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, 2001
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 2,391,603 shares of common stock, par value $.0005 per share,
outstanding as of January 31, 2002.
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
DECEMBER 31, 2001 AND SEPTEMBER 30, 2001 1
CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000 2
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 7
PART II. OTHER INFORMATION 11
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 12
2
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS PAGE 1
(UNAUDITED)
ASSETS
December 31 September 30
2001 2001
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Current assets
Cash and cash equivalents $ 406,489 $ 473,385
Accounts receivable 418,214 469,030
Inventory 748,658 768,707
Other current assets 41,848 26,577
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Total current assets 1,615,209 1,737,699
Property, Plant and Equipment, net 1,679,614 1,701,730
Other assets
Restricted Cash 200,000 200,000
Other assets 18,021 18,873
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Total Assets $3,512,844 $3,658,302
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion - long-term debt $411,493 $419,493
Accounts payable 201,351 139,736
Accrued expenses 54,421 120,527
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Total current liabilities 667,265 679,756
Long-term Debt, net 1,064,378 1,116,187
Stockholders' Equity
Common Stock, $.0005 par value, 25,000,000 shares
authorized, 3,032,227 and 3,018,383 shares issued
2,391,603 and 2,377,759 shares outstanding 1,516 1,509
Additional paid in capital 1,086,435 1,082,542
Retained earnings 1,652,553 1,737,611
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2,740,504 2,821,662
Less 640,624 shares in treasury - at cost (959,303) (959,303)
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Total stockholders' equity 1,781,201 1,862,359
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Total Liabilities and Stockholders' Equity $3,512,844 $3,658,302
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3
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS PAGE 2
(UNAUDITED)
Three Months Ended
December 31
2001 2000
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Sales $ 638,581 $1,317,617
Cost of Sales 545,029 918,535
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Gross profit 93,552 399,082
Selling, general and administrative 157,524 192,974
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Income (loss) from Operations (63,972) 206,108
Interest expense - net ( 21,086) ( 44,315)
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Income (loss) before Income Taxes ( 85,058) 161,793
Income Taxes 0 0
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Net income (loss) $ ( 85,058) $ 161,793
======== ========
Net income (loss) per share
Basic $ ( 0.04) $ 0.07
Diluted $ ( 0.04) $ 0.07
Weighted average shares outstanding 2,387,856 2,356,738
4
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS PAGE 3
(UNAUDITED)
Three Months Ended
December 31
2001 2000
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Cash flows from operating activities:
Net income (loss) $( 85,058) $ 161,793
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 83,100 83,745
Amortization expense 852 852
Allowance for doubtful accounts
(Increase) decrease in:
Accounts receivable 50,816 ( 96,724)
Inventories 20,049 43,376
Prepaid expenses and other current assets ( 15,271) 4,376
Other assets 0
Increase (decrease) in:
Accounts payable 61,615 62,538
Accrued expenses (66,107) (14,277)
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Net cash provided by operating activities 49,996 245,679
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Cash flows from investing activities:
Acquisition of property, plant and equipment ( 60,983) ( 8,615)
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Net cash (used in) investing activities ( 60,983) ( 8,615)
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Cash flows from financing activities:
Issuance of common stock 3,900 132
Repayments of long-term debt ( 59,809) ( 40,579)
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Net cash (used in) financing activities ( 55,909) (40,447)
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Net increase (decrease) in cash (66,896) 196,617
Cash - beginning of period 473,385 249,695
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Cash - end of period $ 406,489 $ 446,312
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5
DYNASIL CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PAGE 4
(UNAUDITED)
1. Basis of Presentation
The consolidated balance sheet as of September 30, 2001 was audited and
appears in the Form 10-KSB previously filed by the Company. The consolidated
balance sheet as of December 31, 2001 and the consolidated statements of
operations and cash flows for the three months ended December 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 December 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, 2001 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:
December 31, 2001 September 30, 2001
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Raw Materials $ 337,065 $ 379,899
Work-in-Process 251,644 224,739
Finished Goods 159,949 164,069
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$ 748,658 $ 768,707
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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.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Sales were $638,581 for the three months ended December 31, 2001, a
decrease of 51.5% over sales of $1,317,617, for the three months ended
December 31, 2000. The decrease in sales is a result of the continued slow
down of our traditional optics market, including the semiconductor and
telecommunications industries.
Cost of sales were $545,029, or 85.3% of sales, for the three months
ended December 31, 2001 and $918,535, or 69.7% of sales, for the three months
ended December 31, 2000. The substantial increase in cost can be attributed
to a unique situation during the quarter. Necessary repairs required us to
shut down our furnaces for most of the quarter. Loss of production had a two-
fold effect: (1) no inventory to spread fixed cost over and (2) need to
procure material from an outside source. Both had the effect to increase our
cost of sales for the quarter. The work on the furnaces was completed in
January and production has resumed.
Gross profit decreased to $93,552, or 14.7% of sales, for the three
months ended December 31, 2001. This is a decrease of $305,530, or 76.5%,
over the $399,082 gross profit for the three months ended December 31, 2000.
See above discussion for explanation of decrease.
Selling, general and administrative expenses were $157,524, or 24.6% of
sales, for the three months ended December 31, 2001. This is a decrease of
$35,450, over the three months ended December 31, 2000 when expenses were
$192,974, or 14.6% of sales. The decrease of $35,450 is primarily related to
reduced wages as a result of reduced manpower and the elimination of bonuses
for the current quarter.
Interest expense decreased to $21,086 for the three months ended
December 31, 2001, from $44,315 for the three months ended December 31, 2000.
The lower interest expense is a direct result of reducing and restructuring
our debt during fiscal year 2001, as discussed in previous filings, and lower
overall interest rates.
The net loss of $85,058 for the three months ended December 31, 2001,
compared to earnings of $161,793, for the three months ended December 31,
2000, generated a loss per share of $0.04, for the three months ended
December 31, 2001 compared to income per share of $0.07 for the three months
ended December 31, 2000.
7
The Company has no provision for income taxes for either period in 2001
or 2000. As of September 30, 2001, we have approximately $585,000 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 $17,000 of net operating loss carryforwards to offset certain
future states' taxable income, expiring in various years through 2007.
Liquidity and Capital Resources
Cash decreased by $66,896 for the three months ended December 31,2001.
Cash provided from operations of $49,996 was primarily used to reduce debt by
$59,809 and acquire property plant and equipment for $60,983.
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.
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
NONE
ITEM 5 OTHER INFORMATION
NONE
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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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/ John Kane DATED: February 14,2002
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John Kane,
President, CEO, Treasurer, Chief Financial
Officer and Principal Accounting Officer
10