-----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, BC5z8zQ7a1o4RVy0o4OMdq+0Jo2X4WdTR854aYxHserOVSFiIFENejjW/HPQlczN DzqrQZpuGH/RMqGT59U3uw== 0001260415-06-000019.txt : 20060512 0001260415-06-000019.hdr.sgml : 20060512 20060511183530 ACCESSION NUMBER: 0001260415-06-000019 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060512 DATE AS OF CHANGE: 20060511 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: 06831718 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 dyn10qsb-033106.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 March 31, 2006 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 3,848,145 shares of common stock, par value $.0005 per share, outstanding as of May 4, 2006. 1 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 March 31, 2006 AND SEPTEMBER 30, 2005 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2006 AND 2005 4 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 2006 AND 2005 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 7 ITEM 3. CONTROLS AND PROCEDURES 11 PART II. OTHER INFORMATION 11 ITEM 1. LEGAL PROCEEDINGS 11 ITEM 2. CHANGES IN SECURITIES 11 ITEM 3. DEFAULTS ON SENIOR SECURITIES 11 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11 ITEM 5. OTHER INFORMATION 12 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 12 SIGNATURES 12 2 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS March 31 September 30 2006 2005 (Unaudited) ---------- ---------- Current assets Cash and cash equivalents $ 320,108 $ 308,210 Accounts receivable 829,803 877,375 Inventory 1,008,483 842,149 Deferred tax asset 24,250 24,250 Prepaid expenses and other assets 115,070 100,298 ---------- ---------- Total current assets 2,297,714 2,152,282 Property, Plant and Equipment, net 693,509 744,764 Other Assets 80,356 87,735 ---------- ---------- Total Assets $3,071,579 $2,984,781 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Note payable to bank- Line of credit $215,000 $250,000 Current portion - long-term debt 70,051 184,403 Accounts payable 419,988 322,094 Accrued expenses 217,373 232,476 ---------- ---------- Total current liabilities 922,412 988,973 Long-term Debt, net 632,496 592,712 Stockholders' Equity Common Stock, $.0005 par value, 25,000,000 shares authorized, 4,658,127 and 4,566,946 shares issued, 3,847,967 and 3,756,786 shares outstanding 2,329 2,283 Preferred Stock, $.001 par value per share, 10,000,000 shares authorized, Series A 10% cumulative,convertible 700,000 shares authorized, issued and outstanding 700 700 Additional paid in capital 2,083,858 2,042,635 Retained earnings 416,126 343,820 ---------- ---------- 2,503,014 2,389,438 Less 810,160 shares in treasury - at cost (986,342) (986,342) ---------- ---------- Total stockholders' equity 1,516,671 1,403,096 ---------- ---------- Total Liabilities and Stockholders' Equity $3,071,579 $2,984,781 ========== ==========
3 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Six Months Ended March 31 March 31 2006 2005 2006 2005 ---------- --------- ---------- --------- Sales $1,665,496 $1,097,026 $3,213,536 $1,878,212 Cost of Sales 1,072,295 816,113 2,142,192 1,396,799 ---------- --------- ---------- --------- Gross profit 593,201 280,913 1,071,344 481,413 Selling, general and administrative 486,640 256,977 913,298 443,698 ---------- --------- ---------- --------- Income from Operations 106,561 23,936 158,046 37,715 Interest expense net (18,709) (11,259) (39,244) (18,962) ---------- --------- ---------- --------- Income before Income Taxes 87,852 12,677 118,802 18,753 Income Tax 5,971 -0- 11,496 -0- ---------- --------- ---------- --------- Net income $ 81,881 $ 12,677 $ 107,306 $ 18,753 ========== ========= ========== ========= Net income per share Basic $0.02 $0.00 $0.02 $0.01 Diluted $0.01 $0.00 $0.01 $0.00 Weighted average shares outstanding 3,846,542 3,522,410 3,807,660 3,454,382
4 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six months Ended March 31, 2006 2006 2005 ---------- ----------- Cash flows from operating activities: Net income $ 107,306 $ 18,753 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 102,000 74,215 Amortization expense 13,602 1,999 Gain on disposal of assets (2,000) -0- Allowance for doubtful accounts 10,998 4,496 (Increase) decrease in: Accounts receivable 36,576 (155,451) Inventories (166,334) (62,448) Prepaid expenses and other current assets (14,772) (9,595) Increase (decrease) in: Accounts payable 97,894 52,632 Accrued expenses (15,105) 89,678 --------- ---------- Net cash provided by (used in) operating activities 170,165 14,279 --------- ---------- Cash flows from investing activities: Acquisition of property, plant and equipment (56,968) (21,287) Proceeds from sale of assets 2,000 -0- Cash paid for acquisition of Optometrics LLC assets -0- (700,000) Cash for Optometrics acquisition costs -0- (67,976) --------- ---------- Net cash provided by (used in) investing activities (54,968) (789,263) --------- ---------- Cash flows from financing activities: Issuance of common stock 41,270 35,538 Issuance of preferred stock -0- 690,000 Payments on long-term debt (68,562) (60,599) Proceeds from refinanced long-term debt 457 -0- Proceeds from short-term debt - Optometrics Acquisition -0- 102,143 Proceeds from long-term debt Optometrics Acquisition -0- 183,106 Payments on short-term debt (41,464) -0- Preferred stock dividends paid (35,000) -0- Deferred financing costs incurred - Optometrics Acquisition -0- (17,273) --------- ---------- Net cash provided by (used in) financing activities (103,299) 932,915 --------- ---------- Net increase (decrease) in cash 11,898 157,931 Cash - beginning of period 308,210 254,908 --------- ---------- Cash - end of period $ 320,108 $ 412,839 ========= =========== Supplemental disclosure of cash flow information: Reconciliation of debt refinancing activities: Proceeds of new loans for New Jersey operations 449,346 -0- Repayment of old New Jersey term loan (448,889) -0- --------- ---------- Net proceeds of refinancing activity $ 457 $ -0-
5 DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Basis of Presentation The consolidated balance sheet as of September 30, 2005 was audited and appears in the Form 10-KSB previously filed by the Company. The consolidated balance sheet as of March 31, 2006 and the consolidated statements of operations and cash flows for the three months and six months ended March 31, 2006 and 2005, 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 March 31, 2006 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. Dynasil financial statements include the Optometrics Corporation results of operations since March 9, 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, 2005 Annual Report on Form 10-KSB previously filed by the Company with the Securities and Exchange Commission. Note 2 - 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: March 31, 2006 September 30, 2005 ----------------- ------------------ Raw Materials $395,511 $322,902 Work-in-Process 307,746 246,921 Finished Goods 305,226 272,326 ------- ------- $1,008,483 $842,149 ======= ======= Note 3 - 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. 6 Note 4 - 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. Six months ended March 31, 2006 March 31, 2005 ------------ ------------- Net income, as reported $ 107,306 $ 18,753 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 (4,636) (153) ------------ ------------- Pro forma net profit (loss) $ 102,670 $ 18,600 ============ ============= Actual net profit (loss) per common share $ 0.02 $ 0.01 Pro forma net profit (loss) per common share $ 0.02 $ 0.01 During the six months ended March 31, 2006, 130,000 stock options were granted at prices ranging from $0.85 to $1.50 per share and 80,000 options were exercised. The 80,000 options had an exercise price of $0.40 per share with $23,857 paid in cash and $8,143 relating to Mr. Dunham's 2005 fiscal year bonus. During the six months ended March 31, 2005, 433,459 options were granted at prices ranging from $0.40 to $0.60 and no options were exercised. The Company cancelled 275,000 and 45,000 options during the six months ended March 31, 2006 and 2005, respectively. Compensation expenses relating to non-employee stock options granted during the six months ended March 31, 2006 and 2005 were $-0-. During the six months ended March 31, 2006, the Company issued a total of 10,771 shares of common stock valued at $0.71 to $0.80 per share to a Director in satisfaction of accrued 2005 Directors Fees and as a signing bonus for the Vice President of Sales position for a combined expense of $9,000. During the six months ended March 31, 2005, the Company issued 158,360 shares of common stock valued at $0.14 to $0.45 per share to the Board of Directors in satisfaction of accrued and 2005 Directors' fee obligations totaling $25,217. ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Overview This is the fourth 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 7 being operated under the Optometrics Corporation ("Optometrics") name. The Dynasil financial statements include the Optometrics results of operations for the period from March 9, 2005 through March 31, 2006. The results from time periods previous to March 9, 2005 do not include Optometrics' results. Integration of Optometrics with Dynasil is essentially completed and Optometrics is having a major positive impact on the Company. Revenues for the 2nd quarter ended March 31, 2006 were $1,665,496, an increase of 51.8% over revenues of $1,097,026 for the quarter ended March 31, 2005. Revenues for the six months ended March 31, 2006 were $3,213,536, an increase of 71.1% over revenues of $1,878,212 for the six months ended March 31, 2005. The net profit for the quarter ended March 31, 2006 was $81,881, or $0.02 per share, compared with a net profit of $12,677, or $0.00 per share, for the quarter ended March 31, 2005. The addition of Optometrics for the full quarter was the primary driver for revenue and profitability increases from the quarter ended March 31, 2006. 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 March 31, 2006 were $1,665,496, an increase of 51.8% over revenues of $1,097,026 for the three months ended March 31, 2005. Revenues for the six months ended March 31, 2006 were $3,213,536, an increase of 71.1% over revenues of $1,878,212 for the six months ended March 31, 2005. The addition of Optometrics was the largest factor in the revenue increase. Cost of sales for the three months ended March 31, 2006 was $1,072,295 or 64.3% of sales, a decrease of 10.1 percentage points from the three months ended March 31, 2005 of $816,113, or 74.4% of sales. Cost of sales for the six months ended March 31, 2006 was $2,142,192 or 66.7% of sales a decrease of 7.7 percentage points from the six months ended March 31, 2005 of $1,396,799, or 74.4% of sales. The significant decrease in cost of sales as a percentage of sales resulted from the higher margin products sold by Optometrics. The company also continues to implement cost reductions such as significantly reducing insurance costs by proactively quoting the combined company insurance package. Gross profit for the three months ended March 31, 2006 was $593,201, or 35.6% of sales, an increase of $312,288 over the three months ended March 31, 2005 of $280,913, or 25.6% of sales. Gross profit for the six months ended March 31, 2006 was $1,071,344, or 33.3% of sales, an increase of $589,931 over the six months ended March 31, 2005 of $481,413, or 25.6% of sales. Selling, general and administrative ("SG&A") expenses for the three months ended March 31, 2006 were $486,640 or 29.2% of sales, an increase of 5.8 percentage points over the three months ended March 31, 2005 of $256,977, or 23.4% of sales. SG&A expenses for the six months ended March 31, 2006 were $913,298 or 28.4% of sales, an increase of 4.8 percentage points over the six months ended March 31, 2005 of $443,698, or 23.6% of sales. The increase in SG&A expenses and percentage resulted primarily from the impact of Optometrics Corporation SG&A expenses. Mr. Bruce Leonetti replaced Mr. Francis Ciancarelli as Vice President of Sales and Marketing in January 2006. Mr. Leonetti rejoined the Company with 16 years of previous Dynasil leadership experience. He held the same position when he left in 2002 and we are pleased to have him return with his strong industry contacts and knowledge of Dynasil. Net interest expense for the three months ended March 31, 2006 was $18,709, an increase of $7,450 over the three months ended March 31, 2005 of 8 $11,259. Net interest expense for the six months ended March 31, 2006 was $39,244, an increase of $20,282 over the six months ended March 31, 2005 of $18,962. 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 recent increases in the prime commercial rate of interest which adversely impacts the Company's variable interest rate payments. Previous loans relating to Dynasil's New Jersey operations were refinanced with a different lender on January 5, 2006. The refinancing reduced Dynasil's interest rate on its New Jersey-based borrowings to a fixed annual rate of 7.25% and also added a $200,000 line of credit. See the Company's 8-K filing dated 1/10/06 for additional details. Net income for the three months ended March 31, 2006 was $81,881, or $.02 in basic earnings per share, an increase of $69,204 over the net profit for the three months ended March 31, 2005 of $12,677, or $.00 in basic profit per share. Net income for the six months ended March 31, 2006 was $107,306, or $.02 in basic earnings per share, an increase of $88,553 over the net profit for the six months ended March 31, 2005 of $18,753, or $.01 in basic profit per share. Optometrics contributed significant additional profitability to the Company. The Company had a $5,971 provision for Massachusetts income taxes for the quarter ended March 31, 2006, $11,496 year to date, and no provision for taxes for the six months ended March 31, 2005. As of September 30, 2005, the Company had approximately $1,300,000 of net operating loss carry forwards to offset future income for federal tax purposes expiring in various years through 2021. In addition, the Company has approximately $760,000 of net operating loss carryforwards to offset certain future New Jersey taxable income, expiring in various years through 2013. Liquidity and Capital Resources Cash increased by $11,898 for the six months ended March 31, 2006. The primary sources of cash were cash from operations of $170,165 and issuance of common stock of $41,270. The primary uses of cash were acquisition of property, plant and equipment of $56,968, an inventory increase of $166,334, net repayments of debt of $109,569, and dividend payments of $35,000 on Preferred Stock. The increase in inventory was a result of purchasing fused silica raw material in advance of a significant price increase announced by the Company's primary supplier; inventory levels are expected to return to a more normal level during the third quarter. 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. Critical Accounting Policies and Estimates There have been no material changes in our critical accounting policies or critical accounting estimates since September 30, 2005, 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, 2005. 9 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. 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 and adversely 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. Based on the company's history of significant fluctuations in net earnings, the Company established a full valuation allowance as of September 30, 2004 and prior due to the uncertainty as to the realization of certain net operating loss carryforwards. With the asset acquisition of Optometrics LLC in March 2005, the Company now believes that some of these carryforwards will be realized, and has adjusted the valuation allowance accordingly as outlined in the Companies 10-KSB for the fiscal year ended September 30, 2005. Recent Accounting Pronouncements There were no accounting pronouncements issued since the date of the Company's most recent Form 10-KSB filing that would require disclosure in the current Form 10-QSB filing. Forward-Looking Statements The statements contained in this Quarterly Report on Form 10-QSB which 10 are not historical facts, including, but not limited to, certain statements found under the captions "Overview", "Results of Operations" and "Liquidity and Capital Resources" 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 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 nor 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 adequate 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 adequately 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 11 ITEM 5 OTHER INFORMATION The information presented in Items 1 and 2 of Part I of this Report is incorporated herein by reference. On May 10, 2006, the Company issued a press release announcing its financial results for its second quarter ending March 31, 2006. 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 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 May 10, 2006, issued by Dynasil Corporation of America announcing its financial results for the second quarter ending March 31, 2006. (b) Reports on Form 8-K - On 1/10/06, a current report for items 1 and 2 for the refinancing of New Jersey business loans with Susquehanna Patriot Bank. - On 1/19/06, a current report for items 1 and 5 for the employment agreement of the new Vice President- Sales and Marketing. 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: May 10, 2006 --------------------------------- -------------------- Craig T. Dunham, President and CEO /s/ Laura Lunardo DATED: May 10, 2006 ----------------------------- -------------------- Laura Lunardo Chief Financial Officer 12 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 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): -1- 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: May 10, 2006 /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 -1- 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 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: May 10, 2006 /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 March 31, 2006 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 May 10, 2006 EX-99 5 dyn0305qex99-1.txt PRESS RELEASE Contact: Craig Dunham Dynasil Corporation of America Phone: (856) 767-4600 Email: cdunham@Dynasil.com Dynasil Announces Second Quarter Fiscal Year 2006 Results WEST BERLIN, N.J.- May 10, 2006--Dynasil Corporation of America (OTCBB: DYSL.OB), 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 2nd quarter ended March 31, 2006. This is the fourth 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. Revenues for the quarter ended March 31, 2006 were $1,665,496, an increase of 52% over revenues of $1,097,026 for the quarter ended March 31, 2005. The net profit for the quarter ended March 31, 2006 was $81,881, or a positive $.02 per share, compared with a net profit of $12,677, or $.00 per share, for the quarter ended March 31, 2005. The addition of Optometrics for the full quarter was the largest driver for the revenue and profitability gains. Revenues for the 6 months ended March 31, 2006 were $3,213,536 an increase of 71% over revenues of $1,878,212 for the 6 months ended March 31, 2005. The net profit for the 6 months ended March 31, 2006 was $107,306, or $0.02 per share, compared with a net profit of $18,753, or $0.01 per share, for the 6 months ended March 31, 2005. "I am pleased with the strong results for the quarter and the significant profitability increase over our first quarter" said Craig T. Dunham, President and CEO. "The addition of Optometrics has had a major positive impact on Dynasil and we are implementing progressive cost reductions and process improvements which have increased profitability". "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) March 31 September 30 2006 2005 (Unaudited) ASSETS Current assets Cash and cash equivalents $320,108 $308,210 Accounts receivable 829,803 877,375 Inventories 1,008,483 842,149 Other current assets 139,320 124,548 --------- --------- Total current assets 2,297,714 2,152,282 Property, plant and equipment, net 693,509 744,764 Other assets 80,356 87,735 --------- --------- Total Assets $3,071,579 $2,984,781 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Note payable to bank-Line of credit $215,000 $250,000 Current portion of long-term debt 70,051 184,403 Accounts payable 419,988 322,094 Accrued expenses and other current liabilities 217,373 232,476 --------- --------- Total current liabilities 922,412 988,973 Long-term debt, net 632,496 592,712 Stockholders' Equity 1,516,671 1,403,096 --------- --------- Total Liabilities and $3,071,579 $2,984,781 Stockholders' Equity ========= ========= DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Three Months Ended Six Months Ended March 31 March 31 2006 2005 2006 2005 Sales $1,665,496 $1,097,026 $3,213,536 $1,878,212 Cost of Sales 1,072,295 816,113 2,142,192 1,396,799 ---------- --------- --------- --------- Gross Profit 593,201 280,913 1,071,345 481,413 Selling, general and 486,640 256,977 913,298 443,698 administrative ---------- --------- --------- --------- Income (Loss) from Operations 106,561 23,936 158,046 37,715 Interest expense - net (18,709) (11,259) (39,244) (18,962) ---------- --------- --------- --------- Income (Loss) before Income 87,852 12,677 118,802 18,753 Taxes Income Taxes 5,971 -0- 11,496 -0- ---------- --------- --------- --------- Net Income (Loss) $ 81,881 $ 12,677 $ 107,306 $ 18,753 ---------- --------- --------- --------- Net Income (Loss) per share Basic $0.02 $0.00 $0.02 $0.01 Diluted $0.01 $0.00 $0.01 $0.00 -----END PRIVACY-ENHANCED MESSAGE-----