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

(Mark One)
[X] Annual report under section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended June 30, 2001.

[  ] Transition report under section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
____________.

Commission file number 0-12697

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

            Utah                                     87-0398434
------------------------                 ------------------------------------
(State of Incorporation)                  (I.R.S. Employer Identification No.)

                              7030 Park Centre Drive
                         Salt Lake City, Utah  84121-6618
                                   (801) 568-7000
     (Address of principal executive offices, zip code, telephone number)

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

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

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB.  [X]

The issuer's revenues for the fiscal year ended June 30, 2001 were
$16,757,821.  The aggregate market value of the voting common stock held
by non-affiliates of the issuer was approximately $10,300,000 as of
September 20, 2001, based on the average bid and asked price on that
date.

The number of shares outstanding of each of the issuer's classes of
common stock as of September 20, 2001 was:

                Class                             Shares Outstanding

Common Stock, no par value                            8,843,774

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

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



<PAGE>
                                    PART I


Item 1. Description of the Business

        Dynatronics Corporation ("Dynatronics" or the "Company"), a Utah
corporation, was organized April 29, 1983. The principal business of the
Company is the design, manufacture and sale of medical and aesthetic
products including: 1) medical devices for therapeutic and chronic pain
applications, 2) medical supplies and soft goods, 3) treatment tables
and rehabilitation products for use by practitioners and, 4) aesthetic
products and devices.  The Company distributes its products in three
ways: 1) through a network of independent dealers nationwide and
internationally, 2) by contract with certain national accounts, and 3)
through a full-line catalog.

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

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

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

        In August 2000, the Company signed an agreement with Alan
Neuromedical Technologies (ANT) naming Dynatronics the exclusive
licensee of ANT's patented technology for treating chronic pain.
Developed by doctors in Texas, this unique technology has been
incorporated into two new electrotherapy devices - the Dynatron STS
(Sympathetic TherapyTM System), which is designed for clinical use, and
the Dynatron STS Rx, a prescription unit for home use.  According to the
American Pain Society, over 70 million Americans suffer from moderate to
severe chronic pain.  As a result, the Company believes that the
Dynatron STS and STS Rx units present significant potential for becoming
the best selling products ever offered by the Company.
<PAGE>
                    Description of Products Manufactured
                      and/or Distributed by the Company

        The Company's product line can be divided into four general
categories: (1) Therapy Devices including Electrotherapy, Sympathetic
Therapy and Therapeutic Ultrasound; (2) Medical Supplies and Soft Goods;
(3) Treatment Tables and Rehabilitation Equipment; and (4) Aesthetic
Products. The Company's products are used primarily by physical
therapists, anesthesiologists, neurologists, orthopedists,
chiropractors, sports medicine practitioners, podiatrists, plastic
surgeons, dermatologists, and other aesthetic services providers.

Therapy Devices

        Electrotherapy - The therapeutic effects of electrical energy have
occupied an important position in physical medicine for over three
decades. There has been an evolution through the years to use the most
effective and painless waveforms and frequencies for patient comfort and
for success in the treatment of pain and related physical ailments.
Medium frequency alternating currents, which are used in the Company's
electrotherapy devices, are believed to be the most effective and
comfortable for patients. Electrotherapy is effective in treating
chronic intractable pain and/or acute post-traumatic pain, increasing
local blood circulation, relaxation of muscle spasms, prevention or
retardation of disuse atrophy, and muscle re-education.

        Therapeutic Ultrasound - Ultrasound therapy is a process of
providing therapeutic deep heat to soft tissues through the introduction
of soundwaves into the body.  It is one of the most common modalities
used in physical therapy today for the treatment of pain relief, muscle
spasms and joint contractures.

        The Company markets seven devices that include electrotherapy,
ultrasound or a combination of both modalities in a single device.  The
Dynatron 125 ultrasound device and the Dynatron 525 electrotherapy
device target the low-priced segment of the market.  The other five
products comprise the "50 Series Plus" product line and provide
additional features and capabilities to its popular predecessor line,
the  "50 Series", while at the same time further reducing the cost of
manufacturing the products.  (See "Schedule of Therapy Products"
below.)  Dynatronics intends to continue development of its
electrotherapy and ultrasound technology and remain a leader in the
design, manufacture and sale of therapy devices.

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

Iontophoresis

    In fiscal year 1997, the Company added Life-Tech's line of iontophoresis
products to its family of therapy devices offered to practitioners.
These products include the Iontophor II and Microphor devices which
are used in physical medicine applications primarily for treating
inflammation.  The devices use electrical current to deliver drugs such
as lidocaine and dexamethasone through the skin for localized treatment
of inflammation through the use of a disposable electrode.  The products
sold by the Company include the electrical current generating device
(Microphor and Iontophor II) and the disposable electrodes into which
the drug of choice is placed by the practitioner.
<PAGE>

    The chart below lists the therapy device products manufactured and
marketed by the Company, which materially contributed to total Company
sales in fiscal year 2001.

                          Schedule of Therapy Products
                Manufactured and/or Distributed by Dynatronics


Product Name                        Description

Dynatron 125                        Ultrasound

Dynatron 525                        Electrotherapy

Iontophor II? &                     Iontophoresis
Microphor? +

Dynatron 150 Plus**                 Ultrasound

Dynatron 550 Plus**                 Multi-modality Electrotherapy

Dynatron 650 Plus**                 Multi-modality Electrotherapy

Dynatron 850 Plus**                 Combination Electrotherapy/Ultrasound

Dynatron 950 Plus**                 Combination Electrotherapy/Ultrasound

Dynatron STS                        Sympathetic Therapy

Dynatron STS Rx                     Sympathetic Therapy

_____________________

Dynatron is a registered trademark (#1280629) owned by Dynatronics
Iontophor II and Microphor are registered trademarks owned by Life Tech,
Inc.
** "50 Series Plus" Product Line
+ Both manufactured by Life-Tech

Medical Supplies and Soft Goods

        In September 2001, the Company introduced its 2001-2002 product
catalog containing an extensive line of well over 1,000 products.  With
the introduction of the 2001-2002 catalog, the Company has expanded its
virtual "one-stop shop" for rehabilitation professionals.  The Company
plans to update its catalog every two years.

        Medical supplies and soft goods currently manufactured by the
Company include:  hot packs, therapy wraps, wrist splints, lumbar
supports, cervical collars, slings, cervical pillows, back cushions,
weight racks, and wood and metal treatment tables.  Products distributed
by the Company include:  coldpacks, skin cleanser, lotions and gels,
paper products, athletic tape, canes and crutches, reflex hammers,
stethoscopes, splints, elastic wraps, exercise weights, Thera-Band?
tubing, wheelchairs, walkers,

____________________________

Thera-Band is a registered trademark of Hygenic Corp.
<PAGE>
treadmills, stair climbers, hydrocollators, whirlpools, gloves,
electrodes, TENS devices, and traction equipment.  The Company is
continually seeking to expand its line of medical supplies and soft
goods.

Treatment Tables and Rehabilitation Equipment

        In January 1997, the Company acquired a metal treatment table
manufacturing operation in Columbia, South Carolina.  In July 1999, the
Company consolidated this operation into its Chattanooga facilities in
order to improve efficiencies.  Products currently manufactured and
distributed include motorized and manually operated physical therapy
treatment tables, rehabilitation parallel bars, and other specialty
rehabilitation products.

    As a result of the acquisition of Superior and the treatment table
manufacturing operation, the Company has become a broad-line supplier in
the physical medicine market. The target markets for these products are
physical therapy, chiropractic, podiatry, sports medicine, industrial
and occupational medicine, family practice, long-term care facilities,
and the sub-groups of each of these specialties.

Aesthetic Products

        In July 1998, the Company began shipments of its new Synergie
Aesthetic Massage (AMS) device.    The Synergie AMS device applies
therapeutic vacuum massage to skin and subcutaneous tissues to achieve a
temporary reduction in the appearance of cellulite and circumferential
body measurements of the cellulite treated areas.

        In December 1999, the Company released the results of a Company-
sponsored study reporting that 91% of participants experienced a
reduction in the appearance of cellulite.  In addition, participants on
average reported a cumulative reduction of six-inches in girth around
the hips, thighs, and waist.

    In February 2000, the Company introduced the Synergie Peel
microdermabrasion device as a companion to the Synergie AMS device. The
Synergie Peel device gently exfoliates the upper layers of skin,
exposing softer, smoother skin.  Microdermabrasion is becoming popular
in the aesthetics industry for customers who want the "ultimate
facial" experience.

Allocation of Sales Among Key Products

        No single product accounted for more than 10% of the Company's
revenues during either of the last two fiscal years.


                       Description of the Company's
                  Marketing and Manufacturing Operations

Patents and Trademarks

        The Company holds a patent on the "Target" feature of its
electrotherapy products that will remain in effect until July 18, 2006,
and a patent on its multi-frequency ultrasound technology that will
remain in effect until June 2013. The Company has the exclusive,
worldwide rights to a patent on the STS technology for the treatment of
chronic pain. An additional patent on the STS technology has been filed
with the U.S. Patent Office and is currently pending.  Patent
applications pertaining to the Company's Synergie AMS device and
Synergie Peel device have also been filed with the U.S. Patent Office
and are currently pending.

    The trademark "Dynatron" has been registered with the United
States Patent and Trademark Office and the appropriate government
offices in Japan.  In addition, registration applications have been
filed for the trademarks  "Synergie,"  "Synergie Peel," and
<PAGE>
"Sympathetic Therapy," and for various other product trademarks.  The
Company's other copyrightable material is protected under U.S. copyright
laws.

Warranty Service

        The Company warrants all products it manufactures for time periods
ranging in length from 90 days to five years after the sale.  The
Company also sells accessory items supplied by other manufacturers.
These accessory products carry warranties similar to those offered by
the Company.  Warranty service is provided from the Company's Salt Lake
City and Chattanooga facilities, according to the service required.
These warranty policies are comparable to warranties generally available
in the industry.   Warranty claims as a percentage of gross sales were
not material in fiscal years 2001 and 2000.

Customers/Market

        With the acquisition of Superior and the introductions of the
Synergie and new STS product lines, the Company has expanded its dealer
network to over 300 wholesale dealers throughout the United States and
internationally. These dealers are the primary customers of the Company.
The dealers purchase and take title to the products, which they then
sell to licensed practitioners such as physical therapists,
anesthesiologists, physiatrists, podiatrists, sports medicine
specialists, medical doctors, chiropractors, hospitals, plastic
surgeons, dermatologists and aestheticians.

        The Company has entered into preferred vendor relationships with
certain national chains of physical therapy clinics and hospitals.  No
single dealer or national account or group of related accounts was
responsible for 10% or more of total sales in fiscal years 2001 or 2000.

        The Company exports products to approximately 30 different
countries.  International sales (i.e., sales outside North America)
totaled approximately $658,400 in fiscal year 2001 and approximately
$659,700 in fiscal year 2000. The Company is working to establish
effective distribution for its products in the international markets.
In August 2001, the Company received CE Mark certification for its STS
devices, which will allow these products to be marketed in Europe. In
addition, during fiscal year 2001, the Company's Salt Lake City
operation was designated an ISO 9001 approved facility. The Company has
no foreign manufacturing operations.

Competition

        Despite significant competition, the Company has distinguished key
products by using the latest technology, such as its patented Target
feature, patented multi-frequency ultrasound technology, and patented
STS technology.  The Company believes that these features, along with
integration of cutting edge technology in the design of each product,
have made the Company a leader in technologically advanced
electrotherapy, ultrasound, chronic pain and therapeutic massage
devices.  In addition, manufacturing many of the medical supplies, soft
goods and tables it sells allows the Company to focus on quality
manufacturing at competitive prices.  The Company believes this gives it
an edge over many competitors who are solely distributors of such
products.

    Electrotherapy/Ultrasound.  The competition in the clinical market
for electrotherapy and ultrasound devices is from both domestic and
foreign companies.  No fewer than a dozen companies produce devices
similar to those of the Company.  Some of these competitors are larger
and better established, and have greater resources than the Company.
Few companies, domestic or foreign, provide multiple-modality devices.
Furthermore, no competitor offers the ultrasound feature of three
frequencies on multiple-sized soundheads for which the Company holds a
patent.  The primary competitors in the electrotherapy and ultrasound
products sales include: Chattanooga Group, Rich-Mar, Mettler
Electronics, Excel Tech, Ltd., Rehabilicare RS Medical, Amrex and
Williams Healthcare.
<PAGE>
        Sympathetic Therapy. The recently acquired technology for treating
chronic pain is protected by a U.S. patent. The Company is not aware of
any competitor that offers a non-invasive, chronic pain treatment
similar to the Company's STS technology.  Other treatments for chronic
pain include prescription narcotic drugs and invasive procedures such as
spinal cord stimulators, nerve block injections and implanted drug
pumps.

        Medical Supplies & Soft Goods.  The Company competes against
various manufacturers and distributors of medical supplies and soft
goods, some of which are larger, more established and have greater
resources than the Company. Excellent customer service along with
providing value to customers is of key importance in this segment of the
market. While there are many specialized manufacturers in this area,
only a few such as Chattanooga Group, Fabrication Enterprises and Bailey
Manufacturing actually manufacture a broad line of competitive products.
Other competitors are primarily distributors such as EMPI, Graham Field,
Sammons Preston, Meyers Distributing and AliMed Inc.

          Iontophoresis.  Competition in the iontophoresis market is
primarily from IOMED and EMPI.  Both of these competitors have a much
larger market share than Life-Tech, the manufacturer of the
iontophoresis products marketed and sold by the Company. The Company
believes that Dynatronics' strong distribution network is important to
its continued ability to compete against these larger companies.   In
addition, the Life-Tech products are priced significantly lower than
either IOMED or EMPI.

        Treatment Tables.  The primary competition in the treatment table
market is from domestic manufacturers including Hill Laboratories
Company, Hausmaun Industries, Sammons Preston, Bailey Manufacturing, S&W
Enterprises, Tri-W-G, Chattanooga Group, Medfit, Williams Healthcare and
Clinton Industries.  Dynatronics' combination of industry experience,
quality and competitive pricing provides the foundation for the Company
to compete in this marketplace.  In addition, some foreign competitors
may gain pricing advantages from time to time due to currency
fluctuations related to the U.S. dollar.

        Aesthetic Products.  The Company has two primary competitors in
the therapeutic massage industry:  LPG Systems and Angel Healing
Corporation.  The Synergie Lifestyle System utilizes unique processes
and technology, which are the subject of a patent applied for by the
Company.  Dynatronics' network of distributors provides another
competitive advantage in the marketplace for these products.

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

        Information necessary to determine or reasonably estimate the
Company's, or its competitors', market share in any of these markets is
not readily available to the Company.

<PAGE>

Manufacturing and Quality Assurance

        Manufacturing of the Company's therapy devices, soft goods and
other medical products is conducted at the Company's facilities in Salt
Lake City, Utah and Chattanooga, Tennessee.  The Company sub-contracts
the production of certain components, but all work is performed to
Dynatronics' specifications.  Sub-assembly, final assembly and quality
assurance procedures are all performed by trained staff at the Company's
manufacturing facilities.  All component parts used in Dynatronics'
device designs and all raw materials for medical supplies and soft goods
manufacturing are presently readily available from suppliers.

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

        The Company adheres to a Quality First Program, a concept for
total quality management designed to involve each employee in the
quality assurance process.  Under this program, employees are not only
expected to inspect for quality, but they are empowered to stop any
process and make any changes necessary to insure that quality is not
compromised.  An incentive program is established to insure the
continual flow of ideas and to reward those who show extraordinary
commitment to the Quality First concept. Quality First has not only
become the Company motto, but it is the standard by which all decisions
are made.  The Quality First Program reinforces employee pride,
increases customer satisfaction, and improves overall operations of the
Company.

        During fiscal year 2001, the Company qualified for ISO 9001
Certification - an internationally recognized standard for quality
systems and manufacturing processes adopted by over 90 countries.  In
addition, the Company has qualified for the CE Mark Certification on its
50 Series Plus, Synergie and STS products.  The Company is now able to
market these products throughout the European Union and in other
countries where CE mark certification and ISO 9001 certification are
recognized.

Research and Development

        The Company has historically been very committed to research and
development.  In 2001 and 2000 the Company expended $805,363 and
$702,754, respectively, for research and development, which represented
approximately 4.8% and 4.6% of the gross revenues of the Company in
those years, respectively.  Substantially all of the research and
development expenditures during 2001 were for the development of new
products, including the new STS chronic pain therapy devices, or the
upgrading of existing products.  Because of its strong commitment to the
future and to providing the most current technology in its medical
devices, the Company projects that in fiscal year 2002 it will continue
to invest in research and development at amounts similar to those
indicated above.

Regulatory Matters

    The manufacture, packaging, labeling, advertising, promotion,
distribution and sale of the Company's 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 the Company's products under the Food, Drug, and Cosmetic Act
("FDC Act") and regulations promulgated thereunder.  Advertising and
other forms of promotion and methods of marketing of the Company's
products are subject to regulation by the Federal Trade Commission
("FTC") under the Federal Trade Commission Act ("FTC Act").

    All of the Company's therapeutic and aesthetic treatment devices
as currently designed have been cleared for marketing under section
510(k) of the FD&C 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
<PAGE>
find that the device is substantially equivalent to a legally marketed
predicate device before the agency will clear the new device for
marketing.  In addition, certain modifications to the Company's marketed
devices may require a premarket notification and clearance under section
510(k) before the changed device may be marketed, if the change or
modification could significantly affect safety or effectiveness.  All
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.

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

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

    General market trends were adversely affected from the
implementation of new Medicare guidelines in fiscal year 1999, which
restricted reimbursement for physical therapy services.  Subsequent
legislation passed by Congress eliminated those reimbursement reductions
for a two-year period beginning in January 2000.  As a result, market
conditions improved for the Company's rehabilitation and other physical
therapy products in fiscal year 2000 and 2001.  The Company cannot
predict the nature of any future laws, regulations, interpretations, or
applications, nor can it determine what effect additional governmental
regulations or administrative orders, when and if promulgated, would
have on its business in the future.  They could include, however,
requirements for the reformulation of certain products to meet new
standards, the recall or discontinuance of certain products, additional
record keeping, expanded documentation of the properties of certain
products, expanded or different labeling, and additional scientific
substantiation.  Any or all such requirements could have a material
adverse effect on the Company.

Environment

        The Company's operations are not subject to material compliance
with Federal, state and local provisions enacted or relating to
protection of the environment or discharge of materials into the
environment.
<PAGE>


Employees

        On June 30, 2001, the Company had a total of 121 full-time
employees and 15 part-time employees, compared to 117 full-time and 13
part-time employees as of June 30, 2000.

Item 2.   Properties

        The Company's headquarters and principal place of business is
located at 7030 Park Centre Drive, Salt Lake City, Utah 84121.  The
Company's headquarters consist of a single facility housing
administrative offices and manufacturing space totaling approximately
36,000 square feet.  The Company owns the land and building, subject to
a mortgage requiring a monthly payment of approximately $16,253.  The
mortgage matures in 2013. The Company also owns a 42,000 sq ft.
manufacturing facility in Ooltewah, Tennessee, and accompanying
undeveloped acreage for future expansion subject to a mortgage requiring
monthly payments of $7,182.  The mortgage matures in 2012.

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

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

Item 3.   Legal Proceedings.

        There are no material pending legal proceedings to which the
Company is a party or of which any of its property is the subject.

Item 4.   Submission of Matters to a Vote of Security Holders.

        No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of the
fiscal year covered by this report.

PART II

Item 5.   Market for the Company's Common Equity and Related Stockholder
Matters.

        Market Information.  The common stock of the Company is listed on
the Nasdaq Small Cap Market (symbol: DYNT).  The following table shows
the range of high and low sale prices for the Company's common stock as
quoted on the Nasdaq system for the quarterly periods indicated.

                                            Year Ended June 30
                                       2000                      2001
                                       ----                      ----
                                 High         Low         High           Low
                               ----------------------------------------------

1st Quarter (July-September)    $1.63       $ .98        $1.88         $ .75
2nd Quarter (October-December)  $1.09       $ .66        $1.94         $ .94
3rd Quarter (January-March)     $1.75       $ .69        $3.00         $1.47
4th Quarter (April-June)        $1.13       $ .72        $2.95         $1.76
<PAGE>
        Holders.  As of September 20, 2001, the approximate number of
common stock shareholders of record was 512.  This number does not
include beneficial owners of shares held in "nominee" or "street"
name.  Including beneficial owners, the Company estimates that the total
number of shareholders exceeds 2,000.

        Dividends.  The Company has never paid cash dividends on its
common stock.  The Company's anticipated capital requirements are such
that it intends to follow a policy of retaining earnings in order to
finance the development of its business.

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

        Stock Options.  In fiscal year 2001, the Company granted options
pursuant to stock option plans for employment or other agreements.  The
total number of shares of common stock issuable under such options is
446,321 shares with an average exercise price of $1.31 per share. In
addition, the Company granted options to purchase 80,000 shares of
common stock at an average price of $2.52 as part of the license
agreement for the STS technology.  In fiscal year 2000, the Company
granted options pursuant to stock option plans.  The total number of
shares of common stock issuable under such options is 185,299 shares
with an average exercise price of $.95 per share.  These options were
issued without registration under the Securities Act in reliance upon
exemptions relating to grants of securities made pursuant to certain
written plans.

Item 6.  Management's Discussion and Analysis of Financial Condition and
Results of Operations

Selected Financial Data

     The table below summarizes selected financial data for the Company
contained in its audited financial statements for the past six fiscal
years.  The financial statements for the fiscal years ended June 30,
2001 and 2000 are filed with and form a part of this report.

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

                           2001             2000            1999            1998            1997         1996
                       _________________________________________________________________________________

<S>                    <C>                <C>            <C>               <C>            <C>           <C>
Net Sales              $16,757,821        $15,173,050    $15,956,798       $12,283,064    $10,160,467   $6,784,748
Net Income (loss)      $   334,179        $    35,910    $   718,080       $   664,788    $   612,539   $ (193,892)
Net Income (loss)
   Per share (diluted) $       .04        $       .00    $       .08       $       .07    $       .07   $     (.02)

Working Capital         $ 4,971,946       $ 4,550,747    $ 4,251,703       $ 3,502,777    $ 3,027,119   $2,616,464
Total Assets            $13,560,347       $12,595,581    $13,854,197       $11,641,948    $ 9,642,479   $8,508,609
Long-term Obligations   $ 2,174,348       $ 2,330,501    $ 2,984,041       $ 3,376,017    $ 2,534,553   $2,856,302

</TABLE>
<PAGE>

Fiscal Year 2000 Compared to Fiscal Year 1999

Results of Operations

        Sales for the fiscal year ended June 30, 2001, increased 10% to a
record $16,757,821, compared to $15,173,050, in fiscal year 2000.  The
increase in sales is primarily due to the introduction of the new
Dynatron STS clinical device and Dynatron STS Rx home units, which were
introduced during the latter part of fiscal year 2001.  These innovative
devices incorporate patented, non-invasive technology, which has been
used successfully in treating over 1,000 chronic pain patients.
Interest in this new technology from doctors and therapists across the
country has been very positive.  During fiscal year 2001, the Company
also experienced a surge in demand for its rehabilitation products.
Sales of electrotherapy and ultrasound devices have been the primary
contributor to increased core product sales this fiscal year over last
year.

        Gross profit for the year ended June 30, 2001, increased to
$7,045,346, compared to $6,278,970 in fiscal year 2000.  The Company's
gross profit as a percentage of sales increased to 42.0% in fiscal year
2001 compared to 41.4% in fiscal year 2000. The improvement in gross
margin percentage for fiscal year 2001 was a result of initial sales of
the Dynatron STS clinical and home units as well as increased sales of
electrotherapy and ultrasound devices.  The Company anticipates margins
will remain in the range of 42% for the coming year.

    Selling, general and administrative (SG&A) expenses were
$5,419,935, or 32.3% of sales in fiscal year 2001, compared to
$5,031,577, or 33.2% of sales in fiscal year 2000.  During the year
ended June 30, 2001, the Company incurred significantly higher selling
expenses associated with the initial marketing efforts and launch of the
new chronic pain therapy devices and expanded sales efforts related to
the Synergie product line. Included in the SG&A expense for the year
ended June 30, 2000 is approximately $500,000 of litigation expenses
related to a dispute with a competitor that was settled during that
year.

        During fiscal year 2001, the Company maintained its commitment to
research and development (R&D), expending $805,363 for the year,
compared to $702,754 in fiscal year 2000. R&D expenses for fiscal year
2001 were primarily related to the development of the two new devices
for treating chronic pain - the Dynatron STS clinical unit and Dynatron
STS Rx prescription home unit.  The Company anticipates that R&D
expenses in 2002 will be moderately higher than prior years due to a
planned redesign of the Company's current line of therapy devices
together with plans for additional clinical research studies related to
the STS technology.

    In the year ended June 30, 2001, the Company's provision for
income taxes was $195,690 compared to $144,981 in fiscal year 2000.
During fiscal year 2000, the Company settled a contractual obligation
related to retirement benefits for one of its officers, which resulted
in recognizing $76,000 of tax expense.    The settlement was funded
through surrendering a company-owned life insurance policy on the
officer's life.  Under tax law, both the premiums paid by Dynatronics on
this policy in prior years and the associated cash value build up were
excluded from the calculation of taxable income.  Conversely, generally
accepted accounting principles required that the premium and cash value
build up activity be recorded annually for book purposes.  At the time
the policy was surrendered, the cash value exceeded the net premiums
paid by approximately $200,000.  The Company had already recognized this
increase on its books over the term of the contract, yet the tax
calculations each year excluded this income.  As a result, the
settlement created a tax liability of approximately $76,000, an amount
equal to the tax on the book income recognized over the life of the
contract but previously excluded from the tax calculation.

     Net income for fiscal year 2001 increased to $334,179, compared to
$35,910 in fiscal year 2000.  This improvement was due to several
factors including the initial sales of Dynatron STS clinical and home
units, increasing sales of higher margin rehabilitation products, and
reduced legal expenses as mentioned above.
<PAGE>
        The Company's business operations were not materially affected by
seasonality factors or year 2000 (Y2K) issues.

Liquidity and Capital Resources

    The Company has financed its operations primarily through cash
flows from operations and from its line of credit facility.

    Inventories at June 30, 2001, were $4,746,323 compared to
$4,038,845 at June 30, 2000. Higher inventory levels were required with
the introduction of the new STS devices and stocking inventories for the
manufacture of these new products. In addition, the Company continues to
expand its product offering of supplies and soft goods, which increased
inventories for the year.

    Trade accounts receivable during fiscal year 2001 increased to
$3,426,404 compared to $3,248,419 at June 30, 2000 primarily due to the
introduction of the new STS devices, which, along with record sales of
rehabilitation products, helped significantly boost sales and
receivables during fiscal year 2001.  Trade accounts receivable
represent amounts due from the Company's dealer network and from medical
practitioners and clinics.  The historical relationship with these
customers indicates that the allowance for doubtful accounts is
adequate.  Accounts receivable are generally collected within 30 days of
the terms extended.  Management anticipates accounts receivable will
increase in future years in connection with increased sales.

    Working capital at June 30, 2001, totaled $4,971,946 compared to
$4,550,747 at June 30, 2000.  The Company's current ratio at June 30,
2001 was 2.2 to 1 compared to 2.3 to 1 at June 30, 2000.

    The Company maintains an open line of credit with a commercial
bank in the amount of $3.75 million.  Interest on the line of credit is
based on the bank's prime rate, which at June 30, 2001, equaled 6.75%.
The line of credit is collateralized by certain accounts receivable and
inventories.  As of June 30, 2001, approximately $2.9 million was
outstanding on the line of credit with amounts available under the line
of credit of approximately $850,000.  The line of credit agreement is
renewable annually in November and includes covenants requiring the
Company to maintain certain financial ratios.  As of June 30, 2001, the
Company was in compliance with all covenants.

        Long-term debt excluding current installments at June 30, 2001 was
$1,834,903 compared to $2,073,894 at June 30, 2000.  This debt
represents primarily the mortgages against real property owned by the
Company in Utah and Tennessee.

    For additional information with respect to sources and uses of
cash, refer to the statements of cash flows included in the Company's
financial statements.

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

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


<PAGE>
Recent Accounting Pronouncements

    In July 2001, the Financial Accounting Standards Board (FASB)
issued Statement on Financial Accounting Standards (SFAS) No. 141,
Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 prohibits the use of the pooling-of-interests
method of accounting and requires that the purchase method of accounting
be used for all business combinations initiated after
June 30, 2001 and is applicable to all purchase method business
combinations completed after June 30, 2001.  SFAS No. 141 also specifies
criteria that intangible assets acquired in a purchase method business
combination must meet to be recognized and reported apart from goodwill.
Effective for the Company beginning July 1, 2002, SFAS No. 142 will
require that goodwill and intangible assets with indefinite useful lives
no longer be amortized, but instead be tested for impairment at least
annually in accordance with the provisions of SFAS No. 142. SFAS No. 142
will also require that intangible assets with definite useful lives be
amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance
with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of.
As of the date of adoption, the Company expects to have
unamortized goodwill and other  intangibles in the amount of $849,000
which will be subject to the transition provisions of SFAS Nos. 141 and
142.  Amortization expense related to goodwill and other intangibles was
$97,486 for the year ended June 30, 2001.  Because of the extensive
effort needed to comply with adopting SFAS Nos. 141 and 142, it is not
practicable to reasonably estimate the impact of adopting these
Statements on the financial statements at the date of this report,
including whether any transitional impairment losses will be required to
be recognized as the cumulative effect of a change in accounting
principle.

Outlook

    Over the past seven years, Dynatronics annual net sales have more
than tripled from $4.9 million in fiscal year 1994 to $16.8 million in
fiscal year 2001.  This growth is the result of many factors including
acquisitions, strategic alliances and the introduction of new products.
During fiscal year 2001, the Company continued to implement a strategy
of expanding product lines, strengthening channels of distribution, and
developing new products for the rehabilitation and aesthetic markets.

    As part of this strategy, in August 2000, the Company announced
the signing of an agreement with Alan Neuromedical Technologies (ANT)
granting Dynatronics the exclusive license for ANT's patented technology
for treating chronic pain.   Two devices incorporating the new
technology - the Dynatron STS clinical unit and the Dynatron STS Rx
prescription unit for home use - were announced to distributors from
around the world at meetings held February 2-3, 2001 in Salt Lake City,
Utah.  The treatment delivered by these devices is referred to as
Sympathetic Therapy.   Medical professionals have used this therapy to
treat chronic pain associated with a variety of conditions in patients
who had previously experienced only marginal results with traditional
therapy regimens.  According to the American Pain Foundation, millions
of people around the world suffer from chronic pain.  The associated
costs in the United States alone are estimated to exceed $100 billion
annually.  There is great demand for an effective treatment in the
battle against chronic pain.

    Recent research studies conducted or commissioned by Dynatronics
showed that 80% of chronic pain patients receiving Sympathetic Therapy
realized some reduction of pain - with at least one-third of the
patients becoming totally pain-free.  The fact these results were
achieved with patients who had suffered on average for eight years with
their chronic pain condition further attests to the effectiveness of
this therapy.  Additional research studies are currently underway to
further validate the efficacy of this innovative technology.
<PAGE>
    It is important to point out that not every chronic pain sufferer
will benefit from this therapy.  However, it appears that many of those
who suffer from chronic pain conditions with a sympathetic bias may
benefit from Sympathetic Therapy treatments.

    As with any new medical therapy or technology, the Company expects
that insurance reimbursement may influence the rate of growth of this
new technology.   Presently, there is limited reimbursement available
for Sympathetic Therapy treatments or home units.  Most are reviewed on
a case-by-case basis.   However, as medical practitioners experience
positive outcomes and further research supports the efficacy of this
therapy, it is anticipated that reimbursements will be more broadly
established.  Dynatronics is working with consultants who specialize in
obtaining Medicare and commercial insurance reimbursement for new
technologies.  It will take time, perhaps years, to obtain broad
acceptance and reimbursement for this new therapy.  Notably, this
technology potentially holds the key to not only relieving suffering for
many chronic pain patients, but significantly reducing the long-term
costs of supporting chronic pain patients through reducing intake of
expensive narcotic medications or avoiding costly invasive procedures.
Management believes that as these potential cost savings are realized,
insurance companies should begin to view Sympathetic Therapy as an
economical alternative to the traditional treatments for chronic pain
sufferers.

    The Company began selling the Dynatron STS clinical device during
the quarter ended March 31, 2001, and the Dynatron STS Rx home unit
during the fourth quarter of fiscal year 2001.  The home unit is
available to patients by prescription from their medical practitioner
with financing terms available through third party finance companies.

    Another important part of our strategic plan is the expansion of
worldwide marketing efforts, particularly into the European Community.
In March 2001, Dynatronics' Salt Lake operations, where all
electrotherapy, ultrasound, STS devices and Synergie products are
manufactured, was designated an ISO 9001 certified facility.  With this
designation of quality processes, the Company can market products
manufactured in this facility in any country that recognizes the CE
Mark.  The Company is now working to establish effective distribution of
these products in the European Community with additional human and
capital resources committed to this expansion effort.

    A third strategic component of the new initiatives is further
expansion into the aesthetics market. In February 2000, the Company
introduced the Synergie Peel microdermabrasion device as a companion to
the Synergie AMS (aesthetic massage system).  Microdermabrasion
technology is very popular in the aesthetics industry because of its
distinct advantages over chemical and laser peels.  The Synergie Peel
device has unique competitive advantages in the market due to its
patent-pending design, which eliminates clogging.  Furthermore, the
combination of the Synergie AMS and Synergie Peel make it not only
unique, but the most affordable combination device of its kind on the
market.

    To take full advantage of the opportunities of the aesthetics
market, Dynatronics has continued efforts to establish effective
distribution for its aesthetic products. The Company's Chairman, Kelvyn
H. Cullimore, is personally managing the effort to establish this
distribution.  The Company recently shifted its distribution strategy to
establishing dealers who are uniquely focused on the aesthetics market
and also to cultivating national accounts.  Previously, the Company had
attempted to establish a direct sales force for Synergie products.
Dynatronics changed its strategy because the Company believes that the
dealer strategy requires less overhead expense, is more easily managed
and will result in better local control of sales.  Controlling and
expanding the channels of distribution for these products is expected to
ultimately increase sales and allow the Company to more fully access the
potential of the aesthetics products market. The Company perceives this
market to be both lucrative and expanding, particularly as aging baby
boomers continue to look for ways to retain a youthful appearance.
<PAGE>
    Since the beginning of fiscal year 2001, the Company has allocated
resources to enhance its presence in the e-business arena.  Dynatronics
has undertaken to improve the appearance and application of its
corporate website and is researching ways to apply electronic media and
Internet solutions to better serve customer needs, access new business
opportunities, reduce cost of operations, and stay technologically
current in the way business is conducted.  The Company believes the
allocation of resources to developing e-business capabilities is
critical to improving future performance and has made the establishment
of these capabilities a focal strategy for the next fiscal year.  In
February 2001, the Company launched a new website that it believes
better reflects the quality of Dynatronics' products and services.  The
site may be viewed at www.dynatronics.com.  This reference to the
Company's website is not intended to incorporate the contents of the
website into or as a part of this report.

    Based on these strategic initiatives, the Company is focusing its
resources in the following areas:

- Introducing the new Dynatron STS and Dynatron STS Rx therapy
  products to the billion-dollar chronic pain market.  This
  includes efforts to maximize sales in the face of limited
  reimbursement by focusing on specific target markets that will
  embrace Sympathetic Therapy treatments and thus better educate
  the medical and insurance communities on the efficacy of
  Sympathetic Therapy treatments.  Additional research and other
  related efforts will also be evaluated to obtain broader
  support of the medical and insurance communities.

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

- Expanding distribution of both rehabilitation and aesthetic
  products internationally.

- Introducing other new rehabilitation products and aesthetic
  products that fit the Dynatronics distribution system.

- Applying e-commerce solutions to improving overall performance.

Forward-Looking Statements

    When used in this Report on Form 10-KSB, the words "believes",
"anticipates", "expects", and similar expressions are intended to
identify forward-looking statements within the safe harbor provisions of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934.  Such statements are subject to certain
risks and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof.  The Company
undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to
reflect events or circumstances after the date of this Report or to
reflect the occurrence of unanticipated events.   Risks and
circumstances that may cause actual results to vary from the Company's
expectations include, among others, the following:

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

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

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

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

    Ability to Sustain and Manage Growth.  The Company has experienced
significant growth in the last several years.  To effectively manage the
challenges resulting from growth, the Company may be required to hire
additional management and operations personnel and make additional
expenditures to improve and to expand its operational, financial,
information and management systems and its production capacity, which
may significantly increase its future operating expenses.  No assurance
can be given that the Company's business will grow in the future or that
the Company will be able to effectively manage such growth.  Any failure
by the Company to appropriately manage its growth could have a material
adverse effect on the Company's business, financial condition and
results of operations.

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

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

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

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

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

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

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

Item 7. Financial Statements

        The consolidated financial statements and accompanying report of
the Company's auditors follow immediately and form a part of this
report.
<PAGE>
                                 DYNATRONICS CORPORATION

                                      Balance Sheets


<TABLE>
<CAPTION>
                                                                              June 30,
                                                                   ------------------------------
                         Assets                                         2001           2000
                                                                   -------------  ---------------
<S>                                                                <C>            <C>
Current assets:
 Cash and cash equivalents                                         $    258,884       233,756
 Trade accounts receivable, less allowance for doubtful accounts
  of $140,735 in 2001 and $141,897 in 2000 (note 4)                   3,426,404     3,248,419
 Other receivables                                                      191,845       103,820
 Inventories (notes 2 and 4)                                          4,746,323     4,038,845
 Prepaid expenses                                                       212,429       133,147
 Prepaid income taxes                                                    26,003        31,416
 Deferred tax asset - current (note 7)                                  268,735       241,260
                                                                   -------------  ------------
     Total current assets                                             9,130,623     8,030,663

Property and equipment, net (notes 3 and 5)                           3,277,458     3,337,924

Excess of cost over fair value of net assets acquired, net
 of accumulated amortization of $562,536 in 2001
 and $496,155 in 2000                                                   876,637       968,020
Other assets                                                            275,629       258,974
                                                                   -------------  ------------
                                                                   $ 13,560,347    12,595,581
                                                                   =============  ============

             Liabilities and Stockholders' Equity

Current liabilities:
 Current installments of long-term debt (note 5)                   $    239,151       241,503
 Line of credit (note 4)                                              2,871,024     1,893,214
 Accounts payable                                                       407,727       739,990
 Accrued expenses                                                       424,257       334,876
 Accrued payroll and benefit expenses                                   216,518       270,333
                                                                   -------------  ------------
     Total current liabilities                                        4,158,677     3,479,916

 Long-term debt, excluding current installments (note 5)              1,834,903     2,073,894
 Deferred compensation (note 11)                                        260,599       233,398
 Deferred tax liability - noncurrent (note 7)                            78,846        23,209
                                                                   -------------  ------------
     Total liabilities                                                6,333,025     5,810,417
                                                                   -------------  ------------

Stockholders' equity:
 Common stock, no par value.  Authorized 50,000,000 shares;
  issued and outstanding 8,840,422 shares in 2001 and
  8,765,038 shares in 2000                                            2,565,926     2,457,947
 Treasury stock, 35,584 common shares at cost in 2001 and 2000         (120,096)     (120,096)
 Retained earnings                                                    4,781,492     4,447,313
                                                                   -------------  ------------
     Total stockholders' equity                                       7,227,322     6,785,164

Commitments and contingencies (notes 6 and 11)
                                                                   -------------  ------------
                                                                   $ 13,560,347    12,595,581
                                                                   =============  ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
                             DYNATRONICS CORPORATION

                              Statements of Income


<TABLE>
<CAPTION>

                                                               Years ended June 30,
                                                         ------------------------------
                                                              2001             2000
                                                         -------------    -------------
<S>                                                      <C>              <C>
Net sales                                                $  16,757,821      15,173,050
Cost of sales                                                9,712,475       8,894,080
                                                         -------------    ------------
     Gross profit                                            7,045,346       6,278,970

Selling, general, and administrative expenses                5,419,935       5,031,577
Research and development expense                               805,363         702,754
                                                         -------------    ------------
     Operating income                                          820,048         544,639

Other income (expense):
 Interest income                                                 7,964           3,125
 Interest expense                                             (320,522)       (401,303)
 Other income, net                                              22,379          34,430
                                                         -------------    ------------
     Total other income (expense), net                        (290,179)       (363,748)
                                                         -------------    ------------
     Income before income taxes                                529,869         180,891

Income tax expense (note 7)                                    195,690         144,981
                                                         -------------    ------------
     Net income                                          $     334,179          35,910
                                                         =============    ============

Basic net income per share                               $        0.04            -
                                                         =============    ============

Diluted net income per share                             $        0.04            -
                                                         =============    ============

Weighted average basic and diluted common
shares outstanding:
 Basic                                                       8,786,205       8,745,465
 Diluted                                                     9,150,310       8,773,629

</TABLE>
See accompanying notes to financial statements.
<PAGE>
                               DYNATRONICS CORPORATION

                          Statements of Stockholders' Equity

                          Years ended June 30, 2001 and 2000

<TABLE>
<CAPTION>
                                                                                                        Total
                                                        Common         Treasury        Retained      stockholders'
                                                        stock            stock         earnings         equity
                                                    ------------      -----------    ------------    ------------
<S>                                                 <C>               <C>            <C>             <C>
Balances at June 30, 1999                           $  2,391,826        (120,096)      4,411,403       6,683,133

Issuance of 62,044 shares of common stock upon
 exercise of employee stock options (note 9)              60,183               0               0          60,183

Income tax benefit from disqualifying disposition
 of employee stock options                                 5,938               0               0           5,938

Net income                                                     0               0          35,910          35,910
                                                    ------------      -----------    ------------    ------------

Balances at June 30, 2000                              2,457,947        (120,096)      4,447,313       6,785,164

Issuance of 20,000 shares of common stock
 and 80,000 options for license agreement                 73,240               0               0          73,240

Issuance of 10,000 common stock options
 for services                                              7,000               0               0           7,000

Issuance of 19,800 shares of common stock upon
 exercise of employee stock options                       20,090               0               0          20,090

Income tax benefit from disqualifying disposition
 of employee stock options                                 7,649               0               0           7,649

Net income                                                     0               0         334,179         334,179
                                                      -----------       ---------    ------------      ----------

Balances at June 30, 2001                           $  2,565,926        (120,096)      4,781,492       7,227,322
                                                     ============       =========    ============      ==========

</TABLE>
See accompanying notes to financial statements.
<PAGE>
                            DYNATRONICS CORPORATION

                            Statements of Cash Flows

<TABLE>
<CAPTION>


                                                                          Years ended June  30,
                                                                       --------------------------
                                                                          2001            2000
                                                                       ----------      ----------
<S>                                                                    <C>             <C>
Cash flows from operating activities:
 Net income                                                            $  334,179          35,910
 Adjustments to reconcile net income to net cash provided by (used in)
  operating activities:
   Depreciation and amortization of property and equipment                312,806         282,266
   Other amortization                                                      97,486          92,217
   Loss (gain) on disposal of assets                                        2,467          (4,216)
   Gain on disposal of stock                                                    0         (10,167)
   Provision for doubtful accounts                                         36,000          36,000
   Provision for inventory obsolescence                                   204,000         267,996
   Provision for warranty reserve                                         212,029         257,566
   Provision for deferred compensation                                     27,201          95,844
   Compensation expense on stock options                                    7,000               0
   Changes in operating assets and liabilities:
    Receivables                                                          (302,010)       (524,594)
    Inventories                                                          (911,478)        185,433
    Prepaid expenses and other assets                                     (28,800)        387,448
    Deferred income taxes                                                  28,162         111,594
    Income taxes payable                                                   13,062         145,315
    Accounts payable and accrued expenses                                (508,726)       (242,699)
    Deferred compensation                                                       0        (481,894)
                                                                       -----------     -----------
     Net cash provided by (used in) operating activities                 (476,622)        634,019
                                                                       -----------     -----------
Cash flows from investing activities:
 Proceeds from sale of fixed assets                                             0          79,083
 Proceeds from sale of stock                                                    0          10,167
 Capital expenditures                                                    (254,807)       (138,436)
                                                                       -----------     -----------
     Net cash used in investing activities                               (254,807)        (49,186)
                                                                       -----------     -----------
Cash flows from financing activities:
 Principal payments on long-term debt                                    (241,343)       (321,185)
 Net change in line of credit                                             977,810        (718,424)
 Proceeds from issuance of common stock                                    20,090          60,183
                                                                       -----------     -----------
     Net cash provided by (used in) financing activities                  756,557        (979,426)
                                                                       -----------     -----------
Net increase (decrease) in cash and cash equivalents                       25,128        (394,593)

Cash and cash equivalents at beginning of year                            233,756         628,349
                                                                       -----------     -----------
Cash and cash equivalents at end of year                               $  258,884         233,756
                                                                       ===========     ===========
Supplemental disclosures of cash flow information:
 Cash paid during the year for interest, net of amounts capitaliz      $  322,970         402,109
 Cash paid during the year for income taxes                               164,000               0

Supplemental disclosures of noncash investing and financing activities:
 Long-term debt incurred for fixed assets                              $        0          26,936
 Income tax benefit from nonemployee exercise of stock options              7,649           5,938

</TABLE>


See accompanying notes to financial statements.
<PAGE>


                    Independent Auditors' Report



The Board of Directors
Dynatronics Corporation:

We have audited the accompanying balance sheets of Dynatronics
Corporation as of June 30, 2001 and 2000, and the related statements of
income, stockholders' equity, and cash flows for each of the years in
the two-year period ended June 30, 2001.  These financial statements are
the responsibility of the Company's management.  Our responsibility is
to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.  An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Dynatronics
Corporation as of June 30, 2001 and 2000, and the results of its
operations and its cash flows for each of the years in the two-year
period ended June 30, 2001, in conformity with accounting principles
generally accepted in the United States of America.


                                /s/ KPMG LLP

August 3, 2001
<PAGE>

                          DYNATRONICS CORPORATION
                       Notes to Financial Statements
                           June 30, 2001 and 2000

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

    (a) Basis of Presentation

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

    (b) Cash Equivalents

        Cash equivalents include all cash and investments with original
        maturities to the Company of three months or less.  Cash
        equivalents consist of money market funds of $2,891 and $2,783
        at June 30, 2001 and 2000, respectively.  The book value of
        cash equivalents approximates fair value at June 30, 2001 and
        2000.

    (c) Inventories

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

    (d) Property and Equipment

        Property and equipment are stated at cost and are depreciated
        using the straight-line method over the estimated useful lives
        of related assets.  The building and its component parts are
        being depreciated over their estimated useful lives that range
        from 5 to 31.5 years.  Estimated lives for all other
        depreciable assets range from 2 to 7 years.

    (e) Excess of Cost over Fair Value of Net Assets Acquired

        The excess of cost over fair value of net assets acquired is
        being amortized on the straight-line method over 15 and 30
        years.  The Company assesses the recoverability of this
        intangible asset by determining whether the amortization of the
        balance over its remaining life can be recovered through
        undiscounted future operating cash flows of the acquired
        operations.  The amount of impairment, if any, is measured
        based on projected discounted future operating cash flows using
        a discount rate reflecting the Company's average cost of funds.
        The assessment of the recoverability of this asset will be
        impacted if estimated future operating cash flows are not
        achieved.

    (f) Revenue Recognition

        Sales revenues are generally recorded at the time products are
        shipped to the customer.

    (g) Research and Development Costs

        Research and development costs are expensed as incurred.
<PAGE>

    (h) Product Warranty Reserve

        Anticipated costs estimated to be incurred in connection with
        the Company's product warranty programs are charged to expense
        as products are sold.

    (i) Earnings Per Common Share

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

        A reconciliation between the basic and diluted weighted average
        number of common shares for 2001 and 2000 is summarized as
        follows:
                                                         2001         2000
                                                      ----------   ----------
           Basic weighted average number of common
             shares outstanding during the year        8,786,205    8,745,465

           Weighted average number of dilutive common
             stock options outstanding during the year   364,105       28,164
                                                      ----------   ----------

           Diluted weighted average number of common
             and common equivalent shares outstanding
             during the year                           9,150,310    8,773,629
                                                      ==========   ==========

       The weighted average number of options outstanding not included
       in the computation of diluted net income per share total
       174,868 and 226,029 as of June 30, 2001 and 2000, respectively,
       because to do so would have been antidilutive.

   (j)  Income Taxes

       The Company accounts for income taxes using the asset and
       liability method.  Under the asset and liability method,
       deferred tax assets and deferred tax liabilities are recognized
       for the future tax consequences attributable to differences
       between the financial statement carrying amounts of existing
       assets and liabilities and their respective tax bases.
       Deferred tax assets and deferred tax liabilities are measured
       using enacted tax rates expected to apply to taxable income in
       the years in which those temporary differences are expected to
       be recovered or settled. The effect on deferred tax assets and
       deferred tax liabilities of a change in tax rates is recognized
       in income in the period that includes the enactment date.

<PAGE>
   (k)  Stock-Based Compensation

       The Company employs the footnote disclosure provisions of
       Statement of Financial Accounting Standards (SFAS) No. 123,
       Accounting for Stock-Based Compensation.  SFAS No. 123
       encourages entities to adopt a fair-value-based method of
       accounting for stock options or similar equity instruments.
       However, it also allows an entity to continue measuring
       compensation cost for stock-based compensation using the
       intrinsic-value method of accounting prescribed by Accounting
       Principles Board (APB) Opinion No. 25, Accounting for Stock
       Issued to Employees (APB 25).  The Company has elected to
       continue to apply the provisions of APB 25 and provide pro
       forma footnote disclosures required by SFAS No. 123.

   (l)  Concentration of Risk

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

   (m)  Operating Segments

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

   (n)  Use of Estimates

       Management of the Company has made a number of estimates and
       assumptions relating to the reporting of assets, liabilities,
       revenues, and expenses and the disclosure of contingent assets
       and liabilities to prepare these financial statements in
       conformity with accounting principles generally accepted in the
       United States of America.  Actual results could differ from
       those estimates.

   (o)  Fair Value Disclosure

       The carrying value of accounts receivable, accounts payable,
       accrued expenses, and notes payable approximates their
       estimated fair value due to the relative short maturity of
       these instruments.  The carrying value of long-term debt
       approximates its estimated fair value due to recent issuance of
       the debt.
<PAGE>
(2)     Inventories

    Inventories consist of the following:
                                                        2001          2000
                                                     ----------    ----------
        Raw materials                                $2,914,710     2,470,979
        Finished goods                                2,071,822     1,785,588
        Inventory reserve                              (240,209)     (217,722)
                                                     ----------    ----------
                                                     $4,746,323     4,038,845
                                                     ==========    ==========
(3)     Property and Equipment

    Property and equipment consist of the following:
                                                        2001          2000
                                                     ----------    ----------
        Land                                         $  354,743       354,743
        Buildings                                     2,802,894     2,792,744
        Machinery and equipment                       1,335,828     1,205,159
        Office equipment                                288,351       231,858
        Vehicles                                         61,771        61,771
                                                     ----------    ----------
                                                      4,843,587     4,646,275
        Less accumulated depreciation and
          amortization                                1,566,129     1,308,351
                                                     ----------    ----------
                                                     $3,277,458     3,337,924
                                                     ==========    ==========

(4)     Line of Credit

    The Company has available with a commercial bank a revolving line
    of credit agreement totaling $3.75 million at June 30, 2001.  The
    agreement requires letter of credit fees and is secured by trade
    receivables and inventories.  The line requires the monthly payment
    of interest on outstanding balances at prime (6.75 percent and 9.5
    percent at June 30, 2001 and 2000, respectively).  The line expires on
    December 1, 2001.

<PAGE>
(5)     Long-term Debt

    Long-term debt consists of the following:
                                                           2001        2000
                                                        ----------  ----------
7.11% promissory note secured by a trust deed on
real property, payable in monthly installments of
$8,708 through November 2003                            $  600,977     660,431

6.21% promissory note secured by a trust deed on
real property, maturing November 2013, payable in
decreasing installments beginning at $7,545
monthly ($7,060 during 2001 and 2000)                      728,900     767,078

8.65% promissory note secured by a trust deed on
real property, payable in monthly installments of
$7,182 through January 2012                                595,930     629,310

8.96% - 9.07% term loans secured by fixed assets,
payable in monthly installments of $5,105 through
July 2003                                                   78,512     129,110

8.87% promissory note secured by fixed assets
payable in monthly installments of $4,382 through
July 2002                                                   50,143      96,045

10.97% promissory note secured by fixed assets
payable in monthly installments of $654 through
September 2001                                               1,290       8,558

8.75% promissory note secured by a vehicle, payable
in monthly installments on $346 through April 2004          10,342      13,444

9.35% promissory note secured by a vehicle, payable
in monthly installments of $365 through 2003                 7,960      11,421
                                                         ---------- -----------

     Total long-term debt                                 2,074,054  2,315,397

Less current installments                                   239,151    241,503
                                                         ---------- ----------
     Long-term debt, excluding current installments      $1,834,903  2,073,894
                                                         ========== ==========

The aggregate maturities of long-term debt for each of the years
subsequent to 2001 are as follow: 2002, $239,151; 2003, $196,709;
2004, $167,092; 2005, $174,833; 2006, $187,960; and thereafter
$1,108,309.

(6)     Leases

    The Company leases vehicles under noncancelable operating lease
    agreements.  Rent expense for the years ended June 30, 2001 and
    2000, was $25,879 and $26,220, respectively.  Future minimum rental
    payments required under noncancelable operating leases that have
    initial or remaining lease terms in excess of one year as of 2001
    are as follow: 2002, $25,265; 2003, $18,377; and 2004, $10,140.

<PAGE>
(7)     Income Taxes

    Income tax expense for the years ended June 30, consists of:

                                                        Stock
                                                        option
                               Current     Deferred     benefit      Total
                             ----------    --------    --------    --------
2001:
   U.S. federal              $  115,704      38,607       6,655     160,966
   State and local               34,657        (927)        994      34,724
                             ----------    --------    --------    --------
                             $  150,361      37,680       7,649     195,690
                             ==========    ========    ========    ========
2000:
   U.S. federal              $     -        114,917       5,109     120,026
   State and local                9,024      15,102         829      24,955
                             ----------    --------    --------    --------
                             $    9,024     130,019       5,938     144,981
                             ==========    ========    ========    ========

Actual income tax expense differs from the "expected" tax expense
(computed by applying the U.S. federal corporate income tax rate of
34 percent to income or loss before income taxes) as follows:

                                                     2001           2000
                                                  ----------     ----------
        Expected tax expense                      $  180,155         61,503
        State taxes, net of federal tax benefit       22,918         16,470
        Meals and entertainment                        2,687          2,138
        Amortization of goodwill not deductible        2,985          2,985
        Charitable contributions                     (11,709)        (2,417)
        Officers' life insurance                      (2,726)        63,728
        Other, net                                     1,380            574
                                                  ----------     ----------
                                                  $  195,690        144,981
                                                  ==========     ==========
<PAGE>

Deferred income tax assets related to the tax effects of temporary
differences are as follows:
                                                      2001           2000
                                                   ----------     ----------
Net deferred tax asset - current:
    Inventory capitalization for income
       tax purposes                                $  60,030         54,147
    Obsolete inventory reserve                        89,598         81,210
    Vacation reserve                                   3,730          3,730
    Warranty reserve                                  41,776         32,824
    Accrued product liability                         21,107         16,421
    Bad debt reserve                                  52,494         52,928
                                                   ---------      ---------
         Total deferred tax asset - current        $ 268,735        241,260

Net deferred tax asset (liability) - noncurrent:
    Salary continuation agreements                 $  97,204         87,057
    Net operating loss carryforwards                  17,422         60,860
    Property and equipment,
      principally due to differences
      in depreciation                               (206,140)      (180,438)
    Noncompete and goodwill amortization              12,668          9,312
                                                   ---------      ---------
         Total deferred tax asset - noncurrent     $ (78,846)       (23,209)
                                                   =========      =========

In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized.  The ultimate
realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those
temporary differences become deductible.  Management considers the
scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this
assessment.  Based upon the level of historical taxable income and
projections for future taxable income over the periods which the
deferred tax assets are deductible, management believes it is more
likely than not that the Company will realize the benefits of these
deductible differences.

The Company benefits from the tax net operating loss (NOL)
carryovers acquired in the November 1992 merger with ACI, the
former parent of the Company.  Amounts and expiration dates of
carryforwards are as follows:

                 Expiration                           Amount
                 ----------                         ----------

                    2004                             $20,296
                    2005                               1,899
                    2006                                  60
                    2007                              29,007
                    2020                               4,612
                                                    ----------
                                                     $55,874
                                                    ==========
<PAGE>
(8)     Major Customers

    During the fiscal years ended June 30, 2001 and 2000, sales to any
    single customer did not exceed ten percent of total revenues.

(9)     Common Stock

    The Company granted options to acquire common stock under its 1992
    qualified stock option plan.  The options are to be granted at not
    less than 100 percent of the market price of the stock at the date
    of grant.  Option terms are determined by the Board of Directors,
    and exercise dates may range from six months to five years from the
    date of grant.

    Summary of activity follows:
                                        2001                     2000
                              ------------------------  -----------------------
                                             Weighted                 Weighted
                                              average                 average
                                 Number      exercise      Number     exercise
                               of shares      price      of shares     price
                              -----------   ----------  -----------   ---------
       Options outstanding
         at beginning of year    678,489      $1.11        655,790      $.93
       Options granted           446,321       1.31        185,299       .95
       Options exercised          19,800       1.02         62,044       .97
       Options canceled or
         expired                 174,104       1.28        100,556      1.34
                               ----------    --------    ----------   --------
       Options outstanding at
         end of year             930,906       1.17        678,489      1.11
                               ==========                ==========
       Options exercisable at
         end of year             437,760       1.04        418,950      0.81
                               ==========                ==========
       Range of exercise prices
         at end of year                      .72-2.70                 .72-2.03

    At June 30, 2001, 1,020,907 shares of common stock were authorized
    and reserved for issuance, but were not granted under the terms of
    the stock option plan.

    The Company accounts for the plan using the intrinsic-value method
    under APB 25.  Accordingly, no compensation expense has been
    recognized for the stock option plan.  Had compensation expense for
    the Company's stock option plan been determined based on the fair
    value at the grant date for awards in 2001 and 2000, consistent
    with the provisions of SFAS 123, the Company's results of
    operations would have been reduced to the pro forma amounts
    indicated below:
                                                       June 30,
                                            -----------------------------
                                                2001             2000
                                            ------------     ------------
     Net income - as reported                $  334,179           35,910
     Net income (loss) - pro forma              205,397          (40,279)
     Earnings per share - as reported               .04                -
     Earnings per share - pro forma                 .02                -
<PAGE>
     The fair value of each option grant is estimated on the date of
     grant using the Black-Scholes option-pricing model with the
     following assumptions:

                                                       June 30,
                                            -----------------------------
                                                2001             2000
                                            ------------     ------------
     Expected dividend yield                     0%               0%
     Expected stock price volatility          69 - 74%            68%
     Risk-free interest rate                 4.9 - 6.2%          6.7%
     Expected life of options                5 & 7 years      5 & 7 years

     The weighted average fair value of options granted during 2001 and
     2000, was $0.78 and $0.66, respectively.
     The Company granted 10,000 options in 2001 to a third party for the
     performance of services.  The Company recognized the fair value of
     the options as compensation expense in 2001.  The fair value of the
     options granted was estimated using the Black-Scholes option-
     pricing model with the following weighted average assumptions:
     risk-free interest rate 5.8 percent, expected dividend yield of -0-
     percent, expected life of 5 years, and expected volatility of 68
     percent.

     During 2001, the Company purchased a license agreement for 20,000
     shares of common stock and 80,000 options to purchase common stock.
     The options granted were not issued under the Company's stock
     option plan.  The Company recorded the license agreement at the
     fair value of the equity instruments issued and is amortizing the
     asset over the l0-year life of the agreement.  The exercise price
     of the options range from $1.08 to $4.00.  The fair value of the
     options granted was estimated using the Black-Scholes option-
     pricing model with the following weighted average assumptions:
     risk-free interest rate 6.1 percent, expected dividend yield of -0-
     percent, expected life of 6 to 9 years, and expected volatility of
     68 percent.

(10)    Employee Benefit Plan

     During 1991, the Company established a deferred savings plan which
     qualifies under Internal Revenue Code Section 401(k).  The plan
     covers all employees of the Company who have at least six months of
     service and who are age 20 or older.  For 2001 and 2000, the
     Company made matching contributions of
     25 percent of the first $2,000 of each employee's contribution.
     The Company's contributions to the plan for 2001 and 2000, were
     $31,043 and $28,808, respectively.  Company matching contributions
     for future years are at the discretion of the Board of Directors.
<PAGE>
(11)    Salary Continuation Agreements

     As of 2001, the Company had salary continuation agreements with two
     key employees.  A third employee's agreement was terminated in
     April 2000.  The agreements provide a pre-retirement salary
     continuation income to the employee's designated beneficiary in the
     event that the employee dies before reaching age 65.  This death
     benefit amount is the lesser of $75,000 per year or 50 percent of
     the employee's salary at the time of death, and continues until the
     employee would have reached age 65.  The agreements also provide
     the employee with a supplemental retirement benefit if the employee
     remains in the employment of the Company until age 65.  Estimated
     amounts to be paid under the agreements are being accrued over the
     period of the employees' active employment.  As of 2001 and 2000,
     the Company has accrued $260,599 and $233,398, respectively, of
     deferred compensation under the terms of the Agreements.

     The agreement terminated in April 2000 with the Chairman of the
     Board of Directors.  The Company paid $481,894 in order to
     terminate his salary continuation agreement.  The payment was
     funded from the surrender of a life insurance policy on the
     Chairman that had been used as a funding vehicle for the salary
     continuation agreement.  The surrender of the life insurance policy
     resulted in income tax expense of approximately $79,000 since the
     tax basis of the policy was lower than the amount received by the
     Company.

(12)    Columbia Operation Closure

     During the last month of fiscal 1999, the Company's management
     decided to close its Columbia, South Carolina manufacturing
     facility in the first quarter of fiscal 2000.  The operations were
     moved to its Chattanooga facility or contracted to a third party.
     As a result of the plan, during fiscal 1999 the Company expensed
     $68,000 in prepaid lease costs related to a manufacturing facility
     abandoned, and recorded an impairment loss for leasehold
     improvements and manufacturing equipment of $39,000.  The Company
     communicated severance arrangements to affected employees in fiscal
     2000.  Severance costs and other costs in excess of original
     estimates of approximately $200,000 were expensed during fiscal
     2000.  The closure-related costs are included in selling, general,
     and administrative expenses.
<PAGE>
(13)    Recent Accounting Pronouncements

     In July 2001, the Financial Accounting Standards Board (FASB)
     issued Statement on Financial Accounting Standards (SFAS) No. 141,
     Business Combinations, and SFAS No. 142, Goodwill and Other
     Intangible Assets. SFAS No. 141 prohibits the use of the pooling-
     of-interests method of accounting and requires that the purchase
     method of accounting be used for all business combinations
     initiated after
     June 30, 2001 and is applicable to all purchase method business
     combinations completed after June 30, 2001.  SFAS No. 141 also
     specifies criteria that intangible assets acquired in a purchase
     method business combination must meet to be recognized and reported
     apart from goodwill.  Effective for the Company beginning July 1,
     2002, SFAS No. 142 will require that goodwill and intangible assets
     with indefinite useful lives no longer be amortized, but instead be
     tested for impairment at least annually in accordance with the
     provisions of SFAS No. 142. SFAS No. 142 will also require that
     intangible assets with definite useful lives be amortized over
     their respective estimated useful lives to their estimated residual
     values, and reviewed for impairment in accordance with SFAS No.
     121, Accounting for the Impairment of Long-Lived Assets and for
     Long-Lived Assets to Be Disposed Of.

     As of the date of adoption, we expect to have unamortized goodwill
     and other  intangibles in the amount of $849,000 which will be
     subject to the transition provisions of SFAS Nos. 141 and 142.
     Amortization expense related to goodwill and other intangibles was
     $97,486 for the year ended June 30, 2001.  Because of the extensive
     effort needed to comply with adopting SFAS Nos. 141 and 142, it is
     not practicable  to reasonably estimate the impact of adopting
     these Statements on our financial statements at the date of this
     report, including whether any transitional impairment losses will
     be required to be recognized as the cumulative effect of a change
     in accounting principle.
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

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


                               PART III

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

The directors and executive officers of the Company at September 20, 2001 are:

                                          Director
                                         or Officer           Position
       Name                Age             Since              with Company

Kelvyn H. Cullimore        66                1983       Chairman of the Board

Kelvyn H. Cullimore, Jr.   45                1983    President, CEO and Director

Larry K. Beardall          45                1986       Executive Vice President
                                                      of Sales and Marketing and
                                                      Director

E. Keith Hansen, M.D.*     56                1983         Director

Joseph H. Barton*          73                1996         Director

Howard L. Edwards*         70                1997         Director

Val J. Christensen*        48                1999         Director

John S. Ramey              50                1992         Sr. Vice President of
                                                           Operations and R&D



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

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

        Directors of the Company hold office until the next annual meeting
of the Company's shareholders and until their successors have been
elected and duly qualified.  In the event of the resignation of a Board
Member, the remaining members of the Board of Directors may elect an
individual to fill the remainder of the resigning member's unexpired
term.  Executive officers are elected by the Board of Directors of the
Company at the first meeting after each annual meeting of shareholders
and hold office until their successors are elected and duly qualified.
The Company has an audit committee and a compensation committee composed
of the outside directors of the board.  The compensation committee
reviews and approves compensation matters for executive officers of the
Company.
<PAGE>
        Kelvyn H. Cullimore has served as Chairman of the Board of the
Company since its incorporation in April 1983.  From 1983 until 1992,
Mr. Cullimore served as President of the Company.  Mr. Cullimore
received a B.S. degree in Marketing from Brigham Young University in
1957, and following graduation, worked for a number of years as a
partner in a family-owned home furnishings business in Oklahoma City,
Oklahoma.  Mr. Cullimore has participated in the organization and
management of various enterprises, becoming the president or general
partner in several business entities, including real estate, motion
picture, and equipment partnerships. From 1979 until 1992, Mr. Cullimore
served as Chairman of the Board of American Consolidated Industries
(ACI), the former parent company of Dynatronics.  From 1986 until 1999,
Mr. Cullimore served as President of ITEC Attractions and from 1986 to
1997, he served as ITEC's Chairman, President and CEO.  He currently
serves on the board of directors of ITEC.

        Kelvyn H. Cullimore, Jr. was elected President and Chief Executive
Officer of the Company in December 1992.  He has been a Director since
the incorporation of the Company.  He served as Secretary/Treasurer of
the Company from 1983 until 1992 and Administrative Vice President from
1988 until 1992.  Mr. Cullimore graduated from Brigham Young University
with a degree in Financial and Estate Planning in 1980.  Mr. Cullimore
has served on the board of directors of several businesses, including
Dynatronics Marketing Company, ACI and currently serves on the board of
ITEC Attractions.  In addition, he served as Secretary/Treasurer of ACI
and Dynatronics Marketing Company.  From 1983 until 1992 Mr. Cullimore
served as Executive Vice President and Chief Operating Officer of ACI.

        Larry K. Beardall was elected Executive Vice President of the
Company in December 1992.  He has served as a Director and the Vice
President of Sales and Marketing for the Company since July 1986.  Mr.
Beardall joined Dynatronics in February 1986 as Director of Marketing.
He graduated from Brigham Young University with a degree in Finance in
1979.  Prior to his employment with Dynatronics, Mr. Beardall worked
with GTE Corporation in Durham, North Carolina as the Manager of Mergers
and Acquisitions and then with Donzis Protective Equipment in Houston,
Texas as National Sales Manager.  He also served on the Board of
Directors of Nielsen & Nielsen, Inc., the marketing arm for Donzis, a
supplier of protective sports equipment.

        E. Keith Hansen, M.D. has been a Director of the Company since
1983.  Dr. Hansen obtained a Bachelor of Arts degree from the University
of Utah in 1966 and an M.D. from Temple University in 1972.  He has been
in private practice in Sandy, Utah since 1976.  Dr. Hansen was also a
Director of ACI until 1992; and he is Vice President and Director of
Mountain Resources Corporation and a Director of Accent Publishers, both
based in Salt Lake City, Utah.

        Joseph H. Barton joined the Board in January 1996.  Mr. Barton
received a Civil Engineering degree from the University of California at
Berkeley and has held various executive positions including President of
J.H. Barton Construction Company, Senior Vice President of Beverly
Enterprises, and President of KB Industries, a building and land
development company.  Most recently, Mr. Barton served as Senior Vice
President of GranCare, Inc. from 1989 to 1994 and currently is a
consultant for Covenant Care, a company that owns and manages long-term
care facilities throughout the United States.

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

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

        John S. Ramey joined the Company in December 1992 as Vice
President of Research and Development and currently serves as Vice
President of Operations.  Prior to joining the Company, Mr. Ramey worked
for 16 years with Phillips Semi-conductors-Signetics, an integrated
circuit manufacturing company, as Manager of Product Engineering.  From
1983 to 1989, Mr. Ramey also served as President of Enertronix, a small
public corporation.  Since 1989, Mr. Ramey has served as Vice President
of JRH Technology, a private engineering firm.  Mr. Ramey earned his MBA
degree in 1991 from the University of Phoenix (in Salt Lake City, Utah)
and a BS degree in electronics in 1977 from Brigham Young University.

          Section 16 (a) Beneficial Ownership Reporting Compliance

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

        Based solely on review of the copies of such forms furnished to the
Company during and with respect to the year ended June 30, 2001, the
Company believes that during the year then ended all Section 16(a)
filings applicable to these Reporting Persons were timely filed.

Item 10.  Executive Compensation.

        The Company hereby incorporates by reference into and makes a part
of this Report the information and disclosure set forth under Item 8 of
Schedule 14A, "Compensation of Directors and Executive Officers,"
contained in the Company's definitive proxy statement for 2001, to be
sent to shareholders of the Company subsequent to the filing of this
Report on Form 10-KSB.

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

        The Company hereby incorporates by reference into and makes a part
of this Report the information and disclosure set forth under Item 6 of
Schedule 14A, "Voting Securities and Principal Holders Thereof,"
contained in the Company's definitive proxy statement for 2001, to be
sent to shareholders of the Company subsequent to the filing of this
Report on Form 10-KSB.

Item 12.  Certain Relationships and Related Transactions

    Except as otherwise disclosed in "Management's Discussion and
Analysis or Plan of Operation," during the two years ended June 30,
2001 the Company was not a party to any transaction in which any
director, executive officer or shareholder holding more than 5% of the
Company's issued and outstanding commons tock had a direct or indirect
material interest.
<PAGE>
Item 13.        Exhibits and Reports on Form 8-K

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

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

                Independent Auditors' Report                              F-1

                Balance Sheets at June 30, 2001 and 2000                  F-2

                Statements of Income for years ended
                June 30, 2001 and 2000                                    F-3

                Statements of Stockholders'
                Equity for years ended June 30, 2001 and 2000             F-4

                Statements of Cash Flows for
                years ended June 30, 2001 and 2000                        F-5

                Notes to Financial Statements                             F-6

                Exhibits:

                 Reg. S-B
                Exhibit No.            Description
        -----------            -----------

           3.1        Articles of Incorporation and Bylaws of Dynatronics
                     Laser Corporation. Incorporated by reference to a
                     Registration Statement on Form S-1 (No. 2-85045) filed
                     with the Securities and Exchange Commission and
                     effective November 2, 1984, as amended by Articles of
                     Amendment dated November 18, 1993.

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

           4.1        Form of certificate representing Dynatronics Laser
                     Corporation common shares, no par value.  Incorporated
                     by reference to a Registration Statement on Form S-1
                     (No. 2-85045) filed with the Securities and Exchange
                     Commission and effective November 2, 1984.

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

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

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

          10.3        Loan Agreement with Zion Bank (previously filed)

          10.4        Settlement Agreement dated March 29, 2000 with Kelvyn
                     Cullimore, Sr. (previously filed)
<PAGE>
(b)  Reports on Form 8-K:  No report on Form 8-K has been filed by the
     Company during the last quarter of the period covered by this report.

<PAGE>
                              SIGNATURES

        In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                       DYNATRONICS CORPORATION



                                       By    /s/ Kelvyn H. Cullimore, Jr.
                                         ------------------------------
                                         Kelvyn H. Cullimore, Jr.
                                         Chief Executive Officer and President


Date:  September 26, 2001

        Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.


/s/ Kelvyn H. Cullimore           Chairman of the Board            9/26 , 2001
-----------------------------                                    -------
Kelvyn H. Cullimore


/s/ Kelvyn H. Cullimore, Jr.      Director, President, CEO         9/26 , 2001
-----------------------------     (Principal Executive Officer   -------
Kelvyn H. Cullimore, Jr.          and Principal Financial
                                  and Accounting Officer)


/s/ Larry K. Beardall             Director, Executive              9/26 , 2001
-----------------------------     Vice President                 -------
Larry K. Beardall


/s/ E. Keith Hansen, M.D.         Director                         9/26 , 2001
------------------------------                                   -------
E. Keith Hansen, M.D.


/s/ Joseph H. Barton              Director                         9/26 , 2001
------------------------------                                   -------
Joseph H. Barton


/s/ Howard L. Edwards             Director                         9/26 , 2001
------------------------------                                   -------
Howard L. Edwards


/s/ Val J. Christensen            Director                         9/26 , 2001
------------------------------                                   -------
Val J. Christensen