Business Acquisitions Hilger Crystals/ Dynasil Biomedical

12 Months Ended

Sep. 30, 2011

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

Note 2 – Business Acquisitions – Hilger Crystals/ Dynasil Biomedical

Hilger Crystals, Ltd.

On July 19, 2010, Dynasil completed the acquisition of 100% of the issued and outstanding common stock of Hilger Crystals Limited (“Hilger”) from Newport Corporation (“Newport”). Hilger, located in Margate, Kent, England, is engaged in the manufacture of synthetic crystals, detectors and arrays for infrared spectroscopy and x-ray and gamma ray detection. Hilger will be the manufacturer for the Company’s dual mode detector technology.

Pursuant to the Share Purchase Agreement dated July 19, 2010 by and among Dynasil, Newport, Hilger and Newport Spectra-Physics Limited, Dynasil acquired 100% of the issued and outstanding common stock of Hilger for an initial payment of $4 million in cash and a possible additional payment of up to $0.75 million after eighteen months based on Hilger’s current business revenues for the eighteen months following the acquisition. In addition, the Company made a payment in the amount of $2,946 associated with a post-closing balance sheet adjustment based on net working capital. There were associated transaction costs of $183,627 recorded in selling, general and administrative costs for the period ended September 30, 2010.

The acquisition was funded by borrowing $4 million from Sovereign/Santander Bank under the Acquisition Line of Credit. This borrowing carries the interest rate of one month LIBOR plus 3.5%. There remains $1 million available under this Acquisition Line of Credit carrying the rate of 0.25% per annum on the unused portion. The transaction costs were funded from the Company’s existing cash balances.

The total purchase price of $4,752,946 has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair values. The results of operations of Hilger have been included in the consolidated financial statements from July 19, 2010, the effective date of the acquisition.

Purchase price:
Purchase price	$	4,000,000
Contingent consideration		750,000
Working Capital Adjustment		2,946
	$	4,752,946

The Allocation of the purchase price is summarized below.

Purchase price allocation:
Accounts receivable	$	618,938
Inventories		923,944
Prepaid expenses and other current assets		127,831
Property and equipment		1,111,728
Goodwill		2,513,054
Current liabilities assumed		(542,549	)
Net fair value of assets acquired	$	4,752,946

The following is the comparative financial information of the Company for the year ended September 30, 2011 and the proforma financial information for the year ended September 30, 2010, assuming the transaction had been consummated at the beginning of the year (i.e., October 1, 2009.)

	For the year ended September 30, 2010 (Unaudited)
Statement of Operations:
Revenue	$	45,087,896
Cost of revenue		26,468,238
Gross profit		18,619,658
Operating Expense		13,885,262
Income from operations		4,734,396
Interest expense, net		(626,246	)
Income before taxes		4,108,150
Income taxes		(986,829	)
Net Income	$	3,121,321

Earnings per share:
Basic	$	0.21
Diluted	$	0.21

Dynasil Biomedical

On April 14, 2011, Dynasil announced the incorporation of Dynasil Biomedical Corp. as a new business unit to pursue opportunities in the medical field. It is located in Rochester, Minnesota and Dr. Daniel Ericson joined Dynasil Biomedical as Scientific Lead with responsibility for research and development. Dynasil Biomedical completed the purchase of Dr. Ericson’s rights to six biomedical technologies invented or co-invented by him for a purchase price of $300,000, together with certain rights to royalty and milestone payments if these technologies are successfully developed. Dr. Ericson previously worked at Mayo Clinic and several of the assigned technologies are jointly owned with that institution. Additionally, he previously invented several medical technologies which are in commercial use or being developed for commercial use by unrelated parties. The six purchased technology rights include a method that could significantly extend the storage time for red blood cells as well as enhancing the quality of those cells, a tuberculosis test with the potential to provide a rapid (one hour) test, a tissue sealant developed for both topical and internal bleeding which could accelerate clot formation and have high tensile strength, and a set of technologies focused on point of care diagnostics for assessing hemophilia, blood coagulation and cardiovascular risk. The point of care tests use finger stick blood samples and handheld optical detection systems. While Dynasil currently believes that these technologies represent exciting opportunities, the technologies are all early stage and there can be no assurances that any of these technologies will be successfully commercialized. Dynasil Biomedical will collaborate with Dynasil’s RMD Research organization and its RMD Instruments business, both of which have proven track records in medical diagnostics. The medical diagnostics market is viewed as a key area for continued investment where Dynasil can contribute its significant ability and expertise to make the world a safer and healthier place. The asset purchase had no impact on the comparative financial information reported above.