergie Peel microdermabrasion
device as a companion to the Synergie AMS device. The Synergie Peel device
gently exfoliates the upper layers of skin, exposing softer, smoother skin.
Combining elements of the AMS vacuum massage techniques with microdermabrasion
has provided practitioners with the "ultimate facial" available only with the
use of Synergie devices.

Allocation of Sales Among Key Products

         Sales of the Company's Dynatron 950Plus device accounted for 10.2% and
10.6% of total revenues for the years ended June 30, 2003 and 2002,
respectively. No other product accounted for more than 10% of the Company's
revenues during either of the last two fiscal years.

Patents and Trademarks

         Dynatronics holds a patent on the "Target" feature of its
electrotherapy products that will remain in effect until April 4, 2008, a patent
on the multi-frequency ultrasound technology that will remain in effect until
June 2013, and a patent on the microdermabrasion device that will remain in
effect until February 2020. We also hold two design patents on the
microdermabrasion device that will remain in effect until November 2015. An
additional patent application pertaining to the Synergie AMS device and Synergie
Peel device has been filed with the U.S. Patent and Trademark Office and is
currently pending.

         Dynatronics owns the exclusive, worldwide rights (under a license
agreement) to a patent on the STS technology for the treatment of chronic pain.
A second patent application on the STS technology has been filed with the U.S.
Patent and Trademark Office and is currently pending.

         The trademark "Dynatron" has been registered with the United States
Patent and Trademark Office. In addition, U.S. trademark registrations have been
obtained for the trademarks "Synergie," "Synergie Peel," and "Sympathetic
Therapy," and trademark registration has been obtained or is now pending for
various other product trademarks. Company materials are also protected under
copyright laws, both in the United States and internationally.

Warranty Service

         The Company warrants all products it manufactures for time periods
ranging in length from 90 days to five years from the date of sale. Warranty
service is provided from the Company's Salt Lake City and Chattanooga facilities
according to the service required. These warranty policies are comparable to
warranties generally available in the industry. Warranty claims as a percentage
of gross sales were not material in fiscal years 2003 and 2002.

         Products distributed by Dynatronics carry warranties provided by the
manufacturers of those products. We do not generally supplement these warranties
or provide warranty services for distributed products. We also sell accessory
items for our manufactured products that are supplied by other manufacturers.
These accessory products carry warranties from their original manufacturers
without supplement from Dynatronics.

Customers and Markets

         Dynatronics products are sold to a network of over 300 independent
dealers throughout the United States and internationally. These dealers are the
Company's primary customers. The dealers purchase and take title to the
products, which they then sell to licensed practitioners such as physical
therapists, physiatrists, podiatrists, sports medicine specialists, medical
doctors, chiropractors, hospitals, plastic surgeons, dermatologists and
estheticians.

         The Company has entered into direct sales relationships with national
chains of physical therapy clinics and hospitals. Under these arrangements, we
sell our products directly to the clinics and hospitals with preferred pricing
arrangements. We also have preferred pricing arrangements with key dealers who
commit to purchase certain volumes and varieties of products. No single dealer
or national account or group of related accounts was responsible for 10% or more
of total sales in fiscal years 2003 or 2002.

                                      4
<PAGE>
         Dynatronics exports products to approximately 30 different countries.
International sales (i.e., sales outside North America) totaled approximately
$427,000 in fiscal year 2003 and approximately $611,000 in fiscal year 2002. A
significant factor affecting international sales in 2003 was the outbreak of the
SARS virus, which negatively impacted sales of our products in Asia. The Company
is working to establish effective distribution for its products in international
markets. Our Salt Lake City operation is an ISO 9001certified facility, a
designation required for marketing products in the European community. The
Company has no foreign manufacturing operations. However, we do purchase certain
products and components from foreign manufacturers.

Competition

         Despite significant competition, Dynatronics has distinguished key
products by using the latest technology, such as its patented Target feature,
patented multi-frequency ultrasound technology, and patented STS technology. We
believe that these features, along with integration of advanced technology in
the design of each product, have made Dynatronics a leader in technologically
advanced therapy devices. Dynatronics was the first company to integrate light
therapy as part of a combination therapy device. As the only such devices
presently on the market, the Solaris Series products are clearly in a class of
their own. In addition, by manufacturing many of the medical supplies, soft
goods and tables it sells, the Company can focus on quality manufacturing at
competitive prices. We believe these factors give Dynatronics an edge over many
competitors who are solely distributors of such products.

         Electrotherapy/Ultrasound Competition. The competition in the clinical
market for electrotherapy and ultrasound devices comes from both domestic and
foreign companies. No fewer than a dozen companies produce devices similar to
those offered by Dynatronics. Some of these competitors are larger and better
established, and have greater resources than the Company. Few companies,
domestic or foreign, provide multiple-modality devices. Furthermore, no
competitor offers a true Target feature or the ultrasound feature of three
frequencies on multiple-sized soundheads for which Dynatronics holds patents.
The Company's primary domestic competitors in the sale of electrotherapy and
ultrasound products include: Chattanooga Group (a division of Encore Medical),
Rich-Mar, Mettler Electronics, and Amrex.

         Light Therapy. - Competitors that manufacture and market light therapy
devices include: Microlight Corp., Erchonia, and Medex, among others. These
competitors offer units that are priced significantly higher than our unit.
Management is not aware of any competitor that offers a combination light
therapy device that includes electrotherapy and ultrasound capabilities.

         STS Therapy. The STS technology for treating chronic pain is protected
by a U.S. patent. The Company is not aware of any competitor that offers a
non-invasive, chronic pain treatment similar to the STS technology. Other
treatments for chronic pain include prescription narcotic drugs and invasive
procedures such as spinal cord stimulators, nerve block injections and implanted
drug pumps.

         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 Dynatronics.
Excellent customer service along with providing value to customers is of key
importance in this market. While there are many specialized manufacturers in
this area, such as Chattanooga Group (a division of Encore Medical), and
Fabrication Enterprises, most competitors are primarily distributors such as
EMPI, North Coast Medical, Ability-One (a division of Patterson Dental), and
Meyer Distributing.

         Iontophoresis. Competition in the iontophoresis market is primarily
from IOMED, Inc. and EMPI. Both of these competitors have a much larger market
share than Life-Tech, the manufacturer of the iontophoresis products marketed
and sold by Dynatronics. We believe that our strong distribution network is
important to our continued ability to compete against these larger companies. In
addition, the Life-Tech products target a lower selling price than the products
of these other two competitors. We anticipate that the introduction of a new,
proprietary line of iontophoresis products in fiscal year 2004 will allow us to
gain market share, while, at the same time, increasing profit margins on these
products.

         Treatment Tables. The primary competition in the treatment table market
is from domestic manufacturers including Hill Laboratories Company, Hausmann
Industries, Ability-One (a division of Patterson Dental), Bailey Manufacturing,
Tri-W-G, Chattanooga Group (a division of Encore Medical), and Clinton
Industries. We believe we compete based on our industry experience and product
quality. In addition, certain components of the treatment tables are
manufactured overseas which allows for significant pricing advantages over
competitors.

                                       5
<PAGE>

         Aesthetic Products. The Company's two primary competitors in the
therapeutic massage industry are LPG Systems, and Silhouette Tone. The Synergie
AMS device utilizes proprietary technology that has been proven effective in a
research study. In addition, we provide a comprehensive training and
certification program for estheticians. Dynatronics is developing a network of
distributors and national accounts, which is expected to provide another
competitive advantage in the marketplace for these products.

         There are a number of competitors in the microdermabrasion market
including: Mega Peel, Diamond Peel, DermaGenesis, DermaMed, E-Med, Integremed,
Medical Alliance, Palomar, Slimtone USA and Soundskin Corp. The Synergie Peel
device incorporates a patented anti-clogging design for the crystals, which sets
it apart from competitors' units. In addition, the system has an innovative
disposable system for the abrasive material, which prevents unwanted contact
with the spent crystals following treatment.

         Information necessary to determine or reasonably estimate the market
share of Dynatronics or any competitor in any of these markets is not readily
available.

Manufacturing and Quality Assurance

         Dynatronics manufactures therapy devices, soft goods and other medical
products at its facilities in Salt Lake City, Utah and Chattanooga, Tennessee.
The Company purchases some components for our manufactured products from
third-party suppliers. All parts and components purchased from these suppliers
meet specifications set by Dynatronics. Trained staff performs all sub-assembly,
final assembly and quality assurance procedures. All component parts used in
Dynatronics' device designs and all raw materials for medical supplies and soft
goods manufacturing are presently readily available from suppliers.

         Dynatronics conforms to Good Manufacturing Practices as outlined by the
FDA. This includes a comprehensive program for processing customer feedback and
analyzing product performance trends. By insuring prompt processing of timely
information, we are better able to respond to customer needs and insure proper
operation of the products.

         The Company adheres to a 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 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 Quality First Program reinforces employee pride, increases customer
satisfaction, and improves overall operations of Dynatronics.

         Dynatronics has been qualified for ISO 9001 Certification since 2001.
ISO 9001 is an internationally recognized standard for quality systems and
manufacturing processes adopted by over 90 countries. In addition, the Company
has qualified for the CE Mark Certification on its electrotherapy, ultrasound
and Synergie products. CE Mark Certification for the new Solaris Series is in
process. With the CE Mark Certification, we are able to market these products
throughout the European Union and in other countries where CE Mark Certification
and ISO 9001 certification are recognized.

Research and Development

         In fiscal year 2003, Dynatronics focused its resources on an aggressive
R&D campaign to develop several new products. Total R&D expenditures for 2003
were 55% higher at $1,038,753, compared to $668,426 in 2002. R&D expenses
represented approximately 6% and 4% of the revenues of the Company in 2003 and
2002, respectively. As a result of our R&D focus, we were able to introduce the
Dynatron STSi device in November 2002 and four of five planned Solaris devices
along with the infrared light therapy probe in September 2003. In addition, we
introduced a new powered therapy table and a line of proprietary cold packs
during fiscal 2003. Substantially all of the research and development
expenditures during 2003 were for the development of new products, or the
upgrading of existing products.
                                       6
<PAGE>
Regulatory Matters

         The manufacture, packaging, labeling, advertising, promotion,
distribution and sale of our products are subject to regulation by numerous
national and local governmental agencies in the United States and other
countries. In the United States, the Food and Drug Administration ("FDA")
regulates our products pursuant to the Medical Device Amendment of the Food,
Drug, and Cosmetic Act ("FDC Act") and regulations promulgated thereunder.
Advertising and other forms of promotion and methods of marketing of the
products are subject to regulation by the Federal Trade Commission ("FTC") under
the Federal Trade Commission Act ("FTC Act").

         All of our therapeutic and aesthetic treatment devices as currently
designed are cleared for marketing under section 510(k) of the Medical Device
Amendment to the FDC Act or are considered 510(k) exempt. If a device is subject
to section 510(k), the FDA must receive premarket notification from the
manufacturer of its intent to market the device. The FDA must find that the
device is substantially equivalent to a legally marketed predicate device before
the agency will clear the new device for marketing. In addition, certain
modifications to the Company's marketed devices may require a premarket
notification and clearance under section 510(k) before the changed device may be
marketed, if the change or modification could significantly affect safety or
effectiveness. All of the Company's devices, unless specifically exempted by
regulation, are subject to the FDC Act's general controls, which include, among
other things, registration and listing, adherence to the Quality System
Regulation requirements for manufacturing, Medical Device Reporting and the
potential for voluntary and mandatory recalls.

         During fiscal year 2003, Congress enacted the Medical Device User Fee
and Modernization Act (MDUFMA). Among other things, this act imposes for the
first time a user fee on medical device manufacturers. Under the provisions of
MDUFMA, manufacturers seeking clearance to market a new device must pay a fee to
FDA in order to have their applications reviewed. Dynatronics primarily submits
new products for clearance under section 510(k) of the Medical Device Amendment
of the Food, Drug and Cosmetic Act. The fee per 510(k) submission in fiscal year
2003 was $2187. That fee rises each year thus creating a new cost for the
Company when introducing new products. The fee for new products in fiscal year
2004 will be approximately $2700.

         Failure to comply with applicable FDA regulatory requirements may
result in, among other things, injunctions, product withdrawals, recalls,
product seizures, fines, and criminal prosecutions. Any such action by the FDA
could materially adversely affect the Company's ability to successfully market
its products.

         Advertising of our products is subject to regulation by the FTC under
the FTC Act. Section 5 of the FTC Act prohibits unfair methods of competition
and unfair or deceptive acts or practices in or affecting commerce. Section 12
of the FTC Act provides that the dissemination or the causing to be disseminated
of any false advertisement pertaining to, among other things, drugs, cosmetics,
devices or foods, is an unfair or deceptive act or practice. Pursuant to this
FTC requirement, the Company is required to have adequate substantiation for all
advertising claims made about its products. The type of substantiation required
depends upon the product claims made.

         If the FTC has reason to believe the law is being violated (e.g., the
manufacturer or distributor does not possess adequate substantiation for product
claims), it can initiate an enforcement action. The FTC has a variety of
processes and remedies available to it for enforcement, both administratively
and judicially, including compulsory process authority, cease and desist orders,
and injunctions. FTC enforcement could result in orders requiring, among other
things, limits on advertising, consumer redress, divestiture of assets,
rescission of contracts, and such other relief as may be deemed necessary.
Violation of such orders could result in substantial financial or other
penalties. Any such action by the FTC could materially adversely affect the
Company's ability to successfully market its products.

         We cannot predict the nature of any future laws, regulations,
interpretations, or applications, nor can we determine what effect additional
governmental regulations or administrative orders, when and if promulgated,
would have on our business in the future. They could include, however,
requirements for the reformulation of certain products to meet new standards,
the recall or discontinuance of certain products, additional record keeping,
expanded documentation of the properties of certain products, expanded or
different labeling, and additional scientific substantiation. Any or all such
requirements could have a material adverse effect on the Company.

Environment

         Environmental regulations are not material to our business. Dynatronics
does not discharge into the environment any pollutants that are regulated by a
governmental agency with the exception of the requirement to provide proper
filtering of discharges into the air from the painting processes at our
Tennessee location.

                                       7
<PAGE>
Employees

         On June 30, 2003, we had a total of 122 full-time employees and 11
part-time employees, compared to 111 full-time and 10 part-time employees at
June 30, 2002.

Item 2.   Description of Property

         The Company's headquarters and principal place of business are located
at 7030 Park Centre Drive, Salt Lake City, Utah, 84121. The headquarters consist
of a single facility housing administrative offices and manufacturing space
totaling approximately 36,000 square feet. The Company owns the land and
building, subject to a mortgage requiring a monthly payment of approximately
$15,768. The mortgage matures in 2013. The Company also owns a 43,200 sq. ft.
manufacturing facility in Ooltewah, Tennessee, and accompanying undeveloped
acreage for future expansion subject to a mortgage requiring monthly payments of
$5,641 and maturing in 2017. During fiscal year 2002, an expansion and
renovation of this facility was completed and the mortgage loan was refinanced
at a lower interest rate of 5.25%.

         We believe the facilities described above are adequate to accommodate
presently expected growth and needs of the Company for its operations. As
Dynatronics continues to grow, additional facilities or the expansion of
existing facilities will likely be required.

         The Company owns equipment used in the manufacture and assembly of its
products. The nature of this equipment is not specialized and replacements may
be readily obtained from any of a number of suppliers. The Company also owns
computer equipment and engineering and design equipment used in its research and
development programs.

Item 3.   Legal Proceedings.
          -----------------

         There are no material pending legal proceedings to which Dynatronics 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. The Company's annual meeting of shareholders will
be held in November 2003.

                                     PART II

Item 5.   Market for Common Equity and Related Stockholder Matters.
          ---------------------------------------------------------

         Market Information. The common stock of the Company is listed on the
Nasdaq SmallCap Market (symbol: DYNT). The following table shows the range of
high and low sale prices for the common stock as quoted on the Nasdaq system for
the quarterly periods indicated.
<TABLE>
<CAPTION>
                                                                    Year Ended June 30,
                                                             2002                      2003
                                                             ----                      ----
                                                        High          Low        High          Low
                                                      -------------------------------------------------
<S>                                                     <C>        <C>            <C>            <C>
1st Quarter (July-September)                            $2.37      $  .81         $ .96           $.59
2nd Quarter (October-December)                          $1.36      $  .99         $ .93           $.53
3rd Quarter (January-March)                             $1.30      $ 1.02         $ .96           $.53
4th Quarter (April-June)                                $1.16      $  .92         $1.20           $.61
</TABLE>


         Holders. As of September 22, 2003, the approximate number of common
stock shareholders of record was 499. This number does not include beneficial
owners of shares held in "nominee" or "street" name. Including beneficial
owners, we estimate that the total number of shareholders exceeds 2,000.

                                       8
<PAGE>
         Dividends. The Company has never paid cash dividends on its common
stock. Our anticipated capital requirements are such that we intend to follow a
policy of retaining earnings in order to finance the development of the
business.

         Sale of Unregistered Securities. The Company has not sold any
securities during the past three years in a private or public offer and sale.

         Stock Options. In fiscal year 2003, Dynatronics granted options to
employees, officers and directors pursuant to stock option plans. The total
number of shares of common stock issuable under such options is 324,651 shares
with an average exercise price of $.77 per share. In fiscal year 2002,
Dynatronics granted options to employees and directors pursuant to stock option
plans. The total number of shares of common stock issuable under such options is
90,861 shares with an average exercise price of $1.12 per share.

         Stock Repurchase. On September 3, 2003, the Company announced a stock
repurchase program. The Board of Directors authorized the expenditure of up to
$500,000 to purchase the Company's common stock on the open market pursuant to
regulatory restrictions governing such repurchases. The decision to initiate the
program was based on the management team's confidence in the company's future
growth - a confidence bolstered in part by the introduction of the Solaris line
- combined with a languishing stock price deemed to be undervalued.

Item 6.  Management's Discussion and Analysis or Plan of Operation
         ---------------------------------------------------------

Selected Financial Data

         The table below summarizes selected financial data contained in the
Company's audited financial statements for the past six fiscal years. The
financial statements for the fiscal years ended June 30, 2003 and 2002 are filed
with and form a part of this report.

<TABLE>
<CAPTION>
                                                         Selected Financial Data
                                                         Fiscal Year Ended June 30

                             2003            2002           2001            2000             1999          1998
                      -----------------------------------------------------------------------------------------------------

<S>                      <C>             <C>             <C>            <C>             <C>               <C>
Net Sales*               $16,896,992     $17,133,953     $17,460,789    $15,779,748     $16,537,205       $12,587,397
Net Income               $    24,799     $   316,101     $   334,179    $    35,910     $   718,080       $   664,788
Net Income
 per share (diluted)     $       .00     $       .04     $       .04    $       .00     $       .08       $       .07
Working Capital          $ 5,516,720     $ 5,484,167     $ 4,971,946    $ 4,550,747     $ 4,251,703       $ 3,502,777
Total Assets             $12,713,029     $12,508,202     $13,560,347    $ 12,595,581    $13,854,197       $11,641,948
Long-term Obligations    $ 2,203,779     $ 2,331,698     $ 2,174,348    $  2,330,501    $ 2,984,041       $ 3,376,017
</TABLE>

* Sales figures have been reclassified to be consistent with the current year's
presentation.

Fiscal Year 2003 Compared to Fiscal Year 2002

         The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the Audited Financial
Statements and Notes thereto appearing elsewhere in this report on Form 10-KSB.

Results of Operations

         Over the past two years, our national economy has faced difficult
times. The rate of economic growth in the United States has slowed dramatically,
and in many sectors, even declined. In assessing the situation, we realized that
we could either continue with the status quo, or we could make a bold move to
grow the Company. We decided on the latter. Our major focus this fiscal year
centered on an aggressive research and development (R&D) campaign to develop
several new products including powered therapy tables, an infrared light therapy
device, the STSi combination device, proprietary iontophoresis products,
proprietary cold pack products and most importantly a redesign of our primary
line of electrotherapy and ultrasound therapy devices.

                                       9
<PAGE>
         A new powered therapy tables was introduced in the first quarter of
fiscal year 2003. The STSi device was introduced in November 2002. This device
combines our innovative STS chronic pain technology with our well-established
interferential acute pain modality in order to target a much broader segment of
the pain market. In September 2003, we introduced the Dynatron Solaris Series,
our new line of advanced technology electrotherapy/ultrasound products featuring
an infrared light therapy probe. As the only combination therapy devices on the
market to include infrared light therapy, we expect our new Solaris Series
products to quickly gain acceptance and popularity in the physical medicine
market and increase our share of sales in that market.

         During the year ended June 30, 2003, net sales were $16,896,992,
compared to $17,133,953 during 2002. Through the first nine months of fiscal
year 2003, sales were up 1% over the prior year. However, fourth quarter sales
lagged behind sales from the same quarter in fiscal year 2002 erasing any gains
and resulting in an overall 1.4% decline in sales for fiscal year 2003 compared
to fiscal year 2002. The reason for the fourth quarter sales decline was a delay
in shipment of the new Dynatron Solaris Series devices. Originally scheduled for
release in late June 2003, unanticipated delays by vendors and the Company's
requirement that all new products meet thorough validation standards prior to
release delayed introduction of these new products to September 2003. The
backlog of orders for these products had grown to over $800,000 by the time of
their release. Nevertheless, anticipating release of the new Solaris devices,
dealers reduced orders of 50 Series Plus products and cleared inventory while
waiting for the Solaris devices to become available. We believe this had the
effect of contraining sales in the months of June, July and August 2003, and
particularly on the fourth quarter of fiscal year 2003.

         Sales of physical medicine products remained even at 86% of total
revenues for both years ended June 30, 2003 and 2002, while sales of aesthetic
products accounted for 7% and 8% of total revenues for the years ended June 30,
2003 and 2002, respectively. Chargeable repairs, billable freight revenue and
other miscellaneous revenue accounted for 7% and 6% of total revenues for the
years ended June 30, 2003 and 2002, respectively.

         During fiscal year 2003, gross profit was $6,187,156 or 36.6% of net
sales compared to $6,496,540 or 37.9% of net sales in 2002. The 1.3% decrease in
gross margin as a percentage of net sales in 2003 reflects lower sales of high
margin therapy and aesthetic devices which have margins ranging from 40% to 80%
while sales of treatment tables, exercise products and supplies that have
margins ranging from 20% to 50% increased. The introduction of the new Solaris
products is anticipated to increase overall margins in fiscal year 2004 based on
the expectation of increased market share of these higher margin therapy
devices.

         Selling, general and administrative (SG&A) expenses for the year ended
June 30, 2003, were $4,948,385 or 29.3% of net sales compared to $5,053,765 or
29.5% of net sales in 2002. In part, the decrease in SG&A expenses reflects the
adoption of Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets," which was required as of July 1, 2002.
This pronouncement reduced the expense associated with the amortization of
goodwill and intangible assets for the year ended June 30, 2003, to $7,325
compared to $94,539 in 2002, resulting in a reduction of $87,214 in 2003. During
fiscal year 2003, the Company's premiums for medical, property and casualty, and
product liability insurance increased by approximately $76,000. In addition,
depreciation expense in 2003 increased by approximately $42,000 due primarily to
the addition of automated manufacturing equipment at our Tennessee facility. In
2003 we saved approximately $40,000 in telephone expense compared to 2002 by
negotiating lower rates with our phone company.

         As a result of our focus on developing a record number of new products
this fiscal year, research and development expenses during the year ended June
30, 2003 increased 55% to $1,038,753, compared to $668,426 in 2002. R&D expenses
represented approximately 6.1% and 3.9% of the revenues of the Company in 2003
and 2002, respectively. Our increased R&D efforts reflected an intentional
effort to bring new products to market more rapidly. R&D costs are expensed as
incurred. Only limited revenue was recognized from these new products in fiscal
year 2003. Products introduced in fiscal year 2003 included the HLT3 powered
therapy table, the Dynatron STSi pain management device, and our proprietary
line of cold packs. The Dynatron Solaris Series devices were introduced in the
first quarter of fiscal year 2004 while other products will also be introduced
during fiscal year 2004. R&D expenses are expected to maintain at their current
level in 2004 and then decline thereafter.

         Interest expense for the year ended June 30, 2003 decreased $104,713 to
$176,731 compared to $281,444 at June 30, 2002. The lower average outstanding
balances on the Company's line of credit in 2003 together with lower interest
rates resulted in reduced interest expense in 2003 compared to 2002.

                                       10
<PAGE>

         Pre-tax profit for the year ended June 30, 2003 was $41,507 compared to
$511,789 in fiscal year 2002. The decline is primarily due to lower sales for
the year as dealers shifted their orders to the new Solaris units which were
delayed beyond year end as well as the $370,327 increase in R&D expense for the
year.

         Income tax expense for the year ended June 30, 2003 was $16,708
compared to $195,688 in 2002. The effective tax rate for the year ended June 30,
2003 was 40.3% compared to 38.2% in 2002. The increase in effective tax rate in
2003 is due to state franchise tax expense remaining relatively constant
compared to 2002, but representing a higher percentage of book income in 2003.

         Net income for the year ended June 30, 2003, was $24,799 (approximately
$.00 per share), compared to $316,101 (approximately $.04 per share) in 2002.
The large increase in R&D expenses, together with the delay in shipping the
Solaris units were the primary reasons for our decreased profits in 2003.

Liquidity and Capital Resources

         The Company has financed its operations through cash reserves,
available borrowings under its credit line facility, and from cash provided by
operations. The Company had working capital of $5,516,720 at June 30, 2003,
inclusive of the current portion of long-term obligations and credit facilities,
as compared to working capital of $5,484,167 at June 30, 2002.

         Trade accounts receivable represent amounts due from the Company's
dealer network and from medical practitioners and clinics. We estimate that the
allowance for doubtful accounts is adequate based on our historical knowledge
and relationship with these customers. Accounts receivable are generally
collected within 30 days of the terms extended.

         Management has focused over the past year on improving collection times
by tightening credit in order to reduce the days to collection of outstanding
receivables. As a result, trade accounts receivable decreased over $873,365 from
June 30, 2002 to June 30, 2003. The days of net sales outstanding in accounts
receivable improved to 49 days at June 30, 2003 compared to 67 days at June 30,
2002. Management anticipates accounts receivable will increase in future years
concurrent with increased sales.

         Inventories, net of reserves, increased during the year by $807,738 to
$4,644,489 at June 30, 2003 compared to $3,836,751 at June 30, 2002. Nearly half
of the increase in inventory levels is related to the bulk purchase of products
from overseas suppliers and the other half is due to a planned build up of 50
Series Plus products to carry us through several months while manufacturing
focuses on the new Solaris product line. Management expects that inventories
will increase with the introduction of Solaris and then return to more
traditional levels over the course of the coming fiscal year.

         Prepaid expenses increased to $480,697 at June 30, 2003 compared to
$359,000 at June 30, 2002 primarily as a result of the Company's higher trade
show activities, software licensing, directors and officers' liability insurance
and other miscellaneous items.

         Goodwill at June 30, 2003 and 2002 totaled $789,422. Beginning July 1,
2002, the Company adopted the provisions of SFAS No. 142. In compliance with FAS
142 Goodwill and other Intangible Assets, management utilized standard
principles of financial analysis and valuation including: transaction value,
market value and income value methods to arrive at a reasonable estimate of the
fair value of the Company in comparison to its book value. As of July 1, 2002
and June 30, 2003, the fair value of the Company exceeded the book value of the
Company. Therefore, there was no indication of impairment upon adoption of SFAS
No. 142 nor at our current fiscal year end. Management is primarily responsible
for the FAS 142 valuation determination and performed the annual impairment
assessment during the Company's fourth quarter.

         Accounts payable increased by $278,206 to $597,111 at June 30, 2003
compared to $318,905 at June 30, 2002. The increase in accounts payable is a
result of the build up of our inventory levels and the timing of our weekly
payments to suppliers. All accounts payable are within term. We continue to take
advantage of available early payment discounts when offered.

                                       11
<PAGE>
         Accrued expenses at June 30, 2003 increased $159,834 to $540,258
compared to $380,424 at June 30, 2002. The increase in accrued expenses relates
primarily to higher accrued professional fees, warranty expense reserves,
accrued commissions payable, and other miscellaneous expenses payable.

         On September 3, 2003, the Company announced a stock repurchase program.
The Board of Directors authorized the expenditure of up to $500,000 to purchase
the Company's common stock on the open market pursuant to regulatory
restrictions governing such repurchases. The decision to initiate the program
was based on the management team's confidence in the company's future growth - a
confidence bolstered in part by the introduction of the Solaris line - combined
with a languishing stock price deemed to be undervalued.

         The Company believes that its current cash balances, amounts available
under its line of credit and cash provided by operations will be sufficient to
cover its operating needs in the ordinary course of business for the next twelve
months. If we experience an adverse operating environment or unusual capital
expenditure requirements, additional financing may be required. However, no
assurance can be given that additional financing, if required, would be
available on favorable terms.

         The current ratio at June 30, 2003 was 2.9 to 1 compared to 3.1 to 1 at
June 30, 2002. Current assets represent 66% of total assets at June 30, 2003.

         The Company's revenues and net income from continuing operations have
not been unusually affected by inflation or price increases for raw materials
and parts from vendors.

         The Company's business operations are not materially affected by
seasonality factors.

Commitments

         Long-term debt excluding current installments totaled $1,754,066 at
June 30, 2003, compared to $1,950,309 at June 30, 2002. Long-term debt is
comprised primarily of the mortgage loans on our office and manufacturing
facilities in Utah and Tennessee. The principal balance on the mortgage loans is
approximately $1.8 million with monthly principal and interest payments of
$21,409.

         As of June 30, 2003, we had the following future contractual cash
commitments:

<TABLE>
<CAPTION>
                                                                Payments Due By Period

                                      Total        1 Year         2-3 Years         4-5 Years          After 5 Years
                                      -----        ------         ---------         ---------          -------------

<S>                               <C>               <C>              <C>              <C>                  <C>
Long-term debt*                   $1,952,672        198,606          425,087          425,289               903,690
Operating lease obligations       $   41,266         24,367           16,899                -                     -
                                  ----------------------------------------------------------------------------------
Total                             $1,993,938        222,973          441,986          425,289               903,690
</TABLE>

------------------------
* Consists primarily of mortgage loans.

Senior Credit Facility

         The Company maintains a revolving line of credit facility with a
commercial bank in the amount of $4,500,000. The outstanding balance on our line
of credit facility was $1.38 million at June 30, 2003 compared to $1.44 million
at June 30, 2002.

         Interest on the line of credit is based on the bank's prime rate, which
at June 30, 2003, equaled 4.00%. The line of credit is collateralized by
accounts receivable and inventories. Borrowing limitations are based on 30% of
eligible inventory and up to 80% of eligible accounts receivable, which results
in a borrowing base of approximately $2.8 million. The line of credit agreement
is renewable annually on December 1st and includes covenants requiring the
Company to maintain certain financial ratios. As of June 30, 2003, we were in
compliance with all loan covenants.

                                       12
<PAGE>

Critical Accounting Policies

         We have identified the policies below as critical to our business
operations and the understanding of our results of operations. The impact and
any risks related to these policies on our business operations are discussed in
Management's Discussion and Analysis or Plan of Operations where such policies
affect our reported and expected financial results. For a detailed discussion of
the application of these and other accounting policies, see Notes to the
Financial Statements contained in this 10-KSB report. In all material respects,
the accounting principles that are utilized conform to generally accepted
accounting principles in the United States of America.

         The preparation of this annual report on Form 10-KSB requires us to
make significant estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses. By their nature, these judgments are
subject to an inherent degree of uncertainty. On an on-going basis, we evaluate
these estimates, including those related to bad debts, inventories, intangible
assets, warranty obligations, product liability, revenue, and income taxes. We
base our estimates on historical experience and other facts and circumstances
that are believed to be reasonable, and the results form the basis for making
judgments about the carrying value of assets and liabilities. The actual results
may differ from these estimates under different assumptions or conditions.

Inventory Reserves

         The nature of our business requires that we maintain sufficient
inventory on hand at all times to meet the requirements of our customers. We
record finished goods inventory 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. Inventory
valuation reserves are maintained for the estimated impairment of the inventory.
Impairment may be a result of slow moving or excess inventory, product
obsolescence or changes in the valuation of the inventory. In determining the
adequacy of reserves, we analyze the following, among other things:

           o Current inventory quantities on hand;
           o Product acceptance in the marketplace;
           o Customer demand;
           o Historical sales;
           o Forecast sales;
           o Product obsolescence; and
           o Technological innovations.

         Any modifications to estimates of inventory valuation reserves are
reflected in the cost of goods sold within the statements of income during the
period in which such modifications are determined necessary by management. At
June 30, 2003 and June 30, 2002, our inventory valuation reserve balance, which
established a new cost basis, was $289,936 and $265,692, respectively and our
inventory balance was $4,644,489 and $3,836,751 net of reserves, respectively.

Revenue Recognition

         Our products are sold primarily through a network of independent
distributors. Sales revenues are recorded when products are shipped FOB shipping
point under an agreement with a customer, risk of loss and title have passed to
the customer, and collection of any resulting receivable is reasonably assured.
Amounts billed for shipping and handling of products are recorded as sales
revenue. Costs for shipping and handling of products to customers are recorded
as cost of sales.

Allowance for Doubtful Accounts

         We must make estimates of the collectibility of accounts receivable. In
doing so, we analyze accounts receivable and historical bad debts, customer
credit-worthiness, current economic trends and changes in customer payment
patterns when evaluating the adequacy of the allowance for doubtful accounts.
Our accounts receivable balance was $2,283,071 and $3,156,436, net of allowance
for doubtful accounts of $145,130 and $165,763, at June 30, 2003 and June 30,
2002, respectively.

                                       13
<PAGE>

Outlook

         Over the past five years, annual net sales have grown from $12.6
million in fiscal year 1998 to $16.9 million in fiscal year 2003. During fiscal
year 2003, we focused our efforts on fueling and sustaining future growth
through the development of several new products for the rehabilitation markets
while, at the same time, strengthening our channels of distribution and
improving operating efficiencies.

         As part of this year's R&D campaign, we introduced the Dynatron STSi
combination therapy device in November 2002. This device incorporates one
channel of our STS chronic pain treatment technology together with one channel
of our interferential therapy for treating patients with acute pain. In
September 2003, we introduced the new Solaris Series line of advanced technology
electrotherapy/ultrasound products featuring an infrared light therapy probe.
This new product line is expected to quickly become our top selling line. During
the fall of 2003, we expect to submit an application to FDA for clearance of a
low-power laser accessory probe to the Solaris Series products. Other probes
will be developed in the future as market needs are identified.

         The Dynatron Solaris 701 device will be introduced in fiscal year 2004.
This device will complete the family of combination therapy devices that make up
the Solaris Series. The 701 will be a combination ultrasound and infrared light
therapy device. In addition, work is underway to develop a proprietary line of
iontophoresis products.

         R&D efforts have not been limited to high tech products alone. During
the first quarter of fiscal 2003, Dynatronics introduced a new, more price
competitive powered therapy table. Demand for these tables quickly outstripped
supply and by January 2003, these tables were on backorder. Increased
manufacturing efforts eliminated that backlog and are now keeping up with
demand. At least two more powered therapy tables are scheduled for introduction
during fiscal year 2004. In addition, we introduced a new line of proprietary
cold packs in May 2003. These new cold packs are of higher quality than the
packs previously purchased from another vendor and carry higher gross margins.
They were well received when they were introduced at the Dealer Meeting held in
Park City, Utah in June 2003.

         Going forward, we will continue to strengthen our manufacturing
capabilities with the goal of improving margins and gaining greater pricing
advantages over competitors. To that end, some products previously purchased
from other manufacturers are being converted to in-house manufacturing. Other
products are being purchased from overseas manufacturers or moved to more
competitive domestic manufacturers.

         Another important part of our strategic plan is the expansion of
worldwide marketing efforts. In July 2002, our ISO 9001 certification was
renewed for our Salt Lake operation, where all electrotherapy, ultrasound, STS
devices, light therapy and Synergie products are manufactured. With this
designation, we can market products manufactured in this facility in any country
that recognizes the CE Mark. We are now working to establish effective
distribution of these products in the European Community. The inclusion of a
popular electrotherapy modality in the European version of the Solaris Series
along with the availability of light therapy products in combination with
electrotherapy and ultrasound modalities positions the Solaris devices for
greater acceptance in the European markets. It is hoped that these attractive
features will make foreign distribution channels more accessible.

         We continue efforts to promote our line of aesthetic products.
Controlling and expanding the channels of distribution for these products is
expected to ultimately increase sales of these high margin products and allow us
to more fully access the potential of the aesthetics products market. We
perceive this market to be both lucrative and expanding, particularly as aging
baby boomers continue to look for ways to retain a youthful appearance. Despite
the expansion of the beauty and spa market, this is a segment of our business
that seems to be more directly impacted by general economic slow down as spa and
beauty services are purchased with discretionary dollars not as readily
available in slower economic times. Recent interest by medical spas in the use
of physical therapy modalities such as electrotherapy, ultrasound and light
therapy in aesthetic applications has opened new potential for crossover of
physical medicine modalities into the aesthetics market. This presents a unique
opportunity for us to grow sales of new aesthetic products with little R&D
effort since the products have already been developed for the physical medicine
markets.

         Over the past two years, we have undertaken to improve the appearance
and application of our corporate website and are researching ways to apply
electronic media and Internet solutions to better serve customer needs, access
new business opportunities, reduce cost of operations, and stay technologically
current in the way business is conducted. Our website may be viewed at
www.dynatronics.com. This reference to our website is not intended to
incorporate the contents of the website into or as a part of this report.

                                       14
<PAGE>

         Based on these strategic initiatives, we are focusing our resources in
the following areas:

o             Increasing our share of the therapy device market with the
              introduction of the new line of Solaris products. We will also
              educate the market on the benefits of infrared light therapy for
              treating pain.

o             Reinforcing our position in the physical medicine market through
              an aggressive research and development campaign that will result
              in the introduction of several more new products over the coming
              year.

o             Improving sales and distribution of rehabilitation products
              domestically through strengthened relationships with dealers,
              particularly the high-volume specialty dealers.

o             Developing a channel for distribution of aesthetic products
              domestically and exploring the opportunities to introduce versions
              of our physical therapy modalities into the aesthetics market.

o             Expanding distribution of both rehabilitation and aesthetic
              products internationally.

o             Applying e-commerce solutions to improving overall performance.

Forward-Looking Statements

         When used in this report, the words "believes", "anticipates",
"expects", and similar expressions are intended to identify forward-looking
statements within the safe harbor provisions of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those described in the forward-looking
statements. 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. Risks and circumstances that may cause actual results to
vary from the Company's expectations include, among others, the following:

         Technological Obsolescence. The business of designing and manufacturing
medical and aesthetic products is characterized by rapid technological change.
Although Dynatronics has obtained patents on certain aspects of its technology,
there can be no assurance that our competitors will not develop or manufacture
products technologically superior to those of the Company.

         Extensive Government Regulation. The manufacture, packaging, labeling,
advertising, promotion, distribution and sale of our products are subject to
regulation by numerous national and local governmental agencies in the United
States and other countries which adds to the expense of doing business and, if
violated, could adversely affect the Company's financial condition and results
of operations.

         Health Care Reform. Governments are continually reviewing and
considering expansive legislation that may lead to significant reforms in health
care delivery systems. The pressure for reform stems largely from the rising
cost of health care in recent years. We cannot predict whether or when new or
proposed legislation will be enacted and there can be no assurance that such
legislation, when enacted, will not impose additional restrictions on part or
all of the Company's business or its intended business, which might adversely
affect such business.

         Product Liability. Manufacturers and distributors of products used in
the medical device, aesthetics and related industries are from time to time
subject to lawsuits alleging product liability, negligence or related theories
of recovery, which have become an increasingly frequent risk of doing business
in these industries. Although from time to time lawsuits may arise or claims
asserted based on product liability matters, all such actions have been insured
against. Although we maintain product liability insurance coverage which we deem
to be adequate based on historical experience, there can be no assurance that
such coverage will be available for such risks in the future or that, if
available, it would prove sufficient to cover potential claims or that the
present amount of insurance can be maintained in force at an acceptable cost.
Furthermore, the assertion of such claims, regardless of their merit or eventual
outcome, also may have a material adverse effect on the Company, its business
reputation and its operations.

                                       15
<PAGE>

         Risks Associated with Manufacturing. The Company's results of
operations are dependent upon the continued operation of its manufacturing
facilities in Utah and Tennessee. The operation of a manufacturing facility
involves many risks, including power failures, the breakdown, failure or
substandard performance of equipment, failure to perform by key suppliers, the
improper installation or operation of equipment, natural or other disasters and
the need to comply with the requirements or directives of government agencies,
including the FDA. There can be no assurance that the occurrence of these or any
other operational problems at our facilities would not have a material adverse
effect on the Company's business, financial condition and results of operations.

         Reliance on Information Technology. The Company's success is dependent
in large part on the accuracy, reliability and proper use of sophisticated and
dependable information processing systems and management information technology.
Our information technology systems are designed and selected in order to
facilitate order entry and customer billing, maintain records, accurately track
purchases, accounts receivable and accounts payable, manage accounting, finance
and manufacturing operations, generate reports and provide customer service and
technical support. Any interruption in these systems could have a material
adverse effect on the Company's business, financial condition and results of
operations.

         Competition. Our industry is highly competitive. Numerous
manufacturers, distributors and retailers compete actively for consumers and
customers. The Company competes directly with other entities that manufacture,
market and distribute products in each of its product lines. Many of these
competitors are substantially larger than the Company and have greater financial
resources and broader name recognition. The market is highly sensitive to the
introduction of new products that may rapidly capture a significant share of the
market. There can be no assurance that the Company will be able to compete in
this intensely competitive environment.

         Dependence on Patents and Proprietary Rights. The Company has five
patents issued and two patents pending relating to its products. In addition, we
have obtained by license the worldwide rights to the STS patent. The Company's
trademarks have also been registered in the United States and in other
countries. There can be no assurance that patents owned by or licensed to us
will not be challenged or circumvented or will provide us with any competitive
advantages or that a patent will issue from any pending patent application. We
also rely upon copyright protection for its proprietary software and other
property. There can be no assurance that any copyright obtained will not be
circumvented or challenged. In addition, we rely on trade secrets that we seek
to protect, in part, through confidentiality agreements with employees and other
parties. There can be no assurance that these agreements will not be breached,
that the Company would have adequate remedies for any breach or that the our
trade secrets will not otherwise become known to or independently developed by
competitors. The Company may become involved from time to time in litigation to
determine the enforceability, scope and validity of proprietary rights. Any such
litigation could result in substantial cost to the Company and divert the
efforts of its management and technical personnel.

         Limited Availability of Conclusive Clinical Studies of STS Technology.
The STS products represent a new approach to chronic pain therapy with few
clinical studies available to prove their effectiveness. The Company has
sponsored clinical studies by physicians, but these have been relatively limited
in size, scope and duration. As additional research studies are undertaken,
there can be no assurance of future favorable clinical results. The absence of
independent scientific review of the STS products may limit the acceptance of
and our ability to market these products. Furthermore, sales of these products
could be adversely affected if consumers fail to follow the proper protocols or
to properly use the products as recommended.

         Foreign Duties and Import Restrictions. Some of the Company's products
are exported to the countries in which they ultimately are sold. The countries
in which we sell products may impose various legal restrictions on imports,
impose duties of varying amounts, or enact regulatory requirements, adverse to
the Company's products. There can be no assurance that changes in legal
restrictions, increased duties or taxes, or stricter health and safety
requirements would not have a material adverse effect in the Company's ability
to market its products in a given country.

         Effect of Exchange Rate Fluctuations. Exchange rate fluctuations may
have a significant effect on the Company's sales and gross margins in a given
foreign country. If exchange rates fluctuate dramatically, it may become
uneconomical for the Company to establish or continue activities in certain
countries. Differences in the exchange rates may also create a marketing
advantage for foreign competitors, making the purchase price of their products
lower than prices originally denominated in U.S. dollars. As the Company's
business expands outside the United States, an increasing share of its revenues
and expenses will be transacted in currencies other than the U.S. dollar.
Consequently, the reported earnings of the Company in future periods may be
significantly affected by fluctuations in currency exchange rates, with earnings
generally increasing with a weaker U.S. dollar and decreasing with a
strengthening U.S. dollar.

                                       16
<PAGE>
Item 7. Financial Statements
        --------------------
         The consolidated financial statements and accompanying report of the
Company's auditors follow immediately and form a part of this report.

                                       17
<PAGE>

                             DYNATRONICS CORPORATION

                              Financial Statements

                             June 30, 2003 and 2002

                   (With Independent Auditors' Report Thereon)



<PAGE>


                          Independent Auditors' Report



The Board of Directors
Dynatronics Corporation:


We have audited the accompanying balance sheets of Dynatronics Corporation as of
June 30,  2003 and 2002 and the  related  statements  of  income,  stockholders'
equity,  and cash flows for each of the years in the two-year  period ended June
30, 2003.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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, 2003 and 2002 and the results of its  operations and its cash flows for
each of the years in the two-year  period ended June 30, 2003 in conformity with
accounting principles generally accepted in the United States of America.

As  discussed in note 1 to the  financial  statements,  the Company  adopted the
provisions of the Financial  Accounting Standards Board's Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangibles Assets, in 2002.




                                        /s/ KPMG LLP


Salt Lake City, Utah
August 8, 2003

<PAGE>

                             DYNATRONICS CORPORATION

                                 Balance Sheets

                             June 30, 2003 and 2002
<TABLE>
<CAPTION>


                                      Assets                                               2003             2002
                                                                                      --------------   --------------
<S>                                                                                   <C>              <C>
Current assets:
    Cash                                                                              $      404,276          396,803
    Trade accounts receivable, less allowance for doubtful accounts
       of $145,130 in 2003 and $165,763 in 2002                                            2,283,071        3,156,436
    Other receivables                                                                        193,713           58,202
    Inventories                                                                            4,644,489        3,836,751
    Prepaid expenses                                                                         480,697          359,000
    Income tax receivable                                                                    105,804               --
    Deferred tax asset - current                                                             312,547          276,905
                                                                                      --------------   --------------
                Total current assets                                                       8,424,597        8,084,097

Property and equipment, net                                                                3,202,553        3,345,059
Goodwill                                                                                     789,422          789,422
Other assets                                                                                 296,457          289,624
                                                                                      --------------   --------------
                                                                                      $   12,713,029       12,508,202
                                                                                      ==============   ==============
                       Liabilities and Stockholders' Equity

Current liabilities:
    Current installments of long-term debt                                            $      198,606          225,604
    Line of credit                                                                         1,382,095        1,435,689
    Accounts payable                                                                         597,111          318,905
    Income tax payable                                                                            --           30,804
    Accrued expenses                                                                         540,258          380,424
    Accrued payroll and benefit expenses                                                     189,807          208,504
                                                                                      --------------   --------------
                Total current liabilities                                                  2,907,877        2,599,930

Long-term debt, excluding current installments                                             1,754,066        1,950,309
Deferred compensation                                                                        305,654          282,229
Deferred tax liability - noncurrent                                                          144,059           99,160
                                                                                      --------------   --------------
                Total liabilities                                                          5,111,656        4,931,628
                                                                                      --------------   --------------
Stockholders' equity:
    Common stock, no par value. Authorized 50,000,000 shares;
       8,869,335 and 8,928,774 shares issued in 2003 and 2002, respectively                2,478,981        2,638,677
    Treasury stock, 59,439 common shares at cost in 2002                                          --         (159,696)
    Retained earnings                                                                      5,122,392        5,097,593
                                                                                      --------------   --------------
                Total stockholders' equity                                                 7,601,373        7,576,574

Commitments and contingencies
                                                                                      --------------   --------------

                                                                                      $   12,713,029       12,508,202
                                                                                      ==============   ==============
See accompanying notes to financial statements.
</TABLE>

                                       F-2

<PAGE>
                             DYNATRONICS CORPORATION

                              Statements of Income

                       Years ended June 30, 2003 and 2002
<TABLE>
<CAPTION>

                                                                                           2003             2002
                                                                                      --------------   --------------
<S>                                                                                   <C>                  <C>
Net sales                                                                             $   16,896,992       17,133,953
Cost of sales                                                                             10,709,836       10,637,413
                                                                                      --------------   --------------
                 Gross profit                                                              6,187,156        6,496,540

Selling, general, and administrative expenses                                              4,948,385        5,053,765
Research and development expense                                                           1,038,753          668,426
                                                                                      --------------   --------------
                 Operating income                                                            200,018          774,349
                                                                                      --------------   --------------
Other income (expense):
     Interest income                                                                           6,825            3,751
     Interest expense                                                                       (176,731)        (281,444)
     Other income, net                                                                        11,395           15,133
                                                                                      --------------   --------------
                 Total other expense, net                                                   (158,511)        (262,560)
                                                                                      --------------   --------------

                 Income before income taxes                                                   41,507          511,789

Income tax expense                                                                            16,708          195,688
                                                                                      --------------   --------------
                 Net income                                                           $       24,799          316,101
                                                                                      ==============   ==============

Basic net income per share                                                            $         0.00             0.04

Diluted net income per share                                                                    0.00             0.04

Weighted average basic and diluted common shares outstanding:
     Basic                                                                                 8,869,335        8,855,083
     Diluted                                                                               8,869,335        8,898,422


See accompanying notes to financial statements.
</TABLE>

                                       F-3
<PAGE>

                             DYNATRONICS CORPORATION

                       Statements of Stockholders' Equity

                       Years ended June 30, 2003 and 2002
<TABLE>
<CAPTION>

                                                                                                                Total
                                                         Common            Treasury           Retained       stockholders'
                                                          stock              stock            earnings         equity
                                                     --------------     --------------     ------------    ----------------
<S>                                                  <C>                <C>                <C>             <C>
Balances at June 30, 2001                            $    2,565,926           (120,096)       4,781,492           7,227,322

Purchase of 23,855 shares of treasury stock                      --            (39,600)              --             (39,600)

Issuance of 88,352 shares of common stock
    upon exercise of employee stock options                  68,364                 --               --              68,364

Income tax benefit from disqualifying disposition
    of employee stock options and nonemployee
    exercise of stock options                                 4,387                 --               --               4,387

Net income                                                       --                --           316,101             316,101
                                                     --------------     --------------     ------------    ----------------

Balances at June 30, 2002                                 2,638,677           (159,696)       5,097,593           7,576,574

Retirement of 59,439 shares of treasury stock              (159,696)           159,696               --                  --

Net income                                                       --                 --           24,799              24,799
                                                     --------------     --------------     ------------    ----------------

Balances at June 30, 2003                            $    2,478,981                 --        5,122,392           7,601,373
                                                     ==============     ==============     ============    ================

</TABLE>


See accompanying notes to financial statements.

                                       F-4

<PAGE>

                             DYNATRONICS CORPORATION

                            Statements of Cash Flows

                       Years ended June 30, 2003 and 2002
<TABLE>
<CAPTION>

                                                                                            2003            2002
                                                                                      --------------   --------------
<S>                                                                                   <C>                     <C>
Cash flows from operating activities:
    Net income                                                                        $       24,799          316,101
    Adjustments to reconcile net income to net cash provided by
       operating activities:
          Depreciation and amortization of property and equipment                            374,864          333,077
          Other amortization                                                                   7,325           94,539
          Provision for doubtful accounts                                                     72,000           48,000
          Provision for inventory obsolescence                                               240,000          204,000
          Provision for warranty reserve                                                     199,718          248,576
          Provision for deferred compensation                                                 23,425           21,630
          Changes in operating assets and liabilities:
             Receivables                                                                     665,854          355,611
             Inventories                                                                  (1,047,738)         705,572
             Prepaid expenses and other assets                                              (135,855)        (167,890)
             Income tax receivable                                                          (105,804)              --
             Deferred income taxes                                                             9,257           12,144
             Income tax payable                                                              (30,804)          61,194
             Accounts payable and accrued expenses                                           219,625         (389,245)
                                                                                      --------------   --------------

                Net cash provided by operating activities                                    516,666        1,843,309
                                                                                      --------------   --------------
Cash flows used in investing activities:
    Capital expenditures                                                                    (232,358)        (400,678)
                                                                                      --------------   --------------
Cash flows from financing activities:
    Proceeds from issuance of long-term debt                                                   7,375          919,715
    Principal payments on long-term debt                                                    (230,616)        (817,856)
    Net change in line of credit                                                             (53,594)      (1,435,335)
    Proceeds from issuance of common stock                                                        --           28,764
                                                                                      --------------   --------------
                Net cash used in financing activities                                       (276,835)      (1,304,712)
                                                                                      --------------   --------------
                Net increase in cash                                                           7,473          137,919

Cash at beginning of year                                                                    396,803          258,884
                                                                                      --------------   --------------
Cash at end of year                                                                   $      404,276          396,803
                                                                                      ==============   ==============
Supplemental disclosures of cash flow information:
    Cash paid during the year for interest                                            $      180,217          287,113
    Cash paid during the year for income taxes                                               138,500          122,350

Supplemental disclosures of noncash investing and financing activities:
    Common stock issued in exchange for cashless exercise of options
       using mature stock                                                             $           --           39,600
    Income tax benefit from nonemployee exercise of stock options                                 --            4,387

</TABLE>



See accompanying notes to financial statements.


                                       F-5
<PAGE>
                             DYNATRONICS CORPORATION

                          Notes to Financial Statements

                             June 30, 2003 and 2002



(1)      Basis of Presentation and Summary of Significant Accounting Policies

         (a) Basis of Presentation

              Dynatronics  Corporation (the Company) manufactures,  markets, and
              distributes  a  broad  line  of   therapeutic,   diagnostic,   and
              rehabilitation   equipment,   medical  supplies  and  soft  goods,
              treatment  tables and  aesthetic  medical  devices to an expanding
              market  of   physical   therapists,   podiatrists,   orthopedists,
              chiropractors, plastic surgeons, dermatologists, and other medical
              professionals.  The products  are  distributed  primarily  through
              dealers  in  the  United  States  and  Canada,   with   increasing
              distribution in foreign countries.

       (b)    Inventories

              Finished  goods  inventories  are stated at the lower of  standard
              cost, which  approximates  actual cost (first-in,  first-out),  or
              market.  Raw materials are stated at the lower of cost  (first-in,
              first-out), or market.

       (c)    Trade Accounts Receivable

              Trade accounts  receivable are recorded at the invoiced amount and
              do not bear interest.  The allowance for doubtful  accounts is the
              Company's best estimate of the amount of probable credit losses in
              the Company's existing accounts receivable. The Company determines
              the  allowance  based  on  historical  write-off  experience.  The
              Company reviews its allowance for doubtful accounts  monthly.  All
              account  balances are  reviewed on an  individual  basis.  Account
              balances are charged off against the allowance  after all means of
              collection  have been  exhausted and the potential for recovery is
              considered remote. The Company does not have any off-balance-sheet
              credit exposure related to its customers.

       (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 2 to 7 years.

       (e)    Goodwill and Long-Lived Assets

              Goodwill  represents the excess of costs over fair value of assets
              of  businesses  acquired.  The Company  adopted the  provisions of
              Statement  of  Financial  Accounting  Standards  (SFAS)  No.  142,
              Goodwill and Other Intangible Assets, as of July 1, 2002. Goodwill
              and intangible assets acquired in a purchase business  combination
              and  determined  to  have  an  indefinite   useful  life  are  not
              amortized,  but instead tested for impairment at least annually in
              accordance  with the  provisions  of SFAS No. 142.  Management  is
              primarily   responsible   for   the   SFAS   No.   142   valuation
              determination.   In  compliance  with  SFAS  No.  142,  management
              utilizes standard  principles of financial  analysis and valuation
              including:  transaction  value,  market  value,  and income  value
              methods to arrive at a  reasonable  estimate  of the fair value of
              the  Company in  comparison  to its book  value.  The  Company has
              determined it has one reporting unit. As of July 1, 2002, the fair
              value  of the  Company  exceeded  the book  value of the  Company.
              Therefore, there was not an indication of impairment upon adoption
              of SFAS  No.  142.  Management  performed  its  annual  impairment
              assessment  during the  Company's  fourth  quarter and  determined

                                       F-6
<PAGE>

                             DYNATRONICS CORPORATION

                          Notes to Financial Statements

                             June 30, 2003 and 2002



              there  was not an  indication  of  impairment.  SFAS No.  142 also
              requires that  intangible  assets with  estimable  useful lives be
              amortized over their  respective  estimated  useful lives to their
              estimated   residual  values,   and  reviewed  for  impairment  in
              accordance  with  SFAS  No.  144,  Accounting  for  Impairment  or
              Disposal of Long-Lived Assets.

              In  accordance  with  SFAS No.  144,  long-lived  assets,  such as
              property,  plant, and equipment, and purchased intangibles subject
              to  amortization,  are reviewed for impairment  whenever events or
              changes in  circumstances  indicate that the carrying amount of an
              asset may not be recoverable.  Recoverability of assets to be held
              and used is measured by a comparison of the carrying  amount of an
              asset to estimated  undiscounted  future cash flows expected to be
              generated by the asset. If the carrying amount of an asset exceeds
              its  estimated   future  cash  flows,  an  impairment   charge  is
              recognized by the amount by which the carrying amount of the asset
              exceeds  the fair value of the  asset.  Assets to be  disposed  of
              would be separately presented in the balance sheet and reported at
              the lower of the carrying amount or fair value less costs to sell,
              and are no longer  depreciated.  The assets and  liabilities  of a
              disposed  group  classified  as held for sale  would be  presented
              separately in the appropriate asset and liability  sections of the
              balance sheet.

              Prior to the adoption of SFAS No. 142, goodwill was amortized on a
              straight-line basis over 15 and 30 years.

       (f)    Revenue Recognition

              Sales  are  generally  recorded  when  products  are  shipped  FOB
              shipping  point under an agreement  with a customer,  risk of loss
              and title  have  passed to the  customer,  and  collection  of any
              resulting  receivable is reasonably  assured.  Amounts  billed for
              shipping and  handling of products are recorded as sales  revenue.
              Costs for  shipping  and  handling of products  to  customers  are
              recorded as cost of sales.

       (g)    Research and Development Costs

              Research and development costs are expensed as incurred.

       (h)    Product Warranty Reserve

              Costs  estimated to be incurred in  connection  with the Company's
              product  warranty  programs are charged to expense as products are
              sold based on historical warranty rates.

       (i)    Earnings per Common Share

              Basic  earnings per common share is the amount of earnings for the
              period available to each share of common stock outstanding  during
              the  reporting  period.  Diluted  earnings per common share is the
              amount of  earnings  for the  period  available  to each  share of
              common stock  outstanding  during the reporting period and to each
              share that would have been  outstanding  assuming  the issuance of
              common shares for all dilutive potential common shares outstanding
              during the period.

                                       F-7
<PAGE>

                             DYNATRONICS CORPORATION

                          Notes to Financial Statements

                             June 30, 2003 and 2002



              A  reconciliation  between the basic and diluted  weighted average
              number  of  common  shares  for  2003 and  2002 is  summarized  as
              follows:
<TABLE>
<CAPTION>

                                                                        2003            2002
                                                                    ------------   -------------
              <S>                                                   <C>            <C>
              Basic weighted average number of common shares
                outstanding during the year                            8,869,335       8,855,083
              Weighted average number of dilutive common stock
                options outstanding during the year                           --          43,339
                                                                    ------------   -------------
              Diluted weighted average number of common and
                common equivalent shares outstanding during the
                year                                                   8,869,335       8,898,422
                                                                    ============   =============
</TABLE>

              Outstanding options not included in the computation of diluted net
              income per share total 983,645 and 279,887 as of June 30, 2003 and
              2002, respectively, because to do so would have been antidilutive.

       (j)    Income Taxes

              The  Company  accounts  for  income  taxes  using  the  asset  and
              liability method.  Under the asset and liability method,  deferred
              tax assets and deferred tax  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 deferred tax  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 deferred  tax  liabilities  of a
              change in tax rates is  recognized  in income in the  period  that
              includes the enactment date.

                                       F-8
<PAGE>

                             DYNATRONICS CORPORATION

                          Notes to Financial Statements

                             June 30, 2003 and 2002



       (k)    Stock-Based Compensation

              The  Company  employs  the  footnote   disclosure   provisions  of
              Statement  of  Financial  Accounting  Standards  (SFAS)  No.  123,
              Accounting for  Stock-Based  Compensation,  as amended by SFAS No.
              148,  Accounting  for  Stock-Based  Compensation  - Transition and
              Disclosure.   SFAS  No.  123   encourages   entities  to  adopt  a
              fair-value-based method of accounting for stock options or similar
              equity instruments.  However, it also allows an entity to continue
              measuring compensation cost for stock-based compensation using the
              intrinsic-value  method of  accounting  prescribed  by  Accounting
              Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
              to  Employees  (APB 25).  The  Company  has  elected  to apply the
              provisions  of APB 25 and provide pro forma  footnote  disclosures
              required by SFAS No. 123. Accordingly, no compensation expense has
              been  recognized  for the  stock  option  plan.  Had  compensation
              expense for the Company's stock option plan been determined  based
              on the fair  value at the grant  date for awards in 2003 and 2002,
              consistent  with the  provisions  of SFAS No. 123,  the  Company's
              results of  operations  would  have been  reduced to the pro forma
              amounts indicated below:
<TABLE>
<CAPTION>

                                                                        Year ended          Year ended
                                                                         June 30,            June 30,
                                                                           2003                2002
                                                                     -----------------    -------------
              <S>                                                    <C>                  <C>
              Net income as reported                                 $          24,799          316,101
              Less: pro forma adjustment for stock based
                compensation, net of income tax                                (36,469)         (67,091)
                                                                     -----------------    -------------
                      Pro forma net (loss) income                    $         (11,670)         249,010
                                                                     =================    =============
              Basic and diluted net (loss) income per share:
                As reported                                                       0.00             0.04
                Effect of pro forma adjustment                                   (0.00)           (0.01)
                Pro forma                                                        (0.00)            0.03
</TABLE>

              The Company has no employee stock-based compensation expense since
              stock  options have  exercise  prices at least equal to the market
              price of the  Company's  stock on the grant date.  The Company has
              refined its  methodology  in  calculating  its pro forma  footnote
              disclosure  and  corrected  its  historical  computations.  In the
              Company's previous  footnotes,  the pro forma net income per share
              on a basic and diluted basis was $0.02 for the year ended June 30,
              2002.

                                       F-9
<PAGE>

                             DYNATRONICS CORPORATION

                          Notes to Financial Statements

                             June 30, 2003 and 2002



              The fair value of each option grant is estimated on the date of
              grant using the Black-Scholes option-pricing model with the
              following assumptions:

                                                             June 30
                                                   -----------------------------
                                                      2003               2002
                                                   ------------     ------------
              Expected dividend yield                 0%                 0%
              Expected stock price volatility        88-91%            90 - 95%
              Risk-free interest rate              2.89 - 4.42%     4.34 - 5.14%
              Expected life of options             5 & 7 years      5 & 7 years

              The weighted average fair value of options granted during 2003 and
              2002 was $0.60 and $0.89, respectively.

       (l)    Concentration of Risk

              In the normal course of business,  the Company provides  unsecured
              credit terms to its customers. Most of the Company's customers are
              involved in the medical  industry.  The Company  performs  ongoing
              credit  evaluations of its customers and maintains  allowances for
              possible losses which,  when realized,  have been within the range
              of management's expectations.

       (m)    Operating Segments

              The Company  operates in one line of  business,  the  development,
              marketing,  and  distribution of a broad line of medical  products
              for the physical  therapy and  aesthetics  markets.  As such,  the
              Company has only one  reportable  operating  segment as defined by
              SFAS No. 131,  Disclosures  about  Segments of an  Enterprise  and
              Related Information.

              The Company groups their sales into physical medicine products and
              aesthetic  products.  Physical medicine products  consisted of 93%
              and 92% of net sales for the years  ended June 30,  2003 and 2002,
              respectively.  Aesthetics  products  consisted of 7% and 8% of net
              sales for the years ended June 30, 2003 and 2002, respectively.

       (n)    Use of Estimates

              Management  of the  Company  has made a number  of  estimates  and
              assumptions  relating  to the  reporting  of assets,  liabilities,
              revenues, and expenses and the disclosure of contingent assets and
              liabilities  to prepare these  financial  statements in conformity
              with accounting principles generally accepted in the United States
              of  America.  Significant  items  subject  to such  estimates  and
              assumptions  include the carrying amount of property,  plant,  and
              equipment;  valuation  allowances for receivables and inventories;
              accrued product warranty reserve; and estimated  recoverability of
              goodwill. Actual results could differ from those estimates.


                                       F-10
<PAGE>

                             DYNATRONICS CORPORATION

                          Notes to Financial Statements

                             June 30, 2003 and 2002



       (o)    Fair Value Disclosure

              The  carrying  value of  accounts  receivable,  accounts  payable,
              accrued expenses,  and line of credit 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 or the
              existence of interest rate reset provisions.

       (p)    Advertising Cost

              Advertising  costs are expensed as incurred  except for  catalogs.
              Catalogs are recorded as prepaid supplies until they are no longer
              owned or expected to be used,  at which time they are  recorded as
              advertising expense.  Advertising expense for the years ended June
              30,  2003  and  2002  was  approximately  $172,300  and  $172,500,
              respectively. No prepaid supplies consisted of catalogs as of June
              30, 2003 and 2002.

       (q)    Reclassifications

              Amounts  billed for shipping and handling of products are recorded
              as sales  revenues.  Costs of shipping and handling of products to
              customers  are  recorded as costs of sales.  In prior  years,  the
              Company recorded  revenues from shipping and handling products net
              of  the  related  costs.   Amounts  recorded  in  2002  have  been
              reclassified  to conform  with  current  year  presentation.  As a
              result,  net sales and cost of sales for 2002 have each  increased
              by $796,635.

(2)      Inventories

         Inventories consist of the following:

                                                2003                   2002
                                          -----------------      --------------
        Raw materials                     $       2,487,435           2,555,535
        Finished goods                            2,446,990           1,546,908
        Inventory reserve                          (289,936)           (265,692)
                                          -----------------      --------------
                                          $       4,644,489           3,836,751
                                          =================      ==============


                                       F-11
<PAGE>

                             DYNATRONICS CORPORATION

                          Notes to Financial Statements

                             June 30, 2003 and 2002




(3)      Property and Equipment

         Property and equipment consist of the following:

                                                 2003                  2002
                                          -----------------      --------------
         Land                             $         354,743             354,743
         Buildings                                2,897,447           2,871,286
         Machinery and equipment                  1,728,106           1,603,963
         Office equipment                           415,349             352,502
         Vehicles                                    65,487              61,771
                                          -----------------      --------------
                                                  5,461,132           5,244,265
         Less accumulated depreciation
               and amortization                   2,258,579           1,899,206
                                          -----------------      --------------
                                          $       3,202,553           3,345,059
                                          =================      ==============


(4)      Product Warranty Reserve

         A  reconciliation  of the  changes  in  the  product  warranty  reserve
         consists of the following:

                                                2003                  2002
                                          -----------------      ---------------
         Beginning product warranty
           reserve balance                $         136,000             112,000
         Warranty repairs                          (175,718)           (224,575)
         Warranties issued                          243,317             235,592
         Changes in estimated warranty
           costs                                    (43,599)             12,983
                                          -----------------      ---------------
            Ending product warranty
                reserve balance           $         160,000             136,000
                                          =================      ===============


(5)      Line of Credit

         The Company has a revolving  line of credit  facility with a commercial
         bank in the amount of $4.5 million.  Borrowing limitations are based on
         30%  of  eligible   inventory  and  up  to  80%  of  eligible  accounts
         receivable.  At June 30,  2003 and 2002,  the  outstanding  balance was
         $1.38 million and $1.44  million,  respectively.  The line of credit is
         collateralized by inventory and accounts  receivable and bears interest
         at the bank's  "prime rate," (4.0% and 4.75% at June 30, 2003 and 2002,
         respectively).  This line is subject to annual  renewal  and matures on
         December 1, 2003. Accrued interest is payable monthly.

                                       F-12
<PAGE>

                             DYNATRONICS CORPORATION

                          Notes to Financial Statements

                             June 30, 2003 and 2002




(6)      Long-Term Debt

         Long-term debt consists of the following:
<TABLE>
<CAPTION>

                                                                                    2003            2002
                                                                             ---------------   --------------
         <S>                                                                 <C>               <C>
         7.11% promissory note with an interest rate reset in
           November 2003 secured by a trust deed on real property,
           payable in monthly installments of $8,708 through
           November 2008                                                     $       468,643          537,154
         6.21% promissory note secured by a trust deed on real
           property, maturing November 2013, payable in decreasing
           installments beginning at $7,545 monthly ($7,060 during
           2003 and 2002)                                                            645,072          688,283
         5.25% promissory note secured by building, payable in
           monthly installments of $5,641 through May 2017                           663,397          694,372
         8.87% promissory note secured by fixed assets, payable in
           monthly installments of $3,901 through May 2007                           159,741          193,930
         Other notes payable                                                          15,819           62,174
                                                                             ---------------   --------------
                 Total long-term debt                                              1,952,672        2,175,913

         Less current installments                                                   198,606          225,604
                                                                             ---------------   --------------
                 Long-term debt, excluding current installments              $     1,754,066        1,950,309
                                                                             ===============   ==============
</TABLE>

         The  aggregate  maturities  of  long-term  debt for  each of the  years
         subsequent to 2003 are as follow: 2004, $198,606; 2005, $206,899; 2006,
         $218,188; 2007, $227,458; 2008, $197,831; and thereafter $903,690.

(7)      Leases

         The  Company  leases  vehicles  under  noncancelable   operating  lease
         agreements. Rent expense for the years ended June 30, 2003 and 2002 was
         $29,203 and  $31,915,  respectively.  Future  minimum  rental  payments
         required  under  noncancelable  operating  leases that have  initial or
         remaining  lease terms in excess of one year as of 2003 are as follows:
         2004, $24,367; 2005, $10,728; and 2006, $6,171.

                                       F-13
<PAGE>

                             DYNATRONICS CORPORATION

                          Notes to Financial Statements

                             June 30, 2003 and 2002



(8)      Goodwill and Other Intangible Assets

         Goodwill. The cost of acquired companies in excess of the fair value of
         the net assets and purchased  intangible  assets at acquisition date is
         recorded as goodwill.  As of June 30, 2002,  the Company had  goodwill,
         net of $789,422 from the acquisition of Superior Orthopaedic  Supplies,
         Inc. on May 1, 1996 and the exchange of Dynatronics  Laser  Corporation
         common  stock  for  a  minority   interest  in  Dynatronics   Marketing
         Corporation  on June 30,  1983.  Through  June 30,  2002,  goodwill was
         amortized  over  a  period  of 15  and  30  years,  respectively,  on a
         straight-line basis. The following table sets forth reported net income
         and basic and diluted  net income per share,  as  adjusted,  to exclude
         amortization  of goodwill which would not have been recorded under SFAS
         No. 142:

                                                                   Year ended
                                                                 June 30, 2002
                                                               -----------------
         Net income, as reported                               $        316,101

         Amortization expense of goodwill, net of tax                    57,018
                                                               -----------------
               Net income, as adjusted                         $        373,119
                                                               =================

         Basic net income per share, as reported                           0.04

         Diluted net income per share, as reported                         0.04

         Amortization expense of goodwill per basic
           and diluted share                                               0.01

         Basic net income per share, as adjusted                           0.04

         Diluted net income per share, as adjusted                         0.04

         License Agreement.  Identifiable  intangible assets,  included in other
         assets,  consist of a license agreement entered into on August 16, 2000
         for a certain  concept  and process  relating to a patent.  The license
         agreement is being amortized over ten years on a  straight-line  basis.
         The following table sets forth the gross carrying  amount,  accumulated
         amortization, and net carrying amount of the license agreement:

                                                As of                 As of
                                            June 30, 2003         June 30, 2002
                                           ---------------       --------------
         Gross carrying amount             $        73,240               73,240

         Accumulated amortization                   20,752               13,427
                                           ---------------       --------------

             Net carrying amount           $        52,488               59,813
                                           ===============       ==============


                                       F-14
<PAGE>

                             DYNATRONICS CORPORATION

                          Notes to Financial Statements

                             June 30, 2003 and 2002



         Amortization  expense  associated with the license agreement was $7,325
         for 2003 and 2002.  Estimated  amortization  expense  for the  existing
         license agreement is expected to be $7,325 for each of the fiscal years
         ending June 30, 2004 through June 30, 2010.

(9)      Income Taxes

         Income tax expense for the years ended June 30 consists of:
<TABLE>
<CAPTION>
                                                                                  Stock option
                                              Current            Deferred           benefit          Total
                                          ----------------  -----------------   ---------------  ------------
         <S>                              <C>               <C>                 <C>              <C>
         2003:
           U.S. federal                   $             --              8,016                --         8,016
           State and local                           7,451              1,241                --         8,692
                                          ----------------  -----------------   ---------------  ------------
                                          $          7,451              9,257                --        16,708
                                          ================  =================   ===============  ============
         2002:
           U.S. federal                   $        143,980             12,850             3,800       160,630
           State and local                          35,177               (706)              587        35,058
                                          ----------------  -----------------   ---------------  ------------
                                          $        179,157             12,144             4,387       195,688
                                          ================  =================   ===============  ============

</TABLE>

         The stock option benefit represents the portion of the Company's income
         tax expense for financial  reporting  purposes that was not required to
         be  paid  due to  the  availability  of a tax  benefit  upon  employees
         exercising  their  options.  The  Company  recognized  an  increase  to
         stockholders' equity as a result of the stock option benefit.

         Actual  income tax  expense  differs  from the  "expected"  tax expense
         (computed by applying the U.S. federal corporate income tax rate of 34%
         to income before income taxes) as follows:
<TABLE>
<CAPTION>
                                                                2003            2002
                                                         --------------   ---------------
         <S>                                             <C>              <C>
         Expected tax expense                            $       14,112           174,009
         State taxes, net of federal tax benefit                  5,737            23,138
         Meals and entertainment                                  1,558             2,247
         Amortization of goodwill not deductible                     --             2,985
         Officers' life insurance                                (3,249)           (2,927)
         Extraterritorial income exclusion                       (2,237)           (3,978)
         Other, net                                                 787               214
                                                         --------------   ---------------
                                                         $       16,708           195,688
                                                         ==============   ===============
</TABLE>

                                       F-15
<PAGE>

                             DYNATRONICS CORPORATION

                          Notes to Financial Statements

                             June 30, 2003 and 2002



         Deferred income tax assets and  liabilities  related to the tax effects
         of temporary differences are as follows:
<TABLE>
<CAPTION>

                                                                                    2003            2002
                                                                             ---------------   --------------
         <S>                                                                 <C>               <C>
         Net deferred tax asset - current:
             Charitable contribution                                         $        10,614               --
             Inventory capitalization for income tax purposes                         64,385           47,689
             Inventory reserve                                                       107,778           99,103
             Vacation reserve                                                          3,730            3,730
             Warranty reserve                                                         59,680           50,728
             Accrued product liability                                                12,227           13,825
             Allowance for doubtful accounts                                          54,133           61,830
                                                                             ---------------   --------------
                 Total deferred tax asset - current                          $       312,547          276,905
                                                                             ===============   ==============
         Net deferred tax asset (liability) - noncurrent:
             Deferred compensation                                           $       114,009          105,271
             Property and equipment, principally due to differences in
               depreciation                                                         (240,987)        (216,170)
             Noncompete and goodwill                                                 (17,081)          11,739
                                                                             ---------------   --------------
                 Total deferred tax liability - noncurrent                   $      (144,059)         (99,160)
                                                                             ===============   ==============

</TABLE>

         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.  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 that the Company  will
         realize the benefits of these deductible differences.

(10)     Major Customers

         During the fiscal  years  ended  June 30,  2003 and 2002,  sales to any
         single customer did not exceed 10% of total revenues.

(11)     Common Stock

         On July 15, 2003, the Company approved an open-market  share repurchase
         program for up to $500,000 of the Company's common stock.

         The  Company  granted  options to acquire  common  stock under its 1992
         qualified  stock option plan. The options are to be granted at not less
         than 100% 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.

                                       F-16
<PAGE>

                             DYNATRONICS CORPORATION

                          Notes to Financial Statements

                             June 30, 2003 and 2002



         A summary of activity follows:
<TABLE>
<CAPTION>
                                                          2003                                   2002
                                          -------------------------------------  -------------------------------------
                                                                 Weighted                                Weighted
                                             Number of            average            Number of           average
                                               shares         exercise price          shares          exercise price
                                          ---------------  ------------------    ----------------    -----------------
         <S>                              <C>                 <C>                <C>                 <C>
         Options outstanding at
            beginning of year                     836,578     $        1.19             930,906      $       1.17
         Options granted                          324,651              0.77              90,861              1.12
         Options exercised                             --                --              88,352              0.77
         Options canceled or expired             (257,584)             1.00             (96,837)             1.34
                                          ---------------     -------------      --------------
         Options outstanding at end
            of year                               903,645              1.09             836,578              1.19
                                          ===============     =============      ==============
         Options exercisable at end
            of year                               466,506              1.25             682,891              1.15
         Range of exercise prices at
            end of year                                         0.66 - 2.70                           0.72 - 2.70

</TABLE>

         At June 30, 2003,  959,816  shares of common stock were  authorized and
         reserved  for  issuance,  but were not  granted  under the terms of the
         stock option plan.

         The Company has 80,000 options  outstanding  that were not issued under
         the  Company's  stock  option plan.  The exercise  price of the options
         ranges  from $1.08 to $4.00.  The  options  expire  during  fiscal 2007
         through fiscal 2010.

(12)     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  2003 and  2002,  the  Company  made
         matching  contributions  of 25% of the first $2,000 of each  employee's
         contribution. The Company's contributions to the plan for 2003 and 2002
         were $19,451 and $12,451, respectively.  Company matching contributions
         for future years are at the discretion of the board of directors.

(13)     Salary Continuation Agreements

         As of June 30,  2003,  the Company had salary  continuation  agreements
         with two key employees.  The agreements provide a preretirement  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% 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
         15-year 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 2003 and 2002,  the  Company has
         accrued $305,654 and $282,229,  respectively,  of deferred compensation
         under the terms of the agreements.


                                       F-17
<PAGE>


Item 8. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

         During the two most recent fiscal years and the subsequent interim
period, there have been no disagreements on financial disclosures or accounting
matters and no resignation by or dismissal of the independent public accountants
engaged by the Company.

Item 8A.  Controls and Procedures

         Based on their evaluation, as of a date within 90 days of the filing
date of this Form 10-KSB, our Chief Executive Officer and principal accounting
officer have concluded that our disclosure controls and procedures (as defined
in Rule 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as
amended) are effective. There have been no significant changes in internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.


                                    PART III

Item 9. Directors and Executive Officers; Compliance With Section 16(a) of the
        Exchange Act

         The directors and executive officers of the Company at September 26,
2003 are:

<TABLE>
<CAPTION>
                                    Director
                                   or Officer                  Position
Name                                Age              Since    with Company

<S>                                 <C>              <C>      <C>
Kelvyn H. Cullimore                 68               1983     Chairman of the Board
Kelvyn H. Cullimore, Jr.            47               1983     President, CEO and Director
Larry K. Beardall                   47               1986     Executive Vice President
                                                              of Sales and Marketing and Director
E. Keith Hansen, M.D.*              58               1983     Director
Howard L. Edwards**                 72               1997     Director
Val J. Christensen**                40               1999     Director
Ronald J. Hatch                     58               2002     Vice President of Operations and R&D
</TABLE>


* Member of Compensation Committee of the Board of Directors. ** Member of Audit
and Compensation Committee of the Board of Directors.

         Kelvyn H. Cullimore is the father of Kelvyn H. Cullimore, Jr. No other
family relationships exist among officers and directors.

         Retirement of Joseph H. Barton. Effective May 9, 2003, Joseph H.
Barton, a director and member of the Company's audit and compensation
committees, announced his retirement and resignation from the Board of
Directors. Under the Bylaws of the Company, the Board of Directors has the power
to appoint a replacement to serve the remainder of Mr. Barton's term, which
would ordinarily continue until the annual meeting of shareholders, scheduled to
be held in November 2003. As of the date of this report the Board had not taken
any action to replace Mr. Barton.

         Directors hold office until the next annual meeting of the shareholders
and until their successors have been elected and duly qualified. Executive
officers are elected by the Board of Directors at the first meeting after each
annual meeting of shareholders and hold office until their successors are
elected and duly qualified. The Company has an audit committee and a
compensation committee composed of the outside directors. The compensation
committee reviews and approves compensation matters for executive officers.

         Kelvyn H. Cullimore has served as Chairman of the Board since April
1983. From 1983 until 1992, Mr. Cullimore served as President of the Company.
Mr. Cullimore received a B.S. degree 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, as president or general partner in several business entities,
including real estate, motion picture, and equipment partnerships. From 1979
until 1992, Mr. Cullimore served as Chairman of the Board of American
Consolidated Industries (ACI), the former parent company of Dynatronics. From
1986 until 1999, Mr. Cullimore served as President of ITEC Attractions, and from
1986 to 1997, he served as ITEC's Chairman, President and CEO. He currently
serves on the board of directors of ITEC.

                                       18
<PAGE>
         Kelvyn H. Cullimore, Jr. was elected President and Chief Executive
Officer in December 1992. He has been a Director since incorporation of the
Company. He served as Secretary/Treasurer 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.
Mr. Cullimore has served on the board of directors of several businesses,
including Dynatronics Marketing Company and ACI, and he currently serves on the
board of directors of ITEC. In addition, he 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. In June 2003, Mr.
Cullimore was elected to the board of the Medical Device Manufacturers
Association, a national medical device trade association headquartered in
Washington, D. C.

         Larry K. Beardall was elected Executive Vice President in December
1992. He has served as a Director and the Vice President of Sales and Marketing
since July 1986. Mr. Beardall joined Dynatronics in February 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 then 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. He
is also Vice President and Director of Mountain Resources Corporation and a
Director of Accent Publishers, both based in Salt Lake City, Utah.

         Howard L. Edwards was elected a Director in January 1997. From 1968 to
1995, Mr. Edwards served in various capacities at Atlantic Richfield Company
(ARCO) and its predecessor, the Anaconda Company, including corporate secretary,
vice president, treasurer and general attorney. Mr. Edwards served for a number
of years as a partner in the law firm of VanCott, Bagley, Cornwall and McCarthy,
based in Salt Lake City, Utah. He graduated from the George Washington
University School of Law in 1959 and received a bachelor's degree in Finance and
Banking from Brigham Young University in 1955.

         Val J. Christensen was appointed to the Board in January 1999. Since
1990, Mr. Christensen has served as Executive Vice President and General Counsel
of Franklin Covey Company, a company with a class of securities listed on the
New York Stock Exchange. He also served on Franklin's Board of Directors from
1989 to 1996. Prior to joining Franklin Covey, Mr. Christensen was a partner in
the international law firm of LeBoeuf, Lamb, Leiby & MacRae, headquartered in
New York City. Following graduation from law school in 1980, Mr. Christensen
served as a law clerk to the Honorable James K. Logan of the United States Tenth
Circuit Court of Appeals. He is an honors graduate of the Brigham Young
University School of Law and served as articles editor of the BYU Law Review.

         Ronald J. Hatch - was appointed Vice President of Operations and R&D in
July 2002. Prior to joining the Company in June 2002, Mr. Hatch worked with
Lineo, Inc. as a Senior Project Manager from 1999 to 2002. From 1972 to 1998, he
served in various management responsibilities at Philips Semiconductors -
Signetics. He graduated from Brigham Young University with a degree in
Electronics Engineering Technology in 1970 and received an MBA degree from the
University of Phoenix (in Salt Lake City) in 1991.

            Section 16 (a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than 10% of
the Company's common stock ("Reporting Persons") to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Reporting
Persons are required by Rule 16a-3(e) of the Securities and Exchange Commission
to furnish the Company with copies of all Section 16(a) forms they file with the
Commission.

                                       19
<PAGE>

         Based solely on review of the copies of such forms furnished to the
Company during and with respect to the year ended June 30, 2003, the Company
believes that during the year then ended all Section 16(a) filings applicable to
these Reporting Persons were timely filed.

Item 10.  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 2003, to be sent to shareholders of the
Company subsequent to the filing of this report on Form 10-KSB.

Item 11.  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 2003, to be sent to shareholders of the
Company subsequent to the filing of this report on Form 10-KSB.

Item 12.  Certain Relationships and Related Transactions

         During the two years ended June 30, 2003, the Company was not a party
to any transaction in which any director, executive officer or shareholder
holding more than 5% of the Company's issued and outstanding commons tock had a
direct or indirect material interest.

Item 13. Exhibits and Reports on Form 8-K

       (a) Exhibits and documents required by Item 601 of Regulation S-B:

       1. Financial Statements (included in Part II, Item 7):

              Independent Auditors' Report..............................F-1

              Balance Sheets at June 30, 2003 and 2002..................F-2

              Statements of Income for years ended
              June 30, 2003 and 2002....................................F-3

              Statements of Stockholders'
              Equity for years ended June 30, 2003
              and 2002..................................................F-4

              Statements of Cash Flows for
              years ended June 30, 2003 and 2002 .......................F-5

              Notes to Financial Statements.............................F-6



                                       20
<PAGE>


       Exhibits:

Reg. S-B
Exhibit No.            Description

3.1       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.

3.2       Articles of Amendment dated November 21, 1988 (previously filed).

4.1       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.

4.2       Amended and Restated  1992 Stock Option Plan,  effective  November 28,
          1996 (previously filed).

10.2     Employment contract with Kelvyn H. Cullimore, Jr. (previously filed)

10.2     Employment contract with Larry K. Beardall (previously filed)

10.3     Loan Agreement with Zion Bank (previously filed)

10.4     Settlement  Agreement dated March 29, 2000 with Kelvyn Cullimore,  Sr.
         (previously filed)

31.1     Certification of President/CEO

31.2     Certification of Principal Accounting Officer

32.1     Certification  under Section 906 of the Sarbanes-Oxley Act of 2002 (18
         U.S.C. SECTION 1350)


         (b) Reports on Form 8-K. On May 16, 2003, we filed a Current Report on
Form 8-K to report that we had announced our financial results for the third
fiscal quarter ended March 31, 2003.

Item 14.    Controls and Procedures

         The Company hereby incorporates by reference into and makes a part of
this report the information and regarding fees paid and services provided by the
Company's independent auditors contained in the Company's definitive proxy
statement for 2003, to be sent to shareholders of the Company subsequent to the
filing of this report on Form 10-KSB.

                                       21
<PAGE>


                                   SIGNATURES


         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant 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.
                                       Chief Executive Officer and President

Date:  September 26, 2003

         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         September 25, 2003
-------------------------
Kelvyn H. Cullimore


/s/ Kelvyn H. Cullimore, Jr.     Director, President, CEO     September 25, 2003
-------------------------------
Kelvyn H. Cullimore, Jr.        (Principal Executive Officer


/s/ Terry M. Atkinson, CPA       Principal Accounting Officer September 25, 2003
-------------------------------
Terry M. Atkinson, CPA

/s/ Larry K. Beardall            Director, Executive          September 25, 2003
------------------------------
Larry K. Beardall                Vice President


/s/ E. Keith Hansen, M.D.        Director                     September 25, 2003
-------------------------------
E. Keith Hansen, M.D.


/s/ Howard L. Edwards            Director                     September 25, 2003
-------------------------------
Howard L. Edwards


/s/ Val J. Christensen           Director                     September 25, 2003
-------------------------------
Val J. Christensen





                                       22