================================================================================



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


(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, 2009.

[  ]     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
             (Exact name of registrant as specified in its charter)

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

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

Registrant's telephone number, including area code (801) 568-7000
                                                   --------------

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

              Securities registered under Section 12(g) of the Act:

                           Common Stock, no par value
                           --------------------------
                                (Title of class)

Indicate by checkmark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.                        Yes     No X

Indicate by checkmark if the registrant is not required to file reports pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act.    Yes     No X

Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K.                                                                [X]

Indicate by checkmark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss. 232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).       Yes     No




<PAGE>

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ___                       Accelerated filer ___
Non-accelerated filer ___                         Smaller reporting company   X
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).                                  Yes     No X

The aggregate market value of the voting and non-voting common stock held by
non-affiliates of the registrant as of September 23, 2009 was approximately
$11.2 million, based on the average bid and asked price on that date.

As of September 23, 2009, there were approximately 13.7 million shares of the
registrant's common stock outstanding.

                       Documents Incorporated by Reference

The issuer hereby incorporates information required by Part III (Items 10, 11,
12, 13, and 14) of this report by reference to the registrant's definitive proxy
statement for the fiscal year ended June 30, 2009 to be filed pursuant to
Regulation 14A and provided to shareholders subsequent to the filing of this
report.

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




                                       2
<PAGE>




                                TABLE OF CONTENTS

                                     PART I

Item 1.       Business........................................................1
Item 2.       Properties.....................................................10
Item 3.       Legal Proceedings..............................................10
Item 4.       Submission of Matters to a Vote of Security Holders............10

                                     PART II

Item 5.       Market for Registrant's Common Equity, Related Stockholder
              Matters and Issuer Purchases of Equity Securities..............10
Item 7.       Management's Discussion and Analysis of Financial
              Condition and Results of Operations............................12
Item 8.       Financial Statements and Supplementary Data....................21
Item 9.       Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure............................22
Item 9A(T)    Controls and Procedures........................................22
Item 9B.      Other Information..............................................22

                                    PART III

Item 10.      Directors, Executive Officers, and Corporate Governance........23
Item 11.      Executive Compensation.........................................23
Item 12.      Security Ownership of Certain Beneficial Owners and
              Management and Related Stockholder Matters.....................23
Item 13.      Certain Relationships and Related Transactions, and
              Director Independence..........................................23
Item 14.      Principal Accountants' Fees and Services.......................23

                                     PART IV

Item 15.      Exhibits.......................................................23
Signatures    ...............................................................25
Certifications  .............................................................26





<PAGE>
                                     PART I

Unless the context otherwise requires, all references in this report to
"registrant," "we," "us," "our," "Dynatronics" or the "Company" refer to
Dynatronics Corporation, a Utah corporation and its wholly-owned subsidiary.

Item 1.   Business

Forward-Looking Statements

         This Annual Report on Form 10-K contains forward-looking information.
Forward-looking information includes statements relating to future actions,
prospective products, future performance or results of current or anticipated
products, sales and marketing efforts, costs and expenses, interest rates,
outcome of contingencies, financial condition, results of operations, liquidity,
business strategies, cost savings, objectives of management and other matters.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking information in order to encourage companies to provide
prospective information about themselves without fear of litigation, so long as
that information is identified as forward-looking and is accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those projected in the information.
Forward-looking information may be included in this Annual Report on Form 10-K
or may be incorporated by reference from other documents filed by us with the
Securities and Exchange Commission. You can find many of these statements by
looking for words including, for example, "believes," "expects," "anticipates,"
"estimates" or similar expressions in this Annual Report on Form 10-K or in
documents incorporated by reference in this Annual Report on Form 10-K. Except
as otherwise required by applicable law, we undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information or future events.

         We have based the forward-looking statements relating to our operations
on management's current expectations, estimates and projections about us and the
industry in which we operate. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions that we cannot
predict. In particular, we have based many of these forward-looking statements
on assumptions about future events that may prove to be inaccurate. Accordingly,
our actual results may differ materially from those contemplated by these
forward-looking statements. Any differences could result from a variety of
factors, including, but not limited to the following:

         o    strategies, outlook and growth prospects;

         o    future plans and potential for future growth;

         o    liquidity, capital resources and capital expenditures;

         o    growth in demand for our products;

         o    economic outlook and industry trends;

         o    developments of our markets;

         o    the impact of regulatory initiatives;

         o    new state or federal legislation; and

         o    the strength of our competitors

Our Company

         Dynatronics is a Utah corporation formed on April 29, 1983. Our
principal business is the design, manufacture, marketing and distribution of
physical medicine products and aesthetic products. We operate on a fiscal year
basis, ending June 30. For example, reference to fiscal year 2009 refers to the
fiscal year ended June 30, 2009. All references to financial statements in this
report refer to the consolidated financial statements of Dynatronics Corporation
and subsidiary.



                                       1
<PAGE>

Developments in Fiscal Year 2009

         In September 2008, we introduced a new 2009-2010 product catalog. With
thousands of new products included in the catalog, we have seen a significant
boost in medical supply sales that we attribute to the catalog. The acquisition
of six of our top distributors last year has allowed us to greatly expand our
product offering. The new catalog contains over 400 pages of products - more
than double our previous catalog.

         In June 2009, we introduced the new V-Force vibration therapy device to
the market. This new unit employs powerful, whole-body vibration technology,
which provides neuromuscular training to increase strength, improve balance and
enhance flexibility. Whole-body vibration therapy has been the subject of
extensive research for many years with numerous clinical studies demonstrating
its effectiveness in the areas of balance/fall prevention, circulation, knee
rehabilitation, low back pain, range of motion and many other neuromuscular
conditions.

         We expanded our direct sales team to 50 sales representatives from 36
sales representatives in fiscal year 2008. Our expanded sales force now includes
27 direct sales employees and 23 independent sales representatives. The recent
consolidation occurring within our market presents a unique opportunity for us
to grow market share in future periods by recruiting experienced and successful
sales representatives and dealers. We are focusing specific efforts on
recruiting additional independent distributors and seasoned direct sales
representatives in geographical areas where distribution has been lost or
diminished due to the recent consolidation in our industry.

Description of Products

         We manufacture and distribute 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, aestheticians 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 four decades. There
has been an evolution through the years to use the most effective and painless
waveforms and frequencies to produce patient comfort and successful treatment of
pain and related physical ailments. Medium frequency alternating currents, which
we use primarily in our electrotherapy devices, are believed to be the most
effective and comfortable for patients. Electrotherapy can be 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 provides therapeutic deep
heat to soft tissue through the introduction of sound waves into the body. It is
one of the most common modalities used in physical therapy for treating pain,
muscle spasms and joint contractures.

         We market a broad line of devices that include electrotherapy,
ultrasound or a combination of both of these modalities in a single device. The
Dynatron 125 ultrasound and the Dynatron 525 electrotherapy devices target the
low-priced segment of the market. The "50 Series Plus" products offer
combinations of electrotherapy and ultrasound modalities at a reasonable cost to
the practitioner. The Dynatron Solaris(TM) products provide our most advanced
technology in combination therapy devices by adding infrared light therapy
capabilities to enhanced electrotherapy and ultrasound combination devices. See
"Schedule of Therapy Products" on page 6. We intend to continue development of
our electrotherapy and ultrasound technology and remain a leader in the design,
manufacture and sale of therapy devices.

         Infrared Light Therapy Our five Dynatron Solaris units, the Dynatron
702, and the Dynatron X3 and DX2 devices, all feature infrared light therapy
technology. These units are capable of powering various cluster probes at
different wavelengths for treating a variety of medical conditions including
pain and stiffness associated with arthritis, as well as muscle and joint pain.
In fiscal year 2006, we introduced the Dynatron Xp light pad for treating larger
areas of the body via unattended infrared light therapy. This light pad can be
powered by several of our devices including the Dynatron 702, Dynatron X3, and
Dynatron DX2. The benefits of light therapy have been documented by numerous
research studies published over the past four decades.


                                       2
<PAGE>

         Oscillation Therapy Soft tissue oscillation therapy has been used for
the treatment of pain in Europe for over 15 years, yet it is relatively new to
the United States market. The Dynatron X5 Oscillation Therapy device creates an
electrostatic field within the patient, resulting in a highly effective
treatment for reducing minor muscle aches and pains.

         Iontophoresis Iontophoresis uses electrical current to transdermally
deliver drugs such as lidocaine for localized treatment of inflammation without
the use of needles. In fiscal year 2006, we developed a proprietary
iontophoresis device - the Dynatron iBox - which is capable of delivering two
treatments simultaneously. At the same time we began distribution of a line of
proprietary iontophoresis electrodes under the brand name of Dynatron Ion
electrodes. These electrodes replace the line of electrodes we previously
distributed for other manufacturers.

         Vibration Therapy We introduced our V-Force vibration therapy device in
June 2009. Originally developed for the Russian space program to compensate for
bone and muscle loss resulting from extended periods in space, whole-body
vibration therapy provides neuromuscular training to increase strength, improve
balance and enhance flexibility. A number of clinical studies have demonstrated
its effectiveness in the areas of balance/fall prevention, circulation
improvement, knee rehabilitation, low back pain relief, range of motion
expansion and many other neuromuscular conditions.

         The following chart lists the therapy device products that we
manufacture and distribute.

                          Schedule of Therapy Products
                 Manufactured and/or Distributed by Dynatronics

   Product Name                      Description
   ------------                      ------------
   Dynatron(R) 125                   Ultrasound
   Dynatron(R) 525                   Electrotherapy
   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                   Electrotherapy for Chronic Pain
   Dynatron(R) STS Rx                Electrotherapy for Chronic Pain
   Dynatron(R) STSi                  Multi-modality Electrotherapy for Chronic
                                       Pain
   Dynatron Solaris(R) 701           Ultrasound with Infrared Light Therapy
   Dynatron(R) 702                   Infrared Light Therapy
   Dynatron Solaris(R) 705           Electrotherapy with Infrared Light Therapy
   Dynatron Solaris(R) 706           Electrotherapy with Infrared Light Therapy
   Dynatron Solaris(R) 708           Combination Electrotherapy/Ultrasound with
                                       Infrared Light Therapy
   Dynatron Solaris(R) 709           Combination Electrotherapy/Ultrasound with
                                       Infrared Light Therapy
   Dynatron Solaris(R) 880           Accessory Infrared Light Probe
   Dynatron Solaris(R) 890           Accessory Infrared Laser Light Probe
   Dynatron(R) X3                    Infrared Light Therapy
   DX2 and DynaPro Spinal
     Health System                   Combination Traction with Infrared Light
                                       Therapy
   Dynatron(R) X5 Turbo              Oscillation Therapy
   Dynatron(R) iBox                  Iontophoresis
   Dynatron(R) TX900                 Traction Therapy
   V-Force                           Vibration Therapy
---------------------

Dynatron(R) and Dynatron Solaris(R) are registered trademarks owned by
Dynatronics
** "50 Series Plus" Product Line

         Medical Supplies and Soft Goods We currently manufacture or have
manufactured for us over 700 medical supply and soft good products including hot
packs, cold packs, exercise balls, 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, and Transcutaneous Electrical Nerve Stimulation
or "TENS" devices.


                                       3
<PAGE>

         As a result of our acquisition of six independent distributors in June
and July 2007, we significantly expanded the number of products we now
distribute to include additional exercise equipment, massage therapy products,
chiropractic tables, hand therapy products, Pilates and yoga equipment,
nutritional supplements, emergency care products and portable electrotherapy
products. A new, 400-page full-line catalog was introduced to the market in
September 2008, containing over 12,000 rehabilitation products. This new catalog
is a major step in presenting our new image to the market following the
assimilation of these dealers. It represents a more consolidated approach to
selling both our high-quality manufactured products, and hundreds of lines of
distributed products we now represent.

         We market our products through direct sales representatives,
independent dealers and the new product catalog. We are also continually seeking
to update our line of manufactured and distributed medical supplies and soft
goods.

         Treatment Tables and Rehabilitation Equipment We manufacture and
distribute motorized and manually operated physical therapy treatment tables,
rehabilitation parallel bars, and other specialty rehabilitation products.

Aesthetic Products

         We manufacture and market a line of aesthetic products under the brand
name of Synergie(TM). The new Synergie Elite Aesthetic Massage System (AMS)
introduced in April 2008 applies therapeutic vacuum massage to skin and
subcutaneous tissues to achieve a temporary reduction in the appearance of
cellulite as well as reducing the circumferential body measurements of the
treated areas.

         The results of a Dynatronics-sponsored research study available at our
offices show that 91% of Synergie 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.

         We also manufacture and market the Synergie Elite microdermabrasion
device (MDA) as a companion to the AMS device. The MDA device gently exfoliates
the upper layers of skin, exposing softer, smoother skin. In conjunction with
the microdermabrasion devices, we offer a unique line of skin care products
under the trademark Calisse(TM) which is designed to enhance the effects of the
MDA treatments.

         As part of the aesthetics line of products, we market the Synergie
Elite LT device which provides light therapy for aesthetic applications. Light
therapy is popular in spas and health clubs for improving skin tone and
appearance. Combining elements of the AMS vacuum massage techniques with
microdermabrasion and Synergie Elite LT for light therapy has provided
aestheticians with the ability to provide an enhanced "ultimate facial"
available only with the use of Synergie devices.

Allocation of Sales Among Key Products

         No product accounted for more than 10% of total revenues during the
fiscal years ended June 30, 2009 and 2008.

Patents and Trademarks

         Patents We hold a United States patent on the multi-frequency
ultrasound technology that will remain in effect until June 2013, and a United
States patent on the microdermabrasion device that will remain in effect until
February 2020. In addition, we hold a United States patent on the STS technology
for treating chronic pain that will remain in effect until July 17, 2021 and a
United States patent on the combination of our aesthetic massage and
microdermabrasion technologies that will remain in effect until February 28,
2020. We also hold two design patents on the microdermabrasion device that will
remain in effect until November 2015. We hold a patent on our light therapy
technology that will remain in effect until August 2025. Three additional patent
applications pertaining to our infrared light therapy technology and combination
traction/light therapy technology have been filed with the United States Patent
and Trademark Office and are currently pending. We also own the exclusive,
worldwide rights (under a license agreement) to patent protection on the STS
technology for the treatment of chronic pain.

         Trademarks. We have developed and we use registered trademarks in our
business, particularly relating to our corporate and product names. The
trademark "Dynatron" has been registered with the United States Patent and
Trademark Office. In addition, United States trademark registrations have been
obtained for the trademarks: "Synergie," "Synergie Peel," "Sympathetic Therapy,"
and "Dynatron Solaris," and trademark registrations have been obtained for
various other product trademarks. Company materials are also protected under
copyright laws, both in the United States and internationally.


                                       4
<PAGE>

         Federal registration of a trademark enables the registered owner of the
mark to bar the unauthorized use of the registered mark in connection with a
similar product in the same channels of trade by any third-party anywhere in the
United States, regardless of whether the registered owner has ever used the
trademark in the area where the unauthorized use occurs. We have filed
applications and own trademark registrations, and we intend to register
additional trademarks in countries where our products are or may be sold in the
future. Protection of registered trademarks in some jurisdictions may not be as
extensive as the protection in the United States.

         We also claim ownership and protection of certain product names,
unregistered trademarks, and service marks under common law. Common law
trademark rights do not provide the same level of protection that is afforded by
the registration of a trademark. In addition, common law trademark rights are
limited to the geographic area in which the trademark is actually used. We
believe these trademarks, whether registered or claimed under common law,
constitute valuable assets, adding to recognition of Dynatronics and the
effective marketing of Dynatronics products. Trademark registration once
obtained is essentially perpetual, subject to the payment of a renewal fee. We
therefore believe that these proprietary rights have been and will continue to
be important in enabling us to compete.

         Trade Secrets. We own certain intellectual property, including trade
secrets that we seek to protect, in part, through confidentiality agreements
with employees and other parties, although some employees who are involved in
research and development activities have not entered into these agreements. Even
where these agreements exist, there can be no assurance that these agreements
will not be breached, that we would have adequate remedies for any breach, or
that our trade secrets will not otherwise become known to or independently
developed by competitors. Our proprietary product formulations are generally
considered trade secrets, but are not otherwise protected under intellectual
property laws.

         We intend to protect our legal rights concerning intellectual property
by all appropriate legal action. Consequently, we may become involved from time
to time in litigation to determine the enforceability, scope, and validity of
any of the foregoing proprietary rights. Any patent litigation could result in
substantial cost and divert the efforts of management and technical personnel.

Warranty Service

         We provide a warranty on all products we manufacture for time periods
ranging in length from 90 days to five years from the date of sale. We service
warranty claims on these products out of our Salt Lake City, Utah and
Chattanooga, Tennessee facilities according to the service required. Our
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 2009 and 2008.

         Products we distribute 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 us.

Customers and Markets

         We sell our products primarily to licensed practitioners such as
physical therapists, chiropractors, podiatrists, sports medicine specialists,
medical doctors, hospitals and clinics, plastic surgeons, dermatologists and
aestheticians. As a result of the acquisition of six dealers and the appointment
or hiring of other sales representatives, we now have 50 direct sales
representatives selling our products in 34 states. We also make use of a network
of over 150 independent dealers throughout the United States and
internationally. These dealers purchase and take title to the products, which
they then sell to licensed practitioners.

         We have entered into direct sales relationships with a few national and
regional chains of physical therapy clinics and hospitals. We sell our products
directly to these clinics and hospitals pursuant to 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 2009 and 2008.




                                       5
<PAGE>

          We export products to approximately 30 different countries. Sales
outside North America totaled approximately $765,000, or 2.4% of net sales in
fiscal year 2009 compared to $772,500, or 2.4% of net sales in fiscal year 2008.
We are working to establish effective distribution for its products in
international markets. Our Salt Lake City facility is certified to the ISO 13485
quality standard for medical device manufacturing. Many of our therapy devices
carry the CE Mark, a designation required for marketing products in the European
community that signifies the device or product was manufactured pursuant to a
certified quality system. We have no foreign manufacturing operations. However,
we purchase certain products and components from foreign manufacturers.

Competition

         We believe our key products are distinguished competitively by our use
of the latest technology. Many of our products are protected by patents. We
believe that the integration of advanced technology in the design of each
product has distinguished Dynatronics branded products in a very competitive
market. We were the first company to integrate infrared light therapy as part of
a combination therapy device. By manufacturing many of the medical supplies,
soft goods and tables that we sell, we can focus on quality manufacturing at
competitive prices. We believe these factors give us an edge over many
competitors who are solely distributors of competing products. Furthermore, the
acquisition of six key distributors in June and July 2007 and the addition of
direct sales representatives over the course of fiscal year 2009 have provided
us with expanded direct distribution of products into 34 states. This vertical
integration allows us to exercise better control over the sale and distribution
of our products as well as products distributed by competitors, including
Mettler, MedX, and DJO and many manufacturers of treatment tables, medical
supplies and soft goods.

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

Electrotherapy/Ultrasound

         We compete in the clinical market for electrotherapy and ultrasound
devices with both domestic and foreign companies. Approximately one dozen
companies produce electrotherapy and/or ultrasound devices. Some of these
competitors are larger and better established, and have greater resources than
us. Other than Dynatronics, few companies, domestic or foreign, provide
multiple-modality devices, which is one important distinction between us and our
competition. Furthermore, we believe no competitor offers three frequencies on
multiple-sized soundheads for which we hold a patent. We believe that our
primary domestic competitors in the sale of electrotherapy and ultrasound
products include DJO (Chattanooga Group division), Naimco (Rich-Mar division),
and Mettler Electronics.

Light Therapy

         Competitors that manufacture and market light therapy devices include
DJO, Rich-Mar, Erchonia, Anodyne and MedX. These and other competitors offer
light therapy units that are not as powerful as our units. We are aware of only
two competitors, DJO and Rich-Mar, who offer a combination light therapy device
that includes electrotherapy and ultrasound capabilities.

Vibration Therapy

         The primary competitors that manufacture and market vibration therapy
devices include PowerPlate and Wave Manufacturing. These competitors offer units
that are more expensive than our unit. In addition, we offer a better warranty
and we believe that we provide better training and customer service than these
competitors.

Medical Supplies and Soft Goods

         We compete against various manufacturers and distributors of medical
supplies and soft goods, some of which are larger, more established and have
greater resources than us. Excellent customer service along with providing value
to customers is of key importance for us to remain competitive in this market.
While there are many specialized manufacturers in this area such as DJO and
Fabrication Enterprises, most of our competitors are primarily distributors such
as North Coast Medical, Sammons Preston (a division of Patterson Medical), and
Meyer Distributing. We enjoy cost advantages on the products we manufacture and
distribute directly to end users compared to companies that only distribute
similar products.

Iontophoresis

         Our competitors in the iontophoresis market include DJO (EMPI and Iomed
divisions) and Naimco. We believe that DJO enjoys the largest market share of
the iontophoresis market. We also believe that our strong distribution network
is important to our continued ability to compete in this increasingly
competitive market. In addition, our products target a lower selling price than
the products of DJO. Our Dynatron iBox iontophoresis device is helping expand
our presence in this market.


                                       6
<PAGE>

Treatment Tables

         Our primary competition in the treatment table market is from domestic
manufacturers including Hill Laboratories Company, Hausmann Industries, Sammons
Preston, Bailey Manufacturing, Tri-W-G, DJO (Chattanooga Division), Armedica,
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 we believe allows for pricing advantages over
competitors.

Aesthetic Products

         Our two primary competitors in the therapeutic massage industry are LPG
Systems, and Silhouette Tone. Other competitors include Cynosure, Inc., Diamond
Systems, Palomar Medical, Eleme Medical, Syneron, and Durmafirm. The Synergie
Elite AMS device utilizes proprietary technology that has been proven effective
in a research study and in ten years of use by doctors and spas. In addition, we
provide a comprehensive training and certification program for aestheticians and
medical practitioners. Our aesthetic massage equipment is priced lower than
competitors' units, providing a significant advantage in the marketplace. We are
striving to develop a network of domestic and international 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 MDA
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. Powered by the Synergie Elite AMS
device, the Synergie Elite MDA is one of the most powerful and easy to control
units on the market.

         Competitors in the light therapy segment of the aesthetic market
include Revitalite, Silhouette Tone, Photo Actif, and DermaPulse. We believe the
Synergie Elite LT device is the most powerful of all the units on the market. It
features a computerized dosage calculation system and is competitively priced.

Manufacturing and Quality Assurance

         We manufacture therapy devices, soft goods and other medical products
at our facilities in Salt Lake City, Utah and Chattanooga, Tennessee. We
purchase some components for our manufactured products from third-party
suppliers. All parts and components purchased from these suppliers meet
specifications we have established. Trained staff performs all sub-assembly,
final assembly and quality assurance procedures. Every effort is made to design
Dynatronics products to incorporate component parts and raw materials that are
readily available from suppliers.

         The development and manufacture of many of our products is subject to
rigorous and extensive regulation by the United States Food and Drug
Administration, or FDA, and other regulatory agencies and authorities in the
United States and abroad. In compliance with the FDA's Good Manufacturing
Practices, or GMP, we have developed a comprehensive program for processing
customer feedback and analyzing product performance trends. By ensuring prompt
processing of timely information, we are better able to respond to customer
needs and insure proper operation of the products.

         In 1994, we established the 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 our company motto, but it is the standard by which all decisions are
made. We believe the Quality First Program reinforces employee pride, increases
customer satisfaction, and improves overall operations.

         Our Salt Lake facility is certified to ISO 13485 standards for medical
products. ISO 13485 is an internationally recognized standard for quality
systems and manufacturing processes adopted by over 90 countries. In addition,
we have qualified for the CE Mark Certification on our electrotherapy,
ultrasound and light therapy products. With the CE Mark Certification, we are
qualified to market these products throughout the European Union and in other
countries where CE Mark Certification and ISO 13485 certification are
recognized.


                                       7
<PAGE>

Research and Development

         Total research and development, or R&D, expenses in fiscal year 2009
decreased $361,405 to $993,338 from $1,354,743 in fiscal year 2008. R&D expenses
represented approximately 3.1% and 4.2% of our net sales in fiscal years 2009
and 2008, respectively. The decrease in R&D expenditures as a percentage of net
sales in fiscal year 2009 is due to the cost cutting measures performed by the
company. We also reduced our R&D spending in fiscal year 2009 due to reduced
cash flows. We generally dedicate significant resources to R&D each year in
order to develop new products for the physical medicine and aesthetic markets
and to sustain engineering efforts of existing products.

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 FDA regulates our products pursuant to the
Medical Device Amendment of the Food, Drug, and Cosmetic Act, or 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, or FTC, under the Federal Trade Commission Act, or FTC.

         As a device manufacturer, we are required to register with the FDA and
once registered we are subject to inspection for compliance with the FDA's
Quality Systems regulations. These regulations require us to manufacture our
products and maintain our documents in a prescribed manner with respect to
manufacturing, testing, and control activities. Further, we are required to
comply with various FDA requirements for reporting. The FDC Act and medical
device reporting regulations require us to provide information to the FDA on
deaths or serious injuries alleged to have been caused or contributed to by the
use of our products, as well as product malfunctions that would likely cause or
contribute to death or serious injury if the malfunction were to occur. The FDA
also prohibits an approved device from being marketed for unapproved uses. 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. We intend to continuously improve our products
after they have been introduced to the market. 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. As appropriate,
we may therefore submit future 510(k) notifications, Pre-Market Approval (PMA)
or PMA supplement applications to the FDA. No assurance can be given that
clearance or approval of such new applications will be granted by the FDA on a
timely basis, or at all. Furthermore, we may be required to submit extensive
preclinical and clinical data depending on the nature of the product changes.
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 described above.

         The FDA is currently evaluating the classification of iontophoresis
products. Since the passage of the Medical Device Amendment in 1975, these
products have been listed as Class III products. However, the FDA has never
called for a PMA for these products. Instead, it has allowed iontophoresis
products to proceed to market as though they were Class II. Recently, FDA has
indicated they intend to make a final decision regarding calling for a PMA for
iontophoresis products or reclassifying them to Class II. We submitted to FDA
the required information to allow continued marketing of our proprietary
iontophoresis products until the final FDA decision is made. In our submission
we urged that the products be reclassified to Class II. If the FDA does not
change the classification of iontophoresis products and requires a PMA, we will
be required to provide a PMA or, in the alternative, cease distributing our
proprietary line and distribute competitor products that comply with the FDA
requirements.

         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
the FDA in order to have their applications reviewed. We submit new products for
clearance primarily under section 510(k) of the Medical Device Amendment of the
FDC Act.



                                       8
<PAGE>

         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 our ability to successfully market our
products. Our Salt Lake City facility is inspected periodically by the FDA for
compliance with the FDA's GMP and other requirements, including appropriate
reporting regulations and various requirements for labeling and promotion. The
FDA Quality Systems Regulations are now based in large part on the ISO 13485
Quality Standard. The GMP regulation requires, among other things, that (i) the
manufacturing process be regulated and controlled by the use of written
procedures, and (ii) the ability to produce devices that meet the manufacturer's
specifications be validated by extensive and detailed testing of every aspect of
the process.

         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, we are 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.

         From time to time, legislation is introduced in the Congress of the
United States or in state legislatures that could significantly change the
statutory provisions governing the approval, manufacturing, and marketing of
medical devices and products like those we manufacture. In addition, FDA
regulations and guidance are often revised or reinterpreted by the agency in
ways that may significantly affect our business and our products. It is
impossible to predict whether legislative changes will be enacted, or FDA
regulations, guidance, or interpretations will be changed, and what the impact
of such changes, if any, may be on the Company's business and the results of its
operations. 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,
domestically or internationally, 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 our business, results of operations or financial condition.

         We believe all of our present products are in compliance in all
material respects with all applicable performance standards as well as GMP,
record keeping and reporting requirements in the production and distribution of
the products.

Environment

         Environmental regulations and the cost of compliance with them 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.

Seasonality

         We believe that the effect of seasonality on the results of our
operations is not material.

Backlog

         The Company had a backlog of orders of approximately $500,000 at June
30, 2009 compared to approximately $567,000 at June 30, 2008.


                                       9
<PAGE>

Employees

         On June 30, 2009, we had a total of 148 full-time employees and 5
part-time employees, compared to 165 full-time employees and 18 part-time
employees on June 30, 2008.

Item 2.   Properties

         Our corporate headquarters and principal executive offices are located
at 7030 Park Centre Drive, Salt Lake City, Utah. The headquarters consist of a
single facility housing administrative offices and manufacturing space totaling
approximately 36,000 square feet. We own the land and building, subject to
mortgages requiring a monthly payment of approximately $19,000. The mortgages
mature in 2013 and 2017. We also own a 53,200 sq. ft. manufacturing facility in
Ooltewah, Tennessee (near Chattanooga), and accompanying undeveloped acreage for
future expansion subject to a mortgage requiring monthly payments of
approximately $13,000 and maturing in 2021. In addition, we rent office and
warehouse space in Pleasanton, California; Houston, Texas; Detroit, Michigan;
Minneapolis, Minnesota; and Girard, Ohio.

         We believe the facilities described above are adequate and able to
accommodate our presently expected growth and operating needs. As our business
continues to grow, additional facilities or the expansion of existing facilities
may be required.

         We own equipment used in the manufacture and assembly of our products.
The nature of this equipment is not specialized and replacements may be readily
obtained from any of a number of suppliers. In addition, we own computer
equipment and engineering and design equipment used in research and development
programs.

Item 3.   Legal Proceedings

         There are no pending legal proceedings of a material nature to which we
are a party or of which any of our 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. Our annual meeting of shareholders will be held in
November 2009 in Salt Lake City, Utah.

                                     PART II


Item 5.   Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities

Market Information

         As of September 23, 2009, we had approximately 13.7 million shares of
common stock issued and outstanding. Our common stock is listed on the Nasdaq
Capital 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.

                                            Fiscal Year Ended June 30,
                                             2009               2008
                                             ----               ----
                                        High       Low     High      Low
1st Quarter (July-September)            $1.03     $0.17    $2.00     $0.95
2nd Quarter (October-December)          $0.64     $0.26    $1.55     $1.01
3rd Quarter (January-March)             $0.48     $0.20    $1.20     $0.97
4th Quarter (April-June)                $0.75     $0.27    $1.07     $0.60



                                       10
<PAGE>

Shareholders

         As of September 23, 2009, the approximate number of shareholders of
record was 439. 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.

Dividends

         We have never paid cash dividends on our 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.

NASDAQ Deficiency Notice

         On June 25, 2008, we received a deficiency letter from the NASDAQ Stock
Market, indicating that we had failed to comply with the minimum bid requirement
for continued inclusion under Marketplace Rule 4310(c)(4). Under the deficiency
notice, our common stock is subject to potential delisting because, for a period
of 30 consecutive business days, the bid price of the common stock has closed
below the minimum $1.00 per share requirement for continued inclusion. The
deadline for compliance with the rule was subsequently extended by Nasdaq to
October 9, 2009. If prior to that date the bid price of our common stock closes
at $1.00 per share or more for a minimum of 10 consecutive business days, Nasdaq
staff may provide written notification that we have achieved compliance with the
rule.

         We are using our best efforts to regain compliance with the minimum bid
price rule. However, there can be no assurance that compliance will be achieved
given recent historical performance of the common stock and the overall current
condition of financial and stock markets in the United States. If compliance is
not achieved and our stock is delisted, we expect that the common stock will
begin trading on the OTC bulletin board where there is no minimum bid
requirement.

       Securities Authorized for Issuance Under Equity Compensation Plans

         The following table shows information related to our equity
compensation plans as of June 30, 2009:

<TABLE>
<CAPTION>

                                        Number of                          Number of securities
                                     securities to be                       remaining available
                                       issued upon                          for future issuance
                                       exercise of      Weighted-average       under equity
                                       outstanding       exercise price     compensation plans
                                         options,        of outstanding         (excluding
                                       warrants and     options, warrants  securities reflected
                                          rights           and rights         in column (a))
          Plan Category                    (a)                 (b)                  (c)
----------------------------------- ------------------- ------------------ ----------------------
<S>                                 <C>                       <C>          <C>
Equity compensation plans
approved by security holders             960,104              $1.39              1,012,828

Equity compensation plans not
approved by security holders              20,000              $4.00                 -0-
                                    -------------------                    ----------------------
              Total                      980,104                                 1,012,828
                                    ===================                    ======================
</TABLE>

Description of Compensation Plans Not Approved by Security Holders

         On August 16, 2000, the Company granted 80,000 options to the licensor
of certain technology under a license agreement. At June 30, 2009, 20,000 of
these options remained outstanding. However, these remaining options expired by
their terms on September 1, 2009.



                                       11
<PAGE>

Recent Sales of Unregistered Securities

         We did not sell any securities without registration under the
Securities Act of 1933 during the period covered by this report.

Purchases of Equity Securities

         On September 3, 2003, our board of directors adopted and announced a
stock repurchase program for the expenditure of up to $500,000 to purchase our
common stock on the open market pursuant to regulatory restrictions governing
such repurchases. In December 2008, the board authorized an additional $250,000
for repurchases under the program. During fiscal year 2008, we purchased 258,569
shares for $280,440 under the program. In fiscal year 2009, we purchased 13,600
shares for $10,138 before discontinuing the program in order to reallocate cash
resources. We made no purchases of equity securities under the repurchase
program during the last quarter of fiscal year 2009.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

Overview

         Our principal business is the design, manufacture, marketing,
distribution and sales of physical medicine products and aesthetic products. We
manufacture and distribute a broad line of medical equipment including therapy
devices, medical supplies and soft goods, treatment tables and rehabilitation
equipment. Our line of aesthetic equipment includes aesthetic massage and
microdermabrasion devices, as well as skin care products. Our products are sold
to and used primarily by physical therapists, chiropractors, sports medicine
practitioners, podiatrists, plastic surgeons, dermatologists, aestheticians and
other aesthetic services providers. We operate on a fiscal year ending June 30.
For example, reference to fiscal year 2009 refers to the year ended June 30,
2009.

Recent Developments

         In fiscal year 2009, we introduced a new 2009-2010 product catalog to
our customers. With thousands of new products added to the new catalog as a
result of our acquisition of distributors in 2007, we have experienced a
significant increase in medical supply sales which we attribute to the catalog.
The acquisition of six of our top distributors allowed us to greatly expand our
product offering. The new catalog contains over 400 pages of products - more
than double our previous catalog offerings.

         We introduced the new V-Force vibration therapy device to the market in
the fourth fiscal quarter of fiscal year 2009. This new unit employs powerful,
whole-body vibration technology, which provides neuromuscular training to
increase strength, improve balance and enhance flexibility. Whole-body vibration
therapy has been the subject of extensive research for many years with numerous
clinical studies demonstrating its effectiveness in the areas of balance/fall
prevention, circulation, knee rehabilitation, low back pain, range of motion and
a host of other neuromuscular conditions.

         We also expanded our direct sales team from 36 sales representatives in
fiscal year 2008 to 50 sales representatives by September 2009. Our expanded
sales force now consists of 27 direct sales employees and 23 independent sales
representatives, helping extend our reach and grow market share. We expect to
continue to recruit experienced sales representatives and dealers as our
industry experiences an ongoing period of consolidation. In addition, we intend
to recruit additional independent distributors and seasoned direct sales
representatives in geographical areas where distribution has been lost or
diminished due to the consolidation activities in our industry.

         During fiscal year 2009, we undertook an aggressive internal campaign
to improve operating efficiencies. With the help of Vici Capital Partners, we
identified a number of opportunities to improve cash flows and operational
efficiencies, as well as to strengthen margins and reduce manufacturing and
other costs. These changes were specifically targeted at lowering transaction
costs, obtaining better pricing and terms from vendors and service providers,
streamlining customer service and production processes, and improving our sales
support functions. Implementation of all ideas generated through this campaign
is projected to yield net economic benefits of approximately $2,000,000 annually
by the end of fiscal year 2010.



                                       12
<PAGE>

How We Assess the Performance of Our Business

         We consider a variety of performance and financial measures in
assessing the performance of our business. The key measures for determining how
our business is performing are net sales, gross profit margin and selling,
general and administrative expense.

Net Sales

         Net sales constitute gross sales net of any returns and sales
discounts.

Gross Profit

         Gross profit is equal to our net sales minus our cost of goods sold.
Gross margin measures gross profit as a percentage of our net sales. Cost of
goods sold for manufactured products includes direct material and labor costs as
well as allocated indirect costs of labor and overhead. Cost of goods sold for
distributed products includes the direct cost of purchased products,
distribution center costs, and all freight costs incurred. The components of our
cost of goods sold may not be comparable to those of other manufacturers or
distributors of similar products within our industry.

         Our cost of goods sold is substantially higher in higher volume
quarters because cost of goods sold generally increases as net sales increase.
Changes in the mix of our products, such as changes in the proportion of
manufactured products, may also impact our overall cost of goods sold. We review
our inventory levels on an ongoing basis in order to identify slow-moving
products in inventory. We may offer incentives or mark-downs on these products.
The timing and level of markdowns are not seasonal in nature but are driven by
customer acceptance and sales. If we misjudge the market for our products, we
may be faced with excess inventories for some products and be required to mark
down those products in order to sell them, however, historically markdowns have
not been a material factor in our business.

Selling, General and Administrative Expense

         Selling, general and administrative expense includes administration,
share-based compensation and occupancy costs. These expenses do not generally
vary proportionally with net sales. As a result, selling, general and
administrative expense as a percentage of net sales is usually higher in lower
volume quarters and lower in higher volume quarters.

         Share-based compensation expense related to stock options was $30,524
and $14,292 for fiscal years 2009 and 2008, respectively. We granted options to
purchase an aggregate of shares 79,455 and 648,370 shares of common stock in
fiscal years 2009 and 2008, respectively. These and any future stock option
grants will increase our share-based compensation expense in fiscal year 2010
and in future fiscal years compared to fiscal year 2009. See "Critical
Accounting Policies".

Results of Operations

Fiscal Year 2009 Compared to Fiscal Year 2008

         The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this report.

Net Sales

         Net sales decreased less than 1%, or $185,616 to $32,406,892 in fiscal
year 2009, from $32,592,507 in fiscal year 2008. Sales were essentially even in
fiscal year 2009 when compared with the prior year, notwithstanding significant
turmoil in the credit and financial markets and the general economic environment
in the United States. Sales of medical supplies and soft goods increased as a
percentage of overall sales to 55.8% in fiscal year 2009, from 51.3% of sales in
2008. We believe that the introduction of our new product catalog in the first
quarter of fiscal year 2009 contributed to the increase in medical supply sales.
The new product catalog contains over 400 pages of products and is twice the
size of our previous catalog. Sales of capital equipment for both rehabilitation
and aesthetics markets experienced a reduction in fiscal year 2009 compared to
fiscal year 2008. This decrease was due primarily to the general downturn in the
economy. The decrease in capital equipment sales was mostly offset by higher
sales of catalog products, medical supplies and treatment tables in fiscal year
2009.


                                       13
<PAGE>

         Sales of manufactured physical medicine products represented
approximately 44% and 49% of our physical medicine product sales in fiscal years
2009 and 2008, respectively. Distribution of products manufactured by other
suppliers accounted for the balance of our physical medicine product sales in
those years. This is a significant change from the product mix prior to the
acquisitions in 2007. For example, in fiscal year 2007, sales of manufactured
physical medicine products represented approximately 76% of all of our physical
medicine product sales. The introduction of our new product catalog produced
increased demand for medical supplies, soft goods and distributed products in
fiscal year 2009, promoting this shift in product mix toward sales of the
distributed products.

         Sales of manufactured aesthetic products in fiscal years 2009 and 2008
represented approximately 83% and 87% of our aesthetic product sales,
respectively, with distributed products making up the balance.

         The majority of our sales revenues come from the sales of physical
medicine products, both manufactured and distributed. In fiscal year 2009, sales
of physical medicine products accounted for 91% of total sales, up from 89% in
fiscal year 2008. Chargeable repairs, billable freight revenue and other
miscellaneous revenue accounted for approximately 7% of total revenues in 2009
and 2008.

Gross Profit

         Gross profit increased approximately $268,500 to $12,410,455, or 38.3%
of net sales in fiscal year 2009, from $12,141,937 or 37.3% of net sales in
fiscal year 2008. The 100 basis points increase in gross margin as a percentage
of sales in fiscal year 2009 over the prior year is attributable primarily to
price increases implemented during the second fiscal quarter ended December 31,
2008. In addition, we implemented a number of refinements to our business
operations in fiscal year 2009 which lowered our costs through better pricing
and terms obtained from vendors. These refinements contributed to the
improvement in gross profit in fiscal year 2009. Gross margin in fiscal year
2008 was adversely affected by the sale of inventory of manufactured products in
inventory of the acquired dealers at the time of the acquisitions. These
products had been purchased from us and as a result of our acquisitions of the
dealers, we acquired products with a cost basis at the higher acquired dealer
cost. This had the effect of increasing our cost of goods sold for those
products by approximately $400,000 in fiscal year 2008 when compared to the
margin for those products had we been able to sell them at our stated cost basis
instead of the acquired cost basis.

Selling, General and Administrative Expenses

         Selling, general and administrative ("SG&A") expenses decreased
$2,763,478, or 20.5%, to $10,709,712, or 33.0% of net sales in fiscal year 2009,
from $13,473,190, or 41.3% of net sales in fiscal year 2008. The decrease in
SG&A expenses in fiscal year 2009 is primarily the result of our internal
aggressive cost reduction campaign to improve efficiencies. We targeted lowering
transaction costs, obtaining better pricing and terms from service providers,
streamlining customer service and production processes, and improving our sales
support functions. The impact of these changes on SG&A expenses for the year
ended June 30, 2009 included:

         o    $495,000 in lower selling expenses

         o    $1,474,000 in lower labor and operating costs

         o    $794,000 in lower general and administrative expenses

         Approximately $472,000, or 17.1%, of the reduction in labor and
operating costs in fiscal year 2009 resulted from the recording of a reversal of
an accrued liability resulting from the cancellation of retirement benefits
previously provided by contract to two executive officers, Kelvyn Cullimore, Jr.
and Larry Beardall. The benefits were cancelled when the employment agreements
in which they were granted were terminated in March 2009. Both executives
subsequently entered into new agreements with the Company in June 2009. The new
agreements do not include retirement benefits such as those that had been a part
of the terminated agreements.

Research and Development

         Research and Development ("R&D") expense decreased $361,405, or 26.7%,
to $993,338 in fiscal year 2009, from $1,354,743 in 2008. R&D expense also
decreased as a percentage of net sales in fiscal year 2009, to 3.1% from 4.2% of
net sales in fiscal year 2008. R&D costs are expensed as incurred. During fiscal
2009, we introduced the V-Force vibration therapy device and began an important
redesign of our main line of therapy products which is scheduled for completion
next summer. We expect to continue our commitment to developing innovative
products for the physical medicine market in fiscal year 2010 and in future
periods in order to position us for growth. We anticipate that R&D expense as a
percentage of net sales and in absolute terms will increase in 2010 to levels
similar to fiscal year 2008.




                                       14
<PAGE>

Pre-tax Income (Loss)

         Pre-tax income improved significantly in fiscal year 2009, to $185,260
compared to a pre-tax loss of $9,915,555 in fiscal year 2008. The improvement in
pre-tax income for fiscal year 2009 was a result in part of the reduction in
SG&A expenses of approximately $2,764,000. A significant portion, approximately
66.9%, of the net loss in fiscal year 2008 was due to $6,636,466 of goodwill
impairment. Higher gross profit, lower R&D expenses, and the elimination of
acquisition-related expenses of approximately $2,000,000 also contributed to the
improved operating results in fiscal year 2009. Additionally, expenses related
to increases in the allowance for doubtful accounts receivable and the reserve
for obsolete inventory decreased $648,000 in fiscal year 2009 as compared to
2008.

Income Tax Expense (Benefit)

         Income tax expense was $81,936 in fiscal year 2009, compared to income
tax benefit of $1,471,784 in fiscal year 2008. The effective tax rate for fiscal
year 2009 was 44.2% compared to 14.8% in 2008. The lower tax accrual rate in
2008 is a result of the non-deductibility of a significant portion of the
write-off of goodwill and certain other items.

Interest Expense, Net

         Interest expense, net decreased by $67,300 to $553,173 in fiscal year
2009 due to decreased borrowings and lower carrying balances on our bank line of
credit.

Net Income (Loss)

         Net income increased to $103,324 ($.01 per share) in fiscal year 2009,
compared to a net loss of $8,443,771 ($.62 per share) in fiscal year 2008. Major
factors contributing to the improvement in fiscal year 2009 were the reduction
in SG&A expenses of approximately $2,764,000, higher gross profit generated for
the year, lower R&D expenses and the elimination of $6,636,466 of goodwill
impairment incurred in fiscal year 2008.

Depreciation and Amortization Expense

         Depreciation and amortization expense decreased as a percentage of net
sales to 1.12% in fiscal year 2009 from 1.15% in fiscal year 2008, or $11,378.

Liquidity and Capital Resources

         We have financed operations through available cash reserves and
borrowings under a line of credit with a bank. Working capital was $4,217,187 as
of June 30, 2009, inclusive of the current portion of long-term obligations and
credit facilities, compared to working capital of $4,320,883 as of June 30,
2008.

Accounts Receivable

         Trade accounts receivable, net of allowance for doubtful accounts,
decreased $411,508, or 7.9% to $4,739,727 as of June 30, 2009, compared to
$5,151,235 as of June 30, 2008. Trade accounts receivable represent amounts due
from our dealer network as well as from medical practitioners and clinics. We
believe that our estimate of 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 agreed terms.

         As a result of increased distribution activity following the
acquisitions completed in fiscal year 2008, the character of the accounts
receivable and collection patterns have changed from prior years. We will
continue to carefully monitor our collection practices to ensure the allowance
estimates are adequate. Allowances for the retail accounts assumed in the
acquisitions include consideration of the historical experience of the acquired
companies.


                                       15
<PAGE>

Inventories

         Inventories, net of reserves, decreased $83,817 or 1.3%, to $6,199,251
as of June 30, 2009, compared to $6,283,068 as of June 30, 2008. As expected,
inventories began to reduce following consolidation of eight distribution points
to three central distribution facilities since the completion of the
acquisitions in 2007. In addition, the amount of inventory we carry fluctuates
each period based on the timing of large inventory purchases from overseas
suppliers.

Accounts Payable

         Accounts payable increased $371,681 or 26.1% to $1,795,520 as of June
30, 2009, from $1,423,839 as of June 30, 2008. The increase in accounts payable
is a result of the timing of our weekly payments to suppliers and the timing of
purchases of product components. Accounts payable are generally not aged beyond
the terms of our suppliers. We take advantage of available early payment
discounts when offered by our vendors.

Accrued Expenses

         Accrued expenses decreased $53,818 or 10.8%, to $446,327 as of June 30,
2009, compared to $500,145 as of June 30, 2008. Accrued expenses consist of
accrued real property taxes and personal property taxes, sales taxes liability,
accrued royalties, commissions, professional fees, directors fees, product
liability deductions, interest expense and miscellaneous other expenses.

Accrued Payroll and Benefit Expenses

         Accrued payroll and benefit expenses increased $14,705 or 3.6%, to
$426,623 as of June 30, 2009, compared to $411,918 as of June 30, 2008. The
increase in accrued payroll and benefit expenses is related to the number of
days within a pay period that require accrual as of the end of our fiscal year.

Cash and Cash Equivalents

         Our cash position as of June 30, 2008 was $141,714, a decrease of 50.9%
or $146,767 from cash of $288,481 as of June 30, 2008. We believe that improved
cash flows from operating activities will be generated through higher sales,
improved management of accounts receivable, reduction of current inventory
levels and reduction of operating expenses. We expect that cash flows from
operating activities, together with amounts available through an existing line
of credit facility, will be sufficient to cover operating needs in the ordinary
course of business for the next twelve months. If we experience an adverse
operating environment, including a further worsening of the general economy in
the United States, 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 terms favorable to the Company, or
at all.

Line of Credit

         During fiscal year 2009, we paid down the outstanding balance on our
line of credit with a bank by $1,215,669, leaving a remaining balance
outstanding of $4,602,651 as of June 30, 2009, compared to $5,818,320 as of June
30, 2008. The decrease in the line of credit was primarily the result of
improved collections of accounts receivable, an increase in accounts payable,
profits generated during fiscal year 2009 and cash flows from operating
activities.

         Interest on the line of credit is based on the 90-day LIBOR rate (1.1%
as of June 30, 2009) plus 4%, which as of June 30, 2009 equaled 5.1% per annum.
The line of credit is collateralized by accounts receivable and inventories, as
well as a security interest in our headquarters facility in Salt Lake City,
Utah. Borrowing limitations are based on approximately 45% of eligible inventory
and up to 80% of eligible accounts receivable, up to a maximum credit facility
of $8,000,000. Interest payments on the line are due monthly. As of June 30,
2009, the borrowing base was approximately $6,300,000, resulting in
approximately $1,700,000 available on the line. The line of credit is renewable
on October 31, 2009 and includes covenants requiring us to maintain certain
financial ratios. As of June 30, 2009, we were in compliance with these loan
covenants.

         The current ratio was 1.5 to 1 as of June 30, 2009 compared to 1.5 to 1
as of June 30, 2008. Current assets represented 70% of total assets as of June
30, 2009 and 2008.


                                       16
<PAGE>

Debt

         Long-term debt excluding current installments totaled $2,881,659 as of
June 30, 2009, compared to $3,046,000 as of June 30, 2008. 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 $2,970,000 with monthly principal and interest payments of
$32,039. For a more complete explanation of the long-term debt, see Note 6 in
the financial statements.

Inflation and Seasonality

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

         Our business operations are not materially affected by seasonality
factors.

Recent Accounting Pronouncements

         In May 2009, the FASB issued SFAS No. 165, Subsequent Events ("SFAS No.
165"). SFAS No. 165 establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. SFAS No. 165 is
effective for interim or annual periods ending after June 15, 2009. We adopted
SFAS No. 165 in the fourth quarter of fiscal 2009. See note 1(t) to the
consolidated financial statements.

         In April 2008, the FASB issued FSP FAS 142-3, "Determination of the
Useful Life of Intangible Assets" ("FSP FAS 142-3"). FSP FAS 142-3 amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under SFAS
Statement No. 142, Goodwill and Other Intangible Assets. FSP FAS 142-3 also
requires expanded disclosure related to the determination of intangible asset
useful lives. FSP FAS 142-3 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. We are currently evaluating the impact that the adoption of FSP
FAS 142-3 will have on our consolidated results of operation, cash flows or
financial condition.

         In December 2007, SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51, was issued which
changes the accounting and reporting for minority interests. Minority interests
will be recharacterized as non-controlling interests and will be reported as a
component of equity separate from the parent's equity, and purchases or sales of
equity interests that do not result in a change in control will be accounted for
as equity transactions. In addition, net income attributable to the
non-controlling interest will be included in net income and, upon a loss of
control, the interest sold, as well as any interest retained, will be recorded
at fair value, with any gain or loss recognized in net income. SFAS No. 160 is
effective for the Company beginning July 1, 2009 and will apply prospectively,
except for the presentation and disclosure requirements, which will apply
retrospectively. We believe the adoption of SFAS No. 160 will not have a
material impact on our financial statements.

         In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements ("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a
framework for measuring fair value, and expands disclosure requirements
regarding fair value measurement. Where applicable, this statement simplifies
and codifies fair value related guidance previously issued within United States
of America generally accepted accounting principles. SFAS No. 157 is effective
for financial statements issued for fiscal years beginning after November 15,
2007 for financial assets and November 15, 2008 for non-financial assets, and
interim periods within those fiscal years. We adopted SFAS No. 157 on July 1,
2008 for our financial assets and liabilities and on July 1, 2009 for
non-financial assets with no material impact on our consolidated financial
statements.

Critical Accounting Policies

         Management's discussion and analysis of financial condition and results
of operations is based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires estimates
and judgments that affect the reported amounts of our assets, liabilities, net
sales and expenses. Management bases estimates on historical experience and
other assumptions it believes to be reasonable given the circumstances and
evaluates these estimates on an ongoing basis. Actual results may differ from
these estimates under different assumptions or conditions.


                                       17
<PAGE>

         We believe that the following critical accounting policies involve a
higher degree of judgment and complexity. See Note 1 to our consolidated
financial statements for the fiscal year ended June 30, 2009 for a complete
discussion of our significant accounting policies. The following reflect the
significant estimates and judgments used in the preparation of our consolidated
financial statements.

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
recorded 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;

         o    Technological innovations; and

         o    Character of the inventory as a distributed item, finished
              manufactured item or raw material.

         Any modifications to estimates of inventory valuation reserves are
reflected in the cost of goods sold within the statements of operations during
the period in which such modifications are determined necessary by management.
As of June 30, 2009 and 2008, our inventory valuation reserve balance, which
established a new cost basis, was $338,788 and $337,718, respectively, and our
inventory balance was $6,199,251 and $6,283,068, net of reserves, respectively.

Revenue Recognition

         Historically, the majority of our product sales were to customers who
were independent distributors. In fiscal year 2008, as a result of acquiring six
of our top distributors, a significant portion of our sales were generated
through our new direct sales force. Our sales force and distributors sell our
products to end users, including physical therapists, professional trainers,
athletic trainers, chiropractors, medical doctors and aestheticians. With the
acquisition of the key distributors, we effectively reduced our dependence on
sales by 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 collectability of accounts receivable. In
doing so, we analyze historical bad debt trends, 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 $4,739,727 and $5,151,235, net of allowance for doubtful accounts of
$398,610 and $411,057, as of June 30, 2009 and 2008, respectively.

Deferred Income Tax Assets

         In August 2009 and August 2008, our management performed an in-depth
analysis of the deferred income tax assets and their recoverability based on the
criteria of SFAS No. 109. Based on several factors, including our strong
earnings history of pre-tax profit averaging over $500,000 per year in 16 of the
last 19 fiscal years and the fact that the principal causes of the loss in
fiscal 2008 (goodwill impairment and expenses resulting from six acquisitions)
are considered to be unusual and are not expected to recur in the near future,
we believe that it is more likely than not that all of the net deferred income
tax assets will be realized.



                                       18
<PAGE>

Business Plan and Outlook

         During fiscal year 2009, we achieved significant improvement in our
operating results compared to the prior fiscal year. In fiscal year 2010, we
will continue to pursue a focused strategy to improve sales and overall
operations that includes the following elements:

         o    strengthening distribution channels by adding direct sales
              representatives and dealers in key locations

         o    developing sales with large national accounts and group purchasing
              organizations

         o    refining operations by continuing to reduce overhead costs and
              automating processes

         o    enhancing product profit margins through improved manufacturing
              processes and negotiating better pricing of components with
              vendors

         o    developing and introducing new, state-of-the-art products for
              future growth

         Our goal in implementing this strategy is to improve short-term
profitability without jeopardizing long-term growth.

         The landscape of our primary market, the physical medicine marketplace,
continues to change. Past years saw consolidation among manufacturers and
distributors including our own acquisitions completed in fiscal years 2007 and
2008. More recently, two additional significant changes have taken place. DJO
announced the closure of its Chattanooga Group operations and the redistribution
of those manufacturing, R&D and support functions to other DJO facilities, in
and out of the United States. The effect is that the full operations of the
former Chattanooga Group have been reduced to a product brand sold by DJO
through non-proprietary distribution channels. In addition, DJO agreed to sell
the catalog division of its Empi subsidiary to Patterson Medical (Sammons
Preston). This decision essentially eliminates Empi as a significant catalog
competitor and further reduces competition in the market. These consolidations
combined with prior year consolidations and continuing declines in the number of
independent distributors has significantly narrowed distribution channels in our
market. At the present time, there remain only two companies with a direct sales
force selling proprietary and distributed products. Those companies are
Dynatronics and Patterson Medical through its Sammons Preston subsidiary. All
other distributors are catalog companies with no direct sales force, or
manufacturers continuing to rely on a declining network of independent dealers.
In the past year we have reinforced our direct sales team to include 27 direct
sales employees and 23 independent sales representatives. We believe we have the
best trained and most knowledgeable sales force in the industry. The recent
changes within our market provide a unique opportunity for us to grow market
share in the coming years through recruitment of the best sales representatives
and dealers.

         The September 2008 introduction of our first consolidated catalog and
pricing schedule provided a powerful sales tool that is helping our sales
efforts with direct sales representatives and independent distributors who use
either a private labeled version or the proprietary version of the catalog. We
are focusing specific efforts on recruiting additional independent distributors
and seasoned direct sales representatives in geographical areas where
distribution has been lost or diminished due to consolidation within our
industry.

         With the broad line of products we now offer and a strong sales force
that we expect will only grow stronger in the coming year, we believe that we
are uniquely positioned to develop relationships with Group Purchasing
Organizations (GPO's) and large chains of hospitals and clinics that purchase
only on contract. This is a segment of business which was previously closed to
us because we were not an approved vendor with the various GPO's and national or
regional chains of care facilities. With the broader offering of products now
available through our catalog, we are better able to compete for this high
volume business.

         To further our efforts to recruit the best direct sales representatives
and dealers as well as to better appeal to the large GPO's and national
customers, we will continue to improve efficiencies of our operations and the
sales support for the industry. Chief among those changes will be the
introduction of our first true e-commerce solution. This launch is scheduled to
occur in the second quarter of fiscal year 2010. With the introduction of this
e-commerce solution, customers will be able to more easily place orders and
obtain information about their accounts. Sales representatives will be more
effective with an abundance of information available to them electronically. Not
only is our e-commerce solution expected to improve sales, but it will
significantly reduce our transactional costs thus enabling us to accommodate
higher sales without significantly increasing overhead.


                                       19
<PAGE>

         We will also continue to focus on new product innovation. The
introduction of V-Force in fiscal year 2009 once again testifies of our
commitment to innovation as we are the first to introduce this technology to the
rehabilitation markets we serve. It is expected that V-Force will be an
important contributor to sales and profits in fiscal year 2010. Several new
products are currently under development and are scheduled for introduction in
the summer of 2010. The commitment to innovation of high quality products has
been a hallmark of Dynatronics and will continue to be throughout the coming
year.

         In April 2008, we introduced the new Synergie Elite aesthetic product
line, representing the first redesign of our popular aesthetic devices since
their original introduction almost 10 years ago. We believe that this new line
of products remains the best value on the market. While the current economic
conditions have dampened demand for large capital equipment purchases like the
Synergie Elite products, we plan to seek strategic partnerships, both domestic
and international, to help maintain the sales momentum from the introduction of
this revised product line. As the economy begins to improve over the coming
year, we expect to see increased sales of these higher margin products. In the
meantime, expenses related to this division are being kept to a minimum.

         We have long believed that international markets present an untapped
potential for growth and expansion. Adding new distributors in several countries
will be the key to this expansion effort. Our past efforts to improve
international marketing have yielded only marginal improvements. We remain
committed, however, to finding the most cost effective ways to expand our
markets internationally. Over the coming year our efforts will be focused on
partnering with key manufacturers and distributors interested in our product
line or technology. Our Salt Lake City facilities, where all electrotherapy,
ultrasound, traction, light therapy and Synergie products are manufactured, are
certified to ISO 13485, an internationally recognized standard of excellence in
medical device manufacturing. This designation is an important requirement in
obtaining the CE Mark certification, which allows us to market our products in
the European Union and other foreign countries.

         Refining our business model for supporting sales representatives and
distributors also will be a focal point of operations. We will continue to
evaluate the most efficient ways to maintain our satellite sales offices and
warehouses. In addition, more emphasis is being placed on pricing management to
protect margins for both manufactured and distributed products. The ongoing
refinement of this model is expected to yield further efficiencies that will
better achieve sales goals while at the same time reduce expenses. Through our
agreement with Vici Capital Partners over this past year, we have identified
over $2,000,000 of efficiency improvements that either have already been
implemented or that we plan to implement during fiscal year 2010 to drive
greater profitability. This is particularly important given the slow market for
capital products associated with the weak national economy.

         While sales in fiscal year 2009 were even with fiscal year 2008, the
trends have favored non-capital equipment and supplies while the demand for
capital equipment has been soft. Yet, the sale of our manufactured capital
equipment remains the largest contributor to margin generation. Therefore, we
have placed renewed emphasis on improving manufacturing operations including
considering more offshore manufacturing of components as well as streamlining
manufacturing operations in Utah and Tennessee. Past experience has shown that
when recessionary pressures start to subside, the pent up demand for capital
equipment will be significant. Expectations of the recessionary grip loosening
during calendar 2010 lead us to a belief that capital equipment sales will start
to rebound toward the end of fiscal year 2010. All our efforts to trim back
during these difficult times should make us a leaner operation when demand ramps
up once again.

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

         o    Reinforcing distribution through a strategy of recruiting direct
              sales representatives and working closely with the most successful
              distributors of capital equipment.

         o    Improving sales by focusing sales strategies on pursuing business
              opportunities with Group Purchasing Organizations and large
              national and regional accounts.

         o    Introducing and refining our first e-commerce solution in order to
              facilitate business opportunities and reduce transactional costs.

         o    Significantly improving operational efficiencies through
              implementation of ideas generated by the operational analysis done
              with the assistance of Vici Capital. These ideas include lowering
              manufacturing and transactional costs, automating processes,
              redefining policies and procedures and working to make every
              customer a profitable customer.

         o    Strengthening pricing management and procurement methodologies.

         o    Minimizing expense associated with the Synergie product line until
              the economy improves and demand for capital equipment re-emerges.
              In the meantime seek additional independent distributors and
              strategic partnerships.



                                       20
<PAGE>

         o    Focusing international sales efforts on identifying key
              distributors and strategic partners who could represent the
              product line, particularly in Europe.

         o    Continuing development of new, state-of-the-art products, both
              high-tech and commodity, in fiscal year 2010, for both the
              rehabilitation and aesthetic markets.

         o    Exploring strategic business alliances that will leverage and
              complement the Company's competitive strengths, increase market
              reach and supplement capital resources.


Item 8. Financial Statements and Supplementary Data


       Report of Independent Registered Public Accounting Firm............. F-1


       Consolidated Balance Sheets as of  June 30, 2009 and 2008........... F-2


       Consolidated Statements of Operations for the years ended
       June 30, 2009 and 2008.............................................. F-3


       Consolidated Statements of Stockholders' Equity for the
       years ended June 30, 2009 and 2008.................................. F-4


       Consolidated Statements of Cash Flows for the years ended
       June 30, 2009 and 2008.............................................. F-5


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






                                       21
<PAGE>

                                                REPORT OF INDEPENDENT REGISTERED
                                                          PUBLIC ACCOUNTING FIRM





To the Board of Directors of
Dynatronics Corporation

We have audited the consolidated  balance sheets of Dynatronics  Corporation and
subsidiary  (collectively,  the  Company) as of June 30, 2009 and 2008,  and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for the years then ended. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
financial  statements  are free of  material  misstatement.  The  Company is not
required  to have,  nor were we engaged to  perform,  an audit of the  Company's
internal control over financial reporting.  Our audit included  consideration of
internal  control  over  financial  reporting  as a basis  for  designing  audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the  effectiveness  of the Company's  internal  control
over  financial  reporting.  Accordingly,  we express no such opinion.  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 consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of the
Company  as of June 30,  2009 and  2008,  and the  consolidated  results  of its
operations  and its cash  flows  for the years  then  ended in  conformity  with
accounting principles generally accepted in the United States of America.




/s/ Tanner LC


Salt Lake City, Utah
September 25, 2009


                                      F-1

<PAGE>

                             DYNATRONICS CORPORATION
                           Consolidated Balance Sheets
                          As of June 30, 2009 and 2008


                       Assets                           2009            2008
                                                    ------------   -------------

Current assets:
  Cash and cash equivalents                         $    141,714        288,481
  Trade accounts receivable, less allowance
   for doubtful accounts of $398,610 as
   of June 30, 2009 and $411,057 as of
   June 30, 2008                                       4,739,727      5,151,235
  Other receivables                                       99,110         63,487
  Inventories, net                                     6,199,251      6,283,068
  Prepaid expenses                                       333,273        619,471
  Prepaid income taxes                                    23,210         98,644
  Deferred income tax asset - current                    466,783        477,300
                                                    ------------   -------------

      Total current assets                            12,003,068     12,981,686

Property and equipment, net                            3,349,239      3,527,153
Intangible asset, net                                    541,870        631,181
Other assets                                             359,171        359,748
Deferred income tax asset - noncurrent                   833,941        928,051
                                                    ------------   -------------

      Total assets                                  $ 17,087,289     18,427,819
                                                    ============   =============

      Liabilities and Stockholders' Equity

Current liabilities:
  Current installments of long-term debt            $    323,713        297,413
  Line of credit                                       4,602,651      5,818,320
  Warranty reserve                                       191,047        209,168
  Accounts payable                                     1,795,520      1,423,839
  Accrued expenses                                       446,327        500,145
  Accrued payroll and benefit expenses                   426,623        411,918
                                                    -----------    -------------

      Total current liabilities                        7,785,881      8,660,803

Long-term debt, net of current installments            2,881,659      3,046,000
Deferred compensation                                          -        455,377
                                                    ------------   -------------

      Total liabilities                               10,667,540     12,162,180
                                                    ------------   -------------

Commitments and contingencies

Stockholders' equity:
   Common stock, no par value.  Authorized
     50,000,000 shares; issued 13,675,387
     shares as of June 30, 2009 and
     13,670,807 shares as of June 30, 2008             7,916,699      7,865,913
   Accumulated deficit                                (1,496,950)    (1,600,274)
                                                    ------------   -------------

      Total stockholders' equity                       6,419,749      6,265,639
                                                    ------------   -------------
      Total liabilities and stockholders' equity    $ 17,087,289     18,427,819
                                                    ============   =============


See accompanying notes to financial statements.

                                       F-2

<PAGE>
                             DYNATRONICS CORPORATION
                      Consolidated Statements of Operations
                   For the Years Ended June 30, 2009 and 2008



                                                        2009            2008
                                                    ------------   -------------

Net sales                                           $ 32,406,891     32,592,507
Cost of sales                                         19,996,436     20,450,570
                                                    ------------   -------------
      Gross profit                                    12,410,455     12,141,937

Selling, general, and administrative expenses         10,709,712     13,473,190
Research and development expenses                        993,338      1,354,743
Goodwill impairment                                            -      6,636,466
                                                    ------------   -------------
      Operating income (loss)                            707,405     (9,322,462)
                                                    ------------   -------------

Other income (expense):
   Interest income                                         7,423          9,610
   Interest expense                                     (553,173)      (620,473)
   Other income, net                                      23,605         17,770
                                                    ------------   -------------
      Total other income (expense)                      (522,145)      (593,093)
                                                    ------------   -------------

      Income (loss) before income taxes                  185,260     (9,915,555)

Income tax (provision) benefit                           (81,936)     1,471,784
                                                    ------------   -------------

      Net  income (loss)                            $    103,324     (8,443,771)
                                                    ============   =============

      Basic net income (loss) per common share      $       0.01          (0.62)

      Diluted net income (loss) per common share    $       0.01          (0.62)


Weighted-average basic and diluted common
shares outstanding:

      Basic                                           13,665,423     13,609,880
      Diluted                                         13,667,148     13,609,880





See accompanying notes to financial statements.

                                       F-3



<PAGE>
<TABLE>
<CAPTION>
                                             DYNATRONICS CORPORATION
                                 Consolidated Statements of Stockholders' Equity
                                   For the Years Ended June 30, 2009 and 2008


                                                                                                     Total
                                                       Number         Common       Accumulated    stockholders'
<S>                                                 <C>            <C>             <C>            <C>
Balances as of June 30, 2007                          10,308,522   $  4,227,147       6,843,497      11,070,644

Issuance of common stock upon exercise
  of employee stock options                              251,499        208,345               -         208,345

Income tax benefit disqualifying disposition
  of employee stock options                                    -          4,195               -           4,195

Redemption of common stock                              (258,569)      (280,440)              -        (280,440)

Common stock issued for compensation                     307,764        294,008               -         294,008

Stock option based compensation                                -         14,292               -          14,292

Issuance of common stock in business
   acquisitions                                        3,061,591      3,398,366               -       3,398,366

Net loss                                                       -              -      (8,443,771)     (8,443,771)
                                                    ------------   -------------   ------------   -------------

Balances as of June 30, 2008                          13,670,807      7,865,913      (1,600,274)      6,265,639

Redemption of common stock                               (13,600)       (10,138)              -         (10,138)

Common stock issued for compensation                      18,180         30,400               -          30,400

Stock option based compensation                                -         30,524               -          30,524

Net income                                                     -              -         103,324         103,324
                                                    ------------   -------------   ------------   -------------

Balances as of June 30, 2009                          13,675,387   $  7,916,699      (1,496,950)      6,419,749
                                                    ============   =============   ============   =============
</TABLE>

See accompanying notes to financial statements.

                                                       F-4



<PAGE>
                             DYNATRONICS CORPORATION
                      Consolidated Statements of Cash Flows
                   For the Years Ended June 30, 2009 and 2008

                                                        2009           2008
                                                    ------------   -------------
Cash flows from operating activities:
  Net income (loss)                                 $    103,324     (8,443,771)
  Adjustments to reconcile net income (loss)
    to net cash provided by (used in)
    operating activities:
      Depreciation and amortization of
        property and equipment                           363,627        375,005
      Amortization of intangible asset                    89,311         92,011
      Gain on disposal of assets                          (2,183)             -
      Stock-based compensation expense                    60,924        308,300
      Goodwill impairment                                      -      6,636,466
      Deferred income tax asset, net                     104,627     (1,473,718)
      Provision for doubtful accounts                     48,000        480,000
      Provision for inventory obsolescence                72,000        288,000
      Provision for warranty reserve                     241,808        270,124
      Provision (gain) for deferred compensation        (455,377)        34,907
      Change in operating assets and liabilities:
        Receivables                                      327,885       (285,958)
        Inventories                                       85,619        (64,445)
        Prepaid expenses and other assets                286,775       (119,852)
        Accounts payable and accrued expenses             72,639     (1,235,410)
        Prepaid income taxes                              97,269         (1,748)
        Income tax payable                               (21,836)             -
                                                    ------------   -------------

           Net cash provided by (used in)
           operating activities                        1,474,412     (3,140,089)
                                                    ------------   -------------

Cash flows from investing activities:
  Capital expenditures                                  (186,130)      (335,899)
  Business acquisitions                                        -     (2,852,664)
  Proceeds from sale of assets                             2,600              -
                                                    ------------   -------------

           Net cash used in investing activities        (183,530)    (3,188,563)
                                                    ------------   -------------

Cash flows from financing activities:
  Proceeds from issuance of long-term debt                29,472        104,401
  Principal payments on long-term debt                  (241,314)      (284,598)
  Net change in line of credit                        (1,215,669)     5,568,320
  Proceeds from issuance of common stock                       -        208,345
  Redemption of common stock                             (10,138)      (280,440)
                                                    ------------   -------------

           Net cash provided by (used in)
           financing activities                       (1,437,649)     5,316,028
                                                    ------------   -------------

           Net change in cash and cash equivalents      (146,767)    (1,012,624)

Cash and cash equivalents at beginning of year           288,481      1,301,105
                                                    ------------   -------------

Cash and cash equivalents at end of year            $    141,714        288,481
                                                    ============   =============

Supplemental disclosures of cash flow information:
  Cash paid for interest                            $    562,457        598,239
  Cash paid for income taxes                              36,828         16,461
Supplemental disclosure of non-cash investing and
financing activities:
  Common stock issued for directors fees                   8,000          8,000
  Stock-based compensation - see note 1(o)
   for details
  Business acquisitions disclosure see note 14
   for details

See accompanying notes to financial statements.

                                       F-5

<PAGE>

                             DYNATRONICS CORPORATION

                   Notes to Consolidated Financial Statements

                             June 30, 2009 and 2008



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

       (a)    Description of Business

              Dynatronics   Corporation  (the  Company),   a  Utah  corporation,
              manufactures,  markets,  distributes  and  sells 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.

       (b)    Principles of Consolidation

              The  consolidated  financial  statements  include the accounts and
              operations  of  Dynatronics   Corporation  and  its  wholly  owned
              subsidiary, Dynatronics Distribution Company, LLC. All significant
              intercompany   account   balances  and   transactions   have  been
              eliminated in consolidation.

       (c)    Cash and Cash Equivalents

              Cash  equivalents  include  all  highly  liquid  investments  with
              maturities  of three months or less at the date of purchase.  Also
              included  within cash  equivalents  are deposits  in-transit  from
              banks for payments  related to  third-party  credit card and debit
              card transactions.

       (d)    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.

       (e)    Trade Accounts Receivable

              Trade accounts  receivable are recorded at the invoiced amount and
              do not bear interest  although a finance  charge may be applied to
              such  receivables  that are past the due date.  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 a
              combination  of  statistical  analysis,   historical  collections,
              customers' current creditworthiness, age of the receivable balance
              both  individually  and  in the  aggregate  and  general  economic
              conditions  that may affect  the  customer's  ability to pay.  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.  Recoveries of receivables  previously charged
              off are recognized when payment is received.  The Company does not
              have  any   off-balance-sheet   credit  exposure  related  to  its
              customers.

       (f)    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 3 to 7 years.


                                      F-6


<PAGE>

       (g)    Goodwill

              Goodwill represents the excess of the purchase price over the fair
              value of assets of an acquired  business.  Goodwill and intangible
              assets acquired in business combinations and determined to have an
              indefinite  useful life are not amortized,  but instead tested for
              impairment at least annually and whenever  circumstances  indicate
              an  impairment  may exist per  Statement of  Financial  Accounting
              Standards (SFAS) No. 142, Goodwill and Other Intangibles.

              As of June 30, 2008,  the Company  performed  the initial phase of
              its  impairment  evaluation  by comparing the fair market value of
              its single  reporting  entity to its carrying  value.  The primary
              factor  in  arriving  at  a  fair  market  value  was  the  market
              capitalization of the Company. As the carrying amount exceeded the
              fair  value,  the  Company  performed  the  second  phase  of  its
              impairment  evaluation  to calculate  impairment  and as a result,
              recorded a pre-tax  goodwill  impairment  charge of  approximately
              $6,600,000.  As a result of the impairment charge, goodwill has no
              net value recorded in the accompanying financial statements.

        (h)   Long-Lived Assets

              The Company evaluates its long-lived assets,  such as property and
              equipment  in  accordance  with SFAS No. 144,  Accounting  for the
              Impairment of Long-Lived  Assets.  Long-lived  assets 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 are  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.

        (i)   Intangible Assets

              Cost associated  with the acquisition of trademarks,  trade names,
              license  rights and  non-compete  agreements are  capitalized  and
              amortized using the straight-line method over periods ranging from
              3 months to 15 years.

        (j)   Revenue Recognition

              The  Company  recognizes  revenue  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.

       (k)    Research and Development Costs

              Direct research and development costs are expensed as incurred.


       (l)    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.


                                      F-7

<PAGE>

       (m)    Earnings per Common Share

              Basic  earnings  (loss) per common share  represents the amount of
              earnings  (loss) for the period  available to each share of common
              stock outstanding  during the reporting  period.  Diluted earnings
              (loss) per common  share is the amount of earnings  (loss) 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.

              The reconciliation between the basic and diluted  weighted-average
              number of common shares for the years ended June 30, 2009 and 2008
              is summarized as follows:

                                                          2009          2008
                                                      -----------    -----------
              Basic weighted-average number
              of common shares outstanding
              during the year                          13,665,423    13,609,880
              Weighted-average number of
              dilutive common stock
              options outstanding during
              the year                                      1,725             -
                                                      -----------    -----------
              Diluted weighted-average
              number of common and common
              equivalent shares outstanding
              during the year                          13,667,148    13,609,880
                                                      ===========    ===========

              Outstanding options not included in the computation of diluted net
              income (loss) per share total 1,033,368 and 719,698 as of June 30,
              2009 and  2008,  respectively,  because  to do so would  have been
              antidilutive.

       (n)    Income Taxes

              The Company  recognizes  an asset or  liability  for the  deferred
              income tax consequences of all temporary  differences  between the
              tax basis of assets and liabilities and their reported  amounts in
              the consolidated  financial statements that will result in taxable
              or deductible amounts in future years when the reported amounts of
              the assets and liabilities are recovered or settled.  Accruals for
              uncertain tax  positions  are provided for in accordance  with the
              requirements  of FIN No. 48,  Accounting for Uncertainty in Income
              Taxes - An  interpretation  of SFAS No. 109. Under FIN No. 48, the
              Company may  recognize  the tax  benefits  from an  uncertain  tax
              position only if it is more-likely-than-not  that the tax position
              will be sustained on examination by the taxing authorities,  based
              on  the  technical  merits  of  the  position.  The  tax  benefits
              recognized in the financial statements from such a position should
              be measured  based on the largest  benefit that has a greater than
              50% likelihood of being realized upon ultimate settlement. Fin No.
              48 also provides  guidance on  derecognition  of income tax assets
              and liabilities, classification of current and deferred income tax
              assets and  liabilities,  accounting  for interest  and  penalties
              associated  with  tax  positions,   and  income  tax  disclosures.
              Judgment is required in assessing the future tax  consequences  of
              events that have been  recognized in the  financial  statements or
              tax returns.  Variations in the actual outcome of these future tax
              consequences  could  materially  impact  the  Company's  financial
              position, results of operations and cash flows.


                                      F-8

<PAGE>

       (o)    Stock-Based Compensation

              The Company  accounts for  stock-based  compensation in accordance
              with SFAS No. 123(R),  Share-Based  Payment.  Under the fair value
              recognition provision of this statement,  stock-based compensation
              cost is  measured at the grant date based on the fair value of the
              award and is  recognized  as expense over the  applicable  vesting
              period  of the  stock  award  (generally  five  years)  using  the
              straight-line method.

              The  Company   recognized  $60,924  and  $312,495  in  stock-based
              compensation   for  the  years  ended  June  30,  2009  and  2008,
              respectively,  as selling, general, and administrative expenses in
              the  consolidated   statements  of  operations.   The  stock-based
              compensation  includes amounts for both restricted stock and stock
              options under SFAS No. 123(R).

       (p)    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.  The Company  maintains its cash in
              bank deposit accounts which at times may exceed federally  insured
              limits.  The  Company  has  not  experienced  any  losses  in such
              accounts.   The  Company   believes  it  is  not  exposed  to  any
              significant credit risks on cash or cash equivalents.

       (q)    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 its sales into physical  medicine  products and
              aesthetic products. Physical medicine products made up 91% and 89%
              of net  sales  for  the  years  ended  June  30,  2009  and  2008,
              respectively.  Aesthetics  products made up 3% and 4% of net sales
              for  the  years  ended  June  30,  2009  and  2008,  respectively.
              Chargeable  repairs,  billable  freight  and  other  miscellaneous
              revenue  account for the remaining 6% and 7% of total revenues for
              the years ended June 30, 2009 and 2008, respectively.

       (r)    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 and equipment;
              valuation   allowances   for   receivables,   income  taxes,   and
              inventories;  accrued  product  warranty  reserve;  and  estimated
              recoverability of intangible  assets.  Actual results could differ
              from those estimates.

        (s)   Advertising Costs

              Advertising  costs are expensed as incurred.  Advertising  expense
              for the  years  ended  June 30,  2009  and 2008 was  approximately
              $288,100 and $286,700, respectively.


                                      F-9

<PAGE>

       (t)    Subsequent Events

              The Company evaluated events occurring between the end of its most
              recent fiscal year and September 25, 2009, the date the financials
              statements were issued.

 (2)   Inventories

       Inventories consist of the following as of June 30:

                                                        2009            2008
                                                    ------------   -------------
             Raw materials                          $  2,523,375      2,984,189
             Finished goods                            4,014,664      3,636,597
             Inventory reserve                          (338,788)      (337,718)
                                                    ------------   -------------
                                                    $  6,199,251      6,283,068
                                                    ============   =============

(3)    Property and Equipment

       Property and equipment consist of the following as of June 30:

                                                        2009            2008
                                                    ------------   -------------
             Land                                   $    354,743        354,743
             Buildings                                 3,691,364      3,682,504
             Machinery and equipment                   1,731,556      1,661,962
             Office equipment                          1,327,379      1,283,821
             Vehicles                                    247,892        188,148
                                                    ------------   -------------
                                                       7,352,934      7,171,178
             Less accumulated depreciation
             and amortization                          4,003,695      3,644,025
                                                    ------------   -------------
                                                    $  3,349,239      3,527,153
                                                    ============   =============

(4)    Product Warranty Reserve

       A reconciliation  of the changes in the product warranty reserve consists
       of the following for the fiscal year ended as of June 30:

                                                        2009            2008
                                                    ------------   -------------
             Beginning product warranty
             reserve balance                        $    209,168        208,000
             Warranty repairs                           (241,808)      (280,746)

             Warranties issued                           251,028        232,077
             Changes in estimated warranty costs         (27,341)        49,837
                                                    ------------   -------------
                  Ending product warranty
                  reserve balance                   $    191,047        209,168
                                                    ============   =============

(5)    Line of Credit

       The Company has a revolving  line of credit  facility  with a  commercial
       bank in the amount of $8,000,000.  Borrowing limitations are based on 45%
       of eligible inventory and up to 80% of eligible accounts  receivable.  As
       of June 30, 2009 and 2008,  the  outstanding  balance  was  approximately
       $4,600,000  and   $5,800,000,   respectively.   The  line  of  credit  is
       collateralized by inventory and accounts receivable and bears interest at
       a rate based on the bank's prime rate.  The interest rate was 5.1% and 6%
       as of June 30,  2009 and  2008,  respectively.  This line is  subject  to
       annual  renewal  and  matures on October 31,  2009.  Accrued  interest is
       payable monthly.


                                      F-10

<PAGE>

       The  Company's  revolving  line of credit  agreement  includes  covenants
       requiring the Company to maintain certain  financial  ratios.  As of June
       30, 2009, the Company was in compliance with its loan covenants.

 (6)   Long-Term Debt

       Long-term debt consists of the following as of June 30:

                                                        2009           2008
                                                    ------------   -------------

           9.11% promissory note secured by
           building, maturing December 2017,
           payable in monthly installments
           beginning at $11,388                     $  1,353,048      1,453,372

           6.44% promissory note secured by
           trust deed on real property,
           maturing January 2021, payable
           in monthly installments of $13,278          1,298,338      1,371,479

           6.21% promissory note secured by a
           trust deed on real property,
           maturing November 2013, payable in
           decreasing installments currently
           at $7,373                                     321,257        383,911

           12.17% promissory note secured by
           fixed assets, payable in monthly
           installments of $2,338 through
           May 2014                                       98,633         79,692

           5% promissory note unsecured,
           payable in monthly installments of
           $3,660 through February 2011                   73,802              -

           7.95% promissory note secured by
           fixed assets, payable in monthly
           installments of $724 through July
           2013                                           29,472              -

           10.64% promissory note secured by
           fixed assets, payable in monthly
           installments of $448 through December
           2012                                           15,793              -

           16.35% promissory note secured by
           fixed assets, payable in monthly
           installments of $409 through
           October 2011                                    9,458         12,534

           9.69% promissory note secured by
           fixed assets, payable in monthly
           installments of $318 through
           October 2011                                    5,571              -

           5.84% promissory note secured by a
           trust deed on real property, payable
           in monthly installments of $8,669
           through November 2008                               -         42,425
                                                    ------------   -------------
              Total long-term debt                     3,205,372      3,343,413

           Less current installments                     323,713        297,413
                                                    ------------   -------------
              Long-term debt, net of current
              installments                          $  2,881,659      3,046,000
                                                    ============   =============

       The  aggregate  maturities  of  long-term  debt  for  each  of the  years
       subsequent to 2009 are as follows: 2010, $323,713;  2011, $346,672; 2012,
       $331,882; 2013, $353,056; 2014, $311,582 and thereafter $1,538,467.

 (7)   Leases

       The  Company  leases   vehicles  under   noncancelable   operating  lease
       agreements. Lease expense for the years ended June 30, 2009 and 2008, was
       $22,970  and  $30,489,  respectively.   Future  minimum  rental  payments
       required  under  noncancelable  operating  leases  that have  initial  or
       remaining  lease  terms in excess of one year as of 2009 are as  follows:
       2010, $135,906; 2011, $15,231; 2012, $7,809 and 2013, $6,507.


                                      F-11

<PAGE>

       The Company rents office,  warehouse,  storage space and office equipment
       under agreements which run one year or less in duration. The rent expense
       for the years ended June 30,  2009 and 2008 was  $263,917  and  $259,816,
       respectively.

       The  office and  warehouse  spaces in Girard,  Ohio;  Detroit,  Michigan;
       Pleasanton,  California;  and Hopkins,  Minnesota are leased on an annual
       basis   from   employees/shareholders;    or   entities   controlled   by
       shareholders,  who were previously  principals of the dealers acquired in
       June and July, 2007. The leases are related-party  transactions with four
       employee/shareholders,  however the lease  agreements have been conducted
       on an arms-length basis and the terms are equal to or more favorable than
       would be available to other third parties.

(8)    Goodwill and Other Intangible Assets

       Goodwill.  The purchase price of acquired companies in excess of the fair
       value of the net assets  (including  intangibles) at the acquisition date
       is recorded as goodwill.

       As described in note 1(g), the Company determined that 100 percent of its
       goodwill should be impaired during the period ended June 30, 2008.

       Identifiable  Intangibles.  Identifiable  intangibles  assets  and  their
       useful lives consist of the following as of June 30:

                                                        2009            2008
                                                    ------------   -------------

       Trade name - 15 years                        $    339,400        339,400
       Domain name - 15 years                              5,400          5,400
       Non-compete covenant - 4 years                    149,400        149,400
       Customer relationships - 7 years                  120,000        120,000
       Trademark licensing agreement - 20 years           45,000         45,000
       Backlog of orders - 3 months                        2,700          2,700
       Customer database - 7 years                        38,100         38,100
       License agreement - 10 years                       73,240         73,240
                                                    ------------   -------------
          Total identifiable intangibles                 773,240        773,240
       Less accumulated amortization                     231,370        142,059
                                                    ------------   -------------
                  Net carrying amount               $    541,870        631,181
                                                    ============   =============


                                      F-12
<PAGE>

         Amortization  expense associated with the license agreement was $89,311
         and $92,011  for 2009 and 2008,  respectively.  Estimated  amortization
         expense for the identifiable  intangibles is expected to be as follows:
         2010, $89,311;  2011,  $83,207;  2012,  $44,637;  2013, $44,637;  2014,
         $44,637 and thereafter $235,440.

(9)    Income Taxes

       Income tax provision (benefit) for the years ended June 30 consists of:

                                   Current          Deferred           Total
                                -------------   --------------   ---------------
      2009:
           U.S. federal         $    (33,167)          89,508            56,341
           State and local            10,476           15,119            25,595
                                -------------   --------------   ---------------
                                $    (22,691)         104,627            81,936
                                =============   ==============   ===============
      2008:
           U.S. federal         $     (9,082)      (1,201,989)       (1,211,071)
           State and local            11,016         (271,729)         (260,713)
                                -------------   --------------   ---------------
                                $      1,934       (1,473,718)       (1,471,784)
                                =============   ==============   ===============

       Actual income tax provision  (benefit)  differs from the  "expected"  tax
       provision  (benefit)  computed by  applying  the U.S.  federal  corporate
       income tax rate of 34% to income before income taxes, as follows:

                                                        2009            2008
                                                    ------------   -------------
      Expected tax provision (benefit)              $     62,988     (3,371,289)
      State taxes, net of federal tax benefit             17,427       (172,071)
      Officers' life insurance                            34,678         (3,916)
      Non-deductible portion of goodwill impairment            -      2,035,542
      Other, net                                         (33,157)        39,950
                                                    ------------   -------------
                                                    $     81,936     (1,471,784)
                                                    ============   =============

       Deferred income tax assets and liabilities  related to the tax effects of
       temporary differences are as follow as of June 30:

                                                        2009            2008
                                                    ------------   -------------
       Net deferred tax asset - current:
         Inventory capitalization for income
           tax purposes                             $     84,117         84,285
         Inventory reserve                               132,127        139,820
         Warranty reserve                                 74,508         81,576
         Accrued product liability                        20,572         11,307
         Allowance for doubtful accounts                 155,459        160,312
                                                    ------------   -------------
            Total deferred tax asset - current      $    466,783        477,300
                                                    ============   =============
       Net deferred tax asset (liability) -
        non-current:
         Deferred compensation                      $          -        177,597
         Property and equipment, principally due to
         differences in depreciation                    (222,550)      (246,853)
         Research and development credit carryover        89,538        120,269
         Other intangibles                              (207,998)      (239,972)
         Other                                            64,499            292
         Operating loss carry forwards                 1,110,452      1,116,718
                                                    ------------   -------------
            Total deferred tax asset (liability) -
            non-current                             $    833,941        928,051
                                                    ============   =============


                                      F-13
<PAGE>

       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  income  tax  assets  will not be  realized.  The  ultimate
       realization  of  deferred   income  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 income 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  income 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 and Sales by Geographic Location

         During the fiscal  years  ended  June 30,  2009 and 2008,  sales to any
         single customer did not exceed 10% of total net sales.

       Approximately  98% of the  Company's  products  were  sold in the  United
       States and Canada,  and  approximately 2% were sold in foreign  countries
       for both years ended June 30, 2009 and 2008.

(11)   Common Stock and Stock Equivalents

       On July 15, 2003, the Company  approved an open-market  share  repurchase
       program for up to $500,000 of the Company's common stock. On November 27,
       2007, the board approved an additional $250,000 for the open-market share
       repurchase program after the original $500,000 was exhausted.  During the
       year ended June 30, 2009, the Company  acquired and retired 13,600 shares
       of common  stock for $10,138.  During the year ended June 30,  2008,  the
       Company acquired and retired 258,569 shares of common stock for $280,440.

       During the years ended June 30, 2009 and 2008, the Company granted 18,180
       and 7,476 shares of  restricted  common stock to directors in  connection
       with compensation arrangements, respectively.

       The Company  maintains a 2005  equity  incentive  plan for the benefit of
       employees.  Incentive and nonqualified  stock options,  restricted common
       stock,  stock  appreciation  rights,  and other share-based awards may be
       granted   under  the  plan.   Awards   granted  under  the  plan  may  be
       performance-based.  Effective November 27, 2007, the plan was amended, as
       approved by the shareholders,  to increase the number of shares available
       by  1,000,000  shares.  As of June 30, 2009,  1,012,828  shares of common
       stock were  authorized  and reserved for  issuance,  but were not granted
       under the terms of the 2005 equity incentive plan as amended.

       The Company granted options to acquire common stock under its 2005 equity
       incentive  plan for fiscal 2009 and 2008.  The options are 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 6 months to 10 years from the date of grant.

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

                                      F-14

<PAGE>

                                                        2009           2008
                                                    ------------   -------------
             Expected dividend yield                     0%             0%
             Expected stock price volatility            56-60%         55-57%
             Risk-free interest rate                2.59 - 4.14%    3.51 - 4.03%
             Expected life of options                  10 years       10 years

       The weighted  average fair value of options  granted during 2009 and 2008
       was $.39 and $.74, respectively.

       The following table summarizes the Company's stock option activity during
       the years ended June 30, 2009 and 2008:
<TABLE>
<CAPTION>

                                                           2009                                              2008
                                             ---------------------------------                 ---------------------------------
                                                                                  Weighted
                                                                  Weighted        average                           Weighted
                                                Number             average       remaining        Number             average
                                                  of              exercise      contractual         of              exercise
                                                shares              price           term          shares              price
                                             --------------     --------------                 --------------     --------------
       <S>                                   <C>               <C>                <C>          <C>               <C>
       Options outstanding at
            beginning of year                  1,101,603       $     1.41         5.86 years       1,048,192     $     1.40
       Options granted                            79,455              .50                            648,370           1.07
       Options exercised                           -                  -0-                           (251,499)           .83
       Options canceled or expired               (220,954)           1.16                           (343,460)          1.14
                                             --------------                                    --------------
       Options outstanding at end
            of year                              960,104             1.39         5.14 years       1,101,603           1.41
                                             ==============                                    ==============
       Options exercisable at end
            of year                              581,193             1.65                            679,523           1.62
                                             ==============                                    ==============
       Range of exercise prices at
            end of year                                        $  0.35 - 3.00                                    $  0.73 - 3.00
</TABLE>

       On August 16, 2000,  the Company  issued 80,000 options that were outside
       of its stock option plan. As of June 30, 2009 and 2008,  there are 20,000
       and 40,000 of those options outstanding respectively.  The exercise price
       of the options ranges from $3.00 to $4.00.  The remaining  options expire
       during fiscal 2010.

       The  aggregate  intrinsic  value  on the  date  of  exercise  of  options
       exercised  during  the  years  ended  June  30,  2009 and 2008 was $0 and
       $16,757,  respectively.  The aggregate intrinsic value of the outstanding
       options as of June 30, 2009 and 2008 was $6,071 and $0, respectively.

(12)   Employee Benefit Plan

       The Company has 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
       2009 and 2008,  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 2009 and 2008 were  $29,456  and  $50,212,  respectively.
       Company matching  contributions for future years are at the discretion of
       the board of directors.

                                      F-15

<PAGE>

(13)   Salary Continuation Agreements

       Effective  March 5, 2009,  Kelvyn H.  Cullimore,  Jr. and Larry  Beardall
       (officers  of  the  Company)   legally   canceled  their   Company-funded
       retirement  programs  which were funded  through life  insurance  polices
       owned by the Company.  As a result,  $367,917 in cash value from the life
       insurance  policies  was  paid  to the  Company.  As a  result  of  these
       cancellations,  the contractual  liability to pay the retirement benefits
       was removed, and selling,  general and administrative  expense during the
       fiscal ended June 30, 2009, was reduced by $472,397.

(14)   Acquisition and Non-Cash Disclosure

       On July 2, 2007, the Company  completed the acquisitions of 100% interest
       in five of its key independent  distributors,  Responsive Providers, Inc.
       of Houston,  Texas; Therapy and Health Care Products, Inc. of Youngstown,
       Ohio; Cyman Therapy,  Inc. of Detroit,  Michigan; Al Rice and Associates,
       Inc. of  Jeffersonville,  Indiana;  and  Theratech  Inc. of  Minneapolis,
       Minnesota.   The  total   consideration  paid  for  the  five  separately
       negotiated   acquisitions  was  approximately   $5,700,000  comprised  of
       approximately $2,400,000 in cash and 3,061,591 shares of common stock.

       On June 30, 2007,  the Company  completed the  acquisition of its largest
       independent  distributor,  Rajala Therapy Sales Associates of Pleasanton,
       California   (Rajala).   The  Rajala  purchase  price  was  approximately
       $2,695,000, paid through $1,000,000 in cash and the issuance of 1,500,000
       shares of the Company's common stock.

       The  acquisitions  of these dealers were accounted for using the purchase
       method of accounting. Accordingly, the purchase price was assigned to the
       assets acquired and the  liabilities  assumed based on fair market values
       at the purchase  date.  The following  table  reflects the estimated fair
       values of the  assets  acquired  and the  liabilities  assumed  as of the
       acquisition dates:

                                                    July 2, 2007   June 30, 2007
                                                    Acquisitions    Acquisition
                                                    ------------   -------------
       Cash                                         $    651,828         67,839
       Trade accounts receivable                       1,160,976        900,322
       Inventories                                     1,192,639        573,356
       Prepaid expenses                                    4,782         42,629
       Property and equipment                            112,764         19,766
       Intangible assets                                 366,400        333,600
       Cash surrender value of life insurance            207,563              -
       Goodwill                                        3,512,779      1,876,734
                                                    ------------   -------------
       Total assets acquired                           7,209,731      3,814,246
       Line of credit                                          -       (250,000)
       Accounts payable and accrued expenses          (1,496,800)      (869,244)
                                                    ------------   -------------
       Net assets acquired                          $  5,712,931      2,695,002
                                                    ============   =============


                                      F-16

<PAGE>

       The July 2, 2007, acquisitions resulted in a $175,188 deferred income tax
       liability  and a  corresponding  increase to goodwill of $175,188 for the
       fiscal year ended June 30, 2008. The June 30, 2007,  acquisition resulted
       in a $7,757 current income tax benefit and a $100,173 deferred income tax
       liability,  the net amount of which was recognized as a $92,416  increase
       to goodwill in the fiscal year ended June 30, 2007.

       Unaudited  pro forma  results of  operations  for the year ended June 30,
       2008, as though the six dealers had been acquired as of July 1, 2007, are
       as follows:

                                                                    Year Ended
                                                                      June 30,
                                                                        2008
                                                                   -------------
       Net sales                                                   $ 32,592,507
       Net loss                                                      (8,443,771)
       Basic and diluted net loss per common share                         (.62)

(15)   Recent Accounting Pronouncements

       In May 2009, the FASB issued SFAS No. 165,  Subsequent  Events ("SFAS No.
       165").  SFAS No. 165 establishes  general standards of accounting for and
       disclosure  of events that occur after the balance  sheet date but before
       financial  statements are issued or are available to be issued.  SFAS No.
       165 is  effective  for interim or annual  periods  ending  after June 15,
       2009.  The Company  adopted SFAS No. 165 in the fourth  quarter of fiscal
       2009. See note 1(t) to the consolidated financial statements.

       In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful
       Life of  Intangible  Assets ("FSP FAS  142-3").  FSP FAS 142-3 amends the
       factors  that should be  considered  in  developing  renewal or extension
       assumptions used to determine the useful life of a recognized  intangible
       asset under SFAS Statement No. 142, Goodwill and Other Intangible Assets.
       FSP  FAS  142-3  also  requires  expanded   disclosure   related  to  the
       determination  of  intangible  asset  useful  lives.  FSP  FAS  142-3  is
       effective  for  financial  statements  issued for fiscal years  beginning
       after December 15, 2008,  and interim  periods within those fiscal years.
       The Company is currently  evaluating  the impact that the adoption of FSP
       FAS 142-3 will have on its consolidated results of operation,  cash flows
       or financial condition.

       In December 2007, SFAS No. 160, Non-controlling Interests in Consolidated
       Financial  Statements  - an  amendment  of ARB No. 51,  was issued  which
       changes the  accounting  and reporting for minority  interests.  Minority
       interests will be recharacterized  as non-controlling  interests and will
       be reported as a component of equity  separate from the parent's  equity,
       and purchases or sales of equity interests that do not result in a change
       in control will be accounted for as equity transactions. In addition, net
       income attributable to the  non-controlling  interest will be included in
       net income and, upon a loss of control, the interest sold, as well as any
       interest retained,  will be recorded at fair value, with any gain or loss
       recognized  in net  income.  SFAS No. 160 is  effective  for the  Company
       beginning  July 1,  2009 and will  apply  prospectively,  except  for the
       presentation    and   disclosure    requirements,    which   will   apply
       retrospectively.  The Company  believes the adoption of SFAS No. 160 will
       not have a material impact on its financial statements.

       In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements.
       SFAS No. 157 defines fair value,  establishes  a framework  for measuring
       fair value,  and expands  disclosure  requirements  regarding  fair value
       measurement.  Where  applicable,  this statement  simplifies and codifies
       fair value  related  guidance  previously  issued within United States of
       America  generally  accepted  accounting  principles.  SFAS  No.  157  is
       effective  for  financial  statements  issued for fiscal years  beginning
       after  November 15, 2007 for  financial  assets and November 15, 2008 for
       non-financial  assets, and interim periods within those fiscal years. The
       Company adopted SFAS No. 157 on July 1, 2008 for its financial assets and
       liabilities and on July 1, 2009 for non-financial assets with no material
       impact on its consolidated financial statements.


                                      F-17


<PAGE>

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

         None.

Item 9A(T).  Controls and Procedures

         Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in company
reports filed or submitted under the Securities Exchange Act of 1934 (the
"Exchange Act") is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include without limitation, controls and
procedures designed to ensure that information required to be disclosed in
company reports filed or submitted under the Exchange Act is accumulated and
communicated to management, including our chief executive officer and treasurer,
as appropriate to allow timely decisions regarding required disclosure.

         As required by Rules 13a-15 and 15d-15 under the Exchange Act, our
chief executive officer and chief financial officer carried out an evaluation of
the effectiveness of the design and operation of our disclosure controls and
procedures as of June 30, 2009. Based on their evaluation, they concluded that
our disclosure controls and procedures were effective.

         Management is responsible for establishing and maintaining adequate
internal control over our financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act). Our internal control over financial reporting is
a process designed by, or under the supervision of, our chief executive officer
and chief financial officer and effected by our board of directors, management
and other personnel, to provide reasonable assurance regarding the reliability
of our financial reporting and the preparation of our financial statements for
external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting includes policies and procedures that
pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of our assets; provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of our financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with the authorization of our board of directors and
management; and provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on our financial statements.

         Under the supervision and with the participation of our management,
including our chief executive officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the
criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based
on this evaluation under the criteria established in Internal Control -
Integrated Framework, our management concluded that our internal control over
financial reporting was effective as of June 30, 2009.

         This annual report does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit us to provide only management's report in this
annual report.

         During the most recently completed fiscal quarter, there has been no
change in our internal control over financial reporting that has materially
affected or is reasonably likely to materially affect, our internal control over
financial reporting.

Item 9B.   Other Information

         None.


                                       22
<PAGE>
                                    PART III

Item 10.  Directors, Executive Officers, and Corporate Governance

         The information for this Item is incorporated by reference to the
definitive proxy statement to be filed pursuant to Regulation 14A under the
Exchange Act.

Item 11.  Executive Compensation

         The information for this Item is incorporated by reference to the
definitive proxy statement to be filed pursuant to Regulation 14A under the
Exchange Act.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

         The information for this Item is incorporated by reference to the
definitive proxy statement to be filed pursuant to Regulation 14A under the
Exchange Act.

Item 13.  Certain Relationships and Related Transactions, and Director
Independence

         The information for this Item is incorporated by reference to the
definitive proxy statement to be filed pursuant to Regulation 14A under the
Exchange Act.

Item 14.    Principal Accountants' Fees and Services

         The information for this Item is incorporated by reference to the
definitive proxy statement to be filed pursuant to Regulation 14A under the
Exchange Act.

                                     PART IV

Item 15.  Exhibits


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

       1.     Financial Statements (included in Part II, Item 8):

              Report of Independent Registered Public Accounting Firm.......F-1

              Consolidated Balance Sheets as of June 30, 2009 and 2008......F-2

              Consolidated Statements of Operations for the years ended
              June 30, 2009 and 2008........................................F-3

              Consolidated Statements of Stockholders'
              Equity for the years ended June 30, 2009 and 2008.............F-4

              Consolidated Statements of Cash Flows for
              the years ended June 30, 2009 and 2008........................F-5

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



                                       23
<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.

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

         3.3         Articles of Amendment dated November 18, 1993 (previously
                     filed)

         3.4         Company ByLaws dated May 19, 1983 (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.

         10.2        Employment contract with Kelvyn H. Cullimore, Jr. (filed as
                     an Exhibit to a Current Report on Form 8-K on June 16,
                     2009)

         10.2        Employment contract with Larry K. Beardall (filed as an
                     Exhibit to a Current Report on Form 8-K on June 16, 2009)

         10.3        Loan Agreement with Zion Bank (filed as Exhibit to June 30,
                     2007 Annual Report on Form 10-K)

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

         10.7        Dynatronics Corporation 2005 Equity Incentive Award Plan
                     (previously filed as Annex A to the Company's Definitive
                     Proxy Statement on Schedule 14A filed on October 27, 2005)

         10.8        Form of Option Agreement for the 2005 Equity Incentive
                     Award Plan for incentive stock options (filed as Exhibit to
                     June 30, 2007 Annual Report on Form 10-K)

         10.9        Form of Option Agreement for the 2005 Equity Incentive
                     Award Plan for non-qualified options (filed as Exhibit to
                     June 30, 2007 Annual Report on Form 10-K)

         23.1        Consent of Tanner LC (filed herewith)

         31.1        Certification under Rule 13a-14(a)/15d-14(a) of principal
                     executive officer (filed herewith)

         31.2        Certification under Rule 13a-14(a)/15d-14(a) of principal
                     accounting officer and principal financial officer (filed
                     herewith)

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


                                       24
<PAGE>

                                  SIGNATURES


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly 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 25, 2009

         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, Jr.  Chairman, President, CEO        September 25, 2009
----------------------------  (Principal Executive Officer)
Kelvyn H. Cullimore, Jr.


/s/ Terry M. Atkinson         Chief Financial Officer         September 25, 2009
----------------------------  (Principal Accounting Officer
Terry M. Atkinson, CPA        and Principal Financial Officer)


/s/ Larry K. Beardall         Director, Executive             September 25, 2009
----------------------------  Vice President
Larry K. Beardall


/s/ Howard L. Edwards          Director                       September 25, 2009
----------------------------
Howard L. Edwards


 /s/ Val J. Christensen        Director                       September 25, 2009
----------------------------
Val J. Christensen


 /s/ Joseph H. Barton          Director                       September 25, 2009
----------------------------
Joseph H. Barton




                                       25




--------------------------------------------------------------------------------