-----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, Q3yxykcghV72oVXYE8dE0jmSqphS/IjHhc8HKzy/t1bH22nCs7VF9oBbJSCJxhHO Tub9G5f/YJM267/bvbkSnA== 0001260415-07-000038.txt : 20070814 0001260415-07-000038.hdr.sgml : 20070814 20070814070646 ACCESSION NUMBER: 0001260415-07-000038 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20070630 FILED AS OF DATE: 20070814 DATE AS OF CHANGE: 20070814 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: 071051219 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 dyn0607-10qsb.txt DYNASIL CORPORATION OF AMERICA FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB (Mark One) XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007 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 6,116,526 shares of common stock, par value $.0005 per share, outstanding as of July 30, 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 JUNE 30, 2007 AND SEPTEMBER 30, 2006 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2007 AND 2006 4 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, 2007 AND 2006 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 11 ITEM 3. CONTROLS AND PROCEDURES 15 PART II. OTHER INFORMATION 15 ITEM 1. LEGAL PROCEEDINGS 15 ITEM 2. CHANGES IN SECURITIES 15 ITEM 3. DEFAULTS ON SENIOR SECURITIES 15 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15 ITEM 5. OTHER INFORMATION 15 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 16 SIGNATURES 16 2 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS June 30 September 30 2007 2006 (Unaudited) ---------- ---------- Current assets Cash and cash equivalents $ 290,556 $ 352,139 Accounts receivable, net of allowance for doubtful accounts of $19,993 and $12,530 for June 30, 2007 and September 30, 2006, respectively 1,272,152 1,086,394 Inventories 1,592,892 1,131,648 Deferred tax asset 87,400 61,500 Prepaid expenses and other current assets 215,772 128,957 ---------- ---------- Total current assets 3,458,772 2,760,638 Property, Plant and Equipment, net 2,456,530 626,790 Other Assets 83,613 78,812 ---------- ---------- Total Assets $5,998,915 $3,466,240 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Note payable to bank - Line of credit $368,290 $190,000 Current portion - long term debt 99,634 72,482 Accounts payable 510,117 390,110 Accrued expenses 569,617 368,977 ---------- ---------- Total current liabilities 1,547,658 1,021,569 Long-term Debt, net 1,569,127 593,889 Stockholders' Equity Common Stock, $.0005 par value, 25,000,000 shares authorized, 6,924,878 and 4,698,453 shares issued, 6,114,718 and 3,888,293 shares outstanding 3,463 2,350 Preferred Stock, $.001 par value, 10,000,000 Shares authorized, -0- and 700,000 Series A shares and 710,000 and -0- shares Series B shares issued and outstanding for June 30, 2007 and September 30, 2006 respectively, 10% cumulative, convertible 710 700 Additional paid in capital 2,980,931 2,100,098 Retained earnings 883,368 733,976 ---------- ---------- 3,868,472 2,837,124 Less 810,160 shares in treasury - at cost (986,342) (986,342) ---------- ---------- Total stockholders' equity 2,882,130 1,850,782 ---------- ---------- Total Liabilities and Stockholders' Equity $5,998,915 $3,466,240 ========== ==========
3 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Nine Months Ended June 30 June 30 2007 2006 2007 2006 ---------- --------- ---------- ---------- Sales $2,584,519 $1,833,869 $8,124,031 $5,047,405 Cost of Sales 1,776,432 1,164,997 5,785,706 3,307,189 ---------- --------- ---------- ---------- 808,087 668,872 2,338,325 1,740,216 Selling, general and administrative 680,900 501,159 2,021,685 1,414,458 ---------- --------- ---------- ---------- Income from Operations 127,187 167,713 316,640 325,758 Interest expense - net 19,110 21,638 52,780 60,882 ---------- --------- ---------- ---------- Income before Income Taxes 108,077 146,075 263,860 264,876 Income Tax 9,973 6,484 30,629 17,980 ---------- --------- ---------- ---------- Net income $ 98,104 $ 139,591 $ 233,231 $ 246,896 ========== ========= ========== ========== Net income per share Basic $0.02 $0.03 $0.03 $0.05 Diluted $0.01 $0.02 $0.03 $0.04 Weighted average shares outstanding 6,114,679 3,848,141 5,104,271 3,821,154
4 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended June 30 2007 2006 ---------- ----------- Cash flows from operating activities: Net income $ 233,231 $ 246,896 Adjustments to reconcile net income to net cash provided by (used in)operating activities: Depreciation 253,656 153,000 Amortization expense 12,222 19,640 Gain on disposal of assets -0- (2,000) Stock based compensation 11,366 -0- Allowance for doubtful accounts 7,463 13,632 (Increase) decrease in: Accounts receivable 98,366 (24,049) Inventories (386,033) (298,317) Prepaid expenses and other current asset (56,670) 3,383 Increase (decrease) in: Accounts payable (140,198) 101,267 Accrued expenses (18,909) 8,442 ---------- ----------- Net cash provided by operating activities 14,494 221,894 ---------- ----------- Cash flows from investing activities: Acquisition of property, plant and equipment (293,773) (71,883) Proceeds from sale of assets -0- 2,000 Cash paid for acquisition of EMF (674,890) -0- ---------- ----------- Net cash used in investing activities (968,663) (69,883) ---------- ----------- Cash flows from financing activities: Issuance of common stock 170,590 41,400 Issuance of preferred stock 700,000 -0- Payments on long-term debt (72,361) (94,847) Proceeds from refinanced long-term debt 174,816 457 Payments on short-term debt (227,277) (57,445) Proceeds from short-term debt 212,910 -0- Preferred stock dividends paid (66,092) (52,500) ---------- ----------- Net cash provided by (used in) financing activities 892,586 (162,935) ---------- ----------- Net decrease in cash (61,583) (10,924) Cash - beginning of period 352,139 308,210 ---------- ----------- Cash - end of period $ 290,556 $ 297,286 ========== =========== 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) Total cost of acquisition 1,194,890 Debt incurred to pay seller (520,000) --------- Net Cash paid for EMF Corporation $674,890 ==========
5 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(Continued) 2007 2006 Reconciliation of debt refinancing activities: Proceeds of new loans for New Jersey operations $ -0- $449,346 Repayment of old New Jersey Term Loan -0- 448,889 -------- -------- Net Proceeds of refinancing activity $ -0- $ 457 Preferred stock dividends declared $83,842 $52,500 Less dividends payable at June 30 (17,750) -0- -------- -------- Net cash paid for dividends $66,092 $52,500 To partially fund the acquisition of Evaporated Metal Films Corporation ("EMF"), the Company issued 710,000 shares of preferred stock, valued at $1.00 per share, incurred stock issuance costs of $10,000 and received net proceeds of $700,000. On October 2, 2006, concurrently with the acquisition of EMF Corporation, EMF borrowed $1,050,000, which amount was guaranteed by the Company. The proceeds were used as follows: 1) repayment of assumed liabilities of $338,161 at closing, 2) payment of the balance due the seller of $520,000 directly by the bank at closing, 3) payment of transaction costs of $17,023 at closing, and 4) the remaining balance of $174,816 was used for working capital purposes. DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Basis of Presentation The consolidated balance sheet as of September 30, 2006 was audited and appears in the Form 10-KSB previously filed by the Company. The consolidated balance sheet as of June 30, 2007 and the consolidated statements of operations and cash flows for the three and nine months ended June 30, 2007 and 2006, and the related information contained in these notes have been prepared by management without audit. In the opinion of management, all adjustments (which include only normal recurring items) necessary to present fairly the financial position, results of operations and cash flows in conformity with generally accepted accounting principles as of June 30, 2007 and for all periods presented have been made. Interim operating results are not necessarily indicative of operating results for a full year. 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. Dynasil's financial statements at June 30, 2007, 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 in a transaction accounted for as a purchase. Total cost of the acquisition was $1,194,890 of which $1.1 million was paid to the seller, and $94,890 represented acquisition costs incurred. From the proceeds of the issuance of 710,000 shares of Preferred Stock, Dynasil paid $580,000 in cash to the seller, incurred stock issuance costs of $10,000 and incurred acquisition related costs of approximately $94,890. Also on October 2, 2006, in a concurrent bank transaction, EMF borrowed $1,050,000 of which $338,161 was used to retire assumed EMF debt, $520,000 was paid directly to the seller at settlement, $17,023 was used to pay transaction costs and the remaining funds of $174,816 were used for working capital purposes. The total purchase price of approximately $1,194,890 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: Total consideration to seller $1,100,000 Acquisition costs incurred $ 94,890 ---------- Total purchase price $1,194,890 Purchase price allocation: Cash and cash equivalents $ 45,457 Accounts receivable 282,575 Inventories 75,211 Prepaid expenses and other current assets 65,057 Property and equipment 1,789,621 Current liabilities assumed ( 443,158) Other liabilities assumed ( 74,227) Debt assumed ( 545,646) ---------- Net fair value of assets acquired $1,194,890 The following is the proforma financial information of the Company for the nine months ended June 30, 2006 assuming the transaction had been consummated at the beginning of the fiscal year ended September 30, 2006: For the nine Months ended June 30, 2006 (Unaudited) Statement of Operations: Revenues $7,247,511 Cost of Sales 4,885,913 Gross Profit 2,361,598 Operating Expenses 1,957,426 Income from Operations 404,172 Interest Expense 81,525 Income before taxes 322,647 Provision for income taxes 21,443 Net Income $301,204 7 DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Earnings per Share: Basic $ 0.05 Diluted $ 0.03 Note 3 - Debt On October 2, 2006, in conjunction with the EMF acquisition, EMF entered into Mortgage Note and Line of Credit Note Agreements 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 were 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 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. On March 9, 2007, the Company issued an aggregate of 1,555,540 shares of its Common Stock, $.0005 par value per share, as a result of the exercise of the conversion rights by holders of 700,000 shares of Dynasil's Series A 10% Cumulative Convertible Preferred Stock (the "Series A Preferred Shares"). Dynasil had previously called all of the Series A Preferred Shares for redemption on March 9, 2007. All of the shares of the Series A Preferred Shares that were called for redemption were converted to shares of common stock. 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. 8 DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Inventories consisted of the following: June 30, 2007 September 30, 2006 ----------------- ------------------ Raw Materials $944,358 $600,451 Work-in-Process 254,886 259,425 Finished Goods 393,648 271,772 ------- ------- $1,592,892 $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 Prior to October 1, 2006, the Company accounted for stock options issued under the Plan under the recognition and measurements provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, as permitted by FASB Statement No. 123, Accounting FOR stock Based Compensation ("SFAS No. 123"). Effective October 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123 (revised 2004), "Share-Based Payment", ("SFAS 123(R)") which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors, including employee stock options, based on estimated fair values. We had previously applied Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," ("APB 25") and related Interpretations and provided the required pro forma disclosures of State of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS 123") which was superceded by SFAS 123(R). The Company has also applied the provisions of Staff Accounting Bulletin No. 107 ("SAB 107") in the adoption of SFAS 123(R). We elected to adopt the modified prospective application transition method as provided by SFAS 123(R). In accordance with the modified prospective transition method, consolidated financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R). Under that transition method, compensation cost recognized in the nine months ended June 30, 2007 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of June 30, 2007, based on the grant date fair value estimated in accordance with the original provisions of Statement 123, and (b) compensation cost for all share-based payments granted subsequent to October 1, 2005, based on the grant-dated fair value estimated in accordance with the provisions of Statement 123(R). The fair value of stock options granted was estimated at the date of grant using the Black-Scholes options pricing model. The Company used the following assumptions for determining the fair value of options granted under Black-Scholes option pricing model: June 30 2007 2006 Expected term in years 3 years 5 years Risk-free interest rate 4.82% 4.60% Expected volatility 20.42% 16.00% Expected dividend yield 0.00% 0.00% 9 DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The expected volatility was determined with reference to the historical volatility of the Company's stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant. During the nine months ended June 30, 2007, 100,000 stock options were granted at prices ranging from $1.66 to $2.00 per share and 80,000 options were exercised. 20,000 of the granted stock options can not be exercised until January 2, 2008 and therefore the stock-based compensation expense will be recognized at that time if they become exercisable. The 80,000 options exercised had an exercise price of $0.40 per share with $32,000 paid in cash. For nine months ended June 30, 2007, total stock-based compensation charged to operations for option-based arrangements amounted to $11,366. At June 30, 2007, there was approximately $9,620 of total unrecognized compensation expense related to non- exercisable option-based compensation arrangements under the Plan. During the nine months ended June 30, 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 exercised 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 nine months ended June 30, 2007 and 2006, respectively. Compensation expense relating to non-employee stock options granted during the nine months ended June 30, 2007 and 2006 were $-0-. The pro forma disclosures of net income and net income per share for the nine months ended June 30, 2006, as permitted by SFAS 123(R), are presented below: Nine months ended June 30, 2006 ----------- Net income, as reported $246,896 Add: Stock-based employee compensation expense included in reported net income -0- Less: Total stock-based employee compensation expense determined under fair value based method for all options (4,636) ----------- Pro forma net profit (loss) $242,260 =========== Actual net profit (loss) per common share $ 0.05 Pro forma net profit (loss) per common share $ 0.05 10 DYNASIL CORPORATION OF AMERICA ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Overview This is the third quarter of results after Dynasil Corporation of America ("Dynasil", the "Company" or "we") acquired 100% of the stock of Evaporated Metal Films Corporation ("EMF") of 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 June 30, 2007. The results for time periods previous to October 2, 2006 do not include EMF except for pro forma financial information provided for the nine months ended June 30, 2006. Revenues for the third quarter of fiscal year 2007 which ended June 30, 2007 were $2,584,519, an increase of 40.9% over revenues of $1,833,869 for the quarter ended June 30,2006. Revenues for the nine months ended June 30, 2007 were $8,124,031, an increase of 60.9% over revenues of $5,047,405 for the nine months ended June 30, 2006. Net income for the quarter ended June 30, 2007 was $98,104 or $0.02 per share, compared with a net income of $139,591, or $0.03 per share, for the quarter ended June 30, 2006. Net income for the nine months ended June 30, was $233,231 or $0.03 per share, compared with a net income of $246,896 or $0.05 per share for the nine months ended June 30, 2006. Excluding the impact of the EMF acquisition for the three months ended June 30, 2007, revenues for our historical businesses were up 5% and net income was up 83%, from $139,351 to $254,944, compared to the three months ended June 30, 2006. Excluding the impact of the EMF acquisition and $11,366 of stock option expense, for the nine months ended June 30, 2007, revenues for our historical businesses were up 21% and net income was up 153%, from $246,896 to $625,442, compared to the nine months ended June 30, 2006. Strong revenue growth combined with continued process improvements drove those significant gains. Transitional and process improvement costs resulted in a loss at EMF for its third quarter with Dynasil. The EMF loss offset the outstanding improvements in our historical businesses. Management is clearly focused on the EMF improvements required to show continued improvement in 2007 and to deliver profitable results for fiscal year 2008. During quarter 3, we significantly improved manufacturing yields and reduced production downtime as we develop the disciplined processes required for EMF to consistently execute with excellent quality, service, and cost performance. We hired an EMF President with a strong operations and engineering background who started on July 11, 2007. Results of Operations Revenues for the three months ended June 30, 2007 were $2,584,519, an increase of 40.9% over revenues of $1,833,869 for the quarter ended June 30, 2006. The revenue increase came from 5% organic growth in our historical businesses as well as the addition of EMF. Revenues for the nine months ended June 30, 2007 were $8,124,031, an increase of 60.9% over revenues of $5,047,405 for the nine months ended June 30, 2006. Cost of sales for the three months ended June 30, 2007 was $1,776,432 or 68.7% of sales, an increase of 5.2 percentage points from the three months ended June 30, 2006 of $1,164,997, or 63.5% of sales. Cost of sales for the nine months ended June 30, 2007 was $5,785,706 or 71.2% of sales, an increase of 5.7 percentage points from the nine months ended June 30, 2006 of $3,307,189, or 65.5% of sales. The higher cost of sales resulted primarily from EMF's costs. 11 DYNASIL CORPORATION OF AMERICA The cost of sales for our historical businesses actually improved by 1.6 percent. The Company continues to implement cost reductions such as manufacturing yield improvements. Gross profit for the three months ended June 30, 2007 was $808,087, or 31.2% of sales, an increase of $139,215 over the three months ended June 30, 2006 of $668,872, or 36.5% of sales. Gross profit for the nine months ended June 30, 2007 was $2,338,325, or 28.7% of sales, an increase of $598,109 over the nine months ended June 30, 2006 of $1,740,216 or 34.5% 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 June 30, 2007 were $680,900 or 26.3% of sales, a decrease of 1.0 percentage points from the three months ended June 30, 2006 of $501,159 or 27.3% of sales. SG&A expenses for the nine months ended June 30, 2007 were $2,021,685 or 24.8% of sales, a decrease of 3.2 percentage points from the nine months ended June 30, 2006 of $1,414,458 or 28.0% of sales. The changes in SG&A expenses and percentages resulted primarily from the impact of the acquisition of EMF. Net interest expense for the three months ended June 30, 2007 was $19,110, compared to $21,638 for the three months ended June 30, 2006. Net interest expense for the nine months ended June 30, 2007 was $52,780 compared to $60,882 for the nine months ended June 30, 2006. Additional EMF interest expense of $61,434 that is allocated to cost of goods sold and SG&A expense resulting in total net interest expense for the nine months ended June 30, 2007, of $114,214, which is an increase of $53,332 for the nine month period. 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 June 30, 2007 was $98,104 or $0.02 in basic earnings per share, which is down $41,487 from net income for the three months ended June 30, 2006 of $139,591 or $.03 in basic profit per share. Net income for the nine months ended June 30, 2007 was $233,231 or $0.03 per share, compared with a net income of $246,896 or $0.05 per share for the nine months ended June 30, 2006. Strong gross margin results drove an 83% net income increase for our historical businesses in the third quarter. Losses at EMF more than offset these improvements and consequently, we have a strong focus at EMF improving our processes and delivering profitability. The Company had a $9,973 provision for Massachusetts income taxes for the quarter ended June 30, 2007 and a $6,484 provision for the quarter ended June 30, 2006. The Company had a $30,109 provision for Massachusetts income taxes for the nine months ended June 30, 2007 and a $17,980 provision for the nine months ended June 30, 2006. 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 decreased by $61,583 for the nine months ended June 30, 2007. The primary sources of cash were net income of $233,231, depreciation and amortization expenses that aggregated $265,878, net borrowings of $88,088, the issuance of common stock of $170,590 and issuance of preferred stock of $700,000. The primary uses of cash were acquisition of property, plant and 12 DYNASIL CORPORATION OF AMERICA equipment of $293,733, an inventory increase of $386,033, reductions in accounts payable and accrued expenses of $159,107, dividend payments of $66,092 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 on a consignment basis by our primary supplier. The reduction in accounts payable and accrued expense came from the timing of accounts payable expenses as well as a reduction in accrued expenses and accounts payable at EMF. The Company believes that its current cash and cash equivalent balances, along with the net cash generated by operations and credit lines, 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 expansions or acquisitions likely will require the Company to seek additional debt and/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. Except for the adoption of SFAS 123(R), we have not 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. 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 13 DYNASIL CORPORATION OF AMERICA established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of any of our significant customers could have a material adverse effect on the collectibility of our accounts receivable and our future operating results. Valuation of Deferred Tax Assets We regularly evaluate our ability to recover the reported amount of our deferred income taxes considering several factors, including our estimate of the likelihood of the Company generating sufficient taxable income in future years during the period over which temporary differences reverse. The Company 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. Stock-Based Compensation Effective October 1, 2006, we adopted SFAS 123(R), "Accounting for Stock Based Compensation." As a result, compensation costs are now recognized for stock options granted to employees and directors. Options and warrants granted to employees and non-employees are recorded as an expense at the date of grant based on the then estimated fair value of the security in question, determined using the Black Scholes option pricing model. Recent Accounting Pronouncements In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115" (SFAS 159). SFAS No. 159 permits entities to choose to measure eligible items at fair value at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of provisions of SFAS 159 on our results of operations and financial position. 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 14 DYNASIL CORPORATION OF AMERICA 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 We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. As required by Rule 13a-15(e) under the Exchange Act, our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of the end of the period covered by the report and have determined that such disclosure controls and procedures are effective. There has been no change in our internal control over financial reporting in connection with this evaluation that occurred during our last fiscal quarter that materially affected, or it is reasonably likely to materially affect, our internal control over financial reporting. 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 August 14, 2007, the Company issued a press release announcing its financial results for its third quarter ending June 30, 2007. 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. 15 DYNASIL CORPORATION OF AMERICA 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 August 14, 2007, issued by Dynasil Corporation of America announcing its financial results for the third quarter ending June 30, 2007. 10.1 Offer letter to Marcella Backer as EMF President effective July 10, 2007. 10.2 Amendment to Margaret Shay employment agreement dated June 15, 2007. (b) Reports on Form 8-K NONE 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: August 14, 2007 --------------------------------- -------------------- Craig T. Dunham, President and CEO /s/ Laura Lunardo DATED: August 14, 2007 ----------------------------- -------------------- Laura Lunardo Chief Financial Officer 16 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, certify that: 1. I have reviewed this Form 10-QSB of Dynasil Corporation of America; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the 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): 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 -1- 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: August 14, 2007 /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, certify that: 1. I have reviewed this Form 10-QSB of Dynasil Corporation of America; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the 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' 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 -1- 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: August 14, 2007 /s/ Laura Lunardo -------------------------- Laura Lunardo Chief Financial Officer -2- EX-32 4 dynex32-1.txt CERTIFICATION EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C.SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DYNASIL CORPORATION OF AMERICA (the "Company") on Form 10QSB for the period ended June 30, 2007 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 August 14, 2007 EX-10 5 dyn10qsb0607ex10-1.txt EXHIBIT 10.1 Ms. Marcie Backer 9 Pearlstone Drive Rochester, NY 14527 June 15, 2007 Dear Marcie: We are pleased to offer you the position of President of EMF Corporation reporting to me with a start date of July 10. You will be paid $4,808.00 bi-weekly (which is $125,000 over a twelve month period). A signing bonus of $10,000 of Dynasil stock or cash will be issued on your first day of work. The stock value will be based on the most recent stock selling price prior to your starting date. A guaranteed bonus will be paid to you equal to 30% of the base pay paid to you from your start date through September 30, 2007. For fiscal year 2008 ending September 30, 2008 and fiscal year 2009 ending September 30, 2009, your bonus will be paid based on year end audited financial statements as per the following as long as you have worked at EMF for the full year: 10% of EMF Net Profit Before Tax (NPBT) on the first $400,000 of NPBT 5% of EMF NPBT on NPBT between $400,000 and $800,000 3% of EMF NPBT on NPBT greater than $800,000 The bonus will be payable in any combination of cash and/or Dynasil stock at your discretion. After this period, a different bonus calculation system is anticipated. You will be eligible for stock options or stock grants at the discretion of the Dynasil Board of Directors. For a maximum of two years from your starting date, you will be reimbursed up to $9,500 per year at the IRS mileage rate for travel from Rochester (this may be taxable income). You will become eligible to participate in our EMF employee benefits plans based on your length of service. Based on current policies, you would start at 20 days per year of vacation. In the event that operations in Ithaca are shutdown and there is not another mutually agreeable position available within Dynasil, then severance will be three months of base pay. This offer is conditioned on your successfully passing a drug test and your ability to present documentation of evidence of your right to work in the United States. Please let me know your decision by June 18, 2007. We believe that your skills are a great fit for the EMF President position. This is an opportunity to run a strategic business and to get involved at an early stage in Dynasil's growth. If you have any questions, please feel free to call me at 856-952-6704. Sincerely, Craig Dunham, President and CEO- Dynasil Corporation I accept the above offer of employment. __________________________________________ Signature Date EX-10 6 dyn10qsb0607ex10-2.txt EXHIBIT 10.2 DYNASIL CORPORATION OF AMERICA AMENDMENT TO AGREEMENT OF EMPLOYMENT THIS AGREEMENT is dated as of June 15, 2007 and amends the Agreement of Employment executed August 21, 2006 and effective October 2, 2006 (the "Original Agreement") by and between DYNASIL CORPORATION OF AMERICA, a New Jersey corporation (the "Company"), and MEGAN SHAY ("Employee"). WHEREAS, the Original Agreement contemplated that the parties could mutually agree that Employee's time commitment pursuant to the Original Agreement could be reduced from full-time to part-time six months after the Closing Date; WHEREAS, the transition contemplated by the Original Agreement has not occurred as contemplated; and WHEREAS, the Company and the Employee wish to amend the Original Agreement to reflect Employee's agreement to work on a full-time basis during the period from April 1, 2007 to September 30, 2007 (the "Full-Time Employment Extension Period"). NOW, THEREFORE, the parties hereto agree as follows: 1. The Company and Employee agree that notwithstanding Paragraph 2(a) of the Original Agreement, Employee shall devote her full time and skills to the conduct of the Company's and EMF's businesses during the Full-Time Employment Extension Period. 2. In consideration of Employee's agreement pursuant to Paragraph 1 above, the Company will pay the Employee an additional $25,000 for the Full- Time Extension Period. At Employee's election, the $25,000 may be paid to Employee either during the Full-Time Extension Period or by adding the $25,000 to the amounts owed to Employee by EMF with respect to obligations owed to Employee for periods prior to the Effective Date. In the event that Employee works less than full time during the Full-Time Extension Period, then a mutually agreeable method will be developed to prorate the amount of the $25,000 which is paid. 3. Capitalized terms not defined herein have the meanings given in the Original Agreement. 4. The obligation for payment as outlined in paragraph 2 shall survive the expiration of the original employment agreement. 5. Unless specifically amended herein, all terms, conditions and provisions of the Original Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have executed and delivered this Amendment to Agreement of Employment as of the date first above written. DYNASIL CORPORATION OF AMERICA By: _______________ Craig T. Dunham President and CEO EMPLOYEE: _______________ Megan Shay EX-99 7 dyn10qsb0607ex99-1.txt PRESS RELEASE Contact: Craig Dunham Dynasil Corporation of America Phone: (856) 767-4600 Email: cdunham@Dynasil.com Dynasil Announces Third Quarter Fiscal 2007 Results WEST BERLIN, N.J. - August 14, 2007 - Dynasil Corporation of America (OTCBB: DYSL.OB), announced results of operations for the quarter ended June 30, 2007. Dynasil is a manufacturer of photonic 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 third fiscal quarter that includes EMF's results. Revenues for the quarter ended June 30, 2007 were $2,584,519, an increase of 41% over revenues of $1,833,869 for the quarter ended June 30, 2006. The net profit for the quarter ended June 30, 2007 was $98,104, or $.02 per share, compared with a net profit of $139,591, or $.03 per share, for the quarter ended June 30, 2006, from $139,591 to $254,944. Excluding the impact of the EMF acquisition and $11,366 of stock option expenses, revenues for our historical businesses were up 5% and net income was up 83% compared to the three months ended June 30, 2006. Ongoing process improvements drove those significant gains. Transitional and process improvement costs resulted in a loss at EMF for its third quarter with Dynasil. The EMF loss offset the substantial improvements in our historical businesses. Management is clearly focused on the EMF initiatives required to show continued improvement in 2007 and to deliver profitable results for fiscal year 2008. During Quarter 3, we continued to improve manufacturing yields and downtime. The search was concluded for a new EMF President with a strong operations background who started work on July 11. Revenues for the 9 months ended June 30, 2007 were $8,124,031, an increase of 61% over revenues of $5,047,405 for the 9 months ended June 30, 2006. The net profit for the 9 months ended June 30, 2007 was $233,231, or $0.03 per share, compared with a net profit of $246,896, or $0.05 per share, for the 9 months ended June 30, 2006. Excluding the impact of the EMF acquisition and option expenses, revenues for our historical businesses were up 21% and net income was up 153% compared to the nine months ended June 30, 2006 from $246,896 to $625,442. "We are pleased with the third quarter net income increases of 83% for our historical business and we are showing progress at EMF. We have a very clear focus on the EMF improvements required to make it profitable." said Craig T. Dunham, President and CEO. "Achieving 21% organic growth year to date and recruiting the new EMF President are important milestones towards executing our strategy of profitable growth in our photonic businesses." 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," 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 June 30 September 30 2007 2006 (Unaudited) ASSETS Current assets Cash and cash equivalents $290,556 $352,139 Accounts receivable 1,272,152 1,086,394 Inventories 1,592,892 1,131,648 Deferred tax asset 87,400 61,500 Other current assets 215,772 128,957 Total current assets 3,458,772 2,760,638 --------- --------- Property, plant and equipment, net 2,456,530 626,790 Other assets 83,613 78,812 --------- --------- Total Assets $5,998,915 $3,466,240 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Note payable to bank- Line of $368,290 $190,000 credit Current portion of long-term 99,634 72,482 debt Accounts payable 510,117 390,110 Accrued expenses and other 569,617 368,977 current liabilities --------- --------- Total current liabilities 1,547,658 1,021,569 Long-term debt, net 1,569,127 593,889 Stockholders' Equity 2,882,130 1,850,782 --------- --------- Total Liabilities and $5,998,915 $3,466,240 Stockholders' Equity -2- DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Three Months Ended Nine Months Ended June 30 June 2007 2006 2007 2006 ---------- --------- --------- --------- Sales $2,584,519 $1,833,869 $8,124,031 $5,047,405 Cost of Sales 1,776,432 1,164,997 5,785,706 3,307,189 ---------- --------- --------- --------- Gross Profit 808,087 668,872 2,338,325 1,740,216 Selling, general and 680,900 501,159 2,021,685 1,414,458 administrative ---------- --------- --------- --------- Income from Operations 127,187 167,713 316,640 325,758 Interest expense - net 19,110 21,638 52,780 60,882 ---------- --------- --------- --------- Income before Income Taxes 108,077 146,075 263,860 264,876 Income Taxes 9,973 6,484 30,629 17,980 ---------- --------- --------- --------- Net Income $ 98,104 $ 139,591 $ 233,231 $ 246,896 ---------- --------- --------- --------- Net Income per share Basic $0.02 $0.03 $0.03 $0.05 Diluted $0.01 $0.02 $0.03 $0.04 -----END PRIVACY-ENHANCED MESSAGE-----