Dynasil Corporation of America Reports Fiscal Year 2012 Financial Results

  Dynasil Corporation of America Reports Fiscal Year 2012 Financial Results

                     Filing of Annual Report on Form 10-K

       Company to Host Earnings Conference Call at 5:00 p.m. (ET) Today

Business Wire

WATERTOWN, Mass. -- January 15, 2013

Dynasil Corporation of America (NASDAQ: DYSL), a leading developer of sensing,
detection and analysis technology for homeland security, medical and
industrial applications, today announced financial results for fiscal year
ended September 30, 2012 and the filing of its Annual Report on Form 10-K
within the extension period provided by Rule 12b-25.

Total revenue for fiscal 2012 increased to $47.9 million from $47.0 million in
fiscal 2011. Contract Research segment revenue decreased to $24.3 million from
$24.9 million in fiscal 2011. The Company’s newly named Optics segment
(previously part of the “Products & Technology” segment) posted revenue of
$17.5 million, up from $15.8 million a year earlier. Instruments segment (also
previously part of the “Products & Technology” segment) revenue remained
relatively flat at $6.1 million, compared with $6.2 million in 2011. The newly
created Biomedical segment achieved its first revenues of $0.1 million in
fiscal 2012.

Gross profit for fiscal 2012 totaled $20.0 million, or 40.7% of net revenue,
compared with $19.8 million, or 42.1% of revenue for fiscal 2011. Gross profit
margin declined as a result of higher costs within the Contract Research
segment.

Selling, general and administrative expenses for fiscal 2012 totaled $21.0
million, versus $17.5 million for fiscal 2011, primarily reflecting
investments in the Company’s Instruments segment and Biomedical segment
pipelines to support future growth. These investments include technology
development activities and staff additions in support of organic product
development. In addition, the Company incurred a significant, non-recurring
charge of approximately $466,000 to its selling, general and administrative
expenses during that quarter related to costs incurred as a result of a
review, under the direction of the Audit Committee of the Board, of certain
cash application processes and billing practices of the RMD division. This
investigation has been completed and has resulted in modifications in the
division’s practices and internal controls. The Company does not anticipate
additional expenses for this matter.

As a result of higher-than-expected costs and product launch delays, the
Company determined that there was a decline in the fair value of its
Instruments segment, and recorded a non-cash goodwill impairment charge of
$2.3 million for the three-month period ended September 30, 2012.

“We made significant investments during fiscal 2012 to launch two refreshed
products – the LPX Pro Lead Paint Analyzer and the Navigator 2.0 gamma probe –
but continue to await the regulatory approvals that would enable us to bring
those devices to market,” said Dynasil Chairman and Interim CEO Peter Sulick.
“The increased expenses also reflected further investment in our dual mode
detector program and our biomedical business. In addition, we incurred
expenses for a review of certain cash application processes and billing
practices at our RMD division. Going forward, we are focused on improving our
liquidity and pursuing strategic initiatives that best position the company
for future profitable growth.”

Including the goodwill impairment charge, net loss for the 12 months ended
September 30, 2012 was $4.3 million, or $0.29 per share, compared with net
income of $1.4 million, or $0.08 per diluted share, for the 12 months ended
September 30, 2011.

Liquidity

As previously disclosed, as of September 30, 2012, Dynasil is in default with
its financial covenants under the Company’s loan agreements. Dynasil continues
to be current with all principal and interest payments due on all its
outstanding indebtedness and management expects to continue discussions with
its lenders to address the financial covenant situation. These financial
covenant defaults give the lenders the right to accelerate the maturity of the
indebtedness outstanding and foreclose on any security interest. Furthermore,
Sovereign Bank, N.A., the Company’s senior lender, may, at its option, impose
a default interest rate with respect to the senior debt outstanding, which is
5% higher than the rate otherwise in effect. To date, the lenders have not
taken any such actions. However, the Company cannot predict when or whether a
resolution of this situation will be achieved.

The Company has taken and will continue to take actions to improve its
liquidity, including the implementation of a number of initiatives designed to
conserve cash, optimize profitability and right-size the cost structure of its
various businesses. Dynasil has retained Argus Management Corporation and
Mirus Capital as financial advisors to assist it in evaluating strategic and
restructuring alternatives, including the potential sale of product lines
and/or a Company division. While the Company is actively considering such
strategic alternatives, there can be no assurances that any such transaction
will occur, or, if a transaction is completed, it will be on terms favorable
to the Company.

Because of the uncertainty of any resolution of the covenant violations and
possibility of an acceleration of the indebtedness by the lenders, the Company
has reclassified all of its outstanding indebtedness as a current liability in
the financial statements for year ended September 30, 2012 filed and the
Company’s independent registered public accountants has included a “going
concern” qualification in its audit opinion with respect to such financial
statements.

Recent Highlights

  *RMD Inc. received contracts totaling $3.4 million from the Department of
    Homeland Security’s Domestic Nuclear Detection Office (DNDO) under the
    Small Business Innovation Research (SBIR) and Small Business Technology
    Transfer (STTR) programs. These contracts provide funded research and
    development of gamma and neutron radiation detectors capable of
    identifying illicit nuclear materials.
  *RMD Inc. received grants totaling $3.45 million from the U.S. Department
    of Energy’s Small Business Innovation Research (SBIR) and Small Business
    Technology Transfer (STTR) Programs. The grants consist of three Phase II
    grants totaling $3 million and three Phase I grants totaling $0.45
    million. These grants provide funded research and development in the areas
    of scintillation, sensing and nondestructive testing technologies.

Conference Call Information

Dynasil will host a conference call for investors and analysts at 5:00 p.m. ET
today. The call will be hosted by Chairman and Interim CEO and President Peter
Sulick and Chief Financial Officer Richard Johnson. Those who wish to listen
to the conference call should visit the Investor Information section of the
Company’s website at www.dynasil.com. The call also may be accessed by dialing
(877) 407-5790 or (201) 689-8328. For interested individuals unable to join
the live conference call, a webcast replay will be available on the Company’s
website for one year.

About Dynasil

Dynasil Corporation of America (NASDAQ: DYSL) develops and manufactures
detection and analysis technology, precision instruments and optical
components for the homeland security, medical and industrial markets.
Combining world-class technology with expertise in research and materials
science, Dynasil is commercializing products including dual-mode radiation
detection solutions for Homeland Security and commercial applications, probes
for medical imaging and sensors for non-destructive testing. The Company is
building a relationship with the Mayo Clinic to develop early-stage
opportunities such as advanced biomedical technologies. Dynasil has an
impressive and growing portfolio of issued and pending U.S. patents. The
Company is based in Watertown, Massachusetts, with additional operations in
Mass., Minn., NY, NJ and the United Kingdom. More information about the
Company is available at www.dynasil.com.

Forward-looking Statements

The statements contained in this Annual Report on Form 10-K which are not
historical facts, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements regarding future events and our future results are based on current
expectations, estimates, forecasts, and projections and the beliefs and
assumptions of our management, including, without limitation, our expectations
regarding results of operations, our default under the financial covenants
under our loan agreement with Sovereign Bank and Massachusetts Capital
Resource Company, the commercialization of our products including our dual
mode detectors, our development of new technologies including at Dynasil
Biomedical, the adequacy of our current financing sources to fund our current
operations, our growth initiatives, our capital expenditures and the strength
of our intellectual property portfolio. These forward-looking statements may
be identified by the use of words such as “may,” “could,” “expect,”
“estimate,” “anticipate,” “continue” or similar terms, though not all
forward-looking statements contain such words. The actual results of the
future events described in such forward-looking statements could differ
materially from those stated in such forward-looking statements due to a
number of important factors. These factors that could cause actual results to
differ from those anticipated or predicted include, without limitation, our
ability to resolve our current default under our outstanding indebtedness, our
ability to develop and commercialize our products, including obtaining
regulatory approvals, the size and growth of the potential markets for our
products and our ability to serve those markets, the rate and degree of market
acceptance of any of our products, our ability to address our material
weaknesses in our internal controls, general economic conditions, costs and
availability of raw materials and management information systems, our ability
to obtain and maintain intellectual property protection for our products,
competition, the loss of key management and technical personnel, our ability
to obtain timely payment of our invoices to governmental customers,
litigation, the effect of governmental regulatory developments, the
availability of financing sources, our ability to identify and execute on
acquisition opportunities and integrate such acquisitions into our business,
and seasonality, as well as the uncertainties set forth in this Annual Report
on Form 10-K, including the risk factors contained in Item 1a, and from time
to time in the Company's other filings with the Securities and Exchange
Commission. The Company disclaims any intention or obligation to update any
forward-looking statements, whether as a result of new information, future
events or otherwise.


DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET


ASSETS
                                              2012           2011
Current Assets
Cash and cash equivalents                        $3,414,880        $4,479,840
Accounts receivable, net of allowance for
doubtful accounts of $146,210 and $182,634
and sales returns allowance of $51,860 and       5,475,142         3,388,237
$182,634 at September 30, 2012 and
September 30, 2011, respectively.
Costs in excess of billings and unbilled         1,735,798         2,857,142
receivables
Inventories, net of reserves                     3,271,700         3,250,539
Deferred tax asset                               126,187           1,119,800
Prepaid expenses and other current assets        1,334,649         771,564
Total current assets                             15,358,356        15,867,122
                                                                   
Property, Plant and Equipment, net               4,984,150         4,860,328
                                                                   
Other Assets
Intangibles, net                                 6,703,305         7,466,506
Goodwill                                         10,254,160        12,521,971
Deferred financing costs, net                    165,457           150,656
Total other assets                               17,122,922        20,139,133
                                                                   
Total Assets                                     $37,465,428       $40,866,583
                                                                   
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt                $11,984,492       $1,859,728
Accounts payable                                 2,416,397         2,088,395
Deferred revenue                                 694,672           -0-
Accrued expenses and other liabilities           2,809,580         2,368,829
Total current liabilities                        17,905,141        6,316,952
                                                                   
Long-term Liabilities
Long-term debt, net of current portion           -0-               8,985,442
Pension Liability                                345,443           113,344
Deferred tax liability                           371,256           1,208,803
Total long-term liabilities                      716,699           10,307,589
                                                                   
Temporary Equity                                 $0                $2,000,000
                                                                   
Stockholders' Equity                             18,843,588        22,242,042
                                                                  
Total Liabilities and Stockholders' Equity       $37,465,428       $40,866,583
                                                                   


DYNASIL CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF OPERATIONS


                                            2012             2011
Net revenue                                    $47,887,150         $46,951,666
Cost of revenue                                28,381,407         27,201,435
Gross profit                                   19,505,743          19,750,231
Selling, general and administrative            20,926,935          17,463,573
expenses
Impairment of goodwill                         2,284,499          -0-
Income (loss) from operations                  (3,705,691  )       2,286,658
Interest expense, net                          639,096            641,815
Income (loss) before income tax                (4,344,787  )       1,644,843
(benefit) provision
Income tax (benefit) provision                 (41,021     )       293,198
Net income (loss)                              ($4,303,766 )       $1,351,645
                                                                   
                                                                   
Net income (loss)                              ($4,303,766 )       $1,351,645
Other comprehensive income (loss):
Increase in pension liability                  ($345,443   )       -0-
Foreign currency translation                   109,783            147,404
Total comprehensive income (loss)              ($4,539,426 )       $1,499,049
                                                                   
                                                                   
Net income (loss)                              ($4,303,766 )       $1,351,645
Dividends on preferred stock                   -0-                116,646
Net income (loss) attributable to common       ($4,303,766 )       $1,234,999
stockholders
                                                                   
Basic net income (loss) per common share       ($0.29      )       $0.08
Diluted net income (loss) per common           ($0.29      )       $0.08
share
                                                                   
Weighted average shares outstanding
Basic                                          14,811,294          14,932,226
Diluted                                        14,811,294          15,127,004
                                                                   

Contact:

Dynasil Corporation of America
Patty Kehe, 617-668-6855
Corporate Secretary
pkehe@dynasil.com
or
Sharon Merrill
David Calusdian, 617-542-5300
Executive Vice President and Partner
DYSL@InvestorRelations.com