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, 2000
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
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(Exact name of small business issuer as specified in its charter)
New Jersey 22-1734088
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(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
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The Company had 2,372,505 shares of common stock, par value $.0005 per share,
outstanding as of April 30, 2001.
1
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
INDEX
PAGE
PART 1. FINANCIAL INFORMATION ----
ITEM 1. FINANCIAL STATEMENTS
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS AS OF
MARCH 31, 2001 AND SEPTEMBER 30, 2000 3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE THREE AND SIX MONTHS ENDED MARCH 31, 2001 AND 2000 4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED MARCH 31, 2001 AND 2000 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 7
PART II. OTHER INFORMATION 9
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 9
SIGNATURES 10
2
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED)
ASSETS
March 31 September 30
2001 2000
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Current assets
Cash and cash equivalents $ 271,851 $ 249,695
Accounts receivable 826,673 608,488
Inventory 931,338 909,223
Other current assets 46,020 32,596
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Total current assets 2,075,882 1,800,022
Property, Plant and Equipment, net 1,865,066 1,838,599
Other Assets
Restricted cash 200,000 0
Other Assets 22,755 20,534
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Total Assets $4,163,703 $3,659,135
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion - long-term debt $321,078 $147,859
Accounts payable 313,106 101,871
Accrued expenses 122,535 165,751
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Total current liabilities 756,719 415,481
Long-term Debt, net 1,438,807 1,620,885
Stockholders' Equity
Common Stock, $.0005 par value, 25,000,000 shares
authorized, 3,013,001 and 2,997,292 shares issued
2,372,377 and 2,356,668 shares outstanding 1,507 1,499
Additional paid in capital 1,079,251 1,062,309
Retained earnings 1,846,722 1,518,264
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2,927,480 2,582,072
Less 640,624 shares in treasury - at cost (959,303) (959,303)
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Total stockholders' equity 1,968,177 1,622,769
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Total Liabilities and Stockholders' Equity $4,163,703 $3,659,135
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3
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
March 31 March 31
2001 2000 2001 2000
---------- --------- ---------- ----------
Sales $1,386,744 $1,040,323 $2,704,361 $1,805,742
Cost of Sales 956,296 749,031 1,874,832 1,302,128
---------- --------- ---------- ----------
Gross profit 430,448 291,292 829,529 503,614
Selling, general and administrative 222,371 191,550 415,346 341,795
---------- --------- ---------- ----------
Income from Operations 208,077 99,742 414,183 161,819
Other income (expense)
Interest expense ( 44,908) ( 46,634) (91,936) (92,970)
Other Income (Expense) 3,498 0 6,210 0
---------- --------- ---------- ----------
Income before Income Taxes 166,667 53,108 328,457 68,849
Provision (benefit) for Income Tax 0 0 0 0
--------- --------- ----------- ----------
Net income $166,667 $ 53,108 $ 328,457 $ 68,849
========= ======== =========== ==========
Net income (loss) per share
Basic $ 0.07 $ 0.02 $ 0.14 $ 0.03
Diluted $ 0.07 $ 0.02 $ 0.14 $ 0.03
Weighted average shares outstanding 2,369,368 2,354,026 2,363,053 2,350,303
4
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
March 31
2001 2000
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Cash flows from operating activities:
Net income $ 328,457 $ 68,849
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 167,490 176,760
Amortization expense 1,704 1,704
Allowance for doubtful accounts
(Increase) decrease in:
Accounts receivable (218,185) (87,019)
Inventories (22,115) (12,959)
Prepaid expenses and other current assets (13,424) (8,784)
Other assets (3,925) (4,181)
Increase (decrease) in:
Accounts payable 211,235 63,396
Accrued expenses (43,217) (54,364)
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Net cash provided by (used in) operating activities 408,020 143,312
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Cash flows from investing activities:
Acquisition of property, plant and equipment (71,657) (28,201)
Increase in restricted cash (200,000) 0
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Net cash provided by (used in) investing activities (271,657) (28,201)
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Cash flows from financing activities:
Issuance of common stock 16,952 2,100
Proceeds from Bank Debt 200,000 0
Repayments of long-term debt (331,159) ( 75,692)
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Net cash provided by (used in) financing activities (114,207) (73,592)
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Net increase (decrease) in cash 22,156 41,519
Cash - beginning of period 249,695 140,253
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Cash - end of period $ 271,851 $ 181,772
========= ===========
5
DYNASIL CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The consolidated balance sheet as of September 30, 2000 was audited and
appears in the Form 10-KSB previously filed by the Company. The consolidated
balance sheet as of March 31, 2001 and the consolidated statements of
operations and cash flows for the six months ended March 31, 2001 and 2000,
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 March 31, 2001 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, 2000 Annual Report on Form 10-KSB previously filed by the
Company.
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
primarily of raw materials, work-in-process and finished goods. The Company
evaluates inventory levels and expected usage on a periodic basis and records
adjustments for impairments as required.
Inventories consisted of the following:
March 31, 2001 September 30, 2000
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Raw Materials 36,192 22,887
Work-in-Process 760,411 747,802
Finished Goods 134,735 138,534
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931,338 909,223
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3. Net Income Per Share
Basic net income per share is computed using the weighted average number of
common shares outstanding. The dilutive effects of potential common shares
outstanding are included in diluted net earnings per share. Diluted net
earnings per share exclude the impact of potential common shares since they
would have resulted in an antidilutive effect.
4. Supplementary Disclosure of Cash Flow Information
Non-cash investing and financing activities during the six months ended March
31, 2001 were as follows:
Purchase of property and equipment 193,957
Debt incurred (122,300)
---------
Cash paid for property and equipment 71,657
=========
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Revenues for the three months ended March 31, 2001 were $1,386,744, an
increase of 33% over revenues of $1,040,323 for the three months ended March
31,2000. Revenues for the six-months ended March 31, 2001 were $2,704,361, an
increase of 50% over revenues of $1,805,742 for the six-months ended March
31,2000. The primary reasons for the increase are the continued strong demand
for synthetic fused silica and our ability to meet the customer's quick
delivery requirements. We have seen growth in the traditional optics market
as well as the rapidly increasing uses of synthetic fused silica in the
electro-optical markets.
Cost of sales for the three months ended March 31, 2001 were $956,296,
or 68.9% of sales, an increase of $207,265 over the three months ended March
31, 2000 of $749,031, or 72.0% of sales. Cost of sales for the six-months
ended March 31, 2001 were $1,874,832, or 69.3% of sales, and increase of
$572,704 over the six-months ended March 31, 2000 of $1,302,128, or 72.1% of
sales. Improvements, as measured by percentage of sales, in the current
fiscal year can be attributed to our ability to control manufacturing
expenses. A recent upgrade in our production schedule system enabled us to
better manage the workflow. We were able to increase the throughput with
minimal increase in manpower. A recent purchase of capital equipment also
helped in this area.
Gross profit for the three months ended March 31, 2001 was $430,448, or
31.1% of sales, an increase of $139,156 over the three months ended March 31,
2000 of $291,292, or 28.0% of sales. Gross profit for the six months ended
March 31, 2001 was $829,529, or 30.7% of sales, an increase of $325,915 over
the six months ended March 31, 2000 of $503,614, or 27.9% of sales. As
discussed above increased sales and controlling expenses contributed to the
substantial improvement.
Selling, general and administrative expenses for the three months ended
March 31, 2001 were $222,371, or 16.0% of sales, an increase of $30,821 over
the three months ended March 31, 2000 of $191,550, or 18.4% of sales.
Selling, general and administrative expenses for the six months ended March
31, 2001 were $415,346, or 15.4% of sales, an increase of $73,551 over the
six months ended March 31, 2000 of $341,795, or 18.9% of sales.
Major components of the increased selling, general and administrative
expenses were an increase in sales salaries as a result of commissions being
paid on higher sales, increased investor relations expenses, increased travel
expense and increase in directors fees. Effective January 2001 the
shareholders approved the following cash compensation for serving on the
board: Chairman of the Board, $2,500 per month, all other non-employee
directors, $1,000 per month. Prior to this period board members were
compensated with stock options.
Interest expense for the three months ended March 31, 2001 was $44,908,
a decrease of $1,726 over the three months ended March 31, 2000 of $46,634.
Interest expense for the six months ended March 31, 2001 was $91,936, a
decrease of $1,034 over the six months ended March 31, 2000 of $92,970. (See
discussion in Liquidity and Capital Resources section)
The increase in other income of $6,210 represents interest income
earned for the six months ended March 31, 2001. We have been investing our
excess cash in interest earning securities.
7
Net income for the three months ended March 31, 2001 was $166,667, or
$.07 in basic earnings per share, an increase of $113,559 over the three
months ended March 31, 2000 of $53,108, or $.02 in basic earnings per share.
Net income for the six months ended March 31, 2001 was $328,457, or $.14 in
basic earnings per share, an increase of $259,608 over the six months ended
March 31, 2000 of $68,849, or $.03 in basic earnings per share.
The Company has no provision for income taxes for either period in 2001
or 2000. As of September 30, 2000, we have approximately $790,000 of net
operating loss carryforwards to offset future income for federal tax purposes
expiring in various years through 2019. In addition, the Company has
approximately $214,000 of net operating loss carryforwards to offset certain
future states' taxable income, expiring in various years through 2007.
Liquidity and Capital Resources
Cash increased by $22,156 for the six months ended March 31,2001. Cash
provided from operations of $408,020 was primarily used to reduce debt by
$131,159, acquire property plant and equipment for $71,657, and increase
restricted cash by $200,000.
In March 2001 management negotiated a $200,000 three-year term note
with Premier Bank at 7.25% interest, collateralized by $200,000 of
certificates of deposit earning 5.12% interest. The funds were used to pay
off $200,000 of subordinated debt at 12% interest that was due in December
2001. In addition $50,000 of the 12% subordinated debt was paid off in
January 2001 from internally generated funds.
The Company believes that its current cash and cash equivalent balances,
and net cash generated by operations, will be sufficient to meet its
anticipated cash needs for working capital for at least the next 12 months.
The Company plans to spend $100,000 in capital improvements in the next six
to nine months. This cash will come from internally generated funds. Any
business expansion will require the Company to seek additional debt or equity
financing.
Forward-Looking Statements
The statements contained in this Quarterly Report on Form 10-QSB which
are not historical facts, including, but not limited to, certain statements
found under the captions "Results of Operations" and "Liquidity and Capital
Resources" above, are forward-looking statements that involve a number of
risks and uncertainties. The actual results of the future events described in
such forward-looking statements could differ materially from those stated in
such forward-looking statements. Among the factors that could cause actual
results to differ materially are the risks and uncertainties discussed in
this Quarterly Report on Form 10-QSB, including, without limitation, the
portions of such reports under the captions referenced above, and the
uncertainties set forth from time to time 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.
8
PART II
OTHER INFORMATION
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ITEM 1 LEGAL PROCEEDINGS
NONE
ITEM 2 CHANGES IN SECURITIES
NONE
ITEM 3 DEFAULTS ON SENIOR SECURITIES
NONE
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of shareholders held on January 30, 2001, the
shareholders voted to approve an amendment to the 1999 Stock Incentive Plan
as amended July 25, 2000 (the "Plan") to increase in the total number of
shares of Company common stock that may be issued under the Plan from 450,000
to 900,000.
ITEM 5 OTHER INFORMATION
NONE
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
9
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/ John Kane DATED: May 14, 2001
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John Kane,
President, Treasurer, Chief Financial
Officer and Principal Accounting Officer
BY: /s/ Charles J. Searock, Jr. DATED: May 14, 2001
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Charles J. Searock, Jr.,
CEO
10