-----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, T9+nPRRdWxE1I28NivYK6vtX2gTpSyudWObFlRyoTwqNpR03g6l4BZchEyjs8H0J WTs+WjDoyToNVSWYlsHdOA== 0001260415-08-000009.txt : 20080214 0001260415-08-000009.hdr.sgml : 20080214 20080214114508 ACCESSION NUMBER: 0001260415-08-000009 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20071231 FILED AS OF DATE: 20080214 DATE AS OF CHANGE: 20080214 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: 08610275 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 dyn1207-10qsb.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, 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 6,737,298 shares of common stock, par value $.0005 per share, outstanding as of December 31, 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 8 ITEM 3. CONTROLS AND PROCEDURES 12 PART II. OTHER INFORMATION 12 ITEM 1. LEGAL PROCEEDINGS 12 ITEM 2. CHANGES IN SECURITIES 12 ITEM 3. DEFAULTS ON SENIOR SECURITIES 12 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12 ITEM 5. OTHER INFORMATION 12 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 13 SIGNATURES 13 2 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS December 31 September 30 2007 2007 (Unaudited) ---------- ---------- Current assets Cash and cash equivalents $ 445,340 $ 496,948 Accounts receivable, net of allowance for doubtful accounts of $105,541 and $98,863 and sales returns of $18,712 and $30,790 for December 31, 2007 and September 30, 2007, respectively 1,372,543 1,284,844 Inventories 2,154,471 1,832,720 Deferred tax asset 216,100 216,100 Prepaid expenses and other current assets 160,361 130,548 ---------- ---------- Total current assets 4,348,815 3,961,160 Property, Plant and Equipment, net 2,379,949 2,436,517 Other Assets 88,011 88,698 ---------- ---------- Total Assets $6,816,775 $6,486,375 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Note payable to bank- Line of credit $798,774 $311,870 Current portion long term debt 115,988 99,237 Accounts payable 471,451 684,208 Accrued expenses 436,662 587,872 ---------- ---------- Total current liabilities 1,822,875 1,683,187 Long-term Debt, net 1,503,954 1,626,980 Stockholders' Equity Common Stock, $.0005 par value, 25,000,000 shares authorized, 7,542,284 and 6,926,683 shares issued, 6,732,124 and 6,116,523 shares outstanding 3,772 3,464 Preferred Stock, $.001 par value, 10,000,000 Shares 710 710 authorized, 710,000 and 710,000 shares Series B shares issued and outstanding for December 31, 2007 and September 30, 2007 respectively, 10% cumulative, convertible Additional paid in capital 3,124,959 2,983,980 Retained earnings 1,346,847 1,174,396 ---------- ---------- 4,476,288 4,162,550 Less 810,160 shares in treasury - at cost (986,342) (986,342) ---------- ---------- Total stockholders' equity 3,489,946 3,176,208 ---------- ---------- Total Liabilities and Stockholders' Equity $6,816,775 $6,486,375 ========== ==========
3 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended December 31 2007 2006 ---------- --------- Net sales $2,814,907 $2,536,297 Cost of sales 1,892,331 1,865,759 ---------- --------- Gross profit 922,576 670,538 Selling, general and administrative 688,097 602,904 expenses ---------- --------- Income from operations 234,479 67,634 Interest expense net 33,523 35,662 ---------- --------- Income before income taxes 200,956 31,972 Income taxes 10,670 9,070 ---------- --------- Net income $190,286 $ 22,902 ========== ========= Net income per common share Basic $0.03 $0.00 Diluted $0.03 $0.00 Weighted average shares outstanding 6,198,183 4,255,041
4 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended December 31 2007 2006 ---------- ----------- Cash flows from operating activities: Net income $ 190,286 $ 22,902 Adjustments to reconcile net income to net cash used in operating activities: Depreciation 88,365 75,363 Amortization expense 4,074 4,803 Allowance for doubtful accounts and sales returns (5,400) 17,231 (Increase) decrease in: Accounts receivable (69,008) 141,404 Inventories (321,752) (272,476) Prepaid expenses and other current asset (34,050) 26,116 Increase (decrease) in: Accounts payable and accrued expenses (363,961) (140,074) ----------- ---------- Net cash used in operating activities (511,446) (124,731) ----------- ---------- Cash flows from investing activities: Acquisition of property, plant and equipment (31,797) (40,293) Cash paid for acquisition of EMF -0- (674,890) ----------- ---------- Net cash used in investing activities (31,797) (715,183) ----------- ---------- Cash flows from financing activities: Issuance of common stock 141,197 132,285 Issuance of preferred stock -0- 700,000 Proceeds from (payments on) long-term debt (23,815) 220,396 Deferred financing costs incurred (12,442) (16,852) Proceeds from (payments on) short-term debt 404,445 (88,473) Preferred stock dividends paid (17,750) (17,500) ----------- ---------- Net cash provided by financing activities 491,635 929,856 ----------- ---------- Net increase(decrease) in cash (51,608) 89,942 Cash - beginning of period 496,948 352,139 ----------- ---------- Cash - end of period $ 445,340 $ 442,081 =========== ========== Supplemental Disclosure of cash flow information: Preferred stock dividends declared $17,750 $35,250 Less dividends payable at December 31 -0- (17,750) ----------- ---------- Net cash paid for dividends $ 17,750 $17,500 =========== ==========
5 DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Basis of Presentation The consolidated balance sheet as of September 30, 2007 was audited and appears in the Form 10-KSB previously filed by the Company. The consolidated balance sheet as of December 31, 2007 and the consolidated statements of operations and cash flows for the three months ended December 31, 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 December 31, 2007 and for all periods presented have been made. Interim operating results are not necessarily indicative of operating results for a full year. 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, 2007 Annual Report on Form 10-KSB previously filed by the Company with the Securities and Exchange Commission. Certain items in the 2006 statement of operations have been restated to conform with the 2007 financial statement presentation. Note 2 - Debt On December 13, 2007, Dynasil's available line of credit with Susquehanna Bank was increased from $200,000 to $475,000. The interest rate was reduced to Susquehanna Bank's prime rate. All other terms remained unchanged. Note 3 - 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, 2007 September 30, 2007 ----------------- ------------------ Raw Materials $1,501,854 $1,145,249 Work-in-Process 250,328 336,203 Finished Goods 402,289 351,268 ----------------- ------------------ $2,154,471 $1,832,720 ================= ================== Note 4 - Net Income Per Share Basic net income per share is computed using the weighted average number of common shares outstanding. The dilutive effects of potential common shares outstanding are included in diluted net earnings per share. 6 DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 5 - Stock Based Compensation 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: December 31,2008 Expected term in years 3 years Risk-free interest rate 4.79% Expected volatility 6.76% Expected dividend yield 0.00% 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 three months ended December 31, 2007, 50,000 stock options were granted at a price of $2.00 per share and -0- options were exercised. The granted stock options cannot be exercised until 2009 and therefore the stock-based compensation expense totaling $1,418 will be recognized at that time if they become exercisable. For three months ended December 31, 2007, total stock-based compensation charged to operations for option-based arrangements amounted to -0-. At December 31, 2007, there was approximately $11,035 of total unrecognized compensation expense related to non-exercisable option-based compensation arrangements under the Plan. The Company cancelled -0- options during the three months ended December 31, 2007. Compensation expense relating to non-employee stock options granted during the three months ended December 31, 2007 were $-0-. During the three months ended December 31, 2007, Mr. Dunham was paid his fiscal year 2007 bonus of $86,711 which is payable two thirds in stock and one third in cash per his employment agreement. For the $57,807 stock portion of the bonus, Mr. Dunham received 256,921 shares by exercising existing warrants at $.225 per share. Mr. Dunham exercised his remaining warrants to purchase 356,706 shares at $.225 per share for a cash payment of $80,259. Note 6 Subsequent Event On January 18, 2008, the Company acquired an optical filter product line from Precision Optics Corporation, Inc. ("POC") located in Gardner, MA for a $250,000 cash payment plus three year royalty agreement. The purchase included the intellectual property, customer base and equipment to produce a variety of high performance optical filters. 7 DYNASIL CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Overview This is the fifth 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. Revenues for the first quarter of fiscal year 2008 which ended December 31, 2007, were $2,814,907, an increase of 11% over revenues of $2,536,297 for the quarter ended December 31, 2006. Net income for the quarter ended December 31, 2007 was $190,286 or $0.03 per share, compared with a net income of $22,902, or $0.00 per share, for the quarter ended December 31, 2006. Strong revenue growth combined with continued process improvements drove those significant gains. EMF had its second consecutive profitable quarter and we have shown significant improvement in productivity, quality, service and process yields. Our other businesses delivered solid profitability gains over the previous year. On December 20, 2007, we announced a letter of intent to acquire an advanced instrument company that, if completed, is expected to more than triple our revenues and profitability. On January 18, we completed the acquisition of the optical filter product line from Precision Optics Corporation which will be fully integrated into our Optometrics location and expected to add about $500,000 of additional revenues per year. Results of Operations Revenues for the three months ended December 31, 2007 were $2,814,907, an increase of 11% over revenues of $2,536,297 for the quarter ended December 31, 2006. The revenue increase came from organic growth in our businesses. Cost of sales for the three months ended December 31, 2007 was $1,892,331 or 67.2% of sales, a decrease of 6.3 percentage points from the three months ended December 31, 2006 of $1,865,759, or 73.5% of sales. The largest driver in the cost of sales improvement was the productivity improvements at EMF. Gross profit for the three months ended December 31, 2007, was $922,576, or 32.8% of sales, an increase of $252,038 over the three months ended December 31, 2006 of $670,538, or 26.5% of sales. Operational improvements at EMF and Optometrics are key factors for the significant gross profit increase. Selling, general and administrative ("SG&A") expenses for the three months ended December 31, 2007, were $688,097 or 24.4% of sales, an increase of 0.7 percentage points from the three months ended December 31, 2006 of $602,904 or 23.7% of sales. The changes in SG&A expenses and percentages resulted primarily from staffing increases to prepare for anticipated future growth. Net interest expense for the three months ended December 31, 2007, was $33,523, compared to $35,662 for the three months ended December 31, 2006. Net income for the three months ended December 31, 2007, was $190,286 or $0.03 in basic earnings per share, which is up $167,384 from net income for the three months ended December 31 2006, of $22,902, or $.00 in basic profit per share. The turn-around of EMF results was the largest factor although our other businesses also delivered significant profitability gains. 8 DYNASIL CORPORATION OF AMERICA The Company had a $10,670 provision for income taxes for the quarter ended December 31, 2007 and a $9,070 provision for the quarter ended December 31, 2006. The income taxes were primarily for Massachusetts. As of September 30, 2007, the Company had approximately $674,200 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 $585,800 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 $51,608 for the three months ended December 31, 2007. The primary sources of cash were net income of $190,286, depreciation and amortization expenses that aggregated $92,439, net borrowings of $380,630, and the issuance of common stock of $141,197. The primary uses of cash were inventory increases of $321,752 and decreases in accounts payable and accrued expenses of $363,961. We took advantage of the opportunity to acquire $240,600 of raw material inventory for a substantial discount at year end and we utilized our line of credit for the purchase. We expect to consume most of that inventory in quarter 2. Accounts payable were abnormally high on September 30, 2007 due to an unusually high $285,000 raw material purchase at year end; these accounts were paid down to normal levels during the quarter. 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, greater than $100,000, in the next six to nine months. Any major business expansions or acquisitions, including the planned acquisition of an advanced instrument company discussed below, likely will require the Company to seek additional debt and/or equity financing. Acquisitions We continue to execute our strategy of significant growth through acquisitions as well as organic growth and effective execution in our businesses. On December 20, 2007, we announced that we had entered into a Letter of Intent to acquire a privately-owned advanced instruments company which, if completed, is expected to more than triple our revenues and profitabilitiy. The company planned to be acquired has high growth potential instruments which are sold into the medical, environmental sensing and quality instrumentation markets. It also has a significant research and development team performing a number of government contracts for Homeland Security and other government agencies. Management expects that the acquisition would be transformational for Dynasil in that it would move us from a predominantly component-based supply company to an instrumentation company with a considerable intellectual property portfolio and extensive technology capability as well as more than tripling expected revenues and profitability. The Letter of Intent plans a Spring 2008 closing date and is contingent on completion of definitive acquisition agreements, due diligence, and obtaining financing; where progress has been satisfactory to date. Dynasil has acquired two other companies during the last three years and has delivered significant performance improvements at all three of its business units. On January 18, 2008, we closed the acquisition of an optical filter product line from Precision Optics Corporation, Inc. ("POC") located in Gardner, MA. The purchase included the intellectual property, customer base and equipment to produce a variety of high performance optical filters that 9 DYNASIL CORPORATION OF AMERICA extend the market offerings of our Optometrics operation in Ayer, MA. In addition to a $250,000 up- front cash payment, there is a royalty agreement on existing business for three years. This purchase fits our strategy of add-on acquisitions to grow our existing businesses. We plan to fully integrate the additional optical filter business into our Ayer, MA location and anticipate incremental revenues of at least $500,000 per year which we expect to be immediately accretive to earnings. The intellectual property and know-how adds a significant capability set to our company. Critical Accounting Policies and Estimates There have been no material changes in our critical accounting policies or critical accounting estimates since September 30, 2007. We have not adopted any 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, 2007. 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 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. 10 DYNASIL CORPORATION OF AMERICA 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, 2007. Stock-Based Compensation Compensation costs are 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. Recently Issued Accounting Standards In December 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141 (revised 2007), Business Combinations, which replaces SFAS No 141. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in- process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS No. 141R is effective for us beginning October 1, 2009 and will apply prospectively to business combinations completed on or after that date. In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements-- An Amendment of ARB No. 51, or SFAS No. 160. SFAS No. 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. We believe that SFAS 160 should not have a material impact on our financial position or results of operations. 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", "Liquidity and Capital Resources" and "Acquisitions" 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 11 DYNASIL CORPORATION OF AMERICA raw materials and management information systems, competition, litigation, need for additional financing, the effect of governmental regulation and other matters. The Company disclaims any intention or obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. ITEM 3 CONTROLS AND PROCEDURES 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 Dynasil's annual meeting was completed on February 5, 2008. At the meeting there are 4,861,933 shares present by Proxy and by shareholders in person, or a total of 79.5% of shares eligible to vote, so a quorum was present. The three Directors, James Saltzman, Craig Dunham, and Cecil Ursprung were reelected each by a vote of 4,863,819 share voted for and 7,271 shares withheld. The shareholders approved the proposal to incorporate the Company as a Delaware Company by a vote of 3,449,816 shares cast for approval, 3,000 shares cast against, and 0 shares abstained from voting. The Shareholders ratified the appointment of Haefele, Flanagan & Company p.c. as the Company's independent public accountants for the 2008 fiscal year by a vote of 4,748,350 shares cast for, 113,583 shares cast against, and 0 shares abstained from voting. The information presented in Items 1 and 2 of Part I of this Report is incorporated herein by reference. On February 14, 2008, the Company issued a press release announcing its financial results for its first quarter ending December 31, 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 the 12 DYNASIL CORPORATION OF AMERICA purposes of Section 18 of the Securities Exchange Act of 1934, as amended ("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 Offer letter to Paul Shultz dated October 26, 2007 as EMF President. 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, 2008 issued by Dynasil Corporation of America announcing its financial results for the first quarter ending December 31, 2007. (b) Reports on Form 8-K On December 26, 2007, a current report on Form 8- K Items 8 for entering into a Letter of Intent On December 18, 2007 to acquire a privately-owned advanced instrumentation company. 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, 2008 --------------------------------- -------------------- Craig T. Dunham, President and CEO /s/ Laura Lunardo DATED: February 14, 2008 --------------------------------- -------------------- Laura Lunardo Chief Financial Officer 13 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 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, 2008 /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 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, 2008 /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 10-QSB for the period ended December 31, 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 February 14, 2008 EX-10 5 dyn10qsb1207ex10-1.txt AGREEMENT Mr. Paul Schulz 518 East Brady Street Butler, PA 16001 October 26, 2007 Dear Paul, It is my pleasure to offer you the position of President for EMF Corporation reporting to me. This offer is conditioned upon your presentation of documentation of your right to work in the United States and passing a drug test. You will be paid $4,615.39 bi-weekly, which calculates to $120,000 annually. 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: 10% of EMF Net Profit Before Tax (NPBT) on the first $400,000 of NPBT 5% of EMF NPBT between $400,000 and $800,000 3% of EMF NPBT greater than $800,000 After these periods, a different bonus calculation system is anticipated. For FY 2008 only, in addition to the bonus outlined above, we propose an incentive bonus of up to $15,000, which would be based upon mutually agreed-upon results for EMF performance in the areas of sales, profits, on-time delivery and quality returns. Bonus payouts are conditioned on your employment as of the date of payout, which we anticipate to be approximately 45 days after the end of the fiscal year. Your bonus can be paid in any combination of cash or Dynasil stock at your discretion. Note that current policies allow each Dynasil employee to purchase up to $5,000 of Dynasil common stock per year at a 15% reduction from market prices. Your vacation entitlement is four weeks to be earned as per our company policy. Your position is part of the Dynasil executive team and, as such, we will require that you execute both a confidentiality agreement and a non-compete agreement upon standard terms. You will become eligible to participate in our employee benefit plans based on length of service under the terms of those plans. These plans and eligibility requirements for enrollment will be explained to you when you report for work. If you accept this offer, please call Sunday Earle @ 800-456-7070 x22 to set an appointment to complete paperwork and begin your orientation and training for your new job. In addition to our standard relocation package, we are suggesting that you be entitled to an additional three months of temporary housing on a month to month basis. With approval in advance, we will work with you regarding total relocations costs. Dynasil/EMF is interested in having you settled in Ithaca as soon as possible. We have a real estate agent, Linda Santos (santos.homes@gmail.com) who will be happy to work with you on finding housing. We offer you a signing/retention bonus in the form of stock options subject to ratification by the Board of Directors for 30,000 Dynasil shares at an exercise price of $2.00/share which will vest two years from date of hire. Further stock options may be granted at the discretion of the Board of Directors. We look forward to welcoming you on board at EMF on November 19. Best regards, /s/ Craig T. Dunham Craig T. Dunham Dynasil Corporation President and CEO I accept the above offer of employment and will report to work on November 19, 2007. /s/ Paul Schultz_____ ______________ Signature Date EX-99 6 dyn10qsb1207ex99-1.txt PRESS RELEASE Contact: Craig Dunham Dynasil Corporation of America Phone: (856) 767-4600 Email: cdunham@Dynasil.com Dynasil Announces First Quarter 2008 Results WEST BERLIN, N.J. February 14, 2008 Dynasil Corporation of America (OTCBB: DYSL.OB), announced the results of operations for its 2008 first quarter ended December 31, 2007. Dynasil is a manufacturer of photonic products including optical materials, components, coatings and specialized instruments. We fabricate optical blanks from synthetic fused silica and other optical materials for the laser, semi-conductor, aerospace and optical instrument industries. Through our subsidiaries, Optometrics Corporation and EMF Corporation, we are a worldwide supplier of optical components including diffraction gratings, thin film filters, laser optics, and specialized instruments. Our capabilities support medical imaging technologies, quality inspection systems, and missile guidance systems, among others. Revenues for the 3 months ended December 31, 2007 were $2.8 million, an increase of 11.0% over revenues of $2.5 million for the 3 months ended December 31, 2006. The net profit for the 3 months ended December 31, 2007 was $190,286, or $0.03 per share, compared with a net profit of $22,902, or $0.00 per share, for the 3 months ended December 31, 2006. Strong revenue growth combined with continued process improvements drove those significant gains. EMF had its second consecutive profitable quarter, and we have shown dramatic improvement in productivity, quality, service, and process yields. Our other businesses delivered solid profitability gains over the previous year. In total, net profits show a seven-fold improvement over last year. On December 20, 2007, we announced a letter of intent to acquire an advanced instrument company that, if completed, is expected to more than triple our revenues and profitability. On January 18, we completed the acquisition of the optical filter product line from Precision Optics Corporation which will be fully integrated into our Optometrics location and is expected to add about $500,000 of additional revenues per year. "We are very pleased with our business units' performance in the first quarter. Through the steady application of Operational Excellence, we continue to grow profitability at an above-average rate," said Craig T. Dunham, President and CEO, "Achieving significant profitability, maintaining a double-digit growth rate in our existing businesses, and potentially tripling the overall company size through acquisitions are all key elements of our strategy in action." About Dynasil: Founded in 1960, Dynasil is a manufacturer of photonic products including optical materials, components, coatings, and instruments for a broad range of applications markets in the medical, industrial, and defense sectors. Its wholly-owned subsidiaries are located in New Jersey, Massachusetts, and New York. 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 ASSETS December 31 September 30 2007 2007 (Unaudited) ---------- ---------- Current assets Cash and cash equivalents $ 445,340 $ 496,948 Accounts receivable, net 1,372,543 1,284,844 Inventories 2,154,471 1,832,720 Deferred tax asset 216,100 216,100 Other current assets 160,361 130,548 ---------- ---------- Total current assets 4,348,815 3,961,160 Property, Plant and Equipment, net 2,379,949 2,436,517 Other Assets 88,011 88,698 ---------- ---------- Total Assets $6,816,775 $6,486,375 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Note payable to bank $798,774 $311,870 Current portion long term debt 115,988 99,237 Accounts payable 471,451 684,208 Accrued expenses and other current liabilities 436,662 587,872 ---------- ---------- Total current liabilities 1,822,875 1,683,187 Long-term Debt, net 1,503,954 1,626,980 Stockholders' Equity 3,489,946 3,176,208 ---------- ---------- Total Liabilities and Stockholders' Equity $6,816,775 $6,486,375 ========== ==========
Dynasil Corporation of America and Subsidiaries Consolidated Statement of Operations Three Months Ended December 31 2007 2006 --------- --------- Sales $2,814,907 $2,536,297 Cost of Sales 1,892,331 1,865,759 --------- --------- Gross Profit 922,576 670,538 Selling, general and 688,097 602,904 administrative --------- --------- Income from Operations 234,479 67,634 Interest expense - net 33,523 35,662 --------- --------- Income before Income Taxes 200,956 31,972 Income Tax expense (benefit) 10,670 9,070 --------- --------- Net Income $190,286 $ 22,902 --------- --------- Net Income per share Basic $0.03 $0.00 Diluted $0.03 $0.00 Weighted average shares outstanding 6,198,183 4,255,041 -----END PRIVACY-ENHANCED MESSAGE-----