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| DYSL.OB > SEC Filings for DYSL.OB > Form 8-K/A on 15-Sep-2008 | All Recent SEC Filings |
15-Sep-2008
Entry into a Material Definitive Agreement, Completion of Acquisition o
On July 1, 2008, Dynasil Corporation of America, a Delaware corporation ("Dynasil"), completed the acquisition of certain assets of RMD Instruments, LLC and acquired the stock of Radiation Monitoring Devices, Inc. on terms, conditions and provisions that are consistent with, but that replaced and superseded, a Letter of Intent dated December 18, 2007 (the "Letter of Intent"). In order to provide financing for this acquisition, Dynasil completed a bank financing with Susquehanna Bank DV and sold shares of Series C 10% Cumulative Convertible Preferred Stock. In addition, Dynasil entered into former owner work continuation agreements with two former owners of the acquired businesses and entered into five year leases for the space currently occupied by the businesses being acquired. Dynasil entered into the following material definitive agreements:
1. An Asset Purchase Agreement dated July 1, 2008 (the "Asset Purchase Agreement") by and among Dynasil, RMD Instruments Corp., a Delaware corporation that is a wholly- owned subsidiary of Dynasil ("RMD Instruments"), RMD Instruments LLC, a Massachusetts limited liability company that manufactures and sells photonics related instruments and components (the "Seller"), the Gerald Entine 1988 Family Trust (the "Entine Trust"), Fritz Wald and Doris Wald (together, the "Walds") and Jacob H. Paster ("Paster");
2. An Agreement and Plan of Merger dated July 1, 2008 (the "Merger Agreement") by and among Dynasil, RMD Acquisition Sub, Inc., a Delaware corporation and a wholly- owned subsidiary of Dynasil ("RMD Acquisition"), Radiation Monitoring Devices, Inc., a Massachusetts corporation that performs research under government contracts such as SBIRs ("RMD"), the Entine Trust, the Walds and Paster;
3. a Former Owner Work Continuation Agreement dated July 1, 2008 (the "Entine Former Owner Work Continuation Agreement") by and between Dynasil and Gerald Entine ("Entine");
4. a Former Owner Work Continuation Agreement dated July 1, 2008 (the "Paster Former Owner Work Continuation Agreement") by and between Dynasil and Paster;
5. a Standard Form Commercial Lease - RMD-I dated July 1, 2008 by and between Charles River Realty, d/b/a Bachrach, Inc. (the "Lessor"), and RMD Instruments (the "RMD Instruments Lease");
6. a Standard Form Commercial Lease - RMD-S dated July 1, 2008 by and between the "Lessor" and RMD (the "RMD Lease"); and
7. a Term Loan and Line of Credit Agreement along with supporting agreements dated July 1, 2008 (the "Bank Loan Agreement") by and among Susquehanna Bank DV (the "Bank"), Dynasil, Evaporated Metal Films Corporation, a New York corporation and a wholly-owned subsidiary of Dynasil ("EMF"), Optometrics Corporation, a Delaware corporation and a wholly-owned subsidiary of Dynasil ("Optometrics"), RMD Instruments and RMD Acquisition.
Dynasil and its subsidiaries had no previous relationship with the Seller, RMD, the Entine Trust, Entine, the Walds or Paster.
Pursuant to the Asset Purchase Agreement, Dynasil, acting through RMD Instruments, acquired key business assets used by the Seller in its business of manufacturing and selling photonics related instruments and components for a purchase price comprised of $12,500,000 in cash and 1,000,000 shares of Dynasil's common stock (the "acquisition stock"). The assets acquired from the Seller included its inventory, equipment, proprietary assets, contracts, goodwill, miscellaneous property, licenses, prepaid expenses, rights under unfilled customer orders and certain accounts receivable. The assets acquired were acquired subject to the following liabilities: accrued vacation, accrued bonus, and sales tax accrual, in each case limited to the amounts indicated on the Seller's June 30, 2008 . . .
The transactions contemplated by the agreements described under Item 1.01 were consummated on July 1, 2008. In connection with the consummation of those transactions, indebtedness previously owed to Citizens Bank of Massachusetts by Optometrics and guaranteed by Dynasil of $468,620 was repaid and the liens associated with that indebtedness were released. In connection with the consummation of those transactions, indebtedness previously owed to the Bank in the amount of $425,460 also was repaid. In recognition of the time that Mr. James Saltzman spent above and beyond normal Director expectations to support the RMD transaction, Dynasil's Board authorized a total payment of $60,000 for consulting services which Mr. Saltzman has elected to receive 50% in cash and the other 50% in options to acquire 144,648 shares with a exercise price of $4.00 per share over a three year term. The information set forth under Items1.01 and 3.02 of this Report is incorporated herein by reference.
The information set forth under Items1.01 and 2.01 of this Report is incorporated herein by reference.
On July 1, 2008, Dynasil issued and sold an aggregate of 4,582,000 shares of its common stock pursuant to and in connection with the transactions described under Items 1.01 and 2.01 of this Report. These shares were sold in transactions exempt from the registration requirements of the Securities Act of 1933 (the "Act") pursuant to section 4(2) thereof. As a result of those transactions, Dynasil believes that Entine, including shares held in his family trust and trusts held in his children's names, owns beneficially or of record approximately 4,363,098 shares of Dynasil's common stock, which represents approximately 40% of its outstanding shares of common stock at the date of this Report.
On July 1, 2008, Dynasil sold approximately 4.7 million shares of a Series C 10% Cumulative Convertible Preferred Stock (the "Series C Preferred Stock"). Through August 31, 2008, approximately 5.3 million shares of the Series C Preferred Stock had been sold. The shares of Series C Preferred Stock were sold at a price of $1.00 per share. No underwriting discounts or commissions were paid in connection with the sales. The securities were offered and sold only to accredited investors within the meaning of Rule 501(a) under the Securities Act of 1933, as amended (the "Act"), in a transaction conducted pursuant to section 4(2) of the Act and Regulation D thereunder. Each share of Series C Preferred Stock carries a 10% per annum dividend and is convertible to 0.4 share of Dynasil common stock, which translates into a conversion price of $2.50 per share, at any time by the holders, subject to adjustment for certain subsequent sales of common stock or securities convertible into or exchangeable for common stock, and is callable after two years by Dynasil at a redemption price of $1.05 per share. After two years, Dynasil can force conversion of the Series C Preferred Stock if the closing price of Dynasil common stock is $4.00 per share or higher. Dynasil will offer Series C Preferred Stock holders the option to receive dividends in cash or in common stock at $2.50 per share subject to a maximum of 480,000 shares to be issued under this arrangement. Dynasil estimates that the net proceeds to it of the offering of the Series C Preferred Stock sold to the date of this Report are approximately $5.3 million. Dynasil also intends to continue to offer shares of the Series C Preferred Stock for sale for the foreseeable future in order to sell a total amount in the $6 to $7 million range. Other financing alternatives are also being evaluated for additional working capital. As set forth under Items 1.01 and 2.01 above, the net proceeds of the sale of shares of the Series C Preferred Stock to date were used to consummate the transactions described under Items 1.01 and 2.01 of this Report.
Information relating to previous sales of unregistered securities described in Dynasil's Reports on Form 8-K dated March 14, 2005 and October 6, 2006 are incorporated herein by reference.
The information set forth under Item 1.01 of this Report is incorporated herein by reference. The requirements under the Bank Loan Agreement that Dynasil maintain a debt service coverage ratio of at least 1.20 to 1 and apply 20% of its earnings after taxes during its fiscal years ending September 30, 2009 and September 30, 2010 to mandatory prepayments of up to $300,000 in fiscal 2009 and $500,000 in fiscal 2010 may constitute material modifications of the rights of holders of shares of its common stock. Although Dynasil has no current plan or intention to pay dividends on shares of its common stock for the foreseeable future, the existence of that restriction under the Bank Loan Agreement, as well as the requirement that dividends on shares of the Series B and C Preferred Stock must be declared and paid prior to the declaration and payment of dividends on the shares of common stock, may as practical matters restrict or eliminate the possibility that dividends will be paid on shares of Dynasil's common stock.
The information set forth under Item 1.01, 2.01 and 3.02 of this Report is incorporated herein by reference.
As a consequence of receipt of an aggregate of 4,363,098 shares of Dynasil's common stock in connection with the transactions described under Items 1.01 and 2.01 of this Report, which represents approximately 40% of Dynasil's outstanding shares of common stock at the date of this Report, Entine and his family trust and trusts held in his children's names trusts now together constitute Dynasil's largest stockholders. Although Dynasil believes that by virtue of that stock ownership, a change of control of Dynasil has not occurred, the holding of such a large percentage of Dynasil's common stock may permit Entine and/or such trusts to exert a significant influence on Dynasil's management and policies.
(a) Financial Statements of businesses acquired
- Independent's Auditor's report - RMD, Inc. and
Affiliate
- Balance sheets - RMD, Inc. and Affiliate
- Statements of Operations - RMD, Inc. and Affiliate
- Statements of Changes in Equity - RMD, Inc. and
Affiliate
- Statements of Cash Flow - RMD, Inc. and Affiliate
- Notes to Financial Statements - RMD, Inc. and
Affiliate
(b) Pro Forma financial information
- Unaudited Pro Forma Condensed Consolidated Balance
Sheet of Dynasil Corporation of America, as of
June 30, 2008
- Unaudited Pro Forma Condensed Consolidated Statement
of Operations of Dynasil Corporation of America for
the nine months ending June 30, 2008 and the twelve
months ending September 30, 2007.
- Notes to the Unaudited Pro Forma Consolidated
Financial Information.
(c) Exhibits
10.1* Form of Asset Purchase Agreement dated July 1, 2008 (the "Asset Purchase Agreement") by and among Dynasil, RMD Instruments Corp., a Delaware corporation ("RMD Instruments"), RMD Instruments LLC, a Massachusetts limited liability company (the "Seller"), the Gerald Entine 1988 Family Trust (the "Entine Trust"), Fritz Wald and Doris Wald (together, the "Walds") and Jacob H. Paster ("Paster");
10.2* Form of Agreement and Plan of Merger dated July 1, 2008 (the "Merger Agreement") by and among Dynasil, RMD Acquisition Sub, Inc., a Delaware corporation ("RMD Acquisition"), Radiation Monitoring Devices, Inc., a Massachusetts corporation ("RMD"), the Entine Trust, the Walds and Paster;
10.3* Form of Former Owner Work Continuation Agreement dated July 1, 2008 by and between Dynasil and Gerald Entine ("Entine");
10.4* Form of Former Owner Work Continuation Agreement dated July 1, 2008 by and between Dynasil and Paster;
10.5* Form of Standard Form Commercial Lease - RMD-I dated July 1, 2008 by and between Charles River Realty, d/b/a Bachrach, Inc. (the "Lessor"), and RMD Instruments;
10.6* Form of Standard Form Commercial Lease - RMD-S dated July 1, 2008 by and between the Lessor and RMD;
10.7* Form of Term Loan and Line of Credit Agreement dated July 1, 2008 by and among Susquehanna Bank DV (the "Bank"), Dynasil, Evaporated Metal Films Corporation, a New York corporation ("EMF"), Optometrics Corporation, a Delaware corporation ("Optometrics"), RMD Instruments and RMD Acquisition.
23 Consent of Haefele, Flanagan & Co., p.c.
99.1* Dynasil Corporation of America press release dated July 2, 2008.
* Incorporated herein by reference.
(a) Financial Statements of businesses acquired
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Radiation Monitoring Devices, Inc. and Affiliate
Watertown, Massachusetts
We have audited the accompanying combined balance sheets of RADIATION MONITORING DEVICES, INC. AND AFFILIATE as of June 30, 2008 and September 30, 2007 and the related combined statements of operations, changes in equity, and cash flows for the nine months ended June 30, 2008 and the year ended September 30, 2007. These combined financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these combined financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of RADIATION MONITORING DEVICES, INC. AND AFFILIATE as of June 30, 2008 and September 30, 2007, and the combined results of its operations and its combined cash flows for the nine months ended June 30, 2008 and the year ended September 30, 2007 in conformity with accounting principles generally accepted in the United States of America.
Radiation Monitoring Devices, Inc. and Affiliate
Combined Balance Sheets
June 30, 2008 and September 30, 2007
ASSETS 2008 2007
--------- ---------
CURRENT ASSETS:
Cash and equivalents $ 909,875 $ 2,165,317
Accounts receivable, net 1,530,598 932,967
Inventories 705,155 1,101,927
Costs in excess of billings 2,088,363 1,761,187
Investments 824,105 812,976
Prepaid expenses and
other current assets 189,328 180,391
--------- ---------
Total current assets 6,247,424 6,954,765
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment , net 913,888 615,895
--------- ---------
TOTAL ASSETS $ 7,161,312 $ 7,570,660
========== ==========
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LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable $466,402 $328,433
Deferred revenue 0 190,225
Accrued expenses and
other current liabilities 454,077 442,094
--------- ---------
Total current liabilities 920,479 960,752
Stockholders' Equity
Common stock, no par value,
12,500 shares authorized
issued and outstanding 11,717 11,717
Accumulated other
comprehensive income (loss) 13,034 (16,760)
Retained earnings 3,802,033 2,963,744
--------- ---------
3,826,784 2,958,701
Members' equity 2,414,049 3,651,207
--------- ---------
Total equity 6,240,833 6,609,908
--------- ---------
Total Liabilities and Equity $ 7,161,312 $ 7,570,660
========== ==========
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The accompanying notes are an integral part of these combined financial statements.
Radiation Monitoring Devices, Inc. and Affiliate
Combined Statements of Operations
For the Nine Months Ended June 30, 2008
and for the
Year Ended September 30, 2007
2008 2007
--------- ---------
(Nine Months)
Net revenues $ 17,177,275 $ 20,420,554
Cost of revenues 8,529,770 9,955,577
--------- ---------
Gross Profit 8,647,505 10,464,977
Selling, general and
administrative expenses 6,428,779 7,812,275
--------- ---------
Income from operations 2,218,726 2,652,702
Other income (expense)
Interest income 71,229 102,474
Investment income 23,634 66,190
Realized loss on sale of investments (6,674) -0-
--------- ---------
Total other income (expense) 88,189 168,664
Income before income taxes 2,306,915 2,821,366
Income taxes -0- -0-
--------- ---------
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See accompanying notes which are an integral part of these
combined financial statements.
Radiation Monitoring Devices, Inc. and Affiliate
Combined Statements of Changes in Equity
For the Nine Months Ended June 30, 2008 and for the Year
Ended September 30, 2007
Common Stock Retained Members' Accum Other Total
Shares Amount Earnings Equity Comp Income Equity
------ ------ --------- --------- ------ ------- ---------
Balance, October 1, 2006 12,500 $11,717 $3,076,022 $2,170,036 $(37,519) $5,220,256
Comprehensive income
Net income 534,462 2,286,904 2,821,366
Unrealized gains from investments 20,759 20,759
---------
Total comprehensive income 2,842,125
Dividends (646,740) (646,740)
Member's withdrawals (805,733) (805,733)
------ ------ --------- --------- ------ ------- ---------
Balance, Sept 30, 2007 12,500 11,717 2,963,744 3,651,207 (16,760) 6,609,908
Comprehensive income
Net income 853,571 1,453,344 2,306,915
Unrealized gains from investments 29,794 29,794
---------
Total comprehensive income 2,336,709
Dividends (15,282) (15,282)
Members' withdrawals (2,690,502) (2,690,502)
------ ------ --------- --------- ------ ------- ---------
Balance, June 30,2007 12,500 $11,717 $3,802,033 $2,414,049 $13,034 $6,240,833
====== ====== ========= ========= ====== ======= =========
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Radiation Monitoring Devices, Inc. and Affiliate
Combined Statements of Cash Flows
For the Nine Months Ended June 30, 2008 and the Year Ended
September 30, 2007
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,306,915 $2,821,366
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 116,213 82,196
Bad debt allowance 12,772 (4,229)
Realized loss on sale of investments 6,674 0
Net decrease in costs and estimated earnings in
excess of billings on uncompleted contracts (327,176) (40,463)
(Increase) decrease in:
Accounts receivable (610,403) (489)
Inventories 396,772 (790,585)
Prepaid expenses and other current assets (8,937) (55,497)
Increase (decrease) in:
Accounts payable 137,969 249,870
Deferred revenue (190,225) (190,506)
Accrued expenses and other current liabilities 11,983 (171,624)
Net cash provided by operating activities 1,852,557 1,900,039
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CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of investments 11,991 886,561 Purchases of property and equipment (414,206) (376,043) Net cash used in investing activities (402,215) 510,518 CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (15,282) (646,740) Members' withdrawals (2,690,502) (805,733) Net cash used in financing activities (2,705,784) (1,452,473) Net increase (decrease) in cash and equivalents (1,255,442) 958,084 Cash and cash equivalents, beginning 2,165,317 1,207,233 Cash and cash equivalents, ending $909,875 $2,165,317 |
The accompanying notes are an integral part of these combined financial statements.
Note 1 - Summary of Significant Accounting Policies
Nature of Operations
The Companies are primarily engaged in the research, development, fabrication and marketing of components, materials and instruments. The Companies' products and services are sold and provided throughout the United States and internationally.
Principles of Combination
The accompanying combined financial statements include the activities of Radiation Monitoring Devices, Inc. (an "S" corporation) and RMD Instruments, LLC (a limited liability corporation), both of which are under common control. All significant inter-company transactions and balances have been eliminated in the combination.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Companies record revenue from product sales at the time the product is shipped and title passes pursuant to the terms of the agreement with the customer, the amount due from the customer is fixed or determinable, and collectability of the related receivable is reasonably assured. Returns of products shipped have historically not been material.
Revenues from research and development activities consists of up-front fees, research and development funding and milestone payments. Non-refundable up-front fees are deferred and amortized to revenue over the related performance period. Periodic payments for research and development activities and government grants are recognized over the period that the Company performs the related activities under the terms of the agreements. Revenue resulting from the achievement of milestone events stipulated in the agreements is recognized when the milestone is achieved.
Note 1 - Summary of Significant Accounting Policies
(continued)
Government funded services revenue from cost plus contracts are recognized as costs are incurred on the basis of direct costs plus allowable indirect costs and an allocable portion of the fixed fee. Revenues from fixed- type contracts are recognized under the percentage of completion method with estimated costs and profits included in contract revenue as work is performed. Revenues from time and materials contracts are recognized as costs are incurred at amounts represented by agreed billing amounts. Recognition of losses on projects are taken as soon as the loss is reasonably determinable. The Companies have no current accrual for potential losses on existing projects.
The majority of the Companies' contract revenue is derived from the United States government and government related contracts. Such contracts have certain risks which include dependence on future appropriations and administrative allotment of funds and changes in government policies. Costs incurred under United States government contracts are subject to audit. The Companies believe that the results of such audits will not have a material effect on its financial position or its results of operations.
Accounts Receivable
Accounts receivable are presented in the balance sheet, net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. Such allowances are based upon our estimate of non-collectability due to customer factors such as payment history and customer classification. The Companies write off specific accounts receivable when they become uncollectible. The allowance for doubtful accounts . . .
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