-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CEw9YLjjAsBcxvcRRjPIQrCvrPn2OvI8UktbVIGxLHx/04CjZam3UTIlx9XBR3F4 HFhX4v8NAOOz0wXm/nVHiw== 0001260415-05-000055.txt : 20050728 0001260415-05-000055.hdr.sgml : 20050728 20050728125819 ACCESSION NUMBER: 0001260415-05-000055 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050728 DATE AS OF CHANGE: 20050728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYNASIL CORP OF AMERICA CENTRAL INDEX KEY: 0000030831 STANDARD INDUSTRIAL CLASSIFICATION: GLASS, GLASSWARE, PRESSED OR BLOWN [3220] IRS NUMBER: 221734088 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-27503 FILM NUMBER: 05980209 BUSINESS ADDRESS: STREET 1: 385 COOPER RD CITY: WEST BERLIN STATE: NJ ZIP: 08091 BUSINESS PHONE: 8567674600 MAIL ADDRESS: STREET 1: 385 COOPER RD CITY: WEST BERLIN STATE: NJ ZIP: 08091 10QSB 1 dyn0605-10qsb.txt DYNASIL CORPORATION OF AMERICA FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB (Mark One) XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005 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 small business issuer as specified in its charter) New Jersey 22-1734088 -------------- ------------------------------- (State or other jurisdiction (IRS Employer Identification No.) of incorporation) 385 Cooper Road, West Berlin, New Jersey, 08091 ---------------------------------------------------------- (Address of principal executive offices) (856) 767-4600 -------------------------------------------------- (Registrant's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 XX No ---- ---- The Company had 3,756,784 shares of common stock, par value $.0005 per share, outstanding as of July 26, 2005. 1 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES INDEX PART 1. FINANCIAL INFORMATION - ---- ITEM 1. FINANCIAL STATEMENTS PAGE DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES ----------------------------------------------- CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2005 AND SEPTEMBER 30, 2004 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND THE NINE MONTHS ENDED JUNE 30, 2005 AND 2004 4 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, 2005 AND 2004 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 9 ITEM 3. CONTROLS AND PROCEDURES 13 PART II. OTHER INFORMATION 13 ITEM 1. LEGAL PROCEEDINGS 13 ITEM 2. CHANGES IN SECURITIES 13 ITEM 3. DEFAULTS ON SENIOR SECURITIES 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13 ITEM 5. OTHER INFORMATION 13 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 14 SIGNATURES 14 2 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS UNAUDITED) ASSETS June 30 September 30 2005 2004 ---------- ---------- Current assets Cash and cash equivalents $ 351,578 $ 254,908 Accounts receivable 732,670 309,276 Inventory 867,300 369,813 Other current assets 114,446 16,656 ---------- ---------- Total current assets 2,065,994 950,653 Property, Plant and Equipment, net 769,414 419,718 Other Assets Deferred financing costs 14,988 3,321 Intangibles 78,414 0 ---------- ---------- Total Other Assets 93,402 3,321 ---------- ---------- Total Assets $2,928,810 $1,373,692 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Note payable to bank - Line of credit $250,000 $ 0 Current portion - long-term debt 186,881 120,000 Accounts payable 333,042 184,214 Accrued expenses 208,876 114,959 ---------- ---------- Total current liabilities 978,799 419,173 Long-term Debt, net 637,467 488,889 Stockholders' Equity Common Stock, $.0005 par value, 25,000,000 shares authorized, 4,559,058 and 4,050,180 shares issued, 3,748,898 and 3,240,020 shares outstanding 2,277 2,025 Preferred Stock, $.001 par value per share, 10,000,000 700 0 Shares authorized, Series A 10% cumulative, convertible 700,000 shares authorized, issued and outstanding Additional paid in capital 2,032,721 1,239,736 Retained earnings 263,188 210,211 ---------- ---------- 2,298,886 1,451,972 Less 810,160 shares in treasury - at cost (986,342) (986,342) ---------- ---------- Total stockholders' equity 1,312,544 465,630 ---------- ---------- Total Liabilities and Stockholders' Equity $2,928,810 $1,373,692 ========== ==========
3 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Nine Months Ended June 30 June 30 2005 2004 2005 2004 ---------- --------- ---------- ---------- Sales $1,619,128 $ 505,504 $3,497,340 $1,722,467 Cost of Sales 1,103,318 417,299 2,500,119 1,337,204 ---------- --------- ---------- ---------- Gross profit 515,810 88,205 997,221 385,263 Selling, general and administrative 434,966 173,740 877,540 528,243 ---------- --------- ---------- ---------- Income (Loss) from Operations 80,844 ( 85,535) 119,681 (142,980) Other income (expense) Interest expense - net (20,610) ( 12,391) (39,572) (27,851) ---------- --------- ---------- ---------- Income (Loss) before Income Taxes 60,234 (97,926) 80,109 (170,831) Income Tax 4,100 0 5,224 0 ---------- --------- ---------- ---------- Net income (loss) $56,134 ($97,926) 74,885 ($170,831) ========== ========= ========== ========== Net income (loss) per share Basic $0.01 ( $0.04) $0.02 ( $0.08) Diluted $0.01 ( $0.04) $0.02 ( $0.08) Weighted average shares outstanding 3,748,313 2,239,412 3,552,359 2,238,542
4 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended June 30 2005 2004 ---------- ----------- Cash flows from operating activities: Net income (loss) $ 74,885 ($ 170,831) Adjustments to reconcile net income (loss) to net cash provided by (used in)operating activities: Depreciation 126,610 118,125 Amortization expense 5,606 2,566 Allowance for doubtful accounts (10,547) -0- (Increase) decrease in: Accounts receivable (103,043) ( 1,418) Inventories (68,616) 59,922 Prepaid expenses and other current assets (16,891) 16,417 Other assets 3,925 Increase (decrease) in: Accounts payable 73,302 (15,776) Accrued expenses (32,705) 33,400 ---------- ----------- Net cash provided by (used in) operating activities 48,601 46,320 ---------- ----------- Cash flows from investing activities: Acquisition of property, plant and equipment (49,108) (5,838) Cash paid for acquisition of Optometrics LLC assets (700,000) (50,000) Cash for acquisition costs to date (67,976) -0- ---------- ----------- Net cash provided by (used in)investing activities (817,084) (55,838) ---------- ----------- Cash flows from financing activities: Issuance of common stock 35,538 390 Issuance of preferred stock 690,000 -0- Proceeds from short-term debt 102,143 -0- Proceeds from long-term debt 183,106 -0- Payments on long-term debt (106,451) (224,817) Deferred financing costs incurred (17,273) -0- Dividends paid (21,910) ---------- ----------- Net cash provided by (used in) financing activities 865,153 (224,427) ---------- ----------- Net increase(decrease) in cash 96,670 (233,945) Cash - beginning of period 254,908 323,321 ---------- ----------- Cash - end of period $ 351,578 $ 89,376 ========== ===========
Supplemental Disclosure of cash flow information: Non-cash investing and financing activities: Acquisition of Optometrics LLC Fair market value of current assets acquired $ 918,067 Property, plant and equipment 410,575 Intangibles 78,414 Fair market value of liabilities assumed (529,110) Acquisition costs incurred (109,546) Issuance of 300,000 common stock shares to sellers (68,400) ---------- Net Cash paid for Optometrics LLC $ 700,000 ---------- 5 Supplemental Disclosures of Cash Flow Information (continued): The Company issued 700,000 shares of preferred stock, valued at $1.00 per share, and received cash of $700,000. The Company incurred stock issuance costs of $10,000 for net proceeds of $690,000, of which $600,000 was used to fund the acquisition of Optometrics, LLC. In connection with the acquisition of Optometrics, LLC, the Company also obtained total debt proceeds of $550,000, of which $100,000 funded the balance of the cash payment to the sellers, $67,976 funded the acquisition costs, $264,751 paid off the debt of Optometrics, LLC, $17,273 paid the deferred financing fees, and $100,000 was used for general working capital purposes. DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Basis of Presentation The consolidated balance sheet as of September 30, 2004 was audited and appears in the Form 10-KSB previously filed by the Company. The consolidated balance sheet as of June 30, 2005 and the consolidated statements of operations for the three months and nine months ended June 30, 2005 and 2004, the consolidated statements of cash flows for the nine months ended June 30, 2005 and 2004,and the related information contained in these notes have been prepared by management without audit. In the opinion of management, all adjustments (which include only normal recurring items) necessary to present fairly the financial position, results of operations and cash flows in conformity with generally accepted accounting principles as of June 30, 2005 and for all periods presented have been made. Interim operating results are not necessarily indicative of operating results for a full year. On March 8, 2005, Dynasil Corporation of America acquired the operating assets and assumed certain liabilities of Optometrics LLC, a worldwide supplier of optical components. The assets acquired from Optometrics LLC are operated under the Optometrics Corporation name. The financial statements in this report include the Optometrics Corporation results of operations from March 9, 2005 through June 30, 2005. Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's September 30, 2004 Annual Report on Form 10-KSB previously filed by the Company with the Securities and Exchange Commission. Note 2 - Business Acquisition On March 8, 2005, the Company, through its newly formed wholly owned subsidiary, Optometrics Corporation, completed its acquisition of substantially all of the assets of Optometrics, LLC, a worldwide supplier of optical components for a total purchase price of $877,946. Cash of $700,000 was paid by the Company and 300,000 shares of the Company's common stock were issued to the former owners of Optometrics, LLC, valued at $0.23 per share, or $68,400. Acquisition costs of $109,546 were incurred. The business acquisition was recorded under the purchase method of accounting which requires that the total consideration be allocated to the assets acquired and liabilities assumed based on their fair values. 6 The fair value of tangible and intangible assets acquired and liabilities assumed were established based on the unaudited March 8, 2005 balance sheet of Optometrics, LLC, as well as certain assumptions made regarding fair values. The excess of the purchase price over the fair value of the net tangible assets acquired of $78,414 was allocated to intangibles, specifically to Acquired Customer Base. The results of operations of Optometrics Corporation have been included in the consolidated financial statements from March 9, 2005, the effective date of acquisition. The allocation of purchase price is summarized below: Cash and cash equivalents $ 50,585 Accounts receivable 310,461 Inventories 428,871 Prepaid expenses and other current assets 128,150 Property and equipment 410,575 Intangibles- Acquired Customer Base ( 78,414) Current liabilities assumed (242,449) Long-term debt liabilities assumed (286,661) --------- Total purchase price $877,946 The following unaudited pro forma results of operations assume that Optometrics Corporation had been acquired at the beginning of fiscal year 2005. Nine Months Ended Ended June 30, 2005 Sales $4,840,187 Net income $149,894 Net income per share $.04 Weighted average shares 3,727,359 Note 3 - Debt On March 8, 2005, the Company entered into loan agreements permitting borrowings up to a total of $700,000 with Citizens Bank of Massachusetts ("Citizens Bank") in connection with the acquisition of Optometrics, LLC of which the initial borrowing was $550,000. The terms of the Loan Agreements provide the Company with a $300,000 term loan (the "Term Loan") and a $400,000 revolving credit facility (the "Line of Credit"). The proceeds have been used to payoff the debt of the former Optometrics LLC, to fund the acquisition, and for general working capital purposes. Borrowings under the Line of Credit bear interest at a variable rate equal to Citizens Bank's prime rate plus 0.5%. Initial borrowing on the Line of Credit was $250,000. Outstanding borrowings under the Term Loan require monthly payments of $5,834.78 over a five year term which started March 9, 2005 and ends in March 2011 at a fixed interest rate of 6.25%. As part of the credit agreement, the Company is required to comply with certain financial covenants measured annually regarding the liabilities to equity ratio and debt service coverage ratio for Optometrics Corporation. The performance of these obligations is secured by the assets of Optometrics Corporation with a corporate guarantee by the Company and a second lien on the Company's New Jersey assets other than real estate. Note 4 - Convertible Preferred Stock On March 8, 2005, the Company completed a private placement of 700,000 shares of Series A 10% Cumulative Convertible preferred stock for cash proceeds of $700,000. The stock was sold at a price of $1.00 per share. Total expenses for the stock placement were $10,000. Each share of preferred stock carries a 10% per annum cumulative dividend payable quarterly and is convertible to 2.2222 shares of common stock at any time by holders, subject to adjustment for certain subsequent sales of common stock or securities convertible into or exchangeable for common stock, and is callable starting March 9, 2007 by the Company at a redemption price of $1.00 per share. Proceeds from the stock sale were used to acquire the assets of Optometrics LLC and for working capital. 7 Note 5 - Inventories Inventories are stated at the lower of average cost or market. Cost is determined using the first-in, first-out (FIFO) method. Inventories consist primarily of raw materials, work-in- process and finished goods. The Company evaluates inventory levels and expected usage on a periodic basis and records adjustments for impairments as required. Inventories consisted of the following: June 30, 2005 September 30, 2004 ----------------- ------------------ Raw Materials $268,625 $148,278 Work-in-Process 334,888 114,170 Finished Goods 263,787 107,365 ------- ------- $867,300 $369,813 ======= ======= Note 6 - Net Income Per Share Basic net income per share is computed using the weighted average number of common shares outstanding. The dilutive effects of potential common shares outstanding are included in diluted net earnings per share. For periods with a net loss, diluted net earnings per share exclude the impact of potential common shares since they would have resulted in an antidilutive effect. Note 7 - Stock Based Compensation The Company has adopted the disclosure provisions of SFAS No. 148 and continues to account for stock-based compensation using the intrinsic value method. Accordingly, no compensation cost has been recognized in the financial statements for stock options issued to employees since the options were granted at the most recent market price or higher on the date of grant. Stock options granted to consultants and other non-employees are reported at fair value in accordance with SFAS No. 123. The pro forma disclosures of net loss and net loss per common share required by SFAS No. 123 are shown below. Nine months ended June 30, 2005 June 30, 2004 ----------- ------------- Net income (loss), as reported $74,885 ($170,831) Add: Stock-based employee compensation expense included in reported net income -0- -0- Less: Total stock-based employee compensation expense determined under fair value based method for all options (22,365) -0- ----------- ------------- Pro forma net profit (loss) $ 52,520 ( $170,831) =========== =========== Actual net profit (loss) per common share $ 0.02 ($0.08) Pro forma net profit (loss) per common share $ 0.01 ($0.08) 8 During the nine months ended June 30, 2005, 436,459 stock options were granted at prices ranging from $0.40 to $0.65 per share and no options were exercised. During the nine months ended June 30, 2004, no stock options were granted or exercised. The Company cancelled 45,000 and 132,000 options during the nine months ended June 30, 2005 and 2004, respectively. Compensation expenses relating to non-employee stock options granted during the nine months ended June 30, 2005 and 2004 were $-0-. During the nine months ended June 30, 2005, The Company issued 158,360 shares of common stock valued at $0.14 to $0.66 per share to the Board of Directors in satisfaction of accrued and 2005 directors' fees totaling $28,717. ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Overview This is the first full quarter of results after the combination of Optometrics with Dynasil. On March 8, 2005, Dynasil Corporation of America acquired the operating assets and assumed certain liabilities of Optometrics LLC, a worldwide supplier of optical components including diffraction gratings, lenses, thin film filters, laser optics, monochromators, and specialized optical systems. The assets acquired from Optometrics LLC are being operated under the Optometrics Corporation ("Optometrics")name. The financial statements in this report include the Optometrics results of operations for the period from March 9, 2005 through June 30, 2005. The results from time periods previous to March 9, 2005 do not include Optometrics results. Integration of Optometrics with Dynasil is going very well and Optometrics is having a major positive impact on the Company. Revenues for the 3rd quarter ended June 30, 2005 were $1,619,128, an increase of 220% over revenues of $505,504 for the quarter ended June 30, 2004. Revenues for the nine months ended June 30, 2005 were $3,497,340, an increase of 103% over revenues of $1,722,467 for the nine months ended June 30, 2004. The net profit for the quarter ended June 30, 2005 was $56,134, or $0.01 per share, compared with a net loss of $97,926, or a negative $.04 per share, for the quarter ended June 30, 2004. The net profit for the nine months ended June 30, 2005 was $74,885, or $0.02 per share, compared with a net loss of $170,831, or a loss of $0.08 per share for the nine months ended June 30, 2004. The Company continues to focus on management's strategy of profitable growth from its optical components business and by pursuing acquisitions and strategic alliances. Results of Operations Revenues for the three months ended June 30, 2005 were $1,619,128, an increase of 220% over revenues of $505,504 for the three months ended June 30, 2004. Revenues for the nine- months ended June 30, 2005 were $3,497,340 an increase of 103% over revenues of $1,722,467 for the nine-months ended June 30, 2004. The addition of Optometrics more than doubled the Company's revenue for the quarter ending June 30, 2005. Excluding Optometrics results, revenues for the Company's historical New Jersey operations were up 62% for the quarter ended June 30, 2005 versus the same quarter in 2004. Management believes that the New Jersey revenue improvement comes from improved economic conditions in the Company's markets combined with aggressive pricing to win several high volume jobs and active pursuit of new business. Cost of sales for the three months ended June 30, 2005 was $1,103,318 or 68.1% of sales, a decrease of 14.5 percentage points from the three months ended June 30, 2004 of $417,299, or 82.6% of sales. Cost of sales for the nine-months ended June 30, 2005 was $2,500,119, or 71.5% of sales, a decrease of 6.1 percentage points from the nine-months ended June 30, 2004 of $1,337,204 or 77.6% of sales. The significant decrease in cost of sales as a percentage of sales resulted from the higher margin products coming from Optometrics as well as improved sales volume for the Company's New Jersey operations. 9 Gross profit for the three months ended June 30, 2005 was $515,810, or 31.9% of sales, an increase of $427,605 over the three months ended June 30, 2004 of $88,205, or 17.4% of sales. Gross profit for the nine months ended June 30, 2005 was $997,221, or 28.5% of sales, an increase of $611,958 over the nine months ended June 30, 2004 of $385,263, or 22.4% of sales. Selling, general and administrative ("SG&A") expenses for the three months ended June 30, 2005 were $434,966 or 26.8% of sales, a decrease of 7.6 percentage points over the three months ended June 30, 2004 of $173,740, or 34.4% of sales. SG&A expenses for the nine months ended June 30, 2005 were $877,540, or 25.1% of sales, a decrease of 5.6 percentage points over the nine months ended June 30, 2004 of $528,243, or 30.6% of sales. The increase in SG&A dollars resulted primarily from the addition of Optometrics Corporation. SG&A costs as a percentage of sales decreased significantly with the addition of Optometrics and significantly higher volumes for New Jersey operations. The combination of Dynasil and Optometrics selling efforts is expected to further improve the sales and marketing efficiency for both companies. Mr. Craig T. Dunham joined The Company to replace Mr. John Kane as President and CEO effective October 1, 2004. Mr. Kane left the Company in early December and the management transition added costs estimated at $32,400 for the nine month period. Mr. Francis Ciancarelli replaced Mr. Paul Roehrenbeck as Vice President of Sales and Marketing late in the second fiscal quarter and the transition added approximately $29,000 of extra cost. Mr. Ciancarelli joined the Company with 17 years of sales and marketing leadership experience from Precision Electronic Glass which serves a similar customer base. Net interest expense for the three months ended June 30, 2005 was $20,610, an increase of $8,219 over the three months ended June 30, 2004 of $12,391. Interest expense for the nine months ended June 30, 2005 was $39,572, an increase of $11,721 over the nine months ended June 30, 2004 of $27,851. The increase in interest expense is primarily related to the additional interest payments resulting from the indebtedness incurred in connection with the Optometrics acquisition and the higher prime rate which impacts the Company's variable interest rate payments. Net income for the three months ended June 30, 2005 was $56,134, or $.01 in basic earnings per share, an increase of $154,060 over the net loss for the three months ended June 30, 2004 of ($97,926), or $.04 in basic loss per share. Net income for the nine months ended June 30, 2005 was $74,885, or $.02 in basic earnings per share, an increase of $245,716 over the nine months ended June 30, 2004 of net loss of $170,831, or $.08 in basic loss per share. Optometrics contributed significant additional profitability to the Company. Management is also pleased to complete a third consecutive profitable quarter for the Dynasil, New Jersey Operations (excluding Optometrics) after several challenging years. The Company had a $4,100 provision for Massachusetts income taxes for the quarter ended June 30, 2005 and zero tax provision for the quarter ended June 30, 2004. For the nine months ended June 30, 2005, the Company had a $5,224 provision for Massachusetts income taxes and zero tax provision for the nine months ending June 30, 2004. As of September 30, 2004, the Company had approximately $1,200,000 of net operating loss carry forwards to offset future income for federal tax purposes expiring in various years through 2020. In addition, the Company has approximately $620,000 of net operating loss carryforwards to offset certain future New Jersey taxable income, expiring in various years through 2012. 10 Liquidity and Capital Resources Cash increased by $96,670 for the nine months ended June 30, 2005. The primary sources of cash were cash from operations of $48,601, the net proceeds from the preferred stock issuance of $690,000 plus new bank debt financing obtained in connection with the Optometrics acquisition. The primary use of cash was for the Optometrics acquisition. On March 8, 2005, the Company entered into two loan agreements with Citizens Bank which were completed as part of the Optometrics acquisition. Both loans are secured by the assets of Optometrics Corporation and guaranteed by the Company, which guaranty is itself secured by a second lien on the Company's assets excluding real estate. The financing included a $300,000 Term Loan for five years at a 6.25% fixed interest rate. A Line of Credit with maximum borrowing of $400,000 was completed with initial borrowing of $250,000 at Citizens Bank's prime rate plus 0.5%. Increased revenues for New Jersey operations have increased working capital usage for accounts receivables and inventory. In addition, the Company had capital expenditures of $49,108, repaid long term debt of $106,451, and had dividends of $21,910 on Preferred Stock. The Company believes that its current cash and cash equivalent balances, along with the net cash generated by operations, are sufficient to meet its anticipated cash needs for working capital for at least the next 12 months. There are currently no plans for any major capital expenditures in the next six to nine months. Any major business expansion or acquisition likely will require the Company to seek additional debt or equity financing. Optometrics Integration Management is pleased with progress of Optometrics' integration since the acquisition of Optometrics LLC assets was closed on March 8, 2005. As planned, Ms. Laura Lunardo became Chief Financial Officer of the Company and Chief Operating Officer of Optometrics Corporation effective March 9, 2005. Mr. Dunham typically travels to Optometrics bi-monthly to lead the integration process. Our primary focus areas have been coordination of sales and marketing programs as well as manufacturing process improvement assistance. By working together, we have been able to use the contacts of one business to get access for the other business to key customer decision makers. Ms. Lunardo has reorganized Optometrics as well as improving the manufacturing layout for greater efficiencies. Mr. Dunham has been assisting Optometrics with project management and process improvement using his Six Sigma Green Belt and process improvement experience. Critical Accounting Policies and Estimates There have been no material changes in our critical accounting policies or critical accounting estimates since September 30, 2004, nor have we adopted an accounting policy that has or will have a material impact on our consolidated financial statements. For further discussion of our accounting policies see Footnote 1 " Summary of Significant Accounting Policies" in this Quarterly Report on Form 10-QSB and the Notes to Consolidated Financial Statements in our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2004. 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: 11 Revenue Recognition Revenue from sales of products is recognized at the time title and the risks and rewards of ownership pass. This is when the products are shipped per customers' instructions, the sales price is fixed and determinable, and collections are reasonably assured. Valuation of Long-Lived Assets We assess the recoverability of long-lived assets whenever we determine that events or changes in circumstances indicate that their carrying amount may not be recoverable. Our assessment is primarily based upon our estimate of future cash flows associated with these assets. These valuations contain certain assumptions concerning estimated future revenues and future expenses. We have determined that there is no indication of impairment of any of our assets. However, should our operating results deteriorate; we may determine that some portion of our long-lived assets are impaired. Such determination could result in non-cash charges to income that could materially affect our financial position or results of operations for that period. Estimating Allowances for Doubtful Accounts Receivable We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer's current credit worthiness, as determined by our review of their current credit information. We continuously monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. While such credit losses have historically been minimal, within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of any of our significant customers could have a material adverse effect on the collectibility of our accounts receivable and our future operating results. Valuation of Deferred Tax Assets We regularly evaluate our ability to recover the reported amount of our deferred income taxes considering several factors, including our estimate of the likelihood of The Company generating sufficient taxable income in future years during the period over which temporary differences reverse. The Company's deferred tax assets are currently fully reserved. Recent Accounting Pronouncements There were no accounting pronouncements issued since the date of the Company's most recent Form 10-QSB filing. Forward-Looking Statements The statements contained in this Quarterly Report on Form 10-QSB which are not historical facts, including, but not limited to, certain statements found under the captions "Results of Operations", "Liquidity and Capital Resources" and "Optometrics Acquisition" above, are forward-looking statements that involve a number of risks and uncertainties. The actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are the risks and uncertainties discussed in this Quarterly Report on Form 10-QSB, including, without limitation, the portions of such reports under the captions referenced above, and the uncertainties set forth from time to time described in this and the Company's other filings with the Securities and 12 Exchange Commission, and other public statements. Such risks and uncertainties include, without limitation, seasonality, interest in the Company's products, customer acceptance of new products, general economic conditions, market trends, costs and availability of raw materials and management information systems, competition, litigation, need for additional financing, the effect of governmental regulation and other matters. The Company disclaims any intention or obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. ITEM 3 CONTROLS AND PROCEDURES Based on their most recent informal evaluation, which was completed during the period covered within this Form 10-QSB, the Company's President/Chief Executive Officer and Chief Financial Officer believe that the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-14 and 15d-14) are effective. There were not any significant changes in the Company's internal controls or no other facts that could significantly affect these controls subsequent to the date of this evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. The Company is presently unable to provide segregation of duties within itself as a means of internal control. As a result, the Company is presently relying on overriding management reviews, and assistance from its board of directors and Audit Committee in providing short-term review procedures until such time as additional funding is provided to hire additional executives to segregate duties within the Company. PART II OTHER INFORMATION - ------------------ ITEM 1 LEGAL PROCEEDINGS NONE ITEM 2 CHANGES IN SECURITIES NONE ITEM 3 DEFAULTS ON SENIOR SECURITIES NONE ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE ITEM 5 OTHER INFORMATION The information presented in Items 1 and 2 of Part I of this Report is incorporated herein by reference. On July 27, 2005, the Company issued a press release announcing its financial results for its third quarter ending June 30, 2005. A copy of this press release is attached as Exhibit 99 to this Report on Form 10-QSB. This information is being furnished pursuant to Item 5 of Part II of Form 10-QSB and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that 13 Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits and index of Exhibits 31.1(a) and (b) Rule 13a-14(a)/15d-14(a) Certifications 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 July 27, 2005, issued by Dynasil Corporation of America announcing its financial results for the third quarter ending June 30, 2005. (b) Reports on Form 8-K - On 5/24/05, an amendment of the current report dated 3/14/05 for Items 2 and 3 for the completion of the Optometrics acquisition and sale of Preferred Stock. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DYNASIL CORPORATION OF AMERICA BY: /s/ Craig T. Dunham DATED: July 27, 2005 --------------------------------- -------------------- Craig T. Dunham, President and CEO /s/ Laura Lunardo DATED: July 27, 2005 ----------------------------- -------------------- Laura Lunardo Chief Financial Officer 14 EX-31 2 dynex31a.txt CERTIFICATION EXHIBIT 31.1 (a) CERTIFICATION PURSUANT TO RULE 13a-14(a)/15D-14(a) and SECTION 302 OF THE SARBANES-OXLEY ACT I, Craig Dunham, the President and Chief Executive Officer of Dynasil Corporation of America, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Dynasil Corporation of America; 2. Based on my knowledge, this quarterly 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 small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s)and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the small business issuer 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 small business issuer, 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) Evaluated the effectiveness of the small business issuer'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 c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and -1- 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer'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 small business issuer'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 small business issuer's internal control over financial reporting. Date: July 27, 2005 /s/ Craig T Dunham ---------------- --------------------------- Craig T Dunham President and Chief Executive Officer -2- EX-31 3 dynex31b.txt CERTIFICATION EXHIBIT 31.1 (b) CERTIFICATION PURSUANT TO RULE 13a-14(a)/15D-14(a) and SECTION 302 OF THE SARBANES-OXLEY ACT I, Laura Lunardo, Chief Financial Officer of Dynasil Corporation of America, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Dynasil Corporation of America; 2. Based on my knowledge, this quarterly 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 small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s)and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the small business issuer 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 small business issuer, 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) Evaluated the effectiveness of the small business issuer'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 c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and -1- 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer'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 small business issuer'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 small business issuer's internal control over financial reporting. Date: July 27, 2005 /s/ Laura Lunardo ----------------------------- Laura Lunardo Chief Financial Officer -2- EX-32 4 dynex32-1.txt CERTIFICATION 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 10QSB for the period ended June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Craig T Dunham, President and Chief Executive Officer of the Company, and Laura Lunardo, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (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 result of operations of The Company. /s/ Craig T Dunham ------------------- Craig T Dunham President and Chief Executive Officer /s/ Laura Lunardo ------------------- Laura Lunardo Chief Financial Officer July 27, 2005 EX-99 5 dyn063005ex99-1.txt PRESS RELEASE Contact: Craig Dunham Dynasil Corporation of America Phone: (856) 767-4600 Email: cdunham@Dynasil.com Dynasil Announces Third Quarter Fiscal Year 2005 Results WEST BERLIN, N.J.-July 28, 2005--Dynasil Corporation of America (OTCBB: DYSL), fabricator of optical blanks from synthetic fused silica, fused quartz, and other optical materials for the semi- conductor, laser, space and optical components industries, and through its subsidiary, Optometrics Corporation, a worldwide supplier of optical components including diffraction gratings, thin film filters, laser optics, monochromators, and specialized optical systems, announced results of operations for the 3rd quarter ended June 30, 2005. This is the first full quarter of results after the combination of Optometrics with Dynasil. As previously announced, the acquisition of the assets of Optometrics LLC was completed on March 8, 2005. The results for the quarter and 9 months ended June 30, 2005 include 113 days of Optometrics' results of operations from March 9, 2005 through June 30, 2005. For calendar year 2004, Optometrics LLC had revenues of $3.06 Million, EBITDA of $380,000, and net income before taxes of $258,000. Revenues for the quarter ended June 30, 2005 were $1,619,128, an increase of 220% over revenues of $505,504 for the quarter ended June 30, 2004. The net profit for the quarter ended June 30, 2005 was $56,134, or a positive $.01 per share, compared with a net loss of $97,926, or a negative $.04 per share, for the quarter ended June 30, 2004. Excluding the impact of Optometrics, Dynasil's long-standing optical materials business delivered a sales increase of 62% and a third consecutive profitable quarter. Revenues for the 9 months ended June 30, 2005 were $3,497,340, an increase of 103% over revenues of $1,722,467 for the 9 months ended June 30, 2004. The net profit for the 9 months ended June 30, 2005 was $74,885, or a positive $.02 per share, compared with a net loss of $170,831, or a negative $0.08 per share, for the 9 months ended June 30, 2004. On a pro forma basis, net income including Optometrics for the entire 9 months ended June 30, 2005 was $149,894, or $.04 per share. "The completion of the Optometrics acquisition and improvements in our long-standing optical materials business have added significant profitability to Dynasil," said Craig T. Dunham, President and CEO. "The integration of Optometrics is going extremely well and we are starting to see benefits in sales, marketing, and manufacturing. We continue to focus on our strategy of profitable growth from our optical components businesses and by pursuing acquisitions and strategic alliances" added Mr. Dunham. About Dynasil: Founded in 1960, Dynasil Corporation of America is a fabricator of optical blanks from synthetic fused silica, fused quartz and other optical materials as well as optical components and specialized optical systems. This news release may contain forward-looking statements usually containing the words "believe," "expect," or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. Future results of operations, projections, and expectations, which may relate to this release, involve certain risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, the factors detailed in the Company's Annual Report or Form 10-KSB and in the Company's other Securities and Exchange Commission filings, continuation of existing market conditions and demand for our products. Dynasil Corporation of America and Subsidiaries Consolidated Balance Sheets (Unaudited) ASSETS June 30 September 30 2005 2004 ---------- ---------- Current assets Cash and cash equivalents $351,578 $254,908 Accounts receivable 732,670 309,276 Inventories 867,300 369,813 Prepaid expenses and other 114,446 16,656 current assets ---------- ---------- Total current assets 2,065,994 950,653 Property, plant and equipment, net 769,414 419,718 Other assets 93,402 3,321 ---------- ---------- Total Assets $2,928,810 $1,373,692 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Note payable to bank- Line of $250,000 $0 credit Current portion of long-term 186,881 120,000 debt Accounts payable 333,042 184,214 Accrued expenses and other 208,876 114,959 current liabilities ---------- ---------- Total current liabilities 978,799 419,173 Long-term debt, net 637,467 488,889 Stockholders' Equity 1,312,544 465,630 ---------- ---------- Total Liabilities and $2,928,810 $1,373,692 Stockholders' Equity ========== ========== DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Three Months Ended Nine Months Ended June 30 June 30 2005 2004 2005 2004 Sales $1,619,128 $505,504 $3,497,340 $1,722,467 Cost of Sales 1,103,318 417,299 2,500,119 1,337,204 --------- -------- ---------- ---------- Gross Profit 515,810 88,205 997,221 385,263 Selling, general and 434,966 173,740 877,540 528,243 administrative --------- -------- ---------- ---------- Income (Loss) from Operations 80,844 ( 85,535) 119,681 (142,980) Interest expense - net (20,610) ( 12,391) (39,572) (27,851) --------- -------- ---------- ---------- Income (Loss) before Income 60,234 (97,926) 80,109 (170,831) Taxes Income Taxes 4,100 0 5,224 0 --------- -------- ---------- ---------- Net Income (Loss) $ 56,134 ($ 97,926) $ 74,885 ($ 170,831) --------- -------- ---------- ---------- Net Income (Loss) per share Basic $0.01 ( $0.04) $0.02 ($0.08) Diluted $0.01 ( $0.04) $0.02 ($0.08) -----END PRIVACY-ENHANCED MESSAGE-----