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Dynasil Corp. of America Posts 1st Quarter Fiscal 2014 Financial Results

February 18, 2014

Dynasil Corp. of America, a developer and manufacturer of optical detection and analysis technology and components for the homeland security, medical and industrial markets, announced financial results for the fiscal 2014 first quarter ended December 31, 2013.

In a release on February 12, the Company reported net income for the quarter of $1,458,000 or $0.10 per share, compared with a net loss of ($379,000), or ($0.03) per share, for the quarter ended December 31, 2012. Net income for the quarter includes a gain of $1,187,000 associated with the sale of the Company's lead paint and medical products businesses.

"I am very happy to report that this quarter's results mark a return to profitability, a substantial reduction in our senior debt and compliance with our bank covenant ratios and the Nasdaq listing requirements," said Dynasil Chairman and Interim CEO Peter Sulick. "In addition, we successfully completed the sale of our LPX and Navigator product lines and the contribution of our tissue sealant technology to Xcede Technologies, Inc., a joint venture with Mayo Clinic. We expect Xcede to independently raise future funding for the continuing development of this promising technology."

Net revenue for the first quarter of fiscal 2014 increased slightly to $10.7 million, compared with $10.6 million for the first quarter of fiscal 2013. Revenue increased approximately $900,000 or 19 percent in the Contract Research segment in the quarter while the Instruments segment declined approximately $500,000 or 40 percent primarily as a result of the sale of the lead paint and medical products businesses. Gross profit for the first quarter of 2014 declined slightly to $4.5 million from $4.6 million for the same period in 2013. Gross margins decreased to 41.5 percent in the quarter compared to 43.8 percent for the first quarter of fiscal 2013.

Operating expenses for the three months ended December 31, 2013 were $4.0 million, a decrease of $883,000 compared to the same period in 2013. The decrease was primarily a result of reduced product development costs associated with the lead paint and medical products businesses which were sold during the quarter ended December 31, 2013.

The Company is in compliance with the debt covenants ratios included in its senior loan agreement for the three months ended December 31, 2013, but has not yet paid interest due to its subordinated lender or obtained waivers from both its lenders for its covenant violations for prior periods, and thus remains in default with both of its lenders. The Company has made all principal and interest payments due to its senior lender through February 12, the date of this earnings release, and has accrued but has not paid approximately $400,000 due to its subordinated lender since February, 2013. Management has initiated discussions with its lenders in order to address the default situation. However, the Company cannot predict when or whether a resolution of this situation will be achieved.

The Company successfully completed three transactions within the first quarter of fiscal 2014 that were important steps in significantly reducing its debt with Santander Bank and returning the Company to profitability. On October 1, 2013, Dynasil Biomedical formed Xcede, a joint venture with the Mayo Clinic, to spin out and separately fund the development of its tissue sealant technology. Xcede has initiated financing efforts and has received funding from outside investors including certain directors of the Company. On November 7, 2013, the Company sold its lead paint detector business to Protec Instrument Corp., which is a subsidiary of Laboratoires Protec S.A., a French corporation and former European distributor of the lead paint detector products; and on December 23, 2013, Dynasil sold its Gamma Medical Probe business to Dilon Technologies, Inc. Approximately $3.9 million of the proceeds from the sales were used to reduce the Company's bank debt.

"Now that we have been successful in reducing our debt and returning to profitability, the Company can continue to pursue various commercialization opportunities arising from technologies developed within our Contract Research segment," said Sulick. "We are continuing our efforts to further improve the size and quality of our CLYC crystals and have other exciting new technologies in development."

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