10-Q

U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE — ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2013

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE — ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO ______.

Commission file number: 000-27503

DYNASIL CORPORATION OF AMERICA

(Exact name of registrant as specified in its charter)

Delaware	22-1734088
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
44 Hunt Street, Watertown, MA	02472
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (617) 668-6855

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x

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

As of August 6, 2013 there were 15,413,116 shares of common stock, par value $.0005 per share, outstanding.

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

INDEX

		Page
PART 1. FINANCIAL INFORMATION
Item 1.	Financial Statements
	DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
	CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2013 AND SEPTEMBER 30, 2012	3
	CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 2013 AND 2012	5
	CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE NINE MONTHS ENDED JUNE 30, 2013	6
	CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, 2013 AND 2012	7
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	8
Item 1A.	Risk Factors	18
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II.  OTHER INFORMATION		29
Item 6.	Exhibits	29
Signatures		30

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	June 30,		September 30,
	2013		2012
	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	2,778,365	$	3,414,880
Accounts receivable, net of allowances of $178,603 and $198,070 for June 30, 2013 and September 30, 2012, respectively		3,995,552		5,475,142
Costs in excess of billings and unbilled receivables		1,558,407		1,735,798
Inventories, net of reserves		3,344,744		3,271,700
Deferred tax asset		126,187		126,187
Prepaid expenses and other current assets		1,370,264		1,334,649
Total current assets		13,173,519		15,358,356
Property, Plant and Equipment, net		4,705,911		4,984,150
Other Assets
Intangibles, net		3,606,177		6,703,305
Goodwill		6,136,128		10,254,160
Deferred financing costs, net		127,036		165,457
Total other assets		9,869,341		17,122,922
Total Assets	$	27,748,771	$	37,465,428
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt	$	10,583,334	$	11,984,492
Capital lease obligations, current		108,184		-0-
Accounts payable		2,629,054		2,416,397
Deferred revenue		542,896		694,672
Accrued expenses and other liabilities		2,112,791		2,809,580
Total current liabilities		15,976,259		17,905,141
Long-term Liabilities
Capital lease obligations, net of current portion		274,972		-0-
Pension liability		342,848		345,443
Deferred tax liability		227,063		371,256
Total long-term liabilities		844,883		716,699

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED) (Continued)

	June 30,			September 30,
	2013			2012
	(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (Continued)
Stockholders' Equity
Common Stock, $0.0005 par value, 40,000,000 shares authorized, 16,152,963 and 15,610,517 shares issued, 15,342,803 and  and 14,800,357  shares outstanding at June 30, 2013 and  September 30, 2012, respectively.		8,077			7,805
Additional paid in capital		17,354,486			17,037,618
Accumulated other comprehensive income (loss)		(183,760	)		61,906
Retained earnings (Accumulated deficit)		(5,264,832	)		2,722,601
		11,913,971			19,829,930
Less 810,160 shares of treasury stock - at cost		(986,342	)		(986,342	)
Total stockholders' equity		10,927,629			18,843,588
Total Liabilities and Stockholders' Equity	$	27,748,771		$	37,465,428

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Net revenue	$	11,322,342		$	12,082,037		$	32,360,147		$	36,513,342
Cost of revenue		6,494,463			7,097,378			18,113,830			21,317,392
Gross profit		4,827,879			4,984,659			14,246,317			15,195,950
Operating expenses:
Sales and marketing expenses		418,318			444,369			1,384,739			1,289,131
Research and development expenses		499,732			721,279			1,710,090			2,343,119
General and administrative expenses		4,125,336			3,958,362			12,043,224			12,116,439
Impairment of goodwill and long-lived assets		-0-			-0-			6,763,072			-0-
Total operating expenses		5,043,386			5,124,010			21,901,125			15,748,689
Loss from operations		(215,507	)		(139,351	)		(7,654,808	)		(552,739	)
Interest expense, net		181,773			140,246			545,690			386,877
Loss before income taxes		(397,280	)		(279,597	)		(8,200,498	)		(939,616	)
Income tax provision (benefit)		(30,920	)		52,303			(213,065	)		(393,044	)
Net loss	$	(366,360	)	$	(331,900	)	$	(7,987,433	)	$	(546,572	)
Net loss	$	(366,360	)	$	(331,900	)	$	(7,987,433	)	$	(546,572	)
Other comprehensive loss:
Foreign currency translation		(45	)		(107,330	)		(245,666	)		(29,138	)
Total comprehensive loss	$	(366,405	)	$	(439,230	)	$	(8,233,099	)	$	(575,710	)
Basic net loss per common share	$	(0.02	)	$	(0.02	)	$	(0.54	)	$	(0.04	)
Diluted net loss per common share	$	(0.02	)	$	(0.02	)	$	(0.54	)	$	(0.04	)
Weighted average shares outstanding
Basic		14,859,899			14,275,293			14,767,401			14,878,360
Diluted		14,859,899			14,275,293			14,767,401			14,878,360

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED JUNE 30, 2013 

(UNAUDITED)

					Additional		Other											Total
	Common		Common		Paid-in		Comprehensive			Retained Earnings			Treasury Stock					Stockholders'
	Shares		Amount		Capital		Income (Loss)			(Accumulated Deficit)			Shares		Amount			Equity
Balance, September 30, 2012		15,610,517	$	7,805	$	17,037,618	$	61,906		$	2,722,601			810,160	$	(986,342	)	$	18,843,588
Issuance of shares of common stock under employee stock purchase plan		23,496		12		16,486		-0-			-0-			-0-		-0-			16,498
Stock-based compensation costs		518,950		260		300,382		-0-			-0-			-0-		-0-			300,642
Foreign currency translation adjustment		-0-		-0-		-0-		(245,666	)		-0-			-0-		-0-			(245,666	)
Net loss		-0-		-0-		-0-		-0-			(7,987,433	)		-0-		-0-			(7,987,433	)
Balance, June 30, 2013		16,152,963	$	8,077	$	17,354,486	$	(183,760	)	$	(5,264,832	)		810,160	$	(986,342	)	$	10,927,629

The accompanying notes are an integral part of these unaudited consolidated financial statements.

6

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended
	June 30,
	2013			2012
Cash flows from operating activities:
Net loss	$	(7,987,433	)	$	(546,572	)
Adjustments to reconcile net loss to net cash:
Stock compensation expense		300,642			679,417
Foreign exchange loss		(33,526	)		(61,813	)
Contingent consideration adjustment		-0-			(18,395	)
Gain on sale of property, plant and equipment		(87,803	)		-0-
Depreciation and amortization		1,329,401			1,134,966
Noncash interest expense		38,421			39,912
Change in reserves		9,241			111,711
Deferred income taxes		(152,401	)		(247,563	)
Impairment of goodwill and long-lived assets		6,763,072			-0-
Other changes in assets and libilities:
Accounts receivable, net		1,496,979			(1,750,219	)
Inventories		(49,887	)		17,312
Costs in excess of billings / unbilled receivables		177,391			803,472
Prepaid expenses and other assets		(27,769	)		(463,622	)
Accounts payable		206,012			1,072,689
Accrued expenses and other liabilities		(705,372	)		(403,179	)
Deferred revenue		(160,058	)		262,942
Net cash provided by operating activities		1,116,910			631,058
Cash flows from investing activities:
Proceeds from sale of property, plant, and equipment		80,252			-0-
Purchases of property, plant and equipment		(422,577	)		(764,028	)
Net cash used in investing activities		(342,325	)		(764,028	)
Cash flows from financing activities:
Proceeds from issuance of common stock		16,498			50,604
Principal payments on capital leases		(49,797	)		-0-
Payments on long-term debt		(1,401,158	)		(1,432,581	)
Net cash used in financing activities		(1,434,457	)		(1,381,977	)
Effect of exchange rates on cash and cash equivalents		23,357			21,419
Net decrease in cash and cash equivalents		(636,515	)		(1,493,528	)
Cash and cash equivalents, beginning		3,414,880			4,479,840
Cash and cash equivalents, ending	$	2,778,365		$	2,986,312
Supplemental disclosures of cash flow information:
Non cash activities:
Assets purchased under capital leases	$	432,953		$	-0-

The accompanying notes are an integral part of these unaudited consolidated financial statements.

7

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1 - Basis of Presentation and Ability to Continue as a Going Concern

The accompanying consolidated balance sheet as of June 30, 2013, the consolidated statements of operations and comprehensive loss for the three and nine months ended June 30, 2013 and 2012, changes in stockholders’ equity for the nine months ended June 30, 2013 and cash flows for the nine months ended June 30, 2013 and 2012 of Dynasil Corporation of America and subsidiaries (the “Company”), 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. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's September 30, 2012 Annual Report on Form 10-K previously filed by the Company with the Securities and Exchange Commission, as amended on February 14, 2013.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. However, the Company has failed to comply with the financial covenants set forth in the terms of its outstanding loan agreements and sustained a substantial loss from operations for the year ended September 30, 2012. The Company has continued to sustain losses from operations for the nine months ended June 30, 2013. These factors raise substantial doubt over the Company’s ability to continue as a going concern.

The Company continues to be in default of the financial covenants set forth in the terms of its loan agreements for its fiscal third quarter ended June 30, 2013. These covenants require the Company to maintain specified ratios of earnings before interest, taxes, depreciation and amortization (EBITDA) to fixed charges and to total debt and senior debt. A default gives the lenders the right to accelerate the maturity of the outstanding indebtedness. Furthermore, Sovereign Bank, N.A, the Company’s senior lender, may, at its option, impose a default interest rate with respect to the senior debt outstanding, which is 5% higher than the rate otherwise in effect. To date, the lender has not taken any such action. However, the Company cannot predict when or whether a resolution of this situation will be achieved or if the higher interest rate will be imposed.

The Company has accrued but not remitted interest payments to its subordinated lender since February 2013. The Company is current with all principal and interest payments due to its senior lender through August 12, 2013, the date of this filing. Management provided a revised forecast to its lenders in February 2013 and is currently evaluating potential transactions involving the sales of divisions and/or product lines which, if consummated, would result in additional debt principal payments to the bank. Because of the continuing default of the financial covenants and the possibility of an acceleration of the indebtedness by the lenders, the Company has classified all of its outstanding indebtedness as a current liability in the accompanying consolidated balance sheets.

The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and positive cash flows and/or to obtain the necessary financing from shareholders or other sources (including sales of divisions and/or product lines) to meet its outstanding obligations and repay its liabilities arising from normal business operations when they become due.

In view of the matters described in the preceding paragraphs, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon the continued operations of the Company. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

8

The Company has taken and will continue to take actions to improve its liquidity, including the implementation of a number of initiatives designed to conserve cash, optimize profitability and right-size the cost structure of its various businesses. The Company has retained financial advisors to assist in evaluating strategic and restructuring alternatives, including the potential sale of product lines and/or a Company division. While the Company is actively considering such strategic alternatives, there can be no assurances that any such transaction will occur, or, if a transaction is completed, it will be on terms favorable to the Company. The Company does not currently have cash available to satisfy its obligations under its indebtedness if it were to be accelerated or payment demanded. If the Company is not able to resolve its current defaults under its outstanding indebtedness and improve its liquidity through the actions described above, it may not have sufficient liquidity to meet its anticipated cash needs for the next twelve months.

We consider events or transactions that have occurred after the unaudited consolidated balance sheet date of June 30, 2013, 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.

Note 2 –Debt Classification

The Company was in default of certain financial covenants set forth in the terms of its outstanding indebtedness as of June 30, 2013, March 31, 2013, December 31, 2012 and September 30, 2012 and has not paid its monthly interest payments to its subordinated lender since February 2013. Based on the covenant violations and the resulting possibility of an acceleration of the indebtedness by the lenders, all of the outstanding bank indebtedness of the Company has been classified as current liabilities in the accompanying balance sheets.

Note 3 - Inventories

Inventories are stated at the lower of average cost or market. Cost is determined using the first-in, first-out (FIFO) method. Inventories consist of raw materials, work-in-process and finished goods. The Company evaluates inventory levels and expected usage on a periodic basis and records, as a charge to cost of revenue, any amounts required to reduce the carrying value to net realizable value.

Inventories, net of reserves, consist of the following:

	June 30,		September 30,
	2013		2012
Raw Materials	$	2,010,394	$	2,096,681
Work-in-Process		788,234		885,328
Finished Goods		546,116		289,691
	$	3,344,744	$	3,271,700

Note 4 – Costs in Excess of Billings and Unbilled Receivables

Costs in excess of billings and unbilled receivables relate to research and development contracts and consist of actual revenues earned under the contracts which have not yet been billed to customers.

Note 5 – Impairment of Goodwill and Long-Lived Assets

Goodwill is subject to an annual impairment test. The Company considers many factors which may indicate the requirement to perform additional, interim impairment tests. These include:

· A significant adverse long term outlook for any of our industries;

· An adverse finding or rejection from a regulatory body involved in new product regulatory approvals;

· Failure of an anticipated commercialization of a product or product line;

· Unanticipated competition or the introduction of a disruptive technology;

9

· The testing for recoverability under the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10 of a significant asset group within a reporting unit;

· A loss of key personnel; and

· An expectation that a reporting unit carrying goodwill, or a significant portion of a reporting unit, will be sold or otherwise disposed of.

The Company’s Dynasil Products subsidiary (“Products”) has experienced delays in obtaining regulatory approval of its next generation lead paint analyzer product. In the second quarter of fiscal 2013, due to the uncertainties regarding whether approval of this updated product could be obtained in a reasonable timeframe, Products determined it would limit its activities to the sale and service of its current lead paint analyzer. The Company is currently evaluating various strategic alternatives associated with the lead paint analyzer product.

Products also experienced delays in obtaining regulatory approvals of its updated medical probe for cancer surgery. In May 2013, Products received approval for the sale of its updated medical probe for cancer surgery in the United States and began shipping its new Navigator 2.0™ units. Products has begun testing the probe for sterility after which it expects to obtain the CE mark and other certifications necessary for sales to various countries outside the United States.

As a result of the downsizing of expenditures associated with both product lines and the process of evaluating strategic alternatives associated with the lead paint analyzer product during the second quarter of fiscal 2013, the Company determined that an interim impairment test of long lived assets and goodwill associated with this business unit was required in the second quarter of 2013. Based on its analyses, the Company determined that the fair value of the long-lived assets (other than goodwill) of Products was less than the carrying amount of those assets and, as a result, recorded a non-cash, pre-tax impairment charge of approximately $2,748,000 during the quarter ended March 31, 2013. The Company then performed a goodwill impairment test as prescribed in ASC 350 and recognized a non-cash, pre-tax charge of approximately $4,015,000 during the quarter ended March 31, 2013. The resulting write-offs, which total approximately $6,763,000 are included in the Company’s results of operations for the nine months ended June 30, 2013.

The valuation methods utilized to value the long lived assets and the goodwill discussed above are based on the amount and timing of expected future cash flows and growth rates and include a determination of an appropriate discount rate. The cash flows utilized in the discounted cash flow analyses were based on financial forecasts developed internally by management. Estimating future cash flows requires significant judgment and projections may vary from the cash flows eventually realized. The discount rate used also requires significant judgment and is intended to reflect the risks involved in the business.

Note 6 – Intangible Assets

Intangible assets at June 30, 2013 and September 30, 2012 consist of the following:

	Useful	Gross		Accumulated
June 30, 2013	Life (years)	Amount		Amortization		Net
Acquired Customer Base	5-15	$	5,275,668	$	2,658,925	$	2,616,743
Know How	15		512,000		170,749		341,251
Trade Names	15 - Indefinite		527,389		74,203		453,186
Biomedical Technologies	5		300,000		105,003		194,997
		$	6,615,057	$	3,008,880	$	3,606,177

	Useful	Gross		Accumulated
September 30, 2012	Life (years)	Amount		Amortization		Net
Acquired Customer Base	5-15	$	7,858,775	$	2,257,533	$	5,601,242
Know How	15		512,000		145,147		366,853
Trade Names	15 - Indefinite		558,435		63,222		495,213
Biomedical Technologies	5		300,000		60,003		239,997
		$	9,229,210	$	2,525,905	$	6,703,305

10

Amortization expense for the three months ended June 30, 2013 and 2012 was $170,304 and $162,802 respectively. Amortization expense for the nine months ended June 30, 2013 and 2012 was $495,079 and $488,407, respectively. Estimated amortization expense for each of the next five fiscal years is as follows:

	2013 (3 Months)		2014		2015		2016		2017		Thereafter		Total
Acquired Customer Base	$	128,867	$	543,085	$	543,085	$	543,085	$	543,085	$	315,504	$	2,616,711
Know How		8,533		34,133		34,133		34,133		34,133		196,187		341,252
Trade Names		3,650		14,600		14,600		14,600		14,600		72,995		135,045
Biomedical Technologies		15,000		60,000		60,000		59,997		0		0		194,997
	$	156,050	$	651,818	$	651,818	$	651,815	$	591,818	$	584,686	$	3,288,005

Note 7 – Capital Leases

The Company has entered into long-term capital lease agreements for purchases of equipment. The remaining principal payments due under all capital leases were $383,156 and $-0- for the three and nine month periods ended June 30, 2013 and 2012, respectively. Aggregate minimum annual principal obligations at March 31, 2013, under non-cancelable leases are as follows:

	2013 (3 Months)		2014		2015		2016		2017		Thereafter		Total
Capital Lease Obligations	$	29,827	$	124,588	$	133,543	$	59,722	$	23,920	$	11,556	$	383,156

Note 8 – Earnings (Loss) Per Common Share

Basic earnings (loss) per common share is computed by dividing the net income applicable or loss attributable to common shares by the weighted average number of common shares. Diluted earnings per common share adjusts basic earnings per share for the effects of common stock options, common stock warrants, convertible preferred stock and other potential dilutive common shares outstanding during the periods.

For the three and nine months ended June 30, 2013 and 2012, no common share equivalents related to stock options were included in the calculation of dilutive shares since there was a loss from continuing operations and the inclusion of common share equivalents would be anti-dilutive. If the Company had not been in a loss position as of June 30, 2013 and 2012, 439,668 and 358,334shares of restricted stock, respectively, would have been considered in the denominator used to calculate diluted earnings per common share. In addition, as of June 30, 2013 and 2012, common stock options for 630,532 and 1,059,584 shares, respectively, with exercise prices above current quarterly average market price per share have been excluded from the calculation of dilutive earnings per share since their effect is also anti-dilutive.

The computation of the weighted shares outstanding for the three months ended June 30 is as follows:

	June 30, 2013		June 30, 2012
Weighted average shares outstanding
Basic		14,859,899		14,275,293
Effect of dilutive securities
Stock Options		-0-		-0-
Dilutive Average Shares Outstanding		14,859,899		14,275,293

11

The computation of the weighted shares outstanding for the nine months ended June 30 is as follows:

	June 30, 2013		June 30, 2012
Weighted average shares outstanding
Basic		14,767,401		14,878,360
Effect of dilutive securities
Stock Options		-0-		-0-
Dilutive Average Shares Outstanding		14,767,401		14,878,360

Note 9 - Stock Based Compensation

The fair value of the stock options granted is estimated at the date of grant using the Black-Scholes option pricing model.

A summary of stock option activity as of June 30, 2013 and changes during the nine months ended June 30, 2013 is presented below:

	Options Outstanding			Weighted Average Exercise Price per Share ($)		Weighted Average Remain Contractual Term (in Years)
Balance at September 30, 2012		794,483			3.34		1.75
Outstanding and exercisable at September 30, 2012		794,483			3.34		1.75
Granted		-0-			-0-
Exercised		-0-			-0-
Cancelled		(163,951	)		3.39
Balance at June 30, 2013		630,532			3.33		1.31
Outstanding and exercisable at June 30, 2013		630,532			3.33		1.31

A summary of restricted stock activity for the nine months ended June 30, 2013 and 2012 is presented below:

Restricted Stock Activity for the Nine Months ended June 30, 2013	Shares			Weighted-Average Grant-Date Fair Value
Nonvested at September 30, 2012		127,834		$	1.92
Granted		404,000			0.67
Vested		(72,166	)		1.44
Cancelled		(20,000	)		4.02
Nonvested at June 30, 2013		439,668		$	0.76

Restricted Stock Activity for the Nine Months ended June 30, 2012	Shares			Weighted-Average Grant-Date Fair Value
Nonvested at September 30, 2011		403,000		$	4.02
Granted		-0-			-0-
Vested		(44,666	)		4.00
Cancelled		-0-			-0-
Nonvested at June 30, 2012		358,334		$	4.02

12

Stock compensation expense for the three and nine months ended June 30, 2013 and 2012 is as follows:

	Three Months Ended		Three Months Ended
Stock Compensation Expense	June 30, 2013		June 30, 2012
Stock Grants	$	48,125	$	43,000
Restricted Stock Grants		41,576		159,552
Option Grants		-0-		37,206
Employee Stock Purchase Plan		843		3,300
Total	$	90,544	$	243,058

	Nine Months Ended		Nine Months Ended
Stock Compensation Expense	June 30, 2013		June 30, 2012
Stock Grants	$	180,647	$	152,041
Restricted Stock Grants		107,270		465,303
Option Grants		9,813		168,675
Employee Stock Purchase Plan		2,912		35,568
Total	$	300,642	$	821,587

At June 30, 2013 there was approximately $312,000 in unrecognized stock compensation cost, which is expected to be recognized over a weighted average period of 6.8 months.

Note 10 – Segment, Customer and Geographical Reporting

Segment Financial Information

Dynasil’s business is comprised of four segments: contract research (“Contract Research”), optics (“Optics”), instruments (“Instruments”) and biomedical (“Biomedical”). Within these segments, there is a segregation of reportable units based upon the organizational structure used to evaluate performance and make decisions on resource allocation, as well as availability and materiality of separate financial results consistent with that structure. The Contract Research segment is one of the largest small business participants in U.S. government-funded research. The Optics segment manufactures optical materials, components and coatings. The Instruments segment manufactures specialized instruments used in various applications in the medical, industrial, and homeland security/defense sectors. The Biomedical segment is developing technologies for a wide spectrum of applications, including hematology, hypothermic core cooling and tissue sealants and will primarily pursue product commercialization of technologies and technology licensing opportunities though no assurance can be given that any of these technologies will become successfully commercialized.

13

The Company’s segment information for the three months ended June 30, 2013 and 2012 is summarized below:

Results of Operations for the Three Months Ended June 30,
2013
	Contract Research		Optics		Instruments			Biomedical			Total
Revenue	$	5,933,085	$	3,860,648	$	1,498,609		$	30,000		$	11,322,342
Gross Profit		2,514,235		1,500,419		783,225			30,000			4,827,879
Impairment of goodwill & long-lived assets		-0-		-0-		-0-			-0-			-0-
Operating Income (Loss)		22,869		25,402		(48,219	)		(215,559	)		(215,507	)
Depreciation and Amortization		88,770		191,741		163,715			15,000			459,226
Capital expenditures		-0-		206,898		-0-			-0-			206,898
Intangibles, Net		332,800		848,046		2,230,334			194,997			3,606,177
Goodwill		4,938,625		1,197,503		-0-			-0-			6,136,128
Total Assets	$	13,562,650	$	8,780,459	$	5,142,707		$	262,955		$	27,748,771

Results of Operations for the Three Months Ended June 30,
2012
	Contract Research		Optics			Instruments			Biomedical			Total
Revenue	$	6,473,078	$	4,157,751		$	1,443,756		$	7,452		$	12,082,037
Gross Profit		2,487,372		1,696,071			794,875			6,341			4,984,659
Operating Income (Loss)		202,551		336,112			(441,905	)		(236,109	)		(139,351	)
Depreciation and Amortization		59,058		184,512			133,203			15,000			391,773
Capital expenditures		3,273		(35,156	)		108,583			-0-			76,700
Intangibles, Net		375,467		388			5,255,067			255,000			5,885,922
Goodwill		4,938,625		2,049,611			6,299,571			-0-			13,287,807
Total Assets	$	13,895,142	$	11,351,634		$	14,916,226		$	309,461		$	40,472,463

14

The Company’s segment information for the nine months ended June 30, 2013 and 2012 is summarized below:

Results of Operations for the Nine Months Ended June 30,
2013
	Contract Research			Optics		Instruments			Biomedical			Total
Revenue	$	16,331,775		$	12,044,354	$	3,796,967		$	187,051		$	32,360,147
Gross Profit		7,376,158			4,832,981		1,850,127			187,051			14,246,317
Impairment of goodwill & long-lived assets		-0-			-0-		6,763,072			-0-			6,763,072
Operating Income (Loss)		254,278			413,414		(7,774,714	)		(547,786	)		(7,654,808	)
Depreciation and Amortization		231,189			562,065		491,147			45,000			1,329,401
Capital expenditures		(1,095	)		416,580		7,092			-0-			422,577
Intangibles, Net		332,800			848,046		2,230,334			194,997			3,606,177
Goodwill		4,938,625			1,197,503		-0-			-0-			6,136,128
Total Assets	$	13,562,650		$	8,780,459	$	5,142,707		$	262,955		$	27,748,771

Results of Operations for the Nine Months Ended June 30,
2012
	Contract Research		Optics		Instruments			Biomedical			Total
Revenue	$	19,677,334	$	11,754,515	$	5,056,540		$	24,953		$	36,513,342
Gross Profit		7,699,303		4,629,856		2,883,666			(16,875	)		15,195,950
Operating Income (Loss)		506,046		531,205		(901,357	)		(688,633	)		(552,739	)
Depreciation and Amortization		153,995		533,612		402,359			45,000			1,134,966
Capital expenditures		350,492		289,685		123,851			-0-			764,028
Intangibles, Net		375,467		388		5,255,067			255,000			5,885,922
Goodwill		4,938,625		2,049,611		6,299,571			-0-			13,287,807
Total Assets	$	13,895,142	$	11,351,634	$	14,916,226		$	309,461		$	40,472,463

15

Customer Financial Information

For the three and nine months ended June 30, 2013 and 2012, the top three customers for the Contract Research segment were various agencies of the U.S. Government. For the three months ended June 30, 2013 and 2012, these customers made up 58% and 56%, respectively, of Contract Research revenue. For the nine months ended June 30, 2013 and 2012, these customers made up 59% and 70%, respectively, of Contract Research revenue.

For the three and nine months ended June 30, 2013 and 2012, there was no customer in the Optics segment whose revenue represented more than 10% of the total segment revenue for the three or the nine months ended June 30, 2013 and 2012.

For the three months ended June 30, 2013 and 2012, the top three customers for the Instruments segment made up 28% and 32%, respectively, of Instruments revenue. For the nine months ended June 30, 2013 and 2012, the top three customers for the Instruments segment made up 28% and 29%, respectively, of Instruments revenue. As of June 30, 2013, an international distributer represented 38% of the Instruments segments’ accounts receivable.

For the three and nine months ended June 30, 2013, the Biomedical segment had one customer whose revenue represented 100% of the total segment revenue. For the three and nine months ended June 30, 2012, the Biomedical segment had one customer whose revenue represented 100% of the total segment revenue.

Geographic Financial Information

Revenue by geographic location in total and as a percentage of total revenue, for the three months ended June 30, 2013 and 2012 are as follows:

	Three Months Ended					Three Months Ended
	June 30, 2013					June 30, 2012
Geographic Location	Revenue		% of Total			Revenue		% of Total
United States	$	9,426,542		83	%	$	10,130,936		84	%
Europe		975,941		9	%		981,147		8	%
Other		919,859		8	%		969,954		8	%
	$	11,322,342		100	%	$	12,082,037		100	%

Revenue by geographic location in total and as a percentage of total revenue, for the nine months ended June 30, 2013 and 2012 are as follows:

	Nine Months Ended					Nine Months Ended
	June 30, 2013					June 30, 2012
Geographic Location	Revenue		% of Total			Revenue		% of Total
United States	$	26,493,062		82	%	$	30,446,812		83	%
Europe		2,711,944		8	%		3,210,520		9	%
Other		3,155,141		10	%		2,856,010		8	%
	$	32,360,147		100	%	$	36,513,342		100	%

Note 11 - Income Taxes

Dynasil Corporation of America and its wholly-owned U.S. subsidiaries file a consolidated federal income tax return and various state returns. The Company’s U.K. subsidiary files tax returns in the U.K.

The Company uses the asset and liability approach to account for income taxes. Under this approach, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and net operating loss and tax credit carryforwards. The amount of deferred taxes on these temporary differences is determined using the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, as applicable, based on tax rates, and tax laws, in the respective tax jurisdiction then in effect.

16

In assessing the ability to realize the net deferred tax assets, management considers various factors including taxable income in carryback years, future reversals of existing taxable temporary differences, tax planning strategies and projections of future taxable income, to determine whether it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Based upon the Company’s recent losses and uncertainty of future profits, the Company has determined that the uncertainty regarding the realization of these assets is sufficient to warrant the need for a full valuation allowance against its U.S. net deferred tax assets.

As a result, the Company has recorded a valuation allowance of approximately $1.7 million as of September 30, 2012 and an additional valuation allowance of approximately $2.7 million based upon year to date activity for a total valuation allowance of approximately $4.4 million as of June 30, 2013.

The Company applies the authoritative provisions related to accounting for uncertainty in income taxes. As required by these provisions, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being reached upon ultimate settlement with the relevant tax authority. As of June 30, 2013 and September 30, 2012, the Company has no liabilities recorded for uncertain tax positions. Interest and penalty charges, if any, related to uncertain tax positions would be classified as income tax expense in the accompanying consolidated statement of operations. As of June 30, 2013 and September 30, 2012, the Company had no accrued interest or penalties related to uncertain tax positions. The Company currently has no federal or state tax examinations in progress.

The effective rate of (8.07%) and (2.61%) for the three and nine months ended June 30, 2013 differs from the U.S. federal statutory income tax rate of 34% primarily due to a full valuation allowance against the Company’s U.S. deferred tax asset. The effective rate of (70.69%) and (72.04%) for the three and nine months ended June 30, 2012 is primarily due to the recognition of research credits.

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Company’s tax filings for federal and state jurisdictions for the tax years beginning with 2009 are still subject to examination.

Note 12 – Fair Value Measurements

The Company uses a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the inputs used in the valuation. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are as follows:

• Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: Observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

• Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amounts for fixed rate long-term debt and variable rate long term debt approximate fair value because the underlying instruments are primarily at current market rates available to the Company for similar borrowings.

17

Note 13 – Subsequent Events

The Company has evaluated subsequent events through the date that the financial statements were released.

ITEM 1A.  RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended September 30, 2012, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

Risks Related To Our Business

We are not in compliance with our financial covenants under our loan agreements with our lenders and we are in payment default with our subordinated lender. Our lenders may exercise one or more of their available remedies, including the right to require the immediate repayment of all outstanding indebtedness.

As of June 30, 2013, we had approximately $7.6 million of indebtedness with Sovereign Bank, N.A. and $3.0 million of indebtedness with Massachusetts Capital Resource Company, which is subordinated to the Sovereign Bank loan. This indebtedness is secured by substantially all of our accounts and assets and is guaranteed by our subsidiaries. Our loan agreements include financial covenants which require us to maintain compliance with certain financial ratios during the term of the agreements. Failure to comply with the financial covenants is an event of default under the loan agreements. In an event of default, each of the lenders has the right to accelerate repayment of all outstanding indebtedness, impose a higher default interest rate (in the case of Sovereign Bank) and take any and all action, at its sole option, to collect monies owed to it, including to enforce and foreclose on its security interest on all of our assets. As of June 30, 2013, March 31, 2013, December 31, 2012 and September 30, 2012, we are in violation of certain financial covenants contained in each of the loan agreements that require us to maintain certain ratios of earnings before interest, taxes, depreciation and amortization to fixed charges and to total debt and senior debt. Additionally, although we continue to be current with all principal and interest payments with Sovereign Bank, as of June 30, 2013, we are currently delinquent on five months of interest payments ($125,000) on our $3.0 million note from Massachusetts Capital Resource Company.

As of June 30, 2013, neither of our lenders has accelerated our payment obligations or taken any of the actions described above. We are currently evaluating potential transactions involving the sales of divisions and/or product lines which, if consummated, would result in additional debt principal payments to the bank. However, we cannot provide any assurance that any potential sales transaction(s) will be successful. If we are not successful making additional debt principal payments to the bank or negotiating a waiver or forbearance agreement or other relief under our loan agreements, our obligations under those agreements may be accelerated in the future and our lenders may exercise other remedies for default. Even if we successfully obtain forbearance from our lenders for our current covenant non-compliance, we can provide no assurance that we will not violate our covenants in the future.

If our lenders were to accelerate our debt payments, our assets may not be sufficient to fully repay the debt and we may not be able to obtain capital from other sources at favorable terms or at all. If additional funding is required, this funding may not be available on favorable terms, if at all, or without potentially very substantial dilution to our stockholders. If we do not raise the necessary funds, we may need to curtail or cease our operations, sell certain assets and/or file for bankruptcy, which would have a material adverse effect on our financial condition and results of operations.

18

We face potential de-listing from the Nasdaq Stock Market that could impair the liquidity of our stock and our availability to access the capital markets.

The NASDAQ Stock Market (“Nasdaq”) requires that companies remain in compliance with the Global Market Continued Listing Requirements for its common stock as set forth in Marketplace Rule 5450(a) and at least one of the Standards in Rule 5450(b). On March 26, 2013, the Company received notice from Nasdaq that, because the closing bid price for the Company's common stock has fallen below $1.00 per share for 30 consecutive business days, the Company no longer complies with the minimum bid price requirement for continued listing on the Nasdaq Global Select Market, set forth in Nasdaq Marketplace Rule 5450(a)(1). The Company has been provided an initial compliance period of 180 calendar days, or until September 23, 2013, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Company's common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days prior to September 23, 2013. We can make no assurance that we will be able to remain listed on the NASDAQ Stock Market. If we are de-listed by Nasdaq the liquidity of our common stock could be impaired and we could have more difficulty raising capital, which could have an adverse effect on our results of operations and financial condition.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in the Dynasil Corporation of America ("Dynasil", the "Company" or "we") Annual Report on Form 10-K for the year ended September 30, 2012, as filed with the Securities and Exchange Commission, as amended on February 14, 2013. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in Part II, Item 1A. "Risk Factors".

General Business Overview

On December 31, 2012, the Company announced it was in default of certain financial covenants set forth in the terms of its outstanding indebtedness with respect to its fiscal year ended September 30, 2012. We continue to be in default through the date of this filing. As a result, our lenders have the ability to require immediate payment of all indebtedness under our loan agreements. While the lenders have not exercised this right, their ability to require immediate payment has caused all of our outstanding indebtedness to be accelerated to current classification on our consolidated financial statements.

The Company has accrued but not remitted monthly interest payments for the period from February through June 2013 to its subordinated lender and does not expect to resume interest payments to its subordinated lender until it resolves its default with the senior lender. The Company has made all principal and interest payments due to its senior lender through August 12, 2013, the date of this filing. Management provided a revised forecast to its lenders in February 2013 and is currently evaluating potential transactions involving the sales of divisions and/or product lines which, if consummated, would result in additional debt principal payments to the bank. Because of the continuing default of the financial covenants and the possibility of an acceleration of the indebtedness by the lenders, the Company has classified all of its outstanding indebtedness as a current liability in the accompanying consolidated balance sheets.

Given the uncertainty created by the defaults under the Company’s outstanding indebtedness, the Company's independent registered public accounting firm has included a “going concern” qualification in its audit opinion for the year ended September 30, 2012.

Revenue for the third quarter of fiscal year 2013, which ended June 30, 2013, was $11.3 million, a decrease of 6% compared with revenue of $12.1 million for the quarter ended June 30, 2012. Revenue declined in our Contract Research and Optics segments. Contract Research revenues declined $0.5 million primarily as a result of lower billable material and subcontractor costs. Contract revenue backlog continues to be strong at approximately $33 million, however, due to the U.S. federal budget uncertainties and the sequester, we remain cautious. Revenue declined in our Optics segment primarily due to lower demand for fused silica products partially offset by increased sales of other optical products.

Cost of revenue for the third quarter of 2013 was $6.5 million, a decrease of 8% compared with $7.1 million for the quarter ended June 30, 2012 primarily as a result of lower material and subcontractor costs in our Contract Research segment.

19

Total operating expenses for the third quarter ended June 30, 2013 decreased $81,000 or 2% to $5.0 million compared to the quarter ended June 30, 2012. Approximately $250,000 of operating expenses in both the three months ended June 30, 2013 and 2012 directly relates to our dual mode detector (CLYC) commercialization effort and our development of certain Biomedical technologies. These investments include technology development activities, capital equipment depreciation, development of intellectual property and staff.

Loss from operations for the quarter ended June 30, 2013 was ($216,000) compared to a loss of ($139,000) for the same period in 2012.  Net loss was ($366,000) or ($0.02) per share for the quarter ended June 30, 2013, compared with net loss of ($332,000) or ($0.02) per share, for the quarter ended June 30, 2012.

The Company continues to pursue various commercialization opportunities arising from technologies developed within our Contract Research segment. CLYC crystals are currently being sold commercially and we continue our efforts to further improve the size and quality of this product as well as develop new applications. Also, the Company continues to explore commercialization opportunities in thin film digital x-rays, sensors for nondestructive testing and radiation dosimeters. We are also exploring licensing opportunities for technologies developed within both our Contract Research and Biomedical segments. There can be no assurances that we will be successful in these commercialization efforts.

Additionally, the Company has prepared a separate business and financing plan for one of the biomedical technologies. Our intention is to spin out our tissue sealant technology into an independent entity in which the Company would retain a substantial interest. This would enable us to raise funds specifically for this venture and recruit additional expertise to help advance the technology. In June, 2013, our senior lender agreed in principal to release the intellectual property and related collateral in connection with the spin-out in exchange for an accelerated debt principal payment of $300,000. As a result, we are in the process of negotiating an amendment with our senior lender and proceeding with our plans to establish the joint venture and raise outside funding to support the joint venture; however, there can be no assurance that we will be able to raise the funding necessary for the transaction or consummate this transaction at any future time.

Results of Operations

Results of Operations for the Three Months Ended June 30,
2013
	Contract Research		Optics		Instruments			Biomedical			Total
Revenue	$	5,933,085	$	3,860,648	$	1,498,609		$	30,000		$	11,322,342
Gross Profit		2,514,235		1,500,419		783,225			30,000			4,827,879
Impairment of goodwill & long-lived assets		-0-		-0-		-0-			-0-			-0-
Operating Income (Loss)		22,869		25,402		(48,219	)		(215,559	)		(215,507	)
Depreciation and Amortization		88,770		191,741		163,715			15,000			459,226
Capital expenditures		-0-		206,898		-0-			-0-			206,898
Intangibles, Net		332,800		848,046		2,230,334			194,997			3,606,177
Goodwill		4,938,625		1,197,503		-0-			-0-			6,136,128
Total Assets	$	13,562,650	$	8,780,459	$	5,142,707		$	262,955		$	27,748,771

Results of Operations for the Three Months Ended June 30,
2012
	Contract Research		Optics			Instruments			Biomedical			Total
Revenue	$	6,473,078	$	4,157,751		$	1,443,756		$	7,452		$	12,082,037
Gross Profit		2,487,372		1,696,071			794,875			6,341			4,984,659
Operating Income (Loss)		202,551		336,112			(441,905	)		(236,109	)		(139,351	)
Depreciation and Amortization		59,058		184,512			133,203			15,000			391,773
Capital expenditures		3,273		(35,156	)		108,583			-0-			76,700
Intangibles, Net		375,467		388			5,255,067			255,000			5,885,922
Goodwill		4,938,625		2,049,611			6,299,571			-0-			13,287,807
Total Assets	$	13,895,142	$	11,351,634		$	14,916,226		$	309,461		$	40,472,463

20

Revenue for the three months ended June 30, 2013 was $11,322,000, a 6% decrease from $12,082,000 for the three months ended June 30, 2012.

Revenue from our Contract Research segment decreased $540,000 or 8% for the three months ended June 30, 2013. The Contract Research segment revenue decline primarily reflects lower billable material and subcontractor costs during the three months ended June 30, 2013 compared to the three months ended June 30, 2012. The research backlog for the Contracts Research segment has remained consistent at nearly 18 months or approximately $33 million. The Company expects the Contract Research revenue to decline modestly in the fourth quarter of 2013 as a result of lower billable hours associated with higher vacation hours in July and August.

The Optics segment revenue decreased $297,000 to $3,861,000 for the three months ended June 30, 2013 compared to the same period in 2012, as a result of lower demand for fused silica products which was partially offset by increased sales of other optical products.

Revenue from our Instruments segment was favorably impacted by sales of our newly updated Navigator 2.0™ medical probe product which was approved for sale in the United States and began shipping in May 2013. Instruments revenue was $1,499,000 for the three months ended June 30, 2013, as compared to $1,444,000 in the same period in 2012 and $1,014,000 for the quarter ended March 31, 2013. The Company is currently completing sterility testing for our Navigator 2.0™ product and expects to file and obtain CE mark certification upon receipt of favorable sterility test results at which point it will begin shipping internationally.

With respect to its lead paint analyzer products, the Company determined in the second quarter of fiscal 2013 to limit its activities to the sale and service of its current lead paint analyzer product due to uncertainties regarding whether approval of the updated version of the product can be obtained in a reasonable timeframe. The Company continues to evaluate strategic alternatives associated with these products.

The Biomedical segment revenues primarily relate to a technology development contract with the Mayo Clinic.

Gross profit for the three months ended June 30, 2013 was $4,828,000, or 42.6% of sales, compared to $4,985,000 or 41.3% of sales for the three months ended June 30, 2012. Gross profit as a percent of sales increased for the Contract Research segment to 42.4% at June 30, 2013 from 38.4% at June 30, 2012 primarily as a result of a shift in the mix of costs from material and subcontractor costs to direct labor which has a higher average mark-up and results in an increased gross profit margin (although the total contract profitability is unchanged) as well as the level of profitability of the contracts in process during the respective periods.

Gross profit for the Optics segment decreased to 38.9% of sales at June 30, 2013 from 40.3% of sales for the quarter ended June 30, 2012 primarily as a result of the mix of products sold.

Gross profit for the Instruments segment decreased to 52.2% of sales at June 30, 2013 from 55.1% of sales for the quarter ended June 30, 2012 as a result of sales of Navigator 2.0™ “demonstration” units to distributors at lower than normal margins.

The Biomedical segment gross profit equals its revenue because the cost of the funded research is included in research and development expense.

Total operating expenses for the three months ended June 30, 2013 decreased to $5,043,000 compared to $5,124,000 for the three months ended June 30, 2012. The decrease primarily reflects lower research and development expenses associated with the Instrument segment product refreshes which were substantially completed during in 2012.

Loss from operations for the three months ended June 30, 2013 was ($216,000) compared to loss from operations of ($139,000) for the three months ended June 30, 2012.

Net interest expense for the three months ended June 30, 2013 was $182,000, compared with $140,000 for the three months ended June 30, 2012. The increase in interest expense was primarily associated with the issuance of a $3 million subordinated note payable in July, 2012 at an interest rate of 10%. Interest-bearing debt outstanding at June 30, 2013 was $10,583,000, compared to $9,413,000 at June 30, 2012.

21

Income tax expense for the three months ended June 30, 2013 consisted primarily of an estimated net operating loss (“NOL”) carryback to 2011 and certain U.K. tax research credits offset by state tax expense.

Net loss for the three months ended June 30, 2013 was ($366,000) or ($0.02) per share, compared with net loss of ($332,000), or ($0.02) per share, for the quarter ended June 30, 2012.

Results of Operations – Year to Date

Results of Operations for the Nine Months Ended June 30,
2013
	Contract Research			Optics		Instruments			Biomedical			Total
Revenue	$	16,331,775		$	12,044,354	$	3,796,967		$	187,051		$	32,360,147
Gross Profit		7,376,158			4,832,981		1,850,127			187,051			14,246,317
Impairment of goodwill & long-lived assets		-0-			-0-		6,763,072			-0-			6,763,072
Operating Income (Loss)		254,278			413,414		(7,774,714	)		(547,786	)		(7,654,808	)
Depreciation and Amortization		231,189			562,065		491,147			45,000			1,329,401
Capital expenditures		(1,095	)		416,580		7,092			-0-			422,577
Intangibles, Net		332,800			848,046		2,230,334			194,997			3,606,177
Goodwill		4,938,625			1,197,503		-0-			-0-			6,136,128
Total Assets	$	13,562,650		$	8,780,459	$	5,142,707		$	262,955		$	27,748,771

Results of Operations for the Nine Months Ended June 30,
2012
	Contract Research		Optics		Instruments			Biomedical			Total
Revenue	$	19,677,334	$	11,754,515	$	5,056,540		$	24,953		$	36,513,342
Gross Profit		7,699,303		4,629,856		2,883,666			(16,875	)		15,195,950
Operating Income (Loss)		506,046		531,205		(901,357	)		(688,633	)		(552,739	)
Depreciation and Amortization		153,995		533,612		402,359			45,000			1,134,966
Capital expenditures		350,492		289,685		123,851			-0-			764,028
Intangibles, Net		375,467		388		5,255,067			255,000			5,885,922
Goodwill		4,938,625		2,049,611		6,299,571			-0-			13,287,807
Total Assets	$	13,895,142	$	11,351,634	$	14,916,226		$	309,461		$	40,472,463

Revenue for the nine months ended June 30, 2013 was $32,360,000, an 11.4% decrease from $36,513,000 for the nine months ended June 30, 2012.

Revenue from our Contract Research segment decreased $3,346,000 or 17% for the nine months ended June 30, 2013 compared to the same period in 2012. The Contract Research segment revenue decline reflects lower billable material and subcontractor costs and lower billable direct labor hours, which occurred while we implemented changes to our procedures and automated our timekeeping practices, during the nine months ended June 30, 2013 compared to the nine months ended June 30, 2012. The research backlog for the Contracts Research segment has remained consistent at nearly 18 months or approximately $33 million.

The Optics segment revenue increased $290,000 or 2% for the nine months ended June 30, 2013, primarily as a result of the timing and mix of product sales.

Revenue from our Instruments segment decreased $1,260,000 or 25% for the nine months ended June 30, 2013 compared to the same period in 2012. We believe the Instruments segment revenue decline is primarily a result of customers delaying purchases of our existing products or purchasing competitor products due to the lack of availability of our updated lead paint analyzer which has not yet been approved and our medical probe (“Navigator 2.0™”) products which was approved for sale in the United States and began shipping in May 2013. The Company is currently completing sterility testing for the Navigator 2.0™ product and expects to file and obtain CE mark certification upon receipt of favorable sterility test results at which point it will begin shipping internationally.

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With respect to its lead paint analyzer products, the Company determined in the second quarter of fiscal 2013 to limit its activities to the sale and service of its current lead paint analyzer product due to uncertainties regarding whether approval of the updated version of the product can be obtained in a reasonable timeframe. The Company continues to evaluate strategic alternatives associated with these products.

The Biomedical segment revenues primarily relate to a technology development contract with the Mayo Clinic.

Gross profit for the nine months ended June 30, 2013 was $14,246,000, or 44.0% of sales, compared to $15,196,000 or 41.6% of sales for the nine months ended June 30, 2012. Gross profit as a percent of sales increased for the Contract Research segment to 45.2% at June 30, 2013 from 39.1% at June 30, 2012 primarily as a result of a change in the mix of costs from material and subcontractor invoices to direct labor which results in an increase in gross profit margin (although the total contract profitability is unchanged) as well as the level of profitability of the contracts in process during the respective periods.

Gross profit for the Optics segment increased to 40.1% of sales at June 30, 2013 from 39.2% of sales for the nine months ended June 30, 2012 primarily as a result of better margins on the mix of products sold.

Gross profit for the Instruments segment decreased to 48.7% of sales at June 30, 2013 from 57.0% of sales for the nine months ended June 30, 2012 as a result of lower product volumes, unfavorable manufacturing efficiencies and initial sales of Navigator 2.0™ “demonstration” units to distributors at lower than normal margins.

The Biomedical segment gross profit equals its revenue because the cost of the funded research is included in research and development expense.

Total operating expenses for the nine months ended June 30, 2013 included a non-cash impairment charge of $6,763,000. Excluding that charge, operating expenses decreased slightly to $15,138,000 compared to $15,749,000 for the nine months ended June 30, 2012. The decrease (excluding the impairment charge) in total operating expenses primarily relates to a decrease in research and development expenses associated with the product refreshes within the Instruments segment.

Loss from operations for the nine months ended June 30, 2013 was ($7,655,000) compared to Loss from Operations of ($553,000) for the prior year comparable period. Excluding the impact of the impairment charge, the loss from operations would have been ($892,000). The decrease was primarily associated with lower operating profit in our Contract Research segment as a result of lower revenues discussed above and increased operating expenses in the Optics segment partially offset by lower operating expenses in the Instruments segment. The increase in operating income in the Biomedical segment primarily reflects the technology development contract with the Mayo Clinic.

Net interest expense for the nine months ended June 30, 2013 was $546,000, compared with $387,000 for the nine months ended June 30, 2012. The increase in interest expense was primarily associated with the issuance of a $3 million subordinated note payable in July, 2012 at an interest rate of 10%. Interest-bearing debt outstanding at June 30, 2013 was $10,583,000, compared to $9,413,000 at June 30, 2012.

Income tax expense for the nine months ended June 30, 2013 consisted primarily of estimated NOL carryback to 2011 and certain U.K. tax research credits partially offset by state tax expense. The Company recorded a tax benefit of $445,000 for the nine months ended June 30, 2012 primarily from the recognition of Research and Experimentation credits and certain state tax losses.

Net loss for the nine months ended June 30, 2013 was ($7,987,000), or ($0.54) per share, compared with Net loss of ($547,000), or ($0.04) per share, for the nine months ended June 30, 2012. Excluding the impact of the impairment charge, the loss from operations would have been ($1,224,000) or ($0.08) per share.

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Use of Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this MD&A also contains non-GAAP financial measures. Specifically, Dynasil included supplemental information in this MD&A section that enables the reader to see the Company’s loss from operations and operating expenses excluding the impact of the impairment charge recorded in the second fiscal quarter to write down the goodwill and long-lived intangible assets of the Company’s Instruments segment. The Company believes that the inclusion of these non-GAAP financial measures helps investors to gain a meaningful understanding of the Company’s core operating results and enhance comparing such performance with prior periods. The non-GAAP financial measures included in this MD&A are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP.

Liquidity and Capital Resources

Liquidity Overview

On December 31, 2012, the Company announced it is in default of the financial covenants set forth in the terms of its outstanding indebtedness at September 30, 2012 and remains so through the date of this filing. These covenants require the Company to maintain specified ratios of earnings before interest, taxes, depreciation and amortization (EBITDA) to fixed charges and to total debt and senior debt. The causes for the covenant violations are lower revenue and higher than expected expenses in the Company's Instruments and Contract Research segments during the fiscal quarter ended September 30, 2012 and continuing into the first three quarters of fiscal 2013, combined with the continued investment in its Biomedical technologies.

Management provided a revised forecast to its lenders in February 2013 and is currently evaluating potential sales of product lines and/or divisions which, if consummated, would result in additional debt principal payments to the bank. The Company continues to be current with all principal and interest payments due on its senior outstanding indebtedness. The Company has accrued but not remitted monthly interest payments for February through June 2013 to its subordinated lender.

These financial covenant defaults give the senior lender the right to accelerate the maturity of the indebtedness outstanding and foreclose on any security interest. Furthermore, Sovereign Bank, N.A, the Company's senior lender, may, at its option, impose a default interest rate with respect to the senior debt outstanding, which is 5% higher than the rate otherwise in effect. To date, the lenders have not taken any such actions.

As of June 30, 2013, the Company had total indebtedness outstanding of approximately $10.6 million, consisting of approximately $7.6 million of senior debt owed to Sovereign Bank, approximately $3.0 million of subordinated debt owed to Massachusetts Capital Resources Company and approximately $383,000 in equipment leases. The Company's indebtedness is secured by substantially all the accounts and assets of the Company and is guaranteed by its subsidiaries.

Management expects to continue to pursue options to address the financial covenant defaults as of September 30, 2012 and continuing for each of the first three quarters in fiscal 2013 as described above. The Company cannot predict when or whether a resolution of this situation will be achieved.

The Company has recently taken and will continue to take actions to improve its liquidity, including the implementation of a number of initiatives designed to conserve cash, optimize profitability and right-size the cost structure of its various businesses, including the spin out of our tissue sealant technology into an independent entity which would eliminate certain cash expenditures. The Company has retained financial advisors to assist in evaluating strategic and restructuring alternatives, including the potential sale of product lines and/or a Company division. While the Company is actively considering such strategic alternatives, there can be no assurances that any such transaction will occur, or, if a transaction is completed, it will be on terms favorable to the Company.

Liquidity Outlook

Net cash as of June 30, 2013 was $2,778,000 or approximately $637,000 less than the net cash of $3,415,000 at September 30, 2012. The Company does not currently have cash available to satisfy its obligations under its indebtedness if it were to be accelerated or payment demanded. If the Company is not able to resolve its current defaults under its outstanding indebtedness and improve its liquidity through the actions described above, it may not have sufficient liquidity to meet its anticipated cash needs for the next twelve months.

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Cash Provided by Operating Activities

In total, including the changes in accounts receivable and accounts payable and accrued expenses, operating activities generated cash of $1,117,000 for the nine months ended June 30, 2013.

Cash Used in Investing and Financing Activities

Cash used for the purchase of property, plant and equipment for the nine months ended June 30, 2013 was approximately $422,000. Payments of long term debt for the nine months ended June 30, 2013 were $1,401,000 primarily as part of regularly scheduled payments to Sovereign Bank, N.A., the Company’s senior lender, under the five year Term Debt and Acquisition Line of Credit. Net cash used in financing activities was approximately $1,436,000 for the nine months ended June 30, 2013.

Critical Accounting Policies and Estimates

There have been no material changes in our critical accounting policies or critical accounting estimates since September 30, 2012. We have not adopted any new accounting policies since September 30, 2012 that have or will have a material impact on our consolidated financial statements. For further discussion of our accounting policies see the “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012 as well as the notes in this Form 10-Q.

The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

Revenue Recognition

Revenue from sales of products is recognized at the time title and the risks and rewards of ownership pass. Revenue from research and development activities is derived generally from the following types of contracts: reimbursement of costs plus fees, fixed price or time and material type contracts. Revenue is recognized when the products are shipped per customers’ instructions, the contract has been executed, the contract or sales price is fixed or determinable, delivery of services or products has occurred and the Company’s ability to collect the contract price is considered reasonably assured.

Government funded services revenues from cost plus contracts are recognized as costs are incurred on the basis of direct costs plus allowable indirect costs and an allocable portion of the contracts’ fixed fees. Revenue from fixed-type contracts is recognized under the percentage of completion method with estimated costs and profits included in contract revenue as work is performed. Revenues from time and materials contracts are recognized as costs are incurred at amounts generally commensurate with billing amounts. Recognition of losses on projects is taken as soon as the loss is reasonably determinable.

The majority of the Company’s contract research revenue is derived from the United States government and government related contracts. Such contracts have certain risks which include dependence on future appropriations and administrative allotment of funds and changes in government policies. Costs incurred under United States government contracts are subject to audit. The Company believes that the results of such audits will not have a material adverse effect on its financial position or its results of operations.

Goodwill

Goodwill is subject to an annual impairment test. We consider many factors which may indicate the requirement to perform additional interim impairment tests. These include:

· A significant adverse long term outlook for any of our industries;

· An adverse finding or rejection from a regulatory body involved in new product regulatory approvals;

· Failure of an anticipated commercialization product line;

· Unanticipated competition or a disruptive technology introduction;

· The testing for recoverability under the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10 of a significant asset group within a reporting unit;

· A loss of key personnel; and

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· An expectation that a reporting unit carrying goodwill, or a significant portion of a reporting unit, will be sold or otherwise disposed of.

Goodwill is tested by reviewing the carrying value compared to the fair value at the reporting unit level. Fair value for the reporting unit is derived using the income approach. Under the income approach, fair value is calculated based on the present value of estimated future cash flows. Assumptions by management are necessary to evaluate the impact of operating and economic changes and to estimate future cash flows. Management’s evaluation includes assumptions on future growth rates and cost of capital that are consistent with internal projections and operating plans.

The Company generally performs its annual impairment testing of goodwill during the fourth quarter of its fiscal year, or more frequently if events or changes in circumstances indicate that the assets might be impaired. The Company tests impairment at the asset group level using the two-step process. The Company’s primary asset groups tested for impairment are Radiation Monitoring Devices, which comprises our Contract Research segment, Dynasil Products (previously known as RMD Instruments), which comprises our Instruments segment, and Hilger Crystals, a component of our Optics segment.

The Company performed an interim impairment test in the second quarter of 2013 for our Products business unit and determined that the approximate $4,015,000 carrying value of goodwill should be written off. The Company also determined that the carrying value of its long-lived asset group exceeded the fair value by approximately $2,750,000.

The carrying value of goodwill in our Products business unit exceeded the new residual fair value of goodwill in the fourth quarter of 2012, and, as a result, the Company recorded a pre-tax impairment loss of $2,284,500 in the quarter ended September 30, 2012.

Intangible Assets

The Company’s intangible assets consist of an acquired customer base of Optometrics, LLC, acquired customer bases and trade names of RMD Instruments, LLC, acquired backlog and know-how of Radiation Monitoring Devices, Inc. and purchased biomedical technologies within the Biomedical Segment. The Company amortizes its intangible assets with definitive lives over their useful lives, which range from 5 to 15 years, based on the time period the Company expects to receive the economic benefit from these assets.

Impairment of Long-Lived Assets

The Company’s long-lived assets include property, plant and equipment and intangible assets. The Company evaluates long-lived assets for recoverability whenever events or changes in circumstances indicate that an asset may have been impaired. In evaluating an asset for recoverability, the Company estimates the future cash flow expected to result from the use of the asset and eventual disposition. If the expected future undiscounted cash flow is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the fair value of the asset, is recognized.

As a result of the downsizing of expenditures associated with both businesses and the process of evaluating strategic alternatives associated with the lead paint analyzer product, the Company determined that an interim impairment test of goodwill associated with this business was required. The interim fair value test of goodwill performed in the second quarter identified, in the step one analysis, that the fair value of Products was less than its carrying value. The Company proceeded to a step two analysis, which included valuing the tangible and intangible assets and liabilities of the Products business to determine the implied fair value of goodwill. The result of this assessment indicated that the implied fair value of the goodwill was zero. As a result, the Company recognized a non-cash, pre-tax charge of $4,015,000 during the second quarter ended March 31, 2013.

Allowance for Doubtful Accounts Receivable

The Company performs ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer's current credit worthiness, as determined by our review of their current credit information. We continuously monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. While such credit losses have historically been minimal, within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of any of our significant customers could have a material adverse effect on the collectability of our accounts receivable and our future operating results.

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Stock-Based Compensation

The Company accounts for stock-based compensation using fair value. Compensation costs are recognized for stock options granted to employees and directors. Options and warrants granted to employees and non-employees are recorded as an expense over the requisite service period based on the grant date estimated fair value of the grant, determined using the Black-Scholes option pricing model.

Income Taxes

As part of the process of preparing our consolidated financial statements, we are required to estimate our income tax provision (benefit) in each of the jurisdictions in which we operate. This process involves estimating our current income tax provision (benefit) together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. We regularly evaluate our ability to recover the reported amount of our deferred income taxes considering several factors, including our estimate of the likelihood of the Company generating sufficient taxable income in future years during the period over which temporary differences reverse.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2011, the FASB issued Accounting Standards Update 2011-05 (“ASU 2011-05”), Comprehensive Income (Topic 220), Presentation of Comprehensive Income. ASU 2011-05 eliminated the option to report other comprehensive income and its components in the statement of changes in stockholder’s equity. In addition, the new guidance requires consecutive presentation of the statement of net income and other comprehensive income with the presentation of reclassification adjustments from other comprehensive income to net income on the face of the financial statements. In December 2011, the FASB issued Accounting Standards Update 2011-12 (“ASU 2011-12”), Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, which is an update to ASU 2011-05. This amendment indefinitely deferred the guidance relating to the presentation of reclassification adjustments. ASUs 2011-05 and 2011-12 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The Company adopted ASU 2011-05 and ASU 2011-12 effective December 31, 2012 with the effect being a change in financial statement presentation.

In September 2011, the FASB issued Accounting Standards Update 2011-08 (“ASU 211-08”), Intangibles—Goodwill and Other (Topic 350), Testing Goodwill for Impairment, to simplify how entities test goodwill for impairment. ASU 2011-08 allows entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If a greater than 50 percent likelihood exists that the fair value is less than the carrying amount, then a two-step goodwill impairment test as described in Topic 350 must be performed. The qualitative assessment is optional, allowing companies to go directly to the quantitative assessment. The guidance provided by this update becomes effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. This new standard is effective for the Company beginning in fiscal 2013.

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. The amendments result in a consistent definition of fair value and common requirements for measurement of and disclosure regarding fair value between U.S. GAAP and International Financial Reporting Standards. Specifically, the amendments clarify the application of existing fair value measurement and disclosure requirements, including: a) application of the highest and best use and valuation premise concepts, b) measurement of the fair value of an instrument classified in a reporting entity's shareholders equity, and c) quantitative disclosure about the unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy. The amendments also change a particular principle or requirement for fair value measurement and disclosure, including: a) measurement of the fair value of financial instruments that are managed within a portfolio, b) application of premiums and discounts in a fair value measurement, and c) additional disclosure about fair value measurements. This new standard became effective as of October 1, 2012 and did not have a material impact on our consolidated financial statements.

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Forward-Looking Statements

The statements contained in this Quarterly Report on Form 10-Q which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements regarding future events and our future results are based on current expectations, estimates, forecasts, and projections and the beliefs and assumptions of our management, including, without limitation, our expectations regarding results of operations, our default under the financial covenants under our loan agreements with Sovereign Bank and Massachusetts Capital Resource Company, the commercialization of our products including our dual mode detectors, our development and funding of new technologies including at Dynasil Biomedical, obtaining certain regulatory approvals, the adequacy of our current financing sources to fund our current operations, our growth initiatives, our capital expenditures and the strength of our intellectual property portfolio. These forward-looking statements may be identified by the use of words such as “may,” “could,” “expect,” “estimate,” “anticipate,” “continue” or similar terms, though not all forward-looking statements contain such words. The actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements due to a number of important factors. These factors that could cause actual results to differ from those anticipated or predicted include, without limitation, our ability to resolve our current default under our outstanding indebtedness, our ability to develop and commercialize our products, including obtaining regulatory approvals, the size and growth of the potential markets for our products and our ability to serve those markets, the rate and degree of market acceptance of any of our products, our ability to address our material weaknesses in our internal controls, general economic conditions, costs and availability of raw materials and management information systems, our ability to obtain and maintain intellectual property protection for our products, competition, the loss of key management and technical personnel, our ability to obtain timely payment of our invoices to governmental customers, litigation, the effect of governmental regulatory developments, the availability of financing sources, our ability to identify and execute on acquisition opportunities and integrate such acquisitions into our business, and seasonality, as well as the uncertainties set forth in the Company’s Annual Report on Form 10-K, including the risk factors contained in Item 1a, and from time to time in the Company's other filings with the Securities and Exchange Commission. The Company disclaims any intention or obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 3 Quantitative and Qualitative Disclosures About Market Risk.

Dynasil, as a smaller reporting company, is not required to complete this item.

ITEM 4 Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

Our Interim Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2013. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of June 30, 2013, our Interim Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective.

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As disclosed in our Annual Report on Form 10-K for the year ended September 30, 2012, which was filed with the SEC on January 15, 2013, as amended on February 14, 2013 (the “Form 10-K”), we identified material weaknesses in our internal control over financial reporting as of September 30, 2012. Internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) are an integral part of disclosure controls and procedures. These material weaknesses, which are described in detail in the Form 10-K, can be summarized as relating to: (i) inadequate and ineffective monitoring controls,(ii) inadequate and ineffective control over the periodic financial close process and (iii) inadequate and ineffective controls over cash accounts and accounts receivable function at our RMD division.

The measures that we have identified to address the material weaknesses are discussed in detail in our Form 10-K. We expect to continue to develop our remediation plans and implement additional measures to make necessary improvements to our internal control over financial reporting. We expect that our remediation efforts, including design, implementation and testing will continue throughout fiscal year 2013, although the material weakness will not be considered remediated until our controls are operational for a period of time, tested, and management concludes that these controls are operating effectively.

Changes in Internal Control Over Financial Reporting

There have been changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We continue to implement measures to address the material weaknesses identified in our annual report on internal control over financial reporting. During the second fiscal quarter, within our RMD division, we completed the implementation of new timekeeping practices and procedures that are more automated, including an electronic time-keeping system integrated with our payroll and human resource systems. Further, we have continued to communicate and reinforce certain control procedures. We are also evaluating changes to improve our purchase order and receiving system to record vendor purchase orders to provide visibility into receipts in order to properly accrue for goods received.

PART II – OTHER INFORMATION

ITEM 6 Exhibits

(a) Exhibits and index of Exhibits

10.01 Restricted Stock Award Agreement between the Company and Peter Sulick, dated June 10, 2013.

31.1(a) Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.1(b) Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Section 1350 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(furnished but not filed for purposes of the Securities Exchange Act of 1934)

99.1 Press release, dated August 12, 2013 issued by Dynasil Corporation of America announcing its financial results for the quarter ended June 30, 2013.

101** The following materials from Dynasil Corporation of America’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, formatted in XBRL (eXtensible Business Reporting Language); (i) Consolidated Balance Sheets as of June 30, 2013 and September 30, 2012, (ii) Consolidated Statements of Operations for the three and nine months ended June 30, 2013 and 2012, (iii) Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended June 30, 2013; (iv) Consolidated Statements of Cash Flows for the nine months ended June 30, 2013 and 2012, and (v) Notes to Consolidated Financial Statements.

** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DYNASIL CORPORATION OF AMERICA

BY:	/s/ Peter Sulick	DATED: August 12, 2013
	Peter Sulick,
	Interim Chief Executive Officer and Interim President
	/s/ Thomas C. Leonard	DATED: August 12, 2013
	Thomas C. Leonard,
	Chief Financial Officer

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EX-10.01

RESTRICTED STOCK AWARD AGREEMENT

THIS RESTRICTED STOCK AWARD AGREEMENT (“Agreement”) is made effective and entered into as of June 10, 2013 (the “Grant Date”), by and between Dynasil Corporation of America, a Delaware corporation (the “Company”), and Peter Sulick (the “Grantee”).

WHEREAS, pursuant to the provisions of the Company’s 2010 Stock Incentive Plan (the “Plan”), the Board of Directors of the Company (the “Board”) has the authority to grant Awards under the Plan to employees of the Company; and

WHEREAS, the Board has determined that the Grantee be granted a Restricted Stock Award under the Plan for the number of shares and upon the terms set forth below;

NOW, THEREFORE, the Company and the Grantee hereby agree as follows:

1.          Grant of Award. The Grantee is hereby granted a Restricted Stock Award under the Plan (this “Award”), subject to the terms and conditions hereinafter set forth, with respect to 300,000 restricted shares of Common Stock (the “Shares”). Restricted shares of Common Stock covered by this Award shall be designated in book entry form on the records of the Company’s transfer agent, subject to the restrictions set forth in this Agreement.

2.          Transfer Restrictions. Except as expressly provided herein, this Award and the Shares issued with respect to this Award are non-transferable otherwise than by will or by the laws of descent and distribution, and may not otherwise be assigned, pledged or hypothecated or otherwise disposed of and shall not be subject to execution, attachment or similar process. Upon any attempt to effect any such disposition, or upon the levy of any such process, this Award shall immediately become null and void and the Shares relating thereto shall be forfeited.

3.          Restrictions. The restrictions on the Shares covered by this Award shall lapse and such shares shall vest at the earlier of:

(i)          the first anniversary of the Grant Date; or

(ii)         the start date of a replacement CEO and President of the Company.

If neither of these events has occurred prior to the termination of the Grantee's Continuous Service, the Common Stock covered by this Award, to the extent not vested, shall terminate and be forfeited by the Grantee.

Notwithstanding any other provision of this Agreement, (i) the Shares, whether or not vested in whole or in part, shall be forfeited and (ii) the Grantee shall be obligated to pay to the Company all gains realized by the Grantee from the disposition of any such Shares if the Grantee violates any of the provisions set forth in the Company’s Confidential Information and Invention Assignment Agreement that Grantee entered into as condition of employment with the Company. Further, any compensation paid to the Grantee pursuant to this Agreement or in accordance with its terms shall be subject to any policy regarding recovery of incentive-based compensation hereafter adopted by the Board in order to comply with (i) Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or any law of similar effect for recovery of incentive-based compensation previously paid, and (ii) any regulations promulgated pursuant to any such law.

-1-

4.          Voting and Dividend Rights. During the period in which the restrictions provided herein are applicable to the Shares covered by this Award, the Grantee shall have the right to vote such shares and to receive any cash dividends paid with respect to such shares. Any dividend or distribution payable with respect to the Shares covered by this Award that shall be paid in shares of Common Stock shall be subject to the same restrictions provided for herein. Any dividend or distribution (other than cash or Common Stock) payable on Shares covered by this Award, and any consideration receivable for or in conversion of or exchange for Shares covered by this Award, unless otherwise determined by the Board, shall be subject to the terms and conditions of this Restricted Stock Award Agreement or with such modifications thereof as the Board may provide in its absolute discretion.

5.          Distribution Following End of Restrictions. Upon the expiration of the restrictions provided in Section 3 hereof as to any portion of the Shares covered by this Award, the Company in its sole discretion will either cause a certificate evidencing such amount of Common Stock to be delivered to the Grantee (or, in the case of his death after such events, cause such certificate to be delivered to Grantee's legal representative, beneficiary or heir) or remove the restrictions regarding transferability from the shares designated in book-entry for the Grantee (or, in the case of his death for Grantee's legal representative, beneficiary or heir) on the records of the Company’s transfer agent; provided, however, that the Company shall not be obligated to issue any fractional shares of Common Stock in the event of certificated shares.

6.          Tax Withholding. The obligation of the Company to deliver any certificate or book-entry uncertificated shares to the Grantee pursuant to Section 5 hereof shall be subject to the receipt by the Company from the Grantee of any minimum withholding taxes required as a result of the grant of the Award or lapsing of restrictions thereon. The Company shall have the right, but not the obligation, to sell or withhold such number of unrestricted shares of Common Stock distributable to the Grantee as will provide assets for payment of any tax so required to be paid by the Company for Grantee unless, prior to such sale or withholding, Grantee shall have paid to the Company the amount of such tax. Any balance of the proceeds of such a sale remaining after the payment of such taxes shall be paid over to Grantee. In making any such sale, the Company shall be deemed to be acting on behalf and for the account of Grantee. The Grantee and the Company hereby agree that the Grantee may, within 30 days following the acceptance of this Award as provided in Paragraph 1 hereof, file with the Internal Revenue Service an election under Section 83(b) of the Internal Revenue Code. In the event the Grantee makes such an election, the Grantee agrees to provide a copy of the election to the Company and to make such provision satisfactory to the Company of any minimum withholding taxes required by the Company.

7.          Securities Laws Requirements; Lock-Up Agreement. The Company shall not be required to issue shares pursuant to this Award unless and until (a) such shares have been duly listed upon each stock exchange on which the Company’s Common Stock is then listed; and (b) the Company has complied with applicable federal and state securities laws. The Board (or a Committee thereof) may require the Grantee to furnish to the Company, prior to the issuance of any shares of Common Stock in connection with this Award, an agreement, in such form as the Board or Committee may from time to time deem appropriate, in which the Grantee represents that the shares acquired by him under this Award are being acquired for investment and not with a view to the sale or distribution thereof. Grantee further agree hereby that he will enter into and perform any underwriter’s lock-up agreement requested by the Company from time to time in connection with public offerings of the Company’s securities.

-2-

8.          Incorporation of Plan Provisions. This Restricted Stock Award Agreement is made pursuant to the Plan and is subject to all of the terms and provisions of the Plan as if the same were fully set forth herein, and receipt of a copy of the Plan is hereby acknowledged. Capitalized terms not otherwise defined herein shall have the same meanings set forth for such terms in the Plan.

9.          Miscellaneous. This Restricted Stock Award Agreement (a) shall be binding upon and inure to the benefit of any successor of the Company, (b) shall be governed by the laws of the State of Delaware, and any applicable laws of the United States, and (c) may not be amended without the written consent of both the Company and the Grantee.

IN WITNESS WHEREOF, the parties hereto have executed this Restricted Stock Award Agreement on the date first above written.

COMPANY:		GRANTEE:
Dyansil Corporation of America
By:	/s/ Thomas C. Leonard	/s/ Peter Sulick
	Thomas C. Leonard	Peter Sulick
	Chief Financial Officer	Interim CEO and Interim President

-3-

EX-31.1(B)

EXHIBIT 31.1 (b)

CERTIFICATION PURSUANT TO RULE 13a–14(a)/15d-14(a) and SECTION 302 OF THE SARBANES-OXLEY ACT

I, Thomas Leonard, certify that:

1. I have reviewed this Form 10-Q of Dynasil Corporation of America;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15 d-15(f))for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 12, 2013	/s/ Thomas C. Leonard
	Thomas C. Leonard
	Chief Financial Officer

EX-31.1(A)

EXHIBIT 31.1 (a)

CERTIFICATION PURSUANT TO RULE 13a–14(a)/15d-14(a) and SECTION 302 OF THE SARBANES-OXLEY ACT

I, Peter Sulick, certify that:

1. I have reviewed this Form 10-Q of Dynasil Corporation of America;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15 d-15(f))for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 12, 2013	/s/ Peter Sulick
	Peter Sulick
	Interim Chief Executive Officer and Interim President

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C.SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of DYNASIL CORPORATION OF AMERICA (the "Company") on Form 10Q for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Peter Sulick, Interim Chief Executive Officer and Interim President of the Company and Thomas C. Leonard, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Peter Sulick
	Peter Sulick
	Interim Chief Executive Officer and Interim President
	/s/ Thomas C. Leonard
	Thomas C. Leonard
	Chief Financial Officer
August 12, 2013

EX-99.1

Contact:
Patty Kehe
Corporate Secretary
Dynasil Corporation of America
Phone: (617) 668-6855
pkehe@dynasil.com

Dynasil Corporation of America Reports
Third Quarter Fiscal 2013 Financial Results

Navigator 2.0™ medical probe for cancer surgery is approved and began shipping in the Third Quarter ended June, 2013

Watertown, MA, August 12, 2013 – Dynasil Corporation of America (NASDAQ: DYSL), a leading developer of sensing, detection and analysis technology for homeland security, medical and industrial applications, today announced financial results for the fiscal 2013 third quarter ended June 30, 2013.

Dynasil reported a net loss for the quarter of ($366,000) or ($0.2) per share, compared with net loss of ($332,000), or ($0.02) per share, for the quarter ended June 30, 2012. The third quarter results include initial sales of the Company’s new Navigator 2.0™ medical probe for cancer surgery which was approved for sale and began shipping in late May 2013. “I am happy to report that our updated Navigator 2.0™ medical probe was approved for sale in the United States and we began shipping this refreshed product,” said Dynasil Chairman and Interim CEO Peter Sulick. “We are currently pursuing the CE Mark, necessary to meet European Union requirements, and anticipate international sales will begin in the near future.”

Net revenue for the third quarter of fiscal 2013 declined $0.8 million to $11.3 million, compared with $12.1 million for the third quarter of fiscal 2012. Revenue declined in the Contract Research and Optics segments in the quarter while the Instruments segment remained largely flat as compared with the same period last year. Gross profit for the third quarter of 2013 declined slightly to $4.8 million from $5.0 million for the same period in 2012 although gross margins increased to 43% in the quarter compared to 41% for the third quarter of fiscal 2012.

Operating expenses for the three months ended June 30, 2013 were $5.0 million, a decrease of $81,000 compared to the same period in 2012. The decrease was a result of the reduced expenditures associated with the product refresh within the Instruments segment in 2012 which was largely offset by increased General and Administrative expenses.

The Company continues to be in default of certain financial covenants set forth in the terms of its outstanding indebtedness as of June 30, 2013. However, the Company has made all principal and interest payments due its senior lender through August 12, 2013, the date of this earnings release. The Company has accrued but not remitted interest payments to its subordinated lender since February, 2013. Management is currently evaluating potential transactions involving the sales of divisions and/or product lines which, if consummated, would result in additional debt principal payments to the bank. The Company cannot, however, predict when or whether a resolution of this situation will be achieved.

Quarterly Business Highlights

The Company received regulatory approval for its updated medical probe for cancer surgery in the third quarter for the United States market and began shipping this product. The Company is continuing to pursue CE mark approval for this product internationally. In addition, the Company is evaluating preliminary test results received on its updated lead paint analyzer product while also evaluating strategic alternatives associated with this product.

The Company continues to pursue various commercialization opportunities arising from technologies developed within our Contract Research segment. “One of our leading commercialization efforts involve our CLYC crystals, which are now being sold commercially,” stated Mr. Sulick. “We continue our efforts to further improve the size and quality of this product as well as develop new applications.”

Additionally, the Company has prepared a separate business and financing plan for one of the biomedical technologies. Our intention is to spin out the tissue sealant technology into an independent entity in which the Company would retain a substantial interest. This would enable us to raise funds specifically for this venture and recruit additional expertise to help advance the technology. In June, 2013, our senior lender agreed to release the intellectual property and related collateral in connection with the spin-out in exchange for an additional debt payment of $300,000. As a result, we are proceeding with plans to establish the joint venture and raise outside funding to support the joint venture; however, there can be no assurance that we will be able to raise the funding necessary for the transaction or consummate this transaction at any future time.

The Company has no conference calls scheduled at this time.

About Dynasil

Dynasil Corporation of America (NASDAQ: DYSL) develops and manufactures detection and analysis technology, precision instruments and optical components for the homeland security, medical and industrial markets.  Combining world-class technology with expertise in research and materials science, Dynasil is commercializing products including dual-mode radiation detection solutions for Homeland Security and commercial applications, probes for medical imaging and sensors for non-destructive testing.  The Company is building a relationship with the Mayo Clinic to develop early-stage opportunities such as advanced biomedical technologies. Dynasil has an impressive and growing portfolio of issued and pending U.S. patents. The Company is based in Watertown, Massachusetts, with additional operations in Mass., Minn., NY, NJ and the United Kingdom. More information about the Company is available at www.dynasil.com.

Forward-looking Statements

This news release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements regarding future events and our future results are based on current expectations, estimates, forecasts, and projections and the beliefs and assumptions of our management, including, without limitation, our expectations regarding results of operations, the commercialization of our products including our dual mode detectors, the adequacy of our current financing sources to fund our current operations, our growth initiatives, our capital expenditures, regulatory approvals and the strength of our intellectual property portfolio. These forward-looking statements may be identified by the use of words such as “may,” “could,” “expect,” “estimate,” “anticipate,” “continue” or similar terms, though not all forward-looking statements contain such words. The actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements due to a number of important factors. These factors that could cause actual results to differ from those anticipated or predicted include, without limitation, our ability to resolve our current default under our outstanding indebtedness, our ability to develop and commercialize our products, including obtaining regulatory approvals, the size and growth of the potential markets for our products and our ability to serve those markets, the rate and degree of market acceptance of any of our products, our ability to address our material weaknesses in our internal controls, general economic conditions, costs and availability of raw materials and management information systems, our ability to obtain and maintain intellectual property protection for our products, competition, the loss of key management and technical personnel, our ability to obtain timely payment of our invoices to governmental customers, litigation, the effect of governmental regulatory developments, the availability of financing sources, our ability to identify and execute on acquisition opportunities and integrate such acquisitions into our business, and seasonality, as well as the uncertainties set forth in the Company’s 2012 Annual Report on Form 10-K, as amended on February 14, 2013, including the risk factors contained in Item 1a, the Company’s Quarterly Reports on Form 10-Q filed on February 13, 2013 and May 15, 2013 and from time to time in the Company's other filings with the Securities and Exchange Commission. The Company disclaims any intention or obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Dynasil Corporation of America and Subsidiaries

Consolidated Balance Sheets

	June 30, 2013		September 30, 2012
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	2,778,365	$	3,414,880
Accounts receivable, net		3,995,552		5,475,142
Costs in excess of billings and unbilled receivables		1,558,407		1,735,798
Inventories, net of reserves		3,344,744		3,271,700
Deferred tax asset		126,187		126,187
Prepaid expenses and other current assets		1,370,264		1,334,649
Total current assets		13,173,519		15,358,356
Property, Plant and Equipment, net		4,705,911		4,984,150
Other Assets
Intangibles, net		3,606,177		6,703,305
Goodwill		6,136,128		10,254,160
Deferred financing costs, net		127,036		165,457
Total other assets		9,869,341		17,122,922
Total Assets	$	27,748,771	$	37,465,428
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt	$	10,583,334	$	11,984,492
Capital lease obligations, current		108,184		-0-
Accounts payable		2,629,054		2,416,397
Deferred revenue		542,896		694,672
Accrued expenses and other liabilities		2,112,791		2,809,580
Total current liabilities		15,976,259		17,905,141
Long-term Liabilities
Capital lease obligations, net of current portion		274,972		-0-
Pension liability		342,848		345,443
Deferred tax liability		227,063		371,256
Total long-term liabilities		844,883		716,699
Stockholders' Equity		10,927,629		18,843,588
Total Liabilities and Stockholders' Equity	$	27,748,771	$	37,465,428

Dynasil Corporation of America and Subsidiaries

Consolidated Statement of Operations

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Net revenue	$	11,322,342		$	12,082,037		$	32,360,147		$	36,513,342
Cost of revenue		6,494,463			7,097,378			18,113,830			21,317,392
Gross profit		4,827,879			4,984,659			14,246,317			15,195,950
Operating expenses:
Sales and marketing expenses		418,318			444,369			1,384,739			1,289,131
Research and development expenses		499,732			721,279			1,710,090			2,343,119
General and administrative expenses		4,125,336			3,958,362			12,043,224			12,116,439
Impairment of goodwill and long-lived assets		-0-			-0-			6,763,072			-0-
Total operating expenses		5,043,386			5,124,010			21,901,125			15,748,689
Loss from operations		(215,507	)		(139,351	)		(7,654,808	)		(552,739	)
Interest expense, net		181,773			140,246			545,690			386,877
Loss before income taxes		(397,280	)		(279,597	)		(8,200,498	)		(939,616	)
Income tax provision (benefit)		(30,920	)		52,303			(213,065	)		(393,044	)
Net loss	$	(366,360	)	$	(331,900	)	$	(7,987,433	)	$	(546,572	)
Net loss	$	(366,360	)	$	(331,900	)	$	(7,987,433	)	$	(546,572	)
Other comprehensive loss:
Foreign currency translation		(45	)		(107,330	)		(245,666	)		(29,138	)
Total comprehensive loss	$	(366,405	)	$	(439,230	)	$	(8,233,099	)	$	(575,710	)
Basic net loss per common share	$	(0.02	)	$	(0.02	)	$	(0.54	)	$	(0.04	)
Diluted net loss per common share	$	(0.02	)	$	(0.02	)	$	(0.54	)	$	(0.04	)
Weighted average shares outstanding
Basic		14,859,899			14,275,293			14,767,401			14,878,360
Diluted		14,859,899			14,275,293			14,767,401			14,878,360

5

XML

Income Taxes

9 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 11 - Income Taxes

Dynasil Corporation of America and its wholly-owned U.S. subsidiaries file a consolidated federal income tax return and various state returns. The Company’s U.K. subsidiary files tax returns in the U.K.

The Company uses the asset and liability approach to account for income taxes. Under this approach, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and net operating loss and tax credit carryforwards. The amount of deferred taxes on these temporary differences is determined using the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, as applicable, based on tax rates, and tax laws, in the respective tax jurisdiction then in effect.

In assessing the ability to realize the net deferred tax assets, management considers various factors including taxable income in carryback years, future reversals of existing taxable temporary differences, tax planning strategies and projections of future taxable income, to determine whether it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Based upon the Company’s recent losses and uncertainty of future profits, the Company has determined that the uncertainty regarding the realization of these assets is sufficient to warrant the need for a full valuation allowance against its U.S. net deferred tax assets.

As a result, the Company has recorded a valuation allowance of approximately $1.7 million as of September 30, 2012 and an additional valuation allowance of approximately $2.7 million based upon year to date activity for a total valuation allowance of approximately $4.4 million as of June 30, 2013.

The Company applies the authoritative provisions related to accounting for uncertainty in income taxes. As required by these provisions, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being reached upon ultimate settlement with the relevant tax authority. As of June 30, 2013 and September 30, 2012, the Company has no liabilities recorded for uncertain tax positions. Interest and penalty charges, if any, related to uncertain tax positions would be classified as income tax expense in the accompanying consolidated statement of operations. As of June 30, 2013 and September 30, 2012, the Company had no accrued interest or penalties related to uncertain tax positions. The Company currently has no federal or state tax examinations in progress.

The effective rate of (8.07%) and (2.61%) for the three and nine months ended June 30, 2013 differs from the U.S. federal statutory income tax rate of 34% primarily due to a full valuation allowance against the Company’s U.S. deferred tax asset. The effective rate of (70.69%) and (72.04%) for the three and nine months ended June 30, 2012 is primarily due to the recognition of research credits.

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Company’s tax filings for federal and state jurisdictions for the tax years beginning with 2009 are still subject to examination.

XML

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (USD $)	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Net revenue	$ 11,322,342	$ 12,082,037	$ 32,360,147	$ 36,513,342
Cost of revenue	6,494,463	7,097,378	18,113,830	21,317,392
Gross profit	4,827,879	4,984,659	14,246,317	15,195,950
Operating expenses:
Sales and marketing expenses	418,318	444,369	1,384,739	1,289,131
Research and development expenses	499,732	721,279	1,710,090	2,343,119
General and administrative expenses	4,125,336	3,958,362	12,043,224	12,116,439
Impairment of goodwill and long-lived assets	0	0	6,763,072	0
Total operating expenses	5,043,386	5,124,010	21,901,125	15,748,689
Loss from operations	(215,507)	(139,351)	(7,654,808)	(552,739)
Interest expense, net	181,773	140,246	545,690	386,877
Loss before income taxes	(397,280)	(279,597)	(8,200,498)	(939,616)
Income tax provision (benefit)	(30,920)	52,303	(213,065)	(393,044)
Net loss	(366,360)	(331,900)	(7,987,433)	(546,572)
Net loss	(366,360)	(331,900)	(7,987,433)	(546,572)
Other comprehensive loss:
Foreign currency translation	(45)	(107,330)	(245,666)	(29,138)
Total comprehensive loss	$ (366,405)	$ (439,230)	$ (8,233,099)	$ (575,710)
Basic net loss per common share (in dollars per share)	$ (0.02)	$ (0.02)	$ (0.54)	$ (0.04)
Diluted net loss per common share (in dollars per share)	$ (0.02)	$ (0.02)	$ (0.54)	$ (0.04)
Weighted average shares outstanding
Basic (in shares)	14,859,899	14,275,293	14,767,401	14,878,360
Diluted (in shares)	14,859,899	14,275,293	14,767,401	14,878,360

XML

Costs in Excess of Billings and Unbilled Receivables

9 Months Ended

Jun. 30, 2013

Cost In Excess Of Billings [Abstract]

Dividend Add Back Due To Preferred Stock Conversion [Text Block]

Note 4 – Costs in Excess of Billings and Unbilled Receivables

Costs in excess of billings and unbilled receivables relate to research and development contracts and consist of actual revenues earned under the contracts which have not yet been billed to customers.

XML

Stock Based Compensation (Tables)

9 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table Text Block]

A summary of stock option activity as of June 30, 2013 and changes during the nine months ended June 30, 2013 is presented below:

	Options Outstanding		Weighted Average Exercise Price per Share ($)		Weighted Average Remain Contractual Term (in Years)
Balance at September 30, 2012		794,483		3.34		1.75
Outstanding and exercisable at September 30, 2012		794,483		3.34		1.75
Granted		-0-		-0-
Exercised		-0-		-0-
Cancelled		(163,951)		3.39
Balance at June 30, 2013		630,532		3.33		1.31
Outstanding and exercisable at June 30, 2013		630,532		3.33		1.31

Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]

A summary of restricted stock activity for the nine months ended June 30, 2013 and 2012 is presented below:

Restricted Stock Activity for the Nine Months ended June 30, 2013	Shares		Weighted-Average Grant-Date Fair Value
Nonvested at September 30, 2012		127,834	$	1.92
Granted		404,000		0.67
Vested		(72,166)		1.44
Cancelled		(20,000)		4.02
Nonvested at June 30, 2013		439,668	$	0.76

Restricted Stock Activity for the Nine Months ended June 30, 2012	Shares		Weighted-Average Grant-Date Fair Value
Nonvested at September 30, 2011		403,000	$	4.02
Granted		-0-		-0-
Vested		(44,666)		4.00
Cancelled		-0-		-0-
Nonvested at June 30, 2012		358,334	$	4.02

Schedule Of Stock Compensation Expense [Table Text Block]

Stock compensation expense for the three and nine months ended June 30, 2013 and 2012 is as follows:

	Three Months Ended		Three Months Ended
Stock Compensation Expense	June 30, 2013		June 30, 2012
Stock Grants	$	48,125	$	43,000
Restricted Stock Grants		41,576		159,552
Option Grants		-0-		37,206
Employee Stock Purchase Plan		843		3,300
Total	$	90,544	$	243,058

	Nine Months Ended		Nine Months Ended
Stock Compensation Expense	June 30, 2013		June 30, 2012
Stock Grants	$	180,647	$	152,041
Restricted Stock Grants		107,270		465,303
Option Grants		9,813		168,675
Employee Stock Purchase Plan		2,912		35,568
Total	$	300,642	$	821,587

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Fair Value Measurements

9 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Note 12 – Fair Value Measurements

The Company uses a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the inputs used in the valuation. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are as follows:

• Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: Observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

• Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amounts for fixed rate long-term debt and variable rate long term debt approximate fair value because the underlying instruments are primarily at current market rates available to the Company for similar borrowings.

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Stock Based Compensation (Details 2) (USD $)	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Stock Based Compensation [Line Items]
Total	$ 90,544	$ 243,058	$ 300,642	$ 821,587
Stock Grants [Member]
Stock Based Compensation [Line Items]
Total	48,125	43,000	180,647	152,041
Restricted Stock [Member]
Stock Based Compensation [Line Items]
Total	41,576	159,552	107,270	465,303
Equity Option [Member]
Stock Based Compensation [Line Items]
Total	0	37,206	9,813	168,675
Employee Stock Option [Member]
Stock Based Compensation [Line Items]
Total	$ 843	$ 3,300	$ 2,912	$ 35,568

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Inventories (Details) (USD $)	Jun. 30, 2013	Sep. 30, 2012
Inventory Current [Line Items]
Raw Materials	$ 2,010,394	$ 2,096,681
Work-in-Process	788,234	885,328
Finished Goods	546,116	289,691
Inventory, Net, Total	$ 3,344,744	$ 3,271,700

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Basis of Presentation and Ability to Continue as a Going Concern (Details Textual)	9 Months Ended
	Jun. 30, 2013
Basis Of Presentation [Line Items]
Debt Instrument, Interest Rate, Increase (Decrease)	5.00%

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Earnings (Loss) Per Common Share (Details)	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Weighted average shares outstanding
Basic	14,859,899	14,275,293	14,767,401	14,878,360
Effect of dilutive securities
Stock Options	0	0	0	0
Dilutive Average Shares Outstanding	14,859,899	14,275,293	14,767,401	14,878,360

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Segment, Customer and Geographical Reporting (Details) (USD $)	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Sep. 30, 2012
Segment Reporting Information [Line Items]
Revenue	$ 11,322,342	$ 12,082,037	$ 32,360,147	$ 36,513,342
Gross Profit	4,827,879	4,984,659	14,246,317	15,195,950
Impairment of goodwill & long-lived assets	0	0	6,763,072	0
Operating Income (Loss)	(215,507)	(139,351)	(7,654,808)	(552,739)
Depreciation and Amortization	459,226	391,773	1,329,401	1,134,966
Capital expenditures	206,898	76,700	422,577	764,028
Intangibles, Net	3,606,177	5,885,922	3,606,177	5,885,922	6,703,305
Goodwill	6,136,128	13,287,807	6,136,128	13,287,807	10,254,160
Total Assets	27,748,771	40,472,463	27,748,771	40,472,463	37,465,428
Contract Research [Member]
Segment Reporting Information [Line Items]
Revenue	5,933,085	6,473,078	16,331,775	19,677,334
Gross Profit	2,514,235	2,487,372	7,376,158	7,699,303
Impairment of goodwill & long-lived assets	0		0
Operating Income (Loss)	22,869	202,551	254,278	506,046
Depreciation and Amortization	88,770	59,058	231,189	153,995
Capital expenditures	0	3,273	(1,095)	350,492
Intangibles, Net	332,800	375,467	332,800	375,467
Goodwill	4,938,625	4,938,625	4,938,625	4,938,625
Total Assets	13,562,650	13,895,142	13,562,650	13,895,142
Optics [Member]
Segment Reporting Information [Line Items]
Revenue	3,860,648	4,157,751	12,044,354	11,754,515
Gross Profit	1,500,419	1,696,071	4,832,981	4,629,856
Impairment of goodwill & long-lived assets	0		0
Operating Income (Loss)	25,402	336,112	413,414	531,205
Depreciation and Amortization	191,741	184,512	562,065	533,612
Capital expenditures	206,898	(35,156)	416,580	289,685
Intangibles, Net	848,046	388	848,046	388
Goodwill	1,197,503	2,049,611	1,197,503	2,049,611
Total Assets	8,780,459	11,351,634	8,780,459	11,351,634
Instruments [Member]
Segment Reporting Information [Line Items]
Revenue	1,498,609	1,443,756	3,796,967	5,056,540
Gross Profit	783,225	794,875	1,850,127	2,883,666
Impairment of goodwill & long-lived assets	0		6,763,072
Operating Income (Loss)	(48,219)	(441,905)	(7,774,714)	(901,357)
Depreciation and Amortization	163,715	133,203	491,147	402,359
Capital expenditures	0	108,583	7,092	123,851
Intangibles, Net	2,230,334	5,255,067	2,230,334	5,255,067
Goodwill	0	6,299,571	0	6,299,571
Total Assets	5,142,707	14,916,226	5,142,707	14,916,226
Biomedical [Member]
Segment Reporting Information [Line Items]
Revenue	30,000	7,452	187,051	24,953
Gross Profit	30,000	6,341	187,051	(16,875)
Impairment of goodwill & long-lived assets	0		0
Operating Income (Loss)	(215,559)	(236,109)	(547,786)	(688,633)
Depreciation and Amortization	15,000	15,000	45,000	45,000
Capital expenditures	0	0	0	0
Intangibles, Net	194,997	255,000	194,997	255,000
Goodwill	0	0	0	0
Total Assets	$ 262,955	$ 309,461	$ 262,955	$ 309,461

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Intangible Assets (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Finite-Lived Intangible Assets [Line Items]
Amortization of Intangible Assets	$ 170,304	$ 162,802	$ 495,079	$ 488,407

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Income Taxes (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Sep. 30, 2012
Income Tax [Line Items]
Valuation Allowance, Amount	$ 4.4		$ 4.4		$ 1.7
Additional Valuation Allowance Amount					$ 2.7
Effective Income Tax Rate, Continuing Operations	8.07%		2.61%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate			34.00%
Effective Income Tax Rate Reconciliation, Tax Credits, Research		70.69%		72.04%

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Segment, Customer and Geographical Reporting (Tables)

9 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

The Company’s segment information for the three months ended June 30, 2013 and 2012 is summarized below:

Results of Operations for the Three Months Ended June 30,
2013
	Contract Research		Optics		Instruments		Biomedical		Total
Revenue	$	5,933,085	$	3,860,648	$	1,498,609	$	30,000	$	11,322,342
Gross Profit		2,514,235		1,500,419		783,225		30,000		4,827,879
Impairment of goodwill & long-lived assets		-0-		-0-		-0-		-0-		-0-
Operating Income (Loss)		22,869		25,402		(48,219)		(215,559)		(215,507)
Depreciation and Amortization		88,770		191,741		163,715		15,000		459,226
Capital expenditures		-0-		206,898		-0-		-0-		206,898
Intangibles, Net		332,800		848,046		2,230,334		194,997		3,606,177
Goodwill		4,938,625		1,197,503		-0-		-0-		6,136,128
Total Assets	$	13,562,650	$	8,780,459	$	5,142,707	$	262,955	$	27,748,771

Results of Operations for the Three Months Ended June 30,
2012
	Contract Research		Optics		Instruments		Biomedical		Total
Revenue	$	6,473,078	$	4,157,751	$	1,443,756	$	7,452	$	12,082,037
Gross Profit		2,487,372		1,696,071		794,875		6,341		4,984,659
Operating Income (Loss)		202,551		336,112		(441,905)		(236,109)		(139,351)
Depreciation and Amortization		59,058		184,512		133,203		15,000		391,773
Capital expenditures		3,273		(35,156)		108,583		-0-		76,700
Intangibles, Net		375,467		388		5,255,067		255,000		5,885,922
Goodwill		4,938,625		2,049,611		6,299,571		-0-		13,287,807
Total Assets	$	13,895,142	$	11,351,634	$	14,916,226	$	309,461	$	40,472,463

The Company’s segment information for the nine months ended June 30, 2013 and 2012 is summarized below:

Results of Operations for the Nine Months Ended June 30,
2013
	Contract Research		Optics		Instruments		Biomedical		Total
Revenue	$	16,331,775	$	12,044,354	$	3,796,967	$	187,051	$	32,360,147
Gross Profit		7,376,158		4,832,981		1,850,127		187,051		14,246,317
Impairment of goodwill & long-lived assets		-0-		-0-		6,763,072		-0-		6,763,072
Operating Income (Loss)		254,278		413,414		(7,774,714)		(547,786)		(7,654,808)
Depreciation and Amortization		231,189		562,065		491,147		45,000		1,329,401
Capital expenditures		(1,095)		416,580		7,092		-0-		422,577
Intangibles, Net		332,800		848,046		2,230,334		194,997		3,606,177
Goodwill		4,938,625		1,197,503		-0-		-0-		6,136,128
Total Assets	$	13,562,650	$	8,780,459	$	5,142,707	$	262,955	$	27,748,771

Results of Operations for the Nine Months Ended June 30,
2012
	Contract Research		Optics		Instruments		Biomedical		Total
Revenue	$	19,677,334	$	11,754,515	$	5,056,540	$	24,953	$	36,513,342
Gross Profit		7,699,303		4,629,856		2,883,666		(16,875)		15,195,950
Operating Income (Loss)		506,046		531,205		(901,357)		(688,633)		(552,739)
Depreciation and Amortization		153,995		533,612		402,359		45,000		1,134,966
Capital expenditures		350,492		289,685		123,851		-0-		764,028
Intangibles, Net		375,467		388		5,255,067		255,000		5,885,922
Goodwill		4,938,625		2,049,611		6,299,571		-0-		13,287,807
Total Assets	$	13,895,142	$	11,351,634	$	14,916,226	$	309,461	$	40,472,463

Schedule Of Segment Revenue By Geographical Location [Table Text Block]

Revenue by geographic location in total and as a percentage of total revenue, for the three months ended June 30, 2013 and 2012 are as follows:

	Three Months Ended					Three Months Ended
	June 30, 2013					June 30, 2012
Geographic Location	Revenue		% of Total			Revenue		% of Total
United States	$	9,426,542		83	%	$	10,130,936		84	%
Europe		975,941		9	%		981,147		8	%
Other		919,859		8	%		969,954		8	%
	$	11,322,342		100	%	$	12,082,037		100	%

Revenue by geographic location in total and as a percentage of total revenue, for the nine months ended June 30, 2013 and 2012 are as follows:

	Nine Months Ended					Nine Months Ended
	June 30, 2013					June 30, 2012
Geographic Location	Revenue		% of Total			Revenue		% of Total
United States	$	26,493,062		82	%	$	30,446,812		83	%
Europe		2,711,944		8	%		3,210,520		9	%
Other		3,155,141		10	%		2,856,010		8	%
	$	32,360,147		100	%	$	36,513,342		100	%

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities:
Net loss	$ (7,987,433)	$ (546,572)
Adjustments to reconcile net loss to net cash:
Stock compensation expense	300,642	679,417
Foreign exchange loss	(33,526)	(61,813)
Contingent consideration adjustment	0	(18,395)
Gain on sale of property, plant and equipment	(87,803)	0
Depreciation and amortization	1,329,401	1,134,966
Noncash interest expense	38,421	39,912
Change in reserves	9,241	111,711
Deferred income taxes	(152,401)	(247,563)
Impairment of goodwill & long-lived assets	6,763,072	0
Other changes in assets and libilities:
Accounts receivable, net	1,496,979	(1,750,219)
Inventories	(49,887)	17,312
Costs in excess of billings / unbilled receivables	177,391	803,472
Prepaid expenses and other assets	(27,769)	(463,622)
Accounts payable	206,012	1,072,689
Accrued expenses and other liabilities	(705,372)	(403,179)
Deferred revenue	(160,058)	262,942
Net cash provided by operating activities	1,116,910	631,058
Cash flows from investing activities:
Proceeds from sale of property, plant, and equipment	80,252	0
Purchases of property, plant and equipment	(422,577)	(764,028)
Net cash used in investing activities	(342,325)	(764,028)
Cash flows from financing activities:
Proceeds from issuance of common stock	16,498	50,604
Principal payments on capital leases	(49,797)	0
Payments on long-term debt	(1,401,158)	(1,432,581)
Net cash used in financing activities	(1,434,457)	(1,381,977)
Effect of exchange rates on cash and cash equivalents	23,357	21,419
Net decrease in cash and cash equivalents	(636,515)	(1,493,528)
Cash and cash equivalents, beginning	3,414,880	4,479,840
Cash and cash equivalents, ending	2,778,365	2,986,312
Supplemental disclosures of cash flow information:
Assets purchased under capital leases	$ 432,953	$ 0

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Debt Classification

9 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

Note 2 –Debt Classification

The Company was in default of certain financial covenants set forth in the terms of its outstanding indebtedness as of June 30, 2013, March 31, 2013, December 31, 2012 and September 30, 2012 and has not paid its monthly interest payments to its subordinated lender since February 2013. Based on the covenant violations and the resulting possibility of an acceleration of the indebtedness by the lenders, all of the outstanding bank indebtedness of the Company has been classified as current liabilities in the accompanying balance sheets.

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Impairment of Goodwill and Long-Lived Assets

9 Months Ended

Jun. 30, 2013

Asset Impairment Charges [Abstract]

Asset Impairment Charges [Text Block]

Note 5 – Impairment of Goodwill and Long-Lived Assets

Goodwill is subject to an annual impairment test. The Company considers many factors which may indicate the requirement to perform additional, interim impairment tests. These include:

⋅ A significant adverse long term outlook for any of our industries;

⋅ An adverse finding or rejection from a regulatory body involved in new product regulatory approvals;

⋅ Failure of an anticipated commercialization of a product or product line;

⋅ Unanticipated competition or the introduction of a disruptive technology;

⋅ The testing for recoverability under the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10 of a significant asset group within a reporting unit;

⋅ A loss of key personnel; and

⋅ An expectation that a reporting unit carrying goodwill, or a significant portion of a reporting unit, will be sold or otherwise disposed of.

The Company’s Dynasil Products subsidiary (“Products”) has experienced delays in obtaining regulatory approval of its next generation lead paint analyzer product. In the second quarter of fiscal 2013, due to the uncertainties regarding whether approval of this updated product could be obtained in a reasonable timeframe, Products determined it would limit its activities to the sale and service of its current lead paint analyzer. The Company is currently evaluating various strategic alternatives associated with the lead paint analyzer product.

Products also experienced delays in obtaining regulatory approvals of its updated medical probe for cancer surgery. In May 2013, Products received approval for the sale of its updated medical probe for cancer surgery in the United States and began shipping its new Navigator 2.0™ units. Products has begun testing the probe for sterility after which it expects to obtain the CE mark and other certifications necessary for sales to various countries outside the United States.

As a result of the downsizing of expenditures associated with both product lines and the process of evaluating strategic alternatives associated with the lead paint analyzer product during the second quarter of fiscal 2013, the Company determined that an interim impairment test of long lived assets and goodwill associated with this business unit was required in the second quarter of 2013. Based on its analyses, the Company determined that the fair value of the long-lived assets (other than goodwill) of Products was less than the carrying amount of those assets and, as a result, recorded a non-cash, pre-tax impairment charge of approximately $2,748,000 during the quarter ended March 31, 2013. The Company then performed a goodwill impairment test as prescribed in ASC 350 and recognized a non-cash, pre-tax charge of approximately $4,015,000 during the quarter ended March 31, 2013. The resulting write-offs, which total approximately $6,763,000 are included in the Company’s results of operations for the nine months ended June 30, 2013.

The valuation methods utilized to value the long lived assets and the goodwill discussed above are based on the amount and timing of expected future cash flows and growth rates and include a determination of an appropriate discount rate. The cash flows utilized in the discounted cash flow analyses were based on financial forecasts developed internally by management. Estimating future cash flows requires significant judgment and projections may vary from the cash flows eventually realized. The discount rate used also requires significant judgment and is intended to reflect the risks involved in the business.

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Inventories

9 Months Ended

Jun. 30, 2013

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

Note 3 - Inventories

Inventories are stated at the lower of average cost or market. Cost is determined using the first-in, first-out (FIFO) method. Inventories consist of raw materials, work-in-process and finished goods. The Company evaluates inventory levels and expected usage on a periodic basis and records, as a charge to cost of revenue, any amounts required to reduce the carrying value to net realizable value.

Inventories, net of reserves, consist of the following:

	June 30,		September 30,
	2013		2012
Raw Materials	$	2,010,394	$	2,096,681
Work-in-Process		788,234		885,328
Finished Goods		546,116		289,691
	$	3,344,744	$	3,271,700

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Segment, Customer and Geographical Reporting (Details 1) (USD $)	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 11,322,342	$ 12,082,037	$ 32,360,147	$ 36,513,342
Concentration Risk, Percentage	100.00%	100.00%	100.00%	100.00%
United State [Member] | Sales Revenue, Segment [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	9,426,542	10,130,936	26,493,062	30,446,812
Concentration Risk, Percentage	83.00%	84.00%	82.00%	83.00%
Europe [Member] | Sales Revenue, Segment [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	975,941	981,147	2,711,944	3,210,520
Concentration Risk, Percentage	9.00%	8.00%	8.00%	9.00%
Other Credit Derivatives [Member] | Sales Revenue, Segment [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 919,859	$ 969,954	$ 3,155,141	$ 2,856,010
Concentration Risk, Percentage	8.00%	8.00%	10.00%	8.00%

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Impairment of Goodwill and Long-Lived Assets (Details Textual) (USD $)	3 Months Ended			9 Months Ended
	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Schedule Of Goodwill And Long Lived Assets [Line Items]
Impairment Of Intangible Assets (Excluding Goodwill), Recorded		$ 2,748,000
Impairment of Intangible Assets (Excluding Goodwill), Recognized		4,015,000
Impairment of Long-Lived Assets Held-for-use	$ 0		$ 0	$ 6,763,072	$ 0

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Capital Leases (Details) (USD $)	Jun. 30, 2013
Capital Leases [Line Items]
Capital Leases Future Minimum Payments Due In Three Months	$ 29,827
Capital Leases, Future Minimum Payments Due, Next Twelve Months	124,588
Capital Leases, Future Minimum Payments Due in Two Years	133,543
Capital Leases, Future Minimum Payments Due in Three Years	59,722
Capital Leases, Future Minimum Payments Due in Four Years	23,920
Capital Leases, Future Minimum Payments Due Thereafter	11,556
Capital Leases, Future Minimum Payments Due	$ 383,156

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Stock Based Compensation (Details 1) (USD $)	9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Stock Based Compensation Restricted Stock Activity [Line Items]
Shares Nonvested, Beginning Balance	127,834	403,000
Shares, Granted	404,000	0
Shares, Vested	(72,166)	(44,666)
Shares, Cancelled	(20,000)	0
Shares, Nonvested, Ending Balance	439,668	358,334
Weighted-Average Grant-Date Fair Value, Nonvested, Beginning Balance	$ 1.92	$ 4.02
Weighted-Average Grant-Date Fair Value, Granted	$ 0.67	$ 0
Weighted-Average Grant-Date Fair Value, Vested	$ 1.44	$ 4.00
Weighted-Average Grant-Date Fair Value, Cancelled	$ 4.02	$ 0
Weighted-Average Grant-Date Fair Value, Nonvested, Ending Balance	$ 0.76	$ 4.02

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CONSOLIDATED BALANCE SHEETS [Parenthetical] (USD $)	Jun. 30, 2013	Sep. 30, 2012
Allowance for doubtful accounts (in dollars)	$ 178,603	$ 198,070
Common stock, par value (in dollars per share)	$ 0.0005	$ 0.0005
Common stock, shares authorized	40,000,000	40,000,000
Common stock, shares issued	16,152,963	15,610,517
Common stock, shares outstanding	15,342,803	14,800,357
Treasury stock, shares (in shares)	810,160	810,160

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Earnings (Loss) Per Common Share

9 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 8 – Earnings (Loss) Per Common Share

Basic earnings (loss) per common share is computed by dividing the net income applicable or loss attributable to common shares by the weighted average number of common shares. Diluted earnings per common share adjusts basic earnings per share for the effects of common stock options, common stock warrants, convertible preferred stock and other potential dilutive common shares outstanding during the periods.

For the three and nine months ended June 30, 2013 and 2012, no common share equivalents related to stock options were included in the calculation of dilutive shares since there was a loss from continuing operations and the inclusion of common share equivalents would be anti-dilutive. If the Company had not been in a loss position as of June 30, 2013 and 2012, 439,668 and 358,334 shares of restricted stock, respectively, would have been considered in the denominator used to calculate diluted earnings per common share. In addition, as of June 30, 2013 and 2012, common stock options for 630,532 and 1,059,584 shares, respectively, with exercise prices above current quarterly average market price per share have been excluded from the calculation of dilutive earnings per share since their effect is also anti-dilutive.

The computation of the weighted shares outstanding for the three months ended June 30 is as follows:

	June 30, 2013		June 30, 2012
Weighted average shares outstanding
Basic		14,859,899		14,275,293
Effect of dilutive securities
Stock Options		-0-		-0-
Dilutive Average Shares Outstanding		14,859,899		14,275,293

The computation of the weighted shares outstanding for the nine months ended June 30 is as follows:

	June 30, 2013		June 30, 2012
Weighted average shares outstanding
Basic		14,767,401		14,878,360
Effect of dilutive securities
Stock Options		-0-		-0-
Dilutive Average Shares Outstanding		14,767,401		14,878,360

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (USD $)	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Retained Earnings [Member]	Treasury Stock [Member]
Balance at Sep. 30, 2012	$ 18,843,588	$ 7,805	$ 17,037,618	$ 61,906	$ 2,722,601	$ (986,342)
Balance (in shares) at Sep. 30, 2012		15,610,517				810,160
Issuance of shares of common stock under employee stock purchase plan	16,498	12	16,486	0	0	0
Issuance of shares of common stock under employee stock purchase plan (in shares)		23,496				0
Stock-based compensation costs	300,642	260	300,382	0	0	0
Stock-based compensation costs (in shares)		518,950				0
Foreign currency translation adjustment	(245,666)	0	0	(245,666)	0	0
Net loss	(7,987,433)	0	0	0	(7,987,433)	0
Balance at Jun. 30, 2013	$ 10,927,629	$ 8,077	$ 17,354,486	$ (183,760)	$ (5,264,832)	$ (986,342)
Balance (in shares) at Jun. 30, 2013		16,152,963				810,160

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CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2013	Sep. 30, 2012
ASSETS
Cash and cash equivalents	$ 2,778,365	$ 3,414,880
Accounts receivable, net of allowances of $178,603 and $198,070 for June 30, 2013 and September 30, 2012, respectively	3,995,552	5,475,142
Costs in excess of billings and unbilled receivables	1,558,407	1,735,798
Inventories, net of reserves	3,344,744	3,271,700
Deferred tax asset	126,187	126,187
Prepaid expenses and other current assets	1,370,264	1,334,649
Total current assets	13,173,519	15,358,356
Property, Plant and Equipment, net	4,705,911	4,984,150
Other Assets
Intangibles, net	3,606,177	6,703,305
Goodwill	6,136,128	10,254,160
Deferred financing costs, net	127,036	165,457
Total other assets	9,869,341	17,122,922
Total Assets	27,748,771	37,465,428
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt	10,583,334	11,984,492
Capital lease obligations, current	108,184	0
Accounts payable	2,629,054	2,416,397
Deferred revenue	542,896	694,672
Accrued expenses and other liabilities	2,112,791	2,809,580
Total current liabilities	15,976,259	17,905,141
Long-term Liabilities
Capital lease obligations, net of current portion	274,972	0
Pension liability	342,848	345,443
Deferred tax liability	227,063	371,256
Total long-term liabilities	844,883	716,699
Stockholders' Equity
Common Stock, $0.0005 par value, 40,000,000 shares authorized, 16,152,963 and 15,610,517 shares issued, 15,342,803 and and 14,800,357 shares outstanding at June 30, 2013 and September 30, 2012, respectively.	8,077	7,805
Additional paid in capital	17,354,486	17,037,618
Accumulated other comprehensive income (loss)	(183,760)	61,906
Retained earnings (Accumulated deficit)	(5,264,832)	2,722,601
Stockholders Equity Before Treasury Stock	11,913,971	19,829,930
Less 810,160 shares of treasury stock - at cost	(986,342)	(986,342)
Total stockholders' equity	10,927,629	18,843,588
Total Liabilities and Stockholders' Equity	$ 27,748,771	$ 37,465,428

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Intangible Assets (Details) (USD $)						9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended			9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended
	Jun. 30, 2013	Sep. 30, 2012	Jun. 30, 2012	Jun. 30, 2013 Acquired Customer Base [Member]	Sep. 30, 2012 Acquired Customer Base [Member]	Jun. 30, 2013 Acquired Customer Base [Member] Minimum [Member]	Sep. 30, 2012 Acquired Customer Base [Member] Minimum [Member]	Jun. 30, 2013 Acquired Customer Base [Member] Maximum [Member]	Sep. 30, 2012 Acquired Customer Base [Member] Maximum [Member]	Jun. 30, 2013 Know How [Member]	Sep. 30, 2012 Know How [Member]	Jun. 30, 2013 Trade Names [Member]	Sep. 30, 2012 Trade Names [Member]	Jun. 30, 2013 Trade Names [Member] Minimum [Member]	Sep. 30, 2012 Trade Names [Member] Minimum [Member]	Jun. 30, 2013 Biomedical Technologies [Member]	Sep. 30, 2012 Biomedical Technologies [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)						5 years	5 years	15 years	15 years	15 years	15 years			15 years	15 years	5 years	5 years
Gross amount	$ 6,615,057	$ 9,229,210		$ 5,275,668	$ 7,858,775					$ 512,000	$ 512,000	$ 527,389	$ 558,435			$ 300,000	$ 300,000
Accumulated Amortization	3,008,880	2,525,905		2,658,925	2,257,533					170,749	145,147	74,203	63,222			105,003	60,003
Net	$ 3,606,177	$ 6,703,305	$ 5,885,922	$ 2,616,743	$ 5,601,242					$ 341,251	$ 366,853	$ 453,186	$ 495,213			$ 194,997	$ 239,997

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Earnings (Loss) Per Common Share (Tables)

9 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The computation of the weighted shares outstanding for the three months ended June 30 is as follows:

	June 30, 2013		June 30, 2012
Weighted average shares outstanding
Basic		14,859,899		14,275,293
Effect of dilutive securities
Stock Options		-0-		-0-
Dilutive Average Shares Outstanding		14,859,899		14,275,293

The computation of the weighted shares outstanding for the nine months ended June 30 is as follows:

	June 30, 2013		June 30, 2012
Weighted average shares outstanding
Basic		14,767,401		14,878,360
Effect of dilutive securities
Stock Options		-0-		-0-
Dilutive Average Shares Outstanding		14,767,401		14,878,360

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Stock Based Compensation (Details Textual) (USD $)	9 Months Ended
	Jun. 30, 2013
Stock Based Compensation [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Stock Options	$ 312,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition	6 months 24 days

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Earnings (Loss) Per Common Share (Details Textual)	9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Earnings Loss Per Common Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	630,532	1,059,584
Restricted Stock [Member]
Earnings Loss Per Common Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	439,668	358,334

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Stock Based Compensation (Details) (USD $)	9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Stock Based Compensation Stock Option Activity [Line Items]
Balance at September 30, 2012	794,483
Outstanding and exercisable, Option at September 30, 2012	794,483
Granted, Options Outstanding	0
Exercised, Options Outstanding	0
Cancelled, Options Outstanding	(163,951)
Balance at June 30, 2013	630,532
Outstanding and exercisable, Options at June 30, 2013	630,532
Balance, Weighted Average Exercise Price per Share at September 30 2012	$ 3.34
Outstanding and exercisable, Weighted Average Exercise Price per Share at September 30 2012	$ 3.34
Granted, Weighted Average Exercise Price per Share	$ 0
Exercised, Weighted Average Exercise Price per Share	$ 0
Cancelled, Weighted Average Exercise Price per Share	$ 3.39
Balance, Weighted Average Exercise Price per Share at June 30, 2013	$ 3.33
Outstanding and exercisable, Weighted Average Exercise Price per Share at June 30, 2013	$ 3.33
Balance, Weighted Average Remain Contractual Term (In Years)	1 year 3 months 22 days	1 year 9 months
Outstanding and exercisable, Weighted Average Remain Contractual Term (in Years)	1 year 3 months 22 days	1 year 9 months

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Capital Leases

9 Months Ended

Jun. 30, 2013

Leases, Capital [Abstract]

Capital Leases in Financial Statements of Lessee Disclosure [Text Block]

Note 7 – Capital Leases

The Company has entered into long-term capital lease agreements for purchases of equipment. The remaining principal payments due under all capital leases were $383,156 and $-0- for the three and nine month periods ended June 30, 2013 and 2012, respectively. Aggregate minimum annual principal obligations at March 31, 2013, under non-cancelable leases are as follows:

	2013 (3 Months)		2014		2015		2016		2017		Thereafter		Total
Capital Lease Obligations	$	29,827	$	124,588	$	133,543	$	59,722	$	23,920	$	11,556	$	383,156

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Intangible Assets (Details 1) (USD $)	Jun. 30, 2013
Finite-Lived Intangible Assets [Line Items]
2013 (3 Months)	$ 156,050
2014	651,818
2015	651,818
2016	651,815
2017	591,818
Thereafter	584,686
Total	3,288,005
Acquired Customer Base [Member]
Finite-Lived Intangible Assets [Line Items]
2013 (3 Months)	128,867
2014	543,085
2015	543,085
2016	543,085
2017	543,085
Thereafter	315,504
Total	2,616,711
Know How [Member]
Finite-Lived Intangible Assets [Line Items]
2013 (3 Months)	8,533
2014	34,133
2015	34,133
2016	34,133
2017	34,133
Thereafter	196,187
Total	341,252
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
2013 (3 Months)	3,650
2014	14,600
2015	14,600
2016	14,600
2017	14,600
Thereafter	72,995
Total	135,045
Biomedical Technologies [Member]
Finite-Lived Intangible Assets [Line Items]
2013 (3 Months)	15,000
2014	60,000
2015	60,000
2016	59,997
2017	0
Thereafter	0
Total	$ 194,997

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Segment, Customer and Geographical Reporting (Details Textual)	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Segment Reporting [Line Items]
Concentration Risk, Percentage	100.00%	100.00%	100.00%	100.00%
Optics [Member]
Segment Reporting [Line Items]
Concentration Risk, Percentage	10.00%	10.00%	10.00%	10.00%
Instrument Segment [Member]
Segment Reporting [Line Items]
Concentration Risk, Percentage	28.00%	32.00%	28.00%	29.00%
Instrument Segment [Member] | Accounts Receivable [Member]
Segment Reporting [Line Items]
Concentration Risk, Percentage	38.00%
Biomedical Technologies [Member] | Sales [Member]
Segment Reporting [Line Items]
Concentration Risk, Percentage	100.00%	100.00%	100.00%	100.00%
Contract Research [Member]
Segment Reporting [Line Items]
Concentration Risk, Percentage	58.00%	56.00%	59.00%	70.00%

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Segment, Customer and Geographical Reporting

9 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 10 – Segment, Customer and Geographical Reporting

Segment Financial Information

Dynasil’s business is comprised of four segments: contract research (“Contract Research”), optics (“Optics”), instruments (“Instruments”) and biomedical (“Biomedical”). Within these segments, there is a segregation of reportable units based upon the organizational structure used to evaluate performance and make decisions on resource allocation, as well as availability and materiality of separate financial results consistent with that structure. The Contract Research segment is one of the largest small business participants in U.S. government-funded research. The Optics segment manufactures optical materials, components and coatings. The Instruments segment manufactures specialized instruments used in various applications in the medical, industrial, and homeland security/defense sectors. The Biomedical segment is developing technologies for a wide spectrum of applications, including hematology, hypothermic core cooling and tissue sealants and will primarily pursue product commercialization of technologies and technology licensing opportunities though no assurance can be given that any of these technologies will become successfully commercialized.

The Company’s segment information for the three months ended June 30, 2013 and 2012 is summarized below:

Results of Operations for the Three Months Ended June 30,
2013
	Contract Research		Optics		Instruments		Biomedical		Total
Revenue	$	5,933,085	$	3,860,648	$	1,498,609	$	30,000	$	11,322,342
Gross Profit		2,514,235		1,500,419		783,225		30,000		4,827,879
Impairment of goodwill & long-lived assets		-0-		-0-		-0-		-0-		-0-
Operating Income (Loss)		22,869		25,402		(48,219)		(215,559)		(215,507)
Depreciation and Amortization		88,770		191,741		163,715		15,000		459,226
Capital expenditures		-0-		206,898		-0-		-0-		206,898
Intangibles, Net		332,800		848,046		2,230,334		194,997		3,606,177
Goodwill		4,938,625		1,197,503		-0-		-0-		6,136,128
Total Assets	$	13,562,650	$	8,780,459	$	5,142,707	$	262,955	$	27,748,771

Results of Operations for the Three Months Ended June 30,
2012
	Contract Research		Optics		Instruments		Biomedical		Total
Revenue	$	6,473,078	$	4,157,751	$	1,443,756	$	7,452	$	12,082,037
Gross Profit		2,487,372		1,696,071		794,875		6,341		4,984,659
Operating Income (Loss)		202,551		336,112		(441,905)		(236,109)		(139,351)
Depreciation and Amortization		59,058		184,512		133,203		15,000		391,773
Capital expenditures		3,273		(35,156)		108,583		-0-		76,700
Intangibles, Net		375,467		388		5,255,067		255,000		5,885,922
Goodwill		4,938,625		2,049,611		6,299,571		-0-		13,287,807
Total Assets	$	13,895,142	$	11,351,634	$	14,916,226	$	309,461	$	40,472,463

The Company’s segment information for the nine months ended June 30, 2013 and 2012 is summarized below:

Results of Operations for the Nine Months Ended June 30,
2013
	Contract Research		Optics		Instruments		Biomedical		Total
Revenue	$	16,331,775	$	12,044,354	$	3,796,967	$	187,051	$	32,360,147
Gross Profit		7,376,158		4,832,981		1,850,127		187,051		14,246,317
Impairment of goodwill & long-lived assets		-0-		-0-		6,763,072		-0-		6,763,072
Operating Income (Loss)		254,278		413,414		(7,774,714)		(547,786)		(7,654,808)
Depreciation and Amortization		231,189		562,065		491,147		45,000		1,329,401
Capital expenditures		(1,095)		416,580		7,092		-0-		422,577
Intangibles, Net		332,800		848,046		2,230,334		194,997		3,606,177
Goodwill		4,938,625		1,197,503		-0-		-0-		6,136,128
Total Assets	$	13,562,650	$	8,780,459	$	5,142,707	$	262,955	$	27,748,771

Results of Operations for the Nine Months Ended June 30,
2012
	Contract Research		Optics		Instruments		Biomedical		Total
Revenue	$	19,677,334	$	11,754,515	$	5,056,540	$	24,953	$	36,513,342
Gross Profit		7,699,303		4,629,856		2,883,666		(16,875)		15,195,950
Operating Income (Loss)		506,046		531,205		(901,357)		(688,633)		(552,739)
Depreciation and Amortization		153,995		533,612		402,359		45,000		1,134,966
Capital expenditures		350,492		289,685		123,851		-0-		764,028
Intangibles, Net		375,467		388		5,255,067		255,000		5,885,922
Goodwill		4,938,625		2,049,611		6,299,571		-0-		13,287,807
Total Assets	$	13,895,142	$	11,351,634	$	14,916,226	$	309,461	$	40,472,463

Customer Financial Information

For the three and nine months ended June 30, 2013 and 2012, the top three customers for the Contract Research segment were various agencies of the U.S. Government. For the three months ended June 30, 2013 and 2012, these customers made up 58% and 56%, respectively, of Contract Research revenue. For the nine months ended June 30, 2013 and 2012, these customers made up 59% and 70%, respectively, of Contract Research revenue.

For the three and nine months ended June 30, 2013 and 2012, there was no customer in the Optics segment whose revenue represented more than 10% of the total segment revenue for the three or the nine months ended June 30, 2013 and 2012.

For the three months ended June 30, 2013 and 2012, the top three customers for the Instruments segment made up 28% and 32%, respectively, of Instruments revenue. For the nine months ended June 30, 2013 and 2012, the top three customers for the Instruments segment made up 28% and 29%, respectively, of Instruments revenue. As of June 30, 2013, an international distributer represented 38% of the Instruments segments’ accounts receivable.

For the three and nine months ended June 30, 2013, the Biomedical segment had one customer whose revenue represented 100% of the total segment revenue. For the three and nine months ended June 30, 2012, the Biomedical segment had one customer whose revenue represented 100% of the total segment revenue.

Geographic Financial Information

Revenue by geographic location in total and as a percentage of total revenue, for the three months ended June 30, 2013 and 2012 are as follows:

	Three Months Ended					Three Months Ended
	June 30, 2013					June 30, 2012
Geographic Location	Revenue		% of Total			Revenue		% of Total
United States	$	9,426,542		83	%	$	10,130,936		84	%
Europe		975,941		9	%		981,147		8	%
Other		919,859		8	%		969,954		8	%
	$	11,322,342		100	%	$	12,082,037		100	%

Revenue by geographic location in total and as a percentage of total revenue, for the nine months ended June 30, 2013 and 2012 are as follows:

	Nine Months Ended					Nine Months Ended
	June 30, 2013					June 30, 2012
Geographic Location	Revenue		% of Total			Revenue		% of Total
United States	$	26,493,062		82	%	$	30,446,812		83	%
Europe		2,711,944		8	%		3,210,520		9	%
Other		3,155,141		10	%		2,856,010		8	%
	$	32,360,147		100	%	$	36,513,342		100	%

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Intangible Assets

9 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

Note 6 – Intangible Assets

Intangible assets at June 30, 2013 and September 30, 2012 consist of the following:

	Useful	Gross		Accumulated
June 30, 2013	Life (years)	Amount		Amortization		Net
Acquired Customer Base	5-15	$	5,275,668	$	2,658,925	$	2,616,743
Know How	15		512,000		170,749		341,251
Trade Names	15 - Indefinite		527,389		74,203		453,186
Biomedical Technologies	5		300,000		105,003		194,997
		$	6,615,057	$	3,008,880	$	3,606,177

	Useful	Gross		Accumulated
September 30, 2012	Life (years)	Amount		Amortization		Net
Acquired Customer Base	5-15	$	7,858,775	$	2,257,533	$	5,601,242
Know How	15		512,000		145,147		366,853
Trade Names	15 - Indefinite		558,435		63,222		495,213
Biomedical Technologies	5		300,000		60,003		239,997
		$	9,229,210	$	2,525,905	$	6,703,305

Amortization expense for the three months ended June 30, 2013 and 2012 was $170,304 and $162,802 respectively. Amortization expense for the nine months ended June 30, 2013 and 2012 was $495,079 and $488,407, respectively. Estimated amortization expense for each of the next five fiscal years is as follows: 

	2013 (3 Months)		2014		2015		2016		2017		Thereafter		Total
Acquired Customer Base	$	128,867	$	543,085	$	543,085	$	543,085	$	543,085	$	315,504	$	2,616,711
Know How		8,533		34,133		34,133		34,133		34,133		196,187		341,252
Trade Names		3,650		14,600		14,600		14,600		14,600		72,995		135,045
Biomedical Technologies		15,000		60,000		60,000		59,997		0		0		194,997
	$	156,050	$	651,818	$	651,818	$	651,815	$	591,818	$	584,686	$	3,288,005

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Basis of Presentation and Ability to Continue as a Going Concern

9 Months Ended

Jun. 30, 2013

Disclosure Text Block [Abstract]

Nature of Operations [Text Block]

Note 1 - Basis of Presentation and Ability to Continue as a Going Concern

The accompanying consolidated balance sheet as of June 30, 2013, the consolidated statements of operations and comprehensive loss for the three and nine months ended June 30, 2013 and 2012, changes in stockholders’ equity for the nine months ended June 30, 2013 and cash flows for the nine months ended June 30, 2013 and 2012 of Dynasil Corporation of America and subsidiaries (the “Company”), 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. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's September 30, 2012 Annual Report on Form 10-K previously filed by the Company with the Securities and Exchange Commission, as amended on February 14, 2013.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. However, the Company has failed to comply with the financial covenants set forth in the terms of its outstanding loan agreements and sustained a substantial loss from operations for the year ended September 30, 2012. The Company has continued to sustain losses from operations for the nine months ended June 30, 2013. These factors raise substantial doubt over the Company’s ability to continue as a going concern.

The Company continues to be in default of the financial covenants set forth in the terms of its loan agreements for its fiscal third quarter ended June 30, 2013. These covenants require the Company to maintain specified ratios of earnings before interest, taxes, depreciation and amortization (EBITDA) to fixed charges and to total debt and senior debt. A default gives the lenders the right to accelerate the maturity of the outstanding indebtedness. Furthermore, Sovereign Bank, N.A, the Company’s senior lender, may, at its option, impose a default interest rate with respect to the senior debt outstanding, which is 5% higher than the rate otherwise in effect. To date, the lender has not taken any such action. However, the Company cannot predict when or whether a resolution of this situation will be achieved or if the higher interest rate will be imposed.

The Company has accrued but not remitted interest payments to its subordinated lender since February 2013. The Company is current with all principal and interest payments due to its senior lender through August 12, 2013, the date of this filing. Management provided a revised forecast to its lenders in February 2013 and is currently evaluating potential transactions involving the sales of divisions and/or product lines which, if consummated, would result in additional debt principal payments to the bank. Because of the continuing default of the financial covenants and the possibility of an acceleration of the indebtedness by the lenders, the Company has classified all of its outstanding indebtedness as a current liability in the accompanying consolidated balance sheets.

The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and positive cash flows and/or to obtain the necessary financing from shareholders or other sources (including sales of divisions and/or product lines) to meet its outstanding obligations and repay its liabilities arising from normal business operations when they become due.

In view of the matters described in the preceding paragraphs, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon the continued operations of the Company. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. 

 

The Company has taken and will continue to take actions to improve its liquidity, including the implementation of a number of initiatives designed to conserve cash, optimize profitability and right-size the cost structure of its various businesses. The Company has retained financial advisors to assist in evaluating strategic and restructuring alternatives, including the potential sale of product lines and/or a Company division. While the Company is actively considering such strategic alternatives, there can be no assurances that any such transaction will occur, or, if a transaction is completed, it will be on terms favorable to the Company. The Company does not currently have cash available to satisfy its obligations under its indebtedness if it were to be accelerated or payment demanded. If the Company is not able to resolve its current defaults under its outstanding indebtedness and improve its liquidity through the actions described above, it may not have sufficient liquidity to meet its anticipated cash needs for the next twelve months.

We consider events or transactions that have occurred after the unaudited consolidated balance sheet date of June 30, 2013, 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.

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Capital Leases (Details Textual) (USD $)	Jun. 30, 2013	Jun. 30, 2012
Capital Leases [Line Items]
Capital Lease Obligations	$ 383,156	$ 0

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Subsequent Events

9 Months Ended

Jun. 30, 2013

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 13 – Subsequent Events

The Company has evaluated subsequent events through the date that the financial statements were released.

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Stock Based Compensation

9 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 9 - Stock Based Compensation

The fair value of the stock options granted is estimated at the date of grant using the Black-Scholes option pricing model.

A summary of stock option activity as of June 30, 2013 and changes during the nine months ended June 30, 2013 is presented below:

	Options Outstanding		Weighted Average Exercise Price per Share ($)		Weighted Average Remain Contractual Term (in Years)
Balance at September 30, 2012		794,483		3.34		1.75
Outstanding and exercisable at September 30, 2012		794,483		3.34		1.75
Granted		-0-		-0-
Exercised		-0-		-0-
Cancelled		(163,951)		3.39
Balance at June 30, 2013		630,532		3.33		1.31
Outstanding and exercisable at June 30, 2013		630,532		3.33		1.31

A summary of restricted stock activity for the nine months ended June 30, 2013 and 2012 is presented below:

Restricted Stock Activity for the Nine Months ended June 30, 2013	Shares		Weighted-Average Grant-Date Fair Value
Nonvested at September 30, 2012		127,834	$	1.92
Granted		404,000		0.67
Vested		(72,166)		1.44
Cancelled		(20,000)		4.02
Nonvested at June 30, 2013		439,668	$	0.76

Restricted Stock Activity for the Nine Months ended June 30, 2012	Shares		Weighted-Average Grant-Date Fair Value
Nonvested at September 30, 2011		403,000	$	4.02
Granted		-0-		-0-
Vested		(44,666)		4.00
Cancelled		-0-		-0-
Nonvested at June 30, 2012		358,334	$	4.02

Stock compensation expense for the three and nine months ended June 30, 2013 and 2012 is as follows:

	Three Months Ended		Three Months Ended
Stock Compensation Expense	June 30, 2013		June 30, 2012
Stock Grants	$	48,125	$	43,000
Restricted Stock Grants		41,576		159,552
Option Grants		-0-		37,206
Employee Stock Purchase Plan		843		3,300
Total	$	90,544	$	243,058

	Nine Months Ended		Nine Months Ended
Stock Compensation Expense	June 30, 2013		June 30, 2012
Stock Grants	$	180,647	$	152,041
Restricted Stock Grants		107,270		465,303
Option Grants		9,813		168,675
Employee Stock Purchase Plan		2,912		35,568
Total	$	300,642	$	821,587

At June 30, 2013 there was approximately $312,000 in unrecognized stock compensation cost, which is expected to be recognized over a weighted average period of 6.8 months.

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Capital Leases (Tables)

9 Months Ended

Jun. 30, 2013

Leases, Capital [Abstract]

Schedule of Future Minimum Lease Payments for Capital Leases [Table Text Block]

Aggregate minimum annual principal obligations at March 31, 2013, under non-cancelable leases are as follows:

	2013 (3 Months)		2014		2015		2016		2017		Thereafter		Total
Capital Lease Obligations	$	29,827	$	124,588	$	133,543	$	59,722	$	23,920	$	11,556	$	383,156

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Inventories (Tables)

9 Months Ended

Jun. 30, 2013

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

Inventories, net of reserves, consist of the following:

	June 30,		September 30,
	2013		2012
Raw Materials	$	2,010,394	$	2,096,681
Work-in-Process		788,234		885,328
Finished Goods		546,116		289,691
	$	3,344,744	$	3,271,700

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Document And Entity Information	9 Months Ended
	Jun. 30, 2013	Aug. 06, 2013
Document Information [Line Items]
Entity Registrant Name	DYNASIL CORP OF AMERICA
Entity Central Index Key	0000030831
Current Fiscal Year End Date	--09-30
Entity Filer Category	Smaller Reporting Company
Trading Symbol	DYSL
Entity Common Stock, Shares Outstanding		15,413,116
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2013

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Intangible Assets (Tables)

9 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

Intangible assets at June 30, 2013 and September 30, 2012 consist of the following:

	Useful	Gross		Accumulated
June 30, 2013	Life (years)	Amount		Amortization		Net
Acquired Customer Base	5-15	$	5,275,668	$	2,658,925	$	2,616,743
Know How	15		512,000		170,749		341,251
Trade Names	15 - Indefinite		527,389		74,203		453,186
Biomedical Technologies	5		300,000		105,003		194,997
		$	6,615,057	$	3,008,880	$	3,606,177

	Useful	Gross		Accumulated
September 30, 2012	Life (years)	Amount		Amortization		Net
Acquired Customer Base	5-15	$	7,858,775	$	2,257,533	$	5,601,242
Know How	15		512,000		145,147		366,853
Trade Names	15 - Indefinite		558,435		63,222		495,213
Biomedical Technologies	5		300,000		60,003		239,997
		$	9,229,210	$	2,525,905	$	6,703,305

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Amortization expense for the three months ended June 30, 2013 and 2012 was $170,304 and $162,802 respectively. Amortization expense for the nine months ended June 30, 2013 and 2012 was $495,079 and $488,407, respectively. Estimated amortization expense for each of the next five fiscal years is as follows: 

	2013 (3 Months)		2014		2015		2016		2017		Thereafter		Total
Acquired Customer Base	$	128,867	$	543,085	$	543,085	$	543,085	$	543,085	$	315,504	$	2,616,711
Know How		8,533		34,133		34,133		34,133		34,133		196,187		341,252
Trade Names		3,650		14,600		14,600		14,600		14,600		72,995		135,045
Biomedical Technologies		15,000		60,000		60,000		59,997		0		0		194,997
	$	156,050	$	651,818	$	651,818	$	651,815	$	591,818	$	584,686	$	3,288,005