-----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, Vr4OW4PZlUD4LSBBvys9xDiEIQnwtwbkP5YGKcNjecqOqvqP44Er3yyE/+ftzzCE Zxgq9viba+28HbjO1uHHDw== 0001260415-07-000006.txt : 20070214 0001260415-07-000006.hdr.sgml : 20070214 20070214113455 ACCESSION NUMBER: 0001260415-07-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070214 DATE AS OF CHANGE: 20070214 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: 07615844 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 dyn1206-10qsb.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 DECEMBER 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 4,557,483 shares of common stock, par value $.0005 per share, outstanding as of February 9, 2007. 1 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES INDEX PART 1. FINANCIAL INFORMATION PAGE ---- ITEM 1. FINANCIAL STATEMENTS DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES ----------------------------------------------- CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31,2006 AND SEPTEMBER 30, 2006 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31,2006 AND 2005 4 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 31, 2006 AND 2005 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 13 SIGNATURES 14 2 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS December 31 September 30 2006 2006 (Unaudited) ---------- ---------- Current assets Cash and cash equivalents $ 442,081 $ 352,139 Accounts receivable, net of allowance for doubtful accounts of $29,761 and $12,530 for December 31, 2006 and September 30, 2006, respectively 1,210,334 1,086,394 Inventory 1,479,335 1,131,648 Deferred tax asset 151,300 61,500 Prepaid expenses and other assets 141,998 128,957 ---------- ---------- Total current assets 3,425,048 2,760,638 Property, Plant and Equipment, net 2,380,440 626,790 Other Assets 91,761 78,812 ---------- ---------- Total Assets $5,897,249 $3,466,240 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Note payable to bank- Line of credit $297,766 $190,000 Current portion - long term debt 92,422 72,482 Accounts payable 718,347 390,110 Accrued expenses 435,800 368,977 ---------- ---------- Total current liabilities 1,544,335 1,021,569 Long-term Debt, net 1,618,297 593,889 Deferred Income Taxes 63,900 -0- Stockholders' Equity Common Stock, $.0005 par value, 25,000,000 shares authorized, 5,285,112 and 4,698,453 shares issued, 4,474,952 and 3,888,293 shares outstanding 2,643 2,350 Preferred Stock, $.001 par value, 10,000,000 Shares 1,410 700 authorized, 700,000 and 700,000 Series A shares and 710,000 and 0 shares Series B shares issued and outstanding for 2006 and 2005 respectively, 10% cumulative, convertible Additional paid in capital 2,931,379 2,100,098 Retained earnings 721,627 733,976 ---------- ---------- 3,657,059 2,837,124 Less 810,160 shares in treasury - at cost (986,342) (986,342) ---------- ---------- Total stockholders' equity 2,670,717 1,850,782 ---------- ---------- Total Liabilities and Stockholders' Equity $5,897,249 $3,466,240 ========== ==========
3 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended December 31 2006 2005 (Unaudited) (Unaudited) ---------- ---------- Sales $2,536,297 $1,548,040 Cost of Sales 1,883,862 1,069,896 ---------- ---------- Gross profit 652,435 478,144 Selling, general and administrative 605,466 426,659 ---------- ---------- Income from Operations 46,969 51,485 Interest expense - net (14,997) (20,535) ---------- ---------- Income before Income Taxes 31,972 30,950 Income Tax (9,070) (5,525) ---------- ---------- Net income $ 22,902 $ 25,425 ========== ========== Net income per share Basic $0.00 $0.00 Diluted $0.00 $0.00 Weighted average shares outstanding 4,255,041 3,768,777 4 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months Ended December 31, 2006 2005 ----------- ----------- Cash flows from operating activities: Net income $ 22,902 $ 25,425 Adjustments to reconcile net income to net cash provided by (used in)operating activities: Depreciation 75,363 51,000 Amortization expense 4,803 6,390 Gain on disposal of assets - (2,000) Allowance for doubtful accounts 17,231 (7,982) (Increase) decrease in: Accounts receivable 141,404 151,494 Inventories (272,476) (37,770) Prepaid expenses and other current assets 26,116 (43,227) Accounts payable and accrued expenses (140,074) (63,289) ----------- ----------- Net cash provided by (used in) operating activities (124,731) 80,041 ----------- ----------- Cash flows from investing activities: Acquisition of property, plant and equipment (40,293) (38,941) Proceeds from sale of assets -0- 2,000 Cash paid for acquisition of EMF (674,890) -0- ----------- ----------- Net cash used in investing activities (715,183) (36,941) ----------- ----------- Cash flows from financing activities: Issuance of common stock 132,285 34,140 Issuance of preferred stock 700,000 -0- Preferred stock dividends paid (17,500) (17,500) Proceeds from (payments on) long-term debt 220,396 (43,242) Payments on short-term debt (88,473) (38,099) Deferred financing costs incurred (16,852) -0- ----------- ----------- Net cash provided by (used in) financing activities 929,856 (64,701) ----------- ----------- Net increase (decrease) in cash 89,942 (21,601) Cash - beginning of period 352,139 308,210 ----------- ----------- Cash - end of period $ 442,081 $ 286,609 =========== ===========
Supplemental Disclosure of cash flow information: Non-cash investing and financing activities: Acquisition of EMF Corporation Fair market value of current assets acquired $ 468,300 Property, plant and equipment 1,789,621 Fair market value of liabilities assumed (1,063,031) Cash paid to seller through proceeds from EMF debt (520,000) --------- Net Cash paid for EMF Corporation $ 674,890 5 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(Continued) Preferred stock dividends declared $35,250 Less dividends payable at December 31, 2006 (17,750) ------ Net cash paid for dividends $17,500 ====== The Company issued 710,000 shares of Series B 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 $700,000 which was used primarily to fund the acquisition of EMF. In connection with the acquisition of EMF, EMF borrowed $1,050,000 of which $497,937 was used to retire existing EMF debt, $520,000 was paid to the seller, $17,023 was used to pay transaction costs and the remaining funds were used for working capital. DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Basis of Presentation The consolidated balance sheet as of September 30, 2006 was audited and appears in the Form 10-KSB previously filed by the Company. The consolidated balance sheet as of December 31, 2006 and the consolidated statements of operations and cash flows for the three months ended December 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 December 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 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. On October 2, 2006, Dynasil acquired 100% of the stock of Evaporated Metal Films Corporation ("EMF") of Ithaca, NY. EMF provides optical thin-film coatings for a broad range of application markets including display systems, optical instruments, satellite communications and lighting. EMF provides products and services to optics markets which are related to those served by Dynasil. The Dynasil financial statements at December 31, 2006 include the EMF results of operations since October 2, 2006. 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, 2006 Annual Report on Form 10-KSB previously filed by the Company with the Securities and Exchange Commission. 6 DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 2 - Business Acquisition On October 2, 2006, the Company completed its acquisition of all of the outstanding capital stock of EMF Corporation in a transaction accounted for as a purchase. Total cash compensation to the seller was $1.1 million. From the proceeds of the issuance of 710,000 shares of Series B Preferred Stock, Dynasil paid $580,000 in cash to the seller and incurred acquisition related costs of approximately $104,890. In a contemporaneous bank transaction, EMF borrowed $1,050,000 of which $497,937 was used to retire existing EMF debt, $520,000 was paid to the seller, $17,023 was used to pay transaction costs and the remaining funds were used for working capital. The net purchase price of approximately $674,890 has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair values. The results of operations of EMF have been included in the consolidated financial statements from October 2, 2006, the effective date of acquisition. The allocation of purchase price is summarized below: Purchase price: Cash consideration at closing $1,100,000 Reimbursed through bank financing (520,000) Estimated costs and expenses 94,890 --------- Total cash paid $674,890 ========= Purchase price allocation: Cash and cash equivalents $ 45,457 Accounts receivable 282,575 Inventories 75,211 Prepaid expenses and other current assets 39,157 Deferred taxes, net 25,900 Property and equipment 1,789,621 Current Liabilities assumed (1,063,031) --------- Net fair value of assets acquired $1,194,890 ========= Note 3 - Debt On October 2, 2006, in conjunction with the EMF acquisition, EMF entered into Mortgage Note and Line of Credit Note borrowing transactions with Tompkins Trust Company ("TTC") which were guaranteed by Dynasil. The guaranteed loans include (a) a $1,050,000 principal amount commercial mortgage (the "mortgage") and (b) a $215,000 principal amount line of credit facility (the "line of credit"). Proceeds of the mortgage were used to repay certain EMF debts, to pay for part of the acquisition of EMF and for working capital purposes. Proceeds of the line of credit will be used for general corporate purposes. The applicable borrowing documents were entered into at arms-length between EMF and Dynasil, on the one hand, and TTC, on the other hand, on commercial lending terms and conditions, including acceleration rights, events of default, TTC's rights and remedies and similar provisions that Dynasil believes are customary for commercial loans of this sort. In connection with the loan transactions, EMF and Dynasil executed and delivered to TTC customary forms of notes, mortgage, security agreement, assignment of leases and rents, and similar documents. The mortgage provides for repayment over a 20 year period at a fixed annual interest rate of 7.80% for the first 5 years, reset to a fixed annual interest rate of 2.80 percentage points over 7 DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) the Federal Home Loan Bank of New York Advance Rate for five- year maturities at five year intervals. The term loan is secured by a first mortgage on EMF's real estate, equipment, and fixtures, as well as Dynasil's guarantee. The line of credit has a term running until December 22, 2010 and carries an annual interest rate of one-half percent over The Wall Street Journal Prime Rate of interest, which is adjusted monthly. It is secured by EMF's real estate, equipment and fixtures, as well as Dynasil's guarantee. Note 4 - Convertible Preferred Stock On October 2, 2006, the Company sold 710,000 shares of a Series B 10% Cumulative Convertible Preferred Stock in a private placement. The stock was sold at a price of $1.00 per share. Total expenses for the stock placement were $10,000. No underwriting discounts or commissions were paid in connection with the sale. Each share of preferred stock carries a 10% per annum dividend and is convertible to 1.33 shares of common stock at any time by the holders and is callable after two years by Dynasil at a redemption price of $1.00 per share. Proceeds of the preferred stock sale were primarily used to acquire the capital stock of EMF and for related acquisition costs. 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: December 31, 2006 September 30, 2006 ----------------- ------------------ Raw Materials $866,565 $600,451 Work-in-Process 312,815 259,425 Finished Goods 299,955 271,772 ------- ------- $1,479,335 $1,131,648 ======= ======= 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. Note 7 - Stock Based Compensation Effective in fiscal year 2007, stock-based employee compensation expenses will be included in reported income. Until fiscal year 2007, the Company had adopted the disclosure provisions of SFAS No. 148 and accounted for stock-based compensation using the intrinsic value method. Accordingly, no compensation cost was 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 8 DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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. Three months ended December 31,2006 December 31,2005 ----------- ----------- Net income, as reported $22,902 $25,425 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 -0- (4,636) ----------- ----------- Pro forma net profit (loss) $ 22,902 $20,789 =========== =========== Actual net profit (loss) per common share $ 0.00 $0.00 Pro forma net profit (loss) per common share $ 0.00 $0.00 During the three months ended December 31, 2006, no options were granted and 40,000 options were exercised. The 40,000 options had an exercise price of $0.40 per share with $16,000 paid in cash. During the three months ended December 31, 2005, 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. The Company cancelled 0 and 90,000 options during the three months ended December 31, 2006 and 2005, respectively. Compensation expenses relating to non-employee stock options granted during the three months ended December 31, 2006 and 2005 were $-0-. On February 1, 2007, 80,000 options were granted to a newly elected board member at a price of $2.00 per share. Accordingly, compensation expense will be recognized for the quarter ending March 31, 2007. ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Overview This is the first quarter of results after Dynasil Corporation of America ("Dynasil" or the "Company" or "we") acquired 100% of the stock of Evaporated Metal Films Corporation ("EMF") in Ithaca, NY on October 2, 2006. EMF provides optical thin-film coatings for a broad range of application markets including display systems, optical instruments, satellite communications and lighting. EMF provides products and services to optics markets which are related to those served by Dynasil's historical operations. The Dynasil financial statements include the EMF results from October 2, 2006 through December 31, 2006. The results from time periods previous to October 2, 2006 do not include EMF. Revenues for the first quarter of fiscal year 2007 which ended December 31, 2006 were $2,536,297, an increase of 63.8% over revenues of $1,548,040 for the quarter ended December 31, 2005. Net income for the quarter ended December 31, 2006 was $22,902 or $0.00 per share, compared with a net income of $25,425, 9 or $0.00 per share, for the quarter ended December 31, 2005. Excluding the impact of the EMF acquisition, revenues for our historical businesses were up 22% and net income was up 411%, from $25,425 to $130,000, compared to the three months ended December 31, 2005. Strong revenue growth combined with continued process improvements drove those significant gains. As anticipated, transitional and process improvement costs resulted in a loss at EMF for its first quarter with Dynasil. The EMF loss offset the outstanding improvements in our historical businesses. Management anticipates a reduced level of EMF losses in Quarter 2 and is targeting profitable results for the second half of fiscal year 2007. During quarter 1, we filled key leadership positions, developed clear goals and initiated a strong focus to develop the disciplined processes required for EMF to consistently execute with excellent quality, service, and cost performance. Results of Operations Revenues for the three months ended December 31, 2006 were $2,536,297, an increase of 63.8% over revenues of $1,548,040 for the quarter ended December 31, 2005. The revenue increase came from 22% organic growth in our historical businesses as well as the addition of EMF. Cost of sales for the three months ended December 31, 2006 was $1,883,862 or 74.3% of sales, an increase of 5.2 percentage points from the three months ended December 31, 2005 of $1,069,896, or 69.1% of sales. The higher cost of sales resulted primarily from the EMF costs. The cost of sales for our historical businesses actually improved by 1.3 percentage points. The Company continues to implement cost reductions such as manufacturing yield improvements. Gross profit for the three months ended December 31, 2006 was $652,435, or 25.7% of sales, an increase of $174,291 over the three months ended December 31, 2005 of $478,144, or 30.9% of sales. Operational improvements at EMF are key to increasing our gross profit in the future. Selling, general and administrative ("SG&A") expenses for the three months ended December 31, 2006 were $605,466 or 23.9% of sales, a decrease of 3.7 percentage points from the three months ended December 31, 2005 of $426,659 or 27.6% of sales. The changes in SG&A expenses and percentage resulted primarily from the impact of adding EMF SG&A expenses. Net interest expense for the three months ended December 31, 2006 was $14,997, a decrease of $5,538 from the three months ended December 31, 2005 of $20,535. There is additional EMF interest expense of $20,665 that is allocated to cost of goods sold and SG&A expense so in total, net interest expense was $35,662. The increase in combined interest expense is primarily related to the additional interest payments resulting from the indebtedness incurred in connection with the EMF acquisition. Net income for the three months ended December 31, 2006 was $22,902, or $.00 in basic earnings per share, which is similar to net income for the three months ended December 31, 2005 of $25,425 or $.00 in basic profit per share. Organic revenue growth of 22% in our historical businesses along with continued process improvements drove a 411% net income increase for our historical businesses. Losses at EMF offset this improvement and are related to transition activities. We have a strong focus at EMF to improve our processes and deliver profitability. The Company had a $9,070 provision for Massachusetts income taxes for the quarter ended December 31, 2006 and a $5,525 provision for the quarter ended 10 December 31, 2005. As of September 30, 2006, the Company had approximately $900,000 of net operating loss carry forwards to offset future income for federal tax purposes expiring in various years through 2021. In addition, the Company had approximately $550,000 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 $89,942 for the three months ended December 31, 2006. The primary sources of cash were net income of $22,902, depreciation and amortization expenses that aggregated $80,166, net borrowings of $131,924, accounts receivable collections of $141,404, the issuance of common stock of $132,285 and preferred stock of $700,000. The primary uses of cash were acquisition of property, plant and equipment of $40,293, an inventory increase of $272,476, reductions in accounts payable and accrued expenses of $140,074, dividend payments of $17,500 on Preferred Stock and the acquisition of EMF of $674,890. The increase in inventory was a result of purchasing fused silica raw material that was previously provided as consignment inventory by our supplier as well as the addition of EMF inventory. 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, 2006, 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 the Notes to Consolidated Financial Statements in our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2006. 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 a portion of our long-lived assets is impaired. Such a determination could result in non-cash charges to income that could materially and adversely affect the Company's financial position or results of operations for that period. 11 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 from 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 Company's Annual Report on Form 10-KSB for the fiscal year ended September 30, 2006. 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 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. 12 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 ITEM 5 OTHER INFORMATION The information presented in Items 1 and 2 of Part I of this Report is incorporated herein by reference. On February 14, 2007, the Company issued a press release announcing its financial results for its first quarter ending December 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 10.1 Indemnification agreement with new Dynasil Director, Cecil Ursprung, dated 2/1/07. 13 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 February 14, 2007, issued by Dynasil Corporation of America announcing its financial results for the second quarter ending DECEMBER 31, 2006. (b) Reports on Form 8-K - On 10/6/06, a current report on Form 8-K Items 1, 2, 3 and 9 for the completion of the EMF acquisition and sale of Preferred Stock. - On 12/15/06, an amendment of the current report on Form 8-K dated 10/6/06 for Items 1, 2, 3 and 9 for the completion of the EMF acquisition and sale of Preferred Stock which includes EMF financial statements. 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: February 14, 2007 --------------------------------- -------------------- Craig T. Dunham, President and CEO /s/ Laura Lunardo DATED: February 14, 2007 --------------------------------- -------------------- Laura Lunardo Chief Financial Officer 14 EX-10 2 dyn120610qsbex10-1.txt URSPRUNG INDEMNIFICATION AGREEMENT INDEMNIFICATION AGREEMENT This INDEMNIFICATION AGREEMENT ("Agreement"), dated as of February 1, 2006, between Dynasil Corporation of America, a New Jersey corporation (the "Company"), and Cecil Ursprung ("Indemnitee"), is made with reference to the following facts: A. It is essential that the Company and its subsidiaries recruit and retain as directors the most capable persons available; B. Indemnitee is currently or is contemplating becoming a director of the Company or a subsidiary of the Company; C. Both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors of publicly traded companies; D. In furtherance of the foregoing, Article 12 of the Company's Restated Certificate of Incorporation (the "Charter") provides as follows: 12. A director or officer of the Corporation shall not be personally liable to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders, except that this Article 12 shall not relieve a director or officer from liability for any breach of duty based upon an act or omission (i) in breach of such person's duty of loyalty to the Corporation or its shareholders, or (ii) not in good faith or involving a knowing violation of law, or (iii) resulting in receipt by such person of an improper personal benefit. If the New Jersey Business Corporation Act is amended after approval by the shareholders of this Article 12 to authorize corporate action further eliminating or limiting the personal liability of directors or officers, then the liability of a director and/or officer of the Corporation, as the case may be, shall, without further corporate action, be eliminated or limited to the fullest extent permitted by the New Jersey Business Corporation Act as so amended. Any repeal or modification of the foregoing paragraph by the shareholders of the Corporation or otherwise shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such repeal or modification. E. Notwithstanding Article 12 of the Company's Charter, in recognition of Indemnitee's legitimate desire that all possible protection against personal liability resulting from or in connection with Indemnitee's performance of service for the Company as a director be available for and provided to Indemnitee (regardless of, among other things, any amendment to or revocation of the Charter or any change in the composition of the Company's board of directors (the "Board of Directors") or any acquisition transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of and the advancement of expenses to Indemnitee to the fullest extent permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Company's directors' and officers' liability insurance policies. NOW, THEREFORE, the parties hereto agree as follows: 1. Certain Definitions. 1.1 "Change in Control" shall be deemed to have occurred if, (i) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 15% or more of the total voting power represented by the Company's then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially all of the Company's assets. 1.2 "Claim" means any claim or prayer for relief in any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative, whether instituted by or in the right of the Company, any subsidiary of the Company or any other party) in which Indemnitee in good faith reasonably believes he is a participant, respondent, party or otherwise involved as a result of Indemnitee's, or a person for whom Indemnitee is the legal representative, past or present service as a director of the Company or any subsidiary of the Company, or is or was serving at the request of the Company or any subsidiary of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans. 1.3 "Expenses" include reasonable attorney's fees and all other costs, expenses and obligations actually and reasonably incurred by the Indemnitee in connection with investigating, defending or preparing to defend any Claim. 1.4 "Independent Legal Counsel" means an attorney or firm of attorneys, selected in accordance with the provisions of Section 3, who shall not have otherwise performed services for the Company, any subsidiary of the Company or Indemnitee within the last five years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements). 1.5 "Reviewing Party" means (i) a majority of directors who are not parties to the action, even though less than a quorum, (ii) a Committee of such directors designated by majority vote of such directors, even though less than a quorum, (iii) if there are no such directors, or if such directors so direct, Independent Legal Counsel, or if the directors are unable to appoint Independent Legal Counsel, the stockholders. 1.6 "Voting Securities" means any securities which vote generally in the election of directors. 2. Indemnification. 2.1 In General. In connection with any Claim that relates to events occurring after the date hereof, the Company shall indemnify and advance Expenses to Indemnitee as provided in this Agreement and to the fullest extent permitted or contemplated by N.J.S.14A:3-5(8); provided, however, that no indemnification shall be made to or on behalf of Indemnitee if a judgment or other final adjudication adverse to Indemnitee establishes that his acts or omissions (a) were in breach of his duty of loyalty to the corporation or its shareholders, as defined in subsection (3) of N.J.S.14A:2-7, (b) were not in good faith or involved a knowing violation of law or (c) resulted in receipt by Indemnitee of an improper personal benefit.. 2.2 Claims Other Than Claims by or in the Right of the Company or Any Subsidiary of the Company. In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in any action, suit or proceeding pursuant to any Claim, other than a Claim by or in the right of the Company or any subsidiary of the Company, the Company shall, subject to Sections 2.5 and 2.6, indemnify Indemnitee against any and all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim. 2.3 Proceedings by or in the right of the Company or Any Subsidiary of the Company. In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in any proceeding pursuant to any Claim brought by or in the right of the Company or any subsidiary of the Company to procure a judgment in its favor, the Company shall, subject to Sections 2.5 and 2.6, indemnify Indemnitee against any and all Expenses (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses) of such Claim. Notwithstanding the foregoing, no such indemnification shall be made in respect of any Claim, issue or matter as to which Indemnitee shall have been finally adjudged to be liable to the Company or any subsidiary of the Company unless and only to the extent that the Superior Court or the court in which such proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such Expenses which the Superior Court or such other court shall deem proper. 2.4 Payment of Indemnification; Advancement of Expenses. Subject to Sections 2.5 and 2.6, the Company shall indemnify Indemnitee as soon as practicable but in any event no later than 30 days after written demand is presented to the Company. If so requested by Indemnitee, the Company shall advance (within 10 business days of such request) any and all Expenses to Indemnitee (an "Expense Advance"); provided, however, that the payment of Expenses incurred by Indemnitee in advance of the final disposition of the Claim will be made only upon receipt by the Company of an undertaking by the Indemnitee to repay all amounts advanced if it should be ultimately determined that the Indemnitee is not entitled to be indemnified under this Agreement or otherwise. 2.5 Indemnitee Not Entitled to Indemnification. Notwithstanding anything in this Agreement to the contrary, Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim (or part thereof) initiated by the Indemnitee unless the Board of Directors has authorized or consented to the initiation of such Claim (or part thereof), other than an action, suit or proceeding commenced by Indemnitee to secure a determination that Indemnitee is entitled to indemnification as provided in Section 2.6 which action, suit or proceeding shall not require such authorization or consent. 2.6 Determination of Entitlement. Notwithstanding anything in this Agreement to the contrary, (i) the obligations of the Company under this Section 2 shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 2.4 shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). If there has not been a Change in Control, the Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), the Reviewing Party shall be the Independent Legal Counsel referred to in Section 3. If there has been no determination by the Reviewing Party within 60 days after written demand for indemnification made under Section 2.4 or if the Reviewing Party determines that Indemnitee would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in the State of New Jersey having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or factual bases therefor. The Company shall indemnify Indemnitee for his Expenses relating to any such proceeding and shall advance such Expenses to Indemnitee, subject to the Company's receipt of such written undertaking as the Company shall reasonably request from Indemnitee to repay to the Company any funds so advanced if the court determines that Indemnitee is not entitled to indemnification of such Expenses. The Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee. Indemnitee may initiate mediation instead of a judicial determination of Indemnitee's entitlement to indemnification, in which event Indemnitee will bear twenty percent (20%) of the costs of such mediation. 3. Change in Control. If there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement, the Company shall seek legal advice only from Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be permitted to be indemnified under applicable law. The Company shall pay the reasonable fees of the Independent Legal Counsel referred to above and fully indemnify such counsel against any and all expenses (including reasonable attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. 4. Indemnification Not Exclusive. Notwithstanding this Agreement, the Company shall indemnify Indemnitee against any and all Expenses (including reasonable attorneys' fees) and, if requested by Indemnitee, shall (within 10 business days of such request) advance such Expenses to Indemnitee for (i) indemnification or advance payment of Expenses by the Company under the Charter or any other agreement, certificate of incorporation or Company by-law now or hereafter in effect relating to Claims and/or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company. Without limiting the generality of the foregoing, to the extent that a change in the New Jersey Business Corporation Act (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Charter or this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. 5. Partial Indemnity. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other provision of the Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith. 6. Burden of Proof. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. 7. No Presumptions. For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law shall be a defense to Indemnitee's claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. 8. Liability Insurance. The Company will maintain insurance (i) at not less than the levels in effect as of the date hereof with respect to Indemnitee until the third anniversary of the date hereof, or (ii) at the levels in effect as of the date of the expiration of the term, death, removal, retirement or resignation of Indemnitee for a period of three years after such event, whichever level is greater, in either case, with respect to any Claim, against all liability and loss suffered and Expenses (including reasonable attorney's fees) reasonably incurred by Indemnitee at the Company's expense, to protect the Company and Indemnitee against any such liability, cost, payment, or Expense. 9. Amendments and Waivers. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 10. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that my be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. 11. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, the Charter or otherwise) of the amounts otherwise indemnifiable hereunder. 12. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, executors and personal and legal representatives. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director of the Company or in any other capacity for any other enterprise at the Company's request. 13. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) is held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired and shall remain enforceable to the fullest extent permitted by law. 14. Counterparts. This Agreement may be executed in one or more counterparts for the convenience of the parties hereto, all of which together will constitute one and the same instrument. 15. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New Jersey applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws. INTENDING TO BE LEGALLY BOUND, the parties hereto have executed this Agreement as of the date first above written. DYNASIL CORPORATION OF AMERICA By Craig T. Dunham President INDEMNITEE Cecil Ursprung 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, 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)) 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: February 14, 2007 /s/ Laura Lunardo ----------------------------- Laura Lunardo Chief Financial Officer -2- EX-31 4 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, 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)) 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: February 14, 2007 /s/ Craig T Dunham ------------------ ------------------------------------ Craig T Dunham President and Chief Executive Officer -2- EX-32 5 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 10-QSB for the period ended December 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 February 14, 2007 EX-99 6 dyn10qsb1206ex99-1.txt PRESS RELEASE Contact: Craig Dunham Dynasil Corporation of America Phone: (856) 767-4600 Email: cdunham@Dynasil.com Dynasil Announces First Quarter Fiscal Year 2007 Results WEST BERLIN, N.J.- February 14, 2007 - Dynasil Corporation of America (OTCBB: DYSL.OB), announced results of operations for the quarter ended December 31, 2006. Dynasil is a manufacturer of photonics products including optical materials, components, coatings and specialized sub-systems. We fabricate optical blanks from synthetic fused silica and other optical materials for the laser, semi- conductor, aerospace and optical instrument industries. Through our subsidiary, Optometrics Corporation, we are a worldwide supplier of optical components including diffraction gratings, thin film filters, laser optics, monochromators, and specialized optical sub-systems. On October 2, 2006, we acquired 100% of the stock of Evaporated Metal Films Corporation ("EMF") of Ithaca, NY. EMF provides optical thin- film coatings for a broad range of application markets including display systems, optical instruments, satellite communications and lighting. This is the first quarter which includes EMF results. Revenues for the quarter ended December 31, 2006 were $2,536,297 an increase of 63.8% over revenues of $1,548,040 for the quarter ended December 31, 2005. Net profit for the quarter ended December 31, 2006 was $22,902 or $.00 per share compared with a net profit of $25,425 or $.00 per share for the quarter ended December 31, 2005. Excluding the impact of the EMF acquisition, revenues for our historical businesses were up 22% and net income was up 411%, from $25,000 to $130,000, compared to the three months ended December 31, 2005. Strong revenue growth combined with continued process improvements drove those significant gains. As anticipated, transitional and process improvement costs resulted in a loss at EMF for its first quarter with Dynasil. The EMF loss offset the outstanding improvements in our historical businesses. Management anticipates a reduced level of EMF losses in Quarter 2 and is targeting profitable results for the second half. During Quarter 1, we filled key EMF leadership positions, developed clear goals and initiated a strong focus on developing the disciplined processes required for EMF to consistently execute with excellent quality, service, and cost performance. "We are pleased with the 411% net income increase for our historical business and the completion of the EMF acquisition. We have a very clear focus on the EMF improvements required to make it profitable. Implementation is underway and we expect to see results later this year. EMF fits well with our markets and has strong people and capabilities." said Craig T. Dunham, President and CEO. "Achieving 22% organic growth and closing the EMF acquisition are important milestones towards executing our strategy of profitable growth in our photonics businesses and through strategic acquisitions." About Dynasil: Founded in 1960, Dynasil is a manufacturer of photonic products including optical materials, components, coatings and specialized sub-systems. This news release may contain forward-looking statements usually containing the words "believe," "expect,", "anticipate" 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 December 31 September 30 2006 2006 ASSETS Current assets Cash and cash equivalents $ 442,081 $ 352,139 Accounts receivable 1,210,334 1,086,394 Inventories 1,479,335 1,131,648 Deferred tax asset 151,300 61,500 Other current assets 141,998 128,957 --------- --------- Total current assets 3,425,048 2,760,638 Property, plant and equipment, net 2,380,440 626,790 Other assets 91,761 78,812 --------- --------- Total Assets $5,897,249 $3,466,240 ========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Note payable to bank- Line of $297,766 $190,000 credit Current portion of long-term 92,422 72,482 debt Accounts payable 718,347 390,110 Accrued expenses and other 435,800 368,977 current liabilities --------- --------- Total current liabilities 1,544,335 1,021,569 Long-term debt, net 1,618,297 593,889 Deferred income taxes 63,900 -0- Stockholders' Equity 2,670,717 1,850,782 --------- --------- Total Liabilities and $5,897,249 $3,466,240 Stockholders' Equity ========== ========= Dynasil Corporation of America and Subsidiaries Consolidated Statement of Operations Three Months Ended December 31 (Unaudited) 2006 2005 Sales $2,536,297 $1,548,040 Cost of Sales 1,883,862 1,069,896 --------- --------- Gross Profit 652,435 478,144 Selling, general and 605,466 426,659 administrative --------- --------- Income (Loss) from Operations 46,969 51,485 Interest expense - net (14,997) (20,535) --------- --------- Income before Income Taxes 31,972 30,950 Income Tax expense ( 9,070) (5,525) --------- --------- Net Income $ 22,902 $ 25,425 --------- --------- Net Income per share Basic $0.00 $0.00 Diluted $0.00 $0.00 -----END PRIVACY-ENHANCED MESSAGE-----