8-K: Dynatronics Files Chapter 7 Bankruptcy, Ceases Operations

Dynatronics Corporation and its subsidiaries have filed for Chapter 7 bankruptcy, ceasing all operations and triggering debt acceleration.

Summary

• Dynatronics Corporation and its wholly-owned subsidiaries (Hausmann Enterprises, LLC, Bird & Cronin, LLC, and Dynatronics Distribution Company, LLC) ceased operations and filed voluntary petitions for relief under Chapter 7 of the U.S. Bankruptcy Code on January 9, 2026.
• The bankruptcy filings were made in the United States Bankruptcy Court for the District of Minnesota.
• A Chapter 7 trustee will be appointed by the Bankruptcy Court to administer each Debtor's estate, including liquidating assets.
• The filings triggered events of default under the Company's Loan and Security Agreement dated August 1, 2023, with Gibraltar Business Capital, LLC, allowing for acceleration of outstanding indebtedness.
• Redemption rights under the Series A 8% Convertible Preferred Stock and Series B Convertible Preferred Stock were also triggered.
• The authority and powers of the Board of Directors and executive officers were effectively eliminated upon the bankruptcy filings.
• All directors (Brian Baker, Andrew Hulett, R. Scott Ward, Erin S. Enright, and David B. Holtz) resigned, and executive officers, including CEO Brian Baker, ceased employment, effective upon the appointment of the Chapter 7 trustee(s).

Sentiment

Score: 1

Explanation: The filing of Chapter 7 bankruptcy and cessation of all operations represents the most negative possible outcome for a company, leading to liquidation and likely complete loss for equity holders.

Negatives

• The company and its subsidiaries have ceased all operations.
• The filing of Chapter 7 bankruptcy indicates a complete liquidation of assets, likely resulting in minimal or no recovery for common shareholders.
• Events of default were triggered under significant debt instruments, including the Loan and Security Agreement with Gibraltar Business Capital, LLC, leading to potential acceleration of debt.
• Redemption rights for Series A and Series B Convertible Preferred Stock were triggered, indicating further financial distress and potential claims against the estate.
• The Board of Directors and executive officers have lost their authority, and their positions have been terminated.

Risks

• The primary risk of business failure has materialized with the Chapter 7 bankruptcy filing.
• Creditors face the risk of partial or no recovery of their outstanding debts, as assets will be liquidated by a Chapter 7 trustee.
• Shareholders face the risk of complete loss of their investment due to the liquidation process.
• The automatic stay under 11 U.S.C. § 362 may temporarily prevent creditors from enforcing their rights, but the ultimate outcome is liquidation.

Future Outlook

The future outlook for Dynatronics Corporation is the liquidation of its assets under Chapter 7 bankruptcy proceedings. A Chapter 7 trustee will be appointed to administer the bankruptcy estate, and the company will cease to exist as an operating entity.

Management Comments

• Management considered all strategic alternatives before deciding to cease operations and file for Chapter 7 bankruptcy.

Industry Context

This announcement reflects a company-specific failure rather than a broader industry trend. The medical equipment and physical therapy products industry, in which Dynatronics operated, generally remains stable, but individual companies can face unique operational and financial challenges leading to such outcomes.

Management Changes

Corporate Governance

Legal Proceedings

• Voluntary petition for relief under Chapter 7 of Title 11 of the United States Code filed in the United States Bankruptcy Court for the District of Minnesota.
• The bankruptcy filings trigger events of default under various contracts and debt instruments, which may be subject to the automatic stay under 11 U.S.C. § 362.

Stakeholder Impact

• **Shareholders**: Highly likely to face a complete loss of their investment as the company's assets will be liquidated to satisfy creditors.
• **Employees**: All employees, including executive officers, have ceased or will cease employment as operations have ceased.
• **Customers**: Operations have ceased, meaning existing orders will not be fulfilled, and no new business will be conducted.
• **Suppliers**: Unpaid invoices are now subject to the bankruptcy process, and suppliers will become unsecured creditors.
• **Creditors (e.g., Gibraltar Business Capital, LLC)**: Their claims are now subject to the bankruptcy court's process, with potential for acceleration of debt and recovery dependent on the liquidation of assets.

Next Steps

• A Chapter 7 trustee will be appointed by the Bankruptcy Court for each of the Debtors.
• The appointed trustee(s) will administer the respective Debtor's bankruptcy estate, including liquidating assets.
• An initial hearing for creditors will be scheduled.
• A Notice of Bankruptcy Case Filing will be sent to known creditors.

Key Dates

Recommendation

The company has filed for Chapter 7 bankruptcy, indicating a complete cessation of operations and liquidation of assets. This typically results in a total loss for equity holders. Any remaining value in the stock is speculative and highly unlikely to be realized, making a 'strong sell' recommendation appropriate for investors to exit any remaining positions.

Keywords

Chapter 7 bankruptcy, liquidation, Dynatronics, DYNT, corporate dissolution, debt default, SEC filing, business cessation, Gibraltar Business Capital