10-K

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended September 30, 2015.

¨ TRANSITION REPORT PURSUANT TO 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.)
313 Washington Street, Suite 403, Newton, MA	02458
(Address of principal executive offices)	(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:  

Title of each class	Name of each exchange on which registered
Common Stock, $0.0005 par value	The NASDAQ Stock Market LLC
	(NASDAQ Capital Market)

Securities registered pursuant to Section 12(g) of the Act: none

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨   No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨   No x

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 preceding 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 shorter period that the registrant was required to submit and post such files). Yes x   No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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 Act.)

Yes ¨ No x

As of March 31, 2015, the aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $13,065,449.

As of December 7, 2015 there were 16,625,794 shares of common stock, par value $0.0005 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for the Annual Meeting of Stockholders scheduled to be held on February 25, 2016 are incorporated by reference into Part III of this report.

PART I

This annual report on Form 10-K contains or incorporates by reference not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by those sections. We refer you to the information under the heading “Forward-Looking Statements."

As used in this annual report on Form 10-K, references to "Dynasil," the "Company," "we," "our" or "us," unless the context otherwise requires, refer to Dynasil Corporation of America and our subsidiaries.

All trademarks or trade names referred to in this report are the property of their respective owners.

ITEM 1. BUSINESS

General

Dynasil Corporation of America was founded as a New Jersey corporation in 1960 and incorporated in the state of Delaware through a migratory merger in March 2008. Our corporate headquarters are located at 313 Washington Street, Suite 403, Newton, MA 02458, and our corporate website is www.dynasil.com. You can access, free of charge, our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, our quarterly reports on Form 10-Q, current reports on Form 8-K and any other amendments to those reports, through a link at our website, or at the Commission’s website at www.sec.gov.

We have three reporting segments based on our main operating activities, as well as a fourth segment substantially all of the assets of which were sold in the first quarter of 2014. Below is a summary of these segments:

· Contract Research: The Contract Research segment consists of the Radiation Monitoring Devices, Inc. (“RMD”) business unit, which is among the largest small business participants in U.S. government-funded research.

· Optics: The Optics segment encompasses four business units – Dynasil Fused Silica, Optometrics, Hilger Crystals, and Evaporated Metal Films – that manufacture commercial products, including optical crystals for sensing in the security and medical imaging markets, as well as optical components, optical coatings and optical materials for scientific instrumentation and other applications.

· Biomedical: The Biomedical segment consists of a single business unit, Dynasil Biomedical Corporation (“Dynasil Biomedical”), a medical technology incubator which owns rights to certain early stage medical technologies. In October 2013, Dynasil Biomedical formed Xcede Technologies, Inc. (“Xcede”), a joint venture with Mayo Clinic to spin out and separately fund the development of a tissue sealant technology. At September 30, 2015, Dynasil Biomedical owned 90% of the common stock of Xcede (approximately 69%, assuming conversion of the $2.0 million of the outstanding convertible notes), and therefore Xcede is included in our consolidated financial statements. Dynasil Biomedical currently has no operations other than relating to its equity ownership in Xcede.

· Instruments: The Instruments segment consists of Dynasil Products (formerly known as RMD Instruments), which manufactured precision instrumentation for medical and commercial applications until the sale in fiscal 2014 of our lead paint detector and gamma medical probe businesses, which together comprised substantially all the operations within our Instruments segment.

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For information about our segments and geographical information about our operating revenues and assets, see Note 17 to the Consolidated Financial Statements included in this Report.

Our business strategy is based on continued development and expansion of our funded research portfolio, investment in the commercialization of the technologies originating from our Contract Research segment, organic growth of existing Optics segment products, continuing development of the Xcede medical technologies using outside funding and acquisitions that align with our core competencies.

Historical Growth by Acquisition

Through a series of acquisitions beginning in March 2005, Dynasil has evolved from a single product line optics company to one focused on multiple optical product lines and a significant contract research business focused on advanced materials used in radiation detection and other advanced instrumentation. Our revenue has increased from $2 million in FY 2004 to $40 million in FY 2015.

The acquisitions we completed during this period included:

· Optometrics: In March 2005, we acquired Optometrics LLC (“Optometrics”), a worldwide supplier of optical components and instruments, including diffraction gratings, interference filters, monochromators, laser optics and specialized optical systems.

· Evaporated Metal Films: In October 2006, we acquired Evaporated Metal Films Corporation (“EMF”), an optical thin-film coatings company with a broad range of application markets, including solar energy, display systems, dental photography, optical instruments, satellite communications and lighting.

· RMD: In July 2008, we acquired Radiation Monitoring Devices, Inc. (“RMD”), a contract research company, and RMD Instruments, LLC (“Dynasil Products”), a precision instruments company that manufactured and sold instruments in the medical imaging and industrial markets, including hand-held analyzers for lead paint and gamma medical probes for cancer surgery. The lead paint detector and gamma medical probe businesses were sold in fiscal 2014.

· Hilger Crystals: In July 2010, we acquired Hilger Crystals, Ltd., (“Hilger”) a manufacturer of synthetic crystals applicable to a wide range of industrial, medical, and homeland security applications with a long history of supplying high-quality synthetic crystals for infrared spectroscopy, X-ray and gamma ray detection.

· Biomedical technologies: In April 2011, we acquired the rights to six early stage biomedical technologies from Dr. Daniel Ericson, a former hematologist at the Mayo Clinic, which jointly owns rights to certain of the technologies acquired. The activity of our Biomedical segment is currently focused on the development of the tissue sealant technology that was part of this transaction.

· DichroTec Thin Films: In June 2014, our EMF subsidiary acquired the assets of DichroTec Thin Films LLC, another optical thin-film coatings company with a broad range of applications, many of which are similar to EMF’s applications.

Contract Research – the Science Behind our Technology

Our Contract Research segment’s business unit, RMD, is among the largest small business participants in U.S. government-funded research, performing research and development activities for government agencies including Department of Energy, Department of Defense, Department of Homeland Security, Domestic Nuclear Detection Office, National Institutes of Health and NASA.

RMD develops advanced technology in materials, sensors and prototype instruments that detect or measure radiation, light, magnetism or sound for use in security, medical and industrial applications. RMD has research expertise in material science, radiation detection, digital imaging technology, magnetic imaging, laser optics and photonics. As of September 30, 2015, our Contract Research segment had a total of 86 employees, including 32 Ph.D. level scientists. RMD serves as an incubator to expand our patent portfolio enabling the opportunity to advance our technology from development to commercialization using government-funded research.As of September 30, 2015, RMD had a portfolio of 61 issued U.S. patents and 53 pending patent applications, compared with 56 issued patents and 48 pending patent applications at the same point in 2014.

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For more than 25 years, RMD has successfully conducted government research under the auspices of the Small Business Innovation Research (“SBIR”) program. In recent years, RMD has augmented its SBIR research with larger, competitively bid government research and development contracts. To grow our research portfolio within the federal government, we are broadening our relationships within key federal funding agencies and the U.S. military. RMD also provides research for non-governmental entities in areas where it has the appropriate expertise. Such research is currently not a significant portion of RMD’s revenues. Our research initiatives are aligned with our focus on the homeland security, medical and industrial markets. As of September 30, 2015, RMD had a contract backlog of approximately $33 million, of which approximately 45% is SBIR contracts.

RMD competes for contract research work against a variety of small and large entities, including universities that submit research proposals based on specific government solicitations. We generate revenues under various types of contracts, which include Cost Reimbursement, Time & Materials (T&M), Fixed Price-Level of Effort and Firm Fixed Price (FFP) contracts. We believe that RMD’s reputation for conducting state-of-the art research and development, as well as the quality of its proposals, are significant competitive advantages. In addition, RMD maintains strong working relationships with universities, government agencies, national laboratories, research hospitals and corporations. However, some of our competitors may have greater financial, technical and human resources than we have and may be better able to operate large, well-funded research and development programs.

We believe that research projects can provide an important source for new commercial products in areas such as medical imaging, industrial sensors, critical care and point of care diagnostics and homeland security. For example, Dynasil Products’ lead paint analyzer and gamma medical probes businesses, which were sold in fiscal year 2014, emanated from the RMD portfolio. Most recently, our government-funded research work supported the development of our CLYC dual-mode radiation detection technology which we are currently selling commercially.

Our Optical Technology

We specialize in the production of optical materials, components and coatings for various applications in the medical, industrial, and homeland security/defense sectors.

Our Optics segment supplies synthetic crystals, optical materials, components, and coatings that are used in devices such as baggage scanners, medical imaging systems, optical instruments, lasers, analytical instruments, automotive components, semiconductor/electronic devices, spacecraft/aircraft components and advertising displays. These products are offered through four business units (Dynasil Fused Silica, Optometrics, Hilger and EMF).

We compete for business with fabricators of industrial optical materials, other optical components manufacturers, other optical crystal manufacturers and other optical coaters as well as other analytical instruments manufacturers and synthetic crystal manufacturers. We believe our proprietary processes, reputation, specialty product offering, products in development and the price at which we offer our products enable us to successfully compete in these markets. However, many of our competitors have greater financial, sales and marketing resources than we do, which may enable them to develop and market products that would compete against those developed by us.

Our products are distributed through a direct sales and marketing staff of 11 people and through other channels, including manufacturer’s representatives and distributors in various foreign countries for international sales and U.S. manufacturers’ representatives for certain product lines. Marketing efforts include direct customer contact through sales visits, advertising in trade publications and attendance at trade shows.

Biomedical: Xcede and Our Development of a Tissue Sealant Technology

Xcede's first product candidate currently under development is a resorbable hemostatic patch to be used when conventional techniques are inadequate or impractical during general or cardiovascular surgery. As described above, in 2011, Dynasil Biomedical acquired rights to the underlying tissue sealant technology as part of a transaction with Dr. Daniel Ericson, a former hematologist at the Mayo Clinic. Since that time, Dynasil Biomedical has invested significant capital developing this tissue sealant technology, including costs to further the related intellectual property rights and to conduct animal studies.

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In October 2013, Dynasil Biomedical formed a new subsidiary, Xcede, and transferred its rights in the tissue sealant technology to it. Xcede was formed as a means of focusing our development efforts on this tissue sealant technology and facilitating the third-party funding of the development costs.

Xcede issued $1.4 million in aggregate principal amount of 5% convertible notes pursuant to a note purchase agreement dated October 2013 that provided for the issuance of up to $2 million in aggregate principal amount of such notes. The notes are convertible into equity of Xcede at a 20% discount to the first equity financing of Xcede of at least $3.0 million, inclusive of the notes and interest.

In May 2015, the note purchase agreement was amended to provide for the issuance of an additional $1 million in aggregate principal amount of such notes (of which $0.6 million was issued in fiscal year 2015) and extend the notes’ maturity date. As amended, the notes are payable after June 30, 2016 upon the demand of the holders of a majority of the aggregate outstanding amount of the notes. Xcede is using the net proceeds from the issuances of the notes to finance its pre-clinical research activities.

Xcede is currently seeking additional financing to complete pre-clinical testing and initiate clinical trials outside of the U.S. for its first tissue sealant product.

Through Dynasil Biomedical, we currently own approximately 90% of the outstanding equity in Xcede (approximately 69% assuming conversion of the outstanding notes described above). Xcede’s convertible note investors include Mayo Clinic Ventures, Southern Initiative Minnesota Foundation, Rochester Area Economic Development Inc., angel investors and certain members of Dynasil’s executive management team and board of directors.

Strategy to Commercialize our Technologies

Our business strategy focuses on combining our expertise in funded research, product development and technology innovation to commercialize detection and analysis equipment for the homeland security, industrial and medical markets. We are executing on this strategy by:

· developing and expanding our research portfolio;

· seeking to commercialize the technologies coming from our Contract Research segment;

· growing organically through investment in existing businesses; and

· identifying and investing in those technologies with the greatest revenue and growth potential in the market.

For example, our CLYC dual mode nuclear detection crystal technology was developed by RMD under a program for the Department of Homeland Security for use in locating nuclear bombs or nuclear materials at our nation’s ports and borders. This technology has the potential to be very important to our national security, as well as other radiation detection applications, such as nuclear power plant safety. Our dual mode detection crystals are being commercialized in cooperation with our Optics segment while RMD continues to further enhance this technology.

Our CLYC dual mode detection crystals technology is designed to be a single detector that replaces two detector subsystems – the gamma radiation detector and also the helium-3 detectors for neutrons. Increasing our value proposition is the fact that the stockpile of the chemical element helium-3, a byproduct of nuclear weapons production, is in short supply. The stockpile of helium-3 has been drawn down during the past 10 years, as the federal government has increased its use in neutron detectors to help prevent nuclear and radiological material from being smuggled into the U.S.

Intellectual Property (IP)

From October 2014 through September 2015, we have been granted six new U.S. patents and have filed 22 new patent applications. Our current portfolio, company-wide, is 63 issued and 66 pending applications, the largest percentage of which are issued to RMD. We believe that intellectual property represents an important strategic advantage for us.

Customers

We have more than 600 customers, with approximately 52% of our business concentrated in our top 10 customers. Our four largest customers are agencies and agents of the Federal government and accounted for approximately 11%, 9%, 7% and 5%, respectively, of our revenues during fiscal year 2015. Our fifth largest customer is a customer of our Optics segment and also accounted for 5% of our overall revenue during fiscal year 2015. The loss of any of these top five customers would likely have a material adverse effect on our business, financial condition and results of operations. Generally, our customers provide purchase orders for a specific part and quantity or they provide a contract for research projects. Product orders are normally filled over a period ranging from one to six weeks. We also have blanket orders that call for monthly deliveries of predetermined amounts. Contract research projects generally run for a one to two year period.

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Employees

As of September 30, 2015, we had a total of 230 employees, 215 of which are full-time. Of the total, 40 of our employees are engaged in administration, 11 are engaged in sales, 95 are engaged in research and/or engineering and 84 are engaged in manufacturing. The Company has a total of 34 Ph.D. level employees. Our operations are non-union except for a two-person union in one location.

Suppliers

Our largest supplier for materials and components is a supplier of the fused silica material that is fabricated and sold by our New Jersey facility. We believe that we have excellent relationships with our suppliers. If any of our suppliers should become unavailable to us for any reason, we believe that there are a number of potential replacements, although we might incur some delay in identifying such replacements.

Research and Development

Our RMD business unit primarily provides research and development (“R&D”) activities under government funded research contracts. The RMD business unit recognized revenues of $18.8 million and $21.9 million in fiscal years 2015 and 2014, respectively. The direct costs associated with these revenues were $10.6 million and $12.6 million in 2015 and 2014, respectively. Substantially all the Contract Research segment’s cost of revenue relates to research performed by RMD which are in turn billed to the contracting party.

R&D for our other businesses, which totaled $0.1 million in both 2015 and 2014, primarily involves new product development, changes to our manufacturing processes and the introduction of improved methods and equipment.

Government Regulation

The businesses that we operate are subject to various federal and states regulations.

Our Contract Research segment is subject to the rules and regulations applicable to government contracting, including: the Federal Acquisition Regulation (FAR) and supplements, which regulate the formation, administration and performance of U.S. Government contracts; the Truth in Negotiations Act, which requires certification and disclosure of cost and pricing data in connection with certain contract negotiations; the Procurement Integrity Act, which regulates access to competitor bids and proposal information and government source selection information, and our ability to provide compensation to certain former government officials; the Civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false or fraudulent claim to the U.S. Government for payment or approval; and the U.S. Government Cost Accounting Standards, which impose accounting requirements that govern our right to reimbursement under certain cost-based U.S. Government contracts.

The tissue sealant being developed by Xcede, our joint venture with Mayo Clinic, is subject to FDA regulations and approval in the United States and requires CE marking and other regulatory agency approval in other countries around the world.

Our use of radioactive materials in research and certain of our products (our dual-mode detector) subject us to laws regulating hazardous wastes under United States federal and certain state, environmental and atomic energy regulatory laws and similar laws in each jurisdiction in which our research and manufacturing facilities are located. Environmental compliance costs, which totaled $25,000 for fiscal year 2015, have not historically had a material effect on our operating results.

With respect to our intellectual property rights, we rely, and are subject to, the laws in the U.S. and abroad governing intellectual property protection.

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Item 1A. RISK FACTORS

In your evaluation of our company and our businesses, you should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this Annual Report on Form 10-K and the other documents we file with the SEC. The following factors describe the risks and uncertainties that we consider significant to the operation of our business, but should not be considered a complete listing of all potential risks and uncertainties that could adversely affect our operating results, financial position or liquidity. Additionally, our business is subject to the same general risks and uncertainties that affect many other companies, such as the overall U.S. and global economic conditions, international conflicts, geopolitical events, changes in laws or accounting rules, fluctuations in interest and exchange rates or other disruptions of expected economic and business conditions.

Risks Related To Our Business

The Company relies on its Contract Research segment for approximately half of its revenues. A decline in or temporary suspension of U.S. Government spending, changes in federal budgetary priorities, the timing of contract awards or a restructuring of the SBIR/STTR programs may adversely affect our future revenues and limit our growth prospects.

Our Contract Research business unit, RMD, is among the largest small business participants in U.S. government-funded research, performing research and development activities for government agencies including Department of Energy, Department of Defense, Department of Homeland Security, Domestic Nuclear Detection Office, National Institutes of Health, and NASA. Historically RMD has conducted its government research contracts through the SBIR (Small Business Innovation Research Program) and the STTR (Small Business Technology Transfer Program). Though RMD has augmented its SBIR contracts with larger competitively bid government contracts in recent years, a reduction in or elimination of the SBIR or the STTR programs could result in our inability to win contracts, as we may not have the resources to compete effectively against much larger, better-funded companies. Further, a significant decline in overall U.S. Government spending, including in the areas of national security, intelligence and homeland security, a significant shift in its spending priorities, the substantial reduction or elimination of particular defense-related programs or significant delays in contract or task order awards for large programs could adversely affect our future revenues and limit our growth prospects. While the October 2013 government shutdown did not have a significant impact on the Company, a future government shutdown could result in the suspension of work on contracts in progress or in payment delays which would adversely affect our future revenues and cash flow.

The Company relies on a small number of key customers for a substantial portion of its revenues.

Ten customers accounted for approximately 52% of the Company’s revenues in 2015 and the largest four customers, all agencies of the U.S. Government, accounted for 32% of revenues. Although we have had business relationships with these customers for many years, there can be no guarantee that we will be able to win contracts with these agencies in the future. Accordingly our performance could be adversely affected by the loss of one or more of these key customers.

The U.S. Government may terminate, cancel, modify or curtail our contracts at any time prior to their completion and, if we do not replace them, we may be unable to achieve our expected future revenues and may suffer a decline in revenues.

As of September 30, 2015, our total backlog for Contract Research was approximately $33 million. Backlog consists of the portion of existing contracts yet to be performed and awards of projects by agencies in favor of RMD. Many of the U.S. Government programs in which we participate as a contractor or subcontractor may extend for several years and include one or more base years and one or more option years. These programs are normally funded on an annual basis. Under our contracts, the U.S. Government generally has the right not to exercise options to extend or expand our contracts and may otherwise terminate, cancel, modify or curtail our contracts at its convenience. Any decisions by the U.S. Government not to exercise contract options or to terminate, cancel, modify or curtail our major programs or contracts would adversely affect our revenues, revenue growth and profitability.

The U.S. Government also has the right to terminate a contract for default, in which case, we may be exposed to liability, including for excess costs incurred by the customer in procuring undelivered services and products from another source. Depending on the nature and value of the contract, a performance issue or termination for default could cause our actual results to differ from those anticipated and could harm our reputation.

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Our earnings and profitability may be adversely affected by our failure to accurately estimate and manage costs, time and resources.

We generate revenues under various types of contracts, which include cost reimbursement, Time & Materials (T&M), Fixed Price-Level of Effort and Firm Fixed Price contracts (FFP). Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract, the nature of services or products provided, as well as the achievement of performance objectives and the stage of performance at which the right to receive fees, particularly under incentive and award fee contracts, is finally determined. Cost reimbursement and T&M contracts generally have lower profitability than FFP contracts. Our operating results in any period may also be affected, positively or negatively, by variable purchasing patterns by our customers of our more profitable proprietary products. Our failure to accurately estimate costs or the resources and technology needed to perform our contracts or to effectively manage and control our costs during the performance of our work could result, and in some instances has resulted, in reduced profits or in losses. More generally, any increased or unexpected costs or unanticipated delays in connection with the performance of our contracts, including costs and delays caused by contractual disputes or other factors outside of our control, such as performance failures of our subcontractors, natural disasters or other force majeure events, could make our contracts less profitable than expected or unprofitable.

Goodwill and other intangible assets represent approximately 30% of our total assets and any impairment of these assets could negatively impact our results of operations.

Non-amortizing intangible assets, including goodwill, are tested for impairment annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Examples of events or changes in circumstances indicating that the carrying value of such intangible assets may not be recoverable could include a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, loss of key personnel, or a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed of.

Any future impairment of goodwill or other intangible assets would have a negative impact on our profitability and financial results.

Our Contract Research business faces aggressive competition that can impact our ability to obtain contracts and therefore affect our future revenues and growth prospects.

RMD’s competitors include other small high technology companies performing SBIR R&D, large firms such as Raytheon which performs related R&D, universities and national laboratories.

The markets in which we operate are characterized by rapid technology development and the needs of our customers change and evolve regularly. Accordingly, our success depends on our ability to develop services and products that address these changing needs and to provide people and technology needed to deliver these services and products. To remain competitive, we must consistently provide superior service, technology and performance on a cost-effective basis to our customers. Our competitors may be able to provide our customers with different or greater capabilities or technologies or better contract terms than we can provide, including technical qualifications, past contract experience, geographic presence, price and the availability of qualified professional personnel. In addition, our competitors may consolidate or establish teaming or other relationships among themselves or with third parties to increase their ability to address customers’ needs. Accordingly, larger or new competitors or alliances among competitors may emerge which may adversely affect our ability to compete.

Our business is subject to reviews, audits and cost adjustments by the U.S. Government, which, if resolved unfavorably to us, could adversely affect our profitability, cash position or growth prospects.

U.S. Government agencies, including the DCAA (Defense Contract Audit Agency), DCMA (Defense Contract Management Agency) and others, routinely audit and review a contractor’s performance on government contracts, indirect rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards. They also review the adequacy of the contractor’s compliance with government standards for its accounting and management internal control systems, including: control environment and overall accounting system, estimating system, purchasing system, property system and earned value management system. Both contractors and the U.S. Government agencies conducting these audits and reviews have come under increased scrutiny.

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A finding of significant control deficiencies in our system audits or other reviews could result in decremented billing rates to our U.S. Government customers until the control deficiencies are corrected and our corrections are accepted by the auditing agency. Government audits and reviews may conclude that our practices are not consistent with applicable laws and regulations and result in adjustments to contract costs and mandatory customer refunds. Such adjustments can be applied retroactively, which could result in significant customer refunds. Our receipt of adverse audit findings or the failure to obtain an “approved” determination of our various accounting and management internal control systems, including our changes to indirect cost and direct labor estimating systems, from the responsible U.S. Government agency could significantly and adversely affect our business, including our ability to bid on new contracts and our competitive position in the bidding process. A determination of non-compliance with applicable contracting and procurement laws, regulations and standards could also result in the U.S. Government imposing penalties and sanctions against us, including withholding of payments, suspension of payments and increased government scrutiny that could delay or adversely affect our ability to invoice and receive timely payment on contracts, perform contracts or compete for contracts with the U.S. Government. We may suffer harm to our reputation if allegations of impropriety are made against us, which would impair our ability to win new contract awards or receive contract renewals.

Our indirect cost audits by the DCAA have been completed for fiscal 2011 while fiscal years 2012 through 2015 remain open pending DCAA audit. Although we have recorded contract revenues subsequent to fiscal 2011 based upon our estimate of costs that we believe will be approved upon final audit or review, we do not know the outcome of any ongoing or future audits or reviews and adjustments and, if future adjustments exceed our estimates, our profitability would be adversely affected.

Our failure to comply with a variety of complex procurement rules and regulations could result in our being liable for penalties, including termination of our U.S. Government contracts, disqualification from bidding on future U.S. Government contracts and suspension or debarment from U.S. Government contracting.

We must comply with laws and regulations relating to the formation, administration and performance of U.S. Government contracts, which affect how we do business with our customers and may impose added costs on our business. Some significant statutes and regulations that affect us include:

· the Federal Acquisition Regulation (FAR) and supplements, which regulate the formation, administration and performance of U.S. Government contracts;

· the Truth in Negotiations Act, which requires certification and disclosure of cost and pricing data in connection with certain contract negotiations;

· the Procurement Integrity Act, which regulates access to competitor bid and proposal information and government source selection information, and our ability to provide compensation to certain former government officials;

· the Civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false or fraudulent claim to the U.S. Government for payment or approval; and

· the U.S. Government Cost Accounting Standards, which impose accounting requirements that govern our right to reimbursement under certain cost-based U.S. Government contracts.

Our failure to comply with any of these rules or regulations could result in loss of business or penalties that could have a material adverse effect on our financial condition or results of operations.

Our loan agreements impose restrictions on our ability to take certain corporate actions and raise additional capital, and include a material adverse change (“MAC”) clause.

Our loan agreements contain numerous customary restrictions that limit our ability to undertake certain activities without the express prior written approval of our lenders. These include, but are not limited to, restricting our ability to:

· incur additional indebtedness;

· pay or declare dividends;

· enter into a business substantially different from existing operations;

· issue or authorize any additional or new equity that will result in a change of control; and

· take any corporate action outside the ordinary course of the business, including without limitation, the sale of material assets or other strategic divestitures, without the prior written approval of our lender.

These restrictions could significantly hamper our ability to raise additional capital. Our ability to receive the necessary approvals is largely dependent upon our relationship with our lenders and our financial performance, and no assurances can be given that we will be able to obtain the necessary approvals in the future. Our inability to raise additional capital could lead to working capital deficits that could have a material adverse effect on our operations in future periods.

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One of our loan agreements also includes a MAC clause which permits the bank to call the loan if any event, fact, circumstance, change in, or effect on the Company could reasonably be expected to be materially adverse to the business.

We may not be able to generate sufficient positive cash flow in the future to fund our operations.

In addition to our bank financing, we are dependent upon cash flow from our businesses to fund our operations. It is our expectation that we can continue to increase our cash flows; however, there can be no assurance that we will be able to continue to do so. If we are unable to fund our operations from future cash flows together with our available bank financing, we will need to seek additional debt and/or equity financing, which may not be available on attractive terms, if at all, in which case there could be a material adverse effect on our results of operations and financial condition.

Our Xcede joint venture requires further funding to support the development of its technology.

Xcede has initiated financing efforts and has raised approximately $2.0 million of funding from external investors (including officers and directors of the Company) as of September 30, 2015. We expect Xcede will continue to require periodic investor funding in amounts larger than what has been raised to date in order to pursue clinical trials and further development of its tissue sealant technology. To the extent Xcede is successful in raising additional equity financing from outside sources, our equity interest in Xcede will decrease. There can be no assurance, however, that Xcede will be able to obtain future financing as needed or on terms which are attractive, in which case it might be required to close its operations and liquidate its assets in which case our investment would likely not be recovered.

Our failure to attract, train and retain skilled employees, including our management team, would adversely affect our ability to execute our strategy.

Portions of our business involve the development of tailored solutions for our customers, a process that relies heavily upon the expertise and services of our employees. Our continued success depends on our ability to recruit and retain highly trained and skilled engineering, technical and professional personnel. Competition for skilled personnel is intense and competitors aggressively recruit key employees. Particularly in highly specialized areas, it has become more difficult to retain employees and meet all of our needs for employees in a timely manner, which may affect our growth in the current fiscal year and in future years. Although we intend to continue to devote significant resources to recruit, train and retain qualified employees, we may not be able to attract and retain these employees. Any failure to do so could impair our ability to perform our contractual obligations efficiently and timely meet our customers’ needs and win new business, which could adversely affect our future results.

In addition to attracting and retaining qualified engineering, technical and professional personnel, we believe that our success will also depend on the continued employment of a highly qualified and experienced senior management team and its ability to retain existing business and generate new business. Our senior management team is important to our business because personal reputations and individual business relationships are a critical element of retaining and obtaining customer contracts in our industry, particularly with agencies performing classified operations. Our inability to hire and retain appropriately qualified and experienced senior executives could cause us to lose customers or new business opportunities.

Misconduct of employees, subcontractors, agents and business partners could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts and customers and could have a significant adverse impact on our business and reputation.

Misconduct, should it occur, could include fraud or other improper activities such as falsifying time or other records and violations of laws, including the Anti-Kickback Act. Other examples could include the failure to comply with our policies and procedures or with federal, state or local government procurement regulations, regulations regarding the use and safeguarding of classified or other protected information, legislation regarding the pricing of labor and other costs in government contracts, laws and regulations relating to environmental, health or safety matters, bribery of foreign government officials, import-export control, lobbying or similar activities, and any other applicable laws or regulations. Intentional or unintentional violation of the Export Control Act or ITAR could result in severe fines which could adversely affect our profitability. Any data loss or information security lapses resulting in the compromise of personal information or the improper use or disclosure of sensitive or classified information could result in claims, remediation costs, regulatory sanctions against us, loss of current and future contracts and serious harm to our reputation. Although we have implemented policies, procedures and controls to prevent and detect these activities, these precautions may not prevent all misconduct, and as a result, we could face unknown risks or losses. Our failure to comply with applicable laws or regulations or misconduct by any of our employees, subcontractors, agents or business partners could damage our reputation and subject us to fines and penalties, restitution or other damages, loss of security clearance, loss of current and future customer contracts and suspension or debarment from contracting with federal, state or local government agencies, any of which would adversely affect our business and our future results.

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Quality problems with our processes, goods, and services could harm our reputation for producing high-quality products and erode our competitive advantage, sales and market share.

Quality is extremely important to us and our customers due to the serious and costly consequences of product failure. Our quality certifications are critical to the marketing success of our goods and services. If we fail to meet these standards, our reputation could be damaged, we could lose customers, and our revenue and results of operations could decline. Aside from specific customer standards, our success depends generally on our ability to manufacture to exact tolerances precision-engineered components, subassemblies, and finished devices from multiple materials. If our components fail to meet these standards or fail to adapt to evolving standards, our reputation as a manufacturer of high-quality components will be harmed, our competitive advantage could be damaged, and we could lose customers and market share.

From time to time we may make acquisitions. The failure to successfully integrate future acquisitions could harm our business, financial condition and operating results.

One component of our growth strategy is to selectively pursue strategic acquisitions. These transactions require significant investment of time and resources and may disrupt our business and distract our management from other responsibilities. Even if successful, these transactions could reduce earnings for a number of reasons, including the amortization of intangible assets, impairment charges, acquired operations that are not yet profitable or the payment of additional consideration under earn-out arrangements if an acquisition performs better than expected. Acquisitions, investments and joint ventures pose many other risks that could adversely affect our reputation, operations or financial results, including:

· we may not be able to identify, compete effectively for or complete suitable acquisitions and investments at prices we consider attractive;

· we may not be able to accurately estimate the financial effect of acquisitions and investments on our business and we may not realize anticipated synergies or acquisitions may not result in improved operating performance;

· we may encounter performance problems with acquired technologies, capabilities and products, particularly with respect to those that are still in development when acquired;

· we may have trouble retaining key employees and customers of an acquired business or otherwise integrating such businesses, such as incompatible accounting, information management, or other control systems, which could result in unforeseen difficulties;

· we may assume material liabilities that were not identified as part of our due diligence or for which we are unable to receive a purchase price adjustment or reimbursement through indemnification;

· we may assume legal or regulatory risks, particularly with respect to smaller businesses that have immature business processes and compliance programs;

· acquired entities or joint ventures may not operate profitably, which could adversely affect our operating income or operating margins and we may be unable to recover investments in any such acquisitions;

· acquisitions, investments and joint ventures may require us to spend a significant amount of cash or to issue capital stock, resulting in dilution of ownership; and

· we may not be able to effectively influence the operations of our joint ventures or we may be exposed to certain liabilities if our joint venture partners do not fulfill their obligations.

If our acquisitions fail, perform poorly or their value is otherwise impaired for any reason, including contractions in credit markets and global economic conditions, our business and financial results could be adversely affected.

In addition, we periodically divest businesses, including businesses that are no longer a part of our ongoing strategic plan. These divestitures similarly require significant investment of time and resources, may disrupt our business, distract management from other responsibilities and may result in losses on disposal or continued financial involvement in the divested business, including through indemnification, guarantee or other financial arrangements, for a period of time following the transaction, which would adversely affect our financial results.

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Our financial results may vary significantly from period-to-period.

Our financial results may fluctuate as a result of a number of factors, many of which are outside of our control. For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Our financial results may be negatively affected by any of the risk factors listed in this “Risk Factors” section and other matters described elsewhere in this Annual Report on Form 10-K and the other documents we file with the SEC.

Changes in tax laws or exposure to additional income tax liabilities could have a material impact on our financial condition and results of operations.

We are subject to income taxes as well as non-income based taxes, in both the U.S. and U.K. We are subject to tax audits in various jurisdictions. Tax authorities may disagree with certain positions we have taken and assess additional taxes. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the outcomes of these audits, and the actual outcomes of these audits could have a material impact on our consolidated earnings and financial condition. Additionally, changes in tax laws or tax rulings could materially impact our effective tax rate.

We face risks associated with our international business.

In 2015 and 2014, we generated approximately 35% and 20% of our sales outside the U.S. Our international business operations may be subject to additional and different risks than our U.S. business. Our ability to achieve and maintain profitable growth in international markets is subject to risks related to the differing legal, political, social and regulatory requirements and economic conditions of many countries. As a result of our expansion outside the U.S., we are subject to certain inherent risks, including political and economic uncertainty, inflation rates, exchange rates, trade protection measures, local labor conditions and laws, restrictions on foreign investments and repatriation of earnings, and weak intellectual property protection. If we are unable to manage these risks it would have a material adverse effect on our results of operations and financial condition.

Increases in prices and declines in the availability of raw materials could negatively impact our financial results.

Our financial results are significantly affected by the cost of raw materials and energy. Most of the raw materials and energy used in production are purchased from outside sources, and the Company has made, and plans to continue to make, supply arrangements to meet the planned operating requirements for the future. Supply of critical raw materials and energy is managed by establishing contracts, multiple sources, and identifying alternative materials or technology whenever possible. An inability to obtain critical raw materials would adversely impact our ability to produce products. Increases in the cost of raw materials and energy may have an adverse effect on our earnings or cash flow in the event we are unable to mitigate these higher costs in a timely manner.

Our business and operations expose us to numerous legal and regulatory requirements and any violation of these requirements could harm our business.

We are subject to numerous federal, state and foreign legal requirements on matters as diverse as data privacy and protection, employment and labor relations, immigration, taxation, anticorruption, import/export controls, trade restrictions, internal and disclosure control obligations, securities regulation, environmental and anti-competition. We are also focused on expanding our business in certain identified growth areas, such as homeland security and biomedical technologies, which are highly regulated and may expose us to increased compliance risk. Compliance with diverse and changing legal requirements is costly, time-consuming and requires significant resources. Violations of one or more of these requirements in the conduct of our business could result in significant fines and other damages, criminal sanctions against us or our officers, prohibitions on doing business and damage to our reputation. Violations of these regulations or contractual obligations related to regulatory compliance in connection with the performance of customer contracts could also result in liability for significant monetary damages, fines and/or criminal prosecution, unfavorable publicity and other reputational damage, restrictions on our ability to compete for certain work and allegations by our customers that we have not performed our contractual obligations.

Moreover, we use controlled hazardous and radioactive materials in our business and generate wastes that are regulated as hazardous wastes under United States federal and certain state, environmental and atomic energy regulatory laws and similar laws in each jurisdiction in which our facilities are located. Our use of these substances and materials is subject to stringent, and periodically changing, regulation that can impose costly compliance obligations on us and have the potential to adversely affect our manufacturing activities. The risk of accidental contamination or injury from these materials cannot be completely eliminated. If an accident with these substances occurs, we could be held liable for any damages that result, in addition to incurring clean-up costs and liabilities, which can be substantial. Additionally, an accident could damage our research and manufacturing facilities resulting in delays and increased costs.

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Our insurance may be insufficient to protect us from product and other liability claims or losses.

We maintain insurance coverage with third-party insurers as part of our overall risk management strategy and because some of our contracts require us to maintain specific insurance coverage limits. However, not every risk or liability is or can be protected by insurance, and, for those risks we insure, the limits of coverage we purchase or that are reasonably obtainable in the market may not be sufficient to cover all actual losses or liabilities incurred. If any of our third-party insurers fail, cancel our coverage or otherwise are unable to provide us with adequate insurance coverage, then our overall risk exposure and our operational expenses would increase and the management of our business operations would be disrupted. Our insurance may be insufficient to protect us from significant product and other liability claims or losses. Moreover, there is a risk that commercially available liability insurance will not continue to be available to us at a reasonable cost, if at all. If liability claims or losses exceed our current or available insurance coverage, our business and prospects may be harmed. Regardless of the adequacy of our liability insurance coverage, any significant claim may have an adverse effect on our industry and market reputation, leading to a substantial decrease in demand for our products and services and reduced revenues.

Our business and financial results could be negatively affected by cyber or other security threats.

As a U.S. Government contractor operating in multiple regulated industries and geographies, we handle sensitive information. Therefore, we are continuously exposed to cyber and other security threats, including computer viruses, attacks by hackers or physical break-ins. Any electronic or physical break-in or other security breach or compromise may jeopardize security of information stored or transmitted through our information technology systems and networks. This could lead to disruptions in mission critical systems, unauthorized release of confidential or otherwise protected information and corruption of data. Although we have implemented policies, procedures and controls to protect against, detect and mitigate these threats, attempts by others to gain unauthorized access to our information technology systems are becoming more sophisticated. These attempts include covertly introducing malware to our computers and networks and impersonating authorized users, among others, and may be perpetrated by well-funded organized crime or state sponsored efforts. We seek to detect and investigate all security incidents and to prevent their occurrence or recurrence. We continue to improve our threat protection, detection and mitigation policies, procedures and controls. In addition, we work with other companies in the industry and government participants on increased awareness and enhanced protections against cyber security threats. However, because of the evolving nature of these security threats, there can be no assurance that our policies, procedures and controls have or will detect or prevent any of these threats and we cannot predict the full impact of any such incident. We may experience similar security threats to the information technology systems that we develop, install or maintain under customer contracts. Although we work cooperatively with our customers and other business partners to seek to minimize the impacts of cyber and other security threats, we must rely on the safeguards put in place by those entities. Any remedial costs or other liabilities related to cyber or other security threats may not be fully insured or indemnified by other means. Occurrence of any of these security threats could adversely affect our reputation, ability to work on sensitive U.S. Government contracts, business operations and financial results.

Risks Relating To Dynasil’s Stock

Xcede, our joint venture, is a pre-clinical stage business with no approved products, which makes it difficult to assess the business’s future viability.

In October 2013, Dynasil Biomedical formed Xcede, a joint venture with Mayo Clinic, to focus on and separately fund the development of its tissue sealant technology. Xcede has not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biomedical area. For example, to execute its business plan, Xcede will need to successfully:

· raise the funds necessary to execute its product development plan;

· manage its spending as costs and expenses increase during the clinical trial and regulatory approval processes;

· obtain required regulatory approvals for the development and commercialization of the tissue sealant product applications;

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· maintain and expand the tissue sealant intellectual property portfolio;

· build and maintain robust sales, distribution and marketing capabilities, either on its own or in collaboration with strategic partners; and

· gain market acceptance for its products.

If Xcede is unsuccessful in accomplishing these objectives, it may not be able to develop its tissue sealant product, raise capital, expand its business or continue its operations, which may have a material adverse effect on our stock price.

The market price for our common stock is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float and lack of profits, which could lead to wide fluctuations in our share price.

The market for our common stock is characterized by significant price volatility when compared to the shares of larger, more established companies that have large public floats, and we expect that our share price will continue to be more volatile than the shares of such larger, more established companies for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common stock is, compared to the shares of such larger, more established companies, sporadically and thinly traded. As a consequence of this limited liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common stock is sold on the market without commensurate demand. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a larger, more established company that has a large public float. Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common stock will sustain its current market price, or as to what effect that the sale of shares or the availability of common stock for sale at any time will have on the prevailing market price.

We do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in its value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.

If our internal control over financial reporting is found not to be effective or if we make disclosure of existing or potential significant deficiencies or material weaknesses in those controls, investors could lose confidence in our financial reports, and our stock price may be adversely affected.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to include an internal control report with our Annual Report on Form 10-K. That report must include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. We evaluate our existing internal control over financial reporting based on the framework issued in 2013 by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. During the course of our ongoing evaluation of the internal controls, we may identify areas requiring improvement, and may have to design enhanced processes and controls to address issues identified through this review. Remedying any deficiencies, significant deficiencies or material weaknesses that we identify may require us to incur significant costs and expend significant time and management resources. We cannot assure you that any of the measures we implement to remedy any such deficiencies will effectively mitigate or remedy such deficiencies. Investors could lose confidence in our financial reports, and our stock price may be adversely affected, if our internal controls over financial reporting are found not to be effective by management or if we make disclosure of existing or potential significant deficiencies or material weaknesses in those controls.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

We own a manufacturing and office facility consisting of a one-story, masonry and steel building containing approximately 15,760 square feet in West Berlin, New Jersey. We lease a 10,000 square foot manufacturing and office building in Ayer, MA with a lease that expires in May 2025. We lease 3,600 square feet of office space in a building in Littleton, MA with a lease that expires in July 2018. We lease a 52,880 square foot manufacturing and office building in Rochester, NY with a lease that expires in March 2018. We own a two-story, 44,000 square foot manufacturing and office facility in Ithaca, New York. We own a two-story, 17,000 square foot manufacturing and office facility in Margate, Kent, in the U.K. All of the foregoing owned and leased properties are used by our Optics segment.

We lease a 40,000 square foot manufacturing, research, and office building in Watertown, MA for our RMD business from a related party with a month-to-month lease that continues until terminated by the landlord with not less than three years’ prior written notice or by the Company with not less than six months’ prior written notice. We lease 2,868 square feet of office space in Newton, MA for our Dynasil Corporation of America office with a lease that expires in December 2017. We believe that the properties are in satisfactory condition and suitable for our purposes. The New Jersey, New York, and U.K. properties are collateral against notes payable to banks.

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Since September 30, 2013, the Company’s Common Stock has been listed on the NASDAQ Capital Market under the symbol “DYSL”. From December 17, 2010 until September 30, 2013, the Company’s Common Stock was listed on the NASDAQ Global Market. Prior to December 17, 2010, the Company’s Common Stock was quoted on the NASD-OTC Bulletin Board under the symbol "DYSL.OB".

The following table reflects the range of high and low common stock sales prices for the four quarters of fiscal 2015 and fiscal 2014 as reported by the NASDAQ Capital Market.

	High & Low Sale Prices
	Years ended September 30,
	2015				2014
	High		Low		High		Low
First quarter	$	1.59	$	1.15	$	1.57	$	0.77
Second quarter		1.62		1.26		2.24		1.04
Third quarter		1.64		1.29		1.89		1.28
Fourth quarter		2.88		1.34		1.90		1.36

As of December 1, 2015 there were 16,585,794 shares of the Company’s common stock outstanding held by approximately 241 holders of record.

The Company has paid no cash dividends on its common stock since its inception. The Company intends to retain any future earnings for use in its business and does not intend to pay cash dividends on its common stock in the foreseeable future.

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ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management's discussion and analysis should be read in conjunction with our financial statements and the notes thereto appearing elsewhere in this Annual Report on Form 10-K.

Overview

We have three reporting segments based on our main operating activities, as well as a fourth segment substantially all of the assets of which were sold in the first quarter of 2014. Below is a summary of these segments:

· Contract Research: The Contract Research segment consists of the Radiation Monitoring Devices, Inc. (“RMD”) business unit.

· Optics: The Optics segment encompasses four business units – our original optics business (“Dynasil Fused Silica”), Optometrics, Hilger, and EMF – that manufacture commercial products, including optical crystals for sensing in the security and medical imaging markets, as well as optical components, optical coatings and optical materials for scientific instrumentation and other applications.

· Biomedical: The Biomedical segment consists of a single business unit, Dynasil Biomedical Corporation, a medical technology incubator which owns rights to certain early stage medical technologies. In October 2013, Dynasil Biomedical formed Xcede Technologies, Inc., a joint venture with the Mayo Clinic to spin out and separately fund the development of a tissue sealant technology. Dynasil Biomedical currently has no operations other than relating to its equity ownership in Xcede.

· Instruments: The Instruments segment consists of Dynasil Products (formerly known as RMD Instruments), which manufactured precision instrumentation for medical and commercial applications until the sale in fiscal 2014 of our lead paint detector and gamma medical probe businesses, which together comprised substantially all the operations within this segment.

For information about our financial segments and geographical information about our operating revenues and assets, see Note 17 to the Consolidated Financial Statements included in this Report. A description of our strategy is included in Item 1 of this Annual Report on Form 10-K.

Our markets are characterized by rapidly changing technology and the needs of our customers, which change and evolve regularly. Accordingly, our success depends on our ability to develop services and products that address these changing needs and to provide the people and technology needed to deliver these services and products. To remain competitive, we must consistently provide superior service, technology and performance on a cost-effective basis to our customers. Our business performance also is influenced by a variety of other factors including, but not limited to, economic conditions, U.S. Government spending on research and development programs, competition, regulatory requirements and insurance costs. Further information on certain risks to our Company is included in Item 1A of this Annual Report on Form 10-K.

Fiscal 2015 Financial Overview

Our revenue declined $1.8 million to $40.5 million in 2015 compared to $42.3 million in 2014. Approximately $0.8 million of the decrease is a result of the sale of the lead paint detector and gamma medical probe businesses in the first quarter of 2014. In addition, Contract Research segment revenues declined $3.2 million or 15% to $18.8 million in 2015 while our Optics segment revenues increased $2.2 million or 11% to $21.8 million in 2015.

In fiscal year 2015, we incurred a net loss of $0.4 million compared to a net income of $2.0 million in 2014. The net loss in 2015 includes a $0.4 million charge for the final termination and settlement of a subsidiary’s pension plan as well as a $0.2 million gain on the sale of a product line while the net income in 2014 included a $1.3 million gain from the sale of two businesses. Excluding the pension charge and the gain on sale of the product line in 2015 and the gain on the sale of the two businesses in 2014, our net loss was $0.2 million in 2015 compared to net income of $0.7 million in 2014.

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Our net income (loss) included losses of approximately $1.2 million and $0.8 million in 2015 and 2014, respectively, associated with research and start-up costs of Xcede Technologies, Inc. (“Xcede”), a joint venture with Mayo, in which we own 90% of the common stock (69% assuming conversion of the outstanding notes described below). Because Dynasil has voting control of Xcede via its common stock ownership, Xcede is required to be included in our consolidated net income for financial reporting purposes.

The majority of the funding for Xcede in 2015 and 2014 was from the sale of approximately $2.0 million in aggregate principal amount of Xcede Convertible Notes to external investors (including certain officers and directors of the Company). Although it is anticipated that the Company will continue for the foreseeable future to hold a significant interest in Xcede, the Company expects that its interest will decrease over time, if and to the extent that Xcede is successful in raising equity financing from outside sources.

Significant Transactions

On November 7, 2013, the Company sold its lead paint detector business to Protec Instrument Corporation, a Delaware corporation (“Protec”), which is a wholly owned subsidiary of Laboratoires Protec S.A., a French corporation and former European distributor of the lead paint detector products. The sales price totaled approximately $1.2 million, less certain adjustments and including the assumption of certain liabilities by Protec. On December 23, 2013, the Company sold its gamma medical probe business to Dilon Technologies, Inc., a Delaware corporation (“Dilon”), for $3.5 million, the assumption of certain liabilities of the Company, and a possible contingent payment. The Company used $4.9 million of the proceeds from the two transactions to reduce its bank indebtedness.

On June 26, 2014, the Company acquired substantially all the assets of DichroTec Thin Films, LLC (“DichroTec”), a manufacturer of optical thin film coatings, for $1.7 million consisting of $500,000 in cash and 700,000 shares of our common stock. The assets acquired consisted primarily of machinery and equipment and inventory. DichroTec reported unaudited revenue of approximately $1.9 million for the twelve months ended December 31, 2013.

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Results of Operations

Results of Operations for the Fiscal Year Ended September 30,
2015
	Contract Research			Optics			Instruments		Biomedical			Total
Revenue	$	18,753,000		$	21,783,000		$	-	$	-		$	40,536,000
Gross Profit		8,176,000			7,076,000			-		-			15,252,000
GM %		43.6	%		32.5	%		-		-			37.6	%
SG&A		7,629,000			6,516,000			-		1,151,000			15,296,000
Gain on sale of assets		-			178,000			-		-			178,000
Operating Income (Loss)		547,000			738,000			-		(1,151,000	)		134,000
Depreciation and Amortization		296,000			839,000			-		61,000			1,196,000
Capital expenditures		18,000			1,166,000			-		119,000			1,303,000
Intangibles, Net		264,000			678,000			-		283,000			1,225,000
Goodwill		4,939,000			1,192,000			-		-			6,131,000
Total Assets	$	7,692,000		$	15,948,000		$	48,000	$	828,000		$	24,516,000

Results of Operations for the Fiscal Year Ended September 30,
2014
	Contract Research			Optics			Instruments			Biomedical			Total
Revenue	$	21,935,000		$	19,590,000		$	773,000		$	11,000		$	42,309,000
Gross Profit		9,301,000			7,100,000			318,000			11,000			16,730,000
GM %		42.4	%		36.2	%		41.1	%		100.0	%		39.5	%
SG&A		8,546,000			5,482,000			527,000			778,000			15,333,000
Gain on sale of assets		-			-			1,297,000			-			1,297,000
Operating Income (Loss)		755,000			1,618,000			1,087,000			(765,000	)		2,695,000
Depreciation and Amortization		280,000			781,000			2,000			60,000			1,123,000
Capital expenditures		12,000			1,326,000			-			110,000			1,448,000
Intangibles, Net		299,000			854,000			-			230,000			1,383,000
Goodwill		4,939,000			1,308,000			-			-			6,247,000
Total Assets	$	8,857,000		$	16,019,000		$	313,000		$	1,188,000		$	26,377,000

Revenue

Revenues for the fiscal year ended September 30, 2015 were $40.5 million, down $1.8 million or 4% from the $42.3 million of revenue recorded in 2014.

Contract Research segment revenues decreased 15% to $18.8 million in 2015 from $21.9 million in 2014, reflecting continuing softness in Federal Agency contracting, including both award and funding decisions. The contract revenue backlog has increased slightly from $30 million in 2014 to $33 million in 2015 of which approximately 45% is SBIR grants. The Company continues to seek to diversify its contracting sources and to limit its reliance on both the SBIR program and the limited number of government agencies that currently contract for its research. This diversification also includes contract research for commercial businesses rather than governmental agencies.

The revenues of our Optics segment increased 11% to $21.8 million from $19.6 million in 2014. Three of the four business units in the Optics segment achieved revenue growth in 2015 due to increases in volume. In addition, the DichroTec acquisition discussed above contributed approximately $1.5 million to the revenues of the Optics segment in 2015.

The Instruments segment, of which substantially all of the assets were disposed of in the first quarter of 2014 as discussed above, had no revenues in 2015 and $0.8 million in revenues in 2014.

The Biomedical segment is engaged in development of a tissue sealant product through its Xcede joint venture and currently has no revenues.

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Gross Profit

Gross profit for fiscal year 2015 decreased $1.5 million or 9% to $15.3 million from the prior year amount of $16.7 million. Gross profit as a percentage of revenue decreased to 38% in 2015 from 40% in 2014 primarily as a result of lower gross profit margins in the Optics segment associated with higher scrap levels experienced during the scaling-up of production for a large customer.

Gross profit for the Contract Research segment declined $1.1 million to $8.2 million in 2015 from $9.3 million in 2014 as a result of a decrease in the volume of direct labor hours billed while gross profit as a percentage of revenue increased to 44% in 2015 from 42% in 2014.

The Optics segment’s gross profit remained essentially unchanged at $7.1 million in both 2015 and 2014 while gross profit as a percentage of revenue dropped to 33% in 2015 from 36% in 2014 primarily as a result of increased costs associated with higher scrap levels experienced during the scaling-up of production for a large customer. The Company has implemented changes to its manufacturing processes and upgraded certain capital equipment during the second half of fiscal year 2015 and, as a result, expects production yields in the Optics segment to improve in fiscal year 2016.

Selling, General & Administrative (“SG&A”) Expenses

SG&A expenses remained essentially unchanged at $15.3 million or 38% of revenue in fiscal year 2015, from $15.3 million or 36% of revenue in fiscal year 2014. Excluding the SG&A expenses associated with the Instruments segment, the assets and business of which were substantially disposed of in the first quarter of fiscal year 2014, SG&A expenses increased 3% to $15.3 million in 2015 compared to $14.8 million in 2014.

Contract Research SG&A decreased to $7.6 million or 41% of revenue in fiscal 2015 from $8.5 million or 39% of revenue in the prior year. The lower SG&A expense in 2015 was primarily a result of the full year impact of cost savings measures implemented during 2014 in response to the decline in government spending and contract awards.

SG&A within the Optics segment increased 19% to $6.5 million in 2015 from $5.5 million in 2014 primarily due to higher expenses associated with increases in research and marketing costs at certain of the business units as well the impact of SG&A costs associated with the DichroTec acquisition completed in the third quarter of fiscal 2014.

Finally, SG&A costs in the Biomedical segment in fiscal year 2015 were approximately $1.2 million as compared to $0.8 million in fiscal year 2014. The costs in 2015 and 2014 were substantially all a result of spending by the Xcede joint venture on its development of the tissue sealant technology.

In fiscal years 2014 and 2015, Xcede raised approximately $1.4 million and $0.6 million of funding, respectively, from external investors, including certain officers and directors of the Company, through the issuance of convertible notes. We expect Xcede will continue to require periodic external investor funding in amounts larger than what has been raised to date in order to pursue clinical trials and regulatory approvals of its tissue sealant technology. We are continuing to explore the availability of outside financing, including through a sale, licensing or joint venture, though we may not be able to secure any such financing arrangement on favorable terms or at all.

Net Interest Expense

Net interest expense decreased 31% to $0.5 million in 2015 from $0.7 million in fiscal 2014, primarily as a result of the debt refinancing completed in the third quarter of 2014 that allowed us to regain compliance with our Massachusetts Capital Resources Company debt covenants. The Company had been accruing interest on this debt at the default rate of 14% rather than the normal rate of 10% since it suspended interest payments in February 2013. Additionally, the Company implemented a cash sweep program during the fourth quarter of fiscal 2015 which reduced borrowings and interest expense under its secured line of credit.

Income Tax Credit

Total income tax credit decreased from a tax credit of ($21,000) in fiscal 2014 to a tax credit of ($6,000) in fiscal 2015. The decrease in the credit is due to a decrease in foreign tax credits substantially offset by a decrease in state income taxes.

19

Net Income

As a result, the Company had a net loss of $0.4 million for the year ended September 30, 2015 compared to net income of $2.0 million in the prior year. The net loss in fiscal 2015 includes a $0.4 million charge for the final termination and settlement of a subsidiary’s pension plan as well as a $0.2 million gain on the sale of a product line while the net income in 2014 included a $1.3 million gain from the sale of two businesses. Excluding the pension charge and the gain on the sale of the product line in 2015 and the gain on the sale of the two businesses in 2014, our net loss would have been $0.2 million in 2015 compared to net income of $0.7 million in 2014.

Our net income (loss) includes approximately $1.2 million and $0.8 million of losses in 2015 and 2014, respectively from our Biomedical segment. Substantially all of the Biomedical losses in 2015 and 2014 were funded through the proceeds from Xcede’s convertible notes offerings in fiscal years 2015 and 2014.

Liquidity and Capital Resources

Liquidity Overview

As of September 30, 2015, the Company is in compliance with the terms of all its outstanding indebtedness. As of such date, the Company had total indebtedness consisting of:

· $1.5 million senior debt under its revolving line of credit with Middlesex Saving Bank, with an additional borrowing capacity of up to $2.5 million, subject to the terms and conditions of the Middlesex Savings Bank Loan Agreement;

· approximately $1.0 million of subordinated debt owed to Massachusetts Capital Resources Company;

· approximately $2.0 million of Xcede Convertible Notes convertible into Xcede common stock; and

· approximately $0.4 million of Notes Payable to two government entities.

In addition, the Company had net cash as of September 30, 2015 of $1.3 million, which was a decrease of $2.5 million as compared to $3.8 million at September 30, 2014. The decrease was primarily the result of cash utilized to repay $2.0 million of subordinated debt owed to Massachusetts Capital Resources Company (“MCRC”) and $0.6 million of cash utilized to pay down the Company’s revolving line of credit during fiscal 2015.

The Company believes that its cash on hand and its borrowing capacity under its revolving line of credit will be sufficient to fund its current debt obligations, estimated capital expenditures and working capital needs for the next twelve months.

On May 1, 2014, the Company entered into a three year revolving line of credit arrangement with Middlesex Savings Bank (“Middlesex”) for up to $4.0 million with the amount available for advances determined monthly based on eligible billed and unbilled accounts receivable and inventory.

The Middlesex line of credit is secured by substantially all the Company’s personal property and certain of the Company’s equity interests in its foreign subsidiary, and is guaranteed by all of the Company’s wholly owned subsidiaries. The interest rate under the line of credit note is equal to the Prime Rate, but in no event less than 3.25%. The Middlesex loan agreement provides that the loan expires on May 1, 2017, at which time all outstanding principal and unpaid interest shall become due and payable.

The Middlesex line of credit was amended on September 29, 2015 to allow the Company to repay up to $3 million of the subordinated debt owed to MCRC and also provides for the Company, if it meets certain conditions, to convert up to $2 million of the advances under the line of credit to a fixed rate note with the principal amortizing monthly over a five year term.

Effective October 1, 2015, MCRC agreed to reduce the interest rate on its remaining outstanding indebtedness to 6% from 10% and to amend the principal repayment terms to provide for repayment of the remaining $1 million outstanding on a monthly basis over two years beginning on September 30, 2016.

In May 2015, the terms of the convertible notes were amended to provide for an additional $1 million of Convertible Notes issuances and to extend the notes maturity date. The terms of the convertible notes now provide that the notes are payable upon the demand of the holders of a majority of the aggregate outstanding amount of the notes, after June 30, 2016.

20

Net Cash Provided by Operating Activities

Net cash provided by operating activities was $0.8 million for fiscal year 2015 versus $1.9 million for fiscal year 2014. In 2015, the principal differences between the net loss of $0.4 million and net cash provided of $0.8 million are for stock compensation expense of $0.5 million, depreciation and amortization of $1.2 million, pension expense of $0.4 million and a gain on the sale of property, plant and equipment of ($0.2) million while changes to the short term asset and liability amounts in our balance sheet used $1.0 million.

In 2014, the principal differences between the net income of $2.0 million and the net cash provided of $1.9 million are stock compensation expense of $0.5 million, depreciation and amortization expense of $1.1 million and a gain on the sale of property, plant and equipment of $1.3 million while changes to the short term asset and liability amounts in our balance sheet used $0.6 million.

Cash Flows from Investing Activities

Cash flows from investing activities were a use of $1.1 million for fiscal 2015 compared with a generation of $2.4 million for fiscal 2014. The use in fiscal 2015 was primarily a result of the purchase of property, plant and equipment while fiscal 2014 activities included $4.3 million of proceeds from the sale of the lead paint detector and gamma medical probe businesses partially offset by the $0.5 million cash payment in connection with the DichroTec acquisition and other machinery and equipment and leasehold improvement expenditures of $1.4 million. The Company currently plans for capital expenditures of $2.0 million during fiscal year 2016, depending on the availability of cash and/or financing.

Substantially all of the $1.2 million Biomedical loss in 2015 and the $0.8 million Biomedical loss in 2014 were funded using the proceeds from Xcede’s convertible notes offerings during 2014 and 2015 which raised an aggregate of $2.0 million.

Cash Flows from Financing Activities

Cash flows from financing activities used $2.3 million of net cash in fiscal 2015, primarily in connection with the prepayment of $2.0 million of subordinated debt to Massachusetts Capital Resources Company and the $0.6 million pay down of the Middlesex revolving line of credit. The Company’s Xcede joint venture raised $0.6 million in convertible notes in 2015. The Company implemented a cash sweep process in 2015 which resulted in the full repayment of the line of credit for a period before the new borrowings were incurred in connection with the $2.0 million prepayment of the subordinated debt to MCRC.

Terms of Outstanding Indebtedness

The following is summary of the terms of the existing loan agreement in place with the Company’s senior lender, Middlesex Savings Bank, and the terms of subordinated debt owed to Massachusetts Capital Resources Company.

Middlesex Savings Bank Loan Agreement

On May 1, 2014, Dynasil entered into a loan and security agreement (the “Bank Loan Agreement”) and line of credit note (the “Note”) with Middlesex Savings Bank pursuant to which Middlesex agreed to provide up to $4 million, subject to the availability restrictions described below, under a revolving line of credit loan to Dynasil for general corporate purposes. The Bank Loan Agreement provides that the loan expires on May 1, 2017, at which time all outstanding principal and unpaid interest shall become due and payable.

The Bank Loan Agreement and the Note are secured by (i) a security interest in substantially all of the Company’s personal property and (ii) sixty-five percent (65%) of the Company’s equity interests in its UK subsidiary, Hilger Crystals, Ltd. Under the note, the borrowing base is determined monthly based on eligible billed and unbilled accounts receivable and eligible inventory. The interest rate under the Note is equal to the Prime Rate, but in no event less than 3.25%.

The Bank Loan Agreement also contains other terms, conditions and provisions that are customary for commercial lending transactions of this sort. The Bank Loan Agreement requires Dynasil, at the close of each fiscal quarter, to maintain a Debt Service Coverage ratio, as defined, of at least 1.20 to 1.00 on a trailing four quarter basis.

The Bank Loan Agreement was amended on September 29, 2015 to allow the Company to repay up to $3 million of the subordinated debt owed Massachusetts Capital Resources Company (“MCRC”) and also provide for the Company, if it meets certain conditions, to convert up to $2 million of the advances under the line of credit to a fixed rate note with the principal amortizing monthly over a five year term.

21

The Bank Loan Agreement provides for events of default customary for credit facilities of this type, including but not limited to non-payment, defaults on other debt, misrepresentation, breach of covenants, representations and warranties, insolvency and bankruptcy, change of management, as defined and the occurrence of a material adverse change, as defined. As a result of the material adverse change clause, the line of credit has been classified as a current liability.

Note Purchase Agreement – Massachusetts Capital Resource Company

On July 31, 2012, the Company entered into a Note Purchase Agreement (the “Agreement”) with MCRC. Pursuant to the terms of the Agreement, the Company issued and sold to MCRC a $3.0 million subordinated note (the “Subordinated Note”) for proceeds of $3.0 million. The Subordinated Note initially matured on July 31, 2017, unless accelerated pursuant to an event of default, as described below. The Subordinated Note initially provided for interest at the rate of ten percent (10%) per annum, with interest to be payable monthly on the last day of each calendar month in each year, the first such payment to be due and payable on August 31, 2012. Under the original terms of the Agreement, beginning on and with September 30, 2015, and on the last day of each calendar month thereafter through and including July 31, 2017, the Company would redeem, without premium, $130,000 in principal amount of the Subordinated Note together with all accrued and unpaid interest then due on the amount redeemed.

Effective October 1, 2015, in connection with the prepayment of $2 million of the Subordinated Note, MCRC agreed to adjust the interest rate to 6% and to amend the principal repayment terms such that beginning on September 30, 2016, the Company will redeem monthly, without premium, $43,478 in principal amount of the Subordinated Note together with all accrued and unpaid interest then due on the amount redeemed.

Under the terms of the Agreement and a Subordination Agreement dated July 31, 2012, MCRC and any successor holder of the Subordinated Note have agreed that the payment of the principal of and interest on the Subordinated Note shall be subordinated in right of payment, to the prior payment in full of all indebtedness of the Company for money borrowed from banks or other institutional lenders at any time outstanding.

The Agreement contains customary representations, warranties and covenants, including covenants by the Company limiting additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks, transactions with affiliates and fundamental changes. In addition, the Agreement contains financial covenants by the Company (as further defined in the Agreement) that (i) impose a Consolidated Maximum Leverage Ratio (consolidated total funded debt to consolidated EBITDA) equal to or less than 4.5 to 1.0 for each rolling four quarter period ending on or after March 31, 2013, and (ii) require a Consolidated Fixed Charge Coverage Ratio (consolidated EBITDA to consolidated fixed charges) of not less than 0.95 to 1.00 for each rolling four quarter period ending on or after September 30, 2013.

The Agreement also provides for events of default customary for agreements of this type, including, but not limited to, non-payment, breach of covenants, insolvency and defaults on other debt. Upon an event of default, MCRC may elect to declare all obligations (including principal, interest and all others amounts payable) immediately due and payable, which shall occur automatically if the Company becomes insolvent.

“Off Balance Sheet” Arrangements

The Company has no “Off Balance Sheet” arrangements.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 2, "Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements, including the respective dates of adoption or expected adoption and effects on our consolidated financial position, results of operations and cash flows.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the SEC. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We have identified the following as the items that require the most significant judgment and often involve complex estimation: revenue recognition, valuation of long-lived assets, intangible assets and goodwill, estimating allowances for doubtful accounts receivable, stock-based compensation and accounting for income taxes.

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Revenue Recognition

Revenue from sales of products is recognized at the time title and the risks and rewards of ownership pass. 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.

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. 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 and intangible assets which have indefinite lives are subject to annual impairment tests. 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 reporting unit level using the two-step process. The Company's primary reporting units tested for impairment are RMD, which comprises our Contract Research segment, and Hilger, which is a component of the Optics segment.

Step one of the impairment testing compares the carrying value of a reporting unit to its fair value. The carrying value represents the net book value of the net assets of the reporting unit or simply the equity of the reporting unit if the reporting unit is the entire entity. If the fair value of the reporting unit is greater than its carrying value, no impairment has been incurred and no further testing or analysis is necessary. The Company estimates fair value using a discounted cash flow methodology which calculates fair value based on the present value of estimated future cash flows. Estimating future cash flows requires significant judgment and includes making assumptions about projected growth rates, industry-specific factors, working capital requirements, weighted average cost of capital, and current and anticipated operating conditions. Assumptions by management are necessary to evaluate the impact of operating and economic changes. The Company's evaluation includes assumptions on future growth rates and cost of capital that are consistent with internal projections and operating plans. The use of different assumptions or estimates for future cash flows could produce different results. The Company regularly assesses the estimates based on the actual performance of each reporting unit.

If the carrying value of a reporting unit is greater than its fair value, step two of the impairment testing process is performed to determine the amount of impairment to be recognized. Step two requires the Company to estimate an implied fair value of the reporting unit's goodwill by allocating the fair value of the reporting unit to all of the assets and liabilities other than goodwill. An impairment then exists if the carrying value of the goodwill is greater than the goodwill's implied fair value. With respect to the Company's annual goodwill impairment testing performed during the fourth quarter of fiscal year 2015, step one of the testing determined the estimated fair value of RMD and Hilger exceeded their carrying values by more than 20%. Accordingly, the Company concluded that no impairment had occurred and no further testing was necessary.

23

Impairment of Long-Lived Assets

The Company's long-lived assets include property, plant and equipment and intangible assets subject to amortization. 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.

There was no impairment charge during the years ended September 30, 2015 and 2014.

Intangible Assets

The Company's intangible assets consist of acquired customer relationships and trade names of Hilger Crystals, Ltd., acquired know-how of Radiation Monitoring Devices, Inc., and provisionally patented technologies within Dynasil Biomedical Corp.

The Company estimates the fair value of indefinite-lived intangible assets using an income approach, and recognizes an impairment loss when the estimated fair value of the indefinite-lived intangible assets is less than the carrying value. During the fourth quarter of fiscal year 2015, the Company conducted its annual impairment review of indefinite-lived intangible assets and concluded the fair value exceeded the carrying value.

The Company reviews intangible assets with finite lives for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Recoverability of these intangible assets is assessed based on the undiscounted future cash flows expected to result from the use of the asset. If the undiscounted future cash flows are less than the carrying value, the intangible assets with finite lives are considered to be impaired. The amount of the impairment loss, if any, is measured as the difference between the carrying amount of these assets and the fair value based on a discounted cash flow approach or, when available and appropriate, to comparable market values.

The Company amortizes its intangible assets with definitive lives over their useful lives, which range from 4 to 20 years, based on the time period the Company expects to receive the economic benefit from these assets.

Allowance for Doubtful Accounts Receivable

We perform 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.

Stock-Based Compensation

We account 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. The Company believes it is more likely than not that these carry-forwards will not be realized and, therefore, a valuation allowance has been applied.

24

Forward-Looking Statements

The statements contained in this Annual Report on Form 10-K 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 compliance with the financial covenants under our loan agreements with Middlesex Savings Bank and Massachusetts Capital Resource Company, Xcede obtaining financing from outside investors, the commercialization of our products including our dual mode detectors, our development of new technologies including at Dynasil Biomedical, 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 “plans”, “intends,” “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 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, 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 deleverage our balance sheet, 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 this 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.

Use of Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this report also contains a measure of our net loss excluding a charge for the final termination and settlement of a subsidiary’s pension plan and the gain on the sale of a product line and our lead paint detector and gamma medical probe businesses. See “—Results of Operations—Net Income.” The Company believes that the inclusion of this non-GAAP financial measure helps investors to gain a meaningful understanding of the Company’s core operating results and enhance comparing such performance with prior periods. Our management uses this non-GAAP measure, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods. The non-GAAP financial measure included in this report is not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statements
	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Financial Statements:
Balance Sheets as of September 30, 2015 and 2014	F-3
Statements of Operations and Comprehensive Income (Loss)  for the years ended September 30, 2015 and 2014	F-5
Statements of Stockholders’ Equity for the years ended September 30, 2015 and 2014	F-6
Statements of Cash Flows for the years ended  September 30, 2015 and 2014	F-7
Notes to Consolidated Financial Statements	F-8

F-1

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Dynasil Corporation of America and Subsidiaries

Newton, Massachusetts

We have audited the accompanying consolidated balance sheets of Dynasil Corporation of America and Subsidiaries (the Company) as of September 30, 2015 and 2014 and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dynasil Corporation of America and Subsidiaries as of September 30, 2015 and 2014, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ RSM US LLP

Boston, Massachusetts

December 17, 2015

F-2

 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2015 and 2014

	September 30,		September 30,
	2015		2014
ASSETS
Current Assets
Cash and cash equivalents	$	1,295,000	$	3,842,000
Accounts receivable, net of allowances of $168,000and $299,000 at September 30, 2015 and September 30, 2014, respectively		3,382,000		3,240,000
Costs in excess of billings and unbilled receivables		1,518,000		1,235,000
Inventories, net of reserves		3,066,000		2,954,000
Prepaid expenses and other current assets		1,167,000		861,000
Total current assets		10,428,000		12,132,000
Property, Plant and Equipment, net		6,662,000		6,518,000
Other Assets
Intangibles, net		1,225,000		1,383,000
Goodwill		6,131,000		6,247,000
Deferred financing costs, net		12,000		39,000
Security and other deposits		58,000		58,000
Total other assets		7,426,000		7,727,000
Total Assets	$	24,516,000	$	26,377,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt	$	1,577,000	$	2,329,000
Capital lease obligations, current		76,000		134,000
Convertible notes		2,123,000		1,433,000
Accounts payable		1,886,000		1,602,000
Deferred revenue		109,000		103,000
Accrued expenses and other liabilities		2,650,000		2,503,000
Total current liabilities		8,421,000		8,104,000
Long-term Liabilities
Long-term debt, net of current portion		1,290,000		3,282,000
Capital lease obligations, net of current portion		43,000		95,000
Deferred tax liability		284,000		264,000
Pension and other long-term liabilities		50,000		318,000
Total long-term liabilities		1,667,000		3,959,000

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

F-3

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2015 and 2014 (Continued)

LIABILITIES AND STOCKHOLDERS' EQUITY (Continued)
	September 30,			September 30,
	2015			2014
Stockholders' Equity
Common Stock, $0.0005 par value, 40,000,000 shares authorized, 17,368,738 and 17,140,182 shares issued, 16,558,578 and and 16,330,022 shares outstanding at September 30, 2015 and September 30, 2014, respectively.		9,000			9,000
Additional paid in capital		19,650,000			19,195,000
Accumulated other comprehensive income		110,000			98,000
Accumulated deficit		(4,167,000	)		(3,933,000	)
Less 810,160 shares of treasury stock - at cost		(986,000	)		(986,000	)
Total Dynasil stockholders' equity		14,616,000			14,383,000
Noncontrolling interest		(188,000	)		(69,000	)
Total stockholders' equity		14,428,000			14,314,000
Total Liabilities and Stockholders' Equity	$	24,516,000		$	26,377,000

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

F-4

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED SEPTEMBER 30, 2015 and 2014

	2015			2014
Net revenue	$	40,536,000		$	42,309,000
Cost of revenue		25,284,000			25,579,000
Gross profit		15,252,000			16,730,000
Operating expenses:
Sales and marketing		1,215,000			1,408,000
Research and development		1,715,000			1,343,000
General and administrative		12,366,000			12,581,000
Gain on sale of assets		(178,000	)		(1,297,000	)
Total operating expenses		15,118,000			14,035,000
Income from operations		134,000			2,695,000
Interest expense, net		493,000			713,000
Income (loss) before taxes		(359,000	)		1,982,000
Income tax (credit)		(6,000	)		(21,000	)
Net income (loss)		(353,000	)		2,003,000
Less: Net loss attributable to noncontrolling interest		(119,000	)		(69,000	)
Net income (loss) attributable to common stockholders	$	(234,000	)	$	2,072,000
Net income (loss)	$	(353,000	)	$	2,003,000
Other comprehensive income (loss):
(Increase) decrease in pension liability		318,000			(68,000	)
Foreign currency translation		(306,000	)		13,000
Total comprehensive income (loss)	$	(341,000	)	$	1,948,000
Basic net income (loss) per common share	$	(0.01	)	$	0.13
Diluted net income (loss) per common share	$	(0.01	)	$	0.13
Weighted average shares outstanding
Basic		16,402,893			15,415,408
Diluted		16,402,893			15,429,664

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

F-5

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED SEPTEMBER 30, 2015 and 2014

						Additional			Other														Total
	Common			Common		Paid-in			Comprehensive			Accumulated			Treasury Stock					Noncontrolling			Stockholders'
	Shares			Amount		Capital			Income			Deficit			Shares		Amount			Interest			Equity
Balance, September 30, 2013		16,224,402		$	8,000	$	17,476,000		$	153,000		$	(6,005,000	)		810,160	$	(986,000	)	$	-		$	10,646,000
Issuance of shares of common stock under employee stock purchase plan		10,499			-		13,000			-			-			-		-			-			13,000
Stock-based compensation costs		205,281			-		467,000			-			-			-		-			-			467,000
Issuance of shares for acquisition		700,000			1,000		1,239,000			-			-			-					-			1,240,000
Adjustment for decrease in pension liability, net of tax		-			-		-			(68,000	)		-			-		-			-			(68,000	)
Foreign currency translation adjustment		-			-		-			13,000			-			-		-			-			13,000
Net income (loss)		-			-		-			-			2,072,000			-		-			(69,000	)		2,003,000
Balance, September 30, 2014		17,140,182		$	9,000	$	19,195,000		$	98,000		$	(3,933,000	)		810,160	$	(986,000	)	$	(69,000	)	$	14,314,000
Issuance of shares of common stock under employee stock purchase plan		9,698			-		13,000			-			-			-		-			-			13,000
Stock-based compensation costs		228,500			-		459,000			-			-			-		-			-			459,000
Adjustment for escrow settlement		(9,642	)		-		(17,000	)		-			-			-		-			-			(17,000	)
Settlement of pension obligation, net of tax		-			-		-			318,000			-			-		-			-			318,000
Foreign currency translation adjustment		-			-		-			(306,000	)		-			-		-			-			(306,000	)
Net loss		-			-		-			-			(234,000	)		-		-			(119,000	)		(353,000	)
Balance, September 30, 2015		17,368,738		$	9,000	$	19,650,000		$	110,000		$	(4,167,000	)		810,160	$	(986,000	)	$	(188,000	)	$	14,428,000

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

F-6

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED SEPTEMBER 30, 2015 and 2014

	2015			2014
Cash flows from operating activities:
Net income (loss)	$	(353,000	)	$	2,003,000
Adjustments to reconcile net income (loss) to net cash:
Stock compensation expense		459,000			467,000
Foreign exchange loss (gain)		70,000			6,000
Gain on sale of assets		(178,000	)		(1,297,000	)
Depreciation and amortization		1,196,000			1,123,000
Pension expense		318,000			-
Other		346,000			245,000
Other changes in assets and libilities:
Accounts receivable, net		(196,000	)		518,000
Inventories		(365,000	)		(395,000	)
Costs in excess of billings and unbilled receivables		(283,000	)		302,000
Prepaid expenses and other assets		(346,000	)		322,000
Accounts payable		304,000			(455,000	)
Accrued expenses and other liabilities		(145,000	)		(531,000	)
Deferred revenue		9,000			(410,000	)
Net cash from operating activities		836,000			1,898,000
Cash flows from investing activities:
Acquisitions		-			(500,000	)
Proceeds from sale of assets		244,000			4,345,000
Purchases of property, plant and equipment		(1,310,000	)		(1,448,000	)
Net cash from investing activities		(1,066,000	)		2,397,000
Cash flows from financing activities:
Proceeds from issuance of common stock		12,000			14,000
Net proceeds from issuance of convertible notes		613,000			1,433,000
Principal payments on capital leases		(147,000	)		(128,000	)
Proceeds from short and long-term debt		2,501,000			2,920,000
Payments on long-term debt		(5,244,000	)		(7,135,000	)
Net cash from financing activities		(2,265,000	)		(2,896,000	)
Effect of exchange rates on cash and cash equivalents		(52,000	)		6,000
Net change in cash and cash equivalents		(2,547,000	)		1,405,000
Cash and cash equivalents, beginning	$	3,842,000		$	2,437,000
Cash and cash equivalents, ending	$	1,295,000		$	3,842,000

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

F-7

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 1 – Nature of Operations

Nature of Operations

The Company is primarily engaged in the development, marketing and manufacturing of detection, sensing and analysis technology and optical components as well as contract research. The Company’s products and services are used in a broad range of application markets including the homeland security, industrial and medical markets sectors. The products and services are sold throughout the United States and internationally.

Note 2 – Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Dynasil Corporation of America (“Dynasil” or the “Company”) and its wholly-owned subsidiaries: Optometrics Corporation (“Optometrics”), Evaporated Metal Films Corporation (“EMF”), Dynasil Products, formerly known as RMD Instruments Corp. (“Dynasil Products”), Radiation Monitoring Devices, Inc. (“RMD”), Hilger Crystals, Ltd (“Hilger”) and Dynasil Biomedical Corp (“Dynasil Biomedical”). All significant intercompany transactions and balances have been eliminated.

Revenue Recognition

Revenue from sales of products is recognized at the time title and the risks and rewards of ownership pass. 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.

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. 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 represented by agreed billing amounts. Recognition of losses on projects is taken as soon as the loss is reasonably determinable. The Company has an accrual for contract losses in the amount of $110,000 and $117,000 as of September 30, 2015 and 2014, respectively.

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.

F-8

 DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 2 – Summary of Significant Accounting Policies (continued)

Allowance for Doubtful Accounts Receivable

The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer's current credit worthiness, as determined by a review of their current credit information. The Company continuously monitors collections and payments from our customers and maintains a provision for estimated credit losses based upon historical experience and any specific customer collection issues that have been identified. While such credit losses have historically been minimal, within expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same credit loss rates as in the past. A significant change in the liquidity or financial position of any significant customers could have a material adverse effect on the collectability of accounts receivable and future operating results. When all collection efforts have failed and it is deemed probable that a customer account is uncollectible, that balance is written off against the existing allowance.

Shipping and Handling Costs

Shipping and handling costs are included in cost of sales. The amounts billed for shipping and included in net revenue were approximately $49,000 and $67,000 for 2015 and 2014, respectively.

Research and Development

The Company expenses research and development costs as incurred. Research and development costs include salaries, employee benefit costs, direct project costs, supplies and other related costs. Substantially all the Contract Research segment’s cost of revenue relates to research contracts performed by RMD which are in turn billed to the contracting party. Amounts of research and development included within cost of revenue for the years ended September 30, 2015 and 2014 were $10.6 million and $12.6 million, respectively. Research and development for our other business totaled $0.1 million in both 2015 and 2014.

Costs in Excess of Billings and Unbilled Receivables

Costs in excess of billings and unbilled receivables relate to research and development contracts and consists of actual costs incurred plus fees in excess of billings at provisional contract rates.

Patent Costs

Costs incurred in filing, prosecuting and maintaining patents (principally legal fees) are expensed as incurred and recorded within selling, general and administrative expenses on the consolidated statements of operations. Such costs aggregated approximately $0.5 and $0.4 million for the years ended September 30, 2015 and 2014, respectively. The Company’s Xcede joint venture capitalizes patent costs, which equaled $0.1 million in both the years ended September 30, 2015 and 2014.

Inventories

Inventories are stated at the lower of average cost or market. Cost is determined using the first-in, first-out (FIFO) method and includes material, labor and overhead. Inventories consist primarily of raw materials, work-in-process and finished goods.

A significant decrease in demand for the Company's products could result in a short-term increase in the cost of inventory purchases and an increase of excess inventory quantities on hand. In addition, as technologies change or new products are developed, product obsolescence could result in an increase in the amount of obsolete inventory quantities on hand. Therefore, although the Company makes every effort to ensure the accuracy of its forecasts of future product demand, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of the inventory and reported operating results. The Company records, as a charge to cost of revenues, any amounts required to reduce the carrying value to net realizable value.

F-9

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 2 – Summary of Significant Accounting Policies (continued)

Property, Plant and Equipment

Property, plant and equipment are recorded at cost or at fair market value for acquired assets. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets.

The estimated useful lives of assets for financial reporting purposes are as follows: building and improvements, 8 to 25 years; machinery and equipment, 5 to 20 years; office furniture and fixtures, 5 to 10 years; transportation equipment, 5 years. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. When items of property, plant and equipment are sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is included in income.

Goodwill

The Company annually assesses goodwill impairment at the end of the fourth quarter of the fiscal year by applying a fair value test. In the first step of testing for goodwill impairment, the Company estimates the fair value of each reporting unit. The reporting units have been determined as RMD which is the Contract Research reportable segment and Hilger, which is a component of the Optics reportable segment. The Company compares the fair value with the carrying value of the net assets assigned to each reporting unit. If the fair value is less than its carrying value, then the Company performs a second step and determines the fair value of the goodwill. In this second step, the fair value of goodwill is determined by deducting the fair value of a reporting unit’s identifiable assets and liabilities from the fair value of the reporting unit as a whole, as if that reporting unit had just been acquired and the purchase price were being initially allocated. If the fair value of the goodwill is less than its carrying value for a reporting unit, an impairment charge is recorded to earnings.

To determine the fair value of each of the reporting units as a whole, the Company uses a discounted cash flow analysis, which requires significant assumptions and estimates about the future operations of each reporting unit. Significant judgments inherent in this analysis include the determination of appropriate discount rates, the amount and timing of expected future cash flows and growth rates. The cash flows employed in the discounted cash flow analyses are based on financial forecasts developed internally by management. The discount rate assumptions are based on an assessment of the Company’s risk adjusted discount rate, applicable for each reporting unit. In assessing the reasonableness of the determined fair values of the reporting units, the Company evaluates its results against its current market capitalization.

In addition, the Company evaluates a reporting unit for impairment if events or circumstances change between annual tests indicating a possible impairment. Examples of such events or circumstances include the following:

• a significant adverse change in legal status or in the business climate,

• an adverse action or assessment by a regulator,

• a more likely than not expectation that a segment or a significant portion thereof will be sold, or

• the testing for recoverability of a significant asset group within the segment.

Intangible Assets

The Company's intangible assets consist of acquired customer relationships, trade names, acquired backlog, know-how and provisionally patented technologies. The Company amortizes its intangible assets with definitive lives over their useful lives, which range from 4 to 20 years, based on the time period the Company expects to receive the economic benefit from these assets.

The Company has a trade name related to its UK subsidiary that has been determined to have an indefinite life and is therefore not subject to amortization and is reviewed at least annually for potential impairment. The fair value of the Company’s trade name is estimated and compared to its carrying value to determine if impairment exists. The Company estimates the fair value of this intangible asset based on an income approach using the relief-from-royalty method. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of this asset. This approach is dependent on a number of factors, including estimates of future sales, royalty rates in the category of intellectual property, discount rates and other variables. Significant differences between these estimates and actual results could materially affect the Company’s future financial results.

F-10

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 2 – Summary of Significant Accounting Policies (continued)

Recovery of Long-Lived Assets

The Company continually assesses whether events or changes in circumstances have occurred that may warrant revision of the estimated useful lives of its long-lived assets (other than goodwill and any indefinite lived assets) or whether the remaining balances of those assets should be evaluated for possible impairment. Long-lived assets include, for example, customer relationships, trade names, backlog, know-how and provisionally patented technologies. Events or changes in circumstances that may indicate that an asset may be impaired include the following:

• a significant decrease in the market price of an asset or asset group,

• a significant adverse change in the extent or manner in which an asset or asset group is being used or in its physical condition,

• a significant adverse change in legal factors or in the business climate that could affect the value of an asset or asset group, including an adverse action or assessment by a regulator,

• an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset,

• a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group,

• a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life, or

• an impairment of goodwill at a reporting unit.

If an impairment indicator occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. The Company groups its long-lived assets for this purpose at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets or asset groups. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value.

To determine fair value the Company uses discounted cash flow analyses and estimates about the future cash flows of the asset or asset group. This analysis includes a determination of an appropriate discount rate, the amount and timing of expected future cash flows and growth rates. The cash flows employed in the discounted cash flow analyses are typically based on financial forecasts developed internally by management. The discount rate used is commensurate with the risks involved. The Company may also rely on third party valuations and or information available regarding the market value for similar assets.

If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment in the amount of the difference is recorded in the period that the impairment occurs. Estimating future cash flows requires significant judgment and projections may vary from the cash flows eventually realized.

F-11

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 2 – Summary of Significant Accounting Policies (continued)

Deferred Financing Costs

Deferred financing costs are net of accumulated amortization of $248,000 and $221,000 at September 30, 2015 and 2014, respectively. Amortization expense for the years ended September 30, 2015 and 2014 was $28,000 and $82,000, respectively. Future amortization will be $9,000 in fiscal 2016 and $2,000 in fiscal 2017.

Advertising

The Company expenses all advertising costs as incurred. Advertising expense for the years ended September 30, 2015 and 2014 was approximately $96,000 and $91,000, respectively.

Retirement Plans

The Company has retirement savings plans available to substantially all full time employees which are intended to qualify as deferred compensation plans under Section 401(k) of the Internal Revenue Code and similar laws in the United Kingdom. Pursuant to these plans, employees contribute amounts as required or allowed by the plans or by law. The Company also makes matching contributions in accordance with the terms of the plans.

The Company’s EMF subsidiary previously had a defined benefit pension plan covering hourly employees. The plan provided defined benefits based on years of service and final average salary. As of September 30, 2006, the plan was frozen. On December 1, 2014, the Company terminated and settled its pension liability with each of the remaining participants in the Plan.

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 deferred 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 carry-forwards. 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 current 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.

F-12

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 2 – Summary of Significant Accounting Policies (continued)

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 September 30, 2015 and 2014, the Company has no unrecorded liabilities 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 September 30, 2015 and 2014, the Company had no accrued interest or penalties related to uncertain tax positions.

Earnings Per Common Share

Basic earnings (loss) per common share is computed by dividing the net income applicable or loss attributable to common shares after preferred dividends paid, if applicable, by the weighted average number of common shares outstanding during each period. 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 year ended September 30, 2015, 10,165 shares of potential common stock related to restricted stock and stock options were excluded from the calculation of dilutive shares since there was a loss from operations and the inclusion of potential shares would be anti-dilutive. If the Company had not been in a loss position as of September 30, 2015, 10,165 shares of restricted stock and stock options wouldhave been considered in the denominator used to calculate diluted earnings per common share.

For the year ended September 30, 2014, 14,256 shares of common stock related to restricted stock were included in the denominator used to calculate diluted earnings per common share.

The computations of the weighted shares outstanding for the years ended September 30 are as follows:

	2015		2014
Weighted average shares outstanding
Basic		16,402,893		15,415,408
Effect of dilutive securities
Stock Options		-		-
Restricted Stock		-		14,256
Dilutive Average Shares Outstanding		16,402,893		15,429,664

Stock Based Compensation

Stock-based compensation cost is measured using the fair value recognition provisions of the FASB authoritative guidance, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors, including employee stock options, based on estimated fair values. Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized over the requisite service period of the award.

F-13

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 2 – Summary of Significant Accounting Policies (continued)

Foreign Currency Translation

The operations of Hilger, the Company’s foreign subsidiary, use their local currency as its functional currency. Assets and liabilities of the Company’s foreign operations, denominated in their local currency, Great Britain Pounds (GBP), are translated at the rate of exchange at the balance sheet date. Revenue and expense accounts are translated at the average exchange rates during the period. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are included in the foreign currency translation adjustment, a component of accumulated other comprehensive income in stockholders’ equity. Gains and losses generated by transactions denominated in foreign currencies are recorded in the accompanying statement of operations in the period in which they occur.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Accumulated comprehensive income (loss) represents cumulative translation adjustments related to Hilger, the Company’s foreign subsidiary and included cumulative adjustments pertaining to the Company’s Defined Benefit Pension Plan in 2014. The Company presents comprehensive income and losses in the consolidated statements of operations and comprehensive income (loss).

Financial Instruments

The carrying amount reported in the balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximates 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.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable. In the normal course of business, the Company extends credit to certain customers. Management performs initial and ongoing credit evaluations of their customers and generally does not require collateral.

Concentration of Credit Risk

The Company maintains allowances for potential credit losses and has not experienced any significant losses related to the collection of its accounts receivable. As of September 30, 2015 and 2014, approximately $921,000 and $665,000 or 26% and 18% of the Company’s accounts receivable are due from foreign sales.

The Company maintains cash and cash equivalents at various financial institutions in New Jersey, Massachusetts and New York. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2015 and 2014, the Company's uninsured bank balances totaled approximately $600,000 and $3,000,000. The Company has not experienced any significant losses on its cash and cash equivalents.

Recent Accounting Pronouncements

Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360) Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. In April 2014, the Financial Statement Accounting Standard Board (FASB) issued Accounting Standard Update (ASU) No. 2014-08, which provides new guidance on reporting discontinued operations and disclosures of disposals. Under the new guidance, only disposals representing a strategic shift in operations will be presented as discontinued operations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of the company that does not qualify for discontinued operations reporting.

F-14

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 2 – Summary of Significant Accounting Policies (continued)

The Company adopted this ASU in the first quarter of fiscal 2015 and it did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

Revenue from Contracts with Customers (Topic 606) Section A—Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs—Contracts with Customers (Subtopic 340-40). In May 2014, the FASB issued ASU No. 2014-09, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new guidance is effective for the Company beginning in fiscal 2019. Early adoption is permitted for periods beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the effect that ASU No. 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

Compensation—Stock Compensation (Topic 718) Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. In June 2014, the FASB issued ASU No. 2014-12, which clarifies the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. Under the new guidance, a performance target that affects vesting and could be achieved after completion of the service period should be treated as a performance condition under FASB Accounting Standards Codification (ASC) 718 and, as a result, should not be included in the estimation of the grant-date fair value of the award. An entity should recognize compensation cost for the award when it becomes probable that the performance target will be achieved. In the event that an entity determines that it is probable that a performance target will be achieved before the end of the service period, the compensation cost of the award should be recognized prospectively over the remaining service period. The new guidance is effective for the Company beginning in fiscal 2017. Early adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

Preparation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. In August 2014, the FASB issued ASU No. 2014-15, which states that under GAAP, continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting. Even when an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this ASU should be followed to determine whether to disclose information about the relevant conditions and events. The new guidance is effective for the Company beginning in fiscal 2017, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU; however, management does not currently believe that the Company will meet the conditions that would subject its financial statements to additional disclosure.

Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. In January 2015, the FASB issued ASU No. 2015-01, which eliminates the concept of extraordinary items in an entity’s income statement. Extraordinary classification outside of income from continuing operations was previously considered only when evidence clearly supported its classification as an extraordinary item. Extraordinary items were events and transactions that were distinguished by their unusual nature and by the infrequency of their occurrence. The ASU eliminates the need to separately classify, present and disclose extraordinary events. The disclosure of events or transactions that are unusual or infrequent in nature will be included in other guidance. This new guidance is effective for the Company beginning in the first quarter of 2017. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s financial statements.

F-15

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 2 – Summary of Significant Accounting Policies (continued)

Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. In April 2015, the FASB issued ASU No. 2015-03, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. This new disclosure guidance is effective for the Company beginning in fiscal 2017. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Inventory (Topic 330), Simplifying the Measurement of Inventory. In July 2015, the FASB issued ASU No. 2015-11, which requires that an entity should measure inventory within the scope of this ASU at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Substantial and unusual losses that result from subsequent measurement of inventory should be disclosed in the financial statements. This new guidance is effective for the Company beginning in fiscal 2018. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments. In September 2015, the FASB issued ASU No. 2015-16, which requires that an acquirer recognize adjustment to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The acquirer needs to record, in the same period’s financial statements, the effect on earnings of changes in depreciations, amortization or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition, an entity is required to present, separately on the face of the income statement or disclose in the notes, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This new guidance is effective for the Company beginning in fiscal 2017. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Cash and Cash Equivalents

The Company generally considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Note 3 – Acquisitions and Divestitures

On June 26, 2014, Dynasil and its wholly owned subsidiary Evaporated Metal Films Corp., a New York corporation (“EMF”) completed the acquisition of substantially all of the assets of DichroTec Thin Films, LLC (“DichroTec”), a New York limited liability company and manufacturer of optical thin film coatings.

Pursuant to the Asset Purchase Agreement (the “APA”) by and among Dynasil, EMF, DichroTec and Syncrolite, LLC, the former owner of DichroTec, EMF acquired substantially all of the assets of DichroTec for approximately $500,000 in cash and 700,000 shares of Dynasil Common Stock for a total purchase price of approximately $1.7 million. The purchase price was allocated to the assets purchased which consist of $1.6 million of machinery and equipment and $0.1 million of inventory. The APA contains customary representations, warranties, covenants and indemnification provisions for these types of transactions. DichroTec reported unaudited revenue of approximately $1.9 million for the twelve months ended December 31, 2013.

F-16

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 3 – Acquisitions and Divestitures (continued)

On December 23, 2013, the Company sold its gamma medical probe business to Dilon Technologies, Inc., a Delaware corporation (“Dilon”), for $3.5 million, the assumption of certain liabilities of the Company, and a possible contingent payment. The Agreement also provided for $250,000 of the proceeds to be deposited in escrow for a year, which amount is included in accounts receivable in the Consolidated Balance Sheet in 2014. The Agreement contains customary representations, warranties, covenants and indemnification provisions.

On November 7, 2013, the Company sold its lead paint detector business to Protec Instrument Corporation (“Protec”), a wholly owned subsidiary of Laboratoires Protec S.A., a French corporation and former European distributor of the Company’s lead paint detector products. The sales price totaled approximately $1.2 million, including the assumption of certain liabilities by Protec. The transaction also resulted in payment to the Company of approximately $500,000 in satisfaction of outstanding accounts receivable.

In connection with the sales of the businesses discussed above, the Company recorded a gain of $1.3 million which is included in Income from Operations in 2014. The businesses sold constituted substantially all of Instruments segment but did not constitute a component of the business, and therefore did not qualify to be reported as discontinued operations. The Company used $4.0 million of the proceeds from the sales to reduce its bank indebtedness.

Note 4 – Inventories

Inventories, net of reserves, at September 30, 2015 and 2014 consisted of the following:

	2015		2014
Raw Materials	$	1,828,000	$	1,805,000
Work-in-Process		862,000		858,000
Finished Goods		376,000		291,000
	$	3,066,000	$	2,954,000

Note 5 - Property, Plant and Equipment

Property, plant and equipment at September 30, 2015 and 2014 consist of the following:

	2015			2014
Land	$	176,000		$	187,000
Building and improvements		3,607,000			3,131,000
Machinery and equipment		10,270,000			9,771,000
Office furniture and fixtures		980,000			896,000
Transportation equipment		53,000			53,000
		15,086,000			14,038,000
Less accumulated depreciation		(8,424,000	)		(7,520,000	)
	$	6,662,000		$	6,518,000

Depreciation expense for the years ended September 30, 2015 and 2014 was $1,026,000 and $948,000.

F-17

 DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 6 – Intangible Assets

Intangible assets at September 30, 2015 and 2014 consist of the following:

	Useful		Gross		Accumulated
September 30, 2015	Life (years)		Amount		Amortization		Net
Acquired Customer Base		5 to 15	$	824,000	$	464,000	$	360,000
Know How		15		512,000		248,000		264,000
Trade Names		Indefinite		318,000		-		318,000
Patents		20		223,000		-		223,000
Biomedical Technologies		5		260,000		200,000		60,000
			$	2,137,000	$	912,000	$	1,225,000

	Useful		Gross		Accumulated
September 30, 2014	Life (years)		Amount		Amortization		Net
Acquired Customer Base		5 to 15	$	877,000	$	409,000	$	468,000
Know How		15		512,000		213,000		299,000
Trade Names		Indefinite		339,000		-		339,000
Patents		20		159,000		-		159,000
Biomedical Technologies		5		260,000		142,000		118,000
			$	2,147,000	$	764,000	$	1,383,000

Amortization expense for the years ended September 30, 2015 and 2014 was $170,000 and $175,000, respectively. Estimated amortization expense for each of the next five fiscal years is as follows:

	2016		2017		2018		2019		2020		Thereafter		Total
Acquired Customer Base	$	80,000	$	80,000	$	80,000	$	80,000	$	40,000	$	-	$	360,000
Know How		34,000		34,000		34,000		34,000		34,000		94,000		264,000
Patents		11,000		11,000		11,000		11,000		11,000		168,000		223,000
Biomedical Technologies		60,000		-		-		-		-		-		60,000
	$	185,000	$	125,000	$	125,000	$	125,000	$	85,000	$	262,000	$	907,000

F-18

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 7 – Goodwill

The changes to goodwill during the years ended September 30, 2015 and 2014 are summarized as follows:

	Contract
	Research		Optics			Total
Goodwill at September 30, 2013	$	4,939,000	$	1,302,000		$	6,241,000
Currency translation on Hilger Crystals				6,000			6,000
Goodwill at September 30, 2014	$	4,939,000	$	1,308,000		$	6,247,000
Currency translation on Hilger Crystals				(116,000	)		(116,000	)
Goodwill at September 30, 2015	$	4,939,000	$	1,192,000		$	6,131,000

With respect to the Company's annual goodwill impairment testing performed during the fourth quarter of fiscal year 2015, step one of the testing determined the estimated fair value of RMD (included in the Contract Research segment) and Hilger (included in the Optics segment) reporting units exceeded their carrying value by more than 20%. Accordingly, the Company concluded that no impairment had occurred and no further testing was necessary.

The step one test for the RMD reporting unit and the resulting calculation of the indicated fair value was performed as described above based on certain specific assumptions. The Company relied on a weighted average cost of capital of approximately 13% for this reporting unit which takes into consideration certain industry and specific premiums. The Company utilized a long term growth rate of approximately 1.5% for this reporting unit which considers industry research and management’s expectations as to the prospects for long term growth in this industry.  

The step one test for the Hilger reporting unit and the resulting calculation of the indicated fair value was performed as described above based on certain specific assumptions. The Company relied on a weighted average cost of capital of 16% for this reporting unit which takes into consideration certain industry and specific premiums. The Company utilized a long term growth rate of approximately 3% for this reporting unit which considers industry research and management’s expectations as to the prospects for long term growth in this industry. 

Determining the fair value using a discounted cash flow method requires significant estimates and assumptions, including market conditions, discount rates, and long-term projections of cash flows. The Company’s estimates are based upon historical experience, current market trends, projected future volumes and other information. The Company believes that the estimates and assumptions underlying the valuation methodology are reasonable; however, different estimates and assumptions could result in a different estimate of fair value. In estimating future cash flows, the Company relies on internally generated projections for a defined time period for revenue and operating profits, including capital expenditures, changes in net working capital, and adjustments for non-cash items to arrive at the free cash flow available to invested capital. A terminal value utilizing a constant growth rate of cash flows is used to calculate a terminal value after the explicit projection period. The future projected cash flows for the discrete projection period and the terminal value are discounted at a risk adjusted discount rate to determine the fair value of the reporting unit.

Note 8 – Fair Value Measurement

The Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements.

F-19

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 8 – Fair Value Measurement (continued)

Under the FASB’s authoritative guidance on fair value measurements, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the transparency of the inputs used in the valuation.

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 three levels are defined 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.

The FASB fair value guidance also applies to certain assets that indirectly impact the consolidated financial statements, including pension plan assets. While the Company does not have direct control over these assets, the Company is indirectly impacted by subsequent fair value adjustments to these assets and the actual return on these assets not only affects the net periodic benefit cost but also the amount included in the consolidated balance sheet. The Company uses the fair value hierarchy to measure the fair value of assets held in the pension plan. On December 1, 2014, the Company terminated and settled its pension liability and, consequently, no longer has any pension plan assets.

The following table presents the pension plan assets financial instruments carried at fair value as of September 30, 2014 in accordance with the fair value hierarchy:

	Quoted prices in active markets for  identical assets		Significant other observable inputs		Significant unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)
September 30, 2014
Money Market Separate Account	$	-	$	327,000	$	-
Total plan assets	$	-	$	327,000	$	-

Note 9 – Debt

As of September 30, 2015, the Company is in compliance with the financial covenants included in its outstanding indebtedness.

Senior Debt

On May 1, 2014, the Company entered into a loan and security agreement (the “Bank Loan Agreement”) and line of credit note (the “Note”) with Middlesex dated May 1, 2014 pursuant to which it agreed to provide up to $4 million, subject to the availability restrictions described below, under a revolving line of credit loan to the Company for general corporate purposes. The Bank Loan Agreement provides that the loan expires on May 1, 2017, at which time all outstanding principal and unpaid interest shall become due and payable.

The Bank Loan Agreement and the Note are secured by (i) a security interest in substantially all of the Company’s personal property and (ii) sixty-five percent (65%) of Dynasil’s equity interests in its UK subsidiary, Hilger Crystals, Ltd. Under the Note, the borrowing base is determined monthly based on eligible billed and unbilled accounts receivable and eligible inventory. The interest rate under the Note is equal the Prime Rate, but in no event less than 3.25%.

F-20

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 9 – Debt (continued)

Senior Debt (continued)

The Bank Loan Agreement also contains other terms, conditions and provisions that are customary for commercial lending transactions of this sort. The Bank Loan Agreement requires Dynasil, at the close of each fiscal quarter, to maintain a Debt Service Coverage ratio, as defined, of at least 1.20 to 1.00 on a trailing four quarter basis.

The Bank Loan Agreement provides for events of default customary for credit facilities of this type, including but not limited to non-payment, defaults on other debt, misrepresentation, breach of covenants, representations and warranties, insolvency and bankruptcy, change of management, as defined and the occurrence of a material adverse change, as defined. As a result of the material adverse change clause, the line of credit is classified as a current liability.

The Bank Loan Agreement was amended on September 29, 2015 to permit the Company to repay up to $3 million of the subordinated debt owed Massachusetts Capital Resources Company (“MCRC”) and also provides for the Company, if it meets certain conditions, to convert up to $2 million of the advances under the line of credit to a fixed rate note with the principal amortizing monthly over a five year term.

Subordinated Debt

On July 31, 2012, the Company entered into a Note Purchase Agreement (the “Agreement”) with Massachusetts Capital Resource Company (“MCRC”). Pursuant to the terms of the Agreement, the Company issued and sold to MCRC a $3,000,000 subordinated note (the “Subordinated Note”) for a purchase price of $3,000,000.

The Subordinated Note initially matured on July 31, 2017, unless accelerated pursuant to an event of default. The Subordinated Note provided for interest at the rate of ten percent (10%) per annum, with interest to be payable monthly on the last day of each calendar month and principal payments of $130,000 beginning on September 30, 2015, and on the last day of each calendar month thereafter through and including July 31, 2017.

Effective October 1, 2015, in connection with a prepayment of $2 million of the Subordinated Note, MCRC agreed to adjust the interest rate to 6% and to amend the principal repayment terms such that beginning on September 30, 2016, the Company will redeem monthly, without premium, $43,478 in principal amount of Subordinated Note together with all accrued and unpaid interest then due on the amount redeemed.

Other Debt

The Company’s Optometrics Corporation subsidiary entered into notes payable with two government entities for up to $500,000 of financing in connection with the purchase of certain equipment. The notes bear interest at 5% to 5.25% and are repayable in monthly installments over a five year period.

The Company’s Xcede joint venture raised $2.0 million through the issuance of convertible notes which bear interest at 5%, due on demand after June 30, 2016. The notes are convertible into equity of Xcede at a 20% discount to the first equity financing of Xcede of at least $3.0 million.

F-21

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 9 – Debt (continued)

Debt at September 30, 2015 and 2014 is summarized as follows:

	2015			2014
Note payable to Middlesex Savings Bank for revolving line of credit. The note expires May, 2017 at which time all outstanding principal and unpaid interest shall become due and payable. The interest rate is equal to the Prime Rate, but in no event less than 3.25%. The rate at September 30, 2015 was 3.25% and the note is secured by an interest in substantially all of the Company's personal property and sixty-five percent of the Company's equity interests in its UK subsidiary, Hilger Crystals, Ltd.	$	1,455,000		$	2,122,000
Note payable to Town of Ayer Industrial Development Finance Authority (Ayer) for an equipment line of credit made with Dynasil subsidiary Optometrics. The note payable to Ayer is in monthly installments of $16,000 per year and will be amortized over ten years with a balloon payment at five years from the date of the note. The interest rate is 5.00%. The note is secured by an interest in the equipment purchased with the line.		175,000			191,000
Note payable to Massachusetts Development Finance Agency (MBDC) for promissory note made with Dynasil subsidiary Optometrics. The note payable to MBDC is in monthly installments of $6,000 for principal and interest through March, 2019. The interest rate is 5.25%. The note is secured by an interest in substantially all of Optometric's personal property.		237,000			298,000
Convertible notes issued by Xcede, a 90% owned subsidiary, payable on demand after June 30, 2016. The interest rate is 5.00%. The notes are convertible into equity in Xcede upon completion of an equity financing raising $3,000,000, inclusive of the convertible notes and interest.		2,123,000			1,433,000
Subordinated note payable to Masschusetts Capital Resource Corporation in monthly installments of $5,000 through August, 2016 for interest only, followed by monthly payments of interest and principal through July 2018.  The interest rate is fixed at 6.00% for the life of the loan.		1,000,000			3,000,000
Total Debt	$	4,990,000		$	7,044,000
Less current portion		(1,577,000	)		(2,329,000	)
Less convertible notes		(2,123,000	)		(1,433,000	)
Long term portion	$	1,290,000		$	3,282,000

The aggregate maturities of debt based on the payment terms of the agreement are as follows:

For the years ending on September 30:
2016	$	3,700,000
2017		607,000
2018		524,000
2019		56,000
2020		21,000
Thereafter		82,000
	$	4,990,000

F-22

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 10 – Income Taxes

Income (loss) before the provision (benefit) for income taxes consists of the following:

	2015			2014
US	$	(865,000	)	$	1,724,000
Foreign		506,000			258,000
Total	$	(359,000	)	$	1,982,000

The provision (credit) for income taxes in the accompanying consolidated financial statements consists of the following:

	2015			2014
Current
Federal	$	-		$	-
State		11,000			68,000
Foreign		(71,000	)		(82,000	)
	$	(60,000	)	$	(14,000	)
Deferred
Federal	$	-		$	-
State		-			-
Foreign		54,000			(7,000	)
		54,000			(7,000	)
Income tax credit	$	(6,000	)	$	(21,000	)

A reconciliation of the federal statutory rate to the Company's effective tax rate is as follows:

	2015			2014
Tax due at statutory rate		34.00	%		34.00	%
State tax provision, net of federal		7.91	%		9.43	%
Valuation allowance		(46.10	)%		(28.63	)%
Foreign tax credits		56.91	%		(12.88	)%
Foreign rate differential and other		(51.12	)%		(3.04	)%
Total		1.60	%		(1.12	)%

F-23

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 10 – Income Taxes (continued)

Net deferred tax assets (liabilities) consisted of the following at September 30, 2015:

	Domestic			Foreign			Worldwide
Credits	$	1,488,000		$	-		$	1,488,000
NOLs		2,775,000			34,000			2,809,000
Stock compensation		82,000			-			82,000
Accruals		333,000			-			333,000
Other		138,000			-			138,000
Gross deferred tax assets		4,816,000			34,000			4,850,000
Valuation allowance		(4,377,000	)		-			(4,377,000	)
Deferred tax assets, net		439,000			34,000			473,000
Depreciation		(403,000	)		(145,000	)		(548,000	)
Intangibles		(36,000	)		(135,000	)		(171,000	)
Gross deferred tax liabilities		(439,000	)		(280,000	)		(719,000	)
Net deferred tax asset (liability)	$	-		$	(246,000	)	$	(246,000	)

Net deferred tax assets (liabilities) consisted of the following at September 30, 2014:

	Domestic			Foreign			Worldwide
Credits	$	1,496,000		$	-		$	1,496,000
NOLs		2,295,000			37,000			2,332,000
Stock compensation		492,000			-			492,000
Accruals		394,000			-			394,000
Other		114,000			-			114,000
Gross deferred tax assets		4,791,000			37,000			4,828,000
Valuation allowance		(4,238,000	)		-			(4,238,000	)
Deferred tax assets, net		553,000			37,000			590,000
Depreciation		(495,000	)		(62,000	)		(557,000	)
Intangibles		(58,000	)		(161,000	)		(219,000	)
Other		-			(18,000	)		(18,000	)
Gross deferred tax liabilities		(553,000	)		(241,000	)		(794,000	)
Net deferred tax asset (liability)	$	-		$	(204,000	)	$	(204,000	)

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 current 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. The net change in the valuation allowances for the years ending September 30, 2015 and 2014 was $0.2 million and ($0.6) million, respectively.

F-24

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 10 – Income Taxes (continued)

As of September 30, 2015 and 2014, the Company has federal net operating losses of $6.2 and $5.2 million, respectively. As of September 30, 2015 and 2014, the Company has state net operating losses of $11.7 million and $9.3 million, respectively. The federal and state net operating losses begin expiring in 2023 and 2026, respectively. At September 30, 2015 and 2014, the Company has foreign net operating loss carryforwards of approximately $171,000 and $183,000, respectively which can be carried forward indefinitely.

As of both September 30, 2015 and 2014, the Company has federal research credits of $1.4 million. The federal credits begin expiring in fiscal year 2025. As of September 30, 2015 and 2014, the Company has state research credits of $127,000 and $138,000, respectively. The state credits begin expiring in fiscal year 2026.

As of September 30, 2015 and 2014, the Company has no unrecorded liabilities 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 September 30, 2015 and 2014, the Company has no accrued interest or penalties related to uncertain tax positions.

The Company is subject to taxation in the United States and the United Kingdom. At September 30, 2015, domestic tax years from fiscal 2012 through fiscal 2015 remain open to examination by the taxing authorities and tax years 2013 through 2015 remain open in the United Kingdom.

Note 11 – Stockholders’ Equity

Stock Based Compensation

The Company adopted Stock Incentive Plans in 1996, 1999 and 2010 which provide for, among other incentives, the granting to officers, directors, employees and consultants options to purchase shares of the Company’s common stock. The Plans also allow eligible persons to be issued shares of the Company’s common stock either through the purchase of such shares or as a bonus for services rendered to the Company. Shares are generally issued at the fair market value on the date of issuance. The maximum number of shares of common stock which may be issued under the 2010 Stock Incentive Plan is 6,000,000, of which 4,006,663 and 3,862,843 shares of common stock are available for future purchases under the plan at September 30, 2015 and 2014, respectively. Options are generally exercisable at the fair market value or higher on the date of grant over a three to five year period currently expiring through 2017.

The fair value of the stock options granted is estimated at the date of grant using the Black-Scholes option pricing model. The expected volatility was determined with reference to the historical volatility of the Company's stock. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The expected term of options granted represents the period of time that the options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant. The dividend yield is expected to be 0.0% because historically the Company has not paid dividends on common stock.

The Company’s Xcede joint venture adopted an Equity Incentive Plan in 2013 which provides for, among other incentives, the granting to officers, directors, employees and consultants options to purchase shares in Xcede’s common stock. The options granted generally vest over a 3 year period. The fair value of the stock options granted is estimated at the date of grant using the Black-Scholes option pricing model using assumptions generally consistent with those used for Company stock options. Because Xcede is not publicly traded, the expected volatility is estimated with reference to the average historical volatility of a group of publicly traded companies that are believed to have similar characteristics to Xcede.

F-25

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 11 – Stockholders’ Equity (continued)

Stock Based Compensation (continued)

Stock compensation expense for the years ended September 30, 2015 and 2014 is presented below:

	2015		2014
Stock Grants	$	323,000	$	270,000
Restricted Stock Grants		28,000		195,000
Option Grants		17,000		-
Employee Stock Purchase Plan		2,000		2,000
Subsidiary Option Grants		89,000		-
Total	$	459,000	$	467,000

At September 30, 2015 there was approximately $33,000 in unrecognized stock compensation cost for Dynasil, which is expected to be recognized over a weighted average period of seven months. At September 30, 2015, the Company’s Xcede joint venture had $188,000 of unrecognized stock compensation expense associated with stock options expected to be recognized over a weighted average period of twenty months and $82,000 of unrecognized stock compensation expense vesting upon the attainment of specific capital raising targets.

Restricted Stock Grants

A summary of restricted stock activity for the year ended September 30, 2015 and 2014 is presented below:

Restricted Stock Activity for the Year ended September 30, 2015	Shares			Weighted-Average Grant-Date Fair Value
Nonvested at September 30, 2014		54,000		$	1.04
Granted		-		$	-
Vested		(27,000	)	$	1.04
Cancelled		-		$	-
Nonvested and expected to vest at September 30, 2015		27,000		$	1.04

Restricted Stock Activity for the Year ended September 30, 2014	Shares			Weighted-Average Grant-Date Fair Value
Nonvested at September 30, 2013		423,168		$	0.74
Granted		6,000		$	1.36
Vested		(375,168	)	$	0.71
Cancelled		-		$	-
Nonvested and expected to vest at September 30, 2014		54,000		$	1.04

F-26

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 11 – Stockholders’ Equity (continued)

Stock Option Grants

A summary of stock option activity for the years ended September 30, 2015 and 2014 is presented below:

	Options Outstanding			Weighted Average Exercise Price per Share ($)		Weighted Average Remaining Contractual Term (in Years)
Balance at September 30, 2013		630,532			3.33		1.06
Outstanding and exercisable at September 30, 2013		630,532			3.33		1.06
Granted		-			-
Exercised		-			-
Cancelled		(200,000	)		2.00
Balance at September 30, 2014		430,532			3.33		0.31
Outstanding and exercisable at September 30, 2014		430,532			3.33		0.31
Granted		36,232			1.82
Exercised		-			-
Cancelled		(408,552	)		3.99
Balance at September 30, 2015		58,212			2.28		1.96
Outstanding and exercisable at September 30, 2015		58,212			2.28		1.96

Stock options outstanding at September 30, 2015 are described as follows:

Outstanding Stock Options at September 30, 2015
Range of Exercise Prices		Options Outstanding		Weighted Average Contractual Life (years)		Weighted Average Exercise Price		Options Exercisable		Weighted Average Exercise Price
$	1.82 - 1.99		36,232		2.34	$	1.82		36,232	$	1.82
	2.00 - 2.99		-		-		-		-		-
	3.00 - 3.03		21,980		1.34		3.03		21,980		3.03
$	1.82 - 3.03		58,212		1.96	$	2.28		58,212	$	2.28

During the years ended September 30, 2015 and 2014, 36,232 and 0 stock options were granted and vested, respectively, and no stock options were exercised.

F-27

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 11 – Stockholders’ Equity (continued)

Subsidiary Stock Option Grants

A summary of Xcede stock option activity for the years ended September 30, 2015 and 2014 is presented below:

	Options Outstanding			Weighted Average Exercise Price per Share ($)		Weighted Average Remaining Contractual Term (in Years)
Balance at September 30, 2013		-			-
Outstanding and exercisable at September 30, 2013		-			-
Granted		506,629			1.00
Exercised		-			-
Cancelled		-			-
Balance at September 30, 2014		506,629			1.00		8.21
Outstanding and exercisable at September 30, 2014		17,500			1.00		9.24
Granted		326,129			1.00
Exercised		-			-
Cancelled		(52,500	)		1.00		8.82
Balance at September 30, 2015		780,258			1.00		8.85
Outstanding and exercisable at September 30, 2015		180,293			1.00		8.50

Employee Stock Purchase Plan

On September 28, 2010, the Company adopted an Amended and Restated Employee Stock Purchase Plan. The existing plan was amended to extend the termination date to September 28, 2020. The Employee Stock Purchase Plan permits substantially all employees to purchase common stock at a purchase price of 85% of the fair market value of the shares. Under the Plan, a total of 450,000 shares have been reserved for issuance of which 144,945 and 154,643 shares have been issued as of September 30, 2015 and 2014, respectively.

On December 16, 2011, the Company amended the Amended and Restated Employee Stock Purchase Plan to change the maximum dollar amount of stock able to be purchased through the Plan by any employee per calendar year from $5,000 to $20,000 per calendar year. During the years ended September 30, 2015 and 2014, 9,698 shares and 10,499 shares of common stock were issued under the Plan for aggregate purchase prices of $12,762 and $13,345, respectively.

Note 12 – Retirement Plans

Defined Contribution Plans

The Company has retirement savings plans available to substantially all full time employees which are intended to qualify as deferred compensation plans under Section 401(k) of the Internal Revenue Code (the “401k Plans”) or similar laws in the United Kingdom. The Company made contributions to these plans during both the years ended September 30, 2015 and 2014 of approximately $171,000 and $152,000, respectively.

F-28

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 12 – Retirement Plans (continued)

Defined Benefit Pension Plan

Pension Obligations

EMF had a defined benefit pension plan (the “Plan”) covering hourly employees. The Plan provided defined benefits based on years of service and final average salary. As of September 30, 2006, the plan was frozen.

On December 1, 2014, the Company terminated and settled EMF’s pension liability with each of the remaining participants in the Plan. The total benefit payments made upon termination were $675,000 and the actual plan assets at the date of termination were $320,000. The Company funded and expensed the difference of $355,000 upon settlement of the Plan.

The following table summarizes the Plan as of September 30, 2014:

	2014
Projected benefit obligation in excess of plan assets:
Projected benefit obligation	$	645,000
Fair value of plan assets		327,000

The following table summarizes the components of the net periodic pension cost at September 30, 2014:

	2014
Interest cost	$	27,000
Expected return on assets		11,000
Amortization of net loss		7,000
Net periodic pension cost	$	45,000

F-29

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 13 - Related Party Transactions

During the years ended September 30, 2015 and 2014, building lease payments of $961,000 and $924,000, respectively were paid to Charles River Realty, dba Bachrach, Inc., which is owned by Gerald Entine and family. Dr. Entine is a former director and employee of the Company, as well as a greater than 5% beneficial owner of the Company’s stock.

Dr. William Hagan provides consulting services to RMD through his consulting company, Hagan & Associates LLC (“H&A”). During the year ended September 30, 2014, H&A was paid approximately $13,000 in fees. No amounts were paid during 2015. This consulting arrangement is expected to continue into the future.

In 2014, the Company was awarded a grant from the National Institute of Heart Lung and Blood to develop new and improved monitors to detect blood loss and potentially fatal hemorrhage in trauma victims. The Company is using the Mayo Clinic in Rochester, MN as its primary subcontractor to conduct animal and human trials with respect to this grants.  Dr. Michael J. Joyner of the Mayo Clinic is a co-investigator under this grant. He is also a member of the Company's Board of Directors. In fiscal year 2015, the Mayo Clinic received approximately $83,315 under this grants. A small fraction of Dr. Joyner’s Mayo salary is charged to this grant. The subcontract awards to, and the work performed by, the Mayo Clinic are administered by the Mayo Foundation for Medical Education and Research and adheres to the approval and conflicts-of-interest policies of both the Mayo Clinic and the Company. We will continue to monitor this relationship through the Director and Officer Questionnaire process.

In October, 2013, the Company’s subsidiary, Dynasil Biomedical, formed Xcede Technologies, Inc., a joint venture with Mayo Clinic, to spin out and separately fund the development of its tissue sealant technology. Mr. Sulick and family members, Mr. Fox, Dr. Joyner, Dr. Hagan and Dr. Entine’s Family Trust, invested $540,000, $150,000, $35,000, $25,000 and $100,000, respectively, in Xcede and were issued convertible promissory notes in those original principal amounts which accrue interest at the rate of 5% per annum. The note purchase agreement was amended in 2015 to extend the maturation date to June 30, 2016 unless previously converted based on a 20% discount to an Xcede equity raise equal to at least $3.0 million or, at the option of the holder, into common stock based on a $5.0 million valuation. As of September 30, 2015, Mr. Sulick and family’s notes are convertible into 323,935 shares or 7.10%, Mr. Fox’s notes are convertible into 89,982 shares, or 1.97%, Dr. Joyner’s notes are convertible into 20,996 shares, or 0.46%, Dr. Hagan’s notes are convertible into 14,997 shares, or 0.33% and Dr. Entine’s notes are convertible into 59,988 shares, or 1.32%, of Xcede’s outstanding common stock.

Upon the closing of a capital stock financing, as defined, the outstanding principal amount of the notes plus all accrued but unpaid interest on the notes will be converted into shares of the same capital stock sold in the capital stock financing at a 20% discount to the price per share of that capital stock financing. Alternatively, at any time prior to a capital stock financing the note holders can convert at their option into common stock based on a $5 million valuation.

The intellectual property rights to certain of the technologies purchased by the Company in April 2011 when it established Dynasil Biomedical and acquired intellectual property assets from Dr. Daniel Ericson are jointly owned with the Mayo Clinic or persons affiliated with the Mayo Clinic. Specifically, Dynasil Biomedical's blood storage technology was invented by Dr. Daniel Ericson and Dr. Michael Joyner. Dr. Ericson assigned his ownership rights to such technology to Dynasil Biomedical and because Dr. Joyner is an employee of the Mayo Clinic, his ownership rights in such technology are assigned to the Mayo Clinic. In April 2011, the Mayo Foundation for Medical Education and Research and Dynasil Biomedical entered into an Inter-Institutional Agreement, which sets forth the terms on which the parties may work together to seek to commercialize this technology. 

F-30

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 14 – Lease Agreements

Capital Leases

The Company has entered into long-term capital lease agreements for purchases of various computer and telephone equipment at a weighted average interest rate of 7.6%. At September 30, 2015 and 2014, the remaining principal payments due under all capital leases were $119,000 and $229,000, respectively. Aggregate minimum annual principal obligations at September 30, 2015, under non-cancelable leases are as follows:

	2016		2017		2018		2019		2020		Total
Capital Lease Obligations	$	76,000	$	31,000	$	12,000	$	-	$	-	$	119,000

Property Leases

The Company has non-cancelable operating lease agreements, primarily for property, that expire through 2025. One of the Company’s facilities is leased from a company controlled by the former owner of RMD, who is also a former director of the Company and the former President of the RMD subsidiary. This building is leased as a month-to-month tenancy and will continue until terminated by either the Company with not less than six months’ prior written notice or the facility’s owner with not less than three years’ prior written notice. Rent expense for the years ended September 30, 2015 and 2014 amounted to $1.6 million and $1.4 million, respectively. Future non-cancelable minimum lease payments under property leases as of September 30, 2015 are as follows:

Years ending September 30,

2016	$	979,000
2017		493,000
2018		296,000
2019		91,000
2020		93,000
thereafter		439,000

Note 15 - Vendor Concentration

The Company purchased $1.5 million and $2.6 million respectively, of its raw materials from one supplier during the years ended September 30, 2015 and 2014. As of September 30, 2015 and 2014, amounts due to that supplier included in accounts payable were $101,000 and $263,000, respectively.

F-31

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 16 – Supplemental Disclosure of Cash Flow Information

	2015			2014
Cash Paid during the year for:
Interest	$	388,000		$	933,000
Income taxes (refunds)		(5,000	)		16,000
Non cash activities:
Assets purchased under capital leases	$	73,000		$	-
Assets acquired		-			1,739,000
Less: common shares issued in acquisition		(17,000	)		1,239,000
Cash paid in acquisition	$	-		$	500,000

Note 17 – Segment, Customer and Geographical Reporting

Segment Financial Information

Operating segments are based upon Dynasil’s internal organizational structure, the manner in which the operations are managed, the criteria used by the Chief Operating Decision Makers (CODM) to evaluate segment performance and the availability of separate financial information. Dynasil reports four reportable 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. Dynasil’s 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 manufactured specialized instruments used in various applications in the medical, industrial, and homeland security/defense sectors until substantially all its businesses were sold in the first quarter of fiscal year 2014. The Biomedical segment consists of a single business unit, Dynasil Biomedical Corporation (“Dynasil Biomedical”), a medical technology incubator which owns rights to certain early stage medical technologies. Dynasil Biomedical holds the common stock of the Xcede joint venture which is developing a tissue sealant technology and currently has no other operations. The Company’s segment information is summarized below:

F-32

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 17 – Segment, Customer and Geographical Reporting (continued)

Results of Operations for the Fiscal Year Ended September 30,
2015
	Contract Research			Optics			Instruments		Biomedical			Total
Revenue	$	18,753,000		$	21,783,000		$	-	$	-		$	40,536,000
Gross Profit		8,176,000			7,076,000			-		-			15,252,000
GM %		43.6	%		32.5	%		-		-			37.6	%
SG&A		7,629,000			6,516,000			-		1,151,000			15,296,000
Gain on sale of assets		-			178,000			-		-			178,000
Operating Income (Loss)		547,000			738,000			-		(1,151,000	)		134,000
Depreciation and Amortization		296,000			839,000			-		61,000			1,196,000
Capital expenditures		18,000			1,166,000			-		119,000			1,303,000
Intangibles, Net		264,000			678,000			-		283,000			1,225,000
Goodwill		4,939,000			1,192,000			-		-			6,131,000
Total Assets	$	7,692,000		$	15,948,000		$	48,000	$	828,000		$	24,516,000

Results of Operations for the Fiscal Year Ended September 30,
2014
	Contract Research			Optics			Instruments			Biomedical			Total
Revenue	$	21,935,000		$	19,590,000		$	773,000		$	11,000		$	42,309,000
Gross Profit		9,301,000			7,100,000			318,000			11,000			16,730,000
GM %		42.4	%		36.2	%		41.1	%		100.0	%		39.5	%
SG&A		8,546,000			5,482,000			527,000			778,000			15,333,000
Gain on sale of assets		-			-			1,297,000			-			1,297,000
Operating Income (Loss)		755,000			1,618,000			1,087,000			(765,000	)		2,695,000
Depreciation and Amortization		280,000			781,000			2,000			60,000			1,123,000
Capital expenditures		12,000			1,326,000			-			110,000			1,448,000
Intangibles, Net		299,000			854,000			-			230,000			1,383,000
Goodwill		4,939,000			1,308,000			-			-			6,247,000
Total Assets	$	8,857,000		$	16,019,000		$	313,000		$	1,188,000		$	26,377,000

Customer Financial Information

For the years ended September 30, 2015 and 2014, the top three customers for the Contract Research segment were each various agencies of the U.S. Government. For the years ended September 30, 2015 and 2014, these customers made up 57% and 69%, respectively, of Contract Research revenue.

For the Optics segment, there was one customer whose revenue represented 9% and 11% of the total segment revenues for the years ended September 30, 2015 and 2014.

Neither the Instruments nor the Biomedical segment had any revenue in the year ending September 30, 2015. One customer’s revenue represented 10% of the Instruments segment revenue in the year ended September 30, 2014. One customer’s revenue represented 100% of the Biomedical segment revenue for the year ended September 30, 2014.

F-33

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 and 2014

Note 17 – Segment, Customer and Geographical Reporting (continued)

Geographic Financial Information

Revenues by geographic location in total and as a percentage of total revenue, for the years ended September 30, 2015 and 2014 are as follows:

	2015					2014
Geographic Location	Revenue		% of Total			Revenue		% of Total
United States	$	30,928,000		76	%	$	33,936,000		80	%
Europe		4,902,000		12	%		3,001,000		7	%
Other		4,706,000		12	%		5,372,000		13	%
	$	40,536,000		100	%	$	42,309,000		100	%

Note 18 – Subsequent Events

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

F-34

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no disputes or disagreements of any nature between the Company or its management and its public auditors with respect to any aspect of accounting or financial disclosure.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

Our management, with the participation and supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified under the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, including the Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2015. Based on this evaluation, our management concluded that as of September 30, 2015, these disclosure controls and procedures were effective at the reasonable assurance level.

Management's Annual Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, the Company's principal executive and principal financial officers, or persons performing similar functions, and effected by the Company's board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Because of inherent limitations, no matter how well designed and operated, internal control over financial reporting may not prevent or detect misstatements and can only provide reasonable assurance of achieving the desired control objectives. In addition, the design of internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Our management performed the evaluation of our internal control over financial reporting under the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013).

Based on its assessment of the effectiveness in internal control over financial reporting as of September 30, 2015, our management concluded that our internal controls over financial reporting were effective.

26

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Our report was not subject to attestation by our registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting occurred during the fiscal quarter ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.   OTHER INFORMATION

None.

PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item 10 is hereby incorporated by reference to our definitive proxy statement to be filed by us within 120 days after the close of our fiscal year.

We have adopted a Code of Conduct that applies to all employees including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The text of our Code of Conduct is posted in the “Investor Information—Corporate Governance” section of our website, www.dynasil.com.

We intend to disclose on our website any amendments to, or waivers from, our Code of Business Conduct and Ethics that are required to be disclosed pursuant to the disclosure requirements of Item 5.05 of Form 8-K.

ITEM 11.   EXECUTIVE COMPENSATION 

The information required by this Item 11 is hereby incorporated by reference to our definitive proxy statement to be filed by us within 120 days after the close of our fiscal year.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item 12 is hereby incorporated by reference to our definitive proxy statement to be filed by us within 120 days after the close of our fiscal year.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item 13 is hereby incorporated by reference to our definitive proxy statement to be filed by us within 120 days after the close of our fiscal year.

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item 14 is hereby incorporated by reference to our definitive proxy statement to be filed by us within 120 days after the close of our fiscal year.

27

PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) (1) The financial statements are included under Part II, Item 8 of this Report.

(2) Schedules are omitted because they are not applicable, or are not required, or because the information is included in the consolidated financial statements and the notes thereto.

(3) EXHIBITS –

The exhibits are listed below under Part IV, Item 15(b) of this Report.

(b) EXHIBITS

3.01    Certificate of Incorporation of the Company, filed as Exhibit A to the Definitive Proxy Statement filed on January 4, 2008 and incorporated herein by reference.

3.02    Certificate of Merger of Foreign Corporation into a Domestic Corporation, dated February 29, 2008, filed as Exhibit 3.02 to Form 8-A filed on December 16, 2010 and incorporated herein by reference.

3.03    Certificate of Amendment of Certificate of Incorporation, dated March 6, 2008, filed as Exhibit 3.03 to Form 8-A filed on December 16, 2010 and incorporated herein by reference.

3.04    Certificate of Amendment of Certificate of Incorporation, dated February 26, 2009, filed as Exhibit 3.1 to Form 10-Q filed on May 15, 2009 and incorporated herein by reference.

3.05    Certificate of Designation of Preferred Stock of Dynasil Corporation of America, dated March 27, 2009, filed as Exhibit 3.05 to Form 8-A filed on December 16, 2010 and incorporated herein by reference.

3.06    Bylaws of the Company, filed as Exhibit B to the Definitive Proxy Statement filed on January 4, 2008 and incorporated herein by reference.

10.01*    2010 Stock Incentive Plan, filed as Exhibit 99 to the Definitive Proxy Statement filed on January 5, 2010 and incorporated herein by reference.

10.02     Loan and Security Agreement by and between Middlesex Savings Bank, as Lender, and the Company, as Borrower, dated as of May 1, 2014, filed as Exhibit 10.1 to Form 8-K filed on May 2, 2014 and incorporated herein by reference.

10.03    Revolving Line of Credit by and between Middlesex Savings Bank, as Lender, and the Company, as Borrower, dated as of May 1, 2014, filed as Exhibit 10.2 to Form 8-K filed on May 2, 2014 and incorporated herein by reference.

10.04    Loan Document Modification Agreement between the Company and Middlesex Savings Bank, dated September 29, 2015, filed herewith.

10.05    Note Purchase Agreement between the Company and Massachusetts Capital Resource Company, dated July 31, 2012, filed as Exhibit 10.1 to Form 8-K filed on August 6, 2012 and incorporated herein by reference.

10.06    Amendment No. 1 to Note Purchase Agreement between the Company and Massachusetts Capital Resource Company, dated September 26, 2013, filed as Exhibit 10.19 to Form 10-K filed on December 20, 2013 and incorporated herein by reference.

28

10.07     Amendment to Note Purchase Agreement between the Company and Massachusetts Capital Resource Company, dated October 1, 2015, filed herewith.

10.08     Lease Agreement between RMD Instruments, Inc. and Charles River Realty, dated July 1, 2008, filed as Exhibit 10.5 to Form 8-K filed on July 7, 2008 and incorporated herein by reference.

10.09     Lease Agreement between Radiation Monitoring Devices, Inc. and Charles River Realty, dated July 1, 2008, filed as Exhibit 10.6 to Form 8-K filed on July 7, 2008 and incorporated herein by reference.

10.14*    Amended and Restated Employee Stock Purchase Plan dated December 16, 2011, filed as Appendix A to Definitive Proxy Statement filed January 11, 2012 and incorporated herein by reference.

10.15     Omnibus Amendment to Leases, dated December 6, 2012, filed as Exhibit 10.1 to Form 8-K filed on December 12, 2012 and incorporated herein by reference.

10.16*    Employment Letter dated January 4, 2013 between the Company and Thomas Leonard, filed as Exhibit 10.1 to Form 8-K filed on January 10, 2013 and incorporated herein by reference.

10.17*    Restricted Stock Award Agreement dated June 10, 2013 between the Company and Peter Sulick, filed as Exhibit 10.1 to Form 10-Q filed on August 12, 2013 and incorporated herein by reference.

10.18    Asset Purchase Agreement by and among the Company and RMD Instruments Corp. and Protec Instrument Corporation, dated as of November 7, 2013, filed as Exhibit 10.27 to Form 10-K, filed on December 20, 2013 and incorporated herein by reference.

10.19    Asset Purchase Agreement by and among Dilon Technologies, Inc, RMD Instruments Corp. and the Company, dated December 23, 2013, filed as Exhibit 10.1 to Form 10-Q filed on February 12, 2014 and incorporated herein by reference.

10.20    Asset Purchase Agreement by and among Evaporated Metal Films Corporation, the Company, DichroTec Thin Films, LLC and Syncrolite, LLC, dated June 26, 2014, filed as Exhibit 10.01 to Form 10-Q filed on August 13, 2014 and incorporated herein by reference.

10.21*   Employment Letter dated November 12, 2015 between the Company and Robert Bowdring, filed as Exhibit 10.1 to Form 8-K filed on November 13, 2015 and incorporated herein by reference.

21.1    Subsidiaries of the Company, filed herewith.

23.1    Consent of RSM US LLP, filed herewith.

31.1(a) Rule 13a-14(a)/15d-14(a) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

31.1(b) Rule 13a-14(a)/15d-14(a) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

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) furnished herewith.

29

99.1     Press release, dated December 17, 2015 issued by Dynasil Corporation of America announcing the filing of its Annual Report on Form 10-K, filed herewith.

101** The following materials from the Company’s Annual Report on Form 10-K for the year ended September 30, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2015 and September 30, 2014, (ii) Consolidated Statements of Operations and Comprehensive Income and Loss for the years ended September 30, 2015 and 2014, (iii) Consolidated Statements of Changes in Stockholders’ Equity for the years ended September 30, 2015 and 2014; (iv) Consolidated Statements of Cash Flows for the years ended September 30, 2015 and 2014, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text.

_____________

* Management contract or compensatory plan or arrangement.

30

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act, 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
	Peter Sulick, President and CEO (Principal Executive Officer)

DATED: December 17, 2015

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

Signature		Title	Date
BY:	/s/ Thomas C. Leonard	CFO (Principal Financial and	December 17, 2015
	Thomas C. Leonard	Accounting Officer)
BY:	/s/ Peter Sulick	Chairman of the Board of Directors,	December 17, 2015
	Peter Sulick	President, CEO
		(Principal Executive Officer)
BY:	/s/ Craig Dunham	Director	December 17, 2015
	Craig Dunham
BY:	/s/ Lawrence Fox	Director	December 17, 2015
	Lawrence Fox
BY:	/s/ William K. Hagan	Director	December 17, 2015
	William K. Hagan
BY:	/s/ Michael Joyner	Director	December 17, 2015
	Michael Joyner
BY:	/s/ David Kronfeld	Director	December 17, 2015
	David Kronfeld
BY:	/s/ Alan Levine	Director	December 17, 2015
	Alan Levine

31

EX-10.04

Exhibit 10.04

LOAN DOCUMENT MODIFICATION AGREEMENT

This Loan Document Modification Agreement (this “Agreement”) is made as of this 29th day of September, 2015 by and between MIDDLESEX SAVINGS BANK, a Banking Corporation organized and existing under the laws of Massachusetts, of 6 Main Street, Natick, Massachusetts 01760 "Lender"), and Dynasil Corporation of America of 44 Hunt Street, Watertown, MA 02472 (the "Borrower"); and Optometrics Corporation of 8 Nemco Way, Ayer, MA 01432, Radiation Monitoring Devices, Inc. of 44 Hunt Street, Watertown, MA 02472, RMD Instruments Corp. of 44 Hunt Street, Watertown, MA 02472, Evaporated Metal Films Corp. of 239 Cherry Street, Ithaca, NY 14850 and Dynasil Biomedical Corp. of 44 Hunt Street, Watertown, MA 02472 (the "Guarantors").

Whereas, on May 1, 2014 Lender made a loan (the “Loan”) to Borrower evidenced by a Revolving Line of Credit Note dated May 1, 2014 from Borrower to Lender in the original principal amount of $4,000,000 (the "LOC Note"); and

Whereas, as security for the payment and performance of Borrower's obligations under the LOC Note, Borrower and Guarantors executed and delivered to Lender, (i) a Loan and Security Agreement dated May 1, 2014 between Borrower and Lender, (the “Loan Agreement”); and (ii) UCC-1 Financing Statements covering the Collateral described in the Loan Agreement and filed with the Secretary of State of the Commonwealth of Massachusetts, State of New York and State of Delaware (the "UCC-1 Financing Statements"); and (iii) Guaranties dated May 1, 2014 from the Guarantors to the Lender (the "Guaranties"); and (iv) a Stock Pledge Agreement by Borrower dated May 1, 2014 (the “Stock Pledge”); and (v) a Subordination Agreement dated as of May 1, 2014 given by Massachusetts Capital Resource Company (“MCRC”) to Lender (the “MCRC Subordination”) by which all debt of Borrower to MCRC (the “Junior Debt”) is subordinated to the Original Note. Collectively the Loan Agreement, the UCC-1 Financing Statements, the Guaranties, the Stock Pledge, and the MCRC Subordination are referred to, together with various other documents referred to therein, as the “Security Instruments”; and

Whereas, Borrower and Lender have agreed to amend the terms of the Loan by adding or modifying certain financial covenants; by Lender granting to Borrower consent to pay-down or pay-off a certain amount of the Junior Debt, and by adding an option on the part of Borrower to term out a certain amount of Advances made to Borrower under the LOC Note in accordance with Section 2 of this Agreement; and

Now, therefore, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, it is hereby agreed as follows:

1. Anything contained in Sections 2 and 3 of the MCRC Subordination to the contrary notwithstanding, Lender hereby consents to the Borrower paying-down or paying off up to $3,000,000 of the Junior Debt, utilizing up to $2,000,000 of Advances under the LOC Note, subject to compliance with all of the terms and conditions of the Loan, including but not limited to the Borrowing Base set forth in Section 1.4 of the Loan Agreement.

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2. At Borrower’s option, if, as and when Borrower achieves Adjusted EBITDA, as defined in new Section 4.9A of the Loan agreement as inserted below, of $2,850,000, and on the condition that Borrower is not in default of any of the terms and conditions of the Loan, including but not limited to the revised financial covenants set forth below, Borrower may convert up to $2,000,000 of outstanding Advances under the LOC Note to a new five year term note, in Lender’s standard form, bearing interest at the annual rate of (i) 4.5% fixed, if said option is exercised within sixty (60) days of the date of this Agreement; or otherwise (ii) the then applicable Federal Home Loan Bank Classic Advance Regular Rate for a five (5) year term plus three (3%) percent, to be rounded to the nearest one-eighth of one percentage point (0.125%). Upon such conversion, the terms of the Loan Agreement shall be deemed to have been modified and amended by renumbering Section 1.1.2 to 1.1.1 (and deleting the third, fourth and fifth paragraphs thereof) and inserting a new Section 1.1.2 as follows:

1.1.2 Term Loan. A Term Loan, evidenced by a Term Note in the original principal amount of Two Million and 00/100 ($2,000,000.00) Dollars (the "Term Note").

Such loan or loans together are referred to as the “Loan” or “Loans”, and such Line of Credit Note and the Term Note together are referred to as the "Notes", as such Notes may be modified, extended, and/or amended from time to time.

The Borrower agrees to repay to the Lender all advances (each, an "Advance"), whether pursuant to the Notes or otherwise, all of which, together with all other indebtedness, liabilities and commitments which the Borrower owes to the Lender, whether (a) arising under this Agreement or otherwise, (b) now existing or hereafter arising, or (c) direct or indirect, absolute or contingent, joint or several, due or not due, are referred to as the "Obligation(s)."

The Loans are being made upon the terms contained in this Agreement, the Notes, and any other Security Instrument (as defined herein), the terms of which are incorporated herein.

3. The terms of the Loan Agreement are further modified and amended:

A. By deleting Section 3.4 in its entirety and inserting in lieu thereof the following:

3.4 Loans and Investments. Make any loan or advance (other than in the ordinary course of business and other than inter-company loans made to a Guarantor) or declare any dividends or make any distributions to any individual or entity or make any investment in or with any individual or entity, except Borrower may pay dividends, provided that after such payments, Borrower is in compliance with the financial covenant set forth in Section 4.9 of this Agreement, and provided that, in any case, there shall be no intercompany advances, loans, or investment from the Borrower or from the Guarantors to Xcede. Intercompany advances, loans or investments from the Borrower or from the Guarantors to Biomedical will be limited to no more than $50,000 annually for the purpose of preserving Biomedical’s patents and other Intellectual Property.

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B. By deleting Section 4.9 in its entirety and inserting in lieu thereof the following:

4.9 Debt Service Coverage. At the close of each fiscal quarter of the Borrower, maintain a Debt Service Coverage ratio of at least 1.20 to 1.00 on a trailing four quarter basis. "Debt Service Coverage" shall be determined for the relevant period, and shall mean (i) EBITDA excluding non-cash and/or non-recurring expenditures or gains as permitted and the operating income or loss of the Xcede joint venture that is consolidated into Borrower’s financial results, minus un-financed (cash) capital expenditures, minus dividends and distributions, minus cash taxes paid for ongoing operations, divided by (ii) scheduled interest and principal payments made on all debt.

C. By inserting new Section 4.9A as follows:

4.9A Maximum Leverage. At the close of each fiscal quarter of the Borrower, and on a trailing four quarter basis maintain Maximum Leverage of 3.00 to 1.00 with Leverage equal to (i) Senior Secured Debt plus Subordinated Debt; divided by (ii) Adjusted EBITDA, defined as EBITDA excluding non-cash and/or recurring expenditures (expenses) or gains as permitted and the operating income or loss of the Xcede joint venture that is consolidated into Borrower’s financial results.

D. By deleting Section 4.10 in its entirety and inserting in lieu thereof the following:

4.10 Time of Testing. Borrower’s compliance with the financial covenants set forth in Sections 4.9 through 4.9A above shall be tested at the time of Borrower’s furnishing of financial statements to the Lender as required by Section 4.2.1 herein, at which time the Borrower shall also furnish the Lender with completed Covenant Compliance Certificates in the form attached hereto as Schedule 4.14.

4. Borrower and Guarantors confirm that the Security Instruments, as amended by or added to in connection with this Agreement, constitute the valid and enforceable obligations of Borrower and Guarantors, and that neither Borrower nor Guarantors has any existing claims, defenses or rights of setoff with respect thereto.

5. Borrower and Guarantor hereby warrant and represent that the statements set forth in the recitals above are true and correct, and that all representations and warranties made by Borrower and Guarantor in the Security Instruments continue to be true and correct in all material respects.

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6. It is further agreed that this Agreement shall not, in any manner, release, relinquish, or otherwise affect the liens, security interests, and rights created by or arising under the Security Instruments or its priority over other liens, charges, or encumbrances affecting the Collateral referred to therein (except by extending such lien to secure, inter alia, any and all new obligations created hereby and pursuant to any New Note and/or Amended and Restated Note executed in connection herewith) or Borrower’s or Guarantors’ liability there under; and all other terms, conditions and covenants therein contained which are not hereby amended, are hereby ratified and confirmed as previously written.

7. Borrower and Guarantors acknowledge that there are and were no oral or written representations, warranties, understandings, stipulations, agreements or promises made by any party or by any agent, employee or other representative of any party, pertaining to the subject matter of this Agreement which have not been incorporated herein. No express or implied consent to any further modifications involving any of the matters set forth in the Security Instruments or herein shall be inferred or implied by Lender's execution of this Agreement. Any further modification of the Loan shall require the express written approval of Lender. No provision hereof shall be modified or limited except by a written instrument signed by the parties hereto, expressly referring hereto and to the provision so modified or limited.

8. Except as expressly amended and modified by this Agreement, all of the terms and conditions of the Security Instruments shall remain in full force and effect, and shall apply to any advances made pursuant to the Original Note (but only if it is not superseded by an Amended and Restated Note hereunder) and any New Note and/or Amended and Restated Note executed herewith.

[The remainder of this page 4 is intentionally blank]

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Executed under seal this 29th day of September, 2015.

	Dynasil Corporation of America		Optometrics Corporation
By:	/s/ Thomas C. Leonard	By:	/s/ Thomas C. Leonard
	Thomas C. Leonard, Treasurer		Thomas C. Leonard, Treasurer
	Middlesex Savings Bank		Radiation Monitoring Devices, Inc.
By:	/s/ Tony Zhang	By	/s/ Thomas C. Leonard
	Tony Zhang, Vice President		Thomas C. Leonard, Treasurer
			RMD Instruments Corp.
		By:	/s/ Thomas C. Leonard
			Thomas C. Leonard, Treasurer
			Evaporated Metal Films Corp.
		By:	/s/ Thomas C. Leonard
			Thomas C. Leonard, Treasurer
			Dynasil Biomedial Corp.
		By:	/s/ Thomas C. Leonard
			Thomas C. Leonard, Treasurer

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EX-10.07

Exhibit 10.07

Execution Copy

AMENDMENT TO

NOTE PURCHASE AGREEMENT

This Amendment to the Note Purchase Agreement, dated as of July 31, 2012, as amended, (this "Amendment"), is entered into as of October 1,2015 (subject to the satisfaction of the conditions set forth in Section 3 below, the "Effective Date"), by and between Dynasil Corporation of America, a Delaware corporation (the "Company"), and Massachusetts Capital Resource Company (the "Purchaser").

W I T N E S S E T H:

WHEREAS, the Company and the Purchaser are parties to that certain Note Purchase Agreement, dated as of July 31,2012, (as amended to date and as amended hereby and as may be further amended, restated, supplemented or otherwise modified from time to time, the "Purchase Agreement");

WHEREAS, pursuant to the Purchase Agreement the Company issued and sold to the Purchaser the Company’s Note, due 2017, in the original outstanding principal amount of $3,000,000 (the ''Note',);

WHEREAS, the Company has requested the Purchaser to amend certain provisions of the Purchase Agreement and the Note; and

WHEREAS, the Purchaser is willing to make such amendments, all on the terms and subject to the conditions set forth herein;

NOW, THEREFORE, in consideration of the foregoing and for other good and valid consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Defined Terms. Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Purchase Agreement.

2. Amendment to Purchase Agreement and Notes. Upon satisfaction of the conditions to effectiveness set forth in Section 3 below:

(a) As of and from the Effective Date of this Amendment, all references in the Purchase Agreement, and all exhibits thereto, to the Notes being "due 2017" are hereby amended to read "due 2018". Further, all references in the Purchase Agreement, and all exhibits thereto, to the Notes being due on "July 31, 2017" are hereby amended to read "July 31, 2018".

(b) As of and from the Effective Date of this Amendment, and after giving effect to the prepayment of $2,000,000 in principal amount of the Notes, Section 1.04(a) of the Purchase Agreement is amended in its entirety to read as follows:

"(a) Required Redemption. Beginning on and with September 30, 2016, and on the last day of each calendar month thereafter through and including July 31, 2018, the Company will redeem, without premium, $43,478.26 in principal amount of the Notes, or such lesser amount as may be then outstanding, together with all accrued and unpaid interest then due on the amount so redeemed. On the stated or accelerated maturity of the Notes, the Company will pay the principal amount of the Notes then outstanding together with all accrued and unpaid interest then due thereon. No optional redemption of less than all of the Notes shall affect the obligation of the Company to make the redemptions required by this subsection."

(c) As of and from the Effective Date of this Amendment, Section 4.01(k) of the Purchase Agreement is amended in its entirety to read as follows:

"(k) Maintenance of Consolidated Fixed Charge Coverage Ratio. Maintain at all times a Consolidated Fixed Charge Coverage Ratio of not less than 1.25 to 1.00 for each rolling four quarter period ending on or after December 31, 2015. Compliance with this covenant shall be tested on a rolling four (4) quarters basis as of the last day of each quarter of each Fiscal Year of Company."

(d) As of and from the Effective Date of this Amendment, all references in the Notes to being "due 2017" are hereby amended to read "due 2018". Further, all references in the Notes to being due on "July 31, 2017" are hereby amended to read "July 31, 2018".

(e) As of and from the Effective Date of this Amendment, the first paragraph of the Notes shall be amended by reducing the interest rate from ''ten percent (10%) per annum" to "six percent (6%) per annum"; provide however, that if at any time the Company shall be in violation of the Consolidated Fixed Charge Coverage Ratio as amended by this Amendment such interest rate shall immediately thereupon and from such date revert back to ten percent (10%) per annum.

3. Conditions. The effectiveness of this Amendment is subject to the following conditions:

(a) the execution and delivery of this Amendment by the Company and the Purchaser;

(b) Middlesex Savings Bank shall have consented to this Amendment and the provisions contained herein;

(c) the execution of the acknowledgement of this Amendment by each guarantor whose name appears at the end of this Amendment;

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(d) the Purchaser shall have received a certificate of the Company certifying certified copies of all documents evidencing other necessary corporate or other action and governmental approvals, if any, with respect to this Amendment and the Note;

(e) the Company shall have prepaid $2,000,000 in principal amount of the outstanding Notes, together with all accrued and unpaid interest due thereon;

(f) if requested by the Purchaser, the Company shall have issued and delivered to the Purchaser the Note, as herein amended, against tender by the Purchaser of the existing Note; and

(g) the Company shall have paid the Purchaser all fees, costs and expenses of the Purchaser in connection with this Amendment, including, without limitation, reasonable fees, costs and expenses of counsel.

4. Representations and Warranties. The Company hereby represents and warrants to the Purchaser as follows:

(a) the Company is a corporation, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation;

(b) the Company has the power and authority to execute, deliver and perform its obligations under this Amendment, the Purchase Agreement and the Note;

(c) the execution, delivery and performance by the Company of this Amendment, the Purchase Agreement and the Note have been duly authorized by all necessary corporate action and does not and will not require any registration with, consent or approval of, notice to or action by, any Person (including any governmental agency);

(d) this Amendment, the Purchase Agreement, the Note, and any other loan documents executed in connection herewith and therewith (the "Loan Documents") to which the Company or any of its subsidiaries or affiliates is a party, as each Loan Document is amended by this Amendment, constitute the legal, valid and binding obligation of the Company and such subsidiaries and affiliates, enforceable against such person in accordance with its terms;

(e) after giving effect to this Amendment, (i) no Event of Default exists or shall exist under the Purchase Agreement, and (ii) no event of default exists or shall exist under the Company's or any of its subsidiaries' or affiliates' loan agreements with any bank or financial institution;

(f) after giving effect to this Amendment, all representations and warranties by the Company contained in the Purchase Agreement and the Note are true and correct in all material respects as of the date hereof, except to the extent made as of a specific date, in which case each such representation and warranty shall be true and correct as of such date; and

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(g) by its signature below, the Company agrees that it shall constitute an Event of Default if any representation or warranty made herein is untrue or incorrect in any material respect as of the date when made or deemed made.

5. Agreement in Full Force and Effect as Amended. Except as specifically amended hereunder, the Purchase Agreement, the Note, and other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed as so amended. Except as expressly set forth herein, this Amendment shall not be deemed to be a waiver, amendment or modification of any provisions of the Purchase Agreement or any other Loan Document or any right, power or remedy of the Purchaser, nor constitute a waiver of any provision of the Purchase Agreement or any other Loan Document, or any other document, instrument and/or agreement executed or delivered in connection therewith or of any Event of Default under any of the foregoing, in each case, whether arising before or after the date hereof or as a result of performance hereunder or thereunder. This Amendment also shall not preclude the future exercise of any right, remedy, power, or privilege available to the Purchaser whether under the Purchase Agreement, the Note, the other Loan Documents, at law or otherwise and nothing contained herein shall constitute a course of conduct or dealing among the parties hereto. All references to the Purchase Agreement shall be deemed to mean the Purchase Agreement as amended hereby. This Amendment shall not constitute a novation or satisfaction and accord of the Purchase Agreement and/or other Loan Documents, but shall constitute an amendment thereof. The parties hereto agree to be bound by the terms and conditions of the Purchase Agreement, the Note, and Loan Documents as amended by this Amendment, as though such terms and conditions were set forth herein. Each reference in the Purchase Agreement to ''this Agreement," "hereunder," "hereof," "herein" or words of similar import shall mean and be a reference to the Purchase Agreement as amended by this Amendment, and each reference herein or in any other Loan Document to the "Purchase Agreement" shall mean and be a reference to the Purchase Agreement as amended and modified by this Amendment.

6. Counterparts. This Amendment may be executed by one or more of the parties to this Amendment and any number of separate counterparts, each of which when so executed, shall be deemed an original and all said counterparts when taken together shall be deemed to constitute but one and the same instrument.

7. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the Company and its successors and assigns and the Purchaser and its successors and assigns.

8. Further Assurance. The Company hereby agrees from time to time, as and when requested by the Purchaser, to execute and deliver or cause to be executed and delivered, all such documents, instruments and agreements and to take or cause to be taken such further or other action as the Purchaser may reasonably deem necessary or desirable in order to carry out the intent and purposes of this Amendment, the Purchase Agreement, the Note, and the Loan Documents.

9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.

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10. Severability. Wherever possible, each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Amendment.

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

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IN WITNESS WHEREOF, each of the undersigned has executed this Amendment as of the date set forth above.

DYNASIL CORPORATION OF AMERICA
By: /s/	Thomas C. Leonard
	Thomas C. Leonard, CFO
MASSACHUSETTS CAPITAL RESOURCE COMPANY
By: /s/	Suzanne L. Dwyer
	Suzanne L. Dwyer, Vice President

Each of the undersigned, hereby agrees to the foregoing changes and hereby confirms its Unconditional Guaranty, dated July 31, 2012 as amended, issued by the undersigned in favor of Massachusetts Capital Resource Company.

DYNASIL BIOMEDICAL CORPORATION
By: /s/	Thomas C. Leonard
	Thomas C. Leonard, Treasurer
EVAPORATED METAL FILMS CORPORATION
By: /s/	Thomas C. Leonard
	Thomas C. Leonard, Treasurer
OPTOMETRICS CORPORATION
By: /s/	Thomas C. Leonard
	Thomas C. Leonard, Treasurer
RADIATION MONITORING DEVICES, INC.
By: /s/	Thomas C. Leonard
	Thomas C. Leonard, Treasurer
RMD INSTRUMENTS CORPORATION
By: /s/	Thomas C. Leonard
	Thomas C. Leonard, Treasurer

[Signature Page to the Amendment to Note Purchase Agreement]

EX-21.1

EXHIBIT 21.1   Subsidiaries of the Company

Subsidiaries of Dynasil Corporation of America

	Jurisdiction of Incorporation
Dynasil International, Inc (Inactive)	New Jersey
Hibshman Corporation (Inactive)	California
Optometrics Corporation	Delaware
Evaporated Metal Films Corporation	New York
Radiation Monitoring Devices, Inc.	Delaware
RMD Instruments Corporation	Delaware
Hilger Crystals, Ltd.	United Kingdom
Dynasil Biomedical Corporation	Delaware
Xcede Technologies, Inc.	Delaware

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statements on Form S-8 (No. 333-169623, 333-165651, 333-46068) of Dynasil Corporation of America and Subsidiaries (the Company) of our report dated December 17, 2015, relating to our audits of the consolidated financial statements as of and for the years ended September 30, 2015 and 2014, which appears in this Annual Report on Form 10-K of Dynasil Corporation of America for the year ended September 30, 2015.

/s/ RSM US LLP

RSM US LLP

Boston, Massachusetts

December 17, 2015

EX-31.1

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-K 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 15d-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:  December 17, 2015	/s/ Peter Sulick
	Peter Sulick
	President and Chief Executive Officer

EX-31.1B

EXHIBIT 31.1 (b)

CERTIFICATION PURSUANT TO RULE 13a–14(a)/15d-14(a) and

SECTION 302 OF THE SARBANES-OXLEY ACT

I, Thomas C. Leonard, certify that:

1.   I have reviewed this Form 10-K 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 15d-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:  December 17, 2015	/s/ Thomas C. Leonard
	Thomas C. Leonard
	Chief Financial Officer

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 this Annual Report of DYNASIL CORPORATION OF AMERICA (the "Company") on Form 10-K for the period ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Peter Sulick, President and Chief Executive Officer of the Company and Thomas C. Leonard, Chief Financial Officer of the Company, 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 our 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
	President and Chief Executive Officer
	/s/ Thomas C. Leonard
	Thomas C. Leonard
	Chief Financial Officer
December 17, 2015

EX-99.1

EXHIBIT 99.1

Contact:

Patty Kehe

Corporate Secretary

Dynasil Corporation of America

Phone: 617.668.6855

pkehe@dynasil.com

Dynasil Corporation of America Reports

Fiscal Year 2015 Financial Results

Optics segment continues double digit growth in 2015

Newton, MA, December 17, 2015 – Dynasil Corporation of America (NASDAQ: DYSL), a developer and manufacturer of optics and photonics products, optical detection and analysis technology and components for the homeland security, medical and industrial markets, today announced a net loss of ($0.4 million) or ($0.01) per common share for the fiscal year ended September 30, 2015 and the filing of its Annual Report on Form 10-K.

“Our four optics business units grew their revenues by 11% in 2015, the second year of double digit growth.” said CEO Peter Sulick. “In fact, we achieved record revenues at three of our optics business units. We believe these business units will continue to generate solid revenue growth in 2016, particularly as a result of the recently announced three year arrangement entered into by our UK subsidiary, Hilger Crystals, to supply high-quality crystal components to a leading global supplier of security inspection equipment utilizing X-ray and gamma-ray imaging.

Our Contract Research segment revenues declined 15% to $18.8 million in 2015. Over the past three years Contract Research revenue has declined from $24.3 million in 2012 to $18.8 million in 2015,” continued Mr. Sulick. “While gradual, this substantial reduction is reflective of the changes in Federal government funding policies and budget cutbacks for research across the Federal agencies serviced by RMD. We believe this represents a new reality for government-funded research. As a result, we have refocused this business to several key research areas, reflective of our core expertise in materials science. RMD’s research focus is now more concentrated on important areas of radiation detection and related fields with fewer but larger and more collaborative projects. These changes have been driven by the needs and expressed interests of our government and commercial research clients. We do not anticipate continued erosion of our Research revenue beyond the current levels over the next two years.

During 2015, we also repaid approximately $3 million of outstanding debt, including a $2 million prepayment of our 10% subordinated loan with Massachusetts Capital Resource Company, and we were able to secure a reduction of the interest rate to 6% for our remaining $1.0 million outstanding balance.”

“In addition, Xcede Technologies, Inc., our majority-owned subsidiary, raised $0.6 million of convertible notes in fiscal 2015 (as well as an additional $0.3 million raised subsequent to our fiscal yearend) from external investors, including officers and directors of the Company, to fund on-going development of its exciting tissue sealant technology,” added Mr. Sulick. “As we previously announced, Xcede expanded its management team with the addition of Linda Zuckerman, Ph.D. who brings substantial prior experience in the development and approval processes for tissue sealant products. I am confident that with Linda’s experience and leadership, we will be well-positioned to accelerate the development of this breakthrough tissue sealant.”

Dynasil incurred a net loss of $0.4 million in 2015 compared to net income of $2.0 million in 2014. The net loss is 2015 includes a $0.4 million charge for the final termination and settlement of our subsidiary’s pension plan as well as a $0.2 million gain on the sale of a product line while the net income in 2014 included a $1.3 million gain from the sale of two businesses. Excluding the pension charge and the gain on sale of the product line in 2015 and the gain on the sale of the two businesses in 2014, the Company’s net loss was $0.2 million in 2015 compared to net income of $0.7 million in 2014.

Net income (loss) also included losses of approximately $1.2 million and $0.8 million in 2015 and 2014, respectively, associated with research and start-up costs of Xcede Technologies, Inc. (“Xcede”), a joint venture with the Mayo Clinic, in which the Company owns 90% of the common stock (approximately 69% assuming conversion of Xcede’s outstanding convertible promissory notes). Because Dynasil has voting control of Xcede via its common stock ownership, it is required to be included in our consolidated net income for financial reporting purposes even though Dynasil is no longer funding Xcede.

Revenue declined $1.8 million to $40.5 million in 2015 compared to $42.3 million in 2014. Approximately $0.8 million of the decrease is a result of the sale of the lead paint and gamma medical probe businesses in the first quarter of 2014. In addition, Contract Research segment revenues declined $3.2 million or 15% to $18.8 million in 2015 while the Optics segment revenues increased $2.2 million or 11% to $21.8 million in 2015.

Gross profit for fiscal year 2015 decreased $1.5 million or 9% to $15.3 million from the prior year amount of $16.7 million. Gross profit as a percentage of revenue decreased to 38% in 2015 from 40% in 2014 primarily as a result of lower gross profit margins in the Optics segment related to higher scrap levels associated with scaling up of production yields for a large customer and the integration into EMF of the Rochester coating acquisition completed in June of 2014. Management does not expect these yield issues to recur in 2016.

Total operating expenses remained essentially unchanged at $15.3 million or 38% of revenue in fiscal year 2015, from $15.3 million or 36% of revenue in fiscal year 2014. Excluding the operating expenses associated with the Instruments segment, the assets and business of which were substantially disposed of in the first quarter of fiscal year 2014, total operating expenses increased 3% to $15.3 million in 2015 compared to $14.8 million in 2014.

Conference Call Information

Dynasil will host a conference call for investors and analysts at 5:00 p.m. ET today. The call will be hosted by Chairman, CEO and President Peter Sulick and Chief Financial Officer Thomas Leonard. Those who wish to listen to the conference call can go to the event page at or visit the Investor Information section of the Company’s website at www.dynasil.com. The call also may be accessed by dialing (888) 346-2613 or (412) 902-4252. For interested individuals unable to join the live conference call, a webcast replay will be available on the Company’s website for one year.

Use of Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this press release also contains (i) a measure of our net income excluding the termination and settlement of pension plan and a gain on the sale of a product line, (ii) a measure of our net income excluding the gain on sale of our lead paint and gamma medical probe businesses and (iii) a measure of adjusted SG&A expenses for fiscal years 2014 “as if” the Instruments businesses which were sold in the first quarter of 2014 had been sold prior to the start of fiscal year 2014. The Company believes that the inclusion of these non-GAAP financial measures help investors to gain a meaningful understanding of the Company’s core operating results and enhances comparing such performance with prior periods. Our management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods. The non-GAAP financial measures included in this press release are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP.

About Dynasil

Dynasil Corporation of America (NASDAQ: DYSL) develops and manufactures optics and photonics products, optical detection and analysis technology and components for the homeland security, medical and industrial markets. Combining world-class expertise in research and materials science with extensive experience in manufacturing and product development, Dynasil is commercializing products including dual-mode radiation detection solutions for Homeland Security and commercial applications and sensors for non-destructive testing. Dynasil has an impressive and growing portfolio of issued and pending U.S. patents. The Company is based in Newton, 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 press 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 our results of operations, our compliance with the financial covenants under our loan agreements with Middlesex Savings Bank and Massachusetts Capital Resource Company, Xcede obtaining financing from outside investors, the commercialization of our products including our dual mode detectors, our development of new technologies including at Dynasil Biomedical, uncertainty of the impact of the DichroTec acquisition, 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 “plans,” “intends,” “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 comply with the financial covenants 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, 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 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

	September 30, 2015			September 30, 2014
ASSETS
Current Assets
Cash and cash equivalents	$	1,295,000		$	3,842,000
Accounts receivable, net		3,382,000			3,240,000
Costs in excess of billings and unbilled receivables		1,518,000			1,235,000
Inventories, net of reserves		3,066,000			2,954,000
Prepaid expenses and other current assets		1,167,000			861,000
Total current assets		10,428,000			12,132,000
Property, Plant and Equipment, net		6,662,000			6,518,000
Other Assets
Intangibles, net		1,225,000			1,383,000
Goodwill		6,131,000			6,247,000
Deferred financing costs, net		12,000			39,000
Security and other deposits		58,000			58,000
Total other assets		7,426,000			7,727,000
Total Assets	$	24,516,000		$	26,377,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt	$	1,577,000		$	2,329,000
Capital lease obligations, current		76,000			134,000
Convertible notes		2,123,000			1,433,000
Accounts payable		1,886,000			1,602,000
Deferred revenue		109,000			103,000
Accrued expenses and other liabilities		2,650,000			2,503,000
Total current liabilities		8,421,000			8,104,000
Long-term Liabilities
Long-term debt, net of current portion		1,290,000			3,282,000
Capital lease obligations, net of current portion		43,000			95,000
Deferred tax liability		284,000			264,000
Pension and other long-term liabilities		50,000			318,000
Total long-term liabilities		1,667,000			3,959,000
Stockholders' Equity
Dynasil stockholders' equity		14,616,000			14,383,000
Noncontrolling interest		(188,000	)		(69,000	)
Total stockholders' equity		14,428,000			14,314,000
Total Liabilities and Stockholders' Equity	$	24,516,000		$	26,377,000

DYNASIL CORPORATION OF AMERICA

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

	2015			2014
Net revenue	$	40,536,000		$	42,309,000
Cost of revenue		25,284,000			25,579,000
Gross profit		15,252,000			16,730,000
Operating expenses:
Sales and marketing		1,215,000			1,408,000
Research and development		1,715,000			1,343,000
General and administrative		12,366,000			12,581,000
Gain on sale of assets		(178,000	)		(1,297,000	)
Total operating expenses		15,118,000			14,035,000
Income from operations		134,000			2,695,000
Interest expense, net		493,000			713,000
Income (loss) before taxes		(359,000	)		1,982,000
Income tax (credit)		(6,000	)		(21,000	)
Net income (loss)		(353,000	)		2,003,000
Less: Net loss attributable to noncontrolling interest		(119,000	)		(69,000	)
Net income (loss) attributable to common stockholders	$	(234,000	)	$	2,072,000
Net income (loss)	$	(353,000	)	$	2,003,000
Other comprehensive income (loss):
(Increase) decrease in pension liability		318,000			(68,000	)
Foreign currency translation		(306,000	)		13,000
Total comprehensive income (loss)	$	(341,000	)	$	1,948,000
Basic net income (loss) per common share	$	(0.01	)	$	0.13
Diluted net income (loss) per common share	$	(0.01	)	$	0.13
Weighted average shares outstanding
Basic		16,402,893			15,415,408
Diluted		16,402,893			15,429,664

XML

Document And Entity Information - USD ($)	12 Months Ended
	Sep. 30, 2015	Dec. 07, 2015	Mar. 31, 2015
Document Information [Line Items]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Sep. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	FY
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		16,625,794
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 13,065,449

XML

CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2015	Sep. 30, 2014
Current Assets
Cash and cash equivalents	$ 1,295,000	$ 3,842,000
Accounts receivable, net of allowances of $168,000 and $299,000 at September 30, 2015 and September 30, 2014, respectively	3,382,000	3,240,000
Costs in excess of billings and unbilled receivables	1,518,000	1,235,000
Inventories, net of reserves	3,066,000	2,954,000
Prepaid expenses and other current assets	1,167,000	861,000
Total current assets	10,428,000	12,132,000
Property, Plant and Equipment, net	6,662,000	6,518,000
Other Assets
Intangibles, net	1,225,000	1,383,000
Goodwill	6,131,000	6,247,000
Deferred financing costs, net	12,000	39,000
Security and other deposits	58,000	58,000
Total other assets	7,426,000	7,727,000
Total Assets	24,516,000	26,377,000
Current Liabilities
Current portion of long-term debt	1,577,000	2,329,000
Capital lease obligations, current	76,000	134,000
Convertible notes	2,123,000	1,433,000
Accounts payable	1,886,000	1,602,000
Deferred revenue	109,000	103,000
Accrued expenses and other liabilities	2,650,000	2,503,000
Total current liabilities	8,421,000	8,104,000
Long-term Liabilities
Long-term debt, net of current portion	1,290,000	3,282,000
Capital lease obligations, net of current portion	43,000	95,000
Deferred tax liability	284,000	264,000
Pension and other long-term liabilities	50,000	318,000
Total long-term liabilities	1,667,000	3,959,000
Stockholders' Equity
Common Stock, $0.0005 par value, 40,000,000 shares authorized, 17,368,738 and 17,140,182 shares issued, 16,558,578 and and 16,330,022 shares outstanding at September 30, 2015 and September 30, 2014, respectively.	9,000	9,000
Additional paid in capital	19,650,000	19,195,000
Accumulated other comprehensive income	110,000	98,000
Accumulated deficit	(4,167,000)	(3,933,000)
Less 810,160 shares of treasury stock - at cost	(986,000)	(986,000)
Total Dynasil stockholders' equity	14,616,000	14,383,000
Noncontrolling interest	(188,000)	(69,000)
Total stockholders' equity	14,428,000	14,314,000
Total Liabilities and Stockholders' Equity	$ 24,516,000	$ 26,377,000

XML

CONSOLIDATED BALANCE SHEETS [Parenthetical] - USD ($)	Sep. 30, 2015	Sep. 30, 2014
Allowance for doubtful accounts (in dollars)	$ 168,000	$ 299,000
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	17,368,738	17,140,182
Common stock, shares outstanding	16,558,578	16,330,022
Treasury stock, shares	810,160	810,160

XML

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Net revenue	$ 40,536,000	$ 42,309,000
Cost of revenue	25,284,000	25,579,000
Gross profit	15,252,000	16,730,000
Operating expenses:
Sales and marketing	1,215,000	1,408,000
Research and development	1,715,000	1,343,000
General and administrative	12,366,000	12,581,000
Gain on sale of assets	(178,000)	(1,297,000)
Total operating expenses	15,118,000	14,035,000
Income from operations	134,000	2,695,000
Interest expense, net	493,000	713,000
Income (loss) before taxes	(359,000)	1,982,000
Income tax (credit)	(6,000)	(21,000)
Net income (loss)	(353,000)	2,003,000
Less: Net loss attributable to noncontrolling interest	(119,000)	(69,000)
Net income (loss) attributable to common stockholders	(234,000)	2,072,000
Net income (loss)	(353,000)	2,003,000
Other comprehensive income (loss):
(Increase) decrease in pension liability	318,000	(68,000)
Foreign currency translation	(306,000)	13,000
Total comprehensive income (loss)	$ (341,000)	$ 1,948,000
Basic net income (loss) per common share (in dollars per share)	$ (0.01)	$ 0.13
Diluted net income (loss) per common share (in dollars per share)	$ (0.01)	$ 0.13
Weighted average shares outstanding
Basic (in shares)	16,402,893	15,415,408
Diluted (in shares)	16,402,893	15,429,664

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($)	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Other Comprehensive Income [Member]	Accumulated Deficit [Member]	Treasury Stock [Member]	Noncontrolling Interest [Member]
Balance at Sep. 30, 2013	$ 10,646,000	$ 8,000	$ 17,476,000	$ 153,000	$ (6,005,000)	$ (986,000)	$ 0
Balance (in shares) at Sep. 30, 2013		16,224,402				810,160
Issuance of shares of common stock under employee stock purchase plan	13,000	$ 0	13,000	0	0	$ 0	0
Issuance of shares of common stock under employee stock purchase plan (in shares)		10,499				0
Stock-based compensation costs	467,000	$ 0	467,000	0	0	$ 0	0
Stock-based compensation costs (in shares)		205,281				0
Issuance of shares for acquisition	1,240,000	$ 1,000	1,239,000	0	0	$ 0	0
Issuance of shares for acquisition (in shares)		700,000				0
Adjustment for decrease in pension liability, net of tax	(68,000)	$ 0	0	(68,000)	0	$ 0	0
Foreign currency translation adjustment	13,000	0	0	13,000	0	0	0
Net income (loss)	2,003,000	0	0	0	2,072,000	0	(69,000)
Balance at Sep. 30, 2014	14,314,000	$ 9,000	19,195,000	98,000	(3,933,000)	$ (986,000)	(69,000)
Balance (in shares) at Sep. 30, 2014		17,140,182				810,160
Issuance of shares of common stock under employee stock purchase plan	13,000	$ 0	13,000	0	0	$ 0	0
Issuance of shares of common stock under employee stock purchase plan (in shares)		9,698				0
Stock-based compensation costs	459,000	$ 0	459,000	0	0	$ 0	0
Stock-based compensation costs (in shares)		228,500				0
Adjustment for escrow settlement	(17,000)	$ 0	(17,000)	0	0	$ 0	0
Adjustment for escrow settlement (in shares)		(9,642)				0
Adjustment for decrease in pension liability, net of tax	318,000	$ 0	0	318,000	0	$ 0	0
Foreign currency translation adjustment	(306,000)	0	0	(306,000)	0	0	0
Net income (loss)	(353,000)	0	0	0	(234,000)	0	(119,000)
Balance at Sep. 30, 2015	$ 14,428,000	$ 9,000	$ 19,650,000	$ 110,000	$ (4,167,000)	$ (986,000)	$ (188,000)
Balance (in shares) at Sep. 30, 2015		17,368,738				810,160

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash flows from operating activities:
Net income (loss)	$ (353,000)	$ 2,003,000
Adjustments to reconcile net income (loss) to net cash:
Stock compensation expense	459,000	467,000
Foreign exchange loss (gain)	70,000	6,000
Gain on sale of assets	(178,000)	(1,297,000)
Depreciation and amortization	1,196,000	1,123,000
Pension expense	318,000	0
Other	346,000	245,000
Other changes in assets and libilities:
Accounts receivable, net	(196,000)	518,000
Inventories	(365,000)	(395,000)
Costs in excess of billings and unbilled receivables	(283,000)	302,000
Prepaid expenses and other assets	(346,000)	322,000
Accounts payable	304,000	(455,000)
Accrued expenses and other liabilities	(145,000)	(531,000)
Deferred revenue	9,000	(410,000)
Net cash from operating activities	836,000	1,898,000
Cash flows from investing activities:
Acquisitions	0	(500,000)
Proceeds from sale of assets	244,000	4,345,000
Purchases of property, plant and equipment	(1,310,000)	(1,448,000)
Net cash from investing activities	(1,066,000)	2,397,000
Cash flows from financing activities:
Proceeds from issuance of common stock	12,000	14,000
Net proceeds from issuance of convertible notes	613,000	1,433,000
Principal payments on capital leases	(147,000)	(128,000)
Proceeds from short and long-term debt	2,501,000	2,920,000
Payments on long-term debt	(5,244,000)	(7,135,000)
Net cash from financing activities	(2,265,000)	(2,896,000)
Effect of exchange rates on cash and cash equivalents	(52,000)	6,000
Net change in cash and cash equivalents	(2,547,000)	1,405,000
Cash and cash equivalents, beginning	3,842,000	2,437,000
Cash and cash equivalents, ending	$ 1,295,000	$ 3,842,000

XML

Nature of Operations

12 Months Ended

Sep. 30, 2015

Disclosure Text Block [Abstract]

Nature of Operations [Text Block]

Note 1 – Nature of Operations

Nature of Operations

The Company is primarily engaged in the development, marketing and manufacturing of detection, sensing and analysis technology and optical components as well as contract research. The Company’s products and services are used in a broad range of application markets including the homeland security, industrial and medical markets sectors. The products and services are sold throughout the United States and internationally.

XML

Summary of Significant Accounting Policies

12 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 2 – Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Dynasil Corporation of America (“Dynasil” or the “Company”) and its wholly-owned subsidiaries: Optometrics Corporation (“Optometrics”), Evaporated Metal Films Corporation (“EMF”), Dynasil Products, formerly known as RMD Instruments Corp. (“Dynasil Products”), Radiation Monitoring Devices, Inc. (“RMD”), Hilger Crystals, Ltd (“Hilger”) and Dynasil Biomedical Corp (“Dynasil Biomedical”). All significant intercompany transactions and balances have been eliminated.

Revenue Recognition

Revenue from sales of products is recognized at the time title and the risks and rewards of ownership pass. 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.

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. 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 represented by agreed billing amounts. Recognition of losses on projects is taken as soon as the loss is reasonably determinable. The Company has an accrual for contract losses in the amount of $110,000 and $117,000 as of September 30, 2015 and 2014, respectively.

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.

Allowance for Doubtful Accounts Receivable

The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer's current credit worthiness, as determined by a review of their current credit information. The Company continuously monitors collections and payments from our customers and maintains a provision for estimated credit losses based upon historical experience and any specific customer collection issues that have been identified. While such credit losses have historically been minimal, within expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same credit loss rates as in the past. A significant change in the liquidity or financial position of any significant customers could have a material adverse effect on the collectability of accounts receivable and future operating results. When all collection efforts have failed and it is deemed probable that a customer account is uncollectible, that balance is written off against the existing allowance.

Shipping and Handling Costs

Shipping and handling costs are included in cost of sales. The amounts billed for shipping and included in net revenue were approximately $49,000 and $67,000 for 2015 and 2014, respectively.

Research and Development

The Company expenses research and development costs as incurred. Research and development costs include salaries, employee benefit costs, direct project costs, supplies and other related costs. Substantially all the Contract Research segment’s cost of revenue relates to research contracts performed by RMD which are in turn billed to the contracting party. Amounts of research and development included within cost of revenue for the years ended September 30, 2015 and 2014 were $10.6 million and $12.6 million, respectively. Research and development for our other business totaled $0.1 million in both 2015 and 2014.

Costs in Excess of Billings and Unbilled Receivables

Costs in excess of billings and unbilled receivables relate to research and development contracts and consists of actual costs incurred plus fees in excess of billings at provisional contract rates.

Patent Costs

Costs incurred in filing, prosecuting and maintaining patents (principally legal fees) are expensed as incurred and recorded within selling, general and administrative expenses on the consolidated statements of operations. Such costs aggregated approximately $0.5 and $0.4 million for the years ended September 30, 2015 and 2014, respectively. The Company’s Xcede joint venture capitalizes patent costs, which equaled $0.1 million in both the years ended September 30, 2015 and 2014.

Inventories

Inventories are stated at the lower of average cost or market. Cost is determined using the first-in, first-out (FIFO) method and includes material, labor and overhead. Inventories consist primarily of raw materials, work-in-process and finished goods.

A significant decrease in demand for the Company's products could result in a short-term increase in the cost of inventory purchases and an increase of excess inventory quantities on hand. In addition, as technologies change or new products are developed, product obsolescence could result in an increase in the amount of obsolete inventory quantities on hand. Therefore, although the Company makes every effort to ensure the accuracy of its forecasts of future product demand, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of the inventory and reported operating results. The Company records, as a charge to cost of revenues, any amounts required to reduce the carrying value to net realizable value.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost or at fair market value for acquired assets. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets.

The estimated useful lives of assets for financial reporting purposes are as follows: building and improvements, 8 to 25 years; machinery and equipment, 5 to 20 years; office furniture and fixtures, 5 to 10 years; transportation equipment, 5 years. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. When items of property, plant and equipment are sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is included in income.

Goodwill

The Company annually assesses goodwill impairment at the end of the fourth quarter of the fiscal year by applying a fair value test. In the first step of testing for goodwill impairment, the Company estimates the fair value of each reporting unit. The reporting units have been determined as RMD which is the Contract Research reportable segment and Hilger, which is a component of the Optics reportable segment. The Company compares the fair value with the carrying value of the net assets assigned to each reporting unit. If the fair value is less than its carrying value, then the Company performs a second step and determines the fair value of the goodwill. In this second step, the fair value of goodwill is determined by deducting the fair value of a reporting unit’s identifiable assets and liabilities from the fair value of the reporting unit as a whole, as if that reporting unit had just been acquired and the purchase price were being initially allocated. If the fair value of the goodwill is less than its carrying value for a reporting unit, an impairment charge is recorded to earnings.

To determine the fair value of each of the reporting units as a whole, the Company uses a discounted cash flow analysis, which requires significant assumptions and estimates about the future operations of each reporting unit. Significant judgments inherent in this analysis include the determination of appropriate discount rates, the amount and timing of expected future cash flows and growth rates. The cash flows employed in the discounted cash flow analyses are based on financial forecasts developed internally by management. The discount rate assumptions are based on an assessment of the Company’s risk adjusted discount rate, applicable for each reporting unit. In assessing the reasonableness of the determined fair values of the reporting units, the Company evaluates its results against its current market capitalization.

In addition, the Company evaluates a reporting unit for impairment if events or circumstances change between annual tests indicating a possible impairment. Examples of such events or circumstances include the following:

• a significant adverse change in legal status or in the business climate,

• an adverse action or assessment by a regulator, 

• a more likely than not expectation that a segment or a significant portion thereof will be sold, or

• the testing for recoverability of a significant asset group within the segment.

Intangible Assets

The Company's intangible assets consist of acquired customer relationships, trade names, acquired backlog, know-how and provisionally patented technologies. The Company amortizes its intangible assets with definitive lives over their useful lives, which range from 4 to 20 years, based on the time period the Company expects to receive the economic benefit from these assets.

The Company has a trade name related to its UK subsidiary that has been determined to have an indefinite life and is therefore not subject to amortization and is reviewed at least annually for potential impairment. The fair value of the Company’s trade name is estimated and compared to its carrying value to determine if impairment exists. The Company estimates the fair value of this intangible asset based on an income approach using the relief-from-royalty method. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of this asset. This approach is dependent on a number of factors, including estimates of future sales, royalty rates in the category of intellectual property, discount rates and other variables. Significant differences between these estimates and actual results could materially affect the Company’s future financial results.

Recovery of Long-Lived Assets

The Company continually assesses whether events or changes in circumstances have occurred that may warrant revision of the estimated useful lives of its long-lived assets (other than goodwill and any indefinite lived assets) or whether the remaining balances of those assets should be evaluated for possible impairment. Long-lived assets include, for example, customer relationships, trade names, backlog, know-how and provisionally patented technologies. Events or changes in circumstances that may indicate that an asset may be impaired include the following:

• a significant decrease in the market price of an asset or asset group,

• a significant adverse change in the extent or manner in which an asset or asset group is being used or in its physical condition,

• a significant adverse change in legal factors or in the business climate that could affect the value of an asset or asset group, including an adverse action or assessment by a regulator,

• an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset,

• a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group,

• a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life, or

• an impairment of goodwill at a reporting unit.

If an impairment indicator occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. The Company groups its long-lived assets for this purpose at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets or asset groups. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value.

To determine fair value the Company uses discounted cash flow analyses and estimates about the future cash flows of the asset or asset group. This analysis includes a determination of an appropriate discount rate, the amount and timing of expected future cash flows and growth rates. The cash flows employed in the discounted cash flow analyses are typically based on financial forecasts developed internally by management. The discount rate used is commensurate with the risks involved. The Company may also rely on third party valuations and or information available regarding the market value for similar assets.

If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment in the amount of the difference is recorded in the period that the impairment occurs. Estimating future cash flows requires significant judgment and projections may vary from the cash flows eventually realized.

Deferred Financing Costs

Deferred financing costs are net of accumulated amortization of $248,000 and $221,000 at September 30, 2015 and 2014, respectively. Amortization expense for the years ended September 30, 2015 and 2014 was $28,000 and $82,000, respectively. Future amortization will be $9,000 in fiscal 2016 and $2,000 in fiscal 2017.

Advertising

The Company expenses all advertising costs as incurred. Advertising expense for the years ended September 30, 2015 and 2014 was approximately $96,000 and $91,000, respectively.

Retirement Plans

The Company has retirement savings plans available to substantially all full time employees which are intended to qualify as deferred compensation plans under Section 401(k) of the Internal Revenue Code and similar laws in the United Kingdom. Pursuant to these plans, employees contribute amounts as required or allowed by the plans or by law. The Company also makes matching contributions in accordance with the terms of the plans.

The Company’s EMF subsidiary previously had a defined benefit pension plan covering hourly employees. The plan provided defined benefits based on years of service and final average salary. As of September 30, 2006, the plan was frozen. On December 1, 2014, the Company terminated and settled its pension liability with each of the remaining participants in the Plan.

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 deferred 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 carry-forwards. 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 current 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.

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 September 30, 2015 and 2014, the Company has no unrecorded liabilities 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 September 30, 2015 and 2014, the Company had no accrued interest or penalties related to uncertain tax positions.

Earnings Per Common Share

Basic earnings (loss) per common share is computed by dividing the net income applicable or loss attributable to common shares after preferred dividends paid, if applicable, by the weighted average number of common shares outstanding during each period. 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 year ended September 30, 2015, 10,165 shares of potential common stock related to restricted stock and stock options were excluded from the calculation of dilutive shares since there was a loss from operations and the inclusion of potential shares would be anti-dilutive. If the Company had not been in a loss position as of September 30, 2015, 10,165 shares of restricted stock and stock options would have been considered in the denominator used to calculate diluted earnings per common share.

For the year ended September 30, 2014, 14,256 shares of common stock related to restricted stock were included in the denominator used to calculate diluted earnings per common share.

The computations of the weighted shares outstanding for the years ended September 30 are as follows:

	2015		2014
Weighted average shares outstanding
Basic		16,402,893		15,415,408
Effect of dilutive securities
Stock Options		-		-
Restricted Stock		-		14,256
Dilutive Average Shares Outstanding		16,402,893		15,429,664

Stock Based Compensation

Stock-based compensation cost is measured using the fair value recognition provisions of the FASB authoritative guidance, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors, including employee stock options, based on estimated fair values. Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized over the requisite service period of the award.

Foreign Currency Translation

The operations of Hilger, the Company’s foreign subsidiary, use their local currency as its functional currency. Assets and liabilities of the Company’s foreign operations, denominated in their local currency, Great Britain Pounds (GBP), are translated at the rate of exchange at the balance sheet date. Revenue and expense accounts are translated at the average exchange rates during the period. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are included in the foreign currency translation adjustment, a component of accumulated other comprehensive income in stockholders’ equity. Gains and losses generated by transactions denominated in foreign currencies are recorded in the accompanying statement of operations in the period in which they occur.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Accumulated comprehensive income (loss) represents cumulative translation adjustments related to Hilger, the Company’s foreign subsidiary and included cumulative adjustments pertaining to the Company’s Defined Benefit Pension Plan in 2014. The Company presents comprehensive income and losses in the consolidated statements of operations and comprehensive income (loss).

Financial Instruments

The carrying amount reported in the balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximates 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.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable. In the normal course of business, the Company extends credit to certain customers. Management performs initial and ongoing credit evaluations of their customers and generally does not require collateral.

Concentration of Credit Risk

The Company maintains allowances for potential credit losses and has not experienced any significant losses related to the collection of its accounts receivable. As of September 30, 2015 and 2014, approximately $921,000 and $665,000 or 26% and 18% of the Company’s accounts receivable are due from foreign sales.

The Company maintains cash and cash equivalents at various financial institutions in New Jersey, Massachusetts and New York. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2015 and 2014, the Company's uninsured bank balances totaled approximately $600,000 and $3,000,000. The Company has not experienced any significant losses on its cash and cash equivalents.

Recent Accounting Pronouncements

Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360) Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. In April 2014, the Financial Statement Accounting Standard Board (FASB) issued Accounting Standard Update (ASU) No. 2014-08, which provides new guidance on reporting discontinued operations and disclosures of disposals. Under the new guidance, only disposals representing a strategic shift in operations will be presented as discontinued operations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of the company that does not qualify for discontinued operations reporting.

The Company adopted this ASU in the first quarter of fiscal 2015 and it did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

Revenue from Contracts with Customers (Topic 606) Section A—Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs—Contracts with Customers (Subtopic 340-40). In May 2014, the FASB issued ASU No. 2014-09, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new guidance is effective for the Company beginning in fiscal 2019. Early adoption is permitted for periods beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the effect that ASU No. 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

Compensation—Stock Compensation (Topic 718) Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. In June 2014, the FASB issued ASU No. 2014-12, which clarifies the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. Under the new guidance, a performance target that affects vesting and could be achieved after completion of the service period should be treated as a performance condition under FASB Accounting Standards Codification (ASC) 718 and, as a result, should not be included in the estimation of the grant-date fair value of the award. An entity should recognize compensation cost for the award when it becomes probable that the performance target will be achieved. In the event that an entity determines that it is probable that a performance target will be achieved before the end of the service period, the compensation cost of the award should be recognized prospectively over the remaining service period. The new guidance is effective for the Company beginning in fiscal 2017. Early adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

Preparation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. In August 2014, the FASB issued ASU No. 2014-15, which states that under GAAP, continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting. Even when an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this ASU should be followed to determine whether to disclose information about the relevant conditions and events. The new guidance is effective for the Company beginning in fiscal 2017, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU; however, management does not currently believe that the Company will meet the conditions that would subject its financial statements to additional disclosure.

Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. In January 2015, the FASB issued ASU No. 2015-01, which eliminates the concept of extraordinary items in an entity’s income statement. Extraordinary classification outside of income from continuing operations was previously considered only when evidence clearly supported its classification as an extraordinary item. Extraordinary items were events and transactions that were distinguished by their unusual nature and by the infrequency of their occurrence. The ASU eliminates the need to separately classify, present and disclose extraordinary events. The disclosure of events or transactions that are unusual or infrequent in nature will be included in other guidance. This new guidance is effective for the Company beginning in the first quarter of 2017. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s financial statements.

Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. In April 2015, the FASB issued ASU No. 2015-03, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. This new disclosure guidance is effective for the Company beginning in fiscal 2017. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Inventory (Topic 330), Simplifying the Measurement of Inventory. In July 2015, the FASB issued ASU No. 2015-11, which requires that an entity should measure inventory within the scope of this ASU at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Substantial and unusual losses that result from subsequent measurement of inventory should be disclosed in the financial statements. This new guidance is effective for the Company beginning in fiscal 2018. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments. In September 2015, the FASB issued ASU No. 2015-16, which requires that an acquirer recognize adjustment to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The acquirer needs to record, in the same period’s financial statements, the effect on earnings of changes in depreciations, amortization or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition, an entity is required to present, separately on the face of the income statement or disclose in the notes, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This new guidance is effective for the Company beginning in fiscal 2017. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Cash and Cash Equivalents

The Company generally considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

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Acquisitions and Divestitures

12 Months Ended

Sep. 30, 2015

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Note 3 – Acquisitions and Divestitures

On June 26, 2014, Dynasil and its wholly owned subsidiary Evaporated Metal Films Corp., a New York corporation (“EMF”) completed the acquisition of substantially all of the assets of DichroTec Thin Films, LLC (“DichroTec”), a New York limited liability company and manufacturer of optical thin film coatings.

Pursuant to the Asset Purchase Agreement (the “APA”) by and among Dynasil, EMF, DichroTec and Syncrolite, LLC, the former owner of DichroTec, EMF acquired substantially all of the assets of DichroTec for approximately $500,000 in cash and 700,000 shares of Dynasil Common Stock for a total purchase price of approximately $1.7 million. The purchase price was allocated to the assets purchased which consist of $1.6 million of machinery and equipment and $0.1 million of inventory. The APA contains customary representations, warranties, covenants and indemnification provisions for these types of transactions. DichroTec reported unaudited revenue of approximately $1.9 million for the twelve months ended December 31, 2013.

On December 23, 2013, the Company sold its gamma medical probe business to Dilon Technologies, Inc., a Delaware corporation (“Dilon”), for $3.5 million, the assumption of certain liabilities of the Company, and a possible contingent payment. The Agreement also provided for $250,000 of the proceeds to be deposited in escrow for a year, which amount is included in accounts receivable in the Consolidated Balance Sheet in 2014. The Agreement contains customary representations, warranties, covenants and indemnification provisions.

On November 7, 2013, the Company sold its lead paint detector business to Protec Instrument Corporation (“Protec”), a wholly owned subsidiary of Laboratoires Protec S.A., a French corporation and former European distributor of the Company’s lead paint detector products. The sales price totaled approximately $1.2 million, including the assumption of certain liabilities by Protec. The transaction also resulted in payment to the Company of approximately $500,000 in satisfaction of outstanding accounts receivable.

In connection with the sales of the businesses discussed above, the Company recorded a gain of $1.3 million which is included in Income from Operations in 2014. The businesses sold constituted substantially all of Instruments segment but did not constitute a component of the business, and therefore did not qualify to be reported as discontinued operations. The Company used $4.0 million of the proceeds from the sales to reduce its bank indebtedness.

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Inventories

12 Months Ended

Sep. 30, 2015

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

Note 4 – Inventories

Inventories, net of reserves, at September 30, 2015 and 2014 consisted of the following:

	2015		2014
Raw Materials	$	1,828,000	$	1,805,000
Work-in-Process		862,000		858,000
Finished Goods		376,000		291,000
	$	3,066,000	$	2,954,000

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Property, Plant and Equipment

12 Months Ended

Sep. 30, 2015

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Note 5 - Property, Plant and Equipment

Property, plant and equipment at September 30, 2015 and 2014 consist of the following:

	2015		2014
Land	$	176,000	$	187,000
Building and improvements		3,607,000		3,131,000
Machinery and equipment		10,270,000		9,771,000
Office furniture and fixtures		980,000		896,000
Transportation equipment		53,000		53,000
		15,086,000		14,038,000
Less accumulated depreciation		(8,424,000)		(7,520,000)
	$	6,662,000	$	6,518,000

Depreciation expense for the years ended September 30, 2015 and 2014 was $1,026,000 and $948,000.

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Intangible Assets

12 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets Disclosure [Text Block]

Note 6 – Intangible Assets

Intangible assets at September 30, 2015 and 2014 consist of the following:

	Useful		Gross		Accumulated
September 30, 2015	Life (years)		Amount		Amortization		Net
Acquired Customer Base		5 to 15	$	824,000	$	464,000	$	360,000
Know How		15		512,000		248,000		264,000
Trade Names		Indefinite		318,000		-		318,000
Patents		20		223,000		-		223,000
Biomedical Technologies		5		260,000		200,000		60,000
			$	2,137,000	$	912,000	$	1,225,000

	Useful		Gross		Accumulated
September 30, 2014	Life (years)		Amount		Amortization		Net
Acquired Customer Base		5 to 15	$	877,000	$	409,000	$	468,000
Know How		15		512,000		213,000		299,000
Trade Names		Indefinite		339,000		-		339,000
Patents		20		159,000		-		159,000
Biomedical Technologies		5		260,000		142,000		118,000
			$	2,147,000	$	764,000	$	1,383,000

Amortization expense for the years ended September 30, 2015 and 2014 was $170,000 and $175,000, respectively. Estimated amortization expense for each of the next five fiscal years is as follows:

	2016		2017		2018		2019		2020		Thereafter		Total
Acquired Customer Base	$	80,000	$	80,000	$	80,000	$	80,000	$	40,000	$	-	$	360,000
Know How		34,000		34,000		34,000		34,000		34,000		94,000		264,000
Patents		11,000		11,000		11,000		11,000		11,000		168,000		223,000
Biomedical Technologies		60,000		-		-		-		-		-		60,000
	$	185,000	$	125,000	$	125,000	$	125,000	$	85,000	$	262,000	$	907,000

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Goodwill

12 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill Disclosure [Text Block]

Note 7 – Goodwill

The changes to goodwill during the years ended September 30, 2015 and 2014 are summarized as follows:

	Contract
	Research		Optics		Total
Goodwill at September 30, 2013	$	4,939,000	$	1,302,000	$	6,241,000
Currency translation on Hilger Crystals				6,000		6,000
Goodwill at September 30, 2014	$	4,939,000	$	1,308,000	$	6,247,000
Currency translation on Hilger Crystals				(116,000)		(116,000)
Goodwill at September 30, 2015	$	4,939,000	$	1,192,000	$	6,131,000

With respect to the Company's annual goodwill impairment testing performed during the fourth quarter of fiscal year 2015, step one of the testing determined the estimated fair value of RMD (included in the Contract Research segment) and Hilger (included in the Optics segment) reporting units exceeded their carrying value by more than 20%. Accordingly, the Company concluded that no impairment had occurred and no further testing was necessary.

The step one test for the RMD reporting unit and the resulting calculation of the indicated fair value was performed as described above based on certain specific assumptions. The Company relied on a weighted average cost of capital of approximately 13% for this reporting unit which takes into consideration certain industry and specific premiums. The Company utilized a long term growth rate of approximately 1.5% for this reporting unit which considers industry research and management’s expectations as to the prospects for long term growth in this industry.  

The step one test for the Hilger reporting unit and the resulting calculation of the indicated fair value was performed as described above based on certain specific assumptions. The Company relied on a weighted average cost of capital of 16% for this reporting unit which takes into consideration certain industry and specific premiums. The Company utilized a long term growth rate of approximately 3% for this reporting unit which considers industry research and management’s expectations as to the prospects for long term growth in this industry. 

Determining the fair value using a discounted cash flow method requires significant estimates and assumptions, including market conditions, discount rates, and long-term projections of cash flows. The Company’s estimates are based upon historical experience, current market trends, projected future volumes and other information. The Company believes that the estimates and assumptions underlying the valuation methodology are reasonable; however, different estimates and assumptions could result in a different estimate of fair value. In estimating future cash flows, the Company relies on internally generated projections for a defined time period for revenue and operating profits, including capital expenditures, changes in net working capital, and adjustments for non-cash items to arrive at the free cash flow available to invested capital. A terminal value utilizing a constant growth rate of cash flows is used to calculate a terminal value after the explicit projection period. The future projected cash flows for the discrete projection period and the terminal value are discounted at a risk adjusted discount rate to determine the fair value of the reporting unit.

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Fair Value Measurement

12 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Note 8 – Fair Value Measurement

The Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification  defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements.

Under the FASB’s authoritative guidance on fair value measurements, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the transparency of the inputs used in the valuation.

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 three levels are defined 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.

The FASB fair value guidance also applies to certain assets that indirectly impact the consolidated financial statements, including pension plan assets. While the Company does not have direct control over these assets, the Company is indirectly impacted by subsequent fair value adjustments to these assets and the actual return on these assets not only affects the net periodic benefit cost but also the amount included in the consolidated balance sheet. The Company uses the fair value hierarchy to measure the fair value of assets held in the pension plan. On December 1, 2014, the Company terminated and settled its pension liability and, consequently, no longer has any pension plan assets.

The following table presents the pension plan assets financial instruments carried at fair value as of September 30, 2014 in accordance with the fair value hierarchy:

	Quoted prices in				Significant
	active markets for		Significant other		unobservable
	identical assets		observable inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
September 30, 2014
Money Market Separate Account	$	-	$	327,000	$	-
Total plan assets	$	-	$	327,000	$	-

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Debt

12 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

Note 9 – Debt

As of September 30, 2015, the Company is in compliance with the financial covenants included in its outstanding indebtedness.

Senior Debt

On May 1, 2014, the Company entered into a loan and security agreement (the “Bank Loan Agreement”) and line of credit note (the “Note”) with Middlesex dated May 1, 2014 pursuant to which it agreed to provide up to $4 million, subject to the availability restrictions described below, under a revolving line of credit loan to the Company for general corporate purposes. The Bank Loan Agreement provides that the loan expires on May 1, 2017, at which time all outstanding principal and unpaid interest shall become due and payable.

The Bank Loan Agreement and the Note are secured by (i) a security interest in substantially all of the Company’s personal property and (ii) sixty-five percent (65%) of Dynasil’s equity interests in its UK subsidiary, Hilger Crystals, Ltd. Under the Note, the borrowing base is determined monthly based on eligible billed and unbilled accounts receivable and eligible inventory. The interest rate under the Note is equal the Prime Rate, but in no event less than 3.25%.

The Bank Loan Agreement also contains other terms, conditions and provisions that are customary for commercial lending transactions of this sort. The Bank Loan Agreement requires Dynasil, at the close of each fiscal quarter, to maintain a Debt Service Coverage ratio, as defined, of at least 1.20 to 1.00 on a trailing four quarter basis.

The Bank Loan Agreement provides for events of default customary for credit facilities of this type, including but not limited to non-payment, defaults on other debt, misrepresentation, breach of covenants, representations and warranties, insolvency and bankruptcy, change of management, as defined and the occurrence of a material adverse change, as defined. As a result of the material adverse change clause, the line of credit is classified as a current liability.

The Bank Loan Agreement was amended on September 29, 2015 to permit the Company to repay up to $3 million of the subordinated debt owed Massachusetts Capital Resources Company (“MCRC”) and also provides for the Company, if it meets certain conditions, to convert up to $2 million of the advances under the line of credit to a fixed rate note with the principal amortizing monthly over a five year term.

Subordinated Debt

On July 31, 2012, the Company entered into a Note Purchase Agreement (the “Agreement”) with Massachusetts Capital Resource Company (“MCRC”). Pursuant to the terms of the Agreement, the Company issued and sold to MCRC a $3,000,000 subordinated note (the “Subordinated Note”) for a purchase price of $3,000,000.

The Subordinated Note initially matured on July 31, 2017, unless accelerated pursuant to an event of default. The Subordinated Note provided for interest at the rate of ten percent (10%) per annum, with interest to be payable monthly on the last day of each calendar month and principal payments of $130,000 beginning on September 30, 2015, and on the last day of each calendar month thereafter through and including July 31, 2017.

Effective October 1, 2015, in connection with a prepayment of $2 million of the Subordinated Note, MCRC agreed to adjust the interest rate to 6% and to amend the principal repayment terms such that beginning on September 30, 2016, the Company will redeem monthly, without premium, $43,478 in principal amount of Subordinated Note together with all accrued and unpaid interest then due on the amount redeemed.

Other Debt

The Company’s Optometrics Corporation subsidiary entered into notes payable with two government entities for up to $500,000 of financing in connection with the purchase of certain equipment. The notes bear interest at 5% to 5.25% and are repayable in monthly installments over a five year period.

The Company’s Xcede joint venture raised $2.0 million through the issuance of convertible notes which bear interest at 5%, due on demand after June 30, 2016. The notes are convertible into equity of Xcede at a 20% discount to the first equity financing of Xcede of at least $3.0 million.

Debt at September 30, 2015 and 2014 is summarized as follows:

	2015		2014
Note payable to Middlesex Savings Bank for revolving line of credit. The note expires May, 2017 at which time all outstanding principal and unpaid interest shall become due and payable. The interest rate is equal to the Prime Rate, but in no event less than 3.25%. The rate at September 30, 2015 was 3.25% and the note is secured by an interest in substantially all of the Company's personal property and sixty-five percent of the Company's equity interests in its UK subsidiary, Hilger Crystals, Ltd.	$	1,455,000	$	2,122,000
Note payable to Town of Ayer Industrial Development Finance Authority (Ayer) for an equipment line of credit made with Dynasil subsidiary Optometrics. The note payable to Ayer is in monthly installments of $16,000 per year and will be amortized over ten years with a balloon payment at five years from the date of the note. The interest rate is 5.00%. The note is secured by an interest in the equipment purchased with the line.		175,000		191,000
Note payable to Massachusetts Development Finance Agency (MBDC) for promissory note made with Dynasil subsidiary Optometrics. The note payable to MBDC is in monthly installments of $6,000 for principal and interest through March, 2019. The interest rate is 5.25%. The note is secured by an interest in substantially all of Optometric's personal property.		237,000		298,000
Convertible notes issued by Xcede, a 90% owned subsidiary, payable on demand after June 30, 2016. The interest rate is 5.00%. The notes are convertible into equity in Xcede upon completion of an equity financing raising $3,000,000, inclusive of the convertible notes and interest.		2,123,000		1,433,000
Subordinated note payable to Masschusetts Capital Resource Corporation in monthly installments of $5,000 through August, 2016 for interest only, followed by monthly payments of interest and principal through July 2018. The interest rate is fixed at 6.00% for the life of the loan.		1,000,000		3,000,000
Total Debt	$	4,990,000	$	7,044,000
Less current portion		(1,577,000)		(2,329,000)
Less convertible notes		(2,123,000)		(1,433,000)
Long term portion	$	1,290,000	$	3,282,000

The aggregate maturities of debt based on the payment terms of the agreement are as follows:

For the years ending on September 30:
2016	$	3,700,000
2017		607,000
2018		524,000
2019		56,000
2020		21,000
Thereafter		82,000
	$	4,990,000

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Income Taxes

12 Months Ended

Sep. 30, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 10 – Income Taxes

Income (loss) before the provision (benefit) for income taxes consists of the following:

	2015		2014
US	$	(865,000)	$	1,724,000
Foreign		506,000		258,000
Total	$	(359,000)	$	1,982,000

The provision (credit) for income taxes in the accompanying consolidated financial statements consists of the following:

	2015		2014
Current
Federal	$	-	$	-
State		11,000		68,000
Foreign		(71,000)		(82,000)
	$	(60,000)	$	(14,000)
Deferred
Federal	$	-	$	-
State		-		-
Foreign		54,000		(7,000)
		54,000		(7,000)
Income tax credit	$	(6,000)	$	(21,000)

A reconciliation of the federal statutory rate to the Company's effective tax rate is as follows:

	2015			2014
Tax due at statutory rate		34.00	%		34.00	%
State tax provision, net of federal		7.91	%		9.43	%
Valuation allowance		(46.10)	%		(28.63)	%
Foreign tax credits		56.91	%		(12.88)	%
Foreign rate differential and other		(51.12)	%		(3.04)	%
Total		1.60	%		(1.12)	%

Net deferred tax assets (liabilities) consisted of the following at September 30, 2015:

	Domestic		Foreign		Worldwide
Credits	$	1,488,000	$	-	$	1,488,000
NOLs		2,775,000		34,000		2,809,000
Stock compensation		82,000		-		82,000
Accruals		333,000		-		333,000
Other		138,000		-		138,000
Gross deferred tax assets		4,816,000		34,000		4,850,000
Valuation allowance		(4,377,000)		-		(4,377,000)
Deferred tax assets, net		439,000		34,000		473,000
Depreciation		(403,000)		(145,000)		(548,000)
Intangibles		(36,000)		(135,000)		(171,000)
Gross deferred tax liabilities		(439,000)		(280,000)		(719,000)
Net deferred tax asset (liability)	$	-	$	(246,000)	$	(246,000)

Net deferred tax assets (liabilities) consisted of the following at September 30, 2014:

	Domestic		Foreign		Worldwide
Credits	$	1,496,000	$	-	$	1,496,000
NOLs		2,295,000		37,000		2,332,000
Stock compensation		492,000		-		492,000
Accruals		394,000		-		394,000
Other		114,000		-		114,000
Gross deferred tax assets		4,791,000		37,000		4,828,000
Valuation allowance		(4,238,000)		-		(4,238,000)
Deferred tax assets, net		553,000		37,000		590,000
Depreciation		(495,000)		(62,000)		(557,000)
Intangibles		(58,000)		(161,000)		(219,000)
Other		-		(18,000)		(18,000)
Gross deferred tax liabilities		(553,000)		(241,000)		(794,000)
Net deferred tax asset (liability)	$	-	$	(204,000)	$	(204,000)

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 current 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. The net change in the valuation allowances for the years ending September 30, 2015 and 2014 was $0.2 million and ($0.6) million, respectively.

As of September 30, 2015 and 2014, the Company has federal net operating losses of $6.2 and $5.2 million, respectively. As of September 30, 2015 and 2014, the Company has state net operating losses of $11.7 million and $9.3 million, respectively. The federal and state net operating losses begin expiring in 2023 and 2026, respectively. At September 30, 2015 and 2014, the Company has foreign net operating loss carryforwards of approximately $171,000 and $183,000, respectively which can be carried forward indefinitely.

As of both September 30, 2015 and 2014, the Company has federal research credits of $1.4 million. The federal credits begin expiring in fiscal year 2025. As of September 30, 2015 and 2014, the Company has state research credits of $127,000 and $138,000, respectively. The state credits begin expiring in fiscal year 2026.

As of September 30, 2015 and 2014, the Company has no unrecorded liabilities 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 September 30, 2015 and 2014, the Company has no accrued interest or penalties related to uncertain tax positions.

The Company is subject to taxation in the United States and the United Kingdom. At September 30, 2015, domestic tax years from fiscal 2012 through fiscal 2015 remain open to examination by the taxing authorities and tax years 2013 through 2015 remain open in the United Kingdom.

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Stockholders' Equity

12 Months Ended

Sep. 30, 2015

Stockholders Equity Note [Abstract]

Stockholders Equity Note Disclosure [Text Block]

Note 11 – Stockholders’ Equity

Stock Based Compensation

The Company adopted Stock Incentive Plans in 1996, 1999 and 2010 which provide for, among other incentives, the granting to officers, directors, employees and consultants options to purchase shares of the Company’s common stock. The Plans also allow eligible persons to be issued shares of the Company’s common stock either through the purchase of such shares or as a bonus for services rendered to the Company. Shares are generally issued at the fair market value on the date of issuance. The maximum number of shares of common stock which may be issued under the 2010 Stock Incentive Plan is 6,000,000, of which 4,006,663 and 3,862,843 shares of common stock are available for future purchases under the plan at September 30, 2015 and 2014, respectively. Options are generally exercisable at the fair market value or higher on the date of grant over a three to five year period currently expiring through 2017.

The fair value of the stock options granted is estimated at the date of grant using the Black-Scholes option pricing model. The expected volatility was determined with reference to the historical volatility of the Company's stock. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The expected term of options granted represents the period of time that the options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant. The dividend yield is expected to be 0.0% because historically the Company has not paid dividends on common stock.

The Company’s Xcede joint venture adopted an Equity Incentive Plan in 2013 which provides for, among other incentives, the granting to officers, directors, employees and consultants options to purchase shares in Xcede’s common stock. The options granted generally vest over a 3 year period. The fair value of the stock options granted is estimated at the date of grant using the Black-Scholes option pricing model using assumptions generally consistent with those used for Company stock options. Because Xcede is not publicly traded, the expected volatility is estimated with reference to the average historical volatility of a group of publicly traded companies that are believed to have similar characteristics to Xcede.

Stock compensation expense for the years ended September 30, 2015 and 2014 is presented below:

	2015		2014
Stock Grants	$	323,000	$	270,000
Restricted Stock Grants		28,000		195,000
Option Grants		17,000		-
Employee Stock Purchase Plan		2,000		2,000
Subsidiary Option Grants		89,000		-
Total	$	459,000	$	467,000

At September 30, 2015 there was approximately $33,000 in unrecognized stock compensation cost for Dynasil, which is expected to be recognized over a weighted average period of seven months. At September 30, 2015, the Company’s Xcede joint venture had $188,000 of unrecognized stock compensation expense associated with stock options expected to be recognized over a weighted average period of twenty months and $82,000 of unrecognized stock compensation expense vesting upon the attainment of specific capital raising targets.

Restricted Stock Grants

A summary of restricted stock activity for the year ended September 30, 2015 and 2014 is presented below:

Restricted Stock Activity for the Year ended			Weighted-Average
September 30, 2015	Shares		Grant-Date Fair Value
Nonvested at September 30, 2014		54,000	$	1.04
Granted		-	$	-
Vested		(27,000)	$	1.04
Cancelled		-	$	-
Nonvested and expected to vest at September 30, 2015		27,000	$	1.04

Restricted Stock Activity for the Year ended			Weighted-Average
September 30, 2014	Shares		Grant-Date Fair Value
Nonvested at September 30, 2013		423,168	$	0.74
Granted		6,000	$	1.36
Vested		(375,168)	$	0.71
Cancelled		-	$	-
Nonvested and expected to vest at September 30, 2014		54,000	$	1.04

Stock Option Grants

A summary of stock option activity for the years ended September 30, 2015 and 2014 is presented below:

					Weighted Average
			Weighted Average		Remaining
	Options		Exercise Price per		Contractual Term
	Outstanding		Share ($)		(in Years)
Balance at September 30, 2013		630,532		3.33		1.06
Outstanding and exercisable at September 30, 2013		630,532		3.33		1.06
Granted		-		-
Exercised		-		-
Cancelled		(200,000)		2.00
Balance at September 30, 2014		430,532		3.33		0.31
Outstanding and exercisable at September 30, 2014		430,532		3.33		0.31
Granted		36,232		1.82
Exercised		-		-
Cancelled		(408,552)		3.99
Balance at September 30, 2015		58,212		2.28		1.96
Outstanding and exercisable at September 30, 2015		58,212		2.28		1.96

Stock options outstanding at September 30, 2015 are described as follows:

Outstanding Stock Options at September 30, 2015
				Weighted		Weighted				Weighted
Range of				Average		Average				Average
Exercise		Options		Contractual		Exercise		Options		Exercise
Prices		Outstanding		Life (years)		Price		Exercisable		Price
$	1.82 - 1.99		36,232		2.34	$	1.82		36,232	$	1.82
	2.00 - 2.99		-		-		-		-		-
	3.00 - 3.03		21,980		1.34		3.03		21,980		3.03
$	1.82 - 3.03		58,212		1.96	$	2.28		58,212	$	2.28

During the years ended September 30, 2015 and 2014, 36,232 and 0 stock options were granted and vested, respectively, and no stock options were exercised.

Subsidiary Stock Option Grants

A summary of Xcede stock option activity for the years ended September 30, 2015 and 2014 is presented below:

					Weighted Average
			Weighted Average		Remaining
	Options		Exercise Price per		Contractual Term
	Outstanding		Share ($)		(in Years)
Balance at September 30, 2013		-		-
Outstanding and exercisable at September 30, 2013		-		-
Granted		506,629		1.00
Exercised		-		-
Cancelled		-		-
Balance at September 30, 2014		506,629		1.00		8.21
Outstanding and exercisable at September 30, 2014		17,500		1.00		9.24
Granted		326,129		1.00
Exercised		-		-
Cancelled		(52,500)		1.00		8.82
Balance at September 30, 2015		780,258		1.00		8.85
Outstanding and exercisable at September 30, 2015		180,293		1.00		8.50

Employee Stock Purchase Plan

On September 28, 2010, the Company adopted an Amended and Restated Employee Stock Purchase Plan. The existing plan was amended to extend the termination date to September 28, 2020. The Employee Stock Purchase Plan permits substantially all employees to purchase common stock at a purchase price of 85% of the fair market value of the shares. Under the Plan, a total of 450,000 shares have been reserved for issuance of which 144,945 and 154,643 shares have been issued as of September 30, 2015 and 2014, respectively.

On December 16, 2011, the Company amended the Amended and Restated Employee Stock Purchase Plan to change the maximum dollar amount of stock able to be purchased through the Plan by any employee per calendar year from $5,000 to $20,000 per calendar year. During the years ended September 30, 2015 and 2014, 9,698 shares and 10,499 shares of common stock were issued under the Plan for aggregate purchase prices of $12,762 and $13,345, respectively.

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Retirement Plans

12 Months Ended

Sep. 30, 2015

Compensation and Retirement Disclosure [Abstract]

Compensation and Employee Benefit Plans [Text Block]

Note 12 – Retirement Plans

Defined Contribution Plans

The Company has retirement savings plans available to substantially all full time employees which are intended to qualify as deferred compensation plans under Section 401(k) of the Internal Revenue Code (the “401k Plans”) or similar laws in the United Kingdom. The Company made contributions to these plans during both the years ended September 30, 2015 and 2014 of approximately $171,000 and $152,000, respectively.

Defined Benefit Pension Plan

Pension Obligations

EMF had a defined benefit pension plan (the “Plan”) covering hourly employees. The Plan provided defined benefits based on years of service and final average salary. As of September 30, 2006, the plan was frozen.

On December 1, 2014, the Company terminated and settled EMF’s pension liability with each of the remaining participants in the Plan. The total benefit payments made upon termination were $675,000 and the actual plan assets at the date of termination were $320,000. The Company funded and expensed the difference of $355,000 upon settlement of the Plan.

The following table summarizes the Plan as of September 30, 2014:

	2014
Projected benefit obligation in excess of plan assets:
Projected benefit obligation	$	645,000
Fair value of plan assets		327,000

The following table summarizes the components of the net periodic pension cost at September 30, 2014:

	2014
Interest cost	$	27,000
Expected return on assets		11,000
Amortization of net loss		7,000
Net periodic pension cost	$	45,000

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Related Party Transactions

12 Months Ended

Sep. 30, 2015

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 13 - Related Party Transactions

During the years ended September 30, 2015 and 2014, building lease payments of $961,000 and $924,000, respectively were paid to Charles River Realty, dba Bachrach, Inc., which is owned by Gerald Entine and family. Dr. Entine is a former director and employee of the Company, as well as a greater than 5% beneficial owner of the Company’s stock.

Dr. William Hagan provides consulting services to RMD through his consulting company, Hagan & Associates LLC (“H&A”). During the year ended September 30, 2014, H&A was paid approximately $13,000 in fees. No amounts were paid during 2015. This consulting arrangement is expected to continue into the future.

In 2014, the Company was awarded a grant from the National Institute of Heart Lung and Blood to develop new and improved monitors to detect blood loss and potentially fatal hemorrhage in trauma victims. The Company is using the Mayo Clinic in Rochester, MN as its primary subcontractor to conduct animal and human trials with respect to this grants.  Dr. Michael J. Joyner of the Mayo Clinic is a co-investigator under this grant. He is also a member of the Company's Board of Directors. In fiscal year 2015, the Mayo Clinic received approximately $83,315 under this grants. A small fraction of Dr. Joyner’s Mayo salary is charged to this grant. The subcontract awards to, and the work performed by, the Mayo Clinic are administered by the Mayo Foundation for Medical Education and Research and adheres to the approval and conflicts-of-interest policies of both the Mayo Clinic and the Company. We will continue to monitor this relationship through the Director and Officer Questionnaire process.

In October, 2013, the Company’s subsidiary, Dynasil Biomedical, formed Xcede Technologies, Inc., a joint venture with Mayo Clinic, to spin out and separately fund the development of its tissue sealant technology. Mr. Sulick and family members, Mr. Fox, Dr. Joyner, Dr. Hagan and Dr. Entine’s Family Trust, invested $540,000, $150,000, $35,000, $25,000 and $100,000, respectively, in Xcede and were issued convertible promissory notes in those original principal amounts which accrue interest at the rate of 5% per annum. The note purchase agreement was amended in 2015 to extend the maturation date to June 30, 2016 unless previously converted based on a 20% discount to an Xcede equity raise equal to at least $3.0 million or, at the option of the holder, into common stock based on a $5.0 million valuation. As of September 30, 2015, Mr. Sulick and family’s notes are convertible into 323,935 shares or 7.10%, Mr. Fox’s notes are convertible into 89,982 shares, or 1.97%, Dr. Joyner’s notes are convertible into 20,996 shares, or 0.46%, Dr. Hagan’s notes are convertible into 14,997 shares, or 0.33% and Dr. Entine’s notes are convertible into 59,988 shares, or 1.32%, of Xcede’s outstanding common stock.

Upon the closing of a capital stock financing, as defined, the outstanding principal amount of the notes plus all accrued but unpaid interest on the notes will be converted into shares of the same capital stock sold in the capital stock financing at a 20% discount to the price per share of that capital stock financing. Alternatively, at any time prior to a capital stock financing the note holders can convert at their option into common stock based on a $5 million valuation.

The intellectual property rights to certain of the technologies purchased by the Company in April 2011 when it established Dynasil Biomedical and acquired intellectual property assets from Dr. Daniel Ericson are jointly owned with the Mayo Clinic or persons affiliated with the Mayo Clinic. Specifically, Dynasil Biomedical's blood storage technology was invented by Dr. Daniel Ericson and Dr. Michael Joyner. Dr. Ericson assigned his ownership rights to such technology to Dynasil Biomedical and because Dr. Joyner is an employee of the Mayo Clinic, his ownership rights in such technology are assigned to the Mayo Clinic. In April 2011, the Mayo Foundation for Medical Education and Research and Dynasil Biomedical entered into an Inter-Institutional Agreement, which sets forth the terms on which the parties may work together to seek to commercialize this technology. 

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Lease Agreements

12 Months Ended

Sep. 30, 2015

Leases [Abstract]

Leases of Lessee Disclosure [Text Block]

Note 14 – Lease Agreements

Capital Leases

The Company has entered into long-term capital lease agreements for purchases of various computer and telephone equipment at a weighted average interest rate of 7.6%. At September 30, 2015 and 2014, the remaining principal payments due under all capital leases were $119,000 and $229,000, respectively. Aggregate minimum annual principal obligations at September 30, 2015, under non-cancelable leases are as follows:

	2016		2017		2018		2019		2020		Total
Capital Lease Obligations	$	76,000	$	31,000	$	12,000	$	-	$	-	$	119,000

Property Leases

The Company has non-cancelable operating lease agreements, primarily for property, that expire through 2025. One of the Company’s facilities is leased from a company controlled by the former owner of RMD, who is also a former director of the Company and the former President of the RMD subsidiary. This building is leased as a month-to-month tenancy and will continue until terminated by either the Company with not less than six months’ prior written notice or the facility’s owner with not less than three years’ prior written notice. Rent expense for the years ended September 30, 2015 and 2014 amounted to $1.6 million and $1.4 million, respectively. Future non-cancelable minimum lease payments under property leases as of September 30, 2015 are as follows:

Years ending September 30,

2016	$	979,000
2017		493,000
2018		296,000
2019		91,000
2020		93,000
thereafter		439,000

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Vendor Concentration

12 Months Ended

Sep. 30, 2015

Risks and Uncertainties [Abstract]

Concentration Risk Disclosure [Text Block]

Note 15 - Vendor Concentration

The Company purchased $1.5 million and $2.6 million respectively, of its raw materials from one supplier during the years ended September 30, 2015 and 2014. As of September 30, 2015 and 2014, amounts due to that supplier included in accounts payable were $101,000 and $263,000, respectively.

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Supplemental Disclosure of Cash Flow Information

12 Months Ended

Sep. 30, 2015

Supplemental Cash Flow Elements [Abstract]

Cash Flow, Supplemental Disclosures [Text Block]

Note 16 – Supplemental Disclosure of Cash Flow Information

	2015		2014
Cash Paid during the year for:
Interest	$	388,000	$	933,000
Income taxes (refunds)		(5,000)		16,000
Non cash activities:
Assets purchased under capital leases	$	73,000	$	-
Assets acquired		-		1,739,000
Less: common shares issued in acquisition		(17,000)		1,239,000
Cash paid in acquisition	$	-	$	500,000

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Segment, Customer and Geographical Reporting

12 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 17 – Segment, Customer and Geographical Reporting

Segment Financial Information

Operating segments are based upon Dynasil’s internal organizational structure, the manner in which the operations are managed, the criteria used by the Chief Operating Decision Makers (CODM) to evaluate segment performance and the availability of separate financial information. Dynasil reports four reportable 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. Dynasil’s 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 manufactured specialized instruments used in various applications in the medical, industrial, and homeland security/defense sectors until substantially all its businesses were sold in the first quarter of fiscal year 2014. The Biomedical segment consists of a single business unit, Dynasil Biomedical Corporation (“Dynasil Biomedical”), a medical technology incubator which owns rights to certain early stage medical technologies. Dynasil Biomedical holds the common stock of the Xcede joint venture which is developing a tissue sealant technology and currently has no other operations. The Company’s segment information is summarized below:

Results of Operations for the Fiscal Year Ended September 30,
2015
	Contract
	Research			Optics			Instruments		Biomedical		Total
Revenue	$	18,753,000		$	21,783,000		$	-	$	-	$	40,536,000
Gross Profit		8,176,000			7,076,000			-		-		15,252,000
GM %		43.6	%		32.5	%		-		-		37.6	%
SG&A		7,629,000			6,516,000			-		1,151,000		15,296,000
Gain on sale of assets		-			178,000			-		-		178,000
Operating Income (Loss)		547,000			738,000			-		(1,151,000)		134,000
Depreciation and Amortization		296,000			839,000			-		61,000		1,196,000
Capital expenditures		18,000			1,166,000			-		119,000		1,303,000
Intangibles, Net		264,000			678,000			-		283,000		1,225,000
Goodwill		4,939,000			1,192,000			-		-		6,131,000
Total Assets	$	7,692,000		$	15,948,000		$	48,000	$	828,000	$	24,516,000

Results of Operations for the Fiscal Year Ended September 30,
2014
	Contract
	Research			Optics			Instruments			Biomedical			Total
Revenue	$	21,935,000		$	19,590,000		$	773,000		$	11,000		$	42,309,000
Gross Profit		9,301,000			7,100,000			318,000			11,000			16,730,000
GM %		42.4	%		36.2	%		41.1	%		100.0	%		39.5	%
SG&A		8,546,000			5,482,000			527,000			778,000			15,333,000
Gain on sale of assets		-			-			1,297,000			-			1,297,000
Operating Income (Loss)		755,000			1,618,000			1,087,000			(765,000)			2,695,000
Depreciation and Amortization		280,000			781,000			2,000			60,000			1,123,000
Capital expenditures		12,000			1,326,000			-			110,000			1,448,000
Intangibles, Net		299,000			854,000			-			230,000			1,383,000
Goodwill		4,939,000			1,308,000			-			-			6,247,000
Total Assets	$	8,857,000		$	16,019,000		$	313,000		$	1,188,000		$	26,377,000

Customer Financial Information

For the years ended September 30, 2015 and 2014, the top three customers for the Contract Research segment were each various agencies of the U.S. Government. For the years ended September 30, 2015 and 2014, these customers made up 57% and 69%, respectively, of Contract Research revenue.

For the Optics segment, there was one customer whose revenue represented 9% and 11% of the total segment revenues for the years ended September 30, 2015 and 2014.

Neither the Instruments nor the Biomedical segment had any revenue in the year ending September 30, 2015. One customer’s revenue represented 10% of the Instruments segment revenue in the year ended September 30, 2014. One customer’s revenue represented 100% of the Biomedical segment revenue for the year ended September 30, 2014.

Geographic Financial Information

Revenues by geographic location in total and as a percentage of total revenue, for the years ended September 30, 2015 and 2014 are as follows:

	2015					2014
Geographic Location	Revenue		% of Total			Revenue		% of Total
United States	$	30,928,000		76	%	$	33,936,000		80	%
Europe		4,902,000		12	%		3,001,000		7	%
Other		4,706,000		12	%		5,372,000		13	%
	$	40,536,000		100	%	$	42,309,000		100	%

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Subsequent Events

12 Months Ended

Sep. 30, 2015

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 18 – Subsequent Events

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

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Dynasil Corporation of America (“Dynasil” or the “Company”) and its wholly-owned subsidiaries: Optometrics Corporation (“Optometrics”), Evaporated Metal Films Corporation (“EMF”), Dynasil Products, formerly known as RMD Instruments Corp. (“Dynasil Products”), Radiation Monitoring Devices, Inc. (“RMD”), Hilger Crystals, Ltd (“Hilger”) and Dynasil Biomedical Corp (“Dynasil Biomedical”). All significant intercompany transactions and balances have been eliminated.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

Revenue from sales of products is recognized at the time title and the risks and rewards of ownership pass. 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.

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. 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 represented by agreed billing amounts. Recognition of losses on projects is taken as soon as the loss is reasonably determinable. The Company has an accrual for contract losses in the amount of $110,000 and $117,000 as of September 30, 2015 and 2014, respectively.

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.

Trade and Other Accounts Receivable, Policy [Policy Text Block]

Allowance for Doubtful Accounts Receivable

The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer's current credit worthiness, as determined by a review of their current credit information. The Company continuously monitors collections and payments from our customers and maintains a provision for estimated credit losses based upon historical experience and any specific customer collection issues that have been identified. While such credit losses have historically been minimal, within expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same credit loss rates as in the past. A significant change in the liquidity or financial position of any significant customers could have a material adverse effect on the collectability of accounts receivable and future operating results. When all collection efforts have failed and it is deemed probable that a customer account is uncollectible, that balance is written off against the existing allowance.

Shipping and Handling Cost, Policy [Policy Text Block]

Shipping and Handling Costs

Shipping and handling costs are included in cost of sales. The amounts billed for shipping and included in net revenue were approximately $49,000 and $67,000 for 2015 and 2014, respectively.

Research and Development Expense, Policy [Policy Text Block]

Research and Development

The Company expenses research and development costs as incurred. Research and development costs include salaries, employee benefit costs, direct project costs, supplies and other related costs. Substantially all the Contract Research segment’s cost of revenue relates to research contracts performed by RMD which are in turn billed to the contracting party. Amounts of research and development included within cost of revenue for the years ended September 30, 2015 and 2014 were $10.6 million and $12.6 million, respectively. Research and development for our other business totaled $0.1 million in both 2015 and 2014.

Costs In Excess Of Billings [Policy Text Block]

Costs in Excess of Billings and Unbilled Receivables

Costs in excess of billings and unbilled receivables relate to research and development contracts and consists of actual costs incurred plus fees in excess of billings at provisional contract rates.

Legal Costs, Policy [Policy Text Block]

Patent Costs

Costs incurred in filing, prosecuting and maintaining patents (principally legal fees) are expensed as incurred and recorded within selling, general and administrative expenses on the consolidated statements of operations. Such costs aggregated approximately $0.5 and $0.4 million for the years ended September 30, 2015 and 2014, respectively. The Company’s Xcede joint venture capitalizes patent costs, which equaled $0.1 million in both the years ended September 30, 2015 and 2014.

Inventory, Policy [Policy Text Block]

Inventories

Inventories are stated at the lower of average cost or market. Cost is determined using the first-in, first-out (FIFO) method and includes material, labor and overhead. Inventories consist primarily of raw materials, work-in-process and finished goods.

A significant decrease in demand for the Company's products could result in a short-term increase in the cost of inventory purchases and an increase of excess inventory quantities on hand. In addition, as technologies change or new products are developed, product obsolescence could result in an increase in the amount of obsolete inventory quantities on hand. Therefore, although the Company makes every effort to ensure the accuracy of its forecasts of future product demand, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of the inventory and reported operating results. The Company records, as a charge to cost of revenues, any amounts required to reduce the carrying value to net realizable value.

Property, Plant and Equipment, Policy [Policy Text Block]

Property, Plant and Equipment

Property, plant and equipment are recorded at cost or at fair market value for acquired assets. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets.

The estimated useful lives of assets for financial reporting purposes are as follows: building and improvements, 8 to 25 years; machinery and equipment, 5 to 20 years; office furniture and fixtures, 5 to 10 years; transportation equipment, 5 years. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. When items of property, plant and equipment are sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is included in income

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill

The Company annually assesses goodwill impairment at the end of the fourth quarter of the fiscal year by applying a fair value test. In the first step of testing for goodwill impairment, the Company estimates the fair value of each reporting unit. The reporting units have been determined as RMD which is the Contract Research reportable segment and Hilger, which is a component of the Optics reportable segment. The Company compares the fair value with the carrying value of the net assets assigned to each reporting unit. If the fair value is less than its carrying value, then the Company performs a second step and determines the fair value of the goodwill. In this second step, the fair value of goodwill is determined by deducting the fair value of a reporting unit’s identifiable assets and liabilities from the fair value of the reporting unit as a whole, as if that reporting unit had just been acquired and the purchase price were being initially allocated. If the fair value of the goodwill is less than its carrying value for a reporting unit, an impairment charge is recorded to earnings.

To determine the fair value of each of the reporting units as a whole, the Company uses a discounted cash flow analysis, which requires significant assumptions and estimates about the future operations of each reporting unit. Significant judgments inherent in this analysis include the determination of appropriate discount rates, the amount and timing of expected future cash flows and growth rates. The cash flows employed in the discounted cash flow analyses are based on financial forecasts developed internally by management. The discount rate assumptions are based on an assessment of the Company’s risk adjusted discount rate, applicable for each reporting unit. In assessing the reasonableness of the determined fair values of the reporting units, the Company evaluates its results against its current market capitalization.

In addition, the Company evaluates a reporting unit for impairment if events or circumstances change between annual tests indicating a possible impairment. Examples of such events or circumstances include the following:

• a significant adverse change in legal status or in the business climate,

• an adverse action or assessment by a regulator, 

• a more likely than not expectation that a segment or a significant portion thereof will be sold, or

• the testing for recoverability of a significant asset group within the segment.

Intangible Assets, Costs Incurred to Renew or Extend, Policy [Policy Text Block]

Intangible Assets

The Company's intangible assets consist of acquired customer relationships, trade names, acquired backlog, know-how and provisionally patented technologies. The Company amortizes its intangible assets with definitive lives over their useful lives, which range from 4 to 20 years, based on the time period the Company expects to receive the economic benefit from these assets.

The Company has a trade name related to its UK subsidiary that has been determined to have an indefinite life and is therefore not subject to amortization and is reviewed at least annually for potential impairment. The fair value of the Company’s trade name is estimated and compared to its carrying value to determine if impairment exists. The Company estimates the fair value of this intangible asset based on an income approach using the relief-from-royalty method. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of this asset. This approach is dependent on a number of factors, including estimates of future sales, royalty rates in the category of intellectual property, discount rates and other variables. Significant differences between these estimates and actual results could materially affect the Company’s future financial results.

Recovery Of Long Lived Assets [Policy Text Block]

Recovery of Long-Lived Assets

The Company continually assesses whether events or changes in circumstances have occurred that may warrant revision of the estimated useful lives of its long-lived assets (other than goodwill and any indefinite lived assets) or whether the remaining balances of those assets should be evaluated for possible impairment. Long-lived assets include, for example, customer relationships, trade names, backlog, know-how and provisionally patented technologies. Events or changes in circumstances that may indicate that an asset may be impaired include the following:

• a significant decrease in the market price of an asset or asset group,

• a significant adverse change in the extent or manner in which an asset or asset group is being used or in its physical condition,

• a significant adverse change in legal factors or in the business climate that could affect the value of an asset or asset group, including an adverse action or assessment by a regulator,

• an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset,

• a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group,

• a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life, or

• an impairment of goodwill at a reporting unit.

If an impairment indicator occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. The Company groups its long-lived assets for this purpose at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets or asset groups. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value.

To determine fair value the Company uses discounted cash flow analyses and estimates about the future cash flows of the asset or asset group. This analysis includes a determination of an appropriate discount rate, the amount and timing of expected future cash flows and growth rates. The cash flows employed in the discounted cash flow analyses are typically based on financial forecasts developed internally by management. The discount rate used is commensurate with the risks involved. The Company may also rely on third party valuations and or information available regarding the market value for similar assets.

If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment in the amount of the difference is recorded in the period that the impairment occurs. Estimating future cash flows requires significant judgment and projections may vary from the cash flows eventually realized.

Deferred Financing Costs [Policy Text Block]

Deferred Financing Costs

Deferred financing costs are net of accumulated amortization of $248,000 and $221,000 at September 30, 2015 and 2014, respectively. Amortization expense for the years ended September 30, 2015 and 2014 was $28,000 and $82,000, respectively. Future amortization will be $9,000 in fiscal 2016 and $2,000 in fiscal 2017.

Advertising Costs, Policy [Policy Text Block]

Advertising

The Company expenses all advertising costs as incurred. Advertising expense for the years ended September 30, 2015 and 2014 was approximately $96,000 and $91,000, respectively.

Pension and Other Postretirement Plans, Policy [Policy Text Block]

Retirement Plans

The Company has retirement savings plans available to substantially all full time employees which are intended to qualify as deferred compensation plans under Section 401(k) of the Internal Revenue Code and similar laws in the United Kingdom. Pursuant to these plans, employees contribute amounts as required or allowed by the plans or by law. The Company also makes matching contributions in accordance with the terms of the plans.

The Company’s EMF subsidiary previously had a defined benefit pension plan covering hourly employees. The plan provided defined benefits based on years of service and final average salary. As of September 30, 2006, the plan was frozen. On December 1, 2014, the Company terminated and settled its pension liability with each of the remaining participants in the Plan.

Income Tax, Policy [Policy Text Block]

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 deferred 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 carry-forwards. 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 current 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.

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 September 30, 2015 and 2014, the Company has no unrecorded liabilities 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 September 30, 2015 and 2014, the Company had no accrued interest or penalties related to uncertain tax positions.

Earnings Per Share, Policy [Policy Text Block]

Earnings Per Common Share

Basic earnings (loss) per common share is computed by dividing the net income applicable or loss attributable to common shares after preferred dividends paid, if applicable, by the weighted average number of common shares outstanding during each period. 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 year ended September 30, 2015, 10,165 shares of potential common stock related to restricted stock and stock options were excluded from the calculation of dilutive shares since there was a loss from operations and the inclusion of potential shares would be anti-dilutive. If the Company had not been in a loss position as of September 30, 2015, 10,165 shares of restricted stock and stock options would have been considered in the denominator used to calculate diluted earnings per common share.

For the year ended September 30, 2014, 14,256 shares of common stock related to restricted stock were included in the denominator used to calculate diluted earnings per common share.

The computations of the weighted shares outstanding for the years ended September 30 are as follows:

	2015		2014
Weighted average shares outstanding
Basic		16,402,893		15,415,408
Effect of dilutive securities
Stock Options		-		-
Restricted Stock		-		14,256
Dilutive Average Shares Outstanding		16,402,893		15,429,664

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock Based Compensation

Stock-based compensation cost is measured using the fair value recognition provisions of the FASB authoritative guidance, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors, including employee stock options, based on estimated fair values. Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized over the requisite service period of the award.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency Translation

The operations of Hilger, the Company’s foreign subsidiary, use their local currency as its functional currency. Assets and liabilities of the Company’s foreign operations, denominated in their local currency, Great Britain Pounds (GBP), are translated at the rate of exchange at the balance sheet date. Revenue and expense accounts are translated at the average exchange rates during the period. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are included in the foreign currency translation adjustment, a component of accumulated other comprehensive income in stockholders’ equity. Gains and losses generated by transactions denominated in foreign currencies are recorded in the accompanying statement of operations in the period in which they occur.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Accumulated comprehensive income (loss) represents cumulative translation adjustments related to Hilger, the Company’s foreign subsidiary and included cumulative adjustments pertaining to the Company’s Defined Benefit Pension Plan in 2014. The Company presents comprehensive income and losses in the consolidated statements of operations and comprehensive income (loss).

Fair Value of Financial Instruments, Policy [Policy Text Block]

Financial Instruments

The carrying amount reported in the balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximates 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.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable. In the normal course of business, the Company extends credit to certain customers. Management performs initial and ongoing credit evaluations of their customers and generally does not require collateral.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risk

The Company maintains allowances for potential credit losses and has not experienced any significant losses related to the collection of its accounts receivable. As of September 30, 2015 and 2014, approximately $921,000 and $665,000 or 26% and 18% of the Company’s accounts receivable are due from foreign sales.

The Company maintains cash and cash equivalents at various financial institutions in New Jersey, Massachusetts and New York. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2015 and 2014, the Company's uninsured bank balances totaled approximately $600,000 and $3,000,000. The Company has not experienced any significant losses on its cash and cash equivalents.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360) Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. In April 2014, the Financial Statement Accounting Standard Board (FASB) issued Accounting Standard Update (ASU) No. 2014-08, which provides new guidance on reporting discontinued operations and disclosures of disposals. Under the new guidance, only disposals representing a strategic shift in operations will be presented as discontinued operations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of the company that does not qualify for discontinued operations reporting.

The Company adopted this ASU in the first quarter of fiscal 2015 and it did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

Revenue from Contracts with Customers (Topic 606) Section A—Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs—Contracts with Customers (Subtopic 340-40). In May 2014, the FASB issued ASU No. 2014-09, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new guidance is effective for the Company beginning in fiscal 2019. Early adoption is permitted for periods beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the effect that ASU No. 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

Compensation—Stock Compensation (Topic 718) Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. In June 2014, the FASB issued ASU No. 2014-12, which clarifies the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. Under the new guidance, a performance target that affects vesting and could be achieved after completion of the service period should be treated as a performance condition under FASB Accounting Standards Codification (ASC) 718 and, as a result, should not be included in the estimation of the grant-date fair value of the award. An entity should recognize compensation cost for the award when it becomes probable that the performance target will be achieved. In the event that an entity determines that it is probable that a performance target will be achieved before the end of the service period, the compensation cost of the award should be recognized prospectively over the remaining service period. The new guidance is effective for the Company beginning in fiscal 2017. Early adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

Preparation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. In August 2014, the FASB issued ASU No. 2014-15, which states that under GAAP, continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting. Even when an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this ASU should be followed to determine whether to disclose information about the relevant conditions and events. The new guidance is effective for the Company beginning in fiscal 2017, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU; however, management does not currently believe that the Company will meet the conditions that would subject its financial statements to additional disclosure.

Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. In January 2015, the FASB issued ASU No. 2015-01, which eliminates the concept of extraordinary items in an entity’s income statement. Extraordinary classification outside of income from continuing operations was previously considered only when evidence clearly supported its classification as an extraordinary item. Extraordinary items were events and transactions that were distinguished by their unusual nature and by the infrequency of their occurrence. The ASU eliminates the need to separately classify, present and disclose extraordinary events. The disclosure of events or transactions that are unusual or infrequent in nature will be included in other guidance. This new guidance is effective for the Company beginning in the first quarter of 2017. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s financial statements.

Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. In April 2015, the FASB issued ASU No. 2015-03, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. This new disclosure guidance is effective for the Company beginning in fiscal 2017. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Inventory (Topic 330), Simplifying the Measurement of Inventory. In July 2015, the FASB issued ASU No. 2015-11, which requires that an entity should measure inventory within the scope of this ASU at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Substantial and unusual losses that result from subsequent measurement of inventory should be disclosed in the financial statements. This new guidance is effective for the Company beginning in fiscal 2018. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments. In September 2015, the FASB issued ASU No. 2015-16, which requires that an acquirer recognize adjustment to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The acquirer needs to record, in the same period’s financial statements, the effect on earnings of changes in depreciations, amortization or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition, an entity is required to present, separately on the face of the income statement or disclose in the notes, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This new guidance is effective for the Company beginning in fiscal 2017. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Reclassification, Policy [Policy Text Block]

Cash and Cash Equivalents

The Company generally considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Schedule of Weighted Average Number of Shares [Table Text Block]

The computations of the weighted shares outstanding for the years ended September 30 are as follows:

	2015		2014
Weighted average shares outstanding
Basic		16,402,893		15,415,408
Effect of dilutive securities
Stock Options		-		-
Restricted Stock		-		14,256
Dilutive Average Shares Outstanding		16,402,893		15,429,664

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Inventories (Tables)

12 Months Ended

Sep. 30, 2015

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

Inventories, net of reserves, at September 30, 2015 and 2014 consisted of the following:

	2015		2014
Raw Materials	$	1,828,000	$	1,805,000
Work-in-Process		862,000		858,000
Finished Goods		376,000		291,000
	$	3,066,000	$	2,954,000

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Property, Plant and Equipment (Tables)

12 Months Ended

Sep. 30, 2015

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

Property, plant and equipment at September 30, 2015 and 2014 consist of the following:

	2015		2014
Land	$	176,000	$	187,000
Building and improvements		3,607,000		3,131,000
Machinery and equipment		10,270,000		9,771,000
Office furniture and fixtures		980,000		896,000
Transportation equipment		53,000		53,000
		15,086,000		14,038,000
Less accumulated depreciation		(8,424,000)		(7,520,000)
	$	6,662,000	$	6,518,000

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Intangible Assets (Tables)

12 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

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

Intangible assets at September 30, 2015 and 2014 consist of the following:

	Useful		Gross		Accumulated
September 30, 2015	Life (years)		Amount		Amortization		Net
Acquired Customer Base		5 to 15	$	824,000	$	464,000	$	360,000
Know How		15		512,000		248,000		264,000
Trade Names		Indefinite		318,000		-		318,000
Patents		20		223,000		-		223,000
Biomedical Technologies		5		260,000		200,000		60,000
			$	2,137,000	$	912,000	$	1,225,000

	Useful		Gross		Accumulated
September 30, 2014	Life (years)		Amount		Amortization		Net
Acquired Customer Base		5 to 15	$	877,000	$	409,000	$	468,000
Know How		15		512,000		213,000		299,000
Trade Names		Indefinite		339,000		-		339,000
Patents		20		159,000		-		159,000
Biomedical Technologies		5		260,000		142,000		118,000
			$	2,147,000	$	764,000	$	1,383,000

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

Estimated amortization expense for each of the next five fiscal years is as follows:

	2016		2017		2018		2019		2020		Thereafter		Total
Acquired Customer Base	$	80,000	$	80,000	$	80,000	$	80,000	$	40,000	$	-	$	360,000
Know How		34,000		34,000		34,000		34,000		34,000		94,000		264,000
Patents		11,000		11,000		11,000		11,000		11,000		168,000		223,000
Biomedical Technologies		60,000		-		-		-		-		-		60,000
	$	185,000	$	125,000	$	125,000	$	125,000	$	85,000	$	262,000	$	907,000

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Goodwill (Tables)

12 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill [Table Text Block]

The changes to goodwill during the years ended September 30, 2015 and 2014 are summarized as follows:

	Contract
	Research		Optics		Total
Goodwill at September 30, 2013	$	4,939,000	$	1,302,000	$	6,241,000
Currency translation on Hilger Crystals				6,000		6,000
Goodwill at September 30, 2014	$	4,939,000	$	1,308,000	$	6,247,000
Currency translation on Hilger Crystals				(116,000)		(116,000)
Goodwill at September 30, 2015	$	4,939,000	$	1,192,000	$	6,131,000

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Fair Value Measurement (Tables)

12 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements, Nonrecurring [Table Text Block]

The following table presents the pension plan assets financial instruments carried at fair value as of September 30, 2014 in accordance with the fair value hierarchy:

	Quoted prices in				Significant
	active markets for		Significant other		unobservable
	identical assets		observable inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
September 30, 2014
Money Market Separate Account	$	-	$	327,000	$	-
Total plan assets	$	-	$	327,000	$	-

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Debt (Tables)

12 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments [Table Text Block]

Debt at September 30, 2015 and 2014 is summarized as follows:

	2015		2014
Note payable to Middlesex Savings Bank for revolving line of credit. The note expires May, 2017 at which time all outstanding principal and unpaid interest shall become due and payable. The interest rate is equal to the Prime Rate, but in no event less than 3.25%. The rate at September 30, 2015 was 3.25% and the note is secured by an interest in substantially all of the Company's personal property and sixty-five percent of the Company's equity interests in its UK subsidiary, Hilger Crystals, Ltd.	$	1,455,000	$	2,122,000
Note payable to Town of Ayer Industrial Development Finance Authority (Ayer) for an equipment line of credit made with Dynasil subsidiary Optometrics. The note payable to Ayer is in monthly installments of $16,000 per year and will be amortized over ten years with a balloon payment at five years from the date of the note. The interest rate is 5.00%. The note is secured by an interest in the equipment purchased with the line.		175,000		191,000
Note payable to Massachusetts Development Finance Agency (MBDC) for promissory note made with Dynasil subsidiary Optometrics. The note payable to MBDC is in monthly installments of $6,000 for principal and interest through March, 2019. The interest rate is 5.25%. The note is secured by an interest in substantially all of Optometric's personal property.		237,000		298,000
Convertible notes issued by Xcede, a 90% owned subsidiary, payable on demand after June 30, 2016. The interest rate is 5.00%. The notes are convertible into equity in Xcede upon completion of an equity financing raising $3,000,000, inclusive of the convertible notes and interest.		2,123,000		1,433,000
Subordinated note payable to Masschusetts Capital Resource Corporation in monthly installments of $5,000 through August, 2016 for interest only, followed by monthly payments of interest and principal through July 2018. The interest rate is fixed at 6.00% for the life of the loan.		1,000,000		3,000,000
Total Debt	$	4,990,000	$	7,044,000
Less current portion		(1,577,000)		(2,329,000)
Less convertible notes		(2,123,000)		(1,433,000)
Long term portion	$	1,290,000	$	3,282,000

Schedule of Maturities of Long-term Debt [Table Text Block]

The aggregate maturities of debt based on the payment terms of the agreement are as follows:

For the years ending on September 30:
2016	$	3,700,000
2017		607,000
2018		524,000
2019		56,000
2020		21,000
Thereafter		82,000
	$	4,990,000

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Income Taxes (Tables)

12 Months Ended

Sep. 30, 2015

Income Tax Disclosure [Abstract]

Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block]

Income (loss) before the provision (benefit) for income taxes consists of the following:

	2015		2014
US	$	(865,000)	$	1,724,000
Foreign		506,000		258,000
Total	$	(359,000)	$	1,982,000

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

The provision (credit) for income taxes in the accompanying consolidated financial statements consists of the following:

	2015		2014
Current
Federal	$	-	$	-
State		11,000		68,000
Foreign		(71,000)		(82,000)
	$	(60,000)	$	(14,000)
Deferred
Federal	$	-	$	-
State		-		-
Foreign		54,000		(7,000)
		54,000		(7,000)
Income tax credit	$	(6,000)	$	(21,000)

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

A reconciliation of the federal statutory rate to the Company's effective tax rate is as follows:

	2015			2014
Tax due at statutory rate		34.00	%		34.00	%
State tax provision, net of federal		7.91	%		9.43	%
Valuation allowance		(46.10)	%		(28.63)	%
Foreign tax credits		56.91	%		(12.88)	%
Foreign rate differential and other		(51.12)	%		(3.04)	%
Total		1.60	%		(1.12)	%

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

Net deferred tax assets (liabilities) consisted of the following at September 30, 2015:

	Domestic		Foreign		Worldwide
Credits	$	1,488,000	$	-	$	1,488,000
NOLs		2,775,000		34,000		2,809,000
Stock compensation		82,000		-		82,000
Accruals		333,000		-		333,000
Other		138,000		-		138,000
Gross deferred tax assets		4,816,000		34,000		4,850,000
Valuation allowance		(4,377,000)		-		(4,377,000)
Deferred tax assets, net		439,000		34,000		473,000
Depreciation		(403,000)		(145,000)		(548,000)
Intangibles		(36,000)		(135,000)		(171,000)
Gross deferred tax liabilities		(439,000)		(280,000)		(719,000)
Net deferred tax asset (liability)	$	-	$	(246,000)	$	(246,000)

Net deferred tax assets (liabilities) consisted of the following at September 30, 2014:

	Domestic		Foreign		Worldwide
Credits	$	1,496,000	$	-	$	1,496,000
NOLs		2,295,000		37,000		2,332,000
Stock compensation		492,000		-		492,000
Accruals		394,000		-		394,000
Other		114,000		-		114,000
Gross deferred tax assets		4,791,000		37,000		4,828,000
Valuation allowance		(4,238,000)		-		(4,238,000)
Deferred tax assets, net		553,000		37,000		590,000
Depreciation		(495,000)		(62,000)		(557,000)
Intangibles		(58,000)		(161,000)		(219,000)
Other		-		(18,000)		(18,000)
Gross deferred tax liabilities		(553,000)		(241,000)		(794,000)
Net deferred tax asset (liability)	$	-	$	(204,000)	$	(204,000)

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Stockholders' Equity (Tables)

12 Months Ended

Sep. 30, 2015

Schedule Of Stock Compensation Expense [Table Text Block]

Stock compensation expense for the years ended September 30, 2015 and 2014 is presented below:

	2015		2014
Stock Grants	$	323,000	$	270,000
Restricted Stock Grants		28,000		195,000
Option Grants		17,000		-
Employee Stock Purchase Plan		2,000		2,000
Subsidiary Option Grants		89,000		-
Total	$	459,000	$	467,000

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

A summary of restricted stock activity for the year ended September 30, 2015 and 2014 is presented below:

Restricted Stock Activity for the Year ended			Weighted-Average
September 30, 2015	Shares		Grant-Date Fair Value
Nonvested at September 30, 2014		54,000	$	1.04
Granted		-	$	-
Vested		(27,000)	$	1.04
Cancelled		-	$	-
Nonvested and expected to vest at September 30, 2015		27,000	$	1.04

Restricted Stock Activity for the Year ended			Weighted-Average
September 30, 2014	Shares		Grant-Date Fair Value
Nonvested at September 30, 2013		423,168	$	0.74
Granted		6,000	$	1.36
Vested		(375,168)	$	0.71
Cancelled		-	$	-
Nonvested and expected to vest at September 30, 2014		54,000	$	1.04

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

Stock options outstanding at September 30, 2015 are described as follows:

Outstanding Stock Options at September 30, 2015
				Weighted		Weighted				Weighted
Range of				Average		Average				Average
Exercise		Options		Contractual		Exercise		Options		Exercise
Prices		Outstanding		Life (years)		Price		Exercisable		Price
$	1.82 - 1.99		36,232		2.34	$	1.82		36,232	$	1.82
	2.00 - 2.99		-		-		-		-		-
	3.00 - 3.03		21,980		1.34		3.03		21,980		3.03
$	1.82 - 3.03		58,212		1.96	$	2.28		58,212	$	2.28

Stock Option Grants [Member]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

A summary of stock option activity for the years ended September 30, 2015 and 2014 is presented below:

					Weighted Average
			Weighted Average		Remaining
	Options		Exercise Price per		Contractual Term
	Outstanding		Share ($)		(in Years)
Balance at September 30, 2013		630,532		3.33		1.06
Outstanding and exercisable at September 30, 2013		630,532		3.33		1.06
Granted		-		-
Exercised		-		-
Cancelled		(200,000)		2.00
Balance at September 30, 2014		430,532		3.33		0.31
Outstanding and exercisable at September 30, 2014		430,532		3.33		0.31
Granted		36,232		1.82
Exercised		-		-
Cancelled		(408,552)		3.99
Balance at September 30, 2015		58,212		2.28		1.96
Outstanding and exercisable at September 30, 2015		58,212		2.28		1.96

Subsidiary Option Grants [Member]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

A summary of Xcede stock option activity for the years ended September 30, 2015 and 2014 is presented below:

					Weighted Average
			Weighted Average		Remaining
	Options		Exercise Price per		Contractual Term
	Outstanding		Share ($)		(in Years)
Balance at September 30, 2013		-		-
Outstanding and exercisable at September 30, 2013		-		-
Granted		506,629		1.00
Exercised		-		-
Cancelled		-		-
Balance at September 30, 2014		506,629		1.00		8.21
Outstanding and exercisable at September 30, 2014		17,500		1.00		9.24
Granted		326,129		1.00
Exercised		-		-
Cancelled		(52,500)		1.00		8.82
Balance at September 30, 2015		780,258		1.00		8.85
Outstanding and exercisable at September 30, 2015		180,293		1.00		8.50

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Retirement Plans (Tables)

12 Months Ended

Sep. 30, 2015

Compensation and Retirement Disclosure [Abstract]

Schedule of Benefit Obligations in Excess of Fair Value of Plan Assets [Table Text Block]

The following table summarizes the Plan as of September 30, 2014:

	2014
Projected benefit obligation in excess of plan assets:
Projected benefit obligation	$	645,000
Fair value of plan assets		327,000

Schedule of Net Periodic Benefit Cost Not yet Recognized [Table Text Block]

The following table summarizes the components of the net periodic pension cost at September 30, 2014:

	2014
Interest cost	$	27,000
Expected return on assets		11,000
Amortization of net loss		7,000
Net periodic pension cost	$	45,000

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Lease Agreements (Tables)

12 Months Ended

Sep. 30, 2015

Leases [Abstract]

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

Aggregate minimum annual principal obligations at September 30, 2015, under non-cancelable leases are as follows:

	2016		2017		2018		2019		2020		Total
Capital Lease Obligations	$	76,000	$	31,000	$	12,000	$	-	$	-	$	119,000

Operating Leases of Lessee Disclosure [Table Text Block]

Future non-cancelable minimum lease payments under property leases as of September 30, 2015 are as follows:

Years ending September 30,

2016	$	979,000
2017		493,000
2018		296,000
2019		91,000
2020		93,000
thereafter		439,000

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Supplemental Disclosure of Cash Flow Information (Tables)

12 Months Ended

Sep. 30, 2015

Supplemental Cash Flow Elements [Abstract]

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

	2015		2014
Cash Paid during the year for:
Interest	$	388,000	$	933,000
Income taxes (refunds)		(5,000)		16,000
Non cash activities:
Assets purchased under capital leases	$	73,000	$	-
Assets acquired		-		1,739,000
Less: common shares issued in acquisition		(17,000)		1,239,000
Cash paid in acquisition	$	-	$	500,000

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Segment, Customer and Geographical Reporting (Tables)

12 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

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

The Company’s segment information is summarized below:

Results of Operations for the Fiscal Year Ended September 30,
2015
	Contract
	Research			Optics			Instruments		Biomedical		Total
Revenue	$	18,753,000		$	21,783,000		$	-	$	-	$	40,536,000
Gross Profit		8,176,000			7,076,000			-		-		15,252,000
GM %		43.6	%		32.5	%		-		-		37.6	%
SG&A		7,629,000			6,516,000			-		1,151,000		15,296,000
Gain on sale of assets		-			178,000			-		-		178,000
Operating Income (Loss)		547,000			738,000			-		(1,151,000)		134,000
Depreciation and Amortization		296,000			839,000			-		61,000		1,196,000
Capital expenditures		18,000			1,166,000			-		119,000		1,303,000
Intangibles, Net		264,000			678,000			-		283,000		1,225,000
Goodwill		4,939,000			1,192,000			-		-		6,131,000
Total Assets	$	7,692,000		$	15,948,000		$	48,000	$	828,000	$	24,516,000

Results of Operations for the Fiscal Year Ended September 30,
2014
	Contract
	Research			Optics			Instruments			Biomedical			Total
Revenue	$	21,935,000		$	19,590,000		$	773,000		$	11,000		$	42,309,000
Gross Profit		9,301,000			7,100,000			318,000			11,000			16,730,000
GM %		42.4	%		36.2	%		41.1	%		100.0	%		39.5	%
SG&A		8,546,000			5,482,000			527,000			778,000			15,333,000
Gain on sale of assets		-			-			1,297,000			-			1,297,000
Operating Income (Loss)		755,000			1,618,000			1,087,000			(765,000)			2,695,000
Depreciation and Amortization		280,000			781,000			2,000			60,000			1,123,000
Capital expenditures		12,000			1,326,000			-			110,000			1,448,000
Intangibles, Net		299,000			854,000			-			230,000			1,383,000
Goodwill		4,939,000			1,308,000			-			-			6,247,000
Total Assets	$	8,857,000		$	16,019,000		$	313,000		$	1,188,000		$	26,377,000

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

Revenues by geographic location in total and as a percentage of total revenue, for the years ended September 30, 2015 and 2014 are as follows:

	2015					2014
Geographic Location	Revenue		% of Total			Revenue		% of Total
United States	$	30,928,000		76	%	$	33,936,000		80	%
Europe		4,902,000		12	%		3,001,000		7	%
Other		4,706,000		12	%		5,372,000		13	%
	$	40,536,000		100	%	$	42,309,000		100	%

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Summary of Significant Accounting Policies (Details) - shares	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Weighted average shares outstanding
Basic	16,402,893	15,415,408
Dilutive Average Shares Outstanding	16,402,893	15,429,664
Employee Stock Option [Member]
Weighted average shares outstanding
Effect of dilutive securities	0	0
Restricted Stock [Member]
Weighted average shares outstanding
Effect of dilutive securities	0	14,256

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Summary of Significant Accounting Policies (Details Textual) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Significant Accounting Policies [Line Items]
Patent costs	$ 500,000	$ 400,000
Deferred Finance Costs, Net, Total	248,000	221,000
Amortization of Deferred Charges, Total	28,000	82,000
Advertising Expense	96,000	91,000
Cash, FDIC Insured Amount	250,000
Cash, Uninsured Amount	600,000	3,000,000
Accrual For Contract Losses	110,000	117,000
Shipping and Handling Revenue	49,000	67,000
Research and Development Expense, Total	1,715,000	1,343,000
Finite-Lived Intangible Assets, Amortization Expense, Next Twelve Months	185,000
Finite-Lived Intangible Assets, Amortization Expense, Year Two	125,000
Other Research and Development Expense	$ 100,000	$ 100,000
Restricted Stock [Member]
Significant Accounting Policies [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	10,165	14,256
Maximum [Member]
Significant Accounting Policies [Line Items]
Finite-Lived Intangible Asset, Useful Life	20 years
Minimum [Member]
Significant Accounting Policies [Line Items]
Finite-Lived Intangible Asset, Useful Life	4 years
Transportation Equipment [Member]
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Building and Building Improvements [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	25 years
Building and Building Improvements [Member] | Minimum [Member]
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	8 years
Machinery and Equipment [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	20 years
Machinery and Equipment [Member] | Minimum [Member]
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Furniture and Fixtures [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	10 years
Furniture and Fixtures [Member] | Minimum [Member]
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Geographic Concentration Risk [Member] | Accounts Receivable [Member]
Significant Accounting Policies [Line Items]
Accounts Receivable, Net, Total	$ 921,000	$ 665,000
Concentration Risk, Percentage	26.00%	18.00%
Radiation Monitoring Devices, Inc [Member]
Significant Accounting Policies [Line Items]
Research and Development Expense, Total	$ 10,600,000	$ 12,600,000
Finite-Lived Intangible Assets, Amortization Expense, Next Twelve Months	9,000
Finite-Lived Intangible Assets, Amortization Expense, Year Two	2,000
Xcede Technologies inc [Member]
Significant Accounting Policies [Line Items]
Finite-Lived Patents, Gross	$ 100,000	$ 100,000
Restricted Stock and Stock Option [Member]
Significant Accounting Policies [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	10,165

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Acquisitions and Divestitures (Details Textual) - USD ($)		1 Months Ended		12 Months Ended
	Nov. 07, 2013	Jun. 26, 2014	Dec. 23, 2013	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2013
Business Acquisition [Line Items]
Payments to Acquire Businesses, Gross				$ 0	$ 500,000
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable		$ 1,700,000
Revenue, Net, Total				40,536,000	42,309,000
Repayments of Other Debt				4,000,000
Gain (Loss) on Disposition of Business					$ 1,300,000
Dichrotec [Member]
Business Acquisition [Line Items]
Payments to Acquire Businesses, Gross				$ 500,000
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares				700,000
Machinery and Equipment, Gross		1,600,000
Inventory, Gross		$ 100,000
Revenue, Net, Total						$ 1,900,000
Dilon [Member]
Business Acquisition [Line Items]
Proceeds from Sales of Business, Affiliate and Productive Assets			$ 3,500,000
Escrow Deposit			$ 250,000
Protec [Member]
Business Acquisition [Line Items]
Proceeds from Sales of Business, Affiliate and Productive Assets	$ 1,200,000
Repayment Of Accounts Receivable	$ 500,000

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Inventories (Details) - USD ($)	Sep. 30, 2015	Sep. 30, 2014
Inventory Current [Line Items]
Raw Materials	$ 1,828,000	$ 1,805,000
Work-in-Process	862,000	858,000
Finished Goods	376,000	291,000
Inventory, Net, Total	$ 3,066,000	$ 2,954,000

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Property, Plant and Equipment (Details) - USD ($)	Sep. 30, 2015	Sep. 30, 2014
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 15,086,000	$ 14,038,000
Less accumulated depreciation	(8,424,000)	(7,520,000)
Property, Plant and Equipment, net	6,662,000	6,518,000
Land [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	176,000	187,000
Building Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	3,607,000	3,131,000
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	10,270,000	9,771,000
Office furniture and fixtures [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	980,000	896,000
Transportation Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 53,000	$ 53,000

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Property, Plant and Equipment (Details Textual) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Property, Plant and Equipment [Line Items]
Depreciation	$ 1,026,000	$ 948,000

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Intangible Assets (Details) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 2,137,000	$ 2,147,000
Accumulated Amortization	912,000	764,000
Net	$ 1,225,000	1,383,000
Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)	4 years
Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)	20 years
Acquired Customer Base [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 824,000	877,000
Accumulated Amortization	464,000	409,000
Net	$ 360,000	$ 468,000
Acquired Customer Base [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)	5 years	5 years
Acquired Customer Base [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)	15 years	15 years
Know How [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)	15 years	15 years
Gross Amount	$ 512,000	$ 512,000
Accumulated Amortization	248,000	213,000
Net	264,000	299,000
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount	318,000	339,000
Accumulated Amortization	0	0
Net	$ 318,000	$ 339,000
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)	20 years	20 years
Gross Amount	$ 223,000	$ 159,000
Accumulated Amortization	0	0
Net	$ 223,000	$ 159,000
Biomedical Technologies [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)	5 years	5 years
Gross Amount	$ 260,000	$ 260,000
Accumulated Amortization	200,000	142,000
Net	$ 60,000	$ 118,000

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Intangible Assets (Details 1)	Sep. 30, 2015 USD ($)
Finite-Lived Intangible Assets [Line Items]
2016	$ 185,000
2017	125,000
2018	125,000
2019	125,000
2020	85,000
Thereafter	262,000
Total	907,000
Acquired Customer Base [Member]
Finite-Lived Intangible Assets [Line Items]
2016	80,000
2017	80,000
2018	80,000
2019	80,000
2020	40,000
Thereafter	0
Total	360,000
Know How [Member]
Finite-Lived Intangible Assets [Line Items]
2016	34,000
2017	34,000
2018	34,000
2019	34,000
2020	34,000
Thereafter	94,000
Total	264,000
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
2016	11,000
2017	11,000
2018	11,000
2019	11,000
2020	11,000
Thereafter	168,000
Total	223,000
Biomedical Technologies [Member]
Finite-Lived Intangible Assets [Line Items]
2016	60,000
2017	0
2018	0
2019	0
2020	0
Thereafter	0
Total	$ 60,000

XML

Intangible Assets (Details Textual) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Finite-Lived Intangible Assets [Line Items]
Amortization of Intangible Assets	$ 170,000	$ 175,000

XML

Goodwill (Details) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Goodwill [Line Items]
Goodwill, Beginning Balance	$ 6,247,000	$ 6,241,000
Currency translation on Hilger Crystals	(116,000)	6,000
Goodwill, Ending Balance	6,131,000	6,247,000
Contract Research [Member]
Goodwill [Line Items]
Goodwill, Beginning Balance	4,939,000	$ 4,939,000
Currency translation on Hilger Crystals
Goodwill, Ending Balance	4,939,000	$ 4,939,000
Optics [Member]
Goodwill [Line Items]
Goodwill, Beginning Balance	1,308,000	1,302,000
Currency translation on Hilger Crystals	(116,000)	6,000
Goodwill, Ending Balance	$ 1,192,000	$ 1,308,000

XML

Goodwill (Details Textual)	Sep. 30, 2015
Hilger Crystals [Member]
Goodwill [Line Items]
Percentage Increase In Carrying Value Of Unit	20.00%
Weighted Average Cost Of Capital	16.00%
Long Term Growth Rate	3.00%
Radiation Monitoring Devices [Member]
Goodwill [Line Items]
Weighted Average Cost Of Capital	13.00%
Long Term Growth Rate	1.50%

XML

Fair Value Measurement (Details)	Sep. 30, 2014 USD ($)
Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Total plan assets	$ 0
Fair Value, Inputs, Level 1 [Member] | Money Market Separate Account [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Total plan assets	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Total plan assets	327,000
Fair Value, Inputs, Level 2 [Member] | Money Market Separate Account [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Total plan assets	327,000
Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Total plan assets	0
Fair Value, Inputs, Level 3 [Member] | Money Market Separate Account [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Total plan assets	$ 0

XML

Debt (Details) - USD ($)	Sep. 30, 2015	Sep. 30, 2014
Debt [Line Items]
Total Debt	$ 4,990,000	$ 7,044,000
Less current portion	(1,577,000)	(2,329,000)
Less convertible notes	(2,123,000)	(1,433,000)
Long term portion	1,290,000	3,282,000
Middlesex Savings Bank [Member]
Debt [Line Items]
Total Debt	1,455,000	2,122,000
Ayer Industrial Development Finance Authority [Member]
Debt [Line Items]
Total Debt	175,000	191,000
Massachusetts Development Finance Agency [Member]
Debt [Line Items]
Total Debt	237,000	298,000
Convertible Notes Payable [Member]
Debt [Line Items]
Total Debt	2,123,000	1,433,000
Masschusetts Capital Resource Corporation [Member]
Debt [Line Items]
Total Debt	$ 1,000,000	$ 3,000,000

XML

Debt (Details 1)	Sep. 30, 2015 USD ($)
Debt [Line Items]
2016	$ 3,700,000
2017	607,000
2018	524,000
2019	56,000
2020	21,000
Thereafter	82,000
Long-term Debt, Total	$ 4,990,000

XML

Debt (Details Textual) - USD ($)	1 Months Ended		12 Months Ended
	Oct. 31, 2013	Jul. 31, 2012	Sep. 30, 2015	May. 01, 2014
Debt [Line Items]
Purchase Price Of Subordinate Debt			$ 2,000,000
Description Of Consolidated Fixed Charge Coverage Ratio			The Bank Loan Agreement requires Dynasil, at the close of each fiscal quarter, to maintain a Debt Service Coverage ratio, as defined, of at least 1.20 to 1.00 on a trailing four quarter basis.
Debt Instrument Discount Percentage			30.00%
Masschusetts Capital Resource Corporation [Member]
Debt [Line Items]
Debt Instrument Redemption Value			$ 43,478
Debt Instrument, Interest Rate, Stated Percentage			6.00%
Debt Instrument, Periodic Payment, Principal			$ 6,000
Debt Instrument, Maturity Date, Description			March, 2019
Debt Instrument, Periodic Payment			$ 5,000
Debt Instrument, Debt Default, Amount			$ 3,000,000
Middlesex Savings Bank [Member]
Debt [Line Items]
Debt Instrument, Maturity Date			May 01, 2017
Debt Instrument, Interest Rate, Stated Percentage			3.25%
Debt Instrument, Face Amount				$ 4,000,000
Debt Instrument, Description of Variable Rate Basis			The interest rate under the Note is equal the Prime Rate, but in no event less than 3.25%
Town of Ayer Industrial Development Finance Authority [Member]
Debt [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			5.00%
Debt Instrument, Periodic Payment, Principal			$ 16,000
Massachusetts Development Finance Agency [Member]
Debt [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			5.25%
Optometrics Corporation [Member]
Debt [Line Items]
Debt Instrument, Face Amount			$ 500,000
Debt Instrument, Interest Rate, Stated Percentage Rate Range, Minimum			5.00%
Debt Instrument, Interest Rate, Stated Percentage Rate Range, Maximum			5.25%
Note Purchase Agreement [Member]
Debt [Line Items]
Proceeds from Convertible Debt		$ 3,000,000	$ 2,000,000
Purchase Price Of Subordinate Debt		$ 3,000,000
Debt Instrument Redemption Value			$ 130,000
Debt Instrument, Interest Rate, Stated Percentage			10.00%
Hilger Crystals [Member]
Debt [Line Items]
Equity Method Investment, Ownership Percentage			65.00%
Xcede Technologies inc [Member]
Debt [Line Items]
Proceeds from Convertible Debt			$ 2,000,000
Debt Instrument, Maturity Date	Jun. 30, 2016		Jun. 30, 2016
Debt Instrument, Interest Rate, Stated Percentage	5.00%		5.00%
Debt Instrument, Periodic Payment, Principal			$ 3,000,000
Equity Method Investment, Ownership Percentage			90.00%
Debt Instrument Discount Percentage	20.00%		20.00%
Debt Instrument Equity Financing Amount			$ 3,000,000

XML

Income Taxes (Details) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Income Tax [Line Items]
US	$ (865,000)	$ 1,724,000
Foreign	506,000	258,000
Total	$ (359,000)	$ 1,982,000

XML

Income Taxes (Details 1) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Current
Federal	$ 0	$ 0
State	11,000	68,000
Foreign	(71,000)	(82,000)
Current Income Tax Expense (Benefit)	(60,000)	(14,000)
Deferred
Federal	0	0
State	0	0
Foreign	54,000	(7,000)
Deferred Income Tax Expense (Benefit)	54,000	(7,000)
Income tax credit	$ (6,000)	$ (21,000)

XML

Income Taxes (Details 2)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Income Tax [Line Items]
Tax due at statutory rate	34.00%	34.00%
State tax provision, net of federal	7.91%	9.43%
Valuation allowance	(46.10%)	(28.63%)
Foreign tax credits	56.91%	(12.88%)
Foreign rate differential and other	(51.12%)	(3.04%)
Total	1.60%	(1.12%)

XML

Income Taxes (Details 3) - USD ($)	Sep. 30, 2015	Sep. 30, 2014
Domestic [Member]
Income Tax [Line Items]
Credits	$ 1,488,000	$ 1,496,000
NOLs	2,775,000	2,295,000
Stock compensation	82,000	492,000
Accruals	333,000	394,000
Other	138,000	114,000
Gross deferred tax assets	4,816,000	4,791,000
Valuation allowance	(4,377,000)	(4,238,000)
Deferred tax assets, net	439,000	553,000
Depreciation	(403,000)	(495,000)
Intangibles	(36,000)	(58,000)
Other		0
Gross deferred tax liabilities	(439,000)	(553,000)
Net deferred tax asset (liability)	0	0
Foreign [Member]
Income Tax [Line Items]
Credits	0	0
NOLs	34,000	37,000
Stock compensation	0	0
Accruals	0	0
Other	0	0
Gross deferred tax assets	34,000	37,000
Valuation allowance	0	0
Deferred tax assets, net	34,000	37,000
Depreciation	(145,000)	(62,000)
Intangibles	(135,000)	(161,000)
Other		(18,000)
Gross deferred tax liabilities	(280,000)	(241,000)
Net deferred tax asset (liability)	(246,000)	(204,000)
Worldwide [Member]
Income Tax [Line Items]
Credits	1,488,000	1,496,000
NOLs	2,809,000	2,332,000
Stock compensation	82,000	492,000
Accruals	333,000	394,000
Other	138,000	114,000
Gross deferred tax assets	4,850,000	4,828,000
Valuation allowance	(4,377,000)	(4,238,000)
Deferred tax assets, net	473,000	590,000
Depreciation	(548,000)	(557,000)
Intangibles	(171,000)	(219,000)
Other		(18,000)
Gross deferred tax liabilities	(719,000)	(794,000)
Net deferred tax asset (liability)	$ (246,000)	$ (204,000)

XML

Income Taxes (Details Textual) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Income Tax [Line Items]
Deferred Tax Assets, Operating Loss Carryforwards, State and Local	$ 11,700,000	$ 9,300,000
Deferred Tax Assets, Operating Loss Carryforwards, Foreign	171,000	183,000
Deferred Tax Assets, Tax Credit Carryforwards, Research		1,400,000
Deferred Tax Assets, Operating Loss Carryforwards, Domestic	6,200,000	5,200,000
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount	200,000	600,000
Federal [Member]
Income Tax [Line Items]
Deferred Tax Assets, Tax Credit Carryforwards, Research	$ 1,400,000
Operating Loss Carryforwards Expiration Period	2023
State and Local Jurisdiction [Member]
Income Tax [Line Items]
Deferred Tax Assets, Tax Credit Carryforwards, Research	$ 127,000	$ 138,000
Operating Loss Carryforwards Expiration Period	2026

XML

Stockholders' Equity (Details) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Stock Based Compensation [Line Items]
Stock Compensation Expense	$ 459,000	$ 467,000
Stock Grants [Member]
Stock Based Compensation [Line Items]
Stock Compensation Expense	323,000	270,000
Restricted Stock Grants [Member]
Stock Based Compensation [Line Items]
Stock Compensation Expense	28,000	195,000
Option Grants [Member]
Stock Based Compensation [Line Items]
Stock Compensation Expense	17,000	0
Employee Stock Purchase Plan [Member]
Stock Based Compensation [Line Items]
Stock Compensation Expense	2,000	2,000
Subsidiary Option Grants [Member]
Stock Based Compensation [Line Items]
Stock Compensation Expense	$ 89,000	$ 0

XML

Stockholders' Equity (Details 1) - Restricted Stock [Member] - $ / shares	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares Nonvested, Beginning Balance	54,000	423,168
Shares, Granted	0	6,000
Shares, Vested	(27,000)	(375,168)
Shares, Cancelled	0	0
Shares, Nonvested and expected to vest, Ending Balance	27,000	54,000
Weighted-Average Grant-Date Fair Value, Nonvested, Beginning Balance	$ 1.04	$ 0.74
Weighted-Average Grant-Date Fair Value, Granted	0	1.36
Weighted-Average Grant-Date Fair Value, Vested	1.04	0.71
Weighted-Average Grant-Date Fair Value, Cancelled	0	0
Weighted-Average Grant-Date Fair Value, Nonvested, Ending Balance	$ 1.04	$ 1.04

XML

Stockholders' Equity (Details 2) - $ / shares	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted,Options Outstanding	36,232	0
Stock Option Grants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Balance,Options Outstanding	430,532	630,532
Outstanding and exercisable,Options Outstanding	58,212	430,532	630,532
Granted,Options Outstanding	36,232	0
Exercised,Options Outstanding	0	0
Cancelled, Options Outstanding	(408,552)	(200,000)
Balance,Options Outstanding	58,212	430,532	630,532
Balance,Weighted Average Exercise Price per Share	$ 3.33	$ 3.33
Outstanding and exercisable,Weighted Average Exercise Price per Share	2.28	3.33	$ 3.33
Granted,Weighted Average Exercise Price per Share	1.82	0
Exercised,Weighted Average Exercise Price per Share	0	0
Cancelled,Weighted Average Exercise Price per Share	3.99	2.00
Balance,Weighted Average Exercise Price per Share	$ 2.28	$ 3.33	$ 3.33
Balance,Weighted Average Remain Contractual Term (in Years)	1 year 11 months 16 days	3 months 22 days	1 year 22 days
Outstanding and exercisable,Weighted Average Remain Contractual Term (in Years)	1 year 11 months 16 days	3 months 22 days	1 year 22 days
Subsidiary Option Grants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Balance,Options Outstanding	506,629	0
Outstanding and exercisable,Options Outstanding	180,293	17,500	0
Granted,Options Outstanding	326,129	506,629
Exercised,Options Outstanding	0	0
Cancelled, Options Outstanding	(52,500)	0
Balance,Options Outstanding	780,258	506,629	0
Balance,Weighted Average Exercise Price per Share	$ 1.00	$ 0
Outstanding and exercisable,Weighted Average Exercise Price per Share	1.00	1.00	$ 0
Granted,Weighted Average Exercise Price per Share	1.00	1.00
Exercised,Weighted Average Exercise Price per Share	0	0
Cancelled,Weighted Average Exercise Price per Share	1.00	0
Balance,Weighted Average Exercise Price per Share	$ 1.00	$ 1.00	$ 0
Cancelled, Weighted Average Remain Contractual Term (in Years)	8 years 9 months 25 days
Balance,Weighted Average Remain Contractual Term (in Years)	8 years 10 months 6 days	8 years 2 months 16 days
Outstanding and exercisable,Weighted Average Remain Contractual Term (in Years)	8 years 6 months	9 years 2 months 26 days
Option One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding and exercisable,Options Outstanding	36,232
Balance,Options Outstanding	36,232
Outstanding and exercisable,Weighted Average Exercise Price per Share	$ 1.82
Balance,Weighted Average Exercise Price per Share	$ 1.82
Balance,Weighted Average Remain Contractual Term (in Years)	2 years 4 months 2 days
Option Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding and exercisable,Options Outstanding	0
Balance,Options Outstanding	0
Outstanding and exercisable,Weighted Average Exercise Price per Share	$ 0
Balance,Weighted Average Exercise Price per Share	$ 0
Balance,Weighted Average Remain Contractual Term (in Years)	0 years
Option Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding and exercisable,Options Outstanding	21,980
Balance,Options Outstanding	21,980
Outstanding and exercisable,Weighted Average Exercise Price per Share	$ 3.03
Balance,Weighted Average Exercise Price per Share	$ 3.03
Balance,Weighted Average Remain Contractual Term (in Years)	1 year 4 months 2 days
Option Four [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding and exercisable,Options Outstanding	58,212
Balance,Options Outstanding	58,212
Outstanding and exercisable,Weighted Average Exercise Price per Share	$ 2.28
Balance,Weighted Average Exercise Price per Share	$ 2.28
Balance,Weighted Average Remain Contractual Term (in Years)	1 year 11 months 16 days
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices	$ 3.03
Maximum [Member] | Option One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices	1.99
Maximum [Member] | Option Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices	2.99
Maximum [Member] | Option Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices	3.03
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices	1.82
Minimum [Member] | Option One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices	1.82
Minimum [Member] | Option Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices	2.00
Minimum [Member] | Option Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices	$ 3.00

XML

Stockholders' Equity (Details Textual) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Class of Stock [Line Items]
Common Stock, Shares, Issued	17,368,738	17,140,182
Common Stock, Value, Issued	$ 9,000	$ 9,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	36,232	0
Common Stock, Shares Authorized	40,000,000	40,000,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	$ 33,000	$ 188,000
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate	0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total	$ 82,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares	36,232	0
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term	7 months	20 months
Amendmend 2010 September 28 [Member]
Class of Stock [Line Items]
Minimum Stock Value To Be Purchased Under Plan Per Employee	$ 20,000
Amendment 2011 December 16 [Member]
Class of Stock [Line Items]
Minimum Stock Value To Be Purchased Under Plan Per Employee	$ 5,000
Stock Incentive Plan 2010 [Member]
Class of Stock [Line Items]
Common Stock, Shares Authorized	6,000,000
Common Stock, Capital Shares Reserved for Future Issuance	4,006,663	3,862,843
Share-based Compensation Arrangement by Share-based Payment Award, Options, Fair Value Exercisable, Maturity Period	2017
Employee Stock Purchase Plan [Member]
Class of Stock [Line Items]
Common Stock, Shares, Issued	144,945	154,643
Common Stock, Capital Shares Reserved for Future Issuance	450,000
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Date	Sep. 28, 2020
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent	85.00%
Employee Stock Purchase Plan [Member] | Amendment 2011 December 16 [Member]
Class of Stock [Line Items]
Common Stock, Shares, Issued	9,698	10,499
Common Stock, Value, Issued	$ 12,762	$ 13,345

XML

Retirement Plans (Details)	Sep. 30, 2014 USD ($)
Projected benefit obligation in excess of plan assets:
Projected benefit obligation	$ 645,000
Fair value of plan assets	$ 327,000

XML

Retirement Plans (Details 1)	12 Months Ended
	Sep. 30, 2014 USD ($)
Retirement Plans [Line Items]
Interest cost	$ 27,000
Expected return on assets	11,000
Amortization of net loss	7,000
Net periodic pension cost	$ 45,000

XML

Retirement Plans (Details Textual) - USD ($)		12 Months Ended
	Dec. 01, 2014	Sep. 30, 2015	Sep. 30, 2014
Retirement Plans [Line Items]
Defined Contribution Plan, Employer Discretionary Contribution Amount		$ 171,000	$ 152,000
Defined Benefit Plan, Benefit Obligation	$ 675,000
Defined Benefit Plan, Actual Return on Plan Assets	320,000
Defined Benefit Plan, Funded Status of Plan	$ 355,000

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Related Party Transactions (Details Textual) - USD ($)	1 Months Ended	12 Months Ended
	Oct. 31, 2013	Sep. 30, 2015	Sep. 30, 2014
Related Party Transaction [Line Items]
Debt Instrument Discount Percentage		30.00%
Debt Instrument Convertible Value	$ 5,000,000	$ 5,000,000
Charles River Realty [Member]
Related Party Transaction [Line Items]
Payments for Rent		961,000	$ 924,000
Mayo Clinic [Member]
Related Party Transaction [Line Items]
Amount Received Under Grants		$ 83,315
Hagan Associates [Member]
Related Party Transaction [Line Items]
Consulting Fee			$ 13,000
Xcede Technologies inc [Member]
Related Party Transaction [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	5.00%	5.00%
Debt Instrument, Maturity Date	Jun. 30, 2016	Jun. 30, 2016
Debt Instrument Discount Percentage	20.00%	20.00%
Debt Instrument Convertible Into Shares	3,000,000
Dr Gerald Entine [Member]
Related Party Transaction [Line Items]
Beneficial ownership percentage		5.00%
Mr. Sulick and Familys [Member]
Related Party Transaction [Line Items]
Debt Instrument Convertible Into Shares		323,935
Debt Conversion Converted Instrument Shares Outstanding Rate		7.10%
Mr. Sulick and Familys [Member] | Xcede Technologies inc [Member]
Related Party Transaction [Line Items]
Investment Owned, Balance, Principal Amount	$ 540,000
Mr. Fox [Member]
Related Party Transaction [Line Items]
Debt Instrument Convertible Into Shares		89,982
Debt Conversion Converted Instrument Shares Outstanding Rate		1.97%
Mr. Fox [Member] | Xcede Technologies inc [Member]
Related Party Transaction [Line Items]
Investment Owned, Balance, Principal Amount	150,000
Dr. Joyner [Member]
Related Party Transaction [Line Items]
Debt Instrument Convertible Into Shares		20,996
Debt Conversion Converted Instrument Shares Outstanding Rate		0.46%
Dr. Joyner [Member] | Xcede Technologies inc [Member]
Related Party Transaction [Line Items]
Investment Owned, Balance, Principal Amount	35,000
Dr. Hagan [Member]
Related Party Transaction [Line Items]
Debt Instrument Convertible Into Shares		14,997
Debt Conversion Converted Instrument Shares Outstanding Rate		0.33%
Dr. Hagan [Member] | Xcede Technologies inc [Member]
Related Party Transaction [Line Items]
Investment Owned, Balance, Principal Amount	25,000
Dr. Entine Family Trust [Member]
Related Party Transaction [Line Items]
Debt Instrument Convertible Into Shares		59,988
Debt Conversion Converted Instrument Shares Outstanding Rate		1.32%
Dr. Entine Family Trust [Member] | Xcede Technologies inc [Member]
Related Party Transaction [Line Items]
Investment Owned, Balance, Principal Amount	$ 100,000

XML

Lease Agreements (Details)	Sep. 30, 2015 USD ($)
Capital Leased Assets [Line Items]
Capital Lease Obligations, 2016	$ 76,000
Capital Lease Obligations, 2017	31,000
Capital Lease Obligations, 2018	12,000
Capital Lease Obligations, 2019	0
Capital Lease Obligations, 2020	0
Capital Leases, Total	$ 119,000

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Lease Agreements (Details 1)	Sep. 30, 2015 USD ($)
Operating Leased Assets [Line Items]
2016	$ 979,000
2017	493,000
2018	296,000
2019	91,000
2020	93,000
thereafter	$ 439,000

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Lease Agreements (Details Textual) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Operating Leased Assets [Line Items]
Operating Leases, Rent Expense	$ 1,600,000	$ 1,400,000
Capital Lease Obligations	$ 119,000	$ 229,000
Computer and Telephone Equipment [Member]
Operating Leased Assets [Line Items]
Long-term Debt, Weighted Average Interest Rate	7.60%

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Vendor Concentration (Details Textual) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Vendor Concentration [Line Items]
Cost of Goods Sold, Direct Materials	$ 1,500,000	$ 2,600,000
Accounts Payable, Trade, Current	$ 101,000	$ 263,000

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Supplemental Disclosure of Cash Flow Information (Details) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash Paid during the year for:
Interest	$ 388,000	$ 933,000
Income taxes (refunds)	(5,000)	16,000
Non cash activities:
Assets purchased under capital leases	73,000	0
Assets acquired	0	1,739,000
Less: common shares issued in acquisition	(17,000)	1,239,000
Cash paid in acquisition	$ 0	$ 500,000

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Segment, Customer and Geographical Reporting (Details) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2013
Segment Reporting Information [Line Items]
Revenue	$ 40,536,000	$ 42,309,000
Gross Profit	$ 15,252,000	$ 16,730,000
GM %	37.60%	39.50%
SG&A	$ 15,296,000	$ 15,333,000
Gain on sale of assets	178,000	1,297,000
Operating Income (Loss)	134,000	2,695,000
Depreciation and Amortization	1,196,000	1,123,000
Capital expenditures	1,310,000	1,448,000
Intangibles, Net	1,225,000	1,383,000
Goodwill	6,131,000	6,247,000	$ 6,241,000
Total Assets	24,516,000	26,377,000
Contract Research [Member]
Segment Reporting Information [Line Items]
Revenue	18,753,000	21,935,000
Gross Profit	$ 8,176,000	$ 9,301,000
GM %	43.60%	42.40%
SG&A	$ 7,629,000	$ 8,546,000
Gain on sale of assets	0	0
Operating Income (Loss)	547,000	755,000
Depreciation and Amortization	296,000	280,000
Capital expenditures	18,000	12,000
Intangibles, Net	264,000	299,000
Goodwill	4,939,000	4,939,000
Total Assets	7,692,000	8,857,000
Optics [Member]
Segment Reporting Information [Line Items]
Revenue	21,783,000	19,590,000
Gross Profit	$ 7,076,000	$ 7,100,000
GM %	32.50%	36.20%
SG&A	$ 6,516,000	$ 5,482,000
Gain on sale of assets	178,000	0
Operating Income (Loss)	738,000	1,618,000
Depreciation and Amortization	839,000	781,000
Capital expenditures	1,166,000	1,326,000
Intangibles, Net	678,000	854,000
Goodwill	1,192,000	1,308,000
Total Assets	15,948,000	16,019,000
Instruments [Member]
Segment Reporting Information [Line Items]
Revenue	0	773,000
Gross Profit	$ 0	$ 318,000
GM %	0.00%	41.10%
SG&A	$ 0	$ 527,000
Gain on sale of assets	0	1,297,000
Operating Income (Loss)	0	1,087,000
Depreciation and Amortization	0	2,000
Capital expenditures	0	0
Intangibles, Net	0	0
Goodwill	0	0
Total Assets	48,000	313,000
Biomedical [Member]
Segment Reporting Information [Line Items]
Revenue	0	11,000
Gross Profit	$ 0	$ 11,000
GM %	0.00%	100.00%
SG&A	$ 1,151,000	$ 778,000
Gain on sale of assets	0	0
Operating Income (Loss)	(1,151,000)	(765,000)
Depreciation and Amortization	61,000	60,000
Capital expenditures	119,000	110,000
Intangibles, Net	283,000	230,000
Goodwill	0	0
Total Assets	$ 828,000	$ 1,188,000

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Segment, Customer and Geographical Reporting (Details 1) - USD ($)	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 40,536,000	$ 42,309,000
% of Total	100.00%	100.00%
United State [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 30,928,000	$ 33,936,000
% of Total	76.00%	80.00%
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 4,902,000	$ 3,001,000
% of Total	12.00%	7.00%
Other [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 4,706,000	$ 5,372,000
% of Total	12.00%	13.00%

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Segment, Customer and Geographical Reporting (Details Textual) - Sales Revenue, Segment [Member]	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Optics [Member]
Segment Reporting [Line Items]
Concentration Risk, Percentage	9.00%	11.00%
Instrument Segment [Member] | Customer One [Member]
Segment Reporting [Line Items]
Concentration Risk, Percentage		10.00%
Biomedical Technologies [Member] | Customer One [Member]
Segment Reporting [Line Items]
Concentration Risk, Percentage		100.00%
Customer Concentration Risk [Member]
Segment Reporting [Line Items]
Concentration Risk, Percentage	57.00%	69.00%