U. S. SECURITIES AND EXCHANGE COMMISSION
                       Washington, DC   20549

                              FORM 10-KSB
(Mark One)

[x] ANNUAL REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934 for the fiscal year ended September 30, 2008.

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT for the transition period from ___________ to ____________ .
    Commission file number: 000-27503

                       DYNASIL CORPORATION OF AMERICA
      (Exact name of small business issuer as specified in its charter)

         Delaware                              22-1734088
 (State or Other Jurisdiction of            (I.R.S. Employer
 Incorporation or Organization)              Identification No.)

385 Cooper Road, West Berlin, New Jersey	 08091
(Address of Principal Executive Offices)	(Zip Code)

                              (856) 767-4600
                        (Issuer's Telephone Number)

Securities registered under Section 12(b) of the Act: none

Securities registered under Section 12(g) of the Act: common
stock, $.0005 par value

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities 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
[x]     No [ ]

Check if there is no disclosure of delinquent filers in response
to item 405 of Regulation S-B contained in this form, and that
no disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ ]

State issuer's revenues for its most recent fiscal year:
$17,116,341.

The Company's common stock is quoted on the NASDAQ OTC Bulletin
Board under the symbol "DYSL.OB".   The estimated aggregate
market value of the voting and non-voting stock held by
non-affiliates of the registrant as of December 12, 2008 was
$4,024,263. The market value is based upon the last sale of the
Common Stock on the NASDAQ OTC Bulletin Board of $1.16 per share
as of December 12, 2008.

The Company had 11,348,635 shares of common stock, par value
$.0005 per share, outstanding as of December 12, 2008.

Documents incorporated by reference: none

Transitional Small Business Disclosure:     Yes       No  X
                                            ----       -----





                                      -1-
<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

       Dynasil Corporation of America, a Delaware corporation
("Dynasil", "we" or the "Company"), was incorporated in the
State of New Jersey on October 20, 1960 to manufacture synthetic
fused silica, the purest form of glass known to man. For nearly
five decades, Dynasil has provided high quality synthetic fused
silica and fused quartz products to customers for a wide range
of photonics applications.  Today, Dynasil, after several
acquisitions, is comprised of five related businesses: the
original optical materials business, optical components, optical
coatings, optical instruments, and contract research.  We supply
a broad range of applications markets in the medical,
industrial, and homeland security/ defense sectors.

       The Company entered a period of financial distress after
9/11/01. Mr. Craig Dunham purchased a large ownership interest
in Dynasil and became its President and CEO on October 1, 2004.
Under his leadership, Dynasil's strategy changed to one designed
for significant profitable growth through increasing the
revenues of the existing business and strategic acquisitions.
During the last 4 years, Dynasil has implemented clear focus,
professional management tools, process improvements, and has
realized improved execution across its companies with the
following results:

      - Revenue has grown from $2 million to $17.1 million, a
        65% compound annual growth rate.
      - Net income has gone from a $176,000 loss for FY 2004 to
        a $1,162,000 profit for FY 2008.
      - Earnings Before Interest, Taxes, Depreciation and
        Amortization ("EBITDA")
        has been increased from $7 for FY 2004 to $ 1,954,649
        for FY 2008.

       Dynasil was founded as a manufacturer and fabricator of
synthetic fused silica, a high purity, industrial optical
material. The manufacturing aspect of the business entails
producing synthetic fused silica through a chemical-vapor-
deposition process in furnaces. The fabricating aspect deals
with precision cutting, coring and shaping to customer
specifications. In 2002, we suspended operations of our glass
furnaces and concentrated on the fabrication of optical
materials supplied by other manufacturers. This has included
fused quartz from General Electric and fused silica from Corning
Incorporated.

       On March 8, 2005, we acquired the operating assets and
assumed certain liabilities of Optometrics LLC, a worldwide
supplier of optical components and instruments including
diffraction gratings, interference filters, laser optics,
monochromators and specialized optical systems.  This
acquisition approximately doubled our revenues and added
significant profitability.  We conduct this business through our
Optometrics Corporation subsidiary ("Optometrics") which is
located in Ayer, Massachusetts.

       On October 2, 2006, we acquired 100% of the stock of
Evaporated Metal Films Corporation ("EMF") in Ithaca, NY.  EMF
provides optical thin-film coatings for a broad range of
application markets including solar energy, display systems,
optical instruments, satellite communications and lighting.
This acquisition increased our fiscal year 2007 revenues by
approximately 37%.

       On January 18, 2008, Optometrics acquired the optical
filter equipment and customer list of Precision Optics
Corporation, Inc. of Gardener, MA ("Precision Optics").  The
Precision Optics assets have been relocated to Optometrics'
Ayer, MA location. The purchase price was $250,000 plus a
royalty of 25% of revenues exceeding $300,000 from the purchased
customer list for a three year period. The customer list is
expected to generate approximately $500,000 of annual revenues
for optical filter sales.

       On July 1, 2008, Dynasil acquired the stock of Radiation
Monitoring Devices, Inc. ("RMD Research") and specific assets of
RMD Instruments, LLC ("RMD Instruments") which are advanced
instruments and research companies located in Watertown, MA. RMD
Instruments and RMD Research are referred to, together, in this
Annual Report as "RMD."  RMD Instruments manufactures and sells
instruments and components that management believes have high
growth potential.  These are sold

                                    -2-
<PAGE>

into the medical imaging, environmental sensing and quality
control markets and include hand-held analyzers for lead paint
and medical probes for cancer surgery with the potential to
significantly improve surgical outcomes.  RMD Research is one of
the largest small business participants for U.S. government
funded research.  The RMD acquisition more than tripled our
revenues for quarter four of fiscal year 2008.

       Our products include optical instruments as well as
components that are used for optical instruments, lasers,
analytical instruments, semiconductor/electronic devices,
automotive components, spacecraft/aircraft components, and in
devices for the solar energy industry. These applications for
our optical materials, coatings and components include:

  .   Lasers - beam splitters, brewster windows, q-switches,
      exciter systems, diffraction gratings, coatings
      for laser eye protection
  .   Analytical Instruments - diffraction gratings for
      Spectrometers, fused silica for fire control devices,
      interference filters for optical instruments
  .   Astronomy - coatings for telescope mirrors
  .   Energy - coatings for solar energy concentrators
  .   Transportation- beamsplitters for heads-up displays,
      reflective coatings for motorcycle helmet visors
  .   Imaging and sensors - Avalanche photodiodes for medical
      imaging, defense and security sensors

       We also produce several analytical instruments including
instruments designed to measure the "Sun Protection Factor"
("SPF") of sunscreens, handheld instruments to determine whether
there is lead in the paint of buildings and whether electronics
are in compliance with the Reduction of Hazardous Substances
("ROHS") regulations, and medical probes which support cancer
surgery.

       Our products are distributed through direct sales as well
as other channels and delivered by commercial carriers. We have
seventeen sales and marketing people who handle all sales. We
also use manufacturer's representatives and distributors in
various foreign countries for international sales and U.S.
manufacturer's representatives for some of the RMD Instruments'
product lines. Marketing efforts include direct customer contact
through sales visits, advertising in trade publications and
presentations at trade shows.

       We compete for business in the optics and instrument
industries primarily with fabricators of industrial optical
materials, other optical components manufacturers and other
optical coaters as well as other analytical instruments
manufacturers. Market share in the optics and analytical
instrument industries is largely a function of quality, price
and speed of delivery.  We believe that we compete effectively
in all three areas.

       Our largest supplier for materials and components is
Corning Incorporated, which is a primary supplier of the fused
silica material that is fabricated and sold by our New Jersey
facility.

       We presently have over 550 customers with approximately
38% of our business concentrated in our top 10 customers. Our
five largest customers accounted for approximately 10.5%, 7.2%,
4.5%, 3.2% and 2.7%, respectively, of our revenues during fiscal
year 2008. The loss of any of these top five customers would
likely have a material adverse effect on our business, financial
condition and results of operations. Generally, our customers
provide purchase orders for a specific part, quantity and
quality or they provide a contract for research projects.
Product orders are normally filled over a period ranging from
one to six weeks. We have blanket orders that call for monthly
deliveries of a predetermined amount.

       We have 27 patents granted and an additional 17 patents
in the application process.

       More than 30% of RMD Instrument's 2007 commercial revenue
came from after-sales maintenance and support providing ongoing,
profitable revenue from the installed base of instruments.  RMD
Research has been conducting government research under the Small
Business Innovation Research ("SBIR") program for more than 25
years and the current contract backlog exceeds one year.
Management

                                    -3-
<PAGE>

believes that prior and current research projects are a source
for new commercial products in areas like medical imaging,
industrial sensors and homeland security.

       Other than federal, state and local environmental and
safety laws as well as International Traffic in Arms Regulation
("ITAR") and FDA requirements, our operations are not subject to
direct governmental regulation, although RMD Research must
comply with the government contracting rules contained in the
federal acquisitions register.  We do not have any pending
notices of environmental violations and are aware of no
potential violations.  There are no buried storage tanks on our
properties.  Environmental costs for fiscal year 2008 did not
exceed $50,000.

       Our research and development ("R&D") activities include
government funded SBIR research which totaled $4.1 million for
fiscal year 2008.  R&D for our historical businesses has
primarily involved new product development, changes to our
manufacturing processes and the introduction of improved methods
and equipment.  Improvements to our processes are ongoing and
related costs are incorporated into our manufacturing expenses.

       Our total work force consists of 184 employees: 22
administrative, 17 sales, 73 research and/or engineering, and 72
manufacturing personnel. The operations are non-union.

       The public may read and copy any materials we have filed
with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549.  Information on the
operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. The SEC also maintains an
internet site that contains reports, proxy and information
statements, and other information regarding issuers that file
electronically with the SEC. The address of the internet site is
http://www.sec.gov. The public can also contact Mr. Craig T.
Dunham at Dynasil Corporation of America, 385 Cooper Road, West
Berlin, NJ 08091 or through the internet web address
http://www.Dynasil.com.

ITEM 2.    DESCRIPTION OF PROPERTY

Facilities

       We own a manufacturing and office facility consisting of
a one-story, masonry and steel building containing approximately
15,760 square feet, located at 385 Cooper Road, West Berlin, New
Jersey 08091. The building includes optical materials
fabrication and administrative offices and is situated on a
3.7-acre site. We lease a 10,000 square foot building in Ayer,
MA from a related party with a lease that expires in March 2013.
We own a two-story, 44,000 square foot manufacturing and office
facility in Ithaca, New York.  We also lease a 40,000 square
foot building in Watertown, MA for RMD from a related party with
leases that expire in June 2013. We believe the properties are
in satisfactory condition and suitable for our purposes.  The
New Jersey and New York properties are mortgaged as collateral
against notes payable to banks.

ITEM 3.  LEGAL PROCEEDINGS

      On or about May 6, 2008, EMF received a copy of Summons
with Notice (the "Summons") filed on January 18, 2008 in the
Supreme Court of the State of New York, County of Albany, by the
New York State Attorney General on behalf of the State of New
York Workers' Compensation Board, as plaintiff. The Summons
required EMF, which is one of a large number of defendants, to
appear in the action commenced by the plaintiff alleging its
entitlement to recover previously billed and unpaid assessments
aggregating approximately $1 million and other, but as yet
undetermined, assessments which could aggregate to more than $25
million from the defendants based upon their participation on a
joint and several liability basis in a Manufacturing Self
Insurance Trust that closed on or about August 31, 2007. EMF has
engaged counsel who appeared for it in this action. Although the
action is in an early state, EMF believes that its ultimate
liability, if any, in this matter will not have a material
adverse effect on its financial condition.

                                    -4-
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

       During the Fourth Quarter of the Fiscal Year covered by
this report, no matter was submitted to a vote of security
holders through solicitation of proxies or otherwise.

                                  PART II

ITEM 5.  MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

       The Registrant's Common Stock is quoted on the NASD-OTC
Bulletin Board under the symbol "DYSL.OB". The Company's Common
Stock has been traded publicly since April 22, 1981. The "high"
and "low" bid quotations for the Company's Common Stock as
reported by the OTC Bulletin Board for each quarterly period for
the fiscal years ended September 30, 2007 and September 30, 2008
were as follows:

  Fiscal Quarter        High Bid Price        Low Bid Price
  --------------        --------------        -------------
       2007
       First               $1.85                  $0.63
       Second               1.71                   1.20
       Third                1.93                   1.27
       Fourth               1.70                   0.92

       2008
       First               $2.40                  $1.36
       Second               2.25                   1.60
       Third                2.25                   1.61
       Fourth               2.50                   1.05

       The above listed quotes reflect inter-dealer prices
without retail mark-up, mark-down, or commissions, and may not
represent actual transactions.

       The "high" and "low" sale prices for trades of the
Company's Common stock on the OTC bulletin board were as follows
for each quarterly period:

  Fiscal Quarter        High Sale Price       Low Sale Price
  --------------        --------------        -------------
       2007
       First               $1.99                  $0.65
       Second               1.75                   1.20
       Third                1.95                   1.28
       Fourth               1.74                   0.92

       2008
       First               $2.50                  $1.36
       Second               2.25                   1.60
       Third                2.30                   1.65
       Fourth               2.53                   1.05

       As of September 30, 2008 there were 11,332,689 shares of
common stock outstanding held by approximately 530 holders of
record of the Common Stock of the Company (including
shareholders whose stock is held in street name and who have
declined disclosure of such information.)

       The Company has paid no cash dividends on its common
stock since its inception. The Company intends to retain any
future earnings for use in its business and does not intend to
pay cash dividends on its common stock in the foreseeable
future.

       Holders of the Common stock are entitled to share ratably
in dividends when and as declared by the Board of Directors out
of funds legally available therefore.  Preferred Stock dividends
of $203,501 and $101,590 were paid during the years ended
September 30, 2008 and 2007 respectively.

       The Company adopted Stock Incentive Plans in 1996 and
1999 that permit, among other incentives, grants and options to
officers, directors, employees and consultants to purchase up to
2,250,000 shares of the Company's common stock. At

                                    -5-
<PAGE>

September 30, 2008, 500,920 shares of common stock are available
for issuance under the Plans in addition to the number of stock
options outstanding. Options are generally exercisable at the
fair market value or higher on the date of grant over a three to
five-year period.  To date, options have been granted at
exercise prices ranging from $.40 to $4.25 per share. On
September 30, 2008, 843,725 options were outstanding.

       The securities authorized for issuance under equity
compensation plans are set forth in Note 7 to the Consolidated
Financial Statements of this 10-KSB document and are hereby
incorporated by reference.

       The Company adopted an Employee Stock Purchase Plan that
permits substantially all employees to purchase common stock.
Employees have an opportunity to acquire common stock at a
purchase price of 85% of the fair market value of the shares.
Under the plan, a total of 450,000 shares had been reserved for
issuance. Of these, 156,159 shares have been purchased by
employees at purchase prices ranging from $.06 to $2.68 per
share. During any twelve-month period, employees are limited to
a total of $5,000 of stock purchases.

       On September 19, 2000 the Company filed a Form S-8 with
the United States Securities and Exchange Commission to register
the shares associated with the Stock Incentive Plans and the
Employee Stock Purchase Plan. Prior to that date the shares were
restricted and subject to the holding periods of Rule 144.

       On September 23, 2004, the Company entered into a
Subscription Agreement with Mr. Craig T. Dunham pursuant to
which Mr. Dunham agreed to acquire 1,000,000 shares of Dynasil's
common stock at $0.15 per share for $150,000 including a Stock
Purchase Warrant pursuant under which Mr. Dunham has acquired an
additional 1,200,000 shares of the Company's common stock at an
exercise price of $0.225.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

       The following management's discussion and analysis should
be read in conjunction with our financial statements and the
notes thereto appearing elsewhere in this Form 10-KSB.

General Business Overview

       Fiscal year 2008 was a transformational year for Dynasil
with the significant acquisition of RMD on July 1, 2008.  When
compared to fiscal year 2007, revenues increased by 58.6% to
$17.1 million and net income increased by 113.8% to $1,161,967.
Fiscal year 2008 results included only one quarter of results
from the RMD acquisition and annualized quarter four revenues
would be $34.3 million.  Management is pleased with the results
compared to a starting point of $2.3 million in revenues and a
$176,000 loss for fiscal year 2004.  Fiscal year 2008 revenues
for our historical businesses other than RMD were up 5% and net
income before tax was up 47%, from $433,550 to $636,000,
compared to fiscal year 2007. Revenue growth and major
operational improvements at EMF drove those substantial gains.
For Quarter 4, the RMD acquisition tripled our revenues, from
$2.7 to $8.6 million, and nearly quadrupled our net profit
before taxes, from $169,000 to $812,000, as well as
significantly increasing our technical capabilities and
intellectual property. At a time when economic conditions are
adversely impacting commercial revenues, Management views it as
very beneficial to have a significant portion of revenues coming
from RMD's contract research where the revenues are expected to
increase substantially and the contract backlog is more than one
year.  We remain focused on continuing to effectively execute
our internal growth as well as growing through further
acquisitions and strategic alliances.

Results of Operations

       Revenues for the fiscal year ended September 30, 2008
were $17,116,341. This represents an increase of 58.6% over
revenues for the fiscal year ended September 30, 2007 of
$10,794,650. The revenue increases were driven by 5% growth in
our historical businesses as well as the effect in the fourth
quarter of the acquisition of RMD.
                                    -6-
<PAGE>

       Cost of sales for the fiscal year ended September 30,
2008 was $11,307,034, or 66.1% of sales, versus $7,498,691, or
69.4% of sales for fiscal year ended September 30, 2007. Gross
profit increased to $5,809,307, or 33.9% of sales, for fiscal
year 2008 from $3,295,959, or 30.6% of sales for fiscal year
2007.  The increase in gross margin dollars and percentage came
primarily from the impact of the RMD acquisition as well as the
gross margin percentage impact of large operational improvements
at EMF.

       Selling, general and administrative ("SG&A") expenses
increased to $4,359,493 or 25.5% of sales for fiscal year 2008
from $2,708,886 or 25% of sales for fiscal year 2007. The
changes in SG&A expenses resulted primarily from the impact of
the acquisition of RMD.

       Interest Expense-net, increased to $214,090 or 1.25% of
sales for fiscal year 2008 from $153,523 or 1.4% of sales for
fiscal year 2007. The increase in combined interest expense is
primarily related to the additional interest payments resulting
from the indebtedness incurred in connection with the RMD
acquisition.

       For fiscal year 2008, the Company had a net income tax
cost of $73,757 which was largely related to Massachusetts tax
for Optometrics and RMD. For fiscal year 2007, the Company had a
net income tax benefit of $108,460. After the utilization of
current net operating loss carry-forwards, the Company had a
$20,240 net current provision for fiscal year 2007 income taxes,
largely related to Optometrics' profits in Massachusetts. This
was offset by a $128,700 increase in the deferred tax asset to
recognize that the Company's return to profitability means that
the Company's net operating loss carry-forwards are likely to
have future value. Current federal and some New Jersey state
taxes for fiscal year 2008 and 2007 were offset by utilization
of net operating loss carry-forwards. As of September 30, 2008
we have no further net operating loss carry-forwards to offset
future taxable income for federal tax purposes. The Company has
approximately $816,720 of net operating loss carry-forwards to
offset certain future New Jersey and New York state taxable
income, expiring in various years through 2013.

       The Company had net income of $1,161,967 for the year
ended September 30, 2008 compared to net income of $542,010 for
the fiscal year ended September 30, 2007.  Net income for our
historical businesses was up significantly due largely to
operational improvements at EMF and the addition of RMD, which
more than tripled our net income for the fourth quarter.

Liquidity and Capital Resources

       The net cash increase for fiscal year 2008 was $3,386,007
compared to $144,809 for fiscal year 2007.

       Net cash provided by operating activities was $960,950
for fiscal year 2008 versus $324,043 for fiscal y`ear 2007. Net
income was $1,161,967, depreciation/ amortization added back
$504,836, accounts receivable increased by $1,318,626,
inventory increased by $368,969, and accounts payable and
accrued expenses increased by $976,037.

       Cash flows used in investing activities were $13,323,756
for fiscal year 2008 compared to $1,056,612 for fiscal year
2007.  Cash paid for the RMD acquisition and acquisition costs
was $12,801,151 and cash paid for the Precision Optics product
line acquisition was $250,000 during fiscal year 2008. Capital
expenditures to purchase property, plant and equipment of
$272,605 for fiscal year 2008 compared to $374,491 for 2007.

        Cash flows from (used in) financing activities were
$15,748,813 for fiscal year 2008 and $877,378 for fiscal year
2007. Cash from financing activities for fiscal year 2008 came
largely from the sale of $5,256,000 of Preferred Stock, $2
million from a note from RMD Instruments, LLC and $9,000,000 of
proceeds from bank financing that were completed as part of the
RMD acquisition.  Cash provided by financing activities for 2007
came primarily from $700,000 of net proceeds from Preferred
Stock. Cash from 2008 and 2007 issuance of common stock was
$177,928 and $164,464 respectively which came primarily from the
exercise of stock options and warrants.
                                    -7-
<PAGE>

       Management believes that its current cash and cash
equivalent balances, along with the net cash generated by
operations and credit lines, are sufficient to meet its
anticipated cash needs for working capital for at least the next
12 months.  As of September 30, 2008, the Company had cash of
$3,882,955 and available bank line of credit borrowings of
$723,000.  However, the current worldwide economic slow-down has
significantly impacted the Company's revenues and profits so
that a prolonged slowdown could cause a cash shortage.  The
Company has a $2 million note to RMD Instruments, LLC which is
scheduled to be repaid in a balloon repayment by
October 1, 2009.  The Company plans to refinance that note
well in advance of its due date but the financing markets
are currently in a credit crisis. Therefore, the Company
may not be able to refinance that loan.  There are
currently no plans for any major capital expenditures in the
next six to nine months, except for a $125,000 investment to
complete upgrades to diffraction grating mastering capabilities
at Optometrics. Any major business expansions or acquisitions
likely will require the Company to seek additional debt and/or
equity financing.

DYNASIL'S STRATEGY

Summary

       Dynasil's strategy is to grow profitably through
acquisitions and organic growth in the Photonics industry.  A
major industry association estimates the Photonics industry at
$264 billion and growing at a double digit rate.  It is highly
fragmented with more than 90% of firms worldwide estimated to
have 50 employees or less.  We believe that the Photonics
industry is rich in opportunities and that Dynasil can
successfully use its status as a public company to deliver
superior stockholder returns.  Our goal is to reach at least
$100 million of revenues by 2012; the Dynasil/ RMD combination
alone is projected to increase revenues to over $50 million.

       Dynasil has a proven track record for delivering results
by bringing focus to businesses and improving their execution.
The acquisitions of Optometrics, EMF, the Precision Optics
filter product line and RMD have been completed and we have
significantly improved operational execution and results in
these businesses. Management views the RMD acquisition as adding
high potential optical instruments to our commercial products as
well as bringing exciting new product opportunities from RMD
Research's work to continue to drive top line and bottom line
growth. Here are the key elements of our strategy:

Mission

       Dynasil's mission is to be recognized as a premier
manufacturer of photonic products, to achieve financial results
which are consistently superior to those of its peers, and to be
regarded by its employees as an outstanding place to work.
Dynasil strives to achieve the highest level of customer service
and product quality and to maximize stockholder value.

Financial Objectives

     Dynasil's goal is to perform in the top 25% of peer group
companies with respect to:

          - 4 year compound annual growth rate in diluted
            earnings per share
          - Its return on equity

     The goal for Revenues is to exceed $100 million by 2012

Ethics Policy

       Dynasil has a Code of Conduct which requires adherence to
the highest ethical standards in all its dealings with
customers, vendors, employees and stockholders. Ethical behavior
includes the principals of integrity, fairness, respect,
openness, and obeying all laws.

Operations Strategy

       The Company is organized into highly competitive, semi-
autonomous business units which are focused on customers and
meeting key business goals.  Each

                                    -8-
<PAGE>

business unit is led by a General Manager with overall
responsibility for their unit results as well as managing the
interfaces with other business units and the corporate staff.
The Company seeks to foster a high level of employee
involvement, motivation, and profit-sharing participation.

       A small corporate staff focuses on adding value by
centralizing a few selected activities and by developing key
competencies within the business units
including:

      - Providing overall corporate leadership and coordination.
      - Implementing key corporate competencies in the business units
        to support organic growth by teaching and consulting to
        include:
      - Clear focus by defining a few, key business objectives;
        prioritizing the projects to best meet those objectives; setting
        individual goals; consistently communicating updates; and
        sharing in the profits;
      - Disciplined manufacturing and business processes;
      - Market understanding, strategy process, and
        identification of a few high growth projects; and
      - Continuous revenue growth and operational improvements
      - Providing cost effective financial reporting, tax compliance,
        investor relations, SEC compliance, legal support, and fund raising to
        support growth.
      - Identifying, structuring, and coordinating acquisition
        activities to support
        growth objectives.
      - Facilitating cooperation and coordination between business
        units such as working
        together to maximize overall effectiveness of sales and
        marketing.
      - Identifying transferable skills within the business units and
        using them to help
        other business units (e.g. Laser Safety Officer).
      - Purchasing shared items, such as insurance, where consolidated
        purchasing delivers savings.
      - Coordinating Human Resource policies, high level recruiting,
        and supporting business units with HR issues.

Acquisitions

       The Company plans to aggressively pursue additional
acquisitions to enhance growth.  A goal of one acquisition per
year will be targeted using two sets of criteria:

  a)   Acquisitions that can quickly add to financial results.
     Target companies are manufacturers in optics-related industries
     that can be purchased on attractive financial terms.  Of
     particular interest are companies where a combination with
     Dynasil offers increased customer access, complementary
     capabilities that can expand revenues, cost savings or where
     companies have developed capabilities that can be rapidly
     brought to market given access to Dynasil's existing
     infrastructure, growth capital and/or leadership assistance.
     Our business model has proven to be an attractive exit option
     for long term owners who want to see their business continue to
     prosper and grow.

  b)   Acquisitions that create strategic competitive advantage
     through market penetration and/or technology leadership.  Target
     companies are key players in existing supply chains or stepping
     stones to pursue adjacent markets.  Target "technology"
     companies are start-ups or small companies pitted against large
     companies who lack the scale and traction to increase market
     share but have "industry-best" product.

Strategy and Plans for RMD

Existing Commercial Products

       RMD Instruments' Commercial products are organized in a
separate business unit with medical, industrial, and regulatory
testing products.  Nearly 30% of its historical commercial
product revenue has come from the recurring source replacements
required for existing instruments.  The highest growth area for
RMD is expected to be hand-held x-ray florescence ("XRF")
instruments used to detect lead and other hazardous materials in
paint, toys, and electronics to comply with

                                   -9-
<PAGE>

various environmental and hazardous waste laws and regulations.
The overall handheld XRF market is estimated to exceed $250
million and has been growing at a double digit growth rate.  RMD
also has a successful line of medical probes used in breast
cancer surgery (the sentinel node breast biopsy probe) and other
surgical applications.   Dynasil plans to apply its proven
execution skills to help drive RMD Instruments' commercial
products growth and profitability.  Mr. Mark Caldwell was hired
as RMD Instruments General Manager during October 2008 to help
drive growth in revenues and profits.

RMD Research

       Dynasil expects to use RMD's proprietary capabilities to
accelerate the growth of Dynasil's historical businesses as well
as to develop new businesses.  With more than 30 Ph.Ds doing
government funded research, RMD Research brings leading
technology to Dynasil's historical businesses that is unique in
our industry.  For example, RMD Research has developed faster
and higher resolution thin film scintilators for digital x-ray
and high speed x-ray imaging that could be a potential high
volume product at EMF, our thin film coatings division.  RMD's
extensive background in probes is targeted to make RMD
Instruments a market leader in medical probes. RMD's expertise
in the UV and Gamma sectors of the electromagnetic spectrum are
complimentary to the historical business units' expertise.
Photonics developments are areas of rich promise for market
sectors such as semi-conductor, homeland security and medical
imaging.  Examples of potential new businesses include high
speed x-ray imaging to enable the military to photograph
projectiles as they pass through objects and avalanche
photodiodes which are being used to enhance medical imaging by
combining MRI and PET (Positron Emission Tomography) into a
single imaging unit.   RMD has twenty-seven recently issued
patents and 17 applications pending, with topics ranging from
new gamma ray and neutron detectors critical for Homeland
Security applications to improved films to convert x-ray
patterns to light patterns, a crucial step central to all modern
digital radiography.  We believe that Dynasil can provide the
means to more effectively transition research to commercialized
product.  Dynasil's expertise in effective execution and process
control can become key factors in establishing this evolution.
Commercialization of government-funded research is a key aspect
of our strategy with RMD.

"Off Balance Sheet" Arrangements

       The Company has no "Off Balance Sheet" arrangements.

Critical Accounting Policies and Estimates

       There have been no material changes in our critical
accounting policies or critical accounting estimates since
September 30, 2007.  Except for the adoption of Financial
Accounting Standards Board ("FASB") Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes-an Interpretation of
FASB Statements No. 109" ("FIN 48"), we have not adopted an
accounting policy that has or will have a material impact on our
consolidated financial statements.  For further discussion of
our accounting policies see Footnote 1 "Summary of Significant
Accounting Policies" in the Notes to Consolidated Financial
Statements in our Annual Report on Form 10-KSB for the fiscal
year ended September 30, 2008.

       The accounting policies that reflect our more significant
estimates, judgments and assumptions and which we believe are
the most critical to aid in fully understanding and evaluating
our reported financial results include the following:

Revenue Recognition

       Revenue from sales of products is recognized at the time
title and the risks and rewards of ownership pass.  This is when
the products are shipped per customers' instructions, the sales
price is fixed and determinable, and collections are reasonably
assured.  Revenues from research and development activities
consists of up-front fees, research and development funding and
milestone payments.  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.

                                    -10-
<PAGE>

Valuation of Long-Lived Assets

       We assess the recoverability of long-lived assets
whenever we determine that events or changes in circumstances
indicate that their carrying amount may not be recoverable. Our
assessment is primarily based upon our estimate of future cash
flows associated with these assets. These valuations contain
certain assumptions concerning estimated future revenues and
future expenses. We have determined that there is no indication
of impairment of any of our assets.  However, should our
operating results deteriorate, we may determine that a portion
of our long-lived assets is impaired. Such a determination could
result in non-cash charges to income that could materially and
adversely affect the Company's financial position or results of
operations for that period.

Estimating Allowances for Doubtful Accounts Receivable

       We perform ongoing credit evaluations of our customers
and adjust credit limits based upon payment history and the
customer's current credit worthiness, as determined by our
review of their current credit information. We continuously
monitor collections and payments from our customers and maintain
a provision for estimated credit losses based upon our
historical experience and any specific customer collection
issues that we have identified. While such credit losses have
historically been minimal, within our expectations and the
provisions established, we cannot guarantee that we will
continue to experience the same credit loss rates that we have
in the past. A significant change in the liquidity or financial
position of any of our significant customers could have a
material adverse effect on the collectability of our accounts
receivable and our future operating results.

Valuation of Deferred Tax Assets

       We regularly evaluate our ability to recover the reported
amount of our deferred income taxes considering several factors,
including our estimate of the likelihood of the Company
generating sufficient taxable income in future years during the
period over which temporary differences reverse.  The Company
believes that some of these carryforwards will be realized, and
has adjusted the valuation allowance accordingly.

Valuation of Intangible Assets

       The SFAS 142 accounting standard requires the valuation
of intangible assets after an acquisition for financial
statement purposes.  Arriving at these valuations can be a
complicated and uncertain process which requires significant
judgments to be made.  The Company now has significant goodwill
and other intangible assets from the RMD acquisition that will
likely have a material impact on our financial statements.
These intangible assets will require annual testing for
impairment which will involve significant management estimates.

Stock-Based Compensation

       Effective October 1, 2006, we adopted SFAS 123(R),
"Accounting for Stock Based Compensation." As a result,
compensation costs are now recognized for stock options granted
to employees and directors.  Options and warrants granted to
employees and non-employees are recorded as an expense at the
date of grant based on the then estimated fair value of the
security in question, determined using the Black-Scholes option
pricing model.

Recent Accounting Pronouncements

        Recent Accounting Pronouncements addressed in Note 1 to
the Consolidated Financial Statements of this 10-KSB document
are hereby incorporated by reference.

Forward-Looking Statements

       The statements contained in this Annual Report on Form
10-KSB which are not

                                    -11-
<PAGE>

historical facts, including, but not limited to, certain
statements found under the captions "Business," "Results of
Operations," "Strategic Plan," 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 Annual Report on Form 10-KSB,
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.

                                    -12-
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

      REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Dynasil Corporation of America and Subsidiaries
Berlin, New Jersey

       We have audited the accompanying consolidated balance
sheets of DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES (the
"Company") as of September 30, 2008 and 2007, and the related
consolidated statements of operations, changes in stockholders'
equity, and cash flows for the years then ended.  These
consolidated financial statements are the responsibility of the
Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.

       We conducted our audits in accordance with the standards
of the Public Company Accounting Oversight Board (United
States).  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 consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of DYNASIL CORPORATION OF AMERICA AND
SUBSIDIARIES as of September 30, 2008 and 2007 and the results
of their operations and their cash flows for the years then
ended in conformity with accounting principles generally
accepted in the United States of America.

     We were not engaged to examine management's assessment of
the effectiveness of Dynasil Corporation of America and
subsidiaries internal control over financial reporting as of
September 30, 2008, included in the accompanying management's
report on internal control over financial reporting and,
accordingly, we do not express an opinion thereon.

HAEFELE, FLANAGAN & CO., p.c.

Moorestown, New Jersey
December 23, 2008

                                           F-1
<PAGE>

                 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           SEPTEMBER 30, 2008 and 2007



                                     ASSETS

<TABLE>
<S>                                                   <C>               <C>
                                                            2008            2007
                                                        ----------      ----------
Current assets
   Cash and cash equivalents                            $3,882,955       $ 496,948
   Accounts receivable, net of allowance for doubtful
     accounts of $70,165 for 2008 and $98,863 for 2007   3,390,703       1,284,844
     and sales returns of $8,200 for 2008 and $30,790
     for 2007
   Inventories                                           2,909,730       1,832,720
   Deferred tax asset                                      233,500         216,100
   Prepaid expenses and other current assets               259,896         130,548
                                                        ----------      ----------
        Total current assets                            10,676,784       3,961,160

Property, Plant and Equipment, net                       2,694,290       2,436,517

Other Assets
   Intangibles, net                                      7,807,414          49,475
   Goodwill                                             11,014,240            -0-
   Deferred financing costs, net                            81,136          30,167
   Other assets                                              8,360           9,056
                                                        ----------      ----------
        Total other assets                              18,911,150          88,698
                                                        ----------      ----------
               Total Assets                            $32,282,224      $6,486,375
                                                        ==========      ==========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
   Short Term Note payable                             $   490,117      $  311,870
   Current portion of long-term debt                     1,649,101          99,237
   Accounts payable                                      1,026,675         684,208
   Accrued expenses and other current liabilities        1,657,168         587,872
                                                        ----------      ----------
   Total current liabilities                             4,823,061       1,683,187

Long-term Liabilities
   Long-term debt, net                                   8,178,420       1,626,980
   Note payable to related party                         2,000,000           -0-
                                                        ----------      ----------
   Total long-term liabilities                          10,178,420       1,626,980

Stockholders' Equity
   Common Stock, $.0005 par value, 25,000,000 shares
    authorized, 12,142,849 and 6,926,683 shares issued,
    11,332,689 and 6,116,523 shares outstanding
    for 2008 and 2007, respectively                          6,072           3,464
   Preferred Stock, $.001 par value, 10,000,000
     Shares authorized, 5,966,000 and 710,000 shares
     issued
     and outstanding for 2008 and 2007 respectively,
     10% Cumulative, Convertible                             5,966             710
   Additional paid in capital                           16,122,185       2,983,980
   Retained earnings                                     2,132,862       1,174,396
                                                        ----------      ----------
                                                        18,267,085       4,162,550
   Less 810,160 shares of treasury stock, at cost         (986,342)       (986,342)
                                                        ----------      ----------
        Total stockholders' equity                      17,280,743       3,176,208
                                                        ----------      ----------
        Total Liabilities and Stockholders' Equity     $32,282,224      $6,486,375
                                                        ==========      ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial
statements.
                                       F-2
<PAGE>



                 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 and 2007


                                                       2008     2007
                                                 ----------    ----------

Net sales                                       $17,116,341   $10,794,650
Cost of sales                                    11,307,034     7,498,691
                                                 ----------    ----------
Gross profit                                      5,809,307     3,295,959

Selling, general and administrative expenses      4,359,493     2,708,886
                                                  ----------   ----------

Income from operations                            1,449,814       587,073

Interest expense, net                               214,090       153,523
                                                 ----------    ----------
Income before income taxes                        1,235,724       433,550
Income tax (expense) benefit                        (73,757)      108,460
                                                 ----------    ----------
Net income                                       $1,161,967    $  542,010
                                                 ==========    ===========


Basic net income per common share                  $   0.12     $    0.08
Diluted net income per common share                $   0.11     $    0.07


                                       F-3
<PAGE>

                 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 and 2007
                                                                   Additional
                    Common      Common     Preferred   Preferred    Paid-in
                    Shares      Amount     Shares       Amount      Capital
                    ---------   ------     ---------   ---------    ---------

Balance,
October 1, 2006     4,698,453   $2,350    700,000         $  700    $2,100,098

Issuance of shares
of common stock
under employee
stock purchase
plan                      497      -0-        -0-            -0-           529

Issuance of shares
of common stock in
lieu of compensation
to directors            3,289        2        -0-            -0-         4,998

Issuance of shares
of common stock
under stock
option plan            80,000       40        -0-            -0-        31,960

Issuance of shares
of common stock
under stock
warrant plan          586,373      293        -0-            -0-       131,642

Issuance of shares
of Series B
preferred stock
net of issuance
costs of $10,000         -0-      -0-     710,000            710       699,290

Issuance of shares
of common stock
for conversion of
Series A
preferred stock     1,555,540      778   (700,000)         (700)           (78)

Compensation costs
recognized in
connection with
stock options            -0-      -0-        -0-             -0-        11,366

Stock based
compensation            2,531       1            -0-         -0-         4,175

Preferred stock
dividends paid            -0-      -0-           -0-         -0-          -0-

Net income                -0-      -0-           -0-         -0-          -0-
                    ---------    ------     ---------    ---------   -----------
Balance,
September 30, 2007  6,926,683    $3,464      710,000     $  710      $2,983,980

Issuance of shares
of common stock
under employee
stock purchase
plan                    9,537         5          -0-         -0-         17,978

Issuance of shares
of common stock in
lieu of compensation
to directors            7,142         4          -0-         -0-         14,248

Compensation costs
recognized in
connection with
stock options             -0-        -0-         -0-         -0-        159,950

Issuance of shares
of common stock
under stock
warrant plan          613,627        307         -0-         -0-        137,759

Issuance of shares
of Series C
preferred stock net       -0-        -0-    5,256,000      5,256      5,250,744

Stock based
compensation            3,860          1         -0-         -0-          7,717

Stock issued
in connection with
the purchase
of RMD              4,582,000      2,291         -0-         -0-      7,549,809


Preferred stock
dividends paid            -0-      -0-           -0-         -0-          -0-

Net income                -0-      -0-           -0-         -0-          -0-
                    ---------    ------     ---------    ---------   -----------
Balance,
September 30, 2008 12,142,849    $6,072     5,966,000       5,966    $16,122,185
                   ==========    ======     =========    ==========  ===========

                                         F-4
<PAGE>

                        DYNASIL CORPORATION OF AMERICA AND
SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 and 2007
(continued)

                                    Treasury Stock             Total
                   Retained      -----------------------    Stockholders'
                   Earnings        Shares      Amount         Equity
                   --------      ---------   ----------    -------------
Balance,
October 1, 2006     $733,976      810,160    $(986,342)     $1,850,782

Issuance of shares
of common stock
under employee
stock purchase
plan                 -0-            -0-          -0-                529

Issuance of shares
of common stock in
lieu of compensation
to directors         -0-            -0-          -0-              5,000

Issuance of shares
of common stock
under stock
option plan          -0-            -0-          -0-             32,000

Issuance of shares
of common stock
under stock
warrant plan         -0-            -0-          -0-            131,935

Issuance of shares
of Series B
preferred stock
net of issuance
costs of $10,000     -0-            -0-          -0-            700,000

Issuance of shares
of common stock
for conversion
of Series A
preferred stock      -0-            -0-          -0-              -0-

Compensation costs
recognized in
connection with
stock options        -0-            -0-          -0-             11,366

Stock based
compensation         -0-            -0-          -0-              4,176

Preferred stock
dividends paid    (101,590)         -0-          -0-           (101,590)

Net income         542,010          -0-          -0-            542,010
                   --------      ---------   ----------    -------------
Balance,
September 30,
2007              1,174,396       810,160    $(986,342)      $3,176,208

Issuance of shares
of common stock
under employee
stock purchase
plan                 -0-            -0-          -0-             17,983

Issuance of shares
of common stock in
lieu of compensation
to directors         -0-            -0-          -0-             14,252

Compensation costs
recognized in
connection with
stock options        -0-            -0-         -0-             159,950

Issuance of shares
of common stock
under stock
warrant plan         -0-            -0-          -0-            138,066

Issuance of shares
of Series C
Preferred Stock      -0-            -0-          -0-          5,256,000

Stock based
compensation         -0-            -0-          -0-              7,718

Stock issued
in connection with
the purchase
of RMD               -0-            -0-         -0-           7,552,100

Preferred stock
dividends paid     (203,501)        -0-         -0-            (203,501)

Net Income        1,161,967         -0-         -0-           1,161,967
                   --------      ---------   ----------    -------------
Balance,
September 30,
2008              2,132,862       810,160    $(986,342)      $17,280,743
                  =========      =========   ==========    =============

The accompanying notes are an integral part of these consolidated
financial statements.
                                           F-5
<PAGE>


                DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 and 2007

                                                       2008       2007
                                                    ---------   ---------
Cash flows from operating activities:
Net income                                         $1,161,967    $542,010
Adjustments to reconcile net income to net cash
  provided by operating activities
    Stock compensation expense                        159,950      20,542
    Provision for doubtful accounts and sales returns (51,288)    (72,060)
       Depreciation and amortization                  504,836     368,771
       Deferred taxes                                 (31,900)   (128,700)
      (Gain) Loss on Disposal of assets                  -0-          (17)
      (Increase) decrease in:
         Accounts receivable                       (1,318,826)    156,185
         Inventories                                 (368,969)   (625,861)
         Prepaid expenses and other current assets   ( 70,856)     37,565
       Increase (decrease) in:
         Accounts payable and accrued expense         976,036      25,608
                                                   ----------  ----------
Net cash provided by operating activities             960,950     324,043
                                                   ----------  ----------
Cash flows from investing activities:
     Purchases of property, plant and equipment      (272,605)   (374,491)
     Proceeds from sale of fixed assets                  -0-        1,825
     Cash paid for acquisition of RMD              (12,500,000)       -0-
     Cash paid for acquisition of EMF                     -0-    (580,000)
     Cash paid for acquisition costs                 (301,151)    (94,890)
     Other assets                                        -0-       (9,056)
     Cash paid for acquisition of filter equipment   (250,000)        -0-
                                                   ----------  ----------
Net cash used in investing activities             (13,323,756) (1,056,612)
                                                   ----------  ----------
Cash flows from financing activities:
     Issuance of common stock                         177,928     164,464
     Issuance of preferred stock                    5,256,000     700,000
     Proceeds from short-term debt                    415,631     211,870
     Proceeds from related party note               2,000,000         -0-
     Proceeds from long-term debt                   9,000,000     174,816
     Repayment of long-term debt                     (841,243)    (97,021)
     Repayment of short-term debt                        -0-     (175,161)
     Deferred financing costs incurred                (56,002)        -0-
     Preferred stock dividends paid                  (203,501)   (101,590)
                                                   ----------  ----------
Net cash provided by financing activities          15,748,813     877,378
                                                   ----------  ----------
Net increase in cash and cash equivalents           3,386,007     144,809
Cash and cash equivalents, beginning                  496,948     352,139
                                                   ----------  ----------
Cash and cash equivalents, ending                  $3,882,955  $  496,948
                                                   ==========  ==========

The accompanying notes are an integral part of these
consolidated financial statements.


                                         F-6
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007

Note 1 - Summary of Significant Accounting Policies

Nature of Operations

       The Company is primarily engaged in the development,
marketing and manufacturing of optical products and optical
instruments as well as contract research. The Company's products
and services are used in a broad range of application markets
including the medical, industrial and defense sectors. The
products and services are sold throughout the United States and
internationally.

Principles of Consolidation

       The accompanying consolidated financial statements
include the accounts of Dynasil Corporation of America and its
wholly-owned subsidiaries: Optometrics Corporation, Dynasil
International Incorporated, Hibshman Corporation, Evaporated
Metal Films Corp, RMD Instruments Corp, and Radiation Monitoring
Devices, Inc.  All significant intercompany transactions have
been eliminated.

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.

Business Acquisition - EMF

       On October 2, 2006, the Company completed its acquisition
of all of the outstanding capital stock of EMF in a transaction
accounted for as a purchase.  Total cost of the acquisition was
$1,194,890, of which $1.1 million was paid to the seller, and
$94,890 represented acquisition costs incurred.  From the
proceeds of the issuance of 710,000 shares of Preferred Stock,
Dynasil paid $580,000 in cash to the seller, incurred stock
issuance costs of $10,000 and incurred acquisition related costs
of approximately $94,890.  Also on October 2, 2006, in a
concurrent bank transaction, EMF borrowed $1,050,000 of which
$338,161 was used to retire assumed EMF debt, $520,000 was paid
directly to the seller at settlement, $17,023 was used to pay
transaction costs and the remaining funds of $174,816 were used
for working capital purposes.  The total purchase price of
approximately $1,194,890 has been allocated to the tangible and
identifiable intangible assets acquired and liabilities assumed
on the basis of their estimated fair values.  The results of
operations of EMF have been included in the consolidated
financial statements from October 2, 2006, the effective date of
acquisition.  The allocation of purchase price is summarized
below:

Purchase price:

     Total consideration to seller                $1,100,000
     Acquisition costs incurred                   $   94,890
                                                  ----------
                                                  $1,194,890

Purchase price allocation:


     Cash and cash equivalents                    $   45,457
     Accounts receivable                             282,575
     Inventories                                      75,211
     Prepaid expenses and other current assets        65,057
     Property and equipment                        1,789,621
     Current liabilities assumed                    (443,158)
     Other liabilities assumed                      ( 74,227)
     Debt assumed                                   (545,646)
                                                  ----------
Net fair value of assets acquired                 $1,194,890
                                                  ==========
                                      F-7
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007

Note 1 - Summary of Significant Accounting Policies

Acquisition of Optical Filter Equipment and Customer List

       On January 18, 2008, Optometrics acquired the optical
filter equipment and customer list of Precision Optics
Corporation, Inc. of Gardener, MA. The purchase price was
$250,000 in cash plus a 25% royalty on annual revenues exceeding
$300,000 from the purchased customer list for a three year
period.

Business Acquisition - RMD

       On July 1, 2008, the Company completed its acquisition of
all of the outstanding capital stock of RMD Research and the
specific assets and liabilities of RMD Instruments in
transactions that were accounted for as a purchase.  Total cost
of the acquisition was $20,353,251 of which a total of $12.5
million was paid to the seller in cash, $7,552,100 was paid to
the seller in stock and $301,151 represented acquisition costs
incurred.  The cash paid to the seller came from the $5,256,000
of proceeds from the issuance of 5,256,000 shares of Series C
Preferred Stock as well as bank financing.  Also on July 1,
2008, in a concurrent bank transaction, Dynasil borrowed
$10,000,000 of which $425,460 was used to retire Dynasil debt,
$468,620 was used to retire Optometrics debt, $8,500,000 was
paid directly to the seller at settlement, and the remaining
funds of $605,920 were used for working capital purposes.  The
total purchase price of approximately $20,353,251 has been
allocated to the tangible and identifiable intangible assets
acquired and liabilities assumed on the basis of their estimated
fair values.  The results of operations of RMD have been
included in the consolidated financial statements from July 1,
2008, the effective date of acquisition.  The allocation of
purchase price is summarized below:

Purchase price:

       Total consideration to seller              $20,052,100
       Acquisition costs incurred                  $  301,151
                                                  ----------
                                                 $20,353,251
Purchase price allocation:
       Cash and cash equivalents                 $   297,923
       Accounts receivable                           742,512
       Inventories                                   696,123
       Prepaid expenses and other current assets      12,789
       Intangibles and goodwill                   18,964,563
       Property and equipment                         89,657
       Current liabilities assumed                  (450,316)
                                                  ----------
Net fair value of assets acquired                $20,353,251
                                                  ==========

The following is the proforma financial information of the
Company for the year ended September 30, 2008, assuming the
transaction had been consummated at the beginning of the year
ended September 30, 2008:
                                          For the year ended
                                         September 30, 2008
                                             (Unaudited)

Statement of Operations:
Revenues                                       $34,293,615
Cost of sales                                   19,836,804
                                                ----------
Gross profit                                   $14,456,811
Operating Expenses                              10,788,272
                                                ----------
Income from operations                           3,668,539
Interest and other expense                        (575,036)
                                                ----------
Income before taxes                              3,093,503
Income taxes                                    (1,002,752)
                                                ----------
Net Income                                      $2,090,751
                                                ==========
Earnings per share:
       Basic                                        $ 0.13
       Diluted                                      $ 0.13

                                    F-8
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007

Note 1 - Summary of Significant Accounting Policies

Revenue Recognition

       The Company records sales revenue upon shipment to
customers as the terms are generally FOB shipping point at which
time title and risk of loss have been transferred to the
customer, pricing is fixed or determinable and collection of
the resulting receivable is reasonably assured.  Returns of
products shipped are and have historically not been material.
Optometrics and EMF, however, provide an allowance for sales
returns based upon historical experience.  The Company also
provides an allowance for doubtful accounts based on historical
experience and a review of its receivables.

       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.

Shipping and Handling Costs

       The Company includes some shipping and handling fees
billed to customers in sales and shipping and handling costs
incurred in cost of sales.

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.

Property, Plant and Equipment and Depreciation and Amortization

       Property, plant and equipment are recorded at cost or at
fair market value for acquired assets.  Depreciation is provided
using the straight-line method for financial reporting purposes
and accelerated methods for income tax purposes over the
estimated useful lives of the respective assets.

       The estimated useful lives of assets for financial
reporting purposes are as follows:  building and improvements, 8
to 25 years; machinery and equipment, 5 to 10 years; office
furniture and fixtures, 5 to 10 years; transportation equipment
5 years. Maintenance and repairs are charged to expense as
incurred; major renewals and betterments are capitalized.  When
items of property, plant and equipment are sold or retired, the
related costs and accumulated depreciation are removed from the
accounts and any gain or loss is included in income.

Impairment of Long-Lived Assets

       The Company reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to undiscounted
future net cash flows to be generated by the assets.  If these
assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.
Based on these reviews, no asset impairment charges were made to
the carrying value of long-lived assets during the years ended
September 30, 2008 and 2007.

                                     F-9
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007

Note 1 - Summary of Significant Accounting Policies


Goodwill and Other Intangible Assets

        Goodwill consists of the cost in excess of the fair
value of the acquired net assets of the Company's subsidiaries.
The Company's other intangible assets consist of an acquired
customer base of Optometrics, LLC, acquired customer
relationships and trade names of RMD Instruments, LLC and
acquired backlog and know how of RMD, Inc.  Intangible assets
are carried at cost less accumulated amortization. Amortization
is computed using the straight-line method over the economic
life of the respective asset.   As of September 30, 2008 and
2007 the Company had approximately $11,014,240 and $-0- of
goodwill and  $7,807,414 and $49,475 carrying value related to
other intangible assets.

        Goodwill and intangible assets which have indefinite
lives are subject to annual impairment tests.  Impairment tests
require the comparison of the fair value and carrying value of
reporting units.  Measuring fair value of a reporting unit is
generally based on valuation techniques using multiples of
earnings.  The Company assesses the potential impairment of
goodwill and other intangible assets annually and on an interim
basis whenever events or changes in circumstances indicate that
the carrying value may not be recoverable.  Upon completion of
such annual review, if impairment is found to have occurred, a
corresponding charge will be recorded.  The Company has
determined that it has four reporting units representing its
subsidiaries and as a result of the Company's annual test to
determine whether goodwill and other intangible assets have been
impaired as of September 30, 2008, the Company did not identify
any indication of goodwill impairment of its reporting units or
intangible assets.

Other Assets

     Other assets include deferred financing costs which are
amortized on a straight-line basis over the term of the related
debt, or five years.

Advertising

       The Company expenses all advertising as incurred.
Advertising expense for the years ended September 30, 2008
and 2007 was $161,024 and $118,713.

Deferred Rent

       Deferred rent consists of the excess of the allocable
straight line rent expense to date as compared to the total
amount of rent due and payable through such period.  Deferred
rent is amortized as a reduction to rent expense over the term
of the lease.  Deferred rent was $15,658 and $0 as of September
30, 2008 and 2007.

Income Taxes

       Dynasil Corporation of America and its wholly-owned
subsidiaries file a consolidated federal income tax return.

       The Company uses the asset and liability approach to
account for income taxes.  Under this approach, deferred income
taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes and net operating loss and tax credit carryforwards.
The amount of deferred taxes on these temporary differences is
determined using the tax rates that are expected to apply to the
period when the asset is realized or the liability is settled,
as applicable, based on tax rates, and tax laws, in the
respective tax jurisdiction

                                      F-10
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007

Note 1 - Summary of Significant Accounting Policies

then in effect.  Valuation allowances are provided if it is more
likely than not that some or all of the deferred tax assets will
not be realized.  The provision for income taxes includes taxes
currently payable, if any, plus the net change during the year
in deferred tax assets and liabilities recorded by the Company.

       On October 1, 2007, the Company adopted Financial
Accounting Standards Board (FASB) Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes-an Interpretation of
FASB Statements No. 109" (FIN 48).  There was no impact on the
Company's consolidated financial position, results of operations
or cash flows at September 30, 2008 and for the year then ended
as a result of implementing FIN 48.  At the adoption date of
October 1, 2007 and at September 30, 2008, the Company did not
have any unrecognized tax benefits.  The Company's practice is
to recognize interest and/or penalties related to income tax
matters in income tax expense.  As of October 1, 2007 and
September 30, 2008, the Company had no accrued interest or
penalties related to income taxes.  The Company currently has no
federal or state tax examinations in progress.

Net Income Per Common Share

       Basic net income per common share is computed by dividing
the net income applicable to common shares after preferred
dividend requirements, if applicable, by the weighted average
number of common shares outstanding during each period.  Diluted
net income per common share adjusts basic net income for the
effects of common stock options, common stock warrants,
convertible preferred stock and other potential dilutive common
shares outstanding during the periods.

       For purposes of computing diluted earnings per share,
660,124 and 1,118,843 common share equivalents were assumed to
be outstanding for the years ended September 30, 2008 and 2007,
respectively.  The computation of basic and diluted net income
per common share is as follows:

                                                      2008        2007
                                                    ---------  ----------

    Net income                                     $1,161,967    $542,010

    Less:  Preferred stock dividends                $(203,501)   (101,590)

    Income allocable to common shareholders         $ 958,466   $ 440,420

    Weighted average shares outstanding
     Basic                                          7,752,809   5,357,285
     Effect of dilutive securities
       Stock Options                                   84,714      67,292
       Stock Warrants                                     -0-     531,199
       Convertible Preferred Stock                    575,410     520,352
                                                    ---------  ----------
     Diluted average shares outstanding             8,412,935   6,479,128

Stock Based Compensation

       On October 1, 2006, the Company adopted the fair value
recognition provisions of FASB Statement No. 123 (revised 2004),
"Share-Based Payment", ("SFAS 123(R)") which requires the
measurement and recognition of compensation expense for all
stock-based awards made to employees and directors, including
employee stock options, based on estimated fair values.

                                   F-11
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007


Note 1 - Summary of Significant Accounting Policies

       We elected to use the modified prospective application
transition method as provided by SFAS 123(R).  In accordance
with the modified prospective transition method, compensation
cost is recognized in the consolidated financial statements for
all awards granted after the date of adoption.

Financial Instruments

       The carrying amount reported in the balance sheets for
cash and cash equivalents, accounts receivable and accounts
payable approximates fair value because of the immediate or
short-term maturity of these financial instruments. The carrying
amount for long-term debt approximates fair value because the
underlying instruments are primarily at current market rates.

       Financial instruments that potentially subject the
Company to concentrations of credit risk consists primarily of
accounts receivable. In the normal course of business, the
Company extends credit to certain customers. Management performs
initial and ongoing credit evaluations of their customers and
generally does not require collateral.

Concentration of Credit Risk

       The Company maintains allowances for potential credit
losses and has not experienced any significant losses related to
the collection of its accounts receivable.  As of September 30,
2008 and 2007, approximately $1,106,442 and $261,032 or 44% and
20% of the Company's accounts receivable are due from foreign
sales.

       The Company maintains cash and cash equivalents at
various financial institutions in New Jersey, Massachusetts and
New York.  Accounts at each institution are insured by the
Federal Deposit Insurance Corporation up to $250,000. At
September 30, 2008, the Company's uninsured bank balances
totaled $4,090,470. The Company has not experienced any
significant losses on its cash and cash equivalents.

Recent Accounting Pronouncements

       The following is a summary of recent authoritative
pronouncements that affect accounting, reporting, and disclosure
of financial information by the Company:

       In December 2007, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 141 (revised 2007), Business
Combinations, which replaces SFAS No. 141.  The statement
retains the purchase method of accounting for acquisitions, but
requires a number of changes, including changes in the way
assets and liabilities are recognized in the purchase
accounting.  It also changes the recognition of assets acquired
and liabilities assumed arising from contingencies, requires the
capitalization of in-process research and development at fair
value, and requires the expensing of acquisition-related costs
as incurred.  SFAS No. 141R is effective for business
combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or
after December 15, 2008.  Management currently believes that the
adoption of this statement may have a material impact on the
Company's financial statements when it completes significant
acquisitions in the future.
       In May 2008, The FASB Issued Statement No. 162, "The
Hierarchy of Generally Accepted Accounting Principles" ("SFAS
162").  The new standard is intended to improve financial
reporting by identifying a consistent framework, or hierarchy,
for selecting accounting principles to be used in preparing
financial statements
that are presented in conformity with U.S. generally accepted
accounting principles (GAAP) for nongovernmental entities.
Prior to the issuance of SFAS 162, GAAP hierarchy was defined in
the American Institute of Certified Public

                                  F-12
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007


Note 1 - Summary of Significant Accounting Policies

Accountants (AICPA) Statement on Auditing Standards (SAS) No.
69, The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles.  SFAS 162 is effective 60 days
following the SEC's approval of the Public Company Accounting
Oversight Board Auditing amendments to AU Section 411, The
Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles.  Management currently believes that the
adoption of this statement will not have a material impact on
the Company's financial statements.

       Other recent accounting pronouncements issued by the FASB
(including its Emerging Issues Task Force), the AICPA, and the
SEC did not or are not believed by management to have a material
impact on the Company's present or future consolidated financial
statements.

Statement of Cash Flows

        For purposes of the statement of cash flows, the Company
generally considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.

Reclassifications

        Certain amounts as previously reported have been
reclassified to conform to current year financial statement
presentation.

Note 2 - Inventories

       Inventories at September 30, 2008 and 2007 consisted of
the following
                                                  2008       2007
                                               ----------   ---------
             Raw Materials                    $2,110,138   $1,145,249
             Work-in-Process                     467,590      336,203
             Finished Goods                      332,002      351,268
                                               ----------   ---------
                                               2,909,730   $1,832,720
                                               ==========   =========

Note 3 - Property, Plant and Equipment

     Property, plant and equipment at September 30, 2008 and
2007 consist of the following:

                                                 2008           2007
                                             -----------  ------------
             Land                             $   40,450   $   40,450
             Building and improvements         1,704,492    1,674,702
             Machinery and equipment           4,896,556    4,300,534
             Office furniture and fixtures       224,025      237,932
             Transportation equipment             53,419       53,419
                                             -----------  ------------
                                               6,918,942    6,307,037
             Less accumulated depreciation     4,224,652    3,870,520
                                             -----------  ------------
                                              $2,694,290   $2,436,517
                                              ==========  ============

       Included in the cost of machinery and equipment at
September 30, 2008 and 2007 is $47,984 representing the cost of
assets under capitalized lease obligations.  Accumulated
depreciation at September 30, 2008 and 2007 for the capitalized
leases was $30,985 and $22,338.

       Depreciation expense for the years ended September 30,
2008 and 2007 was $354,492 and $352,578 of which $8,647 and
$8,647 represents depreciation of assets under capitalized lease
obligations.
                                       F-13
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007


Note 4 - Other Assets

     Other assets at September 30, 2008 and 2007 consist of the
following:

                                                      2008        2007
                                                 -----------  ------------
      Deferred financing costs                    $   95,306  $   64,880
      Intangible assets                            7,938,414      78,414
      Goodwill                                    11,014,240         -0-
      Other assets                                     8,360       9,055
                                                 -----------  ------------
                                                  19,056,320     152,349
      Less accumulated amortization                  145,170      63,651
                                                 -----------  ------------
                                                $ 18,911,150   $  88,698
                                                 ===========  ============

       Amortization expense for the years ended September 30,
2008 and 2007 was $150,344 and $16,193.

Note 5 - Debt

        On October 2, 2006, in conjunction with the EMF
acquisition, EMF entered into Mortgage Note and Line of Credit
Note Agreements with Tompkins Trust Company ("TTC") which were
guaranteed by Dynasil.  The guaranteed loans include (a) a
$1,050,000 principal amount commercial mortgage (the "EMF
Mortgage") and (b) a $215,000 principal amount line of credit
facility (the "EMF Line of Credit").  Proceeds of the EMF
Mortgage were used to repay certain EMF debts, to pay for part
of the acquisition of EMF and for working capital purposes.
Proceeds of the EMF Line of Credit were used for general
corporate purposes. The applicable borrowing documents were
entered into at arms-length between EMF and Dynasil, on the one
hand, and TTC, on the other hand, on commercial lending terms
and conditions, including acceleration rights, events of
default, TTC'S rights and remedies and similar provisions that
Dynasil believes are customary for commercial loans of this
sort.  In connection with the loan transactions, EMF and Dynasil
executed and delivered to TTC customary forms of notes,
mortgages, security agreements, assignments of leases and rents,
and similar documents.  The EMF Mortgage requires repayment over
a 20 year period at a fixed annual interest rate of 7.80% for
the first 5 years, resetting to a fixed annual interest rate of
2.80 percentage points over the Federal Home Loan Bank of New
York Advance Rate for five-year maturities at five year
intervals.  The EMF Mortgage is secured by a first mortgage on
EMF's real estate, equipment, and fixtures, as well as Dynasil's
guarantee.  The EMF Line of Credit has a term running until
December 22, 2010 and carries an annual interest rate of one-
half percent over the Wall Street Journal's Prime Rate of
interest, which is adjusted monthly.  It is secured by EMF's
real estate, equipment and fixtures, as well as Dynasil's
guarantee.

       On July 1, 2008, in conjunction with the RMD acquisition,
Dynasil entered into a Term Note and Line of Credit Agreement
with Susquehanna Bank ("Susquehanna").  The loans include (1) a
$9,000,000 term loan ("Susquehanna Term Loan") and (b) a
$1,000,000 line of credit facility ("Susquehanna Line of
Credit").  Proceeds of the Susquehanna Term Loan were used to
repay certain debts of Optometrics and Dynasil, to pay for part
of the acquisition of the RMD companies and for working capital
purposes.  The applicable borrowing documents were entered into
on commercial lending terms and conditions, including
acceleration rights, events of default, Susquehanna's rights and
remedies and similar provisions that Dynasil believes are
customary for commercial loans of this sort.  In connection with
the transaction, Dynasil executed and delivered to Susquehanna
customary forms of notes, mortgages, security agreements and
similar documents.  The Susquehanna Term Loan requires repayment
over a five year period at a fixed annual interest rate of 6.0%.
The Susquehanna Term Loan is secured by a first mortgage on
Dynasil's real estate and equipment and fixtures.  The
Susquehanna Line of Credit has a term running until January 31,
2010 and carries an annual interest rate at the Wall Street
Journal's Prime Rate of interest, which is adjusted monthly.  It
is secured by the Dynasil group companies' assets.
                                     F-14
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007

Note 5 - Debt (continued)

        On September 30, 2008, Dynasil entered into a note
payable to RMD Instruments, LLC in which the former owners of
RMD and current officers of RMD have a financial interest.  The
loan is in the amount of $2,000,000 and carries interest at the
rate of 8.0% per annum.  The loan is for working capital. The
loan has a balloon payment of all principal which was originally
scheduled for March 31, 2009 and on December 19, 2008 the
maturity date was amended to be October 1, 2009.

Notes Payable to Bank and other party

       Dynasil had a note payable to Susquehanna Bank that
represented borrowings under the Line of Credit, which bore
interest at a variable rate equal to Susquehanna Bank's prime
rate plus 0.5% (8.75% at September 30, 2007).  The amount
available under this agreement was $200,000. As of September 30,
2008 and 2007, there were no outstanding balances and this line
of credit is was repaid in full and replaced by a new Line of
Credit as part of the July 1, 2008 financing with Susquehanna
Bank.

       Optometrics had a note payable to Citizens Bank that
represented borrowings under the Line of Credit, which bore
interest at a variable rate equal to Citizens Bank's prime rate
plus 0.5% (8.25% at September 30, 2007).  The amount available
under this agreement was $400,000. The outstanding balances at
September 30, 2008 and 2007 were $-0- and $100,000,
respectively.  The Line of Credit was repaid in full on July 1,
2008 and eliminated as part of the Susquehanna Bank financing.

       EMF has a note payable to Tompkins Trust Company that
represents borrowings under the EMF Line of Credit which has a
term running until December 22, 2010 and carries an annual
interest rate of one-half percent over the Wall Street Journal's
Prime Rate of interest, which is adjusted monthly (5.0% and
8.25% as of September 30, 2008 and September 30, 2007). The
amount available under this agreement is $215,000.  The
outstanding balance at September 30, 2008 and 2007 was $210,070
and $211,870, respectively.   It is secured by EMF's real
estate, as well as Dynasil's guarantee.

       Effective July 1, 2008, Dynasil has a note payable to
Susquehanna Bank that represents borrowings under the
Susquehanna Line of Credit, which bears interest at a variable
rate equal to Susquehanna Bank's prime rate which is adjusted
monthly (5.0% at September 30, 2008).  The amount available
under this agreement is $1,000,000. The outstanding balance at
September 30, 2008 was $280,000. It is secured by all of Dynasil
and subsidiary assets except for EMF's real estate.

Long-term Debt

       Long-term debt at September 30, 2008 and 2007 consisted
of the following:

                                                             2008         2007
                                                            ------       ------
   Note payable to bank in monthly installments of $3,580
   including interest at the rate of 7.25% through February
   2011 (after February 2011, the interest rate will adjust
   to the United States Treasury Average Weekly Yield
   rate plus 3.0%), final payment of $305,181 due January 5,
   2016, secured by first mortgage on Berlin, New Jersey
   property and substantially all of the New Jersey assets
   of the Company, repaid in 2008.                           $ -0-    $ 431,761

   Note payable to bank in monthly installments of
   $8,727 including interest of 7.8% through October 2011
   (after October 2011, the interest rate will adjust every
   five years to the Federal Home Loan Bank of NY Advance
   Rate plus 2.8%), maturing on October 1, 2026, secured by
   a mortgage on the Ithaca, New York real estate         1,005,344   1,029,306

                                  F-15
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007

Note 5 - Debt (continued)

   Note payable to bank in monthly installments of
   $5,835 including interest at 6.25%, through March
   2010, secured by the assets of Optometrics Corporation
   with a Corporate guarantee by the Company and a second
   lien on New Jersey assets other than real estate, repaid
   in 2008.                                                     -0-     162,233

   Note payable to Ithaca Urban Renewal Agency for
   Lease of land in Ithaca, New York for 99 years
   with the option to purchase said land for $26,640
   after May 2008                                             18,535     20,457

   Note payable to bank in monthly installments of $174,359
   including interest at 6.0%, through June 2013, secured
   by the assets of Dynasil, RMD, and Optometrics          8,743,620        -0-

   Note payable to a related party in which the former
   owners of RMD and current officers of RMD have a
   financial interest                                      2,000,000        -0-

   Note payable to former owner of EMF in connection with
   EMF acquisition, bears interest at 7.8% with no scheduled
   date of repayment, unsecured                               60,022*    82,460*
                                                            --------     -------
                                                         $11,827,521   1,726,217
       Less current portion                                1,649,101      99,237
                                                            --------     -------
                                                         $10,178,420   1,626,980
                                                          ==========   =========

       * Interest expense of $8,315 and $4,157 was accrued and
included in the outstanding balance as September 30, 2008 and
2007, respectively.

       The aggregate maturities of long-term debt, as of
September 30, 2008 are as follows:
             September 30, 2009                     1,793,165
             September 30, 2010                     3,842,183
             September 30, 2011                     1,958,094
             September 30, 2012                     1,733,393
             Thereafter                               851,585
                                                   ----------
                   Total                          $10,178,420


Note 6 - Income Taxes

       The Company's income tax expense (benefit) for the years
ended September 30, 2008 and 2007 are as follows:
                                           2008        2007
                                         --------   --------
      Current
       Federal                          $ 274,300   $ 98,700
       State                               98,700     57,140
       Utilization of NOL carryforwards  (282,300)  (135,600)
                                         --------   --------
                                         $ 90,700   $ 20,240
                                         --------   --------
       Deferred
       Federal                             28,200    (91,500)
       State                              (45,143)   (37,200)
                                         --------   --------
                                         $(16,943) $(128,700)
                                         --------   --------
      Income tax expense (benefit)        $73,757  $(108,460)
                                         ========   ========

                                     F-16
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007

Note 6 - Income taxes (continued)

       The reasons for the difference between total tax expense
and the amount computed by applying the statutory federal income
tax rates to income before income taxes at September 30, 2008
and 2007 are as follows:

                                                 2008       2007
                                              ----------  ----------
Taxes at statutory rates applied to income
  before income taxes                         $ 400,400    $156,800
Increase (reduction) in tax resulting from:
  Depreciation                                 (115,300)    (35,600)
  Accounts receivable                           (19,300)     29,300
  Inventories                                   113,400     (21,700)
  Vacation pay                                  (24,200)    (   300)
  Unfunded pension liability                     12,300     ( 6,200)
  Deferred compensation                          (6,100)    (19,200)
  Other                                           6,900      (4,400)
  State income taxes                            (129,820)    57,140
  Benefit of net operating loss carryforwards  (292,700)   (135,600)
  Adjustments to valuation allowance            191,077    (128,700)
  Amortization                                  (62,900)       -0-
                                              ----------  ----------
                                               $ 73,757   $(108,460)
                                              ==========  ==========

     Deferred income taxes (benefit) reflect the net tax effects
of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for income tax purposes, and the tax effects of net
operating losses that are available to offset future taxable
income.  Significant components of the Company's deferred tax
assets (liabilities) at September 30, 2008 and 2007 are as
follows:
                                              2008       2007
                                           ----------  ----------
Inventories                                 $ 253,000   $ 122,700
Vacation pay                                  100,400      10,900
Unfunded pension liability                     37,600      23,100
Deferred compensation                             -0-       7,100
Accounts receivable                            49,800      53,900
Depreciation                                 (107,300)     74,500
Net operating loss carryforwards              64,000      276,600
Amortization of intangibles and goodwill      (74,500)        -0-
State deferred taxes                           20,600         -0-
Less valuation allowance                     (110,100)   (352,700)
                                           ----------  ----------
                                             $233,500   $ 216,100

      In assessing the ultimate realization of deferred tax
assets and liabilities, management considers whether it is more
likely than not that some or all of them will not be realized.
Based on the Company's history of significant fluctuations in
net earnings, the Company had established a full valuation
allowance due to the uncertainty as to the realization of
certain net operating loss carryforwards. With the asset
acquisition of Optometrics, LLC in March 2005 and RMD in July,
2008 and operational improvements, the Company now believes that
these carryforwards will likely be realized, and has adjusted
the valuation allowance accordingly.

       At September 30, 2008, the Company has no further net
operating loss carryforwards to offset future taxable income for
federal tax purposes.  In addition, the Company has approximately
$816,720 of net operating loss carryforwards to offset certain
future state taxable income, expiring in various years through 2013.

Note 7 - Stockholders' Equity

       On September 23, 2004, in a privately negotiated transaction,
the Company

                                  F-17
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007

Note 7 - Stockholders' Equity (continued)

entered into a Subscription Agreement (the "Agreement") with Mr.
Craig T. Dunham, an individual, pursuant to which Mr. Dunham
agreed to acquire 1,000,000 shares of the Company's common stock
at a cash purchase price of $.15 per share.  The aggregate
dollar amount of the transaction was $150,000.  In connection
with the Agreement, the Company also granted to Mr. Dunham a
Stock Purchase Warrant (the "Warrant") pursuant to acquire,
prior to January 31, 2008, up to an additional 1,200,000 shares
of the Company's common stock at an exercise price per share of
$.225 dependent upon certain conditions as further described in
the Agreement.  Effective October 1, 2004, the Company also
entered into an Employment Agreement with Mr. Dunham pursuant to
which Mr. Dunham became the Company's President and Chief
Executive Officer.  During the year ended September 30, 2007,
Mr. Dunham exercised 586,373 warrants at $.225 per share for
$131,935.  During the year ending September 30, 2008, Mr. Dunham
exercised the remaining 613,627 warrants at $.225 per share for
$138,066.

Convertible Preferred Stock

       On March 8, 2005, the Company completed a private
placement of 700,000 shares of Series A 10% Cumulative
Convertible Preferred Stock for cash proceeds of $700,000. The
stock was sold at a price of $1.00 per share.  Total expenses
for the stock placement were $10,000.  Each share of preferred
stock carried a 10% per annum cumulative dividend payable
quarterly and was convertible to 2.2222 shares of common stock
at any time by holders, and was callable starting March 9, 2007
by the Company at a redemption price of $1.00 per share.  On
March 9, 2007, the Company issued an aggregate of 1,555,540
shares of its Common Stock, $.0005 par value per share, as a
result of the exercise of the conversion rights by holders of
700,000 shares of Dynasil's Series A 10% Cumulative Convertible
Preferred Stock (the "Series A Preferred Shares").  Dynasil had
previously called all of the Series A Preferred Shares for
redemption on March 9, 2007.  All of the shares of the Series A
Preferred Shares that were called for redemption were converted
to shares of common stock.

       On October 2, 2006 the Company sold 710,000 shares of a
Series B 10% Cumulative Convertible Preferred Stock in a private
placement.  The stock was sold at a price of $1.00 per share.
Total expenses for the stock placement were $10,000.  No
underwriting discounts or commissions were paid in connection
with the sale.  Each share of preferred stock carries a 10% per
annum dividend and is convertible to 1.33 shares of common stock
at any time by the holders and is callable after two years by
Dynasil at a redemption price of $1.00 per share.  Proceeds of
the preferred stock sale were primarily used to acquire the
capital stock of EMF and for related acquisition costs.

       On July 5, 2008 the Company sold 5,256,000 shares of a
Series C 10% Cumulative Convertible Preferred Stock in a private
placement.  The stock was sold at a price of $1.00 per share.
Total expenses for the stock placement were $0.  No underwriting
discounts or commissions were paid in connection with the sale.
Each share of preferred stock carries a 10% per annum dividend
and is convertible to 0.40 shares of common stock at any time by
the holders and is callable after two years by Dynasil at a
redemption price of $1.05 per share.  Proceeds of the preferred
stock sale were primarily used for the acquisition of RMD, for
related acquisition costs, and for general working capital.

Stock Based Compensation

       The Company adopted Stock Incentive Plans in 1996 and
1999 which provide for, among other incentives, the granting to
officers, directors, employees and
consultants options to purchase shares of the Company's common
stock.  The Company's 1999 Stock Incentive Plan was amended on
July 25, 2000, with an effective date of January 1, 1999.
Options are generally exercisable at the fair market value or
higher on the date of grant over a three to five year period
currently expiring through 2012.

                                   F-18
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007

Note 7 - Stockholders Equity (continued)

       The Plans also allow eligible persons to be issued shares
of the Company's common stock either through the purchase of
such shares or as a bonus for services rendered to the Company.
Shares are generally issued at the fair market value on the date
of issuance. The maximum shares of common stock which may be
issued under the Plans are 2,250,000 shares, of which 500,920
shares of common stock are available for future purchases under
the Plan at September 30, 2008 in addition to outstanding stock
options.

       A summary of stock option activity for the years ended
September 30, 2008 and 2007 is presented below:

                                                        Exercise Price
                                              Shares    Per Share
                                             ---------  --------------
Options outstanding at October 1, 2006        261,459    $0.40 - $1.50

Granted in 2007                                100,000   $1.66 - $2.00
Exercised in 2007                              (80,000)      $0.40
Cancelled in 2007                                  -0-
                                             ---------

Options outstanding at September 30, 2007      281,459

Granted in 2008                                562,266   $2.00 - $4.00
Exercised in 2008                                  -0-
Cancelled in 2008                                  -0-
                                              --------
Options outstanding at September 30, 2008      843,725   $0.40 - $4.00


Options exercisable at September 30, 2008      743,725   $0.40 - $4.00
                                              ========

       During the year ended September 30, 2008, 562,266 stock
options were granted at prices ranging from $2.00 to $4.00 per
share and -0- options were exercised. Of the options granted in
2008, 100,000 of the granted stock options cannot be exercised
until October 15, 2009 or later, and therefore the stock-based
compensation expense of $18,043 will be recognized at that time
if they become exercisable.  No options were cancelled during
the year ended September 30, 2008.

       During the year ended September 30, 2007, 100,000 stock
options were granted at prices ranging from $1.66 to $2.00 per
share and 80,000 options were exercised. Of the options granted
in 2007, 20,000 of the granted stock options could not be
exercised until January 2, 2008, and therefore the stock-based
compensation expense was recognized at that time.  The 80,000
options exercised had an exercise price of $0.40 per share with
$32,000 paid in cash.  No options were cancelled during the year
ended September 30, 2007.

       For the year ended September 30, 2008, total stock-based
compensation charged to operations for option-based arrangements
amounted to $159,950.  At September 30, 2008, there was
approximately $18,043 of total unrecognized compensation expense
related to non-exercisable option-based compensation
arrangements under the Plan.

       For the year ended September 30, 2007, total stock-based
compensation charged to operations for option-based arrangements
amounted to $11,366.  At September 30, 2007, there was
approximately $9,620 of total unrecognized compensation expense
related to non-exercisable option-based compensation
arrangements under the Plan.

       During the year ended September 30, 2008, the Company
issued 7,994 shares of common stock valued at an average of
$1.97 per share to a director in lieu of

                                  F-19
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007

Note 7 - Stockholders Equity (continued)

Director's fees totaling $15,750. The Company also issued 4,635
shares of common stock valued between $2.00 and $2.15 per share
totaling $9,386 to employees as compensation.

       During the year ended September 30, 2007, the Company
issued 3,289 shares of common stock valued at an average of
$1.52 per share to a director in lieu of director's fees
totaling $5,000. The Company also issued 2,531 shares of common
stock valued at $1.65 per share totaling $4,176 to an employee
as compensation.

       The fair value of the stock options granted and warrants
issued were estimated on the date of grant using the Black
Scholes option-pricing model.  Based on the list of assumptions
presented below with numbers shown for the most recent grant,
the weighted average fair values of the options granted during
the years ended September 30, 2008 and 2007 is $0.30 and $0.14
per share, respectively.

                                                  2008   2007

      Expected life in years                      3       3
      Risk-free interest rate                     4.47%   4.82%
      Expected volatility                        32.5%   20.42%
                Dividend yield                    0.00%   0.00%

       The expected volatility was determined with reference to
the historical volatility of the Company's stock.  The Company
uses historical data to estimate option exercise and employee
termination within the valuation model. The expected term of
options granted represents the period of time that options
granted are expected to be outstanding.  The risk-free interest
rate for periods within the contractual life of the option is
based on the U.S. Treasury rate in effect at the time of grant.

Employee Stock Purchase Plan

       The Company has an Employee Stock Purchase Plan which
permits substantially all employees to purchase common stock at
a purchase price of 85% of the fair market value of the shares.
Under the Plan, a total of 450,000 shares have been reserved for
issuance of which 156,159 shares have been issued as of
September 30, 2008.

       During any twelve month period, employees may not
purchase more than the number of shares for which the total
purchase price exceeds $5,000.  During the years ended September
30, 2008 and 2007, 8,759 shares, and 497 shares of common stock
were issued under the Plan for aggregate purchase prices of
$16,317, and $529, respectively.

Note 8 - Retirement Plans

401(k) Plans

       The Company has savings plans available to substantially
all full time employees which are intended to qualify as
deferred compensation plans under Section 401(k) of the Internal
Revenue Code (the "401k Plans").  Pursuant to the 401k Plans,
employees may contribute up to the maximum amount allowed by the
401k Plans or by law.  The Company at its sole discretion may
from time to time make discretionary matching contributions as
it deems advisable. The Company made contributions to the plans
during the years ended September 30, 2008 and 2007 of $64,649
and $49,330, respectively.   The Company has an active project
to evaluate and consolidate 401k Plans.

                                  F-20
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007

Note 8 - Retirement Plans (continued)

Defined Benefit Pension Plan

       EMF has a defined benefit pension plan covering hourly
employees.  The plan provides defined benefits based on years of
service and final average salary.  As of September 30, 2006, the
plan was frozen.Accordingly, accrued benefit costs are classified
as a current liability on the consolidated balance sheet.
The following relates to the Company's defined pension plan as
of September 30, 2008 and 2007:


                                                   2008       2007
                                                 --------   --------
Pension benefit obligation as of September 30    $393,554   $349,493
Fair value of plan assets as of September 30     (296,761)  (291,644)
                                                 --------   --------
Excess of benefit obligation over plan assets    $ 96,793   $ 57,849
                                                 ========   ========

Amounts recognized on the balance sheet as:
  Accrued benefit costs (in accrued expenses)    $ 96,793   $ 57,849
                                                 ========   ========

Discount rate on the benefit obligation              5.88%      5.79%
Rate of expected return on the plan assets           5.50%      5.50%

Pension expense                                   $43,410   $  8,806
Company contributions                             $ 7,202   $ 26,946

Note 9 - Related Party Transactions

       During the years ended September 30, 2008 and 2007,
building lease payments of $114,000 were paid to Optometrics
Holdings, LLC in which Laura Lunardo, the Company's Chief
Financial Officer has a 50% interest.
       During the years ended September 30, 2008 and 2007,
building lease payments of $188,055 and $0, were paid to Charles
River Realty, dba Bachrach, Inc., which is owned by Gerald
Entine and family, the Company's President of RMD Research.
       On September 30, 2008, a loan for $2,000,000 was
completed with a company in which the Company's President of RMD
Research, Dr. Gerald Entine, and Vice-President of RMD
Instruments, Mr. Jacob Pastor, have greater than 90% interest.
The loan bears interest at 8% and a balloon payment of all
principal is due on October 1, 2009.

Note 10 - Leases

      The Company has non-cancelable operating leases, primarily
for property, that expire through 2013.  One of the Company's
facilities is leased from a company controlled by the former
owner of RMD, who is also currently President of the Company's
RMD Research subsidiary.  This lease expires in June 2013.  One
of the Company's facilities is leased from a company controlled
by the former owners of Optometrics, one of whom is also
currently the Company's Chief Financial Officer.  This lease
expires in June 2013. Rent expense for the years ended September
30, 2008 and 2007 amounted to $302,055 and $114,000,
respectively.  Future non-cancelable minimum lease payments
under property leases as of September 30, 2008 are as follows:

Year ended September 30,
2009                 $873,742
2010                 $904,132
2011                 $935,737
2012                 $968,607
2013                 $768,263

                                       F-21
<PAGE>

         DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 30, 2008 AND 2007

Note 11 - Vendor Concentration

       The Company purchased $1,343,291 and $1,557,846 of its
raw materials from one supplier during the years ended September
30, 2008 and 2007. As of September 30, 2008 and 2007, amounts
due to that supplier included in accounts payable were $55,455
and $379,940.


Note 12 - Supplemental Disclosure of Cash Flow Information:

                                                2008     2007

       Cash paid during the year for:
          Interest                           $241,777   $150,253
                                             ========    =======
          Income taxes                       $ 33,040    $72,951
                                             ========    =======

       Non-cash investing and financing activities:

Acquisition of Assets of EMF on October 2, 2006:

       Fair market value of current assets acquired   $  468,300
       Property, plant and equipment                   1,789,621
       Fair market value of liabilities assumed       (1,063,031)
                                                       ---------
       Total cost of acquisition                       1,194,890
       Debt incurred to pay seller                      (520,000)
                                                       ---------
       Net cash paid for EMF Corporation              $  674,890
                                                       =========

       To partially fund the acquisition of EMF Corporation, the
Company issued 710,000 shares of Series B preferred stock,
valued at $1.00 per share, incurred stock issuance costs of
$10,000 and received net proceeds of $700,000.

       On October 2, 2006, concurrently with the acquisition of
EMF Corporation, EMF borrowed $1,050,000.  The proceeds were
used as follows: (1) repayment of assumed liabilities of
$338,161 at closing, (2) payment of the balance due seller of
$520,000 directly by the bank at closing, (3) payment of
transaction costs of $17,023 at closing, and (4) remaining
balance of $174,816 was used for working capital purposes.

Acquisition of Assets of RMD Corporation on July 1, 2008:

       Fair market value of current assets acquired   $  1,749,347
       Property, plant and equipment                        89,657
       Intangibles and goodwill                         18,964,563
       Fair market value of liabilities assumed           (450,316)
                                                         ---------
       Total cost of acquisition                        20,353,251
       Common stock issued to seller                    (7,552,100)
                                                         ---------
       Net cash paid for RMD                           $12,801,151
                                                        ==========

       To partially fund the acquisition of RMD, the Company
issued 5,256,000 shares of Series C preferred stock, valued at
$1.00 per share and received net proceeds of $5,256,000.

       On July 1, 2008, concurrently with the acquisition of
RMD, Dynasil borrowed $10,000,000.  The proceeds were used as
follows: (1) repayment of existing bank debt of $894,080, (2)
payment of the balance due seller of $8,500,000 directly by the
bank at closing, (3) payment of transaction costs of $60,967 at
closing, and (4) remaining balance of $544,953 was used for
working capital purposes.

                                   F-22
<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND
         FINANCIAL DISCLOSURE

       There were no disputes or disagreements of any nature
between the Company or its management and its public auditors
with respect to any aspect of accounting or financial
disclosure.


ITEM 8A. CONTROLS AND PROCEDURES

Not Applicable.

ITEM 8A (T). CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

       As required by Rule 13a-15(e) under the Exchange Act, our
Chief Executive Officer and Chief Financial Officer, with the
participation of management, carried out an evaluation of the
effectiveness of the design and operation of the Company's
disclosure controls and procedures as of the end of the period
covered by the report and have determined that such disclosure
controls and procedures are effective.

Management's Report on Internal Control Over Financial Reporting

       Management is responsible for establishing and
maintaining adequate internal control over financial reporting
(as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange
Act). Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of
America.

       Internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
Company, (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with accounting principles generally
accepted in the United States of America, and that receipts and
expenditures are being made only in accordance with
authorizations of management and directors of the Company, and
(iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition
of the Company's assets that could have a material effect on the
consolidated financial statements.  Because of its inherent
limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies
or procedures may deteriorate.

       The Company's management, with the participation and
supervision of our Chief Executive Officer and Chief Financial
Officer, assessed the effectiveness of the Company's internal
control over financial reporting as of September 30, 2008. In
making this assessment, the Company's management used the
criteria set forth by the Committee of Sponsoring Organizations
("COSO") of the Treadway Commission in "Internal Control -
Integrated Framework."

       Because RMD Research and RMD Instruments were acquired by
the Company on July 1, 2008, they were not required to be
included in management's assessment of internal control over
financial reporting for the year ended September 30, 2008 and
therefore, management excluded them from its assessment.  Both
RMD companies are wholly-owned subsidiaries whose total assets
and total revenues represent 79% and 34%, respectively, of the
related consolidated financial statement amounts as of and for
the year ended September 30, 2008.

                                    -13-
<PAGE>

       Based upon the Company's assessment, management has
concluded that, as of September 30, 2008, the Company's internal
control over financial reporting is effective based upon those
criteria.

       This Annual Report does not include an attestation report
of the Company's independent registered public accounting firm
regarding internal control over financial reporting.
Management's report was not subject to attestation by the
Company's  independent registered public accounting firm
pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management's report in
this Annual Report.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

       There has been no change in our internal control over
financial reporting in connection with our evaluation that
occurred during our last fiscal quarter ended September 30, 2008
that materially affected, or is reasonably likely to materially
affect our internal control over financial reporting except for
the acquisition of RMD.

                                PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     Our directors were elected to serve for a one-year term at
our Annual meeting of the shareholders held on February 5, 2008,
with the exception of Mr. Peter Sulick, who was added as a
director on June 12, 2008. All directors will hold office until
their successors are elected at the next annual meeting of the
shareholders.

     Our executive officers and directors, and their ages at
December 15, 2008, are as follows:

Name                        Age   Position
---------------             ---   --------
James Saltzman               65    Chairman of the Board
Craig T. Dunham              52    President, CEO, Director
Cecil Ursprung               64    Director
Peter Sulick                 58    Director, Chairman of Audit Committee
Laura Lunardo                56    COO Optometrics, CFO until 11/15/08
Bruce Leonetti               54    Vice President
Paul Schulz                  48    President EMF
Gerald Entine                65    President, Radiation Monitoring Devices, Inc
Jack Paster                  70    Vice President, RMD Instruments Corp.
Mark Caldwell                42    General Manager, RMD Instruments Corp.
                                   starting 10/20/08
Paul Weaver                  57    CFO starting 11/15/08

      None of the above persons is related to any other of the
above-named persons by blood or marriage.

      Based upon a review of filings with the Securities and
Exchange Commission and written representations that no other
reports were required, the Company believes that all of the
Company's directors and executive officers complied during
fiscal 2008 with the reporting requirements of Section 16(a) of
the Securities Exchange Act of 1934 except for two Form 4
filings for Mr. Cecil Ursprung and one Form 4 filing for Mr.
Peter Sulick which were late due to administrative oversights
and included a total of 6,174 shares paid for Directors
compensation.

     Craig Dunham, 52, Dynasil President and CEO, invested in
Dynasil and then joined the Company in October 2004. Prior to
joining Dynasil, he spent about one year partnering with a
private equity group to pursue acquisitions of mid-market
manufacturing companies.  From 2000 to 2003, he was Vice
President/General Manager of the Tubular Division at Kimble
Glass Corporation.  From 1979 to 2000, he held progressively
increasing leadership responsibilities at Corning Incorporated
in manufacturing, engineering, commercial, and general
management positions.  At

                                -14-
<PAGE>

Corning, he delivered results in various glass and ceramics
businesses including optics and photonics businesses.  Mr.
Dunham earned a B.S. in Mechanical Engineering and an M.B.A.
from Cornell University.

        James Saltzman, 65, Chairman, has been a member of the
Board since February 1998.  Mr. Saltzman has been involved in
the investment community since October 1969 where he has
invested in both public and private corporations. He helped
found several companies which have been purchased by larger
corporations, most recently Without-a-Box which was purchased by
Amazon.com.  He has been a key source of potential acquisitions
including Optometrics and RMD.  Mr. Saltzman earned a BA degree
from Franklin & Marshall College.

       Cecil Ursprung, 64, Director, has been a member of the
Board since February 1, 2007.  Mr. Ursprung is the former
Chairman and CEO of Reflexite Corporation in Avon, Connecticut,
a manufacturer of reflective products to enhance safety and
optical films used to manage light in LCD displays.  He has been
with Reflexite since 1983 and led the revenue growth of that
company from $2.5 million to approximately $100 million.  He is
a frequent speaker on topics such as business strategy
development, employee motivation, business ethics, executive
compensation, employee ownership and the effective use of
outside boards.  His education includes a degree in Economics
and Finance from Baylor University, an MBA from Washington
University in St. Louis, and post-graduate work at the
University of Michigan.

       Peter Sulick, 58, Director, Audit Committee Chairman, and
Financial Expert, joined the Board on June 12, 2008. Mr. Sulick
is currently President and CEO of AmeriSite, LLC, a family-owned
real estate development and investment company.  Mr. Sulick's
business background includes the founding of Independence
Broadcasting Corporation, PowerFone Inc., SSPCS Corp. and
AmeriSite, LLC.  Since 1985, Mr. Sulick has founded and led
telecommunications companies that were later acquired by Nextel
and T-Mobile. In the early part of his career, Mr. Sulick was a
principal financial officer for Cablevision Systems and has also
held several senior-level financial positions at the
Communications Operations Group of ITT.  He began his career in
the audit department at Arthur Andersen & Co, in New York City
following graduate school. He is a certified public accountant
who earned his MBA in finance from the University of
Massachusetts and a B.S. in Business Administration from The
Citadel.

       Laura Lunardo, 56, General Manager of Optometrics
Corporation and Dynasil CFO until December 15, 2008, has been
with Dynasil since the March 2005 acquisition of Optometrics.
Previously, she had been a partner in Optometrics LLC with
primary responsibilities for Sales & Marketing, Accounting,
Finance and Administration, and was the CFO of Optometrics USA,
Inc., the predecessor corporation to Optometrics LLC, since
1984.  Ms. Lunardo earned her B.S. degree in Business and
Accounting from Boston University in 1976.

       Paul Schulz, 48, has been President of EMF since November
19, 2007.  He had previous General Management experience at
Midland Materials and Electro-Tech Machining.  He delivered
results for a total of 15 years at Morgan AM&T in Pennsylvania
as Global Vice President of Operations, Vice President/General
Manager of Pure Carbon Company, Plant Manager, and Engineering
Manager.  Mr. Schulz has a B.S. in Chemical Engineering from
Bucknell University.

       Dr. Gerald Entine, 65, RMD Research President, is a
founder and former majority shareholder of RMD, Inc and RMD
Instruments, LLC.  He has more than 40 years of experience in
optics, nuclear sensors and instrumentations and related physics
or biophysics-based technologies, both applied and for basic
scientific research.  Dr. Entine received his B.SC. in
Physics/Biophysics and M.A. in Physics from the University of
Pennsylvania.  He received his Ph.D. in physics from the
University of California at Berkeley under the direction of two
Nobel Laureates - Dr. Melvin Calvin and Dr. Owen Chamberlain.
Dr. Entine then joined Tyco Laboratories, a high technology
research center in Boston, and conducted studies in
semiconductor sensors until 1974, when he founded RMD with
technology that RMD acquired from Tyco.  Dr. Entine continues to
be involved in research, and has been the Principal Investigator
on numerous research contracts and grants funded both  privately
and by federal agencies.  Dr. Entine is currently an Adjunct
Research Assistant Professor in the Department of Neurology at
the Bowman Gray School of

                                   -15-
<PAGE>

Medicine.  His publications include works in Physics and
Instrumentation (48), Basic Chemistry (22), and Medicine and
Biophysics (51).

       Jack Paster, 70, Vice President, RMD Instruments, is a
founder and former shareholder of RMD.  The former Business
Manager of Tyco Labs, Mr. Paster has 35+ years of experience in
business, marketing, and manufacturing.  He has been responsible
for commercializing RMD technologies such as the Navigator[TM]
Sentinel Node Mapping System and the Lead Paint Analyzer.  Mr.
Paster graduated from Rutgers University with a B.S. in
Industrial Engineering, and continued his studies under an Air
Force scholarship, completing a Master of Engineering program at
Texas A&M.  Mr. Paster has conducted numerous training classes
in lead measurement and has lectured extensively about lead
hazards.  Mr. Paster taught at the University of South Florida
and has written extensively regarding issues within the lead
paint inspection community.  Mr. Paster was Executive Vice
President of one of the first small companies in the solar
energy business to become public and, during the Carter
Administration, Mr. Paster was the Solar Energy Industry
Association's nominee for Deputy Assistant Secretary for Solar &
Conservation.  Mr. Paster is the former president of the
National Lead Assessment and Abatement Council and recipient of
the 1998 Lead Star Award for Contribution to Lead Hazard Control
Industry.

       Paul Weaver, 57, joined the Company on December 15, 2008.
Mr. Weaver is the Chief Financial Officer and will coordinate
acquisition activities.  Most recently, he was employed as a
consultant for Thomas Group on a project to improve the
readiness process of the U.S. Navy.  His corporate experience
includes senior financial positions in manufactured consumer
products, aviation service, and industrial packaging industries.
He spent 22 years with Tyco Toys, Inc. where he was a member of
the executive committee which took the company public and grew
the business through both organic growth and acquisitions from a
$33 million domestic company to a $750 multi-national. Mr.
Weaver is a CPA and has a B.A. in Accounting from Rutgers
University.

       Mark Caldwell, 42, became General Manager of RMD
Instruments on October 20, 2008.  Prior to joining Dynasil, he
was CEO of Gefran, Inc. in Winchester, MA, a leading
manufacturer of process sensors and instrumentation for machine
controls, where he spent fourteen years in various capacities
including General Manager, Operations Manager, Engineering
Manager, and Quality Assurance Manager.   He also worked at
Raytheon and Atlantic-Tracy in engineering and sales roles.  Mr.
Caldwell holds a MMS in Manufacturing Engineering from the
University of Massachusetts and a BS in Industrial Technology
from the University of Lowell.


Code of Conduct

       The Company adopted a revised Code of Conduct for all
employees on December 23, 2008. The Company will provide a copy
to any person without charge upon request in the manner set
forth under item 1 on page 3.

                  ITEM 10. EXECUTIVE COMPENSATION

<TABLE>
<CAPTION>
                            Summary Compensation Table

<S>          <C>     <C>          <C>        <C>          <C>          <C>             <C>

Name and				     Stock         Option      All Other
Position     Year    Salary ($)    Bonus ($) Awards ($)    Awards ($)  Compensation($)  Total ($)
------------ ------  -----------  ---------- -----------  ----------- ----------------  ----------

Craig Dunham  2008  150,000        63,000                                               213,000
President     2007  110,000        86,711                                               196,711
And CEO

Laura Lunardo 2008  115,931        41,928                                  12,492       170,351
CFO, COO-     2007   97,693        33,165                                  14,393       145,251
Optometrics

Paul Schulz   2008   99,230         9,704                                               108,934
President-EMF

Megan Shay    2008   76,676         9,404                                                86,080
Corporate VP  2007   95,400                                                25,000       120,400
</TABLE>
                                    -16-
<PAGE>

Executive Compensation

Executive Compensation Philosophy

       Dynasil's current executive compensation philosophy is
outlined below. When companies are acquired, we typically do not
immediately change existing salary and benefits so there may be
significant differences versus our compensation philosophy for
extended periods of time. We prefer employees to be "at will" in
general but employment agreements are utilized where the Board
sees it as advisable. The Board will deviate from these
philosophies when necessary to attract and retain strong people.
Here are the key points of our executive compensation
philosophy:

       - Moderate base pay where the midpoint of the Company's
         salary is typically set at 90% of the median
         salary for comparable companies from a national
         salary survey. National salary survey data is routinely used for
         annual executive compensation reviews.
       - Excellent incentive compensation to offset the moderate
         base pay and provide strong rewards for
         strong performance.
       - Competitive benefits.
       - No perquisites or "perks".

       The employment agreement with Craig T. Dunham, President and
CEO, commenced on October 1, 2004 for an initial three-year
period, after which it automatically renews for one-year terms,
unless terminated by either party upon ninety days written
notice prior to the end of any term or for cause. Under the
initial terms of the employment agreement, Mr. Dunham agreed to
work for the Company full time and receive an annual base salary
of $110,000 with a performance bonus equal to 20% of the
Company's net income above $100,000 and an additional bonuses or
stock options at the discretion of our Board of Directors. The
annual performance bonus was paid one third in cash and the
other two thirds in stock, with Mr. Dunham having the option to
utilize any existing warrants or options to set the share price.
The initial agreement also provided for then standard company
benefits and a company car (or car allowance). If Dynasil
terminates the agreement for any reason other than "cause" (as
defined), Mr. Dunham is entitled to receive 30% of his base
salary at the time of termination plus continued health care
benefits for six months. Effective October 1, 2007, the Board of
Directors increased Mr. Dunham's base salary to $150,000,
eliminated the company car benefit and reduced Mr. Dunham's
bonus percentage for fiscal 2008 to 49% of a "Core Bonus" pool
comprised of 15% of Dynasil's net profits before taxes after
subtracting an amount equal to an 8% annual return on Dynasil's
stockholders' equity. Effective October 1, 2008 due to the
significant growth of the company, the Board of Directors
increased Mr. Dunham's base salary to $175,000, which the Board
believed was equivalent to 90% of the median salary for chief
executive officers of comparably sized entities. At the date of
this 10K-SB report, the Board of Directors is still finalizing
the bonus formula for fiscal year 2009.

       An employment agreement with Laura Lunardo, Chief Financial
Officer of the Company through December 15, 2008 and Chief
Operating Officer of its Optometrics Corporation subsidiary
("Optometrics"), commenced on March 9, 2005 and ended on March
10, 2008 when she became an "at will" employee consistent with
the Company's current executive compensation philosophy. On
March 10, 2008, Ms. Lunardo's salary was increased from $100,000
to $125,000 and her individual bonus remained at 5% of
Optometrics' net profits before taxes. In order to be consistent
with the Company's executive compensation philosophy,
perquisites that were previously provided to Ms. Lunardo are
being phased out. In accordance with that philosophy, a 6% extra
contribution to Ms. Lunardo's 401(k) pension plan and health
club benefit were eliminated effective March 2008 and her
company car benefit will be eliminated when the car lease ends
in April 2009.  Otherwise, Ms. Lunardo has standard Optometrics
benefits.  For fiscal year 2008, the Board of Directors awarded
Ms. Lunardo an additional $10,000 cash bonus for her
contributions as its interim Chief Financial Officer and role in
implementing the Company's management controls project pursuant
to the Sarbanes-Oxley Act of 2002.

       Mr. Paul Schulz, President of the Company's Evaporated Metal
Films Corporation ("EMF") subsidiary, joined the Company on
November 19, 2007. Mr. Schulz' base salary is $120,000 per year
with a bonus of 10% on the first $400,000 of EMF net profit
before taxes, and a fiscal year 2008 supplemental bonus of up to
$15,000 based on a formula for performance goals. Mr. Schulz
also receives standard EMF company benefits.

                                    -17-
<PAGE>

       An employment agreement with Megan Shay, former EMF President
and former Corporate Vice President, ended on October 2, 2007,
at which time, she became an "at will" employee as per Company
philosophy.  During this time frame, she received an annual base
salary of $95,400 as well as an additional $25,000 for the Full
Time Extension Period of April 1, 2007 to September 30, 2007.
For fiscal year 2008, she received a pro-rated portion of a
bonus equal to 17.5% of a "Core Bonus" pool comprised of 15% of
Dynasil's net profits before taxes after subtracting an amount
equal to an 8% annual return on Dynasil's shareholders' equity.
Effective July 21, 2008, Ms. Shay shifted to consultant status.

       As part of the Company's acquisition of RMD, employment
agreements were entered into with RMD's former owners that
maintained their compensation at then current levels. Dr. Gerald
Entine's Former Owner Work Continuation Agreement provides for
Dr. Entine's employment as RMD's President for a period of 18
months starting July 1, 2008, extendible by mutual agreement for
an additional 6 months thereafter. Under that agreement, Dr,
Entine receives a base salary of $325,000 per year, business
expense reimbursements (including reimbursement for home office
expenses) and customary employee benefits. The agreement also
requires Dr. Entine to maintain confidentiality and not compete
with Dynasil or RMD for a five year period. If Dynasil or RMD
terminates the agreement for any reason other than "cause" (as
defined), Dr. Entine is entitled to receive 20% of his base
salary at the time of termination. The terms of the agreement
are similar to Dr. Entine's pre-transaction compensation
package, although it is not consistent with Dynasil's current
executive compensation philosophy.

       Mr. Jacob Paster's Former Owner Work Continuation Agreement
provides for Mr. Paster's employment as Vice President of RMD
Instruments for a period of 24 months starting July 1, 2008.
Under that agreement, Mr. Paster receives a base salary of
$250,000 per year, vested options exercisable for a 3 year
period starting July 1, 2008 to acquire 100,000 shares of
Dynasil common stock at an exercise price of 33% above market
price, options exercisable for a 3 year period starting July 1,
2008 to acquire an additional 20,000 shares of Dynasil's common
stock at an exercise price of 33% above market price that will
vest on October 15, 2009 if RMD Instruments meets a certain
revenue objective, customary business expense reimbursements,
reimbursement for apartment rental expense of $2,625 per month
through October 2008 and customary employee benefits. The
agreement also requires Mr. Paster to maintain confidentiality
and not compete with Dynasil or RMD for a five year period. If
Dynasil or RMD terminates the agreement for any reason other
than "cause" (as defined), Mr. Paster will be entitled to
receive the greater of the remaining balance of the first twelve
(12) months of base pay or 20% of his annual base pay at the
time of termination. The base compensation in the agreement is
similar to Mr. Paster's pre-transaction compensation package,
although it is not consistent with Dynasil's current executive
compensation philosophy.

Directors' Compensation.

       From October 1, 2007 until June 30, 2008, compensation paid
for serving on the Board was: Chairman of the Board, $1,500 per
month and all other non-employee directors, $1,250 per month.
Outside directors have the option to split their compensation
between shares of the Company's common stock and cash.

       Effective July 2008, the Company increased Directors'
compensation to $36,000 per year for each Director, with at
least 50% of that amount to be paid in the form of stock
options. In addition, in view of their additional
responsibilities and obligations, the Chairman receives an
additional payment of $9,000 per year and the Audit Committee
Chairman/ Financial Expert receives an additional payment of
$5,000 per year. This change was initiated to provide
competitive Directors' compensation with the expected tripling
of Dynasil's revenues resulting from the July 1, 2008
acquisition of RMD.  During multiple board meetings, Dynasil's
Directors reviewed directors' compensation data from the
National Association of Corporate Directors ("NACD") and Silicon
Valley companies and engaged in extensive discussions regarding
future Directors' compensation. This data was used to revise the
Directors' compensation to a level that Dynasil's Directors
believed was comparable to that paid by similar companies. One
of the best practices recommended by the NACD data was to pay at
least half of directors' compensation in stock or stock options;
accordingly, the Dynasil Directors revised their board
compensation package to pay 50% of Directors' fees in stock
options which will be issued on an annual basis following the
election of Directors at the annual meeting. For the remaining
50% of Directors' fees, each Director has the choice to be paid
in any combination of monthly cash payments, quarterly stock
payments at the quarter's ending market price and/or

                                    -18-
<PAGE>

annual stock options. The terms for the stock options generally
include a three year exercise period from the initial issue
date, an exercise price set at a 33% premium to the market price
at the time of issue and the value is determined based on Black-
Shoales methodology. In addition, all reasonable expenses
incurred in attending meetings are reimbursed by the Company and
Directors are eligible for other stock options and grants. With
advance Board approval, when a director is asked to spend time
or exert efforts on Company activities that significantly exceed
normal Director expectations, the director may receive
additional compensation in the form of a consulting fee at the
discretion of the other members of Dynasil's Board of Directors.
In fiscal 2008, Mr. Saltzman received such additional
compensation for his efforts relating to the RMD acquisition.
Additional details of the comparable company data used to revise
Director's compensation as well as additional details regarding
the plan is available in the Company's Periodic Report on Form 8-
K dated July 15, 2008. These fees are in addition to fees paid
or stock or option awards that may be paid or granted to induce
an individual to join Dynasil's Board of Directors.

Directors' Compensation For Fiscal Year Ending September 30, 2008

           Fees earned or
               Paid in   Stock       Option         All other
Name           cash($)   awards($)   awards($)      compensation($)  Total ($)
------------- ---------  ---------   ----------     ---------------  ---------
James Saltzman
(3)(4)           16,875                  7,875            60,246       84,996

Cecil Ursprung
(1)(4)                      15,750       4,500                         18,000

Peter Sulick
(2)(4)                       2,875      40,175                         52,467


(1) Mr. Ursprung elected to receive 100% of his discretionary
Directors' fees
In Dynasil common stock which was issued at each quarter ending
market price which ranged from $1.65 to $2.39 per share.
A total of 7,994 shares of common stock were issued with an
aggregate market value of $15,750 at time of issue and for an
average price per share of $1.97 per share.

(2) Mr. Sulick was issued 80,000 stock options on June 11, 2008 which
is currently a standard part of Director compensation for
new Directors. At that time, the most recent market
price was $2.05 per share, the option exercise price was $3.08
per share, the options granted had a three year exercise
period, and were valued at $32,800.

(3) Mr. Saltzman elected to receive 100% of his Directors' fees in
cash from October 1, 2007 until June 30, 2008.  On July 1, 2008,
he elected to split his discretionary Directors' fees between
stock options and cash. The other Directors approved a
payment totaling $60,246 to Mr. Saltzman for the time and
efforts above and beyond normal Director expectations that
Mr. Saltzman expended on the RMD acquisition. This     payment
included $30,000 in cash and stock options valued at $30,246.
The stock options were issued on July 7, 2008 to purchase
an aggregate of 144,648 shares of common stock at an
exercise price of $4 per share, which was 70% above the
then current market price of $2.35 per share.

(4) On July 14, 2008, stock options were issued to all three outside
Directors to cover  their standard stock option portion of
Directors' fees plus the portion of their discretionary
fees which they elected to receive in stock options through
February  2009. These options were issued at $3.06 per share,
which was 33% above the market price of $2.30 per share with a
three year term. A total of 137,618 options were issued with a
total Black-Scholes value of $52,667.

                                    -19-
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

       The following table sets forth the beneficial ownership of the
Common Stock of the Company as of September 30, 2008 by each
person who was known by the Company to beneficially own more
than 5% of the common stock, by each director and required
executive officers who owns shares of common stock and by all
directors and executive officers as a group:

Title      Name and Address             No. of Shares and nature of   Percent of
of Class   of Beneficial Owner          Beneficial Ownership(1)       Class
--------   -------------------          ---------------------------   ----------

Common     Craig Dunham (1)(4)               3,115,194                 26.9%
           385 Cooper Road
           West Berlin, NJ 08091

Common     Gerald Entine (9)                 4,363,098                 38.5%
           44 Hunt Street
           Watertown, MA 02472

Common     James Saltzman (1)(2)(3)            571,883                  4.9%
           257 Stanford Place
           Newtown, PA  18940

Common     Laura Lunardo                       156,391                  1.4%
           8 Nemco Way
           Ayer, MA 01432

Common     Cecil Ursprung (1)(5)               244,514                  2.1%
           27 Walbridge Road
           West Hartford, CT  06119

Common     Peter Sulick (1)(6) (7)             471,080                  4.0%
           3295 Ft. Charles Dr.
           Naples, FL 34102

Common     Paul Schulz (1)(8)                   30,000                  0.3%
           239 Cherry Street
           Ithaca, NY  14850

All Officers and Directors
as a Group (1)                               9,218,795
72.7%
--------------

 (1)The numbers and percentages shown include shares of common
stock issuable to the identified person pursuant to stock
options that may be exercised within 60 days. In calculating the
percentage of ownership, such shares are deemed to be
outstanding for the purpose of computing the percentage of
shares of common stock owned by such person, but are not deemed
to be outstanding for the purpose of computing the percentage of
share of common stock owned by any other stockholders. The
number of shares outstanding on December 8, 2008 was 11,348,635.

(2)James Saltzman disclaims beneficial ownership of the 243,206
shares owned by Saltzman Partners.

(3)Includes options to purchase 90,000 shares of the Company's
common stock at $1.50 per share, 40,000 shares of the Company's
common stock at $0.40 per share, 144,648 shares of the Company's
common stock at $4.00 per share, 54,873 shares of the Company's
common stock at $3.06 per share, shares of Series B Preferred
Stock that are convertible into 19,950 shares of common stock,
and shares of Series C Preferred Stock that are convertible into
40,400 shares of common stock.

(4)Includes shares of Series B Preferred Stock that are
convertible to 230,755 shares of common stock and Series C
Preferred Stock that are convertible to 20,000 shares of common
stock. Also includes 1,000,000 shares of common stock held in
the Dunham Family Limited Liability Company of which Mr. Dunham
is the sole managing member and over which he has sole
dispositive and voting power.

                                    -20-
<PAGE>

(5)Includes options to purchase 80,000 shares of the Company's
common stock at $2.00 per share 31,356 shares of the Company's
common stock at $3.06 per share.

(6) Includes options to purchase 80,000 shares of the Company's
common stock at $3.08 per share and 51,389 shares of the
Company's common stock at $3.06 per share, shares of Series B
Preferred Stock that are convertible to 86,450 shares of common
stock and shares of Series C Preferred Stock that are
convertible into 124,000 shares of common stock. Also includes
shares held in the names of his children.

(7) Includes a total of 300,000 shares of common stock held in
the names of his children.

(8) Includes options to purchase 30,000 shares of the Company's
common stock at $2.00 per share.

(9) Includes shares held in the names of his family and
childrens trusts.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  Financial Note 9 of this 10KSB is hereby incorporated by
reference.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)  The following exhibits are filed pursuant to Item 601 of
Regulation S-B:

Exhibit No.  Description of Document

2.01*        Asset Purchase Agreement, dated January 18, 2008 between
             Precision Optics Corporation and Optometrics Corporation,
             filed on form 8-K dated January 22, 2008.

2.02*        Asset Purchase Agreement, dated July 1, 2008 by and between
             Dynasil Corporation of America, RMD Instruments Corp,
             RMD Instruments LLC, Gerald Entine 1988 Family Trust,
             Fritz Wald and Doris Wald, and Jacob H. Paster, filed on
             Form 8-K dated July 7, 2008.


2.03*        Plan of Merger, dated July 1, 2008 by and among Dynasil
             Corporation of America, RMD Acquisition Sub, Inc.,
             Radiation Monitoring Devices, Inc., Gerald Entine 1988 Family
             Trust, Fritz Wald and Doris Wald, and Jacob H. Paster, filed
             on Form 8-K dated July 7, 2008.

2.04*        Lease Agreement, dated July 1, 2008 between RMD Instruments, Inc
             and Charles River Realty, filed on Form 8-K on July 7, 2008.

2.05*        Lease Agreement, dated July 1, 2008 between Radiation Monitoring
             Devices, Inc. and Charles River Realty, filed on Form 8-K on
             July 7, 2008.


3.01         Amendment to the Audit Committee Charter, dated December 23, 2008.

10.01*       Amendment to Craig T. Dunham employment agreement,
             filed on Form 8-K dated November 13, 2007.

10.02*       Letter of intent to purchase privately-owned
             instruments company, filed on Form 8K dated
             December 26, 2007.

10.03*       Employment agreement of Gerald Entine, filed on Form
             8-K dated July 7, 2008.

10.04*       Employment agreement of Jacob H. Paster, filed on Form
             8-K dated July 7, 2008.

                                    -21-
<PAGE>

10.05*       Loan agreement dated July 1, 2008 with Susquehanna
             Bank for a $9,000,000 term loan and a
             $1,000,000 line of credit, filed on Form 8-K dated
             July 7, 2008.

10.06*       Loan agreement dated September 30, 2008 with RMD
             Instruments, LLC for $2,000,000, filed on Form 8K on
             October 6, 2008.

10.07        Amendment dated December 19, 2008 to $2,000,000 note
             with RMD Instruments, LLC which extends the
             maturity date by six months.

14.01        Code of Conduct revised and approved on December 23, 2008.

99.01        Press release, dated December 30, 2008, issued by Dynasil
             Corporation of America announcing its financial
             results for the fourth quarter ending September 30, 2008.

* Incorporated herein by reference

Reports on Form 8K: The following reports on Form 8-K were filed
during the last quarter of the period covered by this report:

- On July 7, 2008, a current report for items covering the RMD
acquisition and related financing and contracts.

- On July 15, 2008, a current report covering revised Directors
compensation.

- On September 15, 2008, an amendment to the July 15, 2008
current report covering the RMD acquisition and related
financing and contracts which added financial exhibits.

ITEM 14. Principal Accountant Fees and Services

 (a)   Audit Fees

The aggregate fees billed or to be billed for
professional services rendered by the Company's
principal accountant for the audit of the
Company's annual financial statements for the fiscal
years ended September 30, 2008 and 2007 and the reviews
of the financial statements included in the Company's
Forms 10-QSB during those fiscal years are $93,750 and
$67,750, respectively.

(b)  Audit Related Fees

The aggregate fees billed or to be billed for
professional services rendered by the Company's
principal accountant for audit related fees for the
fiscal years ended September 30, 2008 and 2007 were
$63,220 and $-0-, respectively.  The fiscal year 2008
fees related to due diligence fees of $28,220 for the
RMD acquisition and RMD audit fees of $35,000.

(c)   Tax Fees

The Company incurred fees of $12,000 and $6,500 during the last
two fiscal years for professional services rendered by the
Company's
principal accountant for tax compliance, tax advice and
tax planning.

(d)  All Other Fees

The Company incurred fees of $1,800 for Sarbanes Oxley
consultations during fiscal year 2008 and no other fees
during fiscal year 2007 for products and services by
the Company's principal accountant.

                                    -22-
<PAGE>

(e) Pre-approval Policies and Procedures

The Board of Directors has adopted a pre-approval policy
requiring that the Audit Committee pre-approve the audit and non-
audit services performed by the independent auditor in order to
assure that the provision of such services do not impair the
auditor's independence.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities
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/ Craig Dunham
        ---------------------------------
        Craig Dunham, President, CEO

DATED:  December 30, 2008
      ---------------------------------
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.

 Signature                   Title                           Date
 ---------                   -----                           ----
BY:  /s/ James Saltzman      Chairman of the Board of   December 30, 2008
    ---------------------    Directors
   James Saltzman


BY: /s/ Cecil Ursprung       Director                   December 30, 2008
    ---------------------
   Cecil Ursprung

BY: /s/ Peter Sulick         Director, Chairman of the  December 30, 2008
    ---------------------    Audit Committee
   Peter Sulick

BY: /s/ Craig T. Dunham      President and CEO          December 30, 2008
    ---------------------
   Craig T. Dunham

BY: /s/ Laura Lunardo         CFO and Principal         December 30, 2008
    ---------------------     Accounting Officer
   Laura Lunardo

                                      -23-
<PAGE>