-----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, TDrsFrs8nDdEMLGt7Wb3tYoB38EPs8BnITuPTsRLurRbJnjIJfJzs2xOjkRf93xq 4/uu0+0FJAB12fdjZFbFew== 0001260415-09-000011.txt : 20090217 0001260415-09-000011.hdr.sgml : 20090216 20090217141041 ACCESSION NUMBER: 0001260415-09-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20081231 FILED AS OF DATE: 20090217 DATE AS OF CHANGE: 20090217 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27503 FILM NUMBER: 09610115 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 10-Q 1 dyn1208-10qsb.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, 2008 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) Delaware 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 ---- ---- Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Large accelerated filer Accelerated filer ---- ---- Non-accelerated filer Smaller reporting company XX ---- ---- Indicate by check mark whether the registrant is a shell company Yes No XX ---- ----- The Company had 11,367,399 shares of common stock, par value $.0005 per share, outstanding as of February 9, 2009. 1 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES INDEX PAGE ------ PART 1. FINANCIAL INFORMATION 3 Item 1. Financial Statements DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES ----------------------------------------------- CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2008 AND SEPTEMBER 30, 2008 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007 5 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7 Item 2. Management's Discussion and Analysis of Financial 10 Condition and Results of Operations. Item 3. Quantitative and Qualitative Disclosures About 14 Market Risk Item 4T. Controls and Procedures 14 PART II. OTHER INFORMATION 14 Item 1. Legal Proceedings 14 Item 2. Unregistered Sales of Equity Securities and Use 14 of Proceeds Item 3. Defaults Upon Senior Securities 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 15 Item 6. Exhibits 15 Signatures 16 2 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS December 31 September 30 2008 2008 (Unaudited) ---------- ---------- Current assets Cash and cash equivalents $ 2,215,937 $ 3,882,955 Accounts receivable, net of allowance for doubtful accounts of $54,390 and $70,165 and sales returns of $14,819 and $8,200 for December 31, 2008 and September 30, 2008, respectively 4,852,562 3,390,703 Inventories 2,464,403 2,909,730 Deferred tax asset 233,500 233,500 Prepaid expenses and other current assets 268,909 259,896 ---------- ---------- Total current assets 10,035,311 10,676,784 Property, Plant and Equipment, net 2,735,447 2,694,290 Other Assets Intangibles, net 7,633,448 7,767,258 Goodwill 11,054,396 11,054,396 Deferred financing costs, net 73,899 81,136 Other assets 11,351 8,360 ---------- ---------- Total other assets 18,773,094 18,911,150 ---------- ---------- Total Assets $31,543,852 $32,282,224 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Short Term Note Payable $ 63,130 $ 490,117 Current portion of long term debt 1,655,626 1,649,101 Note payable to related party 2,000,000 -0- Accounts payable 663,797 1,026,675 Billings in excess of cost 753,170 216,946 Accrued expenses and other current liabilities 1,158,056 1,440,222 ---------- ---------- Total current liabilities 6,293,779 4,823,061 Long-term Liabilities Long-term debt, net 7,711,587 8,178,420 Note payable to related party -0- 2,000,000 ---------- ---------- Total long-term liabilities 7,711,587 10,178,420 Stockholders' Equity Common Stock, $.0005 par value, 25,000,000 shares authorized, 12,171,795 and 12,142,849 shares issued, 11,361,635 and 11,332,689 shares outstanding 6,087 6,072
3 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued) Preferred Stock, $.001 par value, 10,000,000 Shares authorized, 5,966,000 shares 5,966 5,966 issued and outstanding for December 31, 2008 and September 30, 2008, 10% cumulative, convertible Additional paid in capital 16,168,853 16,122,185 Retained earnings 2,343,922 2,132,862 ---------- ---------- 18,524,828 18,267,085 Less 810,160 shares in treasury - at cost (986,342) (986,342) ---------- ---------- Total stockholders' equity 17,538,486 17,280,743 ---------- ---------- Total Liabilities and Stockholders' Equity $31,543,852 $32,282,224 ========== ==========
4 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended December 31 2008 2007 ---------- ---------- Net sales $8,767,275 $2,814,907 Cost of sales 5,527,568 1,892,331 ---------- ---------- Gross profit 3,239,707 922,576 Selling, general and administrative expenses 2,582,337 688,097 ---------- ---------- Income from operations 657,370 234,479 Interest expense, net 186,797 33,523 ---------- ---------- Income before income taxes 470,573 200,956 Income taxes 114,934 10,670 ---------- ---------- Net income $355,639 $190,286 ========== ========= Basic net income per common share $0.02 $0.03 Diluted net income per common share $0.02 $0.03 Weighted average shares outstanding 11,349,404 6,198,183 5 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended December 31 2008 2007 ---------- ----------- Cash flows from operating activities: Net income $ 355,639 $ 190,286 Adjustments to reconcile net income to net cash used in operating activities: Provision for doubtful accounts and sales returns (9,156) (5,400) Depreciation and amortization 246,058 92,439 (Increase) decrease in: Accounts receivable (1,452,702) (69,008) Inventories 445,327 (321,752) Prepaid expenses and other current assets (12,004) (34,050) Increase (decrease) in: Accounts payable and accrued expenses (108,818) (363,961) ---------- ----------- Net cash used in operating activities (535,656) (511,446) ---------- ----------- Cash flows from investing activities: Purchases of property, plant and equipment (147,648) (31,797) ---------- ----------- Net cash used in investing activities (147,648) (31,797) ---------- ----------- Cash flows from financing activities: Issuance of common stock 46,592 141,197 Proceeds from short-term debt -0- 404,445 Repayment of long-term debt (486,929) (23,815) Repayment of short-term debt (400,366) -0- Deferred financing costs incurred 6,139 (12,442) Preferred stock dividends paid (149,150) (17,750) ---------- ----------- Net cash provided by (used in) financing activities (983,714) 491,635 ---------- ----------- Net decrease in cash and cash equivalents (1,667,018) (51,608) Cash and cash equivalents, beginning 3,882,955 496,948 ---------- ----------- Cash and cash equivalents, ending $2,215,937 $ 445,340 =========== ===========
6 DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Basis of Presentation The consolidated balance sheet as of September 30, 2008 was audited and appears in the Form 10-KSB previously filed by the Company. The consolidated balance sheet as of December 31, 2008 and the consolidated statements of operations and cash flows for the three months ended December 31, 2008 and 2007, 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, 2008 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, 2008 Annual Report on Form 10-KSB previously filed by the Company with the Securities and Exchange Commission. Certain items between goodwill and intangibles in the 2008 balance sheet have been reclassified to conform to 2009 financial statement presentation. Note 2 - Business Acquisition On July 1, 2008, the Company completed its acquisition of all the outstanding capital stock of RMD Research and the specific assets and liabilities of RMD Instruments in transactions that were accounted for as a purchase. The following is the proforma statement of operations for the quarter ended December 31, 2007, assuming the transaction had been consummated at the beginning of the year ended September 30, 2007. Dynasil Corporation of America and Subsidiaries Pro Forma Statement of Operations Quarter Ended December 31, 2007 Net Sales $8,187,493 Cost of Sales 4,469,697 ---------- Gross Profit 3,717,796 Selling, general and administrative expenses 3,082,075 ---------- Income from operations 635,721 Interest (expense), income net (192,169) ---------- Income before income taxes 443,552 Income tax expense 98,530 ---------- Net income 345,022 ========== 7 Basic net income per common share 0.02 Diluted net income per common share 0.02 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 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, 2008 September 30, 2008 ----------------- ------------------ Raw Materials $1,712,946 $2,110,138 Work-in-Process 379,736 467,590 Finished Goods 371,721 332,002 ----------------- ------------------ $2,464,403 $2,909,730 ================= ================== Note 4 - Billings in Excess of Costs Billings in Excess of Costs relates to research and development contracts and consists of billings at provisional contract rates less actual costs plus fees. Note 5 - Net Income Per Share Basic net income per common share is computed by dividing the net income applicable to common shares after preferred dividend requirements, if applicable, by the weighted average number of common shares outstanding during each period. Diluted net income per common share adjusts basic earnings per share for the effects of common stock options, common stock warrants, convertible preferred stock and other potential dilutive common shares outstanding during the periods. For purposes of computing diluted earnings per share, 442,820 and 677,166 common share equivalents were assumed to be outstanding for the quarters ended December 31, 2008 and 2007, respectively. The computation of basic and diluted net income per common share is as follows: December 31, 2008 December 31, 2007 Net income $ 355,639 $ 190,286 Less: Preferred stock dividends $(149,150) ( 17,750) --------- -------- Income allocable to common shareholders $ 206,489 $ 172,536 Weighted average shares outstanding Basic 11,349,404 6,198,183 Effect of dilutive securities Stock Options 34,455 88,813 Stock Warrants -0- -0- Convertible Preferred Stock 408,365 588,353 Diluted average shares outstanding 11,792,225 6,875,349 8 Note 6 - Stock Based Compensation The fair value of the stock options granted was estimated at the date of grant using the Black-Scholes options pricing model. The list of assumptions used for the Black-Scholes option pricing model is presented below with numbers shown for the most recent grant: December 31, 2008 Expected term in years 3 years Risk-free interest rate 3.29% Expected volatility 40.12% Expected dividend yield 0.00% The expected volatility was determined with reference to the historical volatility of the Company's stock. The expected term of options granted represents the period of time for which the options have been granted. 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, 2008, 55,000 stock options were granted at prices ranging from $1.54 to $1.73 per share and 13,000 stock options were exercised. The granted stock options cannot be exercised until 2010, therefore the stock-based compensation expense totaling $12,082 will be recognized at that time if they become exercisable. The 13,000 options exercised had an exercise price of $0.85 per share with $11,050 paid in cash. For three months ended December 31, 2008, total stock-based compensation charged to operations for option-based arrangements amounted to -0-. At December 31, 2008, there was approximately $30,125 of total unrecognized compensation expense related to non-exercisable option-based compensation arrangements under the Plan. The Company cancelled 147,000 options during the three months ended December 31, 2008. Compensation expense relating to non-employee stock options granted during the three months ended December 31, 2008 were $-0-. Note 7 Material Subsequent Events NONE 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management's discussion and analysis should be read in conjunction with our financial statements and the notes thereto in the Company's Form 10-KSB for the fiscal year ending September 30, 2008. General Business Overview This is the second quarter of results after Dynasil Corporation of America ("Dynasil", the "Company" or "we"), acquired the stock of Radiation Monitoring Devices, Inc. ("RMD Research") and specific assets of RMD Instruments, LLC ("RMD Instruments") on July 1, 2008, which are advanced instruments and research companies located in Watertown, MA. RMD Instruments and RMD Research are referred to, together, in this Report as "RMD". Revenues for the first quarter of fiscal year 2009 which ended December 31, 2008 were $8,767,275, an increase of 211% over revenues of $2,814,907 for the quarter ended December 31, 2007. Income from Operations for the quarter was $657,370, an increase of 180% over Income from Operations of $234,479 for the quarter ended December 31, 2007. Net income for the quarter was $355,639 or $0.02 per share, compared with a net income of $190,286, or $0.03 per share, for the quarter ended December 31, 2007. Net Operating Loss carry forwards for federal taxes were exhausted during fiscal year 2008 so first quarter net income was impacted by increased federal taxation as well as higher interest costs which are primarily related to the RMD acquisition. Results of Operations Revenues for the three months ended December 31, 2008 were $8,767,275, an increase of 211%, over revenues of $2,814,907 for the quarter ended December 31, 2007. The revenue increase came largely from the acquisition of RMD. RMD Research's revenues were strong for the quarter while commercial revenues at all locations were down from the previous year. Dynasil management believes that the revenue reductions were primarily due to the worldwide economic slowdown including inventory reductions by some of our commercial customers. We believe inventory reductions will have a smaller impact during the second quarter. However, Dynasil management expects that the second quarter will continue the first quarter pattern of reduced commercial revenues and strong contract research revenues. Management has increased new product and new customer sales efforts with a view to offsetting the anticipated reduced level of product shipments to historical customers. Cost of sales for the three months ended December 31, 2008 was $5,527,568 or 63.0% of sales, an improvement of 4.2 percentage points from the three months ended December 31, 2007 of $1,892,331, or 67.2% of sales. The largest driver of the cost of sales increase was the addition of RMD. Gross profit for the three months ended December 31, 2008, was $3,239,707, or 37.0% of sales, a 251% increase from $922,576, or 32.8% of sales for the three months ended December 31, 2007. The improved margins were due in part to the reduction of manufacturing staffing during the quarter due to the revenue decrease and steps taken to reduce material costs and improve productivity. Selling, general and administrative ("SG&A") expenses for the three months ended December 31, 2008, were $2,582,337 or 29.5% of sales, an increase of 5.1 percentage points from the three months ended December 31, 2007 of $688,097 or 24.4% of sales. The changes in SG&A expenses and percentages resulted primarily from the addition of RMD. Personnel reductions were completed at several locations to reduce administrative costs while maintaining or increasing selling activities. 10 Income from Operations for the three months ended December 31, 2008 was $657,370, an increase of 180% over Income from Operations of $234,479 for the quarter ended December 31, 2007. Income from Operations increased a lower percentage than revenues since the profitability of contract research is lower than our normal commercial profitability. Net interest expense for the three months ended December 31, 2008, was $186,797, compared to $33,523 for the three months ended December 31, 2007. The increase in combined interest expense is primarily related to the additional interest payments resulting from the indebtedness incurred in connection with the RMD acquisition. Net income for the three months ended December 31, 2008, was $355,639 or $0.02 in basic earnings per share, which is up $165,353 from net income for the three months ended December 31 2007, of $190,286, or $.03 in basic earnings per share. When compared to the quarter ended December 31, 2007, net income was impacted by increased federal taxation, higher interest costs primarily related to the RMD acquisition and the impact of general economic conditions. The Company had a $114,934 provision for income taxes for the quarter ended December 31, 2008 and a $10,670 provision for the quarter ended December 31, 2007. Most federal and New Jersey state taxes for the quarter ending December 31, 2007 were offset by utilization of net operating loss carry-forwards. As of September 30, 2008, Dynasil had no further net operating loss carry-forwards to offset future taxable income for federal tax purposes. The Company had approximately $816,720 of net operating loss carry-forwards as of September 30, 2008 to offset certain future New Jersey and New York state taxable income, expiring in various years through 2013. Liquidity and Capital Resources Cash decreased by $1,667,018 for the three months ended December 31, 2008. The primary sources of cash were net income of $355,639, depreciation and amortization expenses that aggregated $246,058, and reduced inventories of $445,327. The primary uses of cash were increased accounts receivables of $1,452,702, payments on long term debt of $486,929, payments aggregating $400,366 to pay all line of credits down to a zero balance, and purchases of machinery and equipment of $147,648. The accounts receivable increase came primarily from RMD Research and additional resources are being deployed to improve that process. Management 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. As of December 31, 2008, the Company had cash of $2,215,937 and available bank line of credit borrowings of $1,215,000. Improvements to the accounts receivable processes for RMD Research are expected to recoup a portion of the cash used for working capital during the first quarter of fiscal year 2009 and management has increased its focus on working capital. The Company has a $2 million note to RMD Instruments, LLC which is scheduled to be repaid in a balloon repayment by October 1, 2009. The Company expects to refinance that note in advance of its due date but the financing markets remain in a difficult situation. Therefore, the Company may not be able to refinance that loan. There are currently no plans for any major capital expenditures in the next six to nine months, except for a $125,000 investment to complete upgrades to manufacturing capabilities at Optometrics. Any major business expansions or acquisitions 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. The acquisition of RMD on July 1, 2008 had a transformational impact on Dynasil with a tripling of revenues as well as significantly increasing our technical capabilities and intellectual property. In the short 11 term, management's primary focus is to maximize value from RMD including identifying RMD technology which can drive Dynasil's growth. We remain active in screening potential acquisition candidates and expect to increase our activity level during the second half of fiscal year 2009 after the completion of certain RMD initiatives. Critical Accounting Policies and Estimates There have been no material changes in our critical accounting policies or critical accounting estimates since September 30, 2008. We have not adopted any accounting policies since September 30, 2008 that have or will have a material impact on our consolidated financial statements. For further discussion of our accounting policies see the "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, 2008 as well as the notes in this Form 10-Q. 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. Revenues from research and development activities consist of up-front fees, research and development funding and milestone payments. Periodic payments for research and development activities and government grants are recognized over the period that the Company performs the related activities under the terms of the agreements. Billings in Excess of Costs relates to research and development contracts and consists of billings at provisional contract rates less actual costs plus fees. Research and Development Costs Research and development ("R&D") costs are expensed as incurred. Equipment purchased with alternative future benefit in R&D activities is capitalized and resulting depreciation is recorded as R&D expense. Additionally, R&D costs include employee salaries directly related to R&D efforts and all other costs directly allocable to R&D efforts, including equipment for which there is no alternative use. 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. Valuations contain certain assumptions concerning estimated future revenues and future expenses. We have determined 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 12 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 collectability 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 these carry forwards will be realized. Valuation of Intangible Assets The SFAS 142 accounting standard requires the valuation of intangible assets after an acquisition for financial statement purposes. Arriving at these valuations can be a complicated and uncertain process which requires significant judgments to be made. The Company now has significant goodwill and other intangible assets from the RMD acquisition that have had a material impact on our financial statements. These intangible assets will require annual testing for impairment which will involve significant management estimates. 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 when vested based on the estimated fair value, at grant date, determined using the Black-Scholes option pricing model. Recently Issued Accounting Standards In December 2007, the FASB issued SFAS No. 141 (revised) ("SFAS 141(R)"), "Business Combinations." The standard changes the accounting for business combinations, including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition- related restructuring cost accruals, the treatment of acquisition related transaction costs, and the recognition of changes in the acquirer's income tax valuation allowance. SFAS 141(R) is effective for the first annual reporting period beginning on or after December 15, 2008. Thus, SFAS 141(R) will be effective for the Company on October 1, 2009, with early adoption prohibited. The Company is evaluating the potential impact of the implementation of Statement 141(R) on its financial position and results of operations. In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of Intangible Assets (FSB FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141(R) and other generally accepted accounting principles. FSP FAS 142-3 is effective for fiscal years, and interim periods within those fiscal years, 13 beginning after December 15, 2008. The Company does not expect the adoption of FSP FAS 142-3 to have a material impact on our consolidated financial statements. Forward-Looking Statements The statements contained in this Quarterly Report on Form 10-Q which are not historical facts, including, but not limited to, certain statements found under the captions "General Business Overview," "Results of Operations," "Acquisitions," 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 the Annual Report on Form 10-KSB and this 10-Q report, including, without limitation, the portions of such reports under the captions referenced above, and the uncertainties set forth from time to time in the Company's 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, consumer acceptance of new products, general economic conditions, consumer trends, costs and availability of raw materials and management information systems, competition, litigation and the effect of governmental regulation. 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 Quantitative and Qualitative Disclosures About Market Risk. Dynasil, as a smaller reporting company, is not required to complete this item. ITEM 4T 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. Because RMD Research and RMD Instruments were acquired by the company on July 1, 2008, they were not required to be included in management's assessment of internal control over financial reporting for the quarter ending 12-31-08 and therefore, management excluded them from its assessment. PART II OTHER INFORMATION - ------------------ ITEM 1 Legal Proceedings NONE ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds NONE 14 ITEM 3 Defaults Upon Senior Securities NONE ITEM 4 Submission of Matters to a Vote of Security Holders Dynasil's annual meeting of stockholders was held on February 3, 2009. At the meeting there were 10,203,806 shares present by Proxy and by shareholders in person, or a total of 89.9% of shares eligible to vote, so a quorum was present. The four current Directors, James Saltzman, Craig Dunham, Cecil Ursprung and Peter Sulick, were reelected. Each Director received 10,158,812 shares voted for and, respectively, 9,921, 12,021, 10,161, and 10,161 shares withheld. The stockholders also approved a proposal to amend the 1999 Stock Incentive Plan to increase the authorized number of shares that may be issued under that Plan from 2,250,000 shares to 3,750,000 shares by a vote of 8,228,995 in favor and 8,110 shares cast against, with no abstentions. The stockholders also approved a proposal to amend the Company's Certificate of Incorporation to increase the authorized number of common shares to 40,000,000 and the authorized number of preferred shares to 15,000,000 by a vote of 8,222,755 in favor and 14,350 shares cast against, with no abstentions. The stockholders also ratified the appointment of Haefele, Flanagan & Company p.c. as the Company's independent public accountants for the 2009 fiscal year by a vote of 10,158,572 shares in favor, 3,210 shares against and 6,951 shares abstaining. ITEM 5 Other Information NONE ITEM 6 Exhibits (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 February 17, 2009 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 October 6, 2008, a current report on Form 8-K for Items 1.01, 2.03, 5.02, and 8.01 providing a business update to shareholders and disclosing a new financing agreement. On December 15, 2008, a current report on Form 8-K for Item 5.02 reporting that Dynasil had named Mr. Paul Weaver of Moorestown, NJ as Chief Financial Officer of Dynasil. 15 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 17, 2009 --------------------------------- -------------------- Craig T. Dunham, President and CEO /s/ Paul J. Weaver DATED: February 17, 2009 --------------------------------- -------------------- Paul J. Weaver, 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-Q 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 registrant as of, and for, the periods presented in this report; 4. The registrant'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 registrant 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 registrant, 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant'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 d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): DYNASIL CORPORATION OF AMERICA 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 registrant'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 registrant's internal control over financial reporting. Date: February 17, 2009 /s/ Craig T Dunham ------------------ ------------------------ Craig T Dunham President and Chief Executive Officer 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, Paul Weaver, certify that: 1. I have reviewed this Form 10-Q 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 registrant as of, and for, the periods presented in this report; 4. The registrant'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 registrant 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 registrant', 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant'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 d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant'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 registrant'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 registrant's internal control over financial reporting. Date: February 17, 2009 /s/ Paul J. Weaver ----------------------------- Paul J. Weaver Chief Financial Officer 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 10Q for the period ended December 31, 2008 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 Paul J. Weaver, 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 to the best of my knowledge: (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/ Paul J. Weaver ------------------- Paul J. Weaver Chief Financial Officer February 17, 2009 EX-99 5 dyn1208-10qsbex99.txt PRESS RELEASE Contact: Craig Dunham Dynasil Corporation of America Phone: (856) 767-4600 Email: cdunham@Dynasil.com Dynasil Announces First Quarter 2009 Results WEST BERLIN, N.J. - February 17, 2009 - Dynasil Corporation of America (OTCBB: DYSL.OB), announced the results of operations for its first quarter of fiscal year 2009 ended December 31, 2008. Dynasil derives the majority of its revenue from contract research for government and private industry and is a manufacturer of specialized instruments and photonic products including optical materials, components and coatings. The Company serves a broad range of applications markets in the medical, industrial, and homeland security/ defense sectors. Revenues for the quarter ended December 31, 2008 more than tripled to $8.8 million compared to revenues of $2.8 million for the quarter ended December 31, 2007. Income from Operations for the quarter nearly tripled to $657,370 compared to $234,479 for the quarter ended December 31, 2007. Net income for the quarter was $355,639 or $0.02 per share, compared with net income of $190,286, or $0.03 per share, for the quarter ended December 31, 2007. This is the second quarter since the acquisition of Radiation Monitoring Devices, Inc. and certain assets of RMD Instruments, LLC (together, "RMD") on July 1, 2008, which was the key driver for the tripling of revenues. The current recession resulted in reduced commercial product revenues and impacted commercial product profitability. Contract research revenues continued to grow and RMD has significantly increased Dynasil technical capabilities and intellectual property. Net Operating Loss carry-forwards for federal taxes were exhausted during fiscal year 2008 so first quarter net income was impacted by increased federal tax provisions as well as the higher interest costs related to the RMD acquisition. "Given overall economic conditions, we are pleased that we were able to triple revenues and produce solid profits for the quarter," said Craig T. Dunham, President and CEO. "We have taken steps to reduce costs while increasing sales and marketing activities. As we look to the future, we are targeting the commercialization of RMD's new technology for applications such as sensors for improved medical imaging, non-destructive structural testing and Homeland Security's detection of nuclear materials. We continue to execute our strategy of significant and profitable growth through organic growth, commercialization of our broad research portfolio and acquisitions." 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, New York and Massachusetts. This news release may contain forward-looking statements usually containing the words "believe," "expect," "plan", "target", "intend" or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. Future results of operations, projections, and expectations, which may relate to this release, involve certain risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, the factors detailed in the Company's Annual Report or Form 10-KSB and in the Company's other Securities and Exchange Commission filings, continuation of existing market conditions and demand for our products. Dynasil Corporation of America and Subsidiaries Consolidated Balance Sheets December September 31 30 2008 2008 ASSETS (Unaudited) ----------- ----------- Current assets Cash and cash equivalents $2,215,937 $3,882,955 Accounts receivable, net 4,852,562 3,390,703 Inventories 2,464,403 2,909,730 Deferred tax asset 233,500 233,500 Other current assets 268,909 259,896 ----------- ----------- Total current assets 10,035,311 10,676,784 Property, plant and equipment, net 2,735,447 2,694,290 Other Assets Intangibles, net 7,633,448 7,767,258 Goodwill 11,054,396 11,054,396 Deferred financing costs, net 73,899 81,136 Other assets 11,351 8,360 ----------- ----------- Total other assets 18,773,094 18,911,150 ----------- ----------- Total Assets $31,543,852 $32,282,224 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short Term Note Payable 63,130 490,117 Current portion of long-term 1,655,626 1,649,101 debt Note payable to related party 2,000,000 -0- Accounts payable 633,797 1,026,675 Billings in excess of cost 753,170 216,946 Accrued expenses and other 1,158,056 1,440,222 current liabilities ----------- ----------- Total current liabilities 6,293,779 4,823,061 Long-term Liabilities Long-term debt, net 7,711,587 8,178,420 Note payable to related party -0- 2,000,000 ----------- ----------- Total long-term liabilities 7,711,587 10,178,420 Stockholders' Equity 17,538,486 17,280,743 Total Liabilities and Stockholders' $31,543,852 $32,282,224 Equity =========== =========== DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended December 31 2008 2007 Sales $8,767,275 $2,814,907 Cost of Sales 5,527,568 1,892,331 --------- --------- Gross Profit 3,239,707 922,576 Selling, general and 2,582,337 688,097 administrative --------- --------- Income from Operations 657,370 234,479 Interest expense - net 186,797 33,523 --------- --------- Income before Income Taxes 470,573 200,956 Income Tax expense 114,934 10,670 --------- --------- Net Income $355,639 $190,286 ========= ========= Net Income per share Basic $0.02 $0.03 Diluted $0.02 $0.03 Weighted average shares 11,349,404 6,198,183 outstanding -----END PRIVACY-ENHANCED MESSAGE-----