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 MARCH 31, 2003
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
---- ----
The Company had 2,237,197 shares of common stock, par value $.0005 per share,
outstanding as of April 30, 2003.
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, 2003 AND SEPTEMBER 30, 2002 1
CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE THREE AND SIX MONTHS ENDED MARCH 31, 2003 AND 2002 2
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED MARCH 31, 2003 AND 2002 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 7
ITEM 3. CONTROLS AND PROCEDURES 8
PART II. OTHER INFORMATION 9
ITEM 1. LEGAL PROCEDURES 9
ITEM 2. CHANGES IN SECURITIES 9
ITEM 3. DEFAULTS ON SENIOR SECURITIES 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
ITEM 5. 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
2003 2002
---------- ----------
Current assets
Cash and cash equivalents $ 90,151 $ 172,118
Accounts receivable 312,800 343,227
Inventory 541,065 581,104
Other current assets 54,264 40,567
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Total current assets 998,280 1,137,016
Property, Plant and Equipment, net 800,263 891,261
Other Assets
Restricted cash 200,000
200,000
Other Assets 13,761 15,465
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Total Assets $2,012,304 $2,243,742
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion - long-term debt $190,260 $202,477
Accounts payable 166,146 163,903
Accrued expenses 54,480 77,460
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Total current liabilities 410,886 443,840
Long-term Debt, net 821,669 913,710
Stockholders' Equity
Common Stock, $.0005 par value, 25,000,000 shares
authorized, 3,045,828 and 3,043,563 shares issued
2,248,124 and 2,402,939 shares outstanding 1,523 1,522
Additional paid in capital 1,089,459 1,089,200
Retained earnings 672,992 754,773
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1,763,974 1,845,495
Less 797,704 and 640,624 shares in treasury - at cost (984,225) (959,303)
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Total stockholders' equity 779,749 886,192
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Total Liabilities and Stockholders' Equity $2,012,304 $2,243,742
========== ==========
3
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
March 31 March 31
2003 2002 2003 2002
---------- --------- ---------- ----------
Sales $ 599,692 $ 767,627 $1,255,848 $1,406,209
Cost of Sales 470,988 604,233 965,604 1,149,262
---------- -------- ---------- ----------
- --
Gross profit 128,704 163,394 290,244 256,947
Selling, general and administrative 168,330 179,399 348,850 336,926
---------- --------- ---------- ----------
Loss from Operations ( 39,626) ( 16,005) ( 58,606) ( 79,979)
Other income (expense)
Interest expense net ( 11,162) ( 18,189) (23,177) (39,273)
Other Income (Expense) 0 0 0 0
---------- --------- ---------- ----------
Loss before Income Taxes (50,788) (34,194) ( 81,783) (119,252)
Income Tax 0 0 0 0
--------- -------- ----------- ----------
Net loss ( $50,788) ($34,194) ($81,783) ($119,252)
========= ======== =========== ==========
Net loss per share
Basic ( $0.02) ( $0.01) ( $0.03) ( $0.05)
Diluted ( $0.02) ( $0.01) ( $0.03) ( $0.05)
Weighted average shares outstanding 2,302,905 2,392,415 2,345,633 2,390,136
4
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
March 31
2003 2002
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Cash flows from operating activities:
Net loss ($ 81,783) ($ 119,252)
Adjustments to reconcile net (loss)
to net cash provided by operating activities:
Depreciation 98,502 166,198
Amortization expense 1,704 1,704
(Increase) decrease in:
Accounts receivable 30,427 71,753
Inventories 40,039 54,236
Prepaid expenses and other current assets (13,697) (23,494)
Other assets 0 0
Increase (decrease) in:
Accounts payable 2,243 2,552
Accrued expenses (22,981) (36,276)
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Net cash provided by operating activities 54,454 117,421
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Cash flows from investing activities:
Acquisition of property, plant and equipment ( 7,505) (148,698)
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Net cash used in investing activities ( 7,505) (148,698)
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Cash flows from financing activities:
Issuance of common stock 260 5,182
Buyback of common stock (24,921) 0
Repayments of long-term debt (104,255) (111,619)
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Net cash used in financing activities (128,916) (106,437)
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Net (decrease) in cash ( 81,967) (137,714)
Cash - beginning of period 172,118 473,386
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Cash - end of period $ 90,151 $ 335,672
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5
DYNASIL CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The consolidated balance sheet as of September 30, 2002 was audited and
appears in the Form 10-KSB previously filed by the Company. The consolidated
balance sheet as of March 31, 2003 and the consolidated statements of
operations and cash flows for the six months ended March 31, 2003 and 2002,
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, 2003 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, 2002 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, 2003 September 30, 2002
----------------- ------------------
Raw Materials 206,970 255,901
Work-in-Process 197,735 176,303
Finished Goods 136,360 148,900
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541,065 581,104
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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.
6
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Revenues for the three months ended March 31, 2003 were $599,692, a
decrease of 21.9% over revenues of $767,627 for the three months ended March
31,2002. Revenues for the six-months ended March 31, 2003 were $1,255,848 a
decrease of 10.7% over revenues of $1,406,209 for the six-months ended March
31,2002. The continued slowdown in the semi-conductor and telecommunications
industries has had a strong adverse effect on demand for synthetic fused
silica. We do not anticipate any significant improvement in demand at least
through the next quarter.
Cost of sales for the three months ended March 31, 2003 were $470,988,
or 78.5% of sales, a decrease of $133,245 over the three months ended March
31, 2002 of $604,233, or 78.7% of sales. Cost of sales for the six-months
ended March 31, 2003 were $965,604, or 76.9% of sales, a decrease of $183,658
over the six-months ended March 31, 2002 of $1,149,262 or 81.7% of sales. The
slight decrease in cost of sales as a percentage of sales is directly related
to managements continuing concentration on controlling expenses.
Gross profit for the three months ended March 31, 2003 was $128,704, or
21.5% of sales, a decrease of $34,690 over the three months ended March 31,
2002 of $163,394, or 21.3% of sales. Gross profit for the six months ended
March 31, 2003 was $290,244, or 23.1% of sales, an increase of $33,297 over
the six months ended March 31, 2002 of $256,947, or 18.3% of sales.
Selling, general and administrative expenses for the three months ended
March 31, 2003 were $168,330 or 28.1% of sales, a decrease of $11,069 over
the three months ended March 31, 2002 of $179,399, or 23.3% of sales.
Selling, general and administrative expenses for the six months ended March
31, 2003 were $348,850, or 27.8% of sales, an increase of $11,924 over the
six months ended March 31, 2002 of $336,926, or 24.0% of sales.
Interest expense for the three months ended March 31, 2003 was $11,162,
a decrease of $7,027 over the three months ended March 31, 2002 of $18,189.
Interest expense for the six months ended March 31, 2003 was $23,177, a
decrease of $16,096 over the six months ended March 31, 2002 of $39,273. The
decrease in interest expense is related to the reduction and restructuring of
our debt as mentioned in previous filings. Total overall debt continues to
decline and we have incurred no new debt over the past six months. (See and
Liquidity and Capital Resources section)
Net loss for the three months ended March 31, 2003 was $50,788, or
negative $.02 in basic loss per share, an increase of $16,594 over the net
loss for the three months ended March 31, 2002 of $34,194, or $.01 in basic
earnings per share. Net loss for the six months ended March 31, 2003 was
$81,783, or negative $.03 in basic loss per share, a decrease of $37,469 over
the six months ended March 31, 2002 of net loss of $119,252, or $.05 in basic
earnings per share.
The Company has no provision for income taxes for either period in 2003
or 2002. As of September 30, 2002, we have approximately $880,000 of net
operating loss carryforwards to offset future income for federal tax purposes
expiring in various years through 2020. In addition, the Company has
approximately $337,000 of net operating loss carryforwards to offset certain
future states' taxable income, expiring in various years through 2008.
<7>
Liquidity and Capital Resources
Cash decreased by $81,967 for the six months ended March 31,2003. Cash
provided from operations of $54,454 was primarily used to reduce debt by
$104,255 and, in conjunction with our buy-back program, acquire common stock
of the Company for $24,921.
The Company believes that its current cash and cash equivalent balances,
along with the net cash generated by operations, is sufficient to meet its
anticipated cash needs for working capital for at least the next 12 months.
There are currently no plans for any major capital expenditures in the next
six to nine 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.
ITEM 3 CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures. The Company's
principal executive officer/principal financial officer, based on his
evaluation of the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) as of a date within 90 days prior to
the filing of this Quarterly Report on Form 10QSB, concluded that the
Company's disclosure controls and procedures are adequate and effective for
the purposes set forth in the definition in the Exchange Act rules.
(b) Changes in Internal Controls. There were no significant changes in
the Company's internal controls or in other factors that could significantly
affect the Company's internal controls subsequent to the date of the
evaluation.
8
PART II
OTHER INFORMATION
- ------------------
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
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, 2003
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John Kane,
President, CEO, Treasurer, Chief Financial
Officer and Principal Accounting Officer
10
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 10QSB for the period ending March 31, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the
"Report"), I, John Kane, Chief Executive Officer and Chief Financial Officer
of the Company, certify, pursuant to 18 U.S.C. ' 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
(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.
John Kane
Chief Executive Officer and
Chief Financial Officer
May 14, 2003
11
CERTIFICATION PURSUANT TO THE
SARBANES-OXLEY ACT
I, John Kane, the Chief Executive Officer and the Chief Financial Officer
of Dynasil Corporation of America, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Dynasil Corporation
of America;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to me by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report my conclusions about the effectiveness
of
the disclosure controls and procedures based on my evaluation as of the
Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. I have indicated in this quarterly report whether there were significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of my most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003 /s/ John Kane
-----------------------------
John Kane, Chief Executive Officer,
Chief Financial Officer
-12-