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
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(Address of principal executive offices)
(856) 767-4600
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(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
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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.
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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