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Basis of Presentation and Liquidity
6 Months Ended
Mar. 31, 2012
Basis of Presentation and Liquidity [Abstract]  
Basis of Presentation and Liquidity [Text Block]

Note 1 - Basis of Presentation and Liquidity

 

The accompanying consolidated balance sheet as of March 31, 2012, the consolidated statements of operations for the three and six months ended March 31, 2012 and 2011, changes in stockholders’ equity for the six months ended March 31, 2012 and cash flows for the six months ended March 31, 2012 and 2011 of Dynasil Corporation of America and subsidiaries, and the related information contained in these notes have been prepared by management and are unaudited. In the opinion of management, all adjustments (which include normal recurring and nonrecurring items) necessary to present fairly the financial position, results of operations and cash flows in conformity with generally accepted accounting principles for the periods presented have been made. Interim operating results are not necessarily indicative of operating results for a full year.

 

The preparation of our unaudited consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's September 30, 2011 Annual Report on Form 10-K previously filed by the Company with the Securities and Exchange Commission.

 

Certain amounts as previously reported have been reclassified to conform to the current year financial statement preparation.

 

The Company has experienced an increase in accounts receivable due to delayed collections and a decrease in borrowing capacity due to high selling, general and administrative (“SG&A”) expenses for commercialization and research and development (“R&D”) activities for product improvements. This, added with an obligation to repurchase stock no later than May 29, 2012, has caused the Company to believe that it will not satisfy its financial covenants under the Sovereign Bank Loan Agreement as of June 30, 2012. Accordingly, the Company has reclassified the $8,028,688 of debt to Sovereign Bank as a short-term liability.  The Company is pursuing alternatives, including amending their bank covenant requirements to obtain short-term waivers and/or obtaining third-party financing. Management has begun discussions with relevant parties to each of the potential actions.  In addition, the Company plans to take internal steps to cut costs and reduce capital expenditures and to return its collection processes to their historical levels.  However, there can be no assurances that the Company will be successful in implementing any of these actions, or if the Company is successful, whether the terms will be favorable to the Company.

 

We consider events or transactions that have occurred after the unaudited consolidated balance sheet date of March 31, 2012, but prior to the filing of the unaudited consolidated financial statements with the SEC on this Form 10-Q, to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure, as applicable. Subsequent events have been evaluated through the date of the filing of this Quarterly Report on Form 10-Q with the SEC.