10-Q

U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2015

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

Commission file number: 000-27503

DYNASIL CORPORATION OF AMERICA

(Exact name of registrant as specified in its charter)

Delaware	22-1734088
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days Yes x No ¨

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

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

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

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

As of February 5, 2016 there were 16,730,231 shares of common stock, par value $.0005 per share, outstanding.

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

INDEX

	Page
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2015 AND SEPTEMBER 30, 2015	3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE MONTHS ENDED DECEMBER 31, 2015 AND 2014	5
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED DECEMBER 31, 2015	6
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 31, 2015 AND 2014	7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 4.  Controls and Procedures	23
Item 5.  Other Information	23
PART II.  OTHER INFORMATION	24
Item 1A.  Risk Factors	24
Item 6. Exhibits	24
Signatures	24

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	December 31,		September 30,
	2015		2015
ASSETS
Current Assets
Cash and cash equivalents	$	1,101,000	$	1,295,000
Accounts receivable, net of allowances of $168,000 at December 31, 2015 and September 30, 2015, respectively		4,444,000		3,382,000
Costs in excess of billings and unbilled receivables		1,288,000		1,518,000
Inventories, net of reserves		3,252,000		3,066,000
Prepaid expenses and other current assets		1,152,000		1,125,000
Total current assets		11,237,000		10,386,000
Property, Plant and Equipment, net		7,048,000		6,662,000
Other Assets
Intangibles, net		1,197,000		1,225,000
Goodwill		6,094,000		6,131,000
Security deposits		60,000		58,000
Total other assets		7,351,000		7,414,000
Total Assets	$	25,636,000	$	24,462,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt	$	2,503,000	$	1,567,000
Capital lease obligations, current		89,000		76,000
Convertible notes		2,540,000		2,123,000
Accounts payable		1,901,000		1,886,000
Deferred revenue		245,000		109,000
Accrued expenses and other liabilities		2,342,000		2,650,000
Total current liabilities		9,620,000		8,411,000
Long-term Liabilities
Long-term debt, net of current portion		1,129,000		1,288,000
Capital lease obligations, net of current portion		118,000		43,000
Deferred tax liability		214,000		242,000
Other long-term liabilities		49,000		50,000
Total long-term liabilities		1,510,000		1,623,000

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

3

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED) (Continued)

	December 31,			September 30,
	2015			2015
LIABILITIES AND STOCKHOLDERS' EQUITY (Continued)
Stockholders' Equity
Common Stock, $0.0005 par value, 40,000,000 shares authorized, 17,458,249 and 17,368,738 shares issued, 16,648,089 and and 16,558,578 shares outstanding at December 31, 2015 and September 30, 2015, respectively.		9,000			9,000
Additional paid in capital		19,773,000			19,650,000
Accumulated other comprehensive income (loss)		(4,000	)		110,000
Accumulated deficit		(4,061,000	)		(4,167,000	)
Less 810,160 shares of treasury stock - at cost		(986,000	)		(986,000	)
Total Dynasil stockholders' equity		14,731,000			14,616,000
Noncontrolling interest		(225,000	)		(188,000	)
Total stockholders' equity		14,506,000			14,428,000
Total Liabilities and Stockholders' Equity	$	25,636,000		$	24,462,000

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

4

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	Three Months Ended
	December 31,
	2015			2014
Net revenue	$	11,204,000		$	9,611,000
Cost of revenue		7,239,000			6,018,000
Gross profit		3,965,000			3,593,000
Operating expenses:
Sales and marketing		341,000			365,000
Research and development		491,000			375,000
General and administrative		2,973,000			3,467,000
Gain on sale of assets		(4,000	)		(185,000	)
Total operating expenses		3,801,000			4,022,000
Income (loss) from operations		164,000			(429,000	)
Interest expense, net		59,000			125,000
Income (loss) before taxes		105,000			(554,000	)
Income tax (credit)		36,000			3,000
Net income (loss)		69,000			(557,000	)
Less: Net loss attributable to noncontrolling interest		(37,000	)		(24,000	)
Net income (loss) attributable to common stockholders	$	106,000		$	(533,000	)
Net income (loss)	$	69,000		$	(557,000	)
Other comprehensive income (loss):
Increase (decrease) in pension liability		-			318,000
Foreign currency translation		(114,000	)		(194,000	)
Total comprehensive loss	$	(45,000	)	$	(433,000	)
Basic net income (loss) per common share	$	0.01		$	(0.03	)
Diluted net income (loss) per common share	$	0.01		$	(0.03	)
Weighted average shares outstanding
Basic		16,551,197			16,300,902
Diluted		16,578,634			16,300,902

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

5

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

					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, 2015		17,368,738	$	9,000	$	19,650,000	$	110,000		$	(4,167,000	)		810,160	$	(986,000	)	$	(188,000	)	$	14,428,000
Issuance of shares of common stock  under employee stock purchase plan		2,295		-		4,000		-			-			-		-			-			4,000
Stock-based compensation costs		87,216		-		119,000		-			-			-		-			-			119,000
Foreign currency translation adjustment		-		-		-		(114,000	)		-			-		-			-			(114,000	)
Net income (loss)		-		-		-		-			106,000			-		-			(37,000	)		69,000
Balance, December 31, 2015		17,458,249	$	9,000	$	19,773,000	$	(4,000	)	$	(4,061,000	)		810,160	$	(986,000	)	$	(225,000	)	$	14,506,000

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

6

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three Months Ended
	December 31,
	2015			2014
Cash flows from operating activities:
Net income (loss)	$	69,000		$	(557,000	)
Adjustments to reconcile net income (loss) to net cash:
Stock compensation expense		119,000			65,000
Foreign exchange loss (gain)		26,000			(23,000	)
Gain on sale of assets		(4,000	)		(185,000	)
Depreciation and amortization		325,000			293,000
Pension expense		-			318,000
Other		16,000			(35,000	)
Other changes in assets and libilities:
Accounts receivable, net		(1,101,000	)		(79,000	)
Inventories		(218,000	)		12,000
Costs in excess of billings and unbilled receivables		231,000			(56,000	)
Prepaid expenses and other assets		(32,000	)		(469,000	)
Accounts payable		34,000			(360,000	)
Accrued expenses and other liabilities		(303,000	)		(438,000	)
Deferred revenue		136,000			(76,000	)
Net cash from operating activities		(702,000	)		(1,590,000	)
Cash flows from investing activities:
Proceeds from sale of assets		4,000			244,000
Purchases of property, plant and equipment		(603,000	)		(244,000	)
Net cash from investing activities		(599,000	)		-
Cash flows from financing activities:
Proceeds from issuance of common stock		4,000			3,000
Net proceeds from issuance of convertible notes		390,000			18,000
Principal payments on capital leases		(46,000	)		(33,000	)
Proceeds from short and long-term debt		5,037,000			300,000
Payments on long-term debt		(4,264,000	)		(19,000	)
Net cash from financing activities		1,121,000			269,000
Effect of exchange rates on cash and cash equivalents		(14,000	)		(17,000	)
Net change in cash and cash equivalents		(194,000	)		(1,338,000	)
Cash and cash equivalents, beginning	$	1,295,000		$	3,842,000
Cash and cash equivalents, ending	$	1,101,000		$	2,504,000
Supplemental disclosures of cash flow information:
Non cash activities:
Assets purchased under capital leases	$	134,000		$	73,000

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

7

DYNASIL CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1 - Basis of Presentation

The accompanying consolidated balance sheet as of December 31, 2015, the consolidated statements of operations and comprehensive income (loss) for the three months ended December 31, 2015 and 2014, changes in stockholders’ equity for the three months ended December 31, 2015 and cash flows for the three months ended December 31, 2015 and 2014 of Dynasil Corporation of America and subsidiaries (the “Company”), and the related information contained in these notes have been prepared by management and are unaudited. In the opinion of management, all adjustments (which include normal recurring and nonrecurring items) necessary to present fairly the financial position, results of operations and cash flows in conformity with generally accepted accounting principles for the periods presented have been made. Certain prior year balances have been reclassified to conform to the current year presentation. These reclassifications did not affect previously reported net loss or stockholders’ deficit. In the opinion of management, all adjustments (which include normal recurring and nonrecurring items) necessary to present fairly the financial position, results of operations and cash flows in conformity with generally accepted accounting principles for the periods presented have been made. Interim operating results are not necessarily indicative of operating results for a full year.

The preparation of our unaudited consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's September 30, 2015 Annual Report on Form 10-K previously filed by the Company with the Securities and Exchange Commission.

The Company considers events or transactions that have occurred after the unaudited consolidated balance sheet date of December 31, 2015, but prior to the filing of the unaudited consolidated financial statements with the SEC on this Form 10-Q, to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure, as applicable. Subsequent events have been evaluated through the date of the filing of this Quarterly Report on Form 10-Q with the SEC.

Note 2 – Adoption of Accounting Pronouncements

Effective October 1, 2015, the Company early adopted the guidance issued in Accounting Standards Update 2015-03, Interest – Imputation of Interest (Topic 835) (“ASU 2015-03”) to simplify the presentation of debt issuance costs. This standard 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 Company adopted this guidance on a retrospective basis, wherein the balance sheet of each individual period presented was adjusted to reflect the period-specific effects of applying the new guidance. As a result of the adoption of ASU 2015-03, $12,000 of debt issuance costs at October 1, 2015 were reclassified from deferred financing costs, net to long-term debt in the consolidated balance sheets.

Effective for the reporting period beginning October 1, 2015, the Company early adopted the guidance issued in Accounting Standards Update 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”) which simplifies the presentation of deferred income taxes. ASU 2015-17 concludes that deferred tax liabilities and assets should be classified as noncurrent in a classified statement of financial position. The Company adopted this guidance on a retrospective basis, wherein the balance sheet of each individual period presented was adjusted to reflect the period-specific effects of applying the new guidance. The adoption of this ASU did not have a material impact on the Company’s financial statements.

8

Note 3 – Acquisitions and Divestitures

In the three months ended December 31, 2014, the Company recorded a gain of $0.2 million in connection with the sale of a product line in its Optics segment.

Note 4 – Xcede Technologies, Inc. Joint Venture

In October, 2013, the Company formed Xcede Technologies, Inc. (“Xcede”), a joint venture with Mayo Clinic, in order to spin out and separately fund the development of its tissue sealant technology, which formerly comprised the majority of its biomedical segment. Xcede has raised approximately $2.4 million in external funding in the form of Convertible Notes (the “Notes”) to outside investors and to certain officers and directors of the Company. The Notes accrue interest at 5% and, as amended, are due after June 30, 2016, upon the demand of the holders of a majority of the aggregate outstanding principal amount of the Notes.

Upon the closing of a capital stock financing raising at least $3.0 million, inclusive of the Notes and interest, the outstanding principal amount of the Notes plus all accrued interest will be converted into shares of the same capital stock sold in the financing at a 20% discount to the price per share of that capital stock. Alternatively, at any time prior to a capital stock financing the Note holders can convert, at their option, the principal amount of the Notes plus accrued interest into common stock based on a $5 million valuation.

Xcede’s common stock is 90% owned by Dynasil Biomedical and, as a result, is included in the Company’s consolidated balance sheets, results of operations and cash flows. The Company expects Xcede to require significant additional funding prior to commencing human trials.

On January 6, 2016, Xcede announced that it has signed three agreements with Cook Biotech Inc. of West Lafayette, IN including a Development Agreement, a License Agreement and a Supply Agreement in connection with the development, regulatory approval and production of Xcede’s resorbable hemostatic patch.

Note 5 - Inventories

Inventories, net of reserves, consists of the following:

	December 31,		September 30,
	2015		2015
Raw Materials	$	1,883,000	$	1,828,000
Work-in-Process		847,000		862,000
Finished Goods		522,000		376,000
	$	3,252,000	$	3,066,000

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Note 6 – Intangible Assets

Intangible assets at December 31, 2015 and September 30, 2015 consist of the following:

	Useful	Gross		Accumulated
December 31, 2015	Life (years)	Amount		Amortization		Net
Acquired Customer Base	5 to 15	$	807,000	$	473,000	$	334,000
Know How	15		512,000		256,000		256,000
Trade Names	Indefinite		310,000		-		310,000
Patents	20		254,000		2,000		252,000
Biomedical Technologies	5		260,000		215,000		45,000
		$	2,143,000	$	946,000	$	1,197,000

	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

Amortization expense for the three months ended December 31, 2015 and 2014 was $44,000 and $43,000, respectively.

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

	2016 (9 months)		2017		2018		2019		2020		Thereafter		Total
Acquired Customer Base	$	60,000	$	80,000	$	80,000	$	80,000	$	34,000	$	-	$	334,000
Know How		26,000		34,000		34,000		34,000		34,000		94,000		256,000
Patents		5,000		6,000		6,000		6,000		6,000		61,000		90,000
Biomedical Technologies		45,000		-		-		-		-		-		45,000
	$	136,000	$	120,000	$	120,000	$	120,000	$	74,000	$	155,000	$	725,000

Note 7 – Goodwill

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

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

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

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

· Unanticipated competition or the introduction of a disruptive technology;

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

· A loss of key personnel; and

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

There were no changes, aside from foreign exchange rate fluctuations, in the carrying value of goodwill during the three months ended December 31, 2015.

Note 8 – Earnings (Loss) Per Common Share

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

10

For purposes of computing diluted earnings per share for the three months ended December 31, 2015, no common stock options were included in the calculation of dilutive shares as all of the 58,212 common stock options outstanding had exercise prices above the applicable quarterly average market price per share and their inclusion would be anti-dilutive. For the three months ended December 31, 2014, no common share equivalents related to stock options were included in the calculation of dilutive shares, since there was a loss from continuing operations and the inclusion of common share equivalents would be anti-dilutive.

For the three months ended December 31, 2015, 27,437 shares of common stock related to restricted stock were included in the denominator used to calculate diluted earnings per share. For the three months ended December 31, 2014, no common share equivalents related to restricted stock were included in the calculation of dilutive shares, since there was a loss from continuing operations and the inclusion of common share equivalents would be anti-dilutive.

The computation of the weighted shares outstanding for the three months ended December 31 is as follows:

	December 31, 2015		December 31, 2014
Weighted average shares outstanding
Basic		16,551,197		16,300,902
Effect of dilutive securities
Stock Options		-		-
Restricted Stock		27,437		-
Dilutive Average Shares Outstanding		16,578,634		16,300,902

Note 9 - Stock Based Compensation

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

The expected volatility was determined with reference to the historical volatility of the Company's stock. The Company uses historical data to estimate option exercise and employee termination 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 zero 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.

11

Stock Compensation Expense for the three months ended December 31, 2015 and 2014 is as follows:

	Three Months Ended		Three Months Ended
Stock Compensation Expense	December 31, 2015		December 31, 2014
Stock Grants	$	83,000	$	57,000
Restricted Stock Grants		8,000		7,000
Option Grants		6,000		-
Employee Stock Purchase Plan		1,000		1,000
Subsidiary Option Grants		21,000		-
Total	$	119,000	$	65,000

At December 31, 2015 there was approximately $86,000 in unrecognized stock compensation cost for Dynasil, which is expected to be recognized over a weighted average period of eighteen months.

Restricted Stock Grants

A summary of restricted stock activity for the three months ended December 31, 2015 is presented below:

Restricted Stock Activity for the Three Months ended December 31, 2015	Shares		Weighted-Average Grant-Date Fair Value
Nonvested at September 30, 2015		27,000	$	1.04
Granted		40,000		1.70
Vested		-		-
Cancelled		-		-
Nonvested at December 31, 2015		67,000	$	1.43

Stock Option Grants

During the three months ended December 31, 2015, no Dynasil stock options were granted. A summary of stock option activity for the three months ended December 31, 2015 is presented below:

	Options Outstanding		Weighted Average Exercise Price per Share		Weighted Average Remain Contractual Term (in Years)
Balance at September 30, 2015		58,212	$	2.28		1.96
Outstanding and exercisable at September 30, 2015		58,212	$	2.28		1.96
Granted		-		-
Exercised		-		-
Cancelled		-		-
Balance at December 31, 2015		58,212	$	2.28		1.71
Outstanding and exercisable at December 31, 2015		58,212	$	2.28		1.71

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Subsidiary Stock Option Grants

During the three months ended December 31, 2015, 75,000 Xcede stock options were granted at an exercise price of $1.00 per share. These options vest over the next three years and expire ten years from the grant date. The weighted average assumptions for grants during the three months ended December 31, 2015 used in the Black-Scholes option pricing model were as follows:

Expected term in years	10 years
Risk-free interest rate	2.05	%
Expected volatility	82.42	%
Expected dividend yield	0.00	%

A summary of Xcede stock option activity for the three months ended December 31, 2015 is presented below:

	Options Outstanding			Weighted Average Exercise Price per Share		Weighted Average Remain Contractual Term (in Years)
Balance at September 30, 2015		780,258		$	1.00		8.85
Outstanding and exercisable at September 30, 2015		180,293		$	1.00		8.50
Granted		75,000		$	1.00
Exercised		-			-
Cancelled		(35,000	)	$	1.00
Balance at December 31, 2015		820,258		$	1.00		8.70
Outstanding and exercisable at December 31, 2015		201,512		$	1.00		8.21

At December 31, 2015, the Company’s Xcede joint venture had $195,000 of unrecognized stock compensation expense associated with stock options expected to be recognized over a weighted average period of nineteen months and $82,000 of unrecognized stock compensation expense that begin to vest upon the attainment of specific capital raising targets.

Note 10 – Segment, Customer and Geographical Reporting

Segment Financial Information

Dynasil’s business is comprised of three segments: optics (“Optics”), contract research (“Contract Research”) and biomedical (“Biomedical”). The Company’s Instruments segment was substantially disposed of in the first quarter of fiscal 2014, has had no subsequent operations and had no remaining assets as of December 31, 2015. Consequently, it is no longer reported as a separate segment. At December 31, 2014, the Company had approximately $0.3 million of assets related to the businesses formerly comprising the Instruments segment.

Within these segments, there is a segregation of reportable units based upon the organizational structure used to evaluate performance and make decisions on resource allocation, as well as availability and materiality of separate financial results consistent with that structure. The Optics segment manufactures optical materials, components and coatings. The Contract Research segment is one of the largest small business participants in U.S. government-funded research. The Biomedical segment, through Xcede Technologies, Inc., a majority owned, joint venture, is focused on developing a tissue sealant technology though no assurance can be given that this technology will become successfully commercialized.

13

The Company’s segment information for the three months ended December 31, 2015 and 2014 is summarized below:

Results of Operations for the Three Months Ended December 31,
2015
	Optics			Contract Research			Biomedical			Total
Revenue	$	6,214,000		$	4,990,000		$	-		$	11,204,000
Gross Profit		2,110,000			1,855,000			-			3,965,000
GM %		34.0	%		37.2	%		-			35.4	%
SG&A		1,751,000			1,706,000			348,000			3,805,000
Gain on sale of assets		4,000			-			-			4,000
Operating Income (Loss)		363,000			149,000			(348,000	)		164,000
Depreciation and Amortization		228,000			80,000			17,000			325,000
Capital expenditures		565,000			7,000			31,000			603,000
Intangibles, Net		644,000			256,000			297,000			1,197,000
Goodwill		1,155,000			4,939,000			-			6,094,000
Total Assets	$	16,506,000		$	8,273,000		$	857,000		$	25,636,000

Results of Operations for the Three Months Ended December 31,
2014
	Optics			Contract Research			Biomedical			Total
Revenue	$	4,948,000		$	4,663,000		$	-		$	9,611,000
Gross Profit		1,495,000			2,098,000			-			3,593,000
GM %		30.2	%		45.0	%		-			37.4	%
SG&A		2,091,000			1,881,000			235,000			4,207,000
Gain on sale of assets		185,000			-			-			185,000
Operating Income (Loss)		(410,000	)		216,000			(235,000	)		(429,000	)
Depreciation and Amortization		204,000			74,000			15,000			293,000
Capital expenditures		244,000			-			-			244,000
Intangibles, Net		752,000			290,000			229,000			1,271,000
Goodwill		1,232,000			4,939,000			-			6,171,000
Total Assets	$	15,419,000		$	9,036,000		$	922,000		$	25,377,000

Customer Financial Information

For the three months ended December 31, 2015, one customer in the Optics segment represented more than 10% of the total segment revenue. For the three months ended December 31, 2014, the single largest customer in the Optics segment made up 21% and 9%, respectively of the total segment revenue.

For the three months ended December 31, 2015, five customers of the Contract Research segment, all various agencies of the U.S. Government, each represented more than 10% of the total segment revenue. For the three months ended December 31, 2015 and 2014, these customers made up 76% and 74%, respectively, of Contract Research revenue.

Geographic Financial Information

Revenue by geographic location in total and as a percentage of total revenue, for the three months ended December 31, 2015 and 2014 are as follows:

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	Three Months Ended					Three Months Ended
	December 31, 2015					December 31, 2014
Geographic Location	Revenue		% of Total			Revenue		% of Total
United States	$	8,235,000		74	%	$	7,682,000		80	%
Europe		2,041,000		18	%		884,000		9	%
Other		928,000		8	%		1,045,000		11	%
	$	11,204,000		100	%	$	9,611,000		100	%

Note 11 - Income Taxes

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

The Company uses the asset and liability approach to account for income taxes. Under this approach, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and net operating loss and tax credit 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 recent losses and uncertainty of future profits, the Company has determined that the uncertainty regarding the realization of these assets is sufficient to warrant the need for a full valuation allowance against its U.S. net deferred tax assets.

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 December 31, 2015 and September 30, 2015, 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 December 31, 2015 and September 30, 2015, the Company had no accrued interest or penalties related to uncertain tax positions. The Company currently has no federal or state tax examinations in progress.

The effective tax rates were 25% and (0.57%) for the three months ended December 31, 2015 and 2014, respectively. The rates differ from the U.S. federal statutory income tax rate of 34% primarily due to a full valuation allowance against the Company’s U.S. deferred tax asset.

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Company’s tax filings for federal and state jurisdictions for the tax years beginning with 2012 are still subject to examination.

Note 12 – Settlement of Pension Liability

On December 1, 2014, the Company terminated and settled its pension liability with each of the remaining participants in the EMF Defined Benefit Plan (the “Plan”). The Plan had been frozen since 2006. 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 $355,000 difference upon settlement of the Plan.

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Note 13 – Subsequent Events

On February 1, 2016, the Company entered into a $2,000,000 Term Note with Middlesex Savings Bank, as per the terms of the Loan Document Modification Agreement, dated September 29, 2015, as detailed in the Company’s Annual Report on Form 10-K, filed on December 17, 2015. The Company converted $2,000,000 of outstanding advances under the Company’s Middlesex Bank Line of Credit Note to a new five-year term note bearing interest at the fixed annual rate of 4.5%. Immediately following this conversion, the total availability under the Company’s line of credit increased by $2 million to $3,819,000.

ITEM 2. 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 contained herein and in the Dynasil Corporation of America ("Dynasil", the "Company" or "we") Form 10-K for the fiscal year ended September 30, 2015.

General Business Overview

Operations

Revenue for the first quarter of fiscal year 2016, which ended December 31, 2015, was $11.2 million, an increase of 17%, compared with revenue of $9.6 million for the quarter ended December 31, 2014. The increase is largely attributable to a $1.3 million increase in revenue from the Optics segment and a $0.3 million increase in revenue from the Contract Research segment.

Cost of revenue for the first quarter of 2016 was $7.2 million, an increase of 20% compared with $6.0 million for the quarter ended December 31, 2014 as a result of a $0.6 million increase in the cost of revenue associated with the Optics segment and a $0.6 million increase in the cost of revenue associated with the Contract Research segment.

Total operating expenses were $3.8 million for the three month periods ended December 31, 2015 as compared to $4.0 million for the same period in fiscal 2014. Total operating expenses for the first quarter of fiscal year 2014 included a $0.4 million pension charge.

Income from operations for the quarter ended December 31, 2015 was $0.2 million compared with a loss of ($0.4) million for the quarter ended December 31, 2014.

Net income was $0.1 million, or $0.01 per share, for the quarter ended December 31, 2015, compared with a loss of approximately ($0.5) million for the same quarter last year. The loss in the first quarter of last year included a $0.4 million pension charge partially offset by a $0.2 million gain on the sale of a product line in the Optics segment.

Our Biomedical segment primarily consists of the results of our majority owned joint venture, Xcede. Xcede incurred over $1 million in research expenses last year and over $0.3 million in the current quarter as Xcede continues to develop a tissue sealant technology. We expect to incur similar or increasing amounts each quarter in fiscal 2016. We are currently funding these research expenses through cash raised from the issuance of Xcede convertible notes to outside investors and to certain officers and directors of the Company. Xcede raised approximately $400,000 in the first quarter of 2016 and management is continuing to pursue various financing alternatives to fund these research expenses.

The Company’s Instruments segment was substantially disposed of in the first quarter of fiscal 2014, has had no subsequent operations and had no remaining assets as of December 31, 2015. Consequently, it is no longer reported as a separate segment.

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Results of Operations

Results of Operations for the Three Months Ended December 31,
2015
	Optics			Contract Research			Biomedical			Total
Revenue	$	6,214,000		$	4,990,000		$	-		$	11,204,000
Gross Profit		2,110,000			1,855,000			-			3,965,000
GM %		34.0	%		37.2	%		-			35.4	%
SG&A		1,751,000			1,706,000			348,000			3,805,000
Gain on sale of assets		4,000			-			-			4,000
Operating Income (Loss)		363,000			149,000			(348,000	)		164,000
Depreciation and Amortization		228,000			80,000			17,000			325,000
Capital expenditures		565,000			7,000			31,000			603,000
Intangibles, Net		644,000			256,000			297,000			1,197,000
Goodwill		1,155,000			4,939,000			-			6,094,000
Total Assets	$	16,506,000		$	8,273,000		$	857,000		$	25,636,000

Results of Operations for the Three Months Ended December 31,
2014
	Optics			Contract Research			Biomedical			Total
Revenue	$	4,948,000		$	4,663,000		$	-		$	9,611,000
Gross Profit		1,495,000			2,098,000			-			3,593,000
GM %		30.2	%		45.0	%		-			37.4	%
SG&A		2,091,000			1,881,000			235,000			4,207,000
Gain on sale of assets		185,000			-			-			185,000
Operating Income (Loss)		(410,000	)		216,000			(235,000	)		(429,000	)
Depreciation and Amortization		204,000			74,000			15,000			293,000
Capital expenditures		244,000			-			-			244,000
Intangibles, Net		752,000			290,000			229,000			1,271,000
Goodwill		1,232,000			4,939,000			-			6,171,000
Total Assets	$	15,419,000		$	9,036,000		$	922,000		$	25,377,000

Consolidated revenue for the first quarter of fiscal year 2016, which ended December 31, 2015, was $11.2 million, an increase of 17% compared with revenue of $9.6 million for the quarter ended December 31, 2014.

The Optics segment revenue increased approximately $1.3 million or 26% for the three months ended December 31, 2015, compared with the same period in the prior year, primarily as a result of increased sales to a large UK customer.

Contract Research segment revenues increased approximately $0.3 million or 7%, compared with the same period in the prior year, primarily as a result of a higher level of material purchases in connection with a research contract. The purchased materials were billed in accordance with the terms of the contract. The research backlog for the Contracts Research segment has decreased slightly to approximately $32.5 million at December 31, 2015 (of which approximately $12 million is currently funded and in process) compared to $33 million at September 30, 2015.

The Biomedical segment has no revenues as it is currently researching and developing a tissue sealant technology.

Cost of revenue for the first quarter of 2016 was $7.2 million, an increase of 20% compared with $6.0 million for the quarter ended December 31, 2014 primarily as a result of a $0.6 million increase in the cost of revenue associated with the higher revenues in the Optics segment and $0.6 million associated with the higher material costs in the Contract Research segment discussed above.

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Gross profit for the three months ended December 31, 2015 was $4.0 million, or 35% of revenues, compared to $3.6 million or 37% of revenues for the three months ended December 31, 2014. Gross profit for the Optics segment increased $0.6 million to $2.1 million or 34% of revenues at December 31, 2015 compared to 30% of revenues for the quarter ended December 31, 2014 as a result of higher revenues without a corresponding increase in overhead expenses and the addition of new equipment which has improved yields on certain products. Gross profit decreased $0.2 million in the Contract Research segment as the number of direct labor hours billed decreased slightly even though direct material billed increased. Direct labor hours billed have a higher gross profit margin than direct material billings so the gross profit on the increase in direct material billed did not fully offset the gross profit associated with the lower direct labor hours billed.

The Biomedical segment, through Xcede, is developing a tissue sealant technology which has not been approved for commercial use and consequently has no gross profit.

Total operating expenses decreased to $3.8 million for the three months ended December 31, 2015 from $4.0 million for the same quarter in fiscal 2014. Operating expenses for the Contract Research segment decreased approximately $0.1 million due to cost saving measures, while operating expenses in the Optics segment decreased $0.4 million primarily due to the $0.4 million pension settlement charge recorded in the first quarter of 2014. Biomedical segment expenses increased approximately $0.1 million due to Xcede spending increases.

As a result of the items discussed above, income from operations for the three months ended December 31, 2015 was $0.2 million compared to a loss from operations of ($0.4) million for the same period in fiscal 2014.

Net interest expense was approximately $0.1 million for the three months ended December 31, 2015 and 2014.

Income tax expense for the three months ended December 31, 2015 consists primarily of tax expense on U.K. operations, offset by certain U.K. tax research credits.

Net income for the three months ended December 31, 2015 was $0.1 million, or $0.01 in basic earnings per share, compared with a loss of approximately ($0.5) million for the quarter ended December 31, 2014. The loss in the first quarter of last year included a $0.4 million pension charge partially offset by a $0.2 million gain on the sale of a product line in the Optics segment.

Liquidity and Capital Resources

Liquidity Overview and Outlook

Net cash as of December 31, 2015 was $1.1 million or approximately $0.2 million less than the net cash of $1.3 million at September 30, 2015.

As of December 31, 2015, the Company was in compliance with the terms of all its outstanding indebtedness which consisted of $2.3 million of senior debt borrowed under a revolving line of credit with Middlesex Savings Bank and $1.0 million of subordinated debt owed to Massachusetts Capital Resources Company. The Company has $1.7 million of additional availability under its Middlesex Savings Bank line of credit based on its collateral calculations as of December 31, 2015. Management believes that the cash and availability under the line of credit discussed above are adequate to meet the Company’s current liquidity requirements for the next twelve months.

On February 1, 2016, the Company converted $2,000,000 of outstanding advances under the Company’s Middlesex Bank Line of Credit Note to a fixed rate, five-year term note bearing interest at the annual rate of 4.5%. Immediately following this conversion, the total availability under the Company’s line of credit increased by $2 million to $3,819,000.

The Company’s Xcede subsidiary currently has $0.5 million of cash remaining from its convertible notes financings. Approximately $0.4 million of convertible notes were issued in the first quarter of 2016 and the Company does not currently expect to issue any more convertible notes under the current convertible notes offering memorandum. Xcede management is continuing to pursue various financing alternatives.

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Management believes that Xcede has sufficient cash on hand to fund Xcede’s operations for at least the next three months.

Cash From Operating Activities

In total, including the changes in accounts receivable, prepaid expenses, accounts payable and accrued expenses, operating activities used cash of $0.7 million for the three months ended December 31, 2015. Approximately $1.3 million of the cash was used for accounts receivable and inventory increases as a result of the higher level of revenues in the Optics segment as well as normal cyclical billing and payment activity.

Cash From Investing and Financing Activities

The Company used cash of approximately $0.6 million for the purchase of property, plant and equipment for the three months ended December 31, 2015.

Total outstanding bank debt as of December 31, 2015 increased approximately $0.7 million to $3.6 million from $2.9 million at September 30, 2015 and Xcede convertible notes increased approximately $0.4 million to $2.5 million at December 31, 2015 from $2.1 million as of September 30, 2015. Net cash generated from financing activities during the three months ended December 31, 2015 was approximately $1.1 million for the three months ended December 31, 2015 as a result of the $0.7 million drawdown on the Middlesex Bank line of credit and include the issuance of approximately $0.4 million of Xcede convertible notes.

Critical Accounting Policies and Estimates

Effective October 1, 2015, the Company early adopted the guidance issued in Accounting Standards Update 2015-03, Interest – Imputation of Interest (Topic 835) and Accounting Standards Update 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, as detailed in Note 2 to the financial statements in this Form 10-Q. There have been no other material changes in our critical accounting policies or critical accounting estimates since September 30, 2015. For further discussion of our accounting policies see the “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2015 as well as the notes to the financial statements contained in this Form 10-Q.

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

Revenue Recognition

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

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

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

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Goodwill

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

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

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

· Failure of an anticipated commercialization product line;

· Unanticipated competition or a disruptive technology introduction;

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

· A loss of key personnel; and

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

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

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

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 purchased and patented biomedical technologies within the Biomedical segment. The Company amortizes its intangible assets with definitive lives over their useful lives, which range from 5 to 20 years, based on the time period the Company expects to receive the economic benefit from these assets. No impairment charge was recorded during the three month period ended December 31, 2015 or 2014.

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.

Allowance for Doubtful Accounts Receivable

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

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Stock-Based Compensation

The Company accounts for stock-based compensation using fair value. Compensation costs are recognized for stock-based compensation granted to employees and directors. Options and restricted stock awards are recorded as an expense over the requisite service period based on the grant date estimated fair value of the grant, which in the case of options is 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.

RECENT ACCOUNTING PRONOUNCEMENTS

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.

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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. The Company chose to early adopt this ASU effective October 1, 2015 and as a result of the adoption, $12,000 of debt issuance costs at October 1, 2015 were reclassified from deferred financing costs, net to long-term debt in the consolidated balance sheets.

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.

Balance Sheet Classification of Deferred Taxes. In November 2015, the FASB issued ASU 2015-17, which eliminates the current requirement for companies to present deferred tax liabilities and assets as current and non-current in a classified balance sheet. To simplify the presentation of deferred income taxes, ASU 2015-17 requires that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016, the Company’s fiscal year 2018.  As early adoption of this guidance was permitted, the Company chose to adopt ASU 2015-17 for the reporting period beginning on October 1, 2015. The Company adopted this guidance on a retrospective basis, wherein the balance sheet of each individual period presented was adjusted to reflect the period-specific effects of applying the new guidance. The adoption of this ASU did not have a material impact on the Company’s financial statements.

22

Forward-Looking Statements

The statements contained in this Quarterly Report on Form 10-Q which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements regarding future events and our future results are based on current expectations, estimates, forecasts, and projections and the beliefs and assumptions of our management, including, without limitation, our expectations regarding results of operations, our 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 Xcede and 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 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, filed on December 17, 2015, including the risk factors contained in Item 1A, and from time to time in the Company's other filings with the Securities and Exchange Commission. The Company disclaims any intention or obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 4 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 December 31, 2015. Based on this evaluation, our management concluded that as of December 31, 2015, these disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 5 Other Information

During the quarter ended December 31, 2015, Xcede Technologies, Inc., the Company’s 90%-owned subsidiary, issued convertible promissory notes in the aggregate principal amount of $400,000 to certain investors and certain officers and directors of the Company. The notes accrue interest at 5% and are due after June 30, 2016, upon the demand of the holders of a majority of the aggregate outstanding principal amount of all convertible notes issued by Xcede and currently outstanding.

23

PART II – OTHER INFORMATION

ITEM 1A.  RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended September 30, 2015, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

ITEM 6 Exhibits

10.1 Term Note Agreement between the Company and Middlesex Savings Bank, dated February 1, 2016, filed herewith.

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

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

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

99.1 Press release, dated February 11, 2016 issued by Dynasil Corporation of America announcing its financial results for the quarter ended December 31, 2015.

101 The following materials from Dynasil Corporation of America’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2015 and September 30, 2015, (ii) Consolidated Statements of Operations for the three months ended December 31, 2015 and 2014, (iii) Consolidated Statements of Changes in Stockholders’ Equity for the three months ended December 31, 2015; (iv) Consolidated Statements of Cash Flows for the three months ended December 31, 2015 and 2014, and (v) Notes to Consolidated Financial Statements.

SIGNATURES

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

DYNASIL CORPORATION OF AMERICA

BY:	/s/ Peter Sulick	DATED: February 11, 2016
	Peter Sulick,
	Chief Executive Officer and President
	/s/ Robert J. Bowdring	DATED: February 11, 2016
	Robert J. Bowdring,
	Chief Financial Officer

24

EX-10.1

Exhibit 10.1

TERM NOTE

$2,000,000.00 February 1, 2016

FOR VALUE RECEIVED, Dynasil Corporation of America, a duly organized Delaware corporation with a mailing address at 313 Washington Street, Suite 403, Newton, MA 02458 (the “Borrower”), promises to pay to MIDDLESEX SAVINGS BANK (the “Lender”), a Massachusetts banking corporation, at its principal office at 6 Main Street, Natick, Massachusetts 01760, OR TO ITS ORDER, the principal sum of Two Million and 00/100 ($2,000,000.00) Dollars with interest from this date on the unpaid principal balance until paid at the rate of 4.52% percent per year (the “Interest Rate”) computed on the basis of the actual number of days elapsed over a year assumed to have 360 days, in lawful money of the United States of America.

Payments: Beginning on March 1, 2016, and on the first day of each and every month thereafter during the term hereof, Borrower shall make monthly payments of principal and interest in the initial amount of Thirty Seven Thousand Three Hundred Sixty and 42/100 ($37,360.42) Dollars each. Each payment shall be applied first to interest then due on the unpaid balance of principal and then to such principal.

All indebtedness evidenced by this Note shall be due and payable five (5) years from the date hereof (the “Maturity Date”), unless such date is extended in a written agreement executed by Borrower and Lender.

Late Charge: Whenever any installment of principal and interest due hereunder shall not be paid within fifteen (15) days of its due date, the Borrower shall pay in addition thereto as a late charge, five percent (5%) of the amount of any such installment.

Security: This Note is secured by a first priority security interest in all assets of the Borrower, pursuant to a Loan and Security Agreement dated May 1, 2014 as amended and modified by a Loan Document Modification Agreement dated September 29, 2015 (the “Loan and Security Agreement”) which assets are located at 44 Hunt street, Watertown, MA 02172, 8 Nemco Way, Ayer, MA 01432, 119 Russell Street, Suite 10, Littleton, MA 01460, 239 Cherry Street, Ithaca, NY 14850, 385 Cooper Road, West Berlin, NJ 08091, and 85 Main Street, Watertown, MA 02472. All of Borrower’s obligations to the Lender however characterized (the “Obligations”) are guaranteed pursuant to the Entity Guaranties (the “Entity Guaranties”) of Optometrics Corporation, Evaporated Metal Films Corporation, Radiation Monitoring Devices, Inc., Dynasil Biomedical Corp. and RMD Instruments Corporation (the “Entity Guarantors”). Such documents, together with various other instruments securing this Note (the terms and provisions of all of which are incorporated herein by reference) are hereinafter referred to as the “Security Instruments”.

1

Default: An Event of Default under any of the Security Instruments shall constitute an Event of Default hereunder, and such events of default include, but are not limited to, the failure of Borrower to make any payments of principal, interest or other charge when due hereunder. Upon the occurrence of an Event of Default, the Lender may, at its option, without notice or demand, declare the unpaid principal and all accrued interest under this Note to be immediately due and payable without presentment, demand, protest, notice of protest or other notice of dishonor of any kind, all of which are hereby expressly waived. No course of dealing or delay in accelerating the maturity of this Note or in taking any other action with respect to any Event of Default shall affect Lender’s rights to take action with respect thereto, and no waiver as to any one Event of Default shall affect any of Lender’s rights as to any other Event of Default.

Setoff: Any deposits or other sums at any time credited by or due from the holder to the Borrower or Guarantors and any securities or other property of Borrower or Guarantors in the possession or custody of the holder may at all times be held and treated as collateral security for the payment of this Note and any and all other liabilities, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of said respective Borrower or Guarantors to the holder. The holder hereof on or after default in payment hereof may apply such deposits or other sums to said Obligations and sell any such securities or other property at broker’s board or at public or private sale without demand, notice or advertisement of any kind, all of which are hereby expressly waived.

Default Rate: Lender shall have the option of imposing, and Borrower shall pay upon billing therefor, an interest rate which is four percent (4%) per annum above the Interest Rate otherwise payable hereunder (“Default Rate”): (a) while any monetary default exists and is continuing, during that period between the due date and the date of payment; (b) following any Event of Default, unless and until the Event of Default is cured or waived by Lender; and (c) after the Maturity Date.

Collection Costs: If this Note shall not be paid in full whenever it shall become due, the Borrower and Guarantor agree to pay all costs and expenses of collection, including court costs and reasonable attorneys’ fees.

Prepayment: Borrower may prepay the principal amount outstanding in whole or in part at any time without penalty. Any partial prepayment shall be applied against the principal amount outstanding and shall not postpone the due date of any subsequent monthly installments or change the amount of such installments, unless the Note holder shall otherwise agree in writing.

2

Waiver: The Borrower and each Guarantor, and any other person now or hereafter liable for the payment of any of the indebtedness evidenced by this Note each severally agrees, by making, guaranteeing or endorsing this Note or by making any agreement to pay any of the indebtedness evidenced by this Note, to waive presentment for payment, protest and demand, notice of protest, demand and or dishonor and nonpayment of this Note, and consents without notice or further assent (a) to the substitution, exchange or release of the collateral securing this Note or any part thereof at any time, (b) to the acceptance by the holder or holders at any time of any additional collateral or security for or other Guarantors of this Note, (c) to the modification or amendment at any time, and from time to time of this Note, and any other Security Instrument at the request of any person liable hereon, (d) to the granting by the holder hereof of any extension of the time for payment of this Note or for the performance of the agreements, covenants and conditions contained in this Note, or any other Security Instrument, at the request of any other person liable hereon, and (e) to any and all forbearances and indulgences whatsoever; and such consent shall not alter or diminish the liability of any person.

Commercial Loan: The Borrower hereby represents warrants and covenants that the proceeds of this Loan shall be used for commercial and business purposes only, shall not be used for consumer or household purposes, and acknowledges that this representation has been relied upon by Lender in extending credit hereunder.

Jury Trial Waiver: Borrower and Lender mutually hereby knowingly, voluntarily and intentionally waive the right to a trial by jury in respect of any litigation based on this Note, arising out of, under or in connection with the Loan and Security Agreement or any other Security Instruments contemplated to be executed in connection herewith, or any course of conduct, course of dealings, statements (whether verbal or written) or actions of any party. This waiver constitutes a material inducement for Borrower and Lender to enter into the transactions contemplated hereby.

The Borrower has received a copy of this Note.

This Note is the joint and several obligation of the Borrower and the Guarantor and shall be binding upon them and their respective successors and assigns and each or any of them.

THIS TERM NOTE IS THE TERM OUT NOTE REFERRED TO IN SECTION 2 OF SAID LOAN DOCUMENT MODIFICATION AGREEMENT AND SECTION 1.1.2 OF SAID LOAN AGREEMENT.

IN WITNESS WHEREOF, the Borrower has executed this Note as an instrument under seal as of the day and year first above written.

Signed in the presence of:		Dynasil Corporation of America
/s/ Robert J. Bowdring	By:	/s/ Thomas C. Leonard
Witness		Name:	Thomas C. Leonard
		Title:	Treasurer

3

EX-31.1(A)

EXHIBIT 31.1 (a)

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

SECTION 302 OF THE SARBANES-OXLEY ACT

I, Peter Sulick, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	February 11, 2016	/s/ Peter Sulick
		Peter Sulick
		Chief Executive Officer and President

EX-31.1(B)

EXHIBIT 31.1 (b)

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

SECTION 302 OF THE SARBANES-OXLEY ACT

I, Robert Bowdring, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	February 11, 2016	/s/ Robert J. Bowdring
		Robert J. Bowdring
		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 the Quarterly Report of DYNASIL CORPORATION OF AMERICA (the "Company") on Form 10-Q for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Peter Sulick, Chief Executive Officer and President of the Company and Robert J. Bowdring, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

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

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

/s/ Peter Sulick

Peter Sulick

Chief Executive Officer and President

/s/ Robert J. Bowdring

Robert J. Bowdring

Chief Financial Officer

February 11, 2016

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
First Quarter Fiscal 2016 Profit

Newton, MA, February 11, 2016 – 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 earnings attributable to common stockholders of $106,000 or $0.01 per common share for the first quarter of 2016 fiscal year. Certain key metrics by segment for the current quarter and the same quarter last year are presented below:

Results of Operations for the Three Months Ended December 31, 2015

	Optics			Contract Research			Biomedical			Total
Revenue	$	6,214,000		$	4,990,000		$	-		$	11,204,000
Gross Profit		2,110,000			1,855,000			-			3,965,000
GM %		34.0	%		37.2	%		-			35.4	%
Operating expenses		1,747,000			1,706,000			348,000			3,801,000
Net Income	$	297,000		$	147,000		$	(338,000	)	$	106,000

Results of Operations for the Three Months Ended December 31, 2014

	Optics			Contract Research			Biomedical			Total
Revenue	$	4,948,000		$	4,663,000		$	-		$	9,611,000
Gross Profit		1,495,000			2,098,000			-			3,593,000
GM %		30.2	%		45.0	%		-			37.4	%
Operating expenses		1,906,000			1,881,000			235,000			4,022,000
Net Income	$	(515,000	)	$	211,000		$	(229,000	)	$	(533,000	)

“I am pleased to report that both of our operating segments were profitable for the quarter and generated almost $450,000 of net income. Including Xcede Technologies, Inc. (“Xcede”), our tissue sealant technology development joint venture which comprises substantially all our Biomedical segment, we were still profitable. Our Optics segment growth continued as revenues increased by 26% in the first quarter of 2016 compared to the same quarter last year,” said CEO Peter Sulick. “I believe these business units will continue to generate solid revenue growth in 2016, particularly our UK subsidiary, Hilger Crystals, as a result of increasing revenues from its previously announced agreement to supply high-quality crystal components to a leading global supplier of security inspection equipment. I am particularly encouraged by the improvements in gross profit margin in the Optics segment as the investments we have made to improve yields and productivity began to deliver.”

“Our Contract Research segment revenues increased 7% to $5.0 million in the first quarter of 2016 primarily as a result of a higher mix of direct material purchases for one contract. While I think this represented a one-time revenue increase that did not significantly impact net income, I believe we are seeing Contract Research revenue stabilize in the $18-$19 million range on an annual basis consistent with my comments on our annual results in December. While our backlog has been holding steady in the $33 million range, we continue to experience government budget pressure, in the form of both contract award and funding delays.”

“Our Xcede joint venture raised approximately $0.4 million of convertible notes in the quarter just ended from external investors, including officers and directors of the Company, to fund on-going development of its tissue sealant technology,” added Mr. Sulick. “As we previously announced, Xcede signed three collaboration agreements with Cook Biotech Inc. of West Lafayette, IN including a Development Agreement, a License Agreement and a Supply Agreement to complete development, seek regulatory clearance and produce Xcede's resorbable hemostatic patch. With the completion of manufacturing and supply agreements with Cook, our management team is now focused on raising the necessary capital to complete biocompatibility testing and begin first in human clinical trials necessary for regulatory approvals.”

Dynasil’s results for the first quarter of 2016, as shown above, included $0.3 million of Xcede related expenses. Assuming a successful fund raise, the Company expects these expenses to increase as Xcede works to complete pre-clinical testing and initiate clinical trials.

Dynasil generated net income of $0.1 million in the first quarter of fiscal 2016 compared to net loss of ($0.5) million for the first quarter of fiscal 2015. The net loss in 2015 includes a $0.4 million charge for the final termination and settlement of our subsidiary’s pension plan offset by a $0.2 million gain on the sale of a product line. Excluding the pension charge and the gain on sale of the product line in 2015, the Company’s net loss was ($0.3) million in 2015.

Net income (loss) also included expenses of approximately $0.3 million and $0.2 million in the first quarters ended 2016 and 2015, respectively, associated with research and start-up costs of Xcede, 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 financial statements even though Dynasil is no longer funding Xcede.

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 Robert Bowdring. 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 a measure of our net income excluding the termination and settlement of a pension plan and a gain on the sale of a product line. The Company believes that the inclusion of this non-GAAP financial measure 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 such 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 measure included in this press release is 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, MA, with additional operations in MA, MN, 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 revenue growth in 2016 in our Optics segment and our potential future revenues in our Contract Research segment. 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, including the level of demand for our products and the level of government expenditure on contract research projects, 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 (Unaudited)

	December 31, 2015			September 30, 2015
ASSETS
Current Assets
Cash and cash equivalents	$	1,101,000		$	1,295,000
Accounts receivable, net		4,444,000			3,382,000
Costs in excess of billings and unbilled receivables		1,288,000			1,518,000
Inventories, net of reserves		3,252,000			3,066,000
Prepaid expenses and other current assets		1,152,000			1,125,000
Total current assets		11,237,000			10,386,000
Property, Plant and Equipment, net		7,048,000			6,662,000
Other Assets
Intangibles, net		1,197,000			1,225,000
Goodwill		6,094,000			6,131,000
Security deposits		60,000			58,000
Total other assets		7,351,000			7,414,000
Total Assets	$	25,636,000		$	24,462,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt	$	2,503,000		$	1,567,000
Capital lease obligations, current		89,000			76,000
Convertible notes		2,540,000			2,123,000
Accounts payable		1,901,000			1,886,000
Deferred revenue		245,000			109,000
Accrued expenses and other liabilities		2,342,000			2,650,000
Total current liabilities		9,620,000			8,411,000
Long-term Liabilities
Long-term debt, net of current portion		1,129,000			1,288,000
Capital lease obligations, net of current portion		118,000			43,000
Deferred tax liability		214,000			242,000
Other long-term liabilities		49,000			50,000
Total long-term liabilities		1,510,000			1,623,000
Stockholders' Equity
Dynasil stockholders' equity		14,731,000			14,616,000
Noncontrolling interest		(225,000	)		(188,000	)
Total stockholders' equity		14,506,000			14,428,000
Total Liabilities and Stockholders' Equity	$	25,636,000		$	24,462,000

Dynasil Corporation of America and Subsidiaries

Consolidated Statement of Operations and Comprehensive Income (Loss)

(Unaudited)

	Three Months Ended
	December 31,
	2015			2014
Net revenue	$	11,204,000		$	9,611,000
Cost of revenue		7,239,000			6,018,000
Gross profit		3,965,000			3,593,000
Operating expenses:
Sales and marketing		341,000			365,000
Research and development		491,000			375,000
General and administrative		2,973,000			3,467,000
Gain on sale of assets		(4,000	)		(185,000	)
Total operating expenses		3,801,000			4,022,000
Income (loss) from operations		164,000			(429,000	)
Interest expense, net		59,000			125,000
Income (loss) before taxes		105,000			(554,000	)
Income tax (credit)		36,000			3,000
Net income (loss)		69,000			(557,000	)
Less: Net loss attributable to noncontrolling interest		(37,000	)		(24,000	)
Net income (loss) attributable to common stockholders	$	106,000		$	(533,000	)
Net income (loss)	$	69,000		$	(557,000	)
Other comprehensive income (loss):
Increase (decrease) in pension liability		-			318,000
Foreign currency translation		(114,000	)		(194,000	)
Total comprehensive loss	$	(45,000	)	$	(433,000	)
Basic net income (loss) per common share	$	0.01		$	(0.03	)
Diluted net income (loss) per common share	$	0.01		$	(0.03	)
Weighted average shares outstanding
Basic		16,551,197			16,300,902
Diluted		16,578,634			16,300,902

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Document And Entity Information - shares	3 Months Ended
	Dec. 31, 2015	Feb. 05, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Dec. 31, 2015
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
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		16,730,231

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CONSOLIDATED BALANCE SHEETS - USD ($)	Dec. 31, 2015	Sep. 30, 2015
Current Assets
Cash and cash equivalents	$ 1,101,000	$ 1,295,000
Accounts receivable, net of allowances of $168,000 at December 31, 2015 and September 30, 2015, respectively	4,444,000	3,382,000
Costs in excess of billings and unbilled receivables	1,288,000	1,518,000
Inventories, net of reserves	3,252,000	3,066,000
Prepaid expenses and other current assets	1,152,000	1,125,000
Total current assets	11,237,000	10,386,000
Property, Plant and Equipment, net	7,048,000	6,662,000
Other Assets
Intangibles, net	1,197,000	1,225,000
Goodwill	6,094,000	6,131,000
Security deposits	60,000	58,000
Total other assets	7,351,000	7,414,000
Total Assets	25,636,000	24,462,000
Current Liabilities
Current portion of long-term debt	2,503,000	1,567,000
Capital lease obligations, current	89,000	76,000
Convertible notes	2,540,000	2,123,000
Accounts payable	1,901,000	1,886,000
Deferred revenue	245,000	109,000
Accrued expenses and other liabilities	2,342,000	2,650,000
Total current liabilities	9,620,000	8,411,000
Long-term Liabilities
Long-term debt, net of current portion	1,129,000	1,288,000
Capital lease obligations, net of current portion	118,000	43,000
Deferred tax liability	214,000	242,000
Other long-term liabilities	49,000	50,000
Total long-term liabilities	1,510,000	1,623,000
Stockholders' Equity
Common Stock, $0.0005 par value, 40,000,000 shares authorized, 17,458,249 and 17,368,738 shares issued, 16,648,089 and 16,558,578 shares outstanding at December 31, 2015 and September 30, 2015, respectively.	9,000	9,000
Additional paid in capital	19,773,000	19,650,000
Accumulated other comprehensive income (loss)	(4,000)	110,000
Accumulated deficit	(4,061,000)	(4,167,000)
Less 810,160 shares of treasury stock - at cost	(986,000)	(986,000)
Total Dynasil stockholders' equity	14,731,000	14,616,000
Noncontrolling interest	(225,000)	(188,000)
Total stockholders' equity	14,506,000	14,428,000
Total Liabilities and Stockholders' Equity	$ 25,636,000	$ 24,462,000

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CONSOLIDATED BALANCE SHEETS [Parenthetical] - USD ($)	Dec. 31, 2015	Sep. 30, 2015
Allowance for doubtful accounts (in dollars)	$ 168,000	$ 168,000
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	17,458,249	17,368,738
Common stock, shares outstanding	16,648,089	16,558,578
Treasury stock, shares	810,160	810,160

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($)	3 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Net revenue	$ 11,204,000	$ 9,611,000
Cost of revenue	7,239,000	6,018,000
Gross profit	3,965,000	3,593,000
Operating expenses:
Sales and marketing	341,000	365,000
Research and development	491,000	375,000
General and administrative	2,973,000	3,467,000
Gain on sale of assets	(4,000)	(185,000)
Total operating expenses	3,801,000	4,022,000
Income (loss) from operations	164,000	(429,000)
Interest expense, net	59,000	125,000
Income (loss) before taxes	105,000	(554,000)
Income tax (credit)	36,000	3,000
Net income (loss)	69,000	(557,000)
Less: Net loss attributable to noncontrolling interest	(37,000)	(24,000)
Net income (loss) attributable to common stockholders	106,000	(533,000)
Net income (loss)	69,000	(557,000)
Other comprehensive income (loss):
Increase (decrease) in pension liability	0	318,000
Foreign currency translation	(114,000)	(194,000)
Total comprehensive loss	$ (45,000)	$ (433,000)
Basic net income (loss) per common share (in dollars per share)	$ 0.01	$ (0.03)
Diluted net income (loss) per common share (in dollars per share)	$ 0.01	$ (0.03)
Weighted average shares outstanding
Basic (in shares)	16,551,197	16,300,902
Diluted (in shares)	16,578,634	16,300,902

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - 3 months ended Dec. 31, 2015 - 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, 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
Issuance of shares of common stock under employee stock purchase plan	4,000	$ 0	4,000	0	0	$ 0	0
Issuance of shares of common stock under employee stock purchase plan (in shares)		2,295				0
Stock-based compensation costs	119,000	$ 0	119,000	0	0	$ 0	0
Stock-based compensation costs (in shares)		87,216				0
Foreign currency translation adjustment	(114,000)	$ 0	0	(114,000)	0	$ 0	0
Net income (loss)	69,000	0	0	0	106,000	0	(37,000)
Balance at Dec. 31, 2015	$ 14,506,000	$ 9,000	$ 19,773,000	$ (4,000)	$ (4,061,000)	$ (986,000)	$ (225,000)
Balance (in shares) at Dec. 31, 2015		17,458,249				810,160

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	3 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Cash flows from operating activities:
Net income (loss)	$ 69,000	$ (557,000)
Adjustments to reconcile net income (loss) to net cash:
Stock compensation expense	119,000	65,000
Foreign exchange loss (gain)	26,000	(23,000)
Gain on sale of assets	(4,000)	(185,000)
Depreciation and amortization	325,000	293,000
Pension expense	0	318,000
Other	16,000	(35,000)
Other changes in assets and libilities:
Accounts receivable, net	(1,101,000)	(79,000)
Inventories	(218,000)	12,000
Costs in excess of billings and unbilled receivables	231,000	(56,000)
Prepaid expenses and other assets	(32,000)	(469,000)
Accounts payable	34,000	(360,000)
Accrued expenses and other liabilities	(303,000)	(438,000)
Deferred revenue	136,000	(76,000)
Net cash from operating activities	(702,000)	(1,590,000)
Cash flows from investing activities:
Proceeds from sale of assets	4,000	244,000
Purchases of property, plant and equipment	(603,000)	(244,000)
Net cash from investing activities	(599,000)	0
Cash flows from financing activities:
Proceeds from issuance of common stock	4,000	3,000
Net proceeds from issuance of convertible notes	390,000	18,000
Principal payments on capital leases	(46,000)	(33,000)
Proceeds from short and long-term debt	5,037,000	300,000
Payments on long-term debt	(4,264,000)	(19,000)
Net cash from financing activities	1,121,000	269,000
Effect of exchange rates on cash and cash equivalents	(14,000)	(17,000)
Net change in cash and cash equivalents	(194,000)	(1,338,000)
Cash and cash equivalents, beginning	1,295,000	3,842,000
Cash and cash equivalents, ending	1,101,000	2,504,000
Non cash activities:
Assets purchased under capital leases	$ 134,000	$ 73,000

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Basis of Presentation

3 Months Ended

Dec. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Significant Accounting Policies [Text Block]

Note 1 - Basis of Presentation

The accompanying consolidated balance sheet as of December 31, 2015, the consolidated statements of operations and comprehensive income (loss) for the three months ended December 31, 2015 and 2014, changes in stockholders’ equity for the three months ended December 31, 2015 and cash flows for the three months ended December 31, 2015 and 2014 of Dynasil Corporation of America and subsidiaries (the “Company”), and the related information contained in these notes have been prepared by management and are unaudited. In the opinion of management, all adjustments (which include normal recurring and nonrecurring items) necessary to present fairly the financial position, results of operations and cash flows in conformity with generally accepted accounting principles for the periods presented have been made. Certain prior year balances have been reclassified to conform to the current year presentation. These reclassifications did not affect previously reported net loss or stockholders’ deficit. In the opinion of management, all adjustments (which include normal recurring and nonrecurring items) necessary to present fairly the financial position, results of operations and cash flows in conformity with generally accepted accounting principles for the periods presented have been made. Interim operating results are not necessarily indicative of operating results for a full year.

The preparation of our unaudited consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's September 30, 2015 Annual Report on Form 10-K previously filed by the Company with the Securities and Exchange Commission.

The Company considers events or transactions that have occurred after the unaudited consolidated balance sheet date of December 31, 2015, but prior to the filing of the unaudited consolidated financial statements with the SEC on this Form 10-Q, to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure, as applicable. Subsequent events have been evaluated through the date of the filing of this Quarterly Report on Form 10-Q with the SEC.

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Adoption of Accounting Pronouncements

3 Months Ended

Dec. 31, 2015

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

Note 2 – Adoption of Accounting Pronouncements

Effective October 1, 2015, the Company early adopted the guidance issued in Accounting Standards Update 2015-03, Interest – Imputation of Interest (Topic 835) (“ASU 2015-03”) to simplify the presentation of debt issuance costs. This standard 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 Company adopted this guidance on a retrospective basis, wherein the balance sheet of each individual period presented was adjusted to reflect the period-specific effects of applying the new guidance. As a result of the adoption of ASU 2015-03, $12,000 of debt issuance costs at October 1, 2015 were reclassified from deferred financing costs, net to long-term debt in the consolidated balance sheets.

Effective for the reporting period beginning October 1, 2015, the Company early adopted the guidance issued in Accounting Standards Update 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”) which simplifies the presentation of deferred income taxes. ASU 2015-17 concludes that deferred tax liabilities and assets should be classified as noncurrent in a classified statement of financial position. The Company adopted this guidance on a retrospective basis, wherein the balance sheet of each individual period presented was adjusted to reflect the period-specific effects of applying the new guidance. The adoption of this ASU did not have a material impact on the Company’s financial statements.

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Acquisitions and Divestitures

3 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Note 3 – Acquisitions and Divestitures

In the three months ended December 31, 2014, the Company recorded a gain of $0.2 million in connection with the sale of a product line in its Optics segment.

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Xcede Technologies, Inc. Joint Venture

3 Months Ended

Dec. 31, 2015

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments and Joint Ventures Disclosure [Text Block]

Note 4 – Xcede Technologies, Inc. Joint Venture

In October, 2013, the Company formed Xcede Technologies, Inc. (“Xcede”), a joint venture with Mayo Clinic, in order to spin out and separately fund the development of its tissue sealant technology, which formerly comprised the majority of its biomedical segment. Xcede has raised approximately $2.4 million in external funding in the form of Convertible Notes (the “Notes”) to outside investors and to certain officers and directors of the Company. The Notes accrue interest at 5% and, as amended, are due after June 30, 2016, upon the demand of the holders of a majority of the aggregate outstanding principal amount of the Notes.

Upon the closing of a capital stock financing raising at least $3.0 million, inclusive of the Notes and interest, the outstanding principal amount of the Notes plus all accrued interest will be converted into shares of the same capital stock sold in the financing at a 20% discount to the price per share of that capital stock. Alternatively, at any time prior to a capital stock financing the Note holders can convert, at their option, the principal amount of the Notes plus accrued interest into common stock based on a $5 million valuation.

Xcede’s common stock is 90% owned by Dynasil Biomedical and, as a result, is included in the Company’s consolidated balance sheets, results of operations and cash flows. The Company expects Xcede to require significant additional funding prior to commencing human trials.

On January 6, 2016, Xcede announced that it has signed three agreements with Cook Biotech Inc. of West Lafayette, IN including a Development Agreement, a License Agreement and a Supply Agreement in connection with the development, regulatory approval and production of Xcede’s resorbable hemostatic patch.

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Inventories

3 Months Ended

Dec. 31, 2015

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

Note 5 - Inventories

Inventories, net of reserves, consists of the following:

	December 31,		September 30,
	2015		2015
Raw Materials	$	1,883,000	$	1,828,000
Work-in-Process		847,000		862,000
Finished Goods		522,000		376,000
	$	3,252,000	$	3,066,000

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Intangible Assets

3 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets Disclosure [Text Block]

Note 6 – Intangible Assets

Intangible assets at December 31, 2015 and September 30, 2015 consist of the following:

	Useful	Gross		Accumulated
December 31, 2015	Life (years)	Amount		Amortization		Net
Acquired Customer Base	5 to 15	$	807,000	$	473,000	$	334,000
Know How	15		512,000		256,000		256,000
Trade Names	Indefinite		310,000		-		310,000
Patents	20		254,000		2,000		252,000
Biomedical Technologies	5		260,000		215,000		45,000
		$	2,143,000	$	946,000	$	1,197,000

	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

Amortization expense for the three months ended December 31, 2015 and 2014 was $44,000 and $43,000, respectively.

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

	2016 (9 months)		2017		2018		2019		2020		Thereafter		Total
Acquired Customer Base	$	60,000	$	80,000	$	80,000	$	80,000	$	34,000	$	-	$	334,000
Know How		26,000		34,000		34,000		34,000		34,000		94,000		256,000
Patents		5,000		6,000		6,000		6,000		6,000		61,000		90,000
Biomedical Technologies		45,000		-		-		-		-		-		45,000
	$	136,000	$	120,000	$	120,000	$	120,000	$	74,000	$	155,000	$	725,000

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Goodwill

3 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill Disclosure [Text Block]

Note 7 – Goodwill

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

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

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

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

· Unanticipated competition or the introduction of a disruptive technology;

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

· A loss of key personnel; and

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

There were no changes, aside from foreign exchange rate fluctuations, in the carrying value of goodwill during the three months ended December 31, 2015.

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Earnings (Loss) Per Common Share

3 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 8 – Earnings (Loss) Per Common Share

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

For purposes of computing diluted earnings per share for the three months ended December 31, 2015, no common stock options were included in the calculation of dilutive shares as all of the 58,212 common stock options outstanding had exercise prices above the applicable quarterly average market price per share and their inclusion would be anti-dilutive. For the three months ended December 31, 2014, no common share equivalents related to stock options were included in the calculation of dilutive shares, since there was a loss from continuing operations and the inclusion of common share equivalents would be anti-dilutive.

For the three months ended December 31, 2015, 27,437 shares of common stock related to restricted stock were included in the denominator used to calculate diluted earnings per share. For the three months ended December 31, 2014, no common share equivalents related to restricted stock were included in the calculation of dilutive shares, since there was a loss from continuing operations and the inclusion of common share equivalents would be anti-dilutive.

The computation of the weighted shares outstanding for the three months ended December 31 is as follows:

	December 31, 2015		December 31, 2014
Weighted average shares outstanding
Basic		16,551,197		16,300,902
Effect of dilutive securities
Stock Options		-		-
Restricted Stock		27,437		-
Dilutive Average Shares Outstanding		16,578,634		16,300,902

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Stock Based Compensation

3 Months Ended

Dec. 31, 2015

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 9 - Stock Based Compensation

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

The expected volatility was determined with reference to the historical volatility of the Company's stock. The Company uses historical data to estimate option exercise and employee termination 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 zero 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 three months ended December 31, 2015 and 2014 is as follows:

	Three Months Ended		Three Months Ended
Stock Compensation Expense	December 31, 2015		December 31, 2014
Stock Grants	$	83,000	$	57,000
Restricted Stock Grants		8,000		7,000
Option Grants		6,000		-
Employee Stock Purchase Plan		1,000		1,000
Subsidiary Option Grants		21,000		-
Total	$	119,000	$	65,000

At December 31, 2015 there was approximately $86,000 in unrecognized stock compensation cost for Dynasil, which is expected to be recognized over a weighted average period of eighteen months.

Restricted Stock Grants

A summary of restricted stock activity for the three months ended December 31, 2015 is presented below:

Restricted Stock Activity for the Three Months ended			Weighted-Average
December 31, 2015	Shares		Grant-Date Fair Value
Nonvested at September 30, 2015		27,000	$	1.04
Granted		40,000		1.70
Vested		-		-
Cancelled		-		-
Nonvested at December 31, 2015		67,000	$	1.43

Stock Option Grants

During the three months ended December 31, 2015, no Dynasil stock options were granted. A summary of stock option activity for the three months ended December 31, 2015 is presented below:

			Weighted Average		Weighted Average
	Options		Exercise Price per		Remain Contractual
	Outstanding		Share		Term (in Years)
Balance at September 30, 2015		58,212	$	2.28		1.96
Outstanding and exercisable at September 30, 2015		58,212	$	2.28		1.96
Granted		-		-
Exercised		-		-
Cancelled		-		-
Balance at December 31, 2015		58,212	$	2.28		1.71
Outstanding and exercisable at December 31, 2015		58,212	$	2.28		1.71

Subsidiary Stock Option Grants

During the three months ended December 31, 2015, 75,000 Xcede stock options were granted at an exercise price of $1.00 per share. These options vest over the next three years and expire ten years from the grant date. The weighted average assumptions for grants during the three months ended December 31, 2015 used in the Black-Scholes option pricing model were as follows:

Expected term in years	10 years
Risk-free interest rate	2.05	%
Expected volatility	82.42	%
Expected dividend yield	0.00	%

A summary of Xcede stock option activity for the three months ended December 31, 2015 is presented below:

			Weighted Average		Weighted Average
	Options		Exercise Price per		Remain Contractual
	Outstanding		Share		Term (in Years)
Balance at September 30, 2015		780,258	$	1.00		8.85
Outstanding and exercisable at September 30, 2015		180,293	$	1.00		8.50
Granted		75,000	$	1.00
Exercised		-		-
Cancelled		(35,000)	$	1.00
Balance at December 31, 2015		820,258	$	1.00		8.70
Outstanding and exercisable at December 31, 2015		201,512	$	1.00		8.21

At December 31, 2015, the Company’s Xcede joint venture had $195,000 of unrecognized stock compensation expense associated with stock options expected to be recognized over a weighted average period of nineteen months and $82,000 of unrecognized stock compensation expense that begin to vest upon the attainment of specific capital raising targets.

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Segment, Customer and Geographical Reporting

3 Months Ended

Dec. 31, 2015

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 10 – Segment, Customer and Geographical Reporting

Segment Financial Information

Dynasil’s business is comprised of three segments: optics (“Optics”), contract research (“Contract Research”) and biomedical (“Biomedical”). The Company’s Instruments segment was substantially disposed of in the first quarter of fiscal 2014, has had no subsequent operations and had no remaining assets as of December 31, 2015. Consequently, it is no longer reported as a separate segment. At December 31, 2014, the Company had approximately $0.3 million of assets related to the businesses formerly comprising the Instruments segment.

Within these segments, there is a segregation of reportable units based upon the organizational structure used to evaluate performance and make decisions on resource allocation, as well as availability and materiality of separate financial results consistent with that structure. The Optics segment manufactures optical materials, components and coatings. The Contract Research segment is one of the largest small business participants in U.S. government-funded research. The Biomedical segment, through Xcede Technologies, Inc., a majority owned, joint venture, is focused on developing a tissue sealant technology though no assurance can be given that this technology will become successfully commercialized.

The Company’s segment information for the three months ended December 31, 2015 and 2014 is summarized below:

Results of Operations for the Three Months Ended December 31,
2015
				Contract
	Optics			Research			Biomedical		Total
Revenue	$	6,214,000		$	4,990,000		$	-	$	11,204,000
Gross Profit		2,110,000			1,855,000			-		3,965,000
GM %		34.0	%		37.2	%		-		35.4	%
SG&A		1,751,000			1,706,000			348,000		3,805,000
Gain on sale of assets		4,000			-			-		4,000
Operating Income (Loss)		363,000			149,000			(348,000)		164,000
Depreciation and Amortization		228,000			80,000			17,000		325,000
Capital expenditures		565,000			7,000			31,000		603,000
Intangibles, Net		644,000			256,000			297,000		1,197,000
Goodwill		1,155,000			4,939,000			-		6,094,000
Total Assets	$	16,506,000		$	8,273,000		$	857,000	$	25,636,000

Results of Operations for the Three Months Ended December 31,
2014
				Contract
	Optics			Research			Biomedical		Total
Revenue	$	4,948,000		$	4,663,000		$	-	$	9,611,000
Gross Profit		1,495,000			2,098,000			-		3,593,000
GM %		30.2	%		45.0	%		-		37.4	%
SG&A		2,091,000			1,881,000			235,000		4,207,000
Gain on sale of assets		185,000			-			-		185,000
Operating Income (Loss)		(410,000)			216,000			(235,000)		(429,000)
Depreciation and Amortization		204,000			74,000			15,000		293,000
Capital expenditures		244,000			-			-		244,000
Intangibles, Net		752,000			290,000			229,000		1,271,000
Goodwill		1,232,000			4,939,000			-		6,171,000
Total Assets	$	15,419,000		$	9,036,000		$	922,000	$	25,377,000

Customer Financial Information

For the three months ended December 31, 2015, one customer in the Optics segment represented more than 10% of the total segment revenue. For the three months ended December 31, 2014, the single largest customer in the Optics segment made up 21% and 9%, respectively of the total segment revenue.

For the three months ended December 31, 2015, five customers of the Contract Research segment, all various agencies of the U.S. Government, each represented more than 10% of the total segment revenue. For the three months ended December 31, 2015 and 2014, these customers made up 76% and 74%, respectively, of Contract Research revenue.

Geographic Financial Information

Revenue by geographic location in total and as a percentage of total revenue, for the three months ended December 31, 2015 and 2014 are as follows:

	Three Months Ended					Three Months Ended
	December 31, 2015					December 31, 2014
Geographic Location	Revenue		% of Total			Revenue		% of Total
United States	$	8,235,000		74	%	$	7,682,000		80	%
Europe		2,041,000		18	%		884,000		9	%
Other		928,000		8	%		1,045,000		11	%
	$	11,204,000		100	%	$	9,611,000		100	%

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Income Taxes

3 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 11 - Income Taxes

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

The Company uses the asset and liability approach to account for income taxes. Under this approach, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and net operating loss and tax credit 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 recent losses and uncertainty of future profits, the Company has determined that the uncertainty regarding the realization of these assets is sufficient to warrant the need for a full valuation allowance against its U.S. net deferred tax assets.

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 December 31, 2015 and September 30, 2015, 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 December 31, 2015 and September 30, 2015, the Company had no accrued interest or penalties related to uncertain tax positions. The Company currently has no federal or state tax examinations in progress.

The effective tax rates were 25% and (0.57%) for the three months ended December 31, 2015 and 2014, respectively. The rates differ from the U.S. federal statutory income tax rate of 34% primarily due to a full valuation allowance against the Company’s U.S. deferred tax asset.

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Company’s tax filings for federal and state jurisdictions for the tax years beginning with 2012 are still subject to examination.

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Settlement of Pension Liability

3 Months Ended

Dec. 31, 2015

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

Schedule Of Defined Benefit Plans Disclosure [Text Block]

Note 12 – Settlement of Pension Liability

On December 1, 2014, the Company terminated and settled its pension liability with each of the remaining participants in the EMF Defined Benefit Plan (the “Plan”). The Plan had been frozen since 2006. 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 $355,000 difference upon settlement of the Plan.

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Subsequent Events

3 Months Ended

Dec. 31, 2015

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 13 – Subsequent Events

On February 1, 2016, the Company entered into a $2,000,000 Term Note with Middlesex Savings Bank, as per the terms of the Loan Document Modification Agreement, dated September 29, 2015, as detailed in the Company’s Annual Report on Form 10-K, filed on December 17, 2015. The Company converted $2,000,000 of outstanding advances under the Company’s Middlesex Bank Line of Credit Note to a new five-year term note bearing interest at the fixed annual rate of 4.5%. Immediately following this conversion, the total availability under the Company’s line of credit increased by $2 million to $3,819,000.

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Inventories (Tables)

3 Months Ended

Dec. 31, 2015

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

Inventories, net of reserves, consists of the following:

	December 31,		September 30,
	2015		2015
Raw Materials	$	1,883,000	$	1,828,000
Work-in-Process		847,000		862,000
Finished Goods		522,000		376,000
	$	3,252,000	$	3,066,000

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Intangible Assets (Tables)

3 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

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

Intangible assets at December 31, 2015 and September 30, 2015 consist of the following:

	Useful	Gross		Accumulated
December 31, 2015	Life (years)	Amount		Amortization		Net
Acquired Customer Base	5 to 15	$	807,000	$	473,000	$	334,000
Know How	15		512,000		256,000		256,000
Trade Names	Indefinite		310,000		-		310,000
Patents	20		254,000		2,000		252,000
Biomedical Technologies	5		260,000		215,000		45,000
		$	2,143,000	$	946,000	$	1,197,000

	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

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

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

	2016 (9 months)		2017		2018		2019		2020		Thereafter		Total
Acquired Customer Base	$	60,000	$	80,000	$	80,000	$	80,000	$	34,000	$	-	$	334,000
Know How		26,000		34,000		34,000		34,000		34,000		94,000		256,000
Patents		5,000		6,000		6,000		6,000		6,000		61,000		90,000
Biomedical Technologies		45,000		-		-		-		-		-		45,000
	$	136,000	$	120,000	$	120,000	$	120,000	$	74,000	$	155,000	$	725,000

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Earnings (Loss) Per Common Share (Tables)

3 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

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

The computation of the weighted shares outstanding for the three months ended December 31 is as follows:

	December 31, 2015		December 31, 2014
Weighted average shares outstanding
Basic		16,551,197		16,300,902
Effect of dilutive securities
Stock Options		-		-
Restricted Stock		27,437		-
Dilutive Average Shares Outstanding		16,578,634		16,300,902

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Stock Based Compensation (Tables)

3 Months Ended

Dec. 31, 2015

Schedule Of Stock Compensation Expense [Table Text Block]

Stock Compensation Expense for the three months ended December 31, 2015 and 2014 is as follows:

	Three Months Ended		Three Months Ended
Stock Compensation Expense	December 31, 2015		December 31, 2014
Stock Grants	$	83,000	$	57,000
Restricted Stock Grants		8,000		7,000
Option Grants		6,000		-
Employee Stock Purchase Plan		1,000		1,000
Subsidiary Option Grants		21,000		-
Total	$	119,000	$	65,000

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

A summary of restricted stock activity for the three months ended December 31, 2015 is presented below:

Restricted Stock Activity for the Three Months ended			Weighted-Average
December 31, 2015	Shares		Grant-Date Fair Value
Nonvested at September 30, 2015		27,000	$	1.04
Granted		40,000		1.70
Vested		-		-
Cancelled		-		-
Nonvested at December 31, 2015		67,000	$	1.43

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

A summary of Xcede stock option activity for the three months ended December 31, 2015 is presented below:

			Weighted Average		Weighted Average
	Options		Exercise Price per		Remain Contractual
	Outstanding		Share		Term (in Years)
Balance at September 30, 2015		780,258	$	1.00		8.85
Outstanding and exercisable at September 30, 2015		180,293	$	1.00		8.50
Granted		75,000	$	1.00
Exercised		-		-
Cancelled		(35,000)	$	1.00
Balance at December 31, 2015		820,258	$	1.00		8.70
Outstanding and exercisable at December 31, 2015		201,512	$	1.00		8.21

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 three months ended December 31, 2015 is presented below:

			Weighted Average		Weighted Average
	Options		Exercise Price per		Remain Contractual
	Outstanding		Share		Term (in Years)
Balance at September 30, 2015		58,212	$	2.28		1.96
Outstanding and exercisable at September 30, 2015		58,212	$	2.28		1.96
Granted		-		-
Exercised		-		-
Cancelled		-		-
Balance at December 31, 2015		58,212	$	2.28		1.71
Outstanding and exercisable at December 31, 2015		58,212	$	2.28		1.71

Subsidiary Option Grants [Member]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The weighted average assumptions for grants during the three months ended December 31, 2015 used in the Black-Scholes option pricing model were as follows:

Expected term in years	10 years
Risk-free interest rate	2.05	%
Expected volatility	82.42	%
Expected dividend yield	0.00	%

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Segment, Customer and Geographical Reporting (Tables)

3 Months Ended

Dec. 31, 2015

Segment Reporting [Abstract]

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

The Company’s segment information for the three months ended December 31, 2015 and 2014 is summarized below:

Results of Operations for the Three Months Ended December 31,
2015
				Contract
	Optics			Research			Biomedical		Total
Revenue	$	6,214,000		$	4,990,000		$	-	$	11,204,000
Gross Profit		2,110,000			1,855,000			-		3,965,000
GM %		34.0	%		37.2	%		-		35.4	%
SG&A		1,751,000			1,706,000			348,000		3,805,000
Gain on sale of assets		4,000			-			-		4,000
Operating Income (Loss)		363,000			149,000			(348,000)		164,000
Depreciation and Amortization		228,000			80,000			17,000		325,000
Capital expenditures		565,000			7,000			31,000		603,000
Intangibles, Net		644,000			256,000			297,000		1,197,000
Goodwill		1,155,000			4,939,000			-		6,094,000
Total Assets	$	16,506,000		$	8,273,000		$	857,000	$	25,636,000

Results of Operations for the Three Months Ended December 31,
2014
				Contract
	Optics			Research			Biomedical		Total
Revenue	$	4,948,000		$	4,663,000		$	-	$	9,611,000
Gross Profit		1,495,000			2,098,000			-		3,593,000
GM %		30.2	%		45.0	%		-		37.4	%
SG&A		2,091,000			1,881,000			235,000		4,207,000
Gain on sale of assets		185,000			-			-		185,000
Operating Income (Loss)		(410,000)			216,000			(235,000)		(429,000)
Depreciation and Amortization		204,000			74,000			15,000		293,000
Capital expenditures		244,000			-			-		244,000
Intangibles, Net		752,000			290,000			229,000		1,271,000
Goodwill		1,232,000			4,939,000			-		6,171,000
Total Assets	$	15,419,000		$	9,036,000		$	922,000	$	25,377,000

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

Revenue by geographic location in total and as a percentage of total revenue, for the three months ended December 31, 2015 and 2014 are as follows:

	Three Months Ended					Three Months Ended
	December 31, 2015					December 31, 2014
Geographic Location	Revenue		% of Total			Revenue		% of Total
United States	$	8,235,000		74	%	$	7,682,000		80	%
Europe		2,041,000		18	%		884,000		9	%
Other		928,000		8	%		1,045,000		11	%
	$	11,204,000		100	%	$	9,611,000		100	%

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Adoption of Accounting Pronouncements (Details Textual)	1 Months Ended
	Oct. 31, 2015 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Debt Issuance Cost	$ 12,000

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Acquisitions and Divestitures (Details Textual) $ in Millions	3 Months Ended
	Dec. 31, 2014 USD ($)
Business Acquisition [Line Items]
Gain (Loss) on Disposition of Business	$ 0.2

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Xcede Technologies, Inc. Joint Venture (Details Textual) - USD ($) $ in Millions	1 Months Ended	3 Months Ended
	Oct. 31, 2013	Dec. 31, 2015
Schedule of Equity Method Investments [Line Items]
Proceeds from Convertible Debt	$ 2.4
Debt Instrument, Interest Rate, Stated Percentage		5.00%
Debt Instrument, Convertible, Beneficial Conversion Feature		$ 3.0
Capital Stock Financing Discount Percentage		20.00%
Common Stock Valuation		$ 5.0
Equity Method Investment, Ownership Percentage		90.00%

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Inventories (Details) - USD ($)	Dec. 31, 2015	Sep. 30, 2015
Inventory Current [Line Items]
Raw Materials	$ 1,883,000	$ 1,828,000
Work-in-Process	847,000	862,000
Finished Goods	522,000	376,000
Inventory, Net, Total	$ 3,252,000	$ 3,066,000

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Intangible Assets (Details) - USD ($)	3 Months Ended	12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 2,143,000	$ 2,137,000
Accumulated Amortization	946,000	912,000
Net	1,197,000	1,225,000	$ 1,271,000
Acquired Customer Base [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount	807,000	824,000
Accumulated Amortization	473,000	464,000
Net	$ 334,000	$ 360,000
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	256,000	248,000
Net	256,000	264,000
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount	310,000	318,000
Accumulated Amortization	0	0
Net	$ 310,000	$ 318,000
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)	20 years	20 years
Gross Amount	$ 254,000	$ 223,000
Accumulated Amortization	2,000	0
Net	$ 252,000	$ 223,000
Biomedical Technologies [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)	5 years	5 years
Gross Amount	$ 260,000	$ 260,000
Accumulated Amortization	215,000	200,000
Net	$ 45,000	$ 60,000

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Intangible Assets (Details 1)	Dec. 31, 2015 USD ($)
Finite-Lived Intangible Assets [Line Items]
2016 (9 months)	$ 136,000
2017	120,000
2018	120,000
2019	120,000
2020	74,000
Thereafter	155,000
Total	725,000
Acquired Customer Base [Member]
Finite-Lived Intangible Assets [Line Items]
2016 (9 months)	60,000
2017	80,000
2018	80,000
2019	80,000
2020	34,000
Thereafter	0
Total	334,000
Know How [Member]
Finite-Lived Intangible Assets [Line Items]
2016 (9 months)	26,000
2017	34,000
2018	34,000
2019	34,000
2020	34,000
Thereafter	94,000
Total	256,000
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
2016 (9 months)	5,000
2017	6,000
2018	6,000
2019	6,000
2020	6,000
Thereafter	61,000
Total	90,000
Biomedical Technologies [Member]
Finite-Lived Intangible Assets [Line Items]
2016 (9 months)	45,000
2017	0
2018	0
2019	0
2020	0
Thereafter	0
Total	$ 45,000

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Intangible Assets (Details Textual) - USD ($)	3 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Amortization of Intangible Assets	$ 44,000	$ 43,000

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Earnings (Loss) Per Common Share (Details) - shares	3 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Weighted average shares outstanding
Basic	16,551,197	16,300,902
Effect of dilutive securities
Dilutive Average Shares Outstanding	16,578,634	16,300,902
Employee Stock Option [Member]
Effect of dilutive securities
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements	0	0
Restricted Stock [Member]
Effect of dilutive securities
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements	27,437	0

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Earnings (Loss) Per Common Share (Details Textual)	3 Months Ended
	Dec. 31, 2015 shares
Earnings Loss Per Common Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	58,212
Restricted Stock [Member]
Earnings Loss Per Common Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	27,437

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Stock Based Compensation (Details) - USD ($)	3 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Stock Based Compensation [Line Items]
Stock Compensation Expense	$ 119,000	$ 65,000
Stock Grants [Member]
Stock Based Compensation [Line Items]
Stock Compensation Expense	83,000	57,000
Restricted Stock Grants [Member]
Stock Based Compensation [Line Items]
Stock Compensation Expense	8,000	7,000
Option Grants [Member]
Stock Based Compensation [Line Items]
Stock Compensation Expense	6,000	0
Employee Stock Purchase Plan [Member]
Stock Based Compensation [Line Items]
Stock Compensation Expense	1,000	1,000
Subsidiary Option Grants [Member]
Stock Based Compensation [Line Items]
Stock Compensation Expense	$ 21,000	$ 0

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Stock Based Compensation (Details 1) - Restricted Stock [Member]	3 Months Ended
	Dec. 31, 2015 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, Nonvested Beginning Balance | shares	27,000
Shares, Granted | shares	40,000
Shares, Vested | shares	0
Shares, Cancelled | shares	0
Shares, Nonvested Ending Balance | shares	67,000
Weighted-Average Grant-Date Fair Value, Nonvested, Beginning Balance | $ / shares	$ 1.04
Weighted-Average Grant-Date Fair Value, Granted | $ / shares	1.7
Weighted-Average Grant-Date Fair Value, Vested | $ / shares	0
Weighted-Average Grant-Date Fair Value, Cancelled | $ / shares	0
Weighted-Average Grant-Date Fair Value, Nonvested, Ending Balance | $ / shares	$ 1.43

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Stock Based Compensation (Details 2) - $ / shares	3 Months Ended	12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015
Stock Option Grants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Balance,Options Outstanding	58,212
Outstanding and exercisable,Options Outstanding	58,212	58,212
Granted,Options Outstanding	0
Exercised,Options Outstanding	0
Cancelled, Options Outstanding	0
Balance,Options Outstanding	58,212	58,212
Balance,Weighted Average Exercise Price per Share	$ 2.28
Outstanding and exercisable,Weighted Average Exercise Price per Share	2.28	$ 2.28
Granted,Weighted Average Exercise Price per Share	0
Exercised,Weighted Average Exercise Price per Share	0
Cancelled,Weighted Average Exercise Price per Share	0
Balance,Weighted Average Exercise Price per Share	$ 2.28	$ 2.28
Balance,Weighted Average Remain Contractual Term (in Years)	1 year 8 months 16 days	1 year 11 months 16 days
Outstanding and exercisable,Weighted Average Remain Contractual Term (in Years)	1 year 8 months 16 days	1 year 11 months 16 days
Subsidiary Option Grants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Balance,Options Outstanding	780,258
Outstanding and exercisable,Options Outstanding	201,512	180,293
Granted,Options Outstanding	75,000
Exercised,Options Outstanding	0
Cancelled, Options Outstanding	(35,000)
Balance,Options Outstanding	820,258	780,258
Balance,Weighted Average Exercise Price per Share	$ 1.00
Outstanding and exercisable,Weighted Average Exercise Price per Share	1.00	$ 1.00
Granted,Weighted Average Exercise Price per Share	1.00
Exercised,Weighted Average Exercise Price per Share	0
Cancelled,Weighted Average Exercise Price per Share	1.00
Balance,Weighted Average Exercise Price per Share	$ 1.00	$ 1.00
Balance,Weighted Average Remain Contractual Term (in Years)	8 years 8 months 12 days	8 years 10 months 6 days
Outstanding and exercisable,Weighted Average Remain Contractual Term (in Years)	8 years 2 months 16 days	8 years 6 months

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Stock Based Compensation (Details 3) - Subsidiary Option Grants [Member]	3 Months Ended
	Dec. 31, 2015
Class of Stock [Line Items]
Expected term in years	10 years
Risk-free interest rate	2.05%
Expected volatility	82.42%
Expected dividend yield	0.00%

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Stock Based Compensation (Details Textual)	3 Months Ended
	Dec. 31, 2015 USD ($) $ / shares shares
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Subsidiary Option Grants [Member]
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares	75,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term	10 years
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ / shares	$ 1.00
Subsidiary Option Grants [Member] | Xcede joint venture [Member]
Class of Stock [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	$ 195,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total	$ 82,000
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term	19 months
Employee Stock Plan [Member]
Class of Stock [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	$ 86,000
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term	18 months

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Segment, Customer and Geographical Reporting (Details) - USD ($)	3 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Sep. 30, 2015
Segment Reporting Information [Line Items]
Revenue	$ 11,204,000	$ 9,611,000
Gross Profit	$ 3,965,000	$ 3,593,000
GM %	35.40%	37.40%
SG&A	$ 3,805,000	$ 4,207,000
Gain on sale of assets	4,000	185,000
Operating Income (Loss)	164,000	(429,000)
Depreciation and Amortization	325,000	293,000
Capital expenditures	603,000	244,000
Intangibles, Net	1,197,000	1,271,000	$ 1,225,000
Goodwill	6,094,000	6,171,000	6,131,000
Total Assets	25,636,000	25,377,000	$ 24,462,000
Contract Research [Member]
Segment Reporting Information [Line Items]
Revenue	4,990,000	4,663,000
Gross Profit	$ 1,855,000	$ 2,098,000
GM %	37.20%	45.00%
SG&A	$ 1,706,000	$ 1,881,000
Gain on sale of assets	0	0
Operating Income (Loss)	149,000	216,000
Depreciation and Amortization	80,000	74,000
Capital expenditures	7,000	0
Intangibles, Net	256,000	290,000
Goodwill	4,939,000	4,939,000
Total Assets	8,273,000	9,036,000
Optics [Member]
Segment Reporting Information [Line Items]
Revenue	6,214,000	4,948,000
Gross Profit	$ 2,110,000	$ 1,495,000
GM %	34.00%	30.20%
SG&A	$ 1,751,000	$ 2,091,000
Gain on sale of assets	4,000	185,000
Operating Income (Loss)	363,000	(410,000)
Depreciation and Amortization	228,000	204,000
Capital expenditures	565,000	244,000
Intangibles, Net	644,000	752,000
Goodwill	1,155,000	1,232,000
Total Assets	16,506,000	15,419,000
Biomedical [Member]
Segment Reporting Information [Line Items]
Revenue	0	0
Gross Profit	$ 0	$ 0
GM %	0.00%	0.00%
SG&A	$ 348,000	$ 235,000
Gain on sale of assets	0	0
Operating Income (Loss)	(348,000)	(235,000)
Depreciation and Amortization	17,000	15,000
Capital expenditures	31,000	0
Intangibles, Net	297,000	229,000
Goodwill	0	0
Total Assets	$ 857,000	$ 922,000

XML

Segment, Customer and Geographical Reporting (Details 1) - USD ($)	3 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 11,204,000	$ 9,611,000
% of Total	100.00%	100.00%
United State [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 8,235,000	$ 7,682,000
% of Total	74.00%	80.00%
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 2,041,000	$ 884,000
% of Total	18.00%	9.00%
Other [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 928,000	$ 1,045,000
% of Total	8.00%	11.00%

XML

Segment, Customer and Geographical Reporting (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Segment Reporting [Line Items]
Segment Reporting Information Net Assets		$ 0.3
Sales Revenue, Segment [Member]
Segment Reporting [Line Items]
Concentration Risk, Percentage	76.00%	74.00%
Customer Five [Member] | Sales Revenue, Segment [Member]
Segment Reporting [Line Items]
Concentration Risk, Percentage	10.00%
Optics [Member] | Maximum [Member]
Segment Reporting [Line Items]
Concentration Risk, Percentage		21.00%
Optics [Member] | Minimum [Member]
Segment Reporting [Line Items]
Concentration Risk, Percentage		9.00%
Optics [Member] | Customer One [Member]
Segment Reporting [Line Items]
Concentration Risk, Percentage	10.00%

XML

Income Taxes (Details Textual)	3 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Income Tax [Line Items]
Effective Income Tax Rate Reconciliation, Percent, Total	25.00%	(0.57%)
Federal [Member]
Income Tax [Line Items]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	34.00%

XML

Settlement of Pension Liability (Details Textual)	1 Months Ended
	Dec. 31, 2014 USD ($)
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Benefits Paid	$ 675,000
Defined Benefit Plan, Settlements, Benefit Obligation	320,000
Defined Benefit Plan, Funded Status of Plan, Total	$ 355,000

XML

Subsequent Events (Details Textual) - USD ($)	Feb. 01, 2016	Dec. 31, 2015
Subsequent Event [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		5.00%
Middlesex Savings Bank [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Short-term Debt, Total	$ 2,000,000
Debt Conversion, Converted Instrument, Amount	$ 2,000,000
Debt Instrument, Interest Rate, Stated Percentage	4.50%
Debt Instrument, Term	5 years
Middlesex Savings Bank [Member] | Subsequent Event [Member] | Minimum [Member]
Subsequent Event [Line Items]
Long-term Line of Credit	$ 2,000,000
Middlesex Savings Bank [Member] | Subsequent Event [Member] | Maximum [Member]
Subsequent Event [Line Items]
Long-term Line of Credit	$ 3,819,000