-----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, UN5B9jziGgWBtgkaumVSwXoe7mY+9f8iB8l4OtjLem2++/NyRXZQqKQJ54VW41oy EW1ffRYyZRON81BGwpZAGw== 0001260415-10-000009.txt : 20100216 0001260415-10-000009.hdr.sgml : 20100215 20100216091306 ACCESSION NUMBER: 0001260415-10-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20091231 FILED AS OF DATE: 20100216 DATE AS OF CHANGE: 20100216 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: 10602634 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 dyn10q123109.txt DYNASIL CORPORATION OF AMERICA FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) XX QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2009 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 registrant 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) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [x] 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[x] The Company had 12,520,390 shares of common stock, par value $.0005 per share, outstanding as of February 8, 2010. 1 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES INDEX PART 1. FINANCIAL INFORMATION PAGE 3 ------ Item 1. Financial Statements DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES ----------------------------------------------- CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2009 AND SEPTEMBER 30, 2009 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008 5 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008 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 2009 2009 (Unaudited) ---------- ---------- Current assets Cash and cash equivalents $ 2,212,093 $3,104,778 Accounts receivable, net of allowance for doubtful accounts of $114,020 and $123,853 and sales returns of $23,405 and $18,916 for December 31, 2009 and September 30, 2009, respectively 5,626,191 4,053,742 Inventories 2,162,265 2,371,516 Deferred tax asset 290,100 290,100 Prepaid expenses and other current assets 326,990 306,848 ---------- ---------- Total current assets 10,617,639 10,126,984 Property, Plant and Equipment, net 2,676,642 2,744,724 Other Assets Intangibles, net 7,098,230 7,232,035 Goodwill 11,054,396 11,054,396 Deferred financing costs, net 60,490 64,637 ---------- ---------- Total other assets 18,213,116 18,351,068 ---------- ---------- Total Assets $31,507,397 $31,222,776 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current portion of long term debt $ 1,775,585 $1,749,524 Note to a related party 2,000,000 -0- Accounts payable 880,472 773,837 Accrued expenses and other current liabilities 1,291,324 1,111,342 Income taxes payable 153,564 507,122 Billings in excess of costs 480,548 60,448 Dividends payable 131,400 149,150 ---------- ---------- Total current liabilities 6,712,893 4,351,423 Long-term Liabilities Long-term debt, net 5,634,703 6,386,796 Note payable to related party -0- 2,000,000 ---------- ---------- Total long-term liabilities 5,634,703 8,386,796 Stockholders' Equity Common Stock, $.0005 par value, 40,000,000 shares authorized, 13,304,616 and 12,250,257 shares issued, 12,494,456 and 11,440,097 shares outstanding 6,643 6,125
3 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued) Preferred Stock, $.001 par value, 10,000,000 Shares authorized, 5,256,000 and 5,966,000 5,256 5,966 shares issued and outstanding for December 31, 2009 and September 30, 2009, 10% cumulative, convertible Additional paid in capital 16,592,163 16,364,388 Retained earnings 3,564,956 3,094,420 ---------- ---------- 20,169,018 19,470,899 Deferred Compensation - Common Stock (22,875) -0- Less 810,160 shares in treasury - at cost (986,342) (986,342) ---------- ---------- Total stockholders' equity 19,159,801 18,484,557 ---------- ---------- Total Liabilities and Stockholders' Equity $31,507,397 $31,222,776 ========== ==========
4 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended December 31 2009 2008 ---------- --------- Net revenues $9,936,767 $8,767,275 Cost of revenues 6,051,951 5,527,568 ---------- --------- Gross profit 3,884,816 3,239,707 Selling, general and administrative expenses 2,812,980 2,582,337 ---------- --------- Income from operations 1,071,836 657,370 Interest expense, net 162,441 186,797 ---------- --------- Income before income taxes 909,395 470,573 Income taxes 295,626 114,934 ---------- --------- Net income $613,769 $355,639 ========== ========= Basic net income per common share $0.04 $0.02 Diluted net income per common share $0.04 $0.02 Weighted average shares outstanding Basic 11,791,820 11,349,404 Diluted 11,968,319 12,328,159 5 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended December 31 2009 2008 ---------- ----------- Cash flows from operating activities: Net income $ 613,769 $ 355,639 Adjustments to reconcile net income to net cash used in operating activities: Stock compensation expense 54,676 27,124 Provision for doubtful accounts and sales returns (5,345) (9,156) Depreciation and amortization 251,866 246,058 (Increase) decrease in: Accounts receivable (1,567,102) (1,452,702) Inventories 209,250 445,327 Prepaid expenses and other current assets (47,690) (31,754) Increase (decrease) in: Accounts payable and accrued expenses 268,908 (660,765) Income taxes payable (353,559) 15,723 Billings in Excess of Cost 420,100 536,224 ---------- ----------- Net cash used in operating activities (155,127) (528,282) ---------- ----------- Cash flows from investing activities: Purchases of property, plant and equipment (45,826) (147,648) ---------- ----------- Net cash used in investing activities (45,826) (147,648) ---------- ----------- Cash flows from financing activities: Issuance of common stock 177,533 39,218 Repayment of long-term debt (726,032) (486,929) Repayment of short-term debt -0- (400,366) Deferred financing costs incurred -0- 6,139 Preferred stock dividends paid (143,233) (149,150) ---------- ----------- - ---------- Net cash used in financing activities (691,732) (991,088) ---------- ----------- Net decrease in cash and cash equivalents (892,685) (1,667,018) Cash and cash equivalents, beginning 3,104,778 3,882,955 ---------- ----------- Cash and cash equivalents, ending $2,212,093 $2,215,937 =========== ===========
6 DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Basis of Presentation The consolidated balance sheet as of September 30, 2009 was audited and appears in the Form 10-K previously filed by the Company. The consolidated balance sheet as of December 31, 2009 and the consolidated statements of operations and cash flows for the three months ended December 31, 2009 and 2008, 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, 2009 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, 2009 Annual Report on Form 10-K previously filed by the Company with the Securities and Exchange Commission. Reclassifications Certain amounts as previously reported have been reclassified to conform to the current year financial statement presentation. Note 2 - Inventories Inventories are stated at the lower of average cost or market. Cost is determined using the first-in, first-out (FIFO) method. Inventories consist 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, 2009 September 30, 2009 ----------------- ------------------ Raw Materials $1,473,290 $1,374,134 Work-in-Process 417,279 550,151 Finished Goods 271,696 447,231 ----------------- ------------------ $2,162,265 $2,371,516 ================= ================== Note 3 - 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. 7 Note 4 - Net Income Per Share Basic net income per common share is computed by dividing the net income applicable to common shares after preferred stock 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, convertible preferred stock and other potential dilutive common shares outstanding during the periods. For purposes of computing diluted earnings per share, 176,499 and 978,755 common share equivalents were assumed to be outstanding for the quarters ended December 31, 2009 and 2008, respectively. The effect of assumed conversion of the Series C Preferred Stock into 2,102,400 common shares, as well as certain stock options, was antidilutive and therefore excluded from the computations. The computation of basic and diluted net income per common share is as follows: Calculation of Net Income for Basic Earnings per Share December 31, 2009 December 31, 2008 ----------------- ----------------- Net income $ 613,769 $ 355,639 Less: Preferred stock dividends $(143,233) (149,150) ----------------- ----------------- Income allocable to common shareholders $ 470,536 $ 206,489 Calculation of Net Income for Diluted Earnings per Share December 31, 2009 December 31, 2008 ----------------- ----------------- Net income $ 613,769 $ 355,639 Less: Preferred stock dividends $(143,233) (131,400) ----------------- ----------------- Net Income for Dilutive Earnings per Share $ 470,536 $ 224,239 Weighted average shares outstanding December 31, 2009 December 31, 2008 Basic 11,791,820 11,349,404 Effect of dilutive securities Stock Options 176,499 34,455 Convertible Preferred Stock -0- 944,300 ----------------- ----------------- Diluted average shares outstanding 11,968,319 12,328,159 Note 5 - 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: November 30, 2009 Expected term in years 3 years Risk-free interest rate 4.12% Expected volatility 60.75% Expected dividend yield 0.00% 8 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, 2009, 570,000 stock options were granted at prices ranging from $3.19 to $4.06 per share and 81,966 stock options were exercised. Of the granted stock options, 550,000 vest quarterly beginning in January 2010. The remaining 20,000 stock options granted do not vest until 2011. As a result, the stock-based compensation expense totaling $268,565 will be recognized at that time if they become exercisable. Of the options exercised, 80,000 had an exercise price of $2.00 per share with $160,000 paid in cash. The remaining 1,966 stock options exercised had an exercise price of $0.60 per share with $1,179.60 paid in cash. For three months ended December 31, 2009, total stock-based compensation charged to operations totaled $54,676 consisting of $1,418 from previously granted options that vested during this period, $27,501 from Director stock options, and $25,757 for stock grants. At December 31, 2009, there was approximately $331,661 of total unrecognized compensation expense related to non-exercisable option-based compensation arrangements under the Plan. The Company cancelled 20,000 options during the three months ended December 31, 2009. Compensation expense relating to the stock grants during the three months ended December 31, 2009 of $25,757, comprised of 6,200 shares granted at $2.80, 300 shares granted at $2.99 and 3,769 shares granted at $1.99 per share. Note 6 - Equity As part of the July 1, 2008 acquisition of specific assets of RMD Instruments, LLC, the Company issued one million Dynasil common stock shares as part of the purchase price. The Seller's members may tender the shares of the acquisition stock to Dynasil for repurchase by it at a repurchase price of $2.00 per share during a two year period starting July 1, 2010, upon no less than ninety (90) days prior notice to the Company. On November 30, 2009, Dynasil issued an aggregate of 946,431 shares of its Common Stock, $.0005 par value per share, as a result of the exercise of the conversion rights by holders of 710,000 shares of its Series B 10% Cumulative Convertible Preferred Stock (the "Series B Preferred Shares"). Dynasil had previously called all of the Series B Preferred Shares for redemption on November 30, 2009. 100% of the Series B preferred stock was converted to common stock which eliminates dividend payments of $71,000 on an annual basis. Note 7 - Segment Reporting Dynasil's business breaks down into two segments: optics/photonics products and instruments and contract research. Within these segments, there is a segregation of reportable units based upon the organizational structure used to evaluate performance and make decisions on resource allocation, as well as availability and materiality of separate financial results consistent with that structure. The optics/photonics products and instruments segment manufactures optical materials, components, coatings and specialized instruments used in various applications in the medical, industrial, and homeland security/defense sectors. Our contract research segment is one of the largest small business participants in U.S. government-funded research. 9 Segment Financial Information Three Months Ended December 31 Segment 2009 2008 - -------- ----- ----- Contract Research Revenues $ 6,008,917 $ 4,956,957 Income from Operations 620,047 460,876 Income as a percent of sales 10.3% 9.3% Photonics Products and Instruments Revenues $ 3,927,850 $ 3,810,418 Income from Operations 451,789 196,494 Income as a percent of sales 11.5% 5.2% Total Revenues $ 9,936,767 $ 8,767,275 Income from Operations 1,071,856 657,370 Income as a percent of sales 10.8% 7.5% Note 8 - Income Taxes The FASB's guidance on income taxes requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on differing treatment of items for financial reporting and income tax reporting purposes. The deferred tax balances are adjusted to reflect tax rates by tax jurisdiction, based on currently enacted tax laws, which will be in effect in the years in which the temporary differences are expected to reverse. We have provided deferred income tax benefits on net operating loss carry-forwards to the extent we believe we will be able to utilize them in future tax filings. The FASB's guidance also prescribes a comprehensive model for how a company should measure, recognize, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. The Company recognizes the tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Interest and penalties, if incurred, are included in interest and financing expense. The Company's income tax filings are subject to audit by various taxing authorities. The Company's open audit periods are 2005 - 2008. There are no material uncertain positions. Note 9 - Subsequent Events The Company has performed an evaluation of subsequent events through February 16, 2010, which is the date the financial statements were issued. Dynasil's Line of Credit of $1,000,000 with Susquehanna Bank has been extended to April 30, 2010. The interest rate on the Line of Credit was changed from the bank's prime commercial rate of interest with no minimum rate to the bank's prime rate of interest with a minimum interest rate of 4%. As of 2/16/10 and 12/31/09, the entire $1,000,000 Line of Credit was available for Company use. The Company is currently in discussions to increase and renew the Line of Credit. 10 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 Dynasil Corporation of America ("Dynasil", the "Company" or "we") Form 10-K for the fiscal year ending September 30, 2009. General Business Overview Revenues for the first quarter of fiscal year 2009 which ended December 31, 2009 were $9.9 million, an increase of 13.3% over revenues of $8.8 million for the quarter ended December 31, 2008. Income from Operations for the quarter was $1.07 million, an increase of 63% over Income from Operations of $0.66 million for the quarter ended December 31, 2008. Net income for the quarter was $613,769 or $0.04 per share, compared with a net income of $355,639, or $0.02 per share, for the quarter ended December 31, 2008. The gains in profitability were primarily driven by the 13.3% revenue increase as well as improved profitability for our Optics/Photonics Products and Instruments Segment ("Products and Instruments"). Overall, our Contract Research Segment ("Contract Research") continues to grow as interest in our unique research capabilities has increased. In addition, we have been experiencing moderate revenue improvement in our Products and Instruments segment which is translating into higher operating margins given the cost reductions implemented over the last year. We continue to focus on the commercialization of our extensive technology portfolio and have increased our acquisition activities. Results of Operations Revenue for the three months ended December 31, 2009 was $9,936,767, a 13.3% increase from $8,767,275 for the three months ended December 31, 2008. The revenue increase was driven by a 21.1% Contract Research increase and a 3.1% Products and Instruments increase. We continue to be successful at winning Contract Research projects and management is seeing a modest rebound in shipments and orders for Products and Instruments. Gross profit for the three months ended December 31, 2009 was $3,884,816, or 39.1% of sales, a 19.9% increase from $3,239,707, or 37.0% of sales for the three months ended December 31, 2008. The largest drivers of the gross profit percentage improvement were the revenue mix change arising from a large Contract Research revenue increase and cost reductions and efficiency improvements over the last twelve months which improved gross margin percentages for Products and Instruments. Selling, general and administrative ("SG&A") expenses for the three months ended December 31, 2009, were $2,812,980 or 28.3% of sales, a decrease of 1.2 percentage points from the three months ended December 31, 2008 of $2,582,337 or 29.5% of sales. The largest driver for the SG&A percentage improvement was the cost savings implemented for Products and Instruments over the last twelve months. Income from Operations for the three months ended December 31, 2009 was $1,071,836, an increase of 63% over Income from Operations of $657,370 for the quarter ended December 31, 2008. The increased Income from Operations was driven primarily by increased revenues coupled with the continued management focus on cost reductions and the lowering of the overall cost structure over the last year. Net interest expense for the three months ended December 31, 2009, was $162,441, compared to $186,797 for the three months ended December 31, 2008. The decrease in combined interest 11 expense was impacted by the repayment of $2.9 million of debt since September 30, 2008 which includes $0.7 million which was repaid during the quarter ending December 31, 2009. Net income for the three months ended December 31, 2009, was $613,769 or $0.04 in basic earnings per share, which is up 72% from net income for the three months ended December 31 2008, of $355,639, or $0.02 in basic earnings per share. When compared to the quarter ended December 31, 2008, net income was primarily driven by improved operating results. The Company had a $295,626 provision for income taxes for the quarter ended December 31, 2009 and a $114,934 provision for the quarter ended December 31, 2008. The tax provision is higher due to increased net income results. Liquidity and Capital Resources Cash decreased by $892,685 for the three months ended December 31, 2009 to $2,212,093. The primary sources of cash were net income of $613,769, depreciation and amortization expenses that aggregated to $251,866, inventory reductions of $209,250, accounts payable/accrued expense increase of $268,908, billings in excess of costs increase of $420,100, and issuance of common stock of $177,533. Accounts receivable was the largest use of cash with an increase of $1,567,102, coming primarily from Contract Research which was driven by higher revenues and several large customer payments that arrived after December 31, 2009. A second large cash use was the repayment on long term debt in the amount of $726,032. Payments on long term debt included the monthly payments on term and mortgage debt of $426,032. In addition, a mandatory principal repayment of $300,000 was made to Susquehanna Bank based on the earning recapture in terms and conditions contained in the Term Loan and Line of Credit Loan Agreement dated July 1, 2008 (the "Term Loan Agreement"). Also, income taxes payable were reduced by $353,559. 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, 2009, the Company had cash of $2.2 million and available bank line of credit borrowings of $1 million, which management is currently in discussions to extend beyond April 30, 2010. The inability to extend the bank line of credit could cause a cash shortage, although the line is not currently utilized. In addition, a reoccurring worldwide economic slow- down could significantly impact the Company's revenues and profits so that a returning recession could cause a cash shortage. The Company has a $2 million note payable to RMD Instruments, LLC which is scheduled to be repaid by October 1, 2010 and the 1,000,000 share stock repurchase which is explained in Note 6 to the financial statements in this 10-Q. Also, depending on its fiscal 2010 net income, the Company may be required to repay Susquehanna Bank during fiscal year 2010 up to $500,000 under the Term Loan Agreement. There are currently plans for customary capital expenditures which would most likely be funded out of operating cash flow. 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 Radiation Monitoring Devices, Inc. ("RMD Research") and specific assets of RMD Instruments, LLC ("RMD Instruments" on July 1, 2008 (collectively, "RMD") had a transformational impact on Dynasil with a tripling of revenues as well as significantly increasing our technical capabilities and intellectual property. Management has now essentially completed the planned integration of RMD and is focused on commercialization of RMD technology either internally or through acquisitions. Therefore, the Company has recently refocused on seeking possible acquisitions. 12 Critical Accounting Policies and Estimates There have been no material changes in our critical accounting policies or critical accounting estimates since September 30, 2009. We have not adopted any accounting policies since September 30, 2009 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-K for the fiscal year ended September 30, 2009 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. Government funded services revenue from cost plus contracts are recognized as costs are incurred on the basis of direct costs plus allowable indirect costs and an allocable portion of the contracts' fixed fees. Revenues from fixed- type contracts are recognized under the percentage of completion method with estimated costs and profits included in contract revenue as work is performed. Revenues from time and materials contracts are recognized as costs are incurred at amounts represented by agreed billing amounts. Recognition of losses on projects is taken as soon as the loss is reasonably determinable. The Company has no current accrual provision for potential losses on existing research projects based on Management expectations as well as historical experience. The majority of the Companies' contract revenue is derived from the United States government and government related contracts. Such contracts have certain risks which include dependence on future appropriations and administrative allotment of funds and changes in government policies. Costs incurred under United States government contracts are subject to audit. The Companies believe that the results of such audits will not have a material adverse effect on its financial position or its results of operations. Valuation of Long-Lived Assets, Intangible Assets and Goodwill We assess the impairment of long-lived assets, intangible assets and goodwill whenever events or changes in circumstances indicate that the carrying value of such assets may not be fully recoverable or that their useful lives are no longer appropriate. Reviews are performed to determine whether the carrying values of the assets are impaired based on comparison to the discounted expected future cash flows identifiable to such long-lived and amortizable intangible assets. If the comparison indicates that impairment exists, the impaired asset is written down to its fair value. We have determined that there is no indication of material impairment to our long-lived and intangible assets. Goodwill is tested for impairment on an annual basis and between annual tests in certain circumstances, and written down when impaired. No impairment of goodwill was identified based on the annual impairment review during the fourth quarter of fiscal year 2009. 13 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 collectability of our accounts receivable and our future operating results. Stock-Based Compensation We account for stock-based compensation using fair value. 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. Income Taxes As part of the process of preparing our consolidated financial statements, we are required to estimate our income tax provision (benefit) in each of the jurisdictions in which we operate. This process involves estimating our current income tax provision (benefit) together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. 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 carryforwards will be realized, and has adjusted the valuation allowance accordingly. New Accounting Standards Recently Adopted Standards In June 2008, the Financial Accounting Standards Board ("FASB") issued certain provisions of Accounting Standards Codification ("ASC") 260, "Earnings per Share", which state that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are to be included in the computation of earnings per share under the two-class method as described in ASC 260. These provisions were effective for fiscal years beginning after December 15, 2008 (October 1, 2009 for the Company) with early adoption prohibited. These provisions require all presented prior-period earnings per share data to be adjusted. The Company adopted ASC 260, as of October 1, 2009. The adoption of these provisions did not have a material effect on the consolidated financial statements. Recently Issued Accounting Standards In August 2009, the FASB issued changes to measuring liabilities at fair value. The standard changes provide clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure 14 fair value of such liability using one or more of the techniques prescribed by the update. These changes were effective for the Company on October 1, 2009. The adoption of this standard did not have an impact on the Company's consolidated financial statements. In September 2009, the FASB issued authoritative guidance on revenue arrangements with multiple deliverables. This guidance provides another alternative for establishing fair value for a deliverable. When vendor specific objective evidence or third-party evidence for deliverables in an arrangement cannot be determined, companies will be required to develop a best estimate of the selling price for separate deliverables and allocate arrangement consideration using the relative selling price method. This guidance is effective October 1, 2010, and early adoption is permitted. The Company is currently evaluating the potential impact of this guidance on its financial position and results of operations. In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance will be effective for interim and annual reporting periods beginning after December 15, 2009. The Company does not expect the adoption of this guidance will have a material effect on its 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 "Description of Business," "General Business Overview," "Results of Operations," "Dynasil's Strategy," and "Liquidity and Capital Resources" above, are forward-looking statements that involve a number of risks and uncertainties. The actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are the risks and uncertainties discussed in this Quarterly Report on Form 10-Q, 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 and Chief Accounting 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. 15 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 On or about May 6, 2008, the Company's EMF subsidiary ("EMF") received a Summons with Notice (the "Summons") filed on January 18, 2008 in the Supreme Court of the State of New York, County of Albany, by the New York State Attorney General on behalf of the State of New York Workers' Compensation Board (the "Board"), as plaintiff. The Summons required EMF, which is one of a large number of defendants, to appear in the action commenced by the Board alleging its entitlement to recover previously billed and unpaid assessments aggregating approximately $1 million and other, but as then undetermined, assessments that in the aggregate may exceed $19 million from the defendants based upon their participation on a joint and several liability basis in a Manufacturing Self Insurance Trust that terminated on or about August 31, 2007. In order to minimize further legal expenditures, EMF has accepted a settlement offer from the State that calls for EMF to pay $22,704.33. The settlement offer is contingent upon the State obtaining enough acceptances from other plaintiffs to close out the case. Although the action is not fully resolved, EMF has a reserve equal to the proposed settlement and believes that its ultimate liability in this matter will not have a material adverse effect on its financial condition. ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds NONE 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, 2010. At the meeting 11,051,106 of the outstanding shares of common stock were present by proxy or in person, representing 89.11% of shares eligible to vote. The slate of seven (7) nominees for the Director positions was an increase of two (2) positions, primarily designed to broaden the business experience on the Board and to increase the number of independent directors available to serve on corporate governance committees, to help the Company get positioned for a potential move to the NASDAQ Exchange within the next one to two years. The seven (7) nominees for director were elected: Peter Sulick, James Saltzman, Craig Dunham, Cecil Ursprung, Gerald Entine, Michael Joyner and David Kronfeld. Each nominee for director received at least 8,320,311 of the shares voted for his election and, no more than 86,630 shares were withheld, resulting in each nominee receiving at least 99.0% of the favorable votes. The persons elected as directors included two new directors: Dr. Michael Joyner, Associate Dean for Research at Mayo Clinic, and Mr. David Kronfeld, founder of the venture capital firm JK&B Capital. The stockholders also approved the 2010 Stock Incentive Plan to replace the expired 1999 Stock Incentive Plan by the vote of 8,221,367 in favor, 138,584 against and 17,040 abstaining. The stockholders also ratified the appointment of Haefele, Flanagan & Company p.c. as the Company's independent public accountants for the 2010 fiscal year by the vote of 11,009,851 shares in favor, 13,297 against and 27,958 abstaining. 16 ITEM 5 Other Information NONE ITEM 6 Exhibits (a) Exhibits and index of Exhibits 10.1 Line of Credit Extension (Change in Terms Agreement) with Susquehanna Bank extending the Line of Credit maturity on the $1,000,000 Line of Credit from January 31, 2010 to April 30, 2010 and changing the interest rate to a floor rate of 4.0%. 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 16, 2010 issued by Dynasil Corporation of America announcing its financial results for the first quarter ending December 31, 2009. (b) Reports on Form 8-K On November 30, 2009, a current report on Form 8-K for Items 3.02, 5.02, 8.01 and 9.01 reporting that Dynasil had issued an aggregate of 946,431 shares of its Common Stock, as a result of the exercise of the conversion rights by holders of 710,000 shares of its Series B 10% Cumulative Convertible Preferred Stock and had named Mr. Richard A. Johnson as Chief Financial Officer of Dynasil. On December 7, 2009, a current report on Form 8-K for Item 8.01 announcing the slate of Directors to be on the ballot at the February 3, 2010 Annual Meeting. 17 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 16, 2010 --------------------------------- -------------------- Craig T. Dunham, President and CEO /s/ Richard A. Johnson DATED: February 16, 2010 --------------------------------- -------------------- Richard A. Johnson, Chief Financial Officer 18 EX-10 2 dyn10q123109-ex10.txt CHANGE IN AGREEMENT CHANGE IN TERMS AGREEMENT Borrower: Dynasil Corporation of America 385 Cooper Road West Berlin, NJ 08091-9145 Lender: Susquehanna Bank Camden Corporate Office Two Aquarium Drive 4th Floor Camden, NJ 08103 Principal Amount: $1,000,000 Date of Agreement: January 21, 2010 DESCRIPTION OF EXISTING INDEBTEDNESS. Original Promissory Note dated July 1, 2008 and most recent Change in Terms/Modification if applicable. DESCRIPTION OF CHANGE IN TERMS. Bank and Borrower agree the maturity date shall be extended from January 31, 2010 to April 30, 2010 with a floor rate of 4.00% of even date. Except as expressly changed by this Agreement, Borrower hereby re-affirms the obligations under the Note dated July 1, 2008 as subsequently modified, if applicable, and further affirms all terms contained in that Note as modified. Any reference to the Note in any documents securing, guaranteeing, supporting or modifying the Note and the obligations created in the Note, shall be deemed to refer to the Note as hereby amended. Any documents related to the Note shall be deemed to be so amended. PAYMENT. Borrower will pay this loan in full immediately upon Lender's demand. If no demand is made, Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on April 30, 2010. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning January 31, 2010, with all subsequent interest payments to be due on the same day of each month after that. VARIABLE INTEREST RATE. The interest rate on this loan is subject to change from time to time based on changes in an independent index which is the Prime Rate as published in the Money Rates section of the Wall Street Journal. When a range of rates has been published, the higher rate will be used ("the Index"). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current index rate upon Borrower's request. The interest rate change will not occur more often than each day. Borrower understands that Lender may make loans based on other rates as well. The Index is currently 3.250% per annum. Interest on the unpaid principal balance of this loan will be calculated as described in the "INTEREST CALCULATION METHOD" paragraph using a rate equal to the Index, adjusted if necessary for any minimum and maximum rate limitations described below, resulting in an initial rate of 4.000% per annum based on a year of 360 days. NOTICE: Under no circumstances will the interest rate on this loan be less than 4.000% per annum or more than the maximum rate allowed by applicable law. INTEREST CALCULATION METHOD. Interest on this loan is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this loan is computed using this method. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender's right to strict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute a satisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), including accommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not be released by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing below acknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisions of this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all such subsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: DYNASIL CORPORATION OF AMERICA By: /s/ Craig T Dunham ------------------- Craig T Dunham, President of Dynasil Corporation of America EX-31 3 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): 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 16, 2010 /s/ Craig T Dunham ------------------ ------------------------------------ Craig T Dunham President and Chief Executive Officer EX-31 4 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, Richard Johnson, 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 or 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 16, 2010 /s/ Richard A. Johnson ----------------------------- Richard A. Johnson Chief Financial Officer EX-32 5 dynex32-1.txt CERTIFICATION EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C.SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DYNASIL CORPORATION OF AMERICA (the "Company") on Form 10Q for the period ended December 31, 2009 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 Richard A. Johnson, 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/ Richard A. Johnson ------------------- Richard A. Johnson Chief Financial Officer February 16, 2010 EX-99 6 dyn10q123109-ex99.txt PRESS RELEASE Stuart Fine Phone: (908) 469-1788 Email: stuart@carpedminc.com Dynasil Announces First Quarter 2010 Results WEST BERLIN, N.J. - February 16, 2010 - Dynasil Corporation of America (OTCBB: DYSL.OB), ("Dynasil" or the "Company"), a rapidly growing manufacturer of specialized instruments and products with applications in the homeland security/defense, medical and industrial sectors, today announced the results of operations for the first quarter of Fiscal Year 2010 ending December 31, 2009. Revenues for the quarter ended December 31, 2009 increased by 13.3% to $9.9 million compared to revenues of $8.8 million for the quarter ended December 31, 2008. Income from Operations for the quarter increased by 63% to $1,071,836 compared to $657,370 for the quarter ended December 31, 2008. Net income for the quarter was $613,769 or $0.04 per share, an increase of 73% compared to $355,639 or $0.02 per share, for the quarter ended December 31, 2008. These gains in profitability were spurred primarily by an increased demand for our products and services, which generated a 13.3% revenue increase, as well as improved profitability in the Products and Instruments businesses. Management has now essentially completed integration of the RMD acquisition and continues commercializing its promising innovations. Overall, Dynasil's contract research segment continued to grow as interest in RMD's extensive research capabilities increased. In addition, the Company continued revenue improvements in the Products and Instruments segment and more than doubled its operating margin as a percentage of revenues. "We are pleased that we were able to continue our five year revenue and profitability track record," said Craig T. Dunham, President and CEO. "The cost and efficiency improvements completed over the last year have paid off in increased profitability for our Products and Instruments segment. As we look toward future growth, commercializing RMD's new technologies for Homeland Security's detection of nuclear materials is our top priority. We believe that our current level of profitability will allow us to be more aggressive in developing the opportunities that result from RMD's dynamic research results. We expect our revenues to continue to exceed prior year periods as we carry on our strategy of significant and profitable growth through organic development, commercialization of our broad research portfolio, complementary acquisitions, and increasing operating efficiencies." About Dynasil: Founded in 1960, Dynasil is a manufacturer of specialized instruments and products for a broad range of applications markets in the medical, industrial and homeland security/ 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 31 September 30 2009 2009 ----------- ----------- ASSETS (Unaudited) Current assets Cash and cash equivalents $2,212,093 $3,104,778 Accounts receivable, net 5,626,191 4,053,742 Inventories 2,162,265 2,371,516 Deferred tax asset 290,100 290,100 Other current assets 326,990 306,848 ----------- ----------- Total current assets 10,617,639 10,126,984 Property, plant and equipment, net 2,676,642 2,744,724 Other Assets Intangibles, net 7,098,230 7,232,035 Goodwill 11,054,396 11,054,396 Deferred financing costs, net 60,490 64,637 ----------- ----------- Total other assets 18,213,116 18,351,068 ----------- ----------- Total Assets $31,507,397 $31,222,776 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current portion of long-term debt 1,775,585 1,749,524 Note payable to related party 2,000,000 -0- Accounts payable 880,472 773,837 Billings in excess of cost 480,548 60,448 Income taxes payable 153,564 507,122 Dividends payable 131,400 149,150 Accrued expenses and other current 1,291,324 1,111,342 liabilities ----------- ----------- Total current liabilities 6,712,893 4,351,423 Long-term Liabilities Long-term debt, net 5,634,703 6,386,796 Note payable to related party -0- 2,000,000 ----------- ----------- Total long-term liabilities 5,634,703 8,386,796 Stockholders' Equity 19,159,801 18,484,557 ----------- ----------- Total Liabilities and Stockholders' $31,507,397 $31,222,776 Equity =========== =========== DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended December 31 2009 2008 Revenues $9,936,767 $8,767,275 Cost of Revenues 6,051,951 5,527,568 --------- --------- Gross Profit 3,884,816 3,239,707 Selling, general and 2,812,908 2,582,337 administrative --------- --------- Income from Operations 1,071,836 657,370 Interest expense - net 162,441 186,797 --------- --------- Income before Income Taxes 909,395 470,573 Income Tax expense 295,626 114,934 --------- --------- Net Income $613,769 $355,639 ========= ========= Net Income per share Basic $0.04 $0.02 Diluted $0.04 $0.02 Weighted average shares outstanding 11,791,820 11,349,404 Diluted 11,968,319 12,328,159 -----END PRIVACY-ENHANCED MESSAGE-----