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, 2004

[ ] 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)

         New Jersey                                       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 [X]

State issuer's revenues for its most recent fiscal year: $2,296,264

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 November
30, 2004 was $1,355,459. The market value is based upon the last sale of the
Common Stock on the NASDAQ OTC Bulletin Board of $.60 per share on November
30, 2004.

The Company had 3,430,644 shares of common stock, par value $.0005 per share,
outstanding as of November 30, 2004.

Documents incorporated by reference: none

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

                                      -1-
<PAGE>
                                  PART I

ITEM 1.  DESCRIPTION OF BUSINESS

     Dynasil Corporation of America ("Dynasil", "we", or the
"Company") was
incorporated in the State of New Jersey on October 20, 1960.

     On April 22, 1996, the Company's articles of incorporation
were amended to reflect an increase in the authorized shares of
common stock from 1,500,000 to 25,000,000, and a reduction of
the par value of the common stock from $.10 to $.001. On June 1,
1996, the Board of Directors declared a three-for-two stock
split, effected in the form of a 50% stock dividend payable to
stockholders of record on April 30, 1996.

     On October 16, 1996, the Board of Directors declared a
two-for-one stock split payable on November 1, 1996 to
stockholders of record on October 1, 1996, which split further
reduced the par value of our common stock from $.001 to $.0005
per share.

     We were 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, also done at our manufacturing facility.
Fabrication occurs on in-house manufactured material as well as
material procured from outside vendors.

     In recent years, we have suspended operations of our glass
furnaces and concentrated on expanding our product lines to
include the fabrication of optical materials supplied by other
manufacturers. This has included fused quartz from General
Electric, fused silica from Corning Incorporated, and various
optical materials from Schott Glass Technologies Inc., Ohara
Corporation, and others. Our products are used primarily as
components of optical instruments, lasers, analytical
instruments, semiconductor/electronic devices,
spacecraft/aircraft components, and in devices for the energy
industry. These applications include:

          o    Optical components - lenses, prisms, reflectors, mirrors,
               filters, optical flats

          o    Lasers - Beam Splitters, brewster windows, q-switches,
               medical/industrial lasers, exciter systems

          o    Analytical Instruments - UV spectrophotometer cells, fire
               control devices, reticle substrates, and interferometer plates

          o    Semiconductor/Electronic - Microcircuit substrates, microwave
               devices, photomasks, sputter plates, microlithography optics

          o    Spacecraft/Aircraft - Docking light covers, windows, re-entry
               heat shields, ring laser gyros

     Our products are distributed through direct sales and
delivered by commercial carriers. We have a two person sales
force located in our corporate headquarters, West Berlin, New
Jersey, that handles all sales. We also use manufacturer's
representatives in various foreign countries for international
sales. 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 industry primarily
with fabricators of industrial optical material. Market share in
the optics industry is largely a function of quality, price and
speed of delivery.  We believe that we compete effectively in
all three areas.

Our primary suppliers are Corning Incorporated and General
Electric.

                                      -2-
<PAGE>
       We presently have over 150 customers, with approximately
87% of our business concentrated in our top 40 customers. Our
five largest customers accounted for approximately 11.4%, 6.5%,
6.2%, 5.0% and 4.5%, respectively, of our revenues during fiscal
year 2004. The loss of any of these 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 size, quantity and quality. These
purchase orders are filled with material from inventory or
purchased material. Orders are normally filled over a period
ranging from one to three weeks. We have blanket orders that
call for monthly deliveries of a predetermined amount.

     We have no patents or patent applications filed or pending.

     Other than federal, state and local environmental and
safety laws, our fabricating process is not subject to direct
governmental regulation. We do not have any pending notice of
environmental violations and are aware of no potential
violations. There are no buried storage tanks on our property.
Environmental costs for fiscal year 2004 have not exceeded
$50,000.

     Our research and development activities primarily have
involved changes to our manufacturing process 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 consist of 17 employees: 3
administrative; 2 sales; and 12 shop personnel. The shop is
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 is situated on a 3.686-acre site. It
contains eight inactive furnaces with attendant pollution
control systems, glass processing equipment, quality control
functions and administrative office space. We believe the
property is in satisfactory condition and suitable for our
purposes.

     The property is mortgaged as collateral against a note
payable to a bank.

ITEM 3.  LEGAL PROCEEDINGS

     On August 30, 2004, the Company was served with a Summons
and Complaint in an action entitled Torrero v. Alcoa, Inc., et
al filed on August 19, 2004 in the Los Angeles (CA) Superior
Court. In that case, the plaintiffs, Lucy Torrero and Juan
Pedrosa Torrero allege that glass blanks manufactured and sold
by the Company, along with the products or tools made and sold
by approximately twenty other defendants including General
Electric, ALCOA, Corning Incorporated, and Raytheon, caused
plaintiff Lucy Torrero to develop lung cancer and other injuries
during her employment as an optical lens grinder and laborer by
companies that purchased or used those products or tools. The
plaintiffs seek compensatory and punitive damages aggregating
approximately $31,500,000. The Company has referred the matter
over to its commercial general liability insurance carrier which
is defending the Company under a reservation of rights. The
Company does not believe that an adverse outcome on this matter
will have any material adverse effect on the Company, its
financial condition or prospects.

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.
                               -3-
<PAGE>


                                  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, 2003 and September 30, 2004
were as follows:

  Fiscal Quarter        High Bid Price        Low Bid Price
  --------------        --------------        -------------
       2003
       First              $0.20                 $0.07
       Second              0.15                  0.10
       Third               0.51                  0.10
       Fourth              0.51                  0.13

       2004
       First              $0.51                 $0.21
       Second              0.40                  0.25
       Third               0.45                  0.20
       Fourth              0.29                  0.07

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

     As of September 30, 2004, there were 3,240,020 shares of
common stock outstanding held by approximately 500 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 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 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.

     The Company adopted Stock Incentive Plans in 1996 and 1999
that permit, among other incentives, grants to officers,
directors, employees and consultants,
options to purchase up to 1,350,000 shares of the Company's
common stock. At September 30, 2004, 1,004,000 shares of common
stock were reserved for issuance under the Plans. Options are
generally exercisable at the fair market value on the date of
grant over a five-year period.  To date, options have been
granted at exercise prices ranging from $.40 to $4.25 per share.
At September 30, 2004, 135,000 options were outstanding.

     The securities authorized for issuance under equity
compensation plans is set forth in a tabular format in response
to Item 11.

     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 150,000 shares had been reserved for
issuance. Of these, 95,387 shares have been purchased by the
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 signed a three year
employment agreement with Mr. Craig T. Dunham to become
President/ CEO effective October 1, 2004.  In conjunction with
that agreement, the Company entered into a Subscription
Agreement
                                   -4-
<PAGE>

with Mr. 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.  On that date, the Company also granted a Stock
Purchase Warrant to Mr. Dunham pursuant to which Mr. Dunham may
acquire, at any time prior to January 31, 2008, up to an
additional 1,200,000 shares of the Company's common stock at an
exercise price of $0.225 or $0.25 per share dependent upon
certain conditions.


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

     The downturn in demand that we had experienced in fiscal
year 2003 continued into the first part of the fiscal year
ending September 30,2004. Revenues for the first three quarters
of 2004 were down 8.8% versus 2003 but the fourth quarter of
2004 rebounded with a 23% increase over 2003.  For 2003 and
earlier in 2004, two important areas of our customer base, semi-
conductors and telecommunications, had not fully recovered from
adverse economic conditions. While telecommunications has still
not fully recovered, overall, the optics industry appears to be
strengthening, as evidenced by the 23% increase for the fourth
quarter of 2004 and continued strong orders and shipments for
the first two months of fiscal year 2005.  Detailed action plans
have recently been implemented which are designed to continue
revenue growth and new optical materials have recently been
added to our product line.  We expect to return to profitability
in fiscal year 2005 and to continue to deliver positive cash
flow from operations.  In addition, on October 18, 2004, the
Company announced a letter of intent to acquire the assets of
Optometrics LLC in Ayer, Massachusetts. This planned transaction
is anticipated to approximately double the revenues of the
Company and significantly improve profitability. Management is
pleased with progress on this transaction and closing is
tentatively planned for January 31, 2005.


Results of Operations

          Revenues for the fiscal year ended September 30, 2004
were $2,296,264. This represents a decrease of 2% for the fiscal
year ended September 30, 2003 of $2,340,397. The small overall
decrease in sales resulted from a slow start for the year that
was not quite overcome by the strong finish with a 23% revenue
increase in the fourth quarter.  During 2004, new optical
materials were added to the Company's product line including the
recent addition of several glasses closely related to fused
silica.  Management believes that improved economic conditions
combined with proactive sales and marketing efforts resulted in
the fourth quarter revenue turnaround which has continued into
the first two months of fiscal year 2005 with a 20% increase in
shipments and a 36% increase in order bookings versus the same
period last year.

     Cost of sales for the fiscal year ended September 30, 2004
was $1,759,736, or 76.6% of sales, versus $1,849,291 or 79.0% of
sales for fiscal year ended September 30, 2003. The improvement
in percentage of sales of 2.4% (5.9% over the last two years)
can be attributed in part to our continuous expense monitoring
and cost reductions throughout the year.

      Gross profit increased to $536,528 or 23.4% of sales, for
fiscal year 2004 from $491,106 or 21.0% of sales for fiscal year
2003. We believe the increase of $45,422, or 2.4%, is primarily
a result of closely managing our expenses and capital lower
depreciation from reduced capital spending.


                                   -5-
<PAGE>
      Selling, general and administrative expenses increased to
$676,972 or 29.5% of sales for fiscal year 2004 from $657,465 or
28.1% of sales for fiscal year 2003. A reduction in Directors
fees for fiscal year 2004 was more than offset by higher legal
expenses for the leadership transition, higher external sales
commissions on international sales, and increased advertising,
travel, and selling expenses aimed at increasing revenues.

Fiscal year 2003 included a non-cash asset impairment charge of
$158,333 related to the shutdown of glass furnaces.

     Interest Expense-net, decreased to $35,433 or 1.5% of sales
for fiscal year 2004 from $43,989 or 1.9% of sales for fiscal
year 2003. The decrease of $8,556 was the result of debt
decreasing overall by $304,817 for fiscal year 2004.  On April
15, 2004, the Company's debt was restructured to extend the
maturity date two years while maintaining the interest rate at
the bank's prime rate plus 0.5%.

     The Company lost $175,881 for the year ended September 30,
2004 compared to a loss of $368,681 for the fiscal year ended
September 30, 2003.


     The Company has no provisions for income taxes for either
fiscal 2004 or 2003. As of September 30, 2004 we have
approximately $1,400,000 of net operating loss carry-forwards to
offset future taxable income for federal tax purposes expiring
in various years through 2021. In addition, the Company has
approximately $800,000 of net operating loss carry-forwards to
offset certain future states' taxable income, expiring in
various years through 2013.

Liquidity and Capital Resources

     Net cash provided by operating activities was $87,794 for
fiscal year 2004 versus $192,006 for fiscal year 2003. Despite
showing a net loss for the year, the Company generated $87,794
of cash from operating activities primarily through depreciation
and reductions in inventory.

     Cash flows from investing activities increased to $198,091
for fiscal year 2004, from ($11,803) for fiscal year 2003.
$200,000 of the cash flow from investing activities came from
certificates of deposit that matured during 2004 and were used
to reduce debt by $150,000 with the remainder used in
operations. Capital expenditures to purchase Plant, Property,
and Equipment decreased to $5,834 for fiscal year 2004 versus
$13,206 for 2003.

     Cash flows used in financing activities decreased to
$154,298 for fiscal year 2004, from $229,000 for fiscal year
2003. Cash used in financing activities for fiscal year 2004 and
2003 was primarily used to reduce long-term debt. In addition
during fiscal year 2004, $150,519 worth of the Company's common
stock was sold, primarily through a private placement to Mr.
Craig T. Dunham.

     Despite reported losses over the last three years, net cash
from operations has totaled $552,000 and total debt has been
reduced by $927,000 from $1,536,000 to $609,000.

     The Company believes that its current cash and cash
equivalent balances, and net cash generated by operations, will
be sufficient to meet its anticipated cash needs for working
capital for at least the next 12 months. The proposed
Optometrics acquisition and any other business expansions may
require the Company to seek additional debt or equity financing.

Recent Announcement

     On October 18, 2004, the Company announced that it had
signed a Letter of Intent to acquire the assets of Optometrics
LLC of Ayers, Massachusetts.  Optometrics LLC is a worldwide
supplier of high quality optical components including
diffraction gratings, lenses, thin film filters, laser optics,
monochromators, and specialized optical systems and software.
The transaction is currently targeted to close by January 31,
2005 and is contingent upon completion of a definitive asset
purchase agreement, financing, and due diligence.  Under the
terms of the Letter of Intent, the current Optometrics owners,
Ms. Laura Lunardo and Mr. Frank Denton will

                                   -6-
<PAGE>

continue to actively lead the Optometrics business as well as
Ms. Lunardo becoming Dynasil's CFO.  The acquisition of
Optometrics LLC is expected to double Dynasil revenues in
addition to contributing significant net income and cash flow.
Dynasil has been a long term supplier to Optometrics and glass
is a key raw material for Optometrics products. Management
believes that, if the transaction is consummated, Optometrics
will be an excellent addition to the Company with its track
record of profitable growth, strong people, and optical
customers/ markets that fit well with the Company. Management is
pleased with the progress of the transaction to date.


     Strategic Plan

    Under new leadership, the strategy for Dynasil is to
significantly grow revenues through improvements in our core
optical materials business as well as strategic acquisitions.
The ongoing project to acquire the assets of Optometrics LLC
represents the first step planned for strategic acquisitions and
several other potential acquisition candidates have been
identified.  Improving the core business is planned by enhancing
product offerings, increasing value offered to customers, and
pursuing new business in order to grow revenues. Here are the
key elements of the strategy:

1)   Increase revenues and profitability of the Dynasil optical
  materials business
     a.   Grow revenues more than 20% for 2005 and then continue
       growth in future years.   After several depressed years, the
       optics industry seems to be showing a strong recovery and
       Dynasil's orders have picked up significantly.  For the quarter
       ending September 30, 2004, revenues were up 23% over 2003.  For
       the first quarter of FY 2005 ending December 31, 2004, order
       entry for the first two months was up 36% over the previous year
       and shipments are on track for an expected revenue increase
       exceeding 20% for the first quarter of fiscal 2005 (ending
       December 31, 2004).  Recent customer visits have resulted in new
       business orders that are expected to add to FY 2005 revenues. A
       sales and marketing action plan has recently been completed
       which is aimed at driving up revenues and margins.  The planned
       acquisition of Optometrics is expected to offer access to
       several large potential customers as well as the opportunity to
       combine sales and marketing efforts.  Here are some of the
       Company's specific strategies and plans:

           i.   Expand the Company's product line into other high value
            optical materials.  The Company has recently announced the
            addition of ultra low expansion fused silica and low water
            content fused silica. Dynasil recently started offering other
            higher priced optical glasses and will continue to pursue
            attractive opportunities for those products.

ii.  Outperform competitors for quality, service, technical
advice, and flexibility to add value for customers.  Dynasil has
a strong reputation for quality and service.  With an expanded
product offering of high value optical materials, the Company
also plans to strengthen its technical knowledge of the optical
material alternatives to provide enhanced technical advice for
customer selection and usage of different optical materials.
Customers have special needs and Dynasil plans to add value by
flexibly servicing those needs where there is an attractive
economic opportunity.

       b.   Systematically Reduce Costs and realize margin percentage
          improvements by keeping fixed costs fairly constant as sales
          volume increases.  Changes over the last several years have
          significantly reduced the Company's break-even point. The new
          CEO has extensive experience implementing cost reduction plans
          and structured cost reduction is targeted to more than offset
          inflation.  In addition, nearly all of Dynasil S&A costs are
          fixed costs as well as about 40% of product costs.  As sales
          volume goes up, our plan is to control costs so that they do not
          go up proportionally.


                                   -7-
<PAGE>

       c.   Investigate alternative processes for optical materials.
          During 2005, the Company plans to investigate the licensing of
          alternative processes to manufacture optical materials which could
          provide the capability to produce unique, higher value products
          as well as potentially significant cost savings for customers.


2)   Grow through strategic acquisitions and alliances.   The
  planned Optometrics acquisition represents a first step to grow
  through acquisition.  Several other potential acquisition
  candidates have been identified and are planned to be evaluated
  after the conclusion of the Optometrics activities.  Target
  companies include manufacturers in optics related industries.
  In particular, companies that could take the Company's products
  and add value are of particular interest so that a greater range
  of capabilities could be offered to customers.


"Off Balance Sheet" Arrangements

     The Company has no "Off Balance Sheet" arrangements.

Forward-Looking Statements

     The statements contained in this Annual Report on Form
10-KSB which are not historical facts, including, but not
limited to, certain statements found under the captions
"Business," "Results of Operations," 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.


                                      -8-
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS



                        INDEPENDENT AUDITORS' REPORT


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 as of September
30, 2004 and 2003, 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, 2004 and 2003 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.


HAEFELE, FLANAGAN & CO, p.c.

Moorestown, New Jersey
November 5, 2004

                                      F-1
<PAGE>


                 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           SEPTEMBER 30, 2004 AND 2003

                                     ASSETS

<TABLE>
<S>                                                   <C>               <C>
                                                            2004            2003
                                                        ----------      ----------
Current assets
   Cash and cash equivalents                                $254,908      $  123,321
   Certificates of deposit                                    -0-            200,000
   Accounts receivable, net of allowance for doubtful
    accounts of $5,000 for 2004 and 2003                     309,276         242,919
   Inventories                                               369,813         435,820
   Prepaid expenses and other current assets                  16,656          38,935
                                                           ----------      ----------
        Total current assets                                 950,653       1,040,995

Property, Plant and Equipment, net                           419,718         558,191

Other Assets                                                   3,321          10,654
                                                           ----------      ----------
        Total Assets                                      $1,373,692      $1,609,840

                                                           ==========      ==========

                 LIABILITIES AND STOCKHOLDERS' EQUITY



Current Liabilities
   Current portion of long-term debt                        $120,000      $  140,925
   Accounts payable                                          184,214         131,518
   Accrued expenses and other current liabilities            114,959          73,624

                                                           ----------      ----------


        Total current liabilities                            419,173         346,067

Long-term Debt, net                                          488,889         772,781

Stockholders' Equity
   Common Stock, $.0005 par value, 25,000,000 shares
    authorized, 4,050,180 and 3,047,857 shares issued,
    3,240,020 and 2,237,697 shares outstanding
    for 2004 and 2003, respectively                            2,025           1,524
   Additional paid in capital                              1,239,736       1,089,718
   Retained earnings                                         210,211         386,092
                                                           ----------      ----------

                                                           1,451,972       1,477,334
   Less 810,160 shares of treasury stock, at cost           (986,342)       (986,342)
                                                           ----------      ----------
        Total stockholders' equity                           465,630         490,992
                                                           ----------      ----------
        Total Liabilities and Stockholders' Equity        $1,373,692      $1,609,840

                                                           ==========      ==========

</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, 2004 AND 2003


                                                    2004         2003
                                                 ----------   ----------

Net sales                                       $2,296,264    $2,340,397
Cost of sales                                    1,759,736     1,849,291
                                                 ----------   ----------
Gross profit                                       536,528       491,106

Operating Expenses
  Selling, general and administrative              676,976       657,465
  Asset impairment                                    -0-        158,333
                                                 ----------   ----------
     Total operating expenses                      676,976       815,798
                                                 ----------   ----------

Loss from operations                               (140,448)    (324,692)

Interest expense, net                              ( 35,433)    ( 43,989)
                                                 ----------   ----------
Loss before income taxes                           (175,881)    (368,681)

Income taxes                                           -0-         -0-
                                                 ----------   ----------
Net loss                                          $(175,881)  $(368,681)
                                                 ==========   ===========


Basic and diluted net loss per common share         $ (0.08)    $  (0.16)
                                                 ===========  ===========




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

                                      F-3
<PAGE>


                 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003


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

                                                                         Additional
                                                                           Paid-in        Retained
                                                Shares       Amount        Capital        Earnings
                                              ---------      ------      ----------     ----------

Balance, October 1, 2002                      3,043,563      $1,522      $1,089,200     $  754,773

Issuance of shares of common stock under
 employee stock purchase plan                     4,294           2             518              0

Purchase of treasury stock                            0           0               0              0

Net loss                                              0           0               0       (368,681)
                                              ---------       -----         -------      ---------
Balance, September 30, 2003                   3,047,857       1,524       1,089,718        386,092

Issuance of shares of common stock under
 employee stock purchase plan                     2,323           1             518              0

Issuance of shares of common stock in a
 negotiated private transaction (Note 6)      1,000,000         500         149,500              0

Net loss                                              0           0               0       (175,881)
                                              ---------       -----       ---------      ---------
Balance, September 30, 2004                  $4,050,180      $2,025      $1,239,736      $ 210,211
                                              =========      ======      ==========     ==========
</TABLE>


<TABLE>
<S>                                              <C>           <C>           <C>
                                                      Treasury Stock             Total
                                                  -----------------------     Stockholders'
                                                   Shares        Amount          Equity
                                                  -------      ----------     -------------

Balance, October 1, 2002                          640,624      $(959,303)      $  886,192

Issuance of shares of common stock under
 employee stock purchase plan                           0              0              520

Purchase of treasury stock                        169,536       ( 27,039)        ( 27,039)

Net loss                                                0              0         (368,681)
                                                  -------      ----------     -------------
Balance, September 30, 2003                        10,160       (986,342)       $ 490,992


Issuance of shares of common stock under
 employee stock purchase plan                           0              0              519

Issuance of shares of common stock in a
 negotiated private transaction (Note 6)                0              0          150,000

Net loss                                                0              0         (175,881)
                                                  -------      ----------     ------------
Balance, September 30, 2004                      $ 10,160      $(986,342)      $  465,630
                                                  =======      =========       ==========

</TABLE>

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

                                      F-4
<PAGE>

                 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003



                                                   2004              2003
                                                ---------        -----------

Cash flows from operating activities:
    Net loss                                    $(175,881)      $   (368,681)
    Adjustments to reconcile net loss to net
     cash provided by operating activities
       Depreciation and amortization              147,715            191,351
     Asset impairment                                 -0-            158,333
     (Increase) decrease in:
         Accounts receivable                      (66,357)           100,308
         Inventories                               66,007            145,284
         Prepaid expenses and other current assets 22,279              1,632
       Increase (decrease) in:
         Accounts payable                          52,696            (32,385)
         Accrued expenses and
           other current liabilities               41,335             (3,836)
                                                 ---------        -----------
Net cash provided by operating activities          87,794            192,006
                                                 ---------        -----------

Cash flows from investing activities:
     Purchases of property, plant and equipment   ( 5,834)          ( 13,206)
     Decrease in certificates of deposit          200,000                0
     Other assets                                   3,925              1,403
                                                 ---------        -----------
Net cash provided by (used in)
   investing activities                           198,091           ( 11,803)

---------        -----------
Cash flows from financing activities:
     Repayment of long-term debt                 (304,817)          (202,481)
     Purchase of treasury stock                         0            (27,039)
     Issuance of common stock                     150,519                520
                                                 ---------        -----------
Net cash used in financing activities            (154,298)          (229,000)
                                                 ---------        -----------
Net increase (decrease) in cash
       and cash equivalents                       131,587           ( 48,797)
Cash and cash equivalents, beginning              123,321            172,118
                                                 ---------        -----------
Cash and cash equivalents, ending             $   254,908        $   123,321
                                                ==========        ===========


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

                                      F-5
<PAGE>



DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003


Note 1- Summary of Significant Accounting Policies


Nature of Operations

     The Company is primarily engaged in the fabrication and
marketing of customized synthetic fused silica products.  The
Company's products and services are used in the optical lens and
laser manufacturing industries, as well as in the medical
industry.  Other applications include usage in the manufacturing
of analytical instruments and semi-conductors.

     The Company's 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, Dynasil International Incorporated and
Hibshman Corporation. All significant intercompany transactions
have been eliminated.

Use of Estimates

     The preparation of financial statements in conformity with
accounting principals 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 period. Actual results could differ from
those estimates.

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 been not material. The Company
also provides an allowance for doubtful accounts based on
historical experience and a review of its receivables.

Shipping and Handling Costs

     The Company includes 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.

                                    F-6
<PAGE>


DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003

Note 1 - Summary of Significant Accounting Policies (continued)


Property, Plant and Equipment and Depreciation and Amortization

     Property, plant and equipment are recorded at cost.
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,
10 to 25 years; machinery and equipment, 5 to 10 years; office
furniture and fixtures, 5 to 7 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, asset impairment charges of $-0- and $158,333
were made to the carrying value of long-lived assets during the
years ended September 30, 2004 and 2003. Additional disclosures
are included in Note 3.

Other Assets

     Other assets include deferred financing costs which are
amortized using the straight-line method over 7 years.
Amortization expense for the years ended September 30, 2004 and
2003 was $3,408 and $3,408.  Accumulated amortization as of
September 30, 2004 and 2003 was $21,016 and $17,608.

Advertising

     The Company expenses all advertising as incurred.
Advertising expense for the years ended September 30, 2004 and
2003 was $14,688 and $7,125.




                                      F-7
<PAGE>


DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003

Note 1 - Summary of Significant Accounting Policies (continued)

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 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.

Loss per Common Share

     Loss per common share is computed by dividing net loss by
the weighted average number of shares outstanding during each
period. Diluted loss per share gives effect to all dilutive
potential common shares outstanding during the years ended
September 30, 2004 and 2003. Common stock options aggregating
135,000 and 267,000, and stock warrants of 1,200,000 and -0- as
of September 30, 2004 and 2003, respectively, representing
common stock equivalents have been excluded from the calculation
of loss per share as their effect is anti-dilutive.

Stock Based Compensation

     Statement of Financial Accounting Standards No.123,
"Accounting for Stock-Based Compensation", ("SFAS No.123")
allows companies to account for stock-based compensation either
under the new provisions of SFAS No. 123 or using the intrinsic
value method provided by Accounting Principles Board Opinion
No.25 ("APB 25"), "Accounting for Stock Issued to Employees",
but requires pro forma disclosure in the footnotes to the
financial statements as if the measurement provisions of SFAS
No. 123 had been adopted.

     In December 2002, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard NO.148,
"Accounting for Stock-Based Compensation-Transition and
Disclosure" ("SFAS No. 148"). SFAS No. 148 amends SFAS No. 123,
to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-
based employee compensation. In addition, SFAS No. 148 amends
the disclosure requirements of SFAS 123 to require prominent
disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee
compensation and the effect of the method used on reported
results.



                                      F-8
<PAGE>

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003

Note 1 - Summary of Significant Accounting Policies (continued)

Stock Based Compensation(continued)

     The Company has adopted the disclosure provisions of SFAS
No.148 effective December 31, 2002 and continues to account for
stock-based compensation using the intrinsic value method. SFAS
No.148 did not have a material impact on the Company's
consolidated financial statements, as the adoption of this
standard does not require the Company to change, and the Company
does not plan to change, to the fair value based method of
accounting for stock-based compensation. Accordingly, no
compensation cost has been recognized in the financial
statements for stock options and warrants issued to employees
since the options were granted at the quoted market price on the
date of grant. Stock options granted to consultants and other
non-employees are reported at fair value in accordance with SFAS
No. 123. The following table shows the Company's pro forma net
loss and net loss per share as if the Company had recorded the
fair value of stock options and warrants as compensation
expense.

                                                  2004          2003
     Net loss, as reported                       ($ 175,881) ($ 368,681)
     Add:  Stock-based employee compensation
           expense included in reported net income      -0-         -0-
     Less: Total stock-based employee
          compensation expense determined under
          fair method for all options                   -0-         -0-
                                                  ----------  ----------
     Pro forma net loss                         ($ 175,881)   ($368,681)

     Net loss per common share, as reported      ($   0.08)   ($   0.16)
     Pro forma net loss per common share         ($   0.08)   ($   0.16)

Fair Value

     The Company's financial instruments consist primarily of
cash and cash equivalents, accounts receivable, accounts
payable, and debt.  The carrying amounts of cash and cash
equivalents, accounts receivable, and accounts payable
approximate fair value due to the short maturity of these
instruments.  Based on borrowing rates currently available to
the Company for loans with similar terms and maturities, the
Company's debt approximates its fair value.

Concentrations of Credit Risk

     Financial instruments which potentially subject the Company
to significant concentrations of credit risk consist primarily
of cash and cash equivalents and accounts receivable.  The
Company maintains cash and cash equivalents at various financial
institutions in New Jersey and Pennsylvania.  Accounts at each
institution are insured by the Federal Deposit Insurance
Corporation up to $100,000.  At September 30, 2004, the
Company's uninsured bank balances totaled $99,823. The Company
has not experienced any significant losses on its cash and cash
equivalents.  The Company performs ongoing credit evaluations of
it customers and generally requires no collateral from its
customers.  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, 2004 and 2003, approximately $27,028 and $17,273
or 9% and 7% of the Company's accounts receivable are due from
foreign sales.

                                      F-9
<PAGE>

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003

Note 1 - Summary of Significant Accounting Policies (continued)

New Accounting Pronouncements

     In January 2003 FIN No.46, as revised "Consolidation of
Variable Interest Entities" was issued. FIN 46 is intended to
achieve more consistent application of consolidation policies to
variable interest entities. Application of FIN 46 is required in
financial statements of public entities that have interest in
variable interest entities or potential variable interest
entities commonly referred to as special-purpose entities for
periods ending after December 15, 2003. Application by public
entities for all other types of entities is required in
financial statements for periods ending after March 15, 2004.
Accordingly, the Company has adopted FIN 46 as of September 30,
2004. The adoption had no effect on the Company's financial
position, results of operations or cash flows.


Statement of Cash Flows

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


Note 2 - Inventories

     Inventories at September 30, 2004 and 2003 consisted of the
following:

                                2004            2003

          Raw Materials       $148,278       $182,666
          Work-in-Process      114,170        118,836
          Finished Goods       107,365        134,318
                              --------       ---------
                              $369,813       $435,820
                              =========      =========






                              F-10
<PAGE>

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003


Note 3 - Property, Plant and Equipment

     Property, plant and equipment at September 30, 2004 and
2003 consist of the following:

                                            2004           2003

          Land                          $      261          $261
          Building and improvements      1,012,966     1,012,968
          Machinery and equipment        2,477,540     2,471,702
          Office furniture and fixtures    231,246       231,248
          Transportation equipment          53,419        53,419
                                        ----------     ----------
                                         3,775,432     3,769,598
          Less accumulated depreciation  3,355,714     3,211,407
                                        ----------     ----------
                                        $  419,718    $  558,191
                                        ==========     ==========

     Included in the cost of machinery and equipment at
September 30, 2004 and 2003 is $-0- and $123,300 representing
the cost of assets under capitalized lease obligations.
Accumulated depreciation at September 30, 2004 and 2003 for the
capitalized leases was $-0- and $31,853.

     Depreciation expense for the years ended September 30, 2004
and 2003 was $144,307 and $187,943, of which $-0- and $12,330
represents depreciation of assets under capitalized lease
obligations.







                              F-11
<PAGE>

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003


Note 3 - Property, Plant and Equipment (continued)

     During the years ended September 30, 2004 and 2003, the
Company recorded asset impairment charges of $-0- and $158,333
respectively. The impairment charges were required to bring the
carrying value of the production furnaces in line with their
fair value. The combination of reduced demand and substantially
reduced market pricing for synthetic fused silica required
management to recognize the impairment.




Note 4 - Long-Term Debt

     Long-term debt at September 30, 2004 and 2003 consisted of
the following:

                                                           2004          2003

     Note payable to bank in monthly installments of
     $10,000 plus interest at the Bank's prime rate plus
     0.5%(5.0% and 4.5% at September 30, 2004 and
     2003), final payment of $278,889 due July 1, 2007,
     secured by first mortgage on Berlin, New
     Jersey property and substantially all assets of
     the Company                                          $608,889    $ 859,445

     Note payable to bank in monthly installments of
     $5,556 plus interest at 7.25%, due and paid April
     2004, secured by certificate of deposits, first
     mortgage on Berlin, New Jersey property, and all
     accounts receivable, inventory, equipment and
     general intangibles of the Company                       -0-        38,889


     Capital lease obligations payable in total monthly
     installments of $5,328 including interest at rates
     ranging from 10.2% to 11.2% due and paid April 2004,
     secured by equipment                                     -0-        15,372
                                                        -----------   ----------
                                                        $ 608,889    $  913,706
     Less current portion                                (120,000)   (  140,925)
                                                        -----------  -----------
                                                       $  488,889    $  772,781
                                                        ===========  ===========

     As of September 30, 2003, the current portion includes
$15,372 payable under capital lease obligations, which had been
repaid as of September 20, 2004.

     On April 15, 2004, to coincide with the final payment on
the above term note and the maturity of $200,000 of certificates
of deposit ("CD's") used as corresponding collateral, the
Company restructured the remaining mortgage note (the "Note")
with the bank. Under terms of the agreement, $100,000 of the
funds from the CD's were initially used to reduce the balance of
the Note and the principal payment was increased from $7,222 to
$10,000 per month; and the maturity date of the note was
extended from August 2005 to July 2007. In August 2004, an
additional $50,000 of the funds from the CD's were used to
further pay down the Note with the remaining funds from the CDs
transferred for use in operations. The interest rate of the
Bank's prime rate plus 0.5% remained the same under the new
agreement.



                              F-12
<PAGE>

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003


Note 4 - Long-Term Debt (continued)

     The aggregate maturities of long-term debt, as of September
30, 2004 are as follows:

          September 30, 2006       $  120,000
          September 30, 2007          368,889
                                    ---------
          Total                    $  488,889
                                    =========

Note 5- Income Taxes

     The Company's income tax expense (benefit) for the years
ended September 30, 2004 and 2003 are as follows:

                     2004               2003

Current
   Federal          $     0             $     0
   State                  0                   0
                   --------            --------
                          0                   0
Deferred
   Federal                0                   0
   State                  0                   0
                   --------            --------
                    $     0             $     0
                   ========            ========

     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, 2004
and 2003 are as follows:

                                       2004                2003
Taxes at statutory rates applied to
 loss before income taxes           ($  59,800)       ( $125,400)
Increase (reduction) in tax resulting
 from:
  Depreciation                       ( 20,000)        (   18,300)
  Loss on asset retirement                 -0-            53,800
  Inventories                        (  1,600)        (    4,600)
  Vacation pay                            200         (    1,300)
  State income taxes                 ( 21,500)        (   25,300)
  Net operating loss carryforwards    102,700            121,000
                                   ----------          ----------
                                   $       0           $       0
                                   ==========          ==========


                              F-13
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003


Note 5 - Income Taxes (continued)

     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, 2004 and 2003 are as
follows:

                                       2004                2003
Inventories                         $  19,500           $21,400
Vacation pay                            6,600             6,400
Accounts receivable                     2,000             2,000
Depreciation                          124,300           145,300
Net operating loss carryforwards      568,300           465,600
Less valuation allowance             (720,700)         (640,700)
                                   ---------          ----------
                                   $       0           $       0
                                   =========          ==========

     Based on the company's history of significant fluctuations
in net earnings there is uncertainty as to the realization of
certain net operating loss carryforwards. Accordingly, a
valuation allowance has been provided for those deferred tax
assets since management believes it is more likely than not that
the tax benefit will not be realized. At September 30, 2004, the
Company has approximately $1,400,000 of net operating loss
carryforwards to offset future taxable income for federal tax
purposes expiring in various years through 2021.  In addition,
the main operating Company has approximately $800,000 of net
operating loss carryforwards to offset certain future state
taxable income, expiring in various years through 2013.


Note 6 - Stockholders' Equity

     In November 2002, the Company reactivated its share buy-
back program originally authorized by the Board of Directors in
October 2001. Under the plan, these repurchases may be made on
the open market or in negotiated transactions and the timing and
amount of shares repurchased will be determined by the Company's
management. During the year ended September 30, 2003 the Company
repurchased 169,536 shares for $27,039. No shares were
repurchased during the year ended September 30, 2004.

     On September 23, 2004, in a privately negotiated
transaction, the Company 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 which he may acquire, at any time 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 either $.225 or
$.25 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 will become the Company's President and Chief
Executive Officer.




                              F-14
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003

Note 6 - Stockholders Equity (continued)

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 on the date of grant over a
five-year period currently expiring through 2005.

     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 1,350,000 shares, of which 1,004,000
shares of common stock are available for future purchases under
the plan at September 30, 2004.

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES

     A summary of stock option activity for the years ended
September 30, 2004 and 2003 is presented below:

                                                  Exercise Price
                                         Shares      Per Share
                                        --------- --------------
Options outstanding at October 1, 2002   463,977    $.56 - $4.25

Granted in 2003                              -0-
Exercised in 2003                            -0-
Cancelled in 2003                       (196,977)   $.56 - $3.52
                                        ---------
Options outstanding at
  September 30, 2003                     267,000    $.56 - $1.50

Granted in 2004                               -0-
Exercised in 2004                             -0-
Cancelled in 2004                       (132,000)   $.56 - $1.50
                                        ---------
Options outstanding at
   September 30, 2004                     135,000   $1.50
                                        =========

Options exercisable at
   September 30, 2004                     135,000   $1.50
                                        =========

     During the years ended September 30, 2004 and 2003, no
stock options were granted and no options were exercised. The
Company cancelled 132,000 and 196,977 options during the years
ended September 30, 2004 and 2003, respectively.  Compensation
expense relating to non-employee stock options granted during
the years ended September 30, 2004 and 2003 was $-0-.


     As discussed above, on September 23, 2004, the Company
issued warrants to purchase 1,200,000 of the Company's common
stock at an exercise price of either $.225 or $.25 per share.
The warrants will expire January 31, 2008. No warrants were
exercised as of September 30, 2004. The fair value of the
warrants was estimated on the date of grant using Black-Scholes
option-pricing model.


                              F-15
<PAGE>


DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003

Note 6 - Stockholders Equity (continued)

Stock Based Compensation (continued)

     Based on the assumptions presented below, the weighted
average fair value of the warrants was $-0- per warrant.

               Expected life in years        3.25
               Risk-free interest rate       4.80%
               Expected volatility           6.35%
               Dividend yield                0.0%


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 150,000 shares have been reserved for
issuance of which 95,387 shares have been issued as of September
30, 2004.

     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, 2004
and 2003, 2,323, and 4,294 shares of common stock were issued
under the plan for aggregate purchase prices of $519, and $520,
respectively.


Note 7 - Profit Sharing Plan

     The Company has 401(k) Plan for the benefit of its
employees.  The Company did not make a contribution to the plan
during the years ended September 30, 2004 and 2003.


Note 8 - Related Party Transactions

     During the years ended September 30, 2004 and 2003, the
Company made sales of $83,961 and $7,000, respectively, to a
company in which a member of the board of directors is also an
officer. As of September 30, 2004 and 2003, amounts due from
this customer included in accounts receivable were $15,310 and
$526.


Note 9 - Vendor Concentration

     The company purchased $536,636 and $568,853 of its raw
material from one supplier during the years ended September 30,
2004 and 2003. As of September 30, 2004 and 2003, amounts due to
that supplier included in accounts payable were $101,729 and
$55,792.


Note 10 - Supplemental Disclosure of Cash Flow Information:

                                       2004       2003

     Cash paid during the year for:
        Interest                      $41,824   $56,031
                                      ========  =======


                              F-16
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003


Note 11 - Subsequent Events

     On October 1, 2004, Mr. Craig T. Dunham assumed the
position of the Company's President and Chief Executive Officer.

     On October 14, 2004, the Board of Directors authorized the
issuance of 140,834 shares of the Company's common stock valued
at $.14 per share in satisfaction of accrued directors' fees of
$19,717 as of September 30, 2004. The Board of Directors also
authorized the issuance of 80,000 of stock options to the
directors at $.40 per share.

     On October 27, 2004, 49,788 shares of the Company's common
stock were issued under the Employee Stock Purchase Plan for an
aggregate amount of $10,130.



                              F-17
<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

     The Company carried out an evaluation, under the
supervision and the participation of its management, of the
effectiveness of its disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) as of the period covered by this report. Based on this
evaluation, the Company's principal executive officer and acting
principal financial officer concluded that its disclosure
controls and procedures were effective. It should be noted that
design of any system controls is based in part upon certain
assumptions, and there can be no assurance that any design will
succeed in achieving its stated goal.

     There were no significant changes in the Company's internal
controls or in other factors that could significantly affect the
internal controls subsequent to the date the Company completed
its evaluation, including any corrective actions with regard to
significant deficiencies and material weakness.

                                PART III

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

     All of our directors were elected to serve for a one-year
term at our Annual meeting of the shareholders held on January
20, 2004. All directors will hold office until their successors
are elected at the next annual meeting of the shareholders with
the exception of Mr. John Kane who resigned from the Board
effective October 1, 2004 and was replaced with his successor as
President/ CEO, Mr. Craig T. Dunham.


     Our executive officers and directors, and their ages at
November 30, 2004, are as follows:

Name                                         Age       Position
---------------                              ---       --------
James Saltzman                               61        Chairman of the Board
Craig T. Dunham                              48        President, CEO, Director
David Manzi                                  43        Director
John Kane                                    53        CFO, Treasurer
Paul Roehrenbeck                             59        Vice President

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

     The Company's Board of Directors does not have an audit
committee financial expert. Although it would like to attract a
qualified person to serve in that capacity, the Company's small
size and limited resources have precluded it from attracting an
appropriate individual.

     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 2004 with the reporting requirements of Section 16(a) of
the Securities Exchange Act of 1934.


                               -9-
<PAGE>



     Craig T. Dunham, 48, President and CEO, has been with the
Company since October 1, 2004 when he replaced John Kane as a
Director. Prior to joining the Company, 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 Incorporated.  From 1979 to 2000, he held
progressively
increasing leadership responsibilities at Corning Incorporated
in manufacturing, engineering, commercial, and general
management positions.  At 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, Chairman, 61, has been a member of the
Board since February 1998.  From January 1997 to June 2000, Mr.
Saltzman served as Vice Chairman of the Board and a director of
Madison Monroe, Inc., a private company engaged in investments.
He served as a director of Xyvision, Inc., a publicly held
company that develops, markets, integrates and supports content
management and publishing software, since 1992, and was Chairman
of the Board of such company from February 1994 to February
1995.  On September 19, 2001,
in the matter of Securities and Exchange Commission v. James S.
Saltzman, Civil Action No. 00-CV-2468 in the United States
District Court for the Eastern District of Pennsylvania,
Saltzman consented, without admitting or denying the allegations
of the Commission's Complaint, to the entry of a Final Judgment
and Order in the case, to an order permanently enjoining him
from violating Sections 17(a)(2) and 17(a)(3) of the Securities
Act of 1933 and Section 206(2) of the Investment Advisers Act of
1940 (the "Advisers Act"), and requiring him to pay disgorgement
plus prejudgment interest in the amount of $1,920,340, and a
civil penalty in the amount of $50,000. The Order was entered on
September 19, 2001, by the Honorable Anita B. Brody.

     Also on January 31, 2001, the Commission instituted and
simultaneously settled an Administrative Proceeding against
Saltzman pursuant to Section 203(f) of the Advisers Act. Without
admitting or denying the Commission's findings, Saltzman
consented to the entry of an Order suspending him from
association with any investment adviser for a period of twelve
months. The basis for the Administrative Proceeding against
Saltzman and the Commission's findings was the entry of the
Final Judgment and Order in the District Court action.  The
suspension from association with any investment adviser has been
lifted as twelve months have now elapsed.

     The Commission's Complaint in the District Court action
alleged that from at least 1994 through February 4, 2000,
Saltzman, as investment adviser to Saltzman Partners, violated
the securities laws at issue by failing to disclose material
information relating to loans to him by Saltzman Partners in
annual financial statements of Saltzman Partners that were sent
to the limited partners, namely, that he had taken out
approximately $1.78 million in loans from Saltzman Partners,
that by 1999 the loans amounted to approximately 20% of Saltzman
Partners' assets, and that the loans violated specific terms of
the loan provisions in the governing Partnership Agreement and
Private Placement Memorandum. Prior to the entry of the Final
Judgment and Order, Saltzman fully repaid with interest the
loans he had taken from Saltzman Partners, thus satisfying the
Order of disgorgement by the District Court.


      John Kane, 53, CFO and Treasurer, had been with the
Company since January 1997 and he left the company as of the end
of his employment agreement on November 30, 2004. He elected not
to renew his employment agreement and was replaced on October 1,
2004 by Craig Dunham as President and CEO.  On December 1, 2000
he was appointed President of the Company and assumed primary
responsibility for the day-to-day operations. He took on the

                              -10-
<PAGE>

additional position of CEO on August 1, 2001. Prior to his
appointment as President Mr. Kane served as the Chief Financial
Officer of the Company. Prior to joining the Company he spent
three years as an independent financial consultant, primarily
engaged in the design and implementation of accounting systems.
He was the Chief Financial Officer of Delaware River Stevedores,
Inc. from 1985 to 1993. Mr. Kane earned a B.B.A in accounting
from Temple University in 1975, and is a certified public
accountant.


     David Manzi, 43, has been a member of the Board since June
2002.  Since November 1999, Mr. Manzi has served as President
and CEO of Special Optics Inc., a Wharton New Jersey company
that specializes in the design and manufacture of diffraction-
limited lens systems used in high resolution imaging and laser
applications.  Mr. Manzi served as General Manager and as Vice
President of Special Optics from 1991 through 1999.  Prior to
Special Optics he served in various capacities from 1988 through
1991, including Product Manager, for Synoptics, a division of
Litton Corporation.  Mr. Manzi earned his B.S. degree in Physics
from the Pennsylvania State University in 1986.

     Paul Roehrenbeck, 59, Vice President - Sales and Marketing,
has been with the Company since May 2003. He held the position
of Manager, Business Development for the Center for Advanced
Photonics Technology at the City University of New York (CUNY
CAT) from 2001 through May 2003. He has previously served in
sales and marketing management positions in the optics and
photonics industry including positions at Fiberguide (1999-
2001), Archon Technology Resources (1997-1999) and Hamamatsu
(1986-1995) as well as an assignment as Director of Corporate
Services at the Optical Society of America (1996). He holds a BS
degree in Physics from the College of Holy Cross.


Code of Ethics

            The Company has adopted a Code of Ethics for
Principal Executives and Senior Financial Officers that applies
to its Chief Executive Officer and Chief Financial Officer. The
Company will provide a copy to any person without charge upon
request in the manner set forth under item 1 on page 3.

                              -11-
<PAGE>

 ITEM 10. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>


                            Summary Compensation Table

                                                                     Long Term Compensation
                                                                     ----------------------
                           Annual Compensation                  Awards             Payouts
                           -------------------                  ------             -------
<S>         <C>     <C>          <C>        <C>          <C>           <C>         <C>        <C>
                                             Other                                  Long-
Name and                                     Annual       Restricted    Securities  Term       All other
Principle                                    Compen-      Stock         Underlying  Incentive  compen-
Position     Year    Salary ($)    Bonus ($) sation ($)   Awards ($)    Options ($) Plans ($)  sation($)
---------    ----    ---------    ---------  ----------   -----------   ---------   --------- ----------
John Kane    2004     110,000
President    2003     110,000
And CEO,     2002     110,000
Treasurer



Paul         2004      77,000
Roehrenbeck, 2003      29,430
VP

</TABLE>


Employment Agreements

The employment agreement with John Kane, formerly President,
CEO, Chief Financial Officer and Treasurer, commenced on
December 1, 2000 and ended on November 30, 2004.

The employment agreement with Craig T. Dunham, President and
CEO, commenced on October 1, 2004 and will continue for a
three-year period, after which the agreement will automatically
renew 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 employment agreement, Mr. Dunham has agreed to
work for us full time, and receives an annual base salary of
$110,000. Mr. Dunham's agreement also provides for performance
bonuses, and an additional annual bonus at the discretion of our
Board of Directors. The agreement also provides for a 401(k)
pension plan, health insurance benefits and a company car (or
car allowance).



                              -12-
<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, 2004 by each
person who was known by the Company to beneficially own more
than 5% of the common stock, by each director and executive
officer 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 (4)                  2,200,000                 49.6%
           385 Cooper Road
           West Berlin, NJ 08091

Common     Saltzman Partners (2)               367,009                  11.3%
           4 Tower Bridge
           Suite 200
           West Conshohocken, PA   19428

Common     Penn Independent Corporation        160,236                  5.0%
           420 S. York Road
           Hatboro, PA  19040

Common     James Saltzman (2)(3)               125,370                  3.8%
           1508 Gypsy Hill Road
           Box 439
           Gwynedd Valley, PA  19437


Common     John Kane (5)                        54,925                  1.7%
           149 Plowshare Road
           Norristown, PA  19403

All Officers and Directors
as a Group                                   2,380,295                  52.0%

------------

(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 September 30, 2004 was
3,240,020.

(2)James Saltzman disclaims beneficial ownership of the 367,009
shares owned by Saltzman Partners.

(3)Includes options to purchase 90,000 shares of the Company's
common stock at $1.50 per share.


                                      -13-
<PAGE>

(4)Includes warrants to purchase 1,200,000 shares of the
Company's common stock at an exercise price of either $0.225 or
$0.25 per share dependent upon certain conditions.

(5)Includes options to purchase 45,000 shares of the Company's
stock at $1.50 per share.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


  NONE.


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

3.01*     Restated Certificate of Incorporation of Registrant filed
          April 1, 1969, filed as an exhibit to Registrant's
          Registration Statement on Form 10-SB, filed October 1, 1999

3.02*     Certificate of Amendment to the Certificate of Incorporation of
          Registrant filed March 18, 1988, filed as an exhibit to
          Registrant's Registration Statement on Form 10-SB, filed October
          1, 1999

3.03*     Certificate of Amendment to the Certificate of Incorporation of
          Registrant filed April 7, 1989, filed as an exhibit to
          Registrant's Registration Statement on Form 10-SB, filed October
          1, 1999

3.04*     Certificate of Amendment to the Certificate of Incorporation of
          Registrant filed June 12, 1996, filed as an exhibit to
          Registrant's Registration Statement on Form 10-SB, filed October
          1, 1999

3.05*     By-laws of Registrant, filed as an exhibit to Registrant's
          Registration Statement on Form 10-SB, filed October 1, 1999

4.01*     Form of Debenture, filed as an exhibit to Registrant's
          Registration Statement on Form 10-SB, filed October 1, 1999

4.02*     Subordinated Debenture Extension Agreement, filed as an exhibit
          to Registrant's Registration Statement on Form 10-SB, filed
          October 1, 1999

                              -14-
<PAGE>

4.03*     Debenture Extension Warrant, filed as an exhibit to Registrant's
          Registration Statement on Form 10-SB, filed October 1, 1999

10.01*    Loan Agreement and associated documents dated July 10, 1998 with
          Premier Bank, for a $300,000 line of credit, filed as an exhibit
          to Registrant's Registration Statement on Form 10-SB, filed
          October 1, 1999

10.02*    Loan Agreement and associated documents dated July 10, 1998 with
          Premier Bank, for a $1,300,000 line of credit

10.03*    1996 Stock Incentive Plan, filed as an exhibit to Registrant's
          Registration Statement on Form 10-SB, filed October 1, 1999

10.04*    1999 Stock Incentive Plan, filed as an exhibit to Registrant's
          Registration Statement on Form 10-SB, filed October 1, 1999

10.05*    Employee Stock Purchase Plan, filed as an exhibit to Registrant's
          Registration Statement on Form 10-SB, filed October 1, 1999

10.06*    Employment Agreement of John Kane dated December 1, 2000, filed
          December 28, 2000

10.07*    Audit Committee Charter

10.08*    Loan Agreement and associated documents dated April 15, 2004 with
          Premier Bank, for a $708,889 term loan, filed as an exhibit
          to Registrant's Registration Statement on Form 10-SB, filed
          May 14, 2004.

10.09+    Employment Agreement of Craig T. Dunham dated October 1, 2004,
          filed herewith.

21.01*    List of Subsidiaries of Registrant, filed as an exhibit to
          Registrant's Registration Statement on Form 10-SB, filed October
          1, 1999

31.1(a)+  Certification of Chief Executive Officer pursuant to Section 302
          of the Sarbanes-Oxley Act of 2002.

31.1(b)+  Certification of Chief Financial Officer pursuant to Section 302
          of the Sarbanes-Oxley Act of 2002.

32.1+     Certification of Chief Executive Officer/Acting Chief Financial
          Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


* Incorporated herein by reference

+ Filed herewith

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

   -    On 8-12-2004, a current report for Items 12 and 7 including
        June 30, 2004 financial results.

   -    On 9-30-04, a current report for Items 3.02 and 5.01
        covering Mr. Dunham's Stock Purchase and Warrant Agreement as
        part of joining the Company as CEO effective October 1, 2004.

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, 2004 and 2003 and the reviews of the
financial statements included in the Company's Forms 10-
QSB during those fiscal years are $33,780  and $32,200,
respectively.


                                      -16-
<PAGE>



(b)  Audit Related Fees

The Company incurred no fees during the last two fiscal
years for assurance and related services by the
Company's principal accountant that were reasonably
related to the performance of the audit or review of
the Company's financial statements.

 (c)   Tax Fees

The Company incurred fees of $ 3,600 and $ 3,600
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 no other fees  during the last two
fiscal years for products and services rendered by the
Company's principal accountant.

(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.


                                      -16-
<PAGE>

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 21, 2004
        ---------------------------------


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 17, 2004
    ---------------------      Directors

BY: /s/ David Manzi            Director                  December 17, 2004
    ---------------------

BY: /s/ Craig Dunham           President, CEO and        December 17, 2004
                               Acting Principal
                               Financial and Accounting
                               Officer






                                      -17-