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, 1999
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 2,354,144 shares of common stock, par value $.0005 per share,
outstanding as of January 31, 2000.
1
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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, 1999 AND SEPTEMBER 30, 1999.................1
CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998........2
CONSOLIDATED STATEMENT OF CASH FLOWS FOR
THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998........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
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DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET PAGE 1
(UNAUDITED)
ASSETS
<TABLE>
<S> <C> <C>
December 31 September 30
1999 1999
---------- ----------
Current assets
Cash and cash equivalents $ 24,505 $ 140,253
Accounts receivable 441,869 370,839
Inventory 989,337 958,023
Other current assets 40,067 46,599
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Total current assets 1,495,778 1,515,714
Property, Plant and Equipment, net 1,990,341 2,064,029
Other Assets 21,687 22,539
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Total Assets $3,507,806 $3,602,282
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
---------- ----------
Current Liabilities
Current portion - long-term debt $142,976 $142,976
Accounts payable 99,225 92,464
Accrued expenses 73,409 152,534
---------- ----------
Total current liabilities 315,610 387,974
Long-term Debt, net 1,699,589 1,739,535
Stockholders' Equity
Common Stock, $.0005 par value, 25,000,000 shares
authorized, 2,994,168 AND 2,985,566 shares issued
2,353,544 and 2,344,942 shares outstanding 1,497 1,493
Additional paid in capital 1,060,621 1,058,525
Retained earnings 1,389,792 1,374,058
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2,451,910 2,434,076
Less 640,624 shares in treasury - at cost (959,303) (959,303)
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Total stockholders' equity 1,492,607 1,474,773
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Total Liabilities and Stockholders' Equity $3,507,806 $3,602,282
========== ==========
</TABLE>
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DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS PAGE 2
(UNAUDITED)
<TABLE>
<S> <C> <C>
Three Months Ended
December 31
1999 1998
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Sales $ 765,419 $ 677,867
Cost of sales 553,103 683,419
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Gross profit 212,316 (5,552)
Selling, general and administrative 150,245 158,971
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Income (loss) from Operations 62,071 (164,523)
Other income (expense)
Interest expense ( 46,336) ( 49,345)
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Income (Loss) before Income Taxes 15,735 (213,868)
Provision (benefit) for Income Tax 0 0
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Net income (loss) 15,735 (213,868)
========== ==========
Net income (loss) per share
Basic $ 0.01 $ (0.09)
Diluted $ 0.01 $ (0.09)
Weighted average shares outstanding 2,346,579 2,307,798
</TABLE>
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DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS PAGE 3
(UNAUDITED)
<TABLE>
<S> <C> <C>
Three Months Ended
December 31
1999 1998
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Cash flows from operating activities:
Net income $ 15,735 $ (213,868)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 88,335 89,220
Amortization expense 852 852
Allowance for doubtful accounts
(Increase) decrease in:
Accounts receivable (71,030) (24,835)
Inventories (31,314) 152,000
Prepaid expenses and other current assets 9,310 2,310
Other assets (2,778) 2,778
Increase (decrease) in:
Accounts payable 6,761 ( 14,211)
Accrued expenses (79,127) ( 36,869)
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Net cash used in operating activities (63,256) (42,623)
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Cash flows from investing activities:
Acquisition of property, plant and equipment ( 14,647) ( 1,800)
--------- -----------
Net cash used in investing activities (14,647) ( 1,800)
--------- -----------
Cash flows from financing activities:
Issuance of common stock 2,100 568
Repayments of long-term debt (39,945) (34,317)
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Net cash provided by (used in) financing activities ( 37,845) 1,251
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Net decrease in cash (115,748) (43,172)
Cash - beginning of period 140,253 45,980
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Cash - end of period $ 24,505 $ 2,808
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</TABLE>
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DYNASIL CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PAGE 4
(UNAUDITED)
1. Basis of Presentation
The consolidated balance sheet as of September 30, 1999 was audited and
appears in the Form 10-KSB previously filed by the Company. The
consolidated balance sheet as of December 31, 1999 and the consolidated
statements of operations and cash flows for the three months ended December
31, 1999 and 1998, 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,
1999 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, 1999 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, 1999 September 30, 1999
----------------- ------------------
Raw Materials 10,266 21,777
Work-in-Process 839,701 800,395
Finished Goods 139,370 135,851
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989,337 958,023
======= =======
3. Net Income Per Share
Basic net income per share is computed using the weighted average number of
common shares outstanding. The dilutive effect of potential common shares
outstanding are included in diluted net earnings per share. Diluted net
earnings per share excludes the impact of potential common shares since they
would have resulted in an antidilutive effect.
6
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Revenues increased to $765,419 for the three months ended December 31,
1999, from $677,867 for the three months ended December 31, 1998. The
increase of $87,552 or 12.9% was due primarily to the increased demand in
both the semiconductor and optics markets. The international market has also
afforded us opportunities not previously enjoyed.
Cost of sales decreased to $553,103, or 72.3% of revenues, for the three
months ended December 31, 1999, from $683,419 or 100.8% of revenues, for the
three months ended December 31, 1998. The decrease of $130,316 or 19.1% was
directly related to the Company's actions in fiscal year 1999 to reduce
expenses across the board. The reduction of expenses was in response to the
downturn in the market and the increased competitive nature of the industry.
Gross profit increased to $212,316 for the three months ended December
31, 1999, from a negative $5,552 for the three months ended December 31,
1998. As a percentage of revenues, gross profit was 27.7% and (.8%) for the
three months ended December 31, 1999, and 1998 respectively. The increase of
$217,868 was a direct result of the reductions in expenses as discussed
above.
Selling, general and administrative expenses decreased slightly to
$150,245 for the three months ended December 31, 1999, from $158,971 for the
three months ended December 31, 1998. As a percentage of revenues, selling,
general and administrative expense for the three months ended December 31,
1999, and 1998 were 19.6% and 23.5% respectively. In anticipation of
continuing pressure on gross profits, the Company maintained its focus on
controlling increases in these expenses.
Interest expense decreased to $46,336 for the three months ended
December 31, 1999, from $49,345 for the three months ended December 31, 1998.
The decrease of $3,009 or 6.1% is a direct result of our reduced debt.
Net income increased to $15,735 for the three months ended December 31,
1999, from a loss of $213,868 for the three months ended December 31, 1998.
Basic earnings per share increased to $.01 per share for the three months
ended December 31, 1999, from a loss per share of $.09 for the three months
ended December 31, 1998.
The Company has no provision for income taxes for either period in 1999
or 1998. As of September 30, 1999, we have approximately $960,000 of net
operating loss carryforwards to offset future income for federal tax purposes
expiring in various years through 2018. In addition, the Company has
approximately $406,000 of net operating loss carryforwards to offset certain
future states' taxable income, expiring in various years through 2006.
7
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Liquidity and Capital Resources
Cash decreased for the quarter by $140,253. Net cash was used in
operating activities primarily in increasing inventories 3.1% or $31,314, to
cover increased shipments for the 2nd quarter of fiscal 2000; in increasing
accounts receivable 19.2% or 71,030, a result of higher shipments the later
part of the quarter; and decreasing accrued expenses 51.2% or $79,127, a
result of paying off accrued expenses during the quarter.
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.
YEAR 2000
Year 2000 Readiness Disclosure
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. These systems
and software products will need to accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, computer systems
and/or software used by many companies and governmental agencies may need to
be upgraded to comply with such Year 2000 requirements or risk system failure
or miscalculations causing disruptions of normal business activities.
State of Readiness: We have made an assessment of our Year 2000
readiness of our operating, financial and administrative systems, including
the hardware and software that support our systems. Our assessment consisted
of testing and correcting our internally developed material software and
contacting key vendors to ensure their readiness. We have confirmed our Year
2000 compliance by specific testing of our systems and by obtaining
representations by third party vendors of their Year 2000 compliance.
Costs: We have not incurred significant costs to date complying with
Year 2000 requirements and we do not believe that we will incur significant
costs for these purposes in the foreseeable future. However, should products
or systems maintained by third parties or our systems fail to be Year 2000
compliant, despite the representations of third parties and the testing of
our systems, we could incur expenses to remedy any problems. Such expenses
could, but are not expected to, have a material adverse effect on our
business, results of operations and financial condition.
8
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Risks: Our failure to identify and correct a Year 2000 problem could
result in an interruption of normal business activities and operations.
Although there is an inherent uncertainty in the Year 2000 issue, we believe
the impact to our business will not be material. Most of the equipment
involved in delivering our product to our clients does not make use of date
information at all. We believe our greatest risk to be suppliers and
utilities whose Year 2000 programs are outside of our control. A disruption
caused by a utility or supplier whose systems are not compliant may have a
direct and negative effect on our business. Our "worst case scenario" would
be that the power and fuel sources are interrupted, during which interruption
we will not be able to operate. We have tested all of our computer systems
which are responsible for the day to day administrative and sales functions
of our business, including a dry run, to ensure Year 2000 compliance. Based
on such testing, all of our computer systems appear to be Year 2000
compliant. In the event that one or more of our computers has a Year 2000
malfunction, we would have a disruption in administrative or sales functions.
Contingency Plan: We have identified alternate sources for critical
supplies where alternate sources exist. To the best of our knowledge, our
internal systems are fully compliant. We have been advised by our principal
suppliers, particularly the utilities supplying electricity and gas, that
they believe their systems are also compliant.
Progress Report: The Company is pleased to confirm that no incident has
been reported in relation to the Y2K compliance. All systems, as planned,
have been working and are still working. However, contingency plans have
been maintained in place at the change of the millennium as a precautionary
measure in case any problem would occur as a result of Y2K.
As part of the Company's post millennium program, all systems'
operational functions are closely monitored with strong emphasis placed on
other critical dates such as February 29, 2000. A smooth transition into
March 2000 is anticipated. The Company remains confident that it has and will
continue to service its customers without interruption. It must be stressed
that the Company's products are not date sensitive.
The Company's Y2K readiness program will continue to be an ongoing
process to ward off any potential material impact on the Company and its
operations.
9
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Forward-Looking Statements
The statements contained in this Annual Report on Form 10-K which are
not historical facts, including, but not limited to, certain statements found
under the captions "Business," "Results of Operations," "Liquidity and
Capital Resources" and "Year 2000 Compliance" 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 Annual Report on Form 10-K,
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.
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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
Exhibit 27FDS - Financial Data Schedule
(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/ Charles J. Searock, Jr. DATED: February 11, 2000
--------------------------------- --------------------
Charles J. Searock, Jr.,
President and CEO
BY: /s/ John Kane DATED: February 11, 2000
--------------------------------- --------------------
John Kane, Secretary, Treasurer,
and Chief Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)
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[ARTICLE] 5
[CIK] 0000030831
[NAME] DYNASIL CORPORATION OF AMERICA
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] SEP-30-2000
[PERIOD-END] DEC-31-1999
[CASH] 24,505
[SECURITIES] 0
[RECEIVABLES] 452,752
[ALLOWANCES] (10,883)
[INVENTORY] 989,337
[CURRENT-ASSETS] 1,495,778
[PP&E] 5,557,565
[DEPRECIATION] (3,567,224)
[TOTAL-ASSETS] 3,507,806
[CURRENT-LIABILITIES] 315,610
[BONDS] 1,699,589
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 1,497
[OTHER-SE] 1,491,110
[TOTAL-LIABILITY-AND-EQUITY] 3,507,806
[SALES] 765,419
[TOTAL-REVENUES] 765,419
[CGS] 553,103
[TOTAL-COSTS] 553,103
[OTHER-EXPENSES] 150,245
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 46,336
[INCOME-PRETAX] 15,735
[INCOME-TAX] 0
[INCOME-CONTINUING] 15,735
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 15,735
[EPS-BASIC] .01
[EPS-DILUTED] .01
</TABLE>
