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, 2005

[ ] 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 [ ]

State issuer's revenues for its most recent fiscal year: $5,078,436

The Company's common stock is quoted on the NASDAQ OTC Bulletin
Board under the symbol "DYSL.OB".   The estimated aggregate
market value of the voting and non-voting stock held by
non-affiliates of the registrant as of December 12, 2005 was
$2,334,824. The market value is based upon the last sale of the
Common Stock on the NASDAQ OTC Bulletin Board of $0.82 per share
as of December 12, 2005.

The Company had 3,759,786 shares of common stock, par value
$.0005 per share, outstanding as of December 12, 2005.

Documents incorporated by reference: none

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

                                      -1-
<PAGE>
                                  PART I

ITEM 1.  DESCRIPTION OF BUSINESS

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

     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.

      On March 8, 2005, we acquired the operating assets and
assumed certain liabilities of Optometrics LLC, a worldwide
supplier of optical components including diffraction gratings,
interference filters, laser optics, monochromators, and
specialized optical systems.  This acquisition approximately
doubled our revenues and added significant profitability.

      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 - diffraction gratings, interference
         filters, lenses, prisms, reflectors, mirrors, filters,
         optical flats

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

    o    Analytical Instruments - Spectrometers, 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


     We also produce several analytical instruments including an
instrument designed to measure the "Sun Protection Factor"("SPF")
of sunscreens.

     Our products are distributed through direct sales and
delivered by commercial carriers. We have five sales and
marketing people who handle 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 and other
optical components manufacturers. 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 largest supplier is Corning Incorporated.

       We presently have over 400 customers with approximately
72% of our business concentrated in our top 40 customers. Our
five largest customers accounted for approximately 6.3%, 5.9%,
5.3%, 4.2% and 3.1%, respectively, of our revenues during fiscal
year 2005. The loss of any of these top five customers would
likely have a material adverse effect on our business, financial
condition and results of operations. Generally, our customers
provide purchase orders for a specific part, quantity and
quality. Orders are normally filled over a period ranging from
one to six weeks. We have blanket orders that call for monthly
deliveries of a predetermined amount.
                                      -2-
<PAGE>


     We have no patents or patent applications filed or pending.

     Other than federal, state and local environmental and
safety laws, our operations are 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 2005 did not exceed $50,000.

     Our research and development activities primarily have
involved new product development, 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 consists of 47 employees: 6
administrative; 5 sales; 4 engineering, and 28 manufacturing
personnel. The operations are non-union.

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

ITEM 2.    DESCRIPTION OF PROPERTY

Facilities

     We own a manufacturing and office facility consisting of a
one-story, masonry and steel building containing approximately
15,760 square feet, located at 385 Cooper Road, West Berlin, New
Jersey 08091. The building 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 also lease a
10,000 square foot building in Ayer, MA from a related party
with a lease that expires in March 2013. We believe the
properties are in satisfactory condition and suitable for our
purposes.  The New Jersey 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 lawsuit was refiled as a wrongful
death suit following the death of Lucy Torrero on April 11,
2005. To date, Dynasil has not been mentioned in the depositions
of the plaintiffs' or her former employer. The Company has
referred the matter to its commercial general liability
insurance carriers which are defending the Company under a
reservation of rights. At this time, 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, 2004 and September 30, 2005
were as follows:

  Fiscal Quarter        High Bid Price        Low Bid Price
  --------------        --------------        -------------
       2004
       First              $0.30                 $0.21
       Second              0.27                  0.25
       Third               0.30                  0.19
       Fourth              0.20                  0.06

       2005
       First              $0.64                 $0.11
       Second              0.82                  0.40
       Third               0.79                  0.40
       Fourth              0.85                  0.59

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

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

  Fiscal Quarter        High Sale Price       Low Sale Price
  --------------        --------------        -------------
       2004
       First              $0.51                 $0.21
       Second              0.40                  0.25
       Third               0.45                  0.20
       Fourth              0.29                  0.07

       2005
       First              $0.75                 $0.13
       Second              0.99                  0.40
       Third               0.83                  0.41
       Fourth              0.95                  0.59

     As of September 30, 2005, there were 3,756,784 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 on common stock
since its inception. The Company intends to retain any future
earnings for use in its business and does not intend to pay cash
dividends on common stock in the foreseeable future. Holders of
the Common stock are entitled to share ratably in dividends when
and as declared by the Board of Directors out of funds legally
available therefore.  Preferred Stock dividends of $39,410 were
paid during the year ended September 30, 2005.

     The Company adopted Stock Incentive Plans in 1996 and 1999
that permit, among other incentives, grants and options to
officers, directors, employees and consultants to purchase up to
2,250,000 shares of the Company's common stock. At September 30,
2005, 1,046,554 shares of common stock are available 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. On September 30, 2005,
526,459 options were outstanding.

                                   -4-
<PAGE>


     The securities authorized for issuance under equity
compensation plans are 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 450,000 shares had been reserved for
issuance. Of these, 146,164 shares have been purchased by
employees at purchase prices ranging from $.06 to $2.68 per
share. During any twelve-month period, employees are limited to
a total of $5,000 of stock purchases.

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

     On September 23, 2004, the Company entered into a
Subscription Agreement with Mr. Craig T. Dunham pursuant to
which Mr. Dunham agreed to acquire 1,000,000 shares of Dynasil's
common stock at $0.15 per share for $150,000 including a
Stock Purchase Warrant pursuant 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.
Effective October 1, 2004, the Company signed a three year
employment agreement with Mr. Craig T. Dunham to become
President and CEO.


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

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

General Business Overview

     Fiscal year 2005 was a year of major positive change for
Dynasil.  After several difficult years, we turned around
results in our historical optical materials business with a 41%
revenue increase as well as profitable results for all four
quarters.  The acquisition of the assets of Optometrics LLC was
completed in March 2005 which approximately doubled revenues,
added significant profitability, and added strong people to help
our combined businesses. Proforma numbers assuming that
Optometrics had been part of the company for the full FY 2005,
show revenues of $6.4 million, net income of $248,024, and basic
earnings per share of $0.05.  The markets for our optical
materials and components businesses are currently strong and our
businesses appear to be gaining market share.  We remain focused
on internal growth as well as growing through further
acquisitions and strategic alliances. Management is pleased with
our progress over the last year after a leadership change on
October 1, 2004.

Results of Operations

          Revenues for the fiscal year ended September 30, 2005
were $5,078,436. This represents an increase of 121% over
revenues for the fiscal year ended September 30, 2004 of
$2,296,264. The addition of Optometrics more than doubled
revenues on an annual basis so just over six months of
Optometrics' revenues since the March 8, 2005 acquisition
resulted in an 80% revenue increase over FY 2004.  We also grew
our historical optical materials/ fused silica business by 41%
from FY 2004 to FY 2005 by actively pursuing new business and
focusing on serving customers more effectively.

     Cost of sales for the fiscal year ended September 30, 2005
was $3,519,845, or 69.3% of sales, versus $1,759,736 or 76.6% of
sales for fiscal year ended September 30, 2004. Gross profit
tripled to $1,558,591, or 30.7% of sales, for fiscal year 2005
from $536,528 or 23.4% of sales for fiscal year 2004. The gross
profit increase was primarily a result of the 121% increase in
revenues combined with

                              -5-
<PAGE>
Optometrics having higher gross profit margins than our
historical optical materials business.  The gross profit
percentage in our historical optical materials business also
increased as we controlled and reduced costs while increasing
revenues 41%.

      Selling, general and administrative ("SG&A") expenses
increased to $1,341,834 or 26.4% of sales for fiscal year 2005
from $676,972 or 29.5% of sales for fiscal year 2004. The
primary reason for the dollar increase was the addition of
Optometrics SG&A expenses.  The primary reason for the decrease
in SG&A expenses as a percentage of sales was that revenues in
the optical materials business increased by 41% while SG&A
expenses for that business only increased 8%.

     Interest Expense-net, increased to $54,488 or 1.1% of sales
for fiscal year 2005 from $35,433 or 1.5% of sales for fiscal
year 2004. The dollar increase was a result of the additional
interest costs for the financing of the Optometrics acquisition.

     For fiscal year 2005, the Company had an income tax benefit
of $10,750. The Company had a $13,500 provision for fiscal year
2005 state income taxes, largely related to Optometrics profits
in Massachusetts.  This was more than offset by a $24,250
deferred tax asset to recognize that the Company's return to
profitability means that the Company's net operating loss carry-
forwards are likely to have future value. Current federal and
New Jersey state taxes for fiscal year 2005 were offset by
utilization of net operating loss carry-forwards.  As of
September 30, 2005 we have approximately $1,300,000 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 $760,000 of net
operating loss carry-forwards to offset certain future New
Jersey state taxable income, expiring in various years through
2013. The Company had no provisions for income taxes for fiscal
year 2004.

     The Company had net income of $173,019 for the year ended
September 30, 2005 compared to a loss of $175,881 for the fiscal
year ended September 30, 2004.  Our historical optical materials
business had positive profitability for all four quarters of
fiscal year 2005 and just over half a year of Optometrics
results added significant profitability.  The recognition of a
$24,250 deferred tax asset added to net income and net income
was reduced by $49,995 of New Jersey inventory reductions based
on the lower of cost or market and slow moving inventory
reviews.

Liquidity and Capital Resources

     The net cash increase for fiscal year 2005 was $53,302
compared to $131,587 for fiscal year 2004.  Financing through
bank loans and preferred stock was completed to fund the
Optometrics acquisition.

     Net cash provided by operating activities was $102,444 for
fiscal year 2005 versus $87,794 for fiscal year 2004. The
significant growth in revenues during fiscal year 2005 resulted
in a $216,554 increase in accounts receivable requiring cash for
additional working capital.

     Cash flows from investing activities were ($865,955) for
fiscal year 2005 compared to $198,091 for fiscal year 2004. Cash
paid for the Optometrics acquisition and acquisition costs was
$767,976 during fiscal year 2005. During fiscal year 2004,
$200,000 of cash came from certificates of deposit that matured.
Capital expenditures to purchase property, plant and equipment
increased to $97,979 for fiscal year 2005 versus $5,834 for
2004.  The capital expenditure increase primarily relates to
capital spending for Optometrics and spending for needed
facility and equipment improvements in New Jersey.

     Cash flows from financing activities were $816,813 for
fiscal year 2005 and ($154,298) for fiscal year 2004. Cash from
financing activities for fiscal year 2005 came largely from the
sale of $700,000 of Preferred stock and bank financing which
were completed as part of the Optometrics financing. These
amounts were offset by bank debt repayments of $163,882.
Dividends on the new preferred stock of $39,410 were paid during
fiscal year 2005.



                              -6-
<PAGE>


     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. Any business
acquisitions or major expansions may require the Company to
seek additional debt or equity financing.

Strategic Plan

    The strategy for Dynasil is to significantly grow revenues
and profits through growth in our optical components and
materials businesses as well as through strategic acquisitions.
The acquisition of Optometrics represents the first step planned
for strategic acquisitions.  Continued improvements to the
current businesses are 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 our
strategy:

1)    Grow  Optometrics  revenues  at  least  10%  per  year  by
       concentrating on our core competencies in optical components.
  a)    Pursue additional business from existing OEMs as well as
        potential new OEM customers.
  b)    Continue to expand products sold through optical catalog
        companies.
  c)    Review  and  replace international  agents  as  well  as
        recruiting additional SPF instrument agents
  d)    Expand diffraction gratings capabilities.
  e)    Upgrade filter capability to sustain our market position.
  f)    Focus on yield improvement, process discipline, and cost
        reduction in manufacturing.

2)    Run  the New Jersey Optical Materials Business to Maximize
      Cash.   Maintain  the  41% revenue gains from  2005  FY  while
      moderately  increasing  gross margins  and  adding  additional
      revenue growth of 3-5% per year.
  a)    Focus  sales and marketing efforts on Fused  Silica  and
        Quartz  blanks  where  we have a strong  reputation  and  a
        competitive offering.  Enhance relationships with  existing
        customers as well as pursuing other customers with attractive
        fused silica business.
  b)    Selectively expand the Company's product line into other
        high value optical materials if financially attractive.
  c)    Actively manage international sales representatives and add
        representatives in underserved regions.
  d)    Moderately increase gross margins through improved quoting
        and selection of business.
  e)    Continue to systematically reduce costs.

3)    Achieve  significant growth through strategic acquisitions
      and alliances with a target of one per year.

  a)    Complete  acquisitions that immediately add to financial
     results.  The Optometrics acquisition represents a solid
     first step in the strategy to grow through acquisition  and
     several  other potential acquisition candidates  have  been
     identified.  Target companies are manufacturers  in  optics
     related industries that can be purchased on attractive financial
     terms.  Of particular interest are companies where a combination
     with Dynasil offers increased customer access, cost savings, or
     offers the acquired company access to capital required  for
     growth.  Also, we may target companies that can benefit from
     professional management techniques.  Target companies  will
     generally have good profitability and a solid leadership team.

  b)   Pursue strategic alliances with strong long term potential.
     Strategic alliances with companies or universities to
     commercialize a new/improved technology are of interest.  The
     objective is to enter into attractive markets with a sustainable
     competitive advantage.  Because of the higher risk of these
     opportunities, a higher anticipated ROI is required.

"Off Balance Sheet" Arrangements

     The Company has no "Off Balance Sheet" arrangements.

                                     -7-
<PAGE>


Critical Accounting Policies and Estimates

      There  have  been  no  material changes  in  our  critical
accounting  policies  or  critical  accounting  estimates  since
September  30,  2004, nor have we adopted an  accounting  policy
that  has  or  will  have a material impact on our  consolidated
financial  statements.  For further discussion of our accounting
policies  see  Footnote  1 " Summary of  Significant  Accounting
Policies"  in this Annual Report on Form 10-KSB for  the  fiscal
year ended September 30, 2005.
      The  accounting policies that reflect our more significant
estimates,  judgments and assumptions and which we  believe  are
the  most  critical to aid in fully understanding and evaluating
our  reported financial results include the following: valuation
of  deferred  tax assets, estimated current and deferred  taxes,
and evaluation of other assets, primarily the recoverability of
intangible assets.  The actual results could differ materially
from estimates.

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," "Strategic Plan," and
"Liquidity and Capital Resources" above, are forward-looking
statements that involve a number of risks and uncertainties. The
actual results of the future events described in such
forward-looking statements could differ materially from those
stated in such forward-looking statements. Among the factors that
could cause actual results to differ materially are the risks and
uncertainties discussed in this Annual Report on Form 10-KSB,
including, without limitation, the portions of such reports
under the captions referenced above, and the uncertainties set
forth from time to time in the Company's filings with the
Securities and Exchange Commission, and other public statements.
Such risks and uncertainties include, without limitation,
seasonality, interest in the Company's products, consumer
acceptance of new products, general economic conditions,
consumer trends, costs and availability of raw materials and
management information systems, competition, litigation and the
effect of governmental regulation. The Company disclaims any
intention or obligation to update any forward-looking
statements, whether as a result of new information, future
events or otherwise.


                                      -8-
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS



         REPORT OF INDEPENDENT PUBLIC ACCOUNTING FIRM




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

      We  have  audited  the  accompanying consolidated  balance
sheets of DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES as  of
September  30,  2005  and  2004, 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, 2005 and 2004 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 21, 2005

                                      F-1
<PAGE>


                 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           SEPTEMBER 30, 2005 AND 2004

<TABLE>
<S>                                                   <C>               <C>
                                                            2005            2004
                                                        ----------      ----------
Current assets
   Cash and cash equivalents                            $  308,210      $  254,908
   Accounts receivable, net of allowance for doubtful
     accounts of $7,530 for 2005 and $5,000 for 2004       877,375         309,276
   Inventories                                             842,149         369,813
   Deferred tax asset                                       24,250            -0-
   Prepaid expenses and other current assets               100,298          16,656
                                                        ----------      ----------
        Total current assets                             2,152,282       950,653

Property, Plant and Equipment, net                         744,764        419,718

Other Assets                                                87,735          3,321
                                                        ----------      ----------
        Total Assets                                    $2,984,781      $1,373,692
                                                        ==========      ==========

                 LIABILITIES AND STOCKHOLDERS' EQUITY



Current Liabilities
   Note payable to bank                                 $  250,000      $     -0-
   Current portion of long-term debt                       184,403         120,000
   Accounts payable                                        322,094         184,214
   Accrued expenses and other current liabilities          232,476         114,959
                                                        ----------      ----------
        Total current liabilities                          988,973         419,173

Long-term Debt, net                                        592,712         488,889

Stockholders' Equity
   Common Stock, $.0005 par value, 25,000,000 shares
    authorized, 4,566,946 and 4,050,180 shares issued,
    3,756,786 and 3,240,020 shares outstanding
    for 2005 and 2004, respectively                          2,283           2,025
   Preferred Stock, $.001 par value, 10,000,000
     Shares authorized, 700,000 and -0- shares issued
     And outstanding for 2004 and 2005 respctively,
     10% Cumulative, Convertible                               700             -0-
   Additional paid in capital                            2,042,635       1,239,736
   Retained earnings                                       343,820         210,211
                                                        ----------      ----------
                                                         2,389,438       1,451,972
   Less 810,160 shares of treasury stock, at cost         (986,342)       (986,342)
                                                        ----------      ----------
        Total stockholders' equity                       1,403,096         465,630
                                                        ----------      ----------
        Total Liabilities and Stockholders' Equity      $2,984,781      $1,373,692
                                                        ==========      ==========

</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, 2005 AND 2004



                                                    2005         2004
                                                 ----------   ----------

Net sales                                       $5,078,436   $2,296,264
Cost of sales                                    3,519,845    1,759,736
                                                 ----------   ----------
Gross profit                                     1,558,591      536,528

Selling, general and administrative expenses     1,341,834      676,976
                                                 ----------   ----------
Income (Loss) from operations                      216,757     (140,448)

Interest expense, net                             ( 54,488 )   ( 35,433)
                                                 ----------   ----------
Income (Loss) before income taxes                  162,269     (175,881)

Income tax benefit                                  10,750          -0-
                                                 ----------   ----------
Net income (loss)                               $  173,019    $(175,881)
                                                 ==========   ===========


Basic net income (loss) per common share          $   0.04    $   (0.08)
Diluted net income (loss) per common share        $   0.03    $   (0.08)
                                                 ===========  ===========




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, 2005 AND 2004

                                                                   Additional
                    Common      Common     Preferred   Preferred    Paid-in
                    Shares      Amount     Shares       Amount      Capital
                    ---------   ------     ---------   ---------    ---------
Balance,
October 1, 2003     3,047,857    $1,524       -0-       $ -0-      $1,089,718

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

Issuance of shares
of common stock
in a negotiated
private transaction
(Note 7)            1,000,000       500       -0-         -0-         149,500

Net loss                  -0-       -0-       -0-         -0-            -0-
                    ---------   ------     ---------   ---------    ---------
Balance,
September 30,
2004                4,050,180    $2,025        -0-         -0-     $1,239,736

Issuance of shares
of common stock
under employee
stock purchase
plan                   50,777       25         -0-         -0-         10,566

Issuance of shares
of common stock for
Directors
compensation          165,987       83         -0-         -0-         33,134

Issuance of shares
of common stock in
conjunction with
Optometrics
acquisition           300,000      150         -0-         -0-         68,229

Issuance of share
of preferred stock
net of stock
issuance costs
of $10,000                -0-       -0-     700,000         700       689,300

Stock compensation
expense relating to
outstanding
stock options             -0-       -0-        -0-          -0-          -0-

Dividends paid on
preferred stock           -0-       -0-        -0-          -0-          -0-

Net income                -0-       -0-        -0-          -0-          -0-
                    ---------   ------     ---------   ---------    ---------
Balance,
September 30, 2005  4,566,944   $2,283      700,000         700     $2,042,635
                    =========   ======     =========   =========    ==========


                                    Treasury Stock             Total
                   Retained      -----------------------    Stockholders'
                   Earnings        Shares      Amount         Equity
                   --------      ---------   ----------    -------------
Balance,
October 1, 2003   $  386,092      810,160     $(986,342)      $ 490,992

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

Issuance of shares
of common stock
in a negotiated
private transaction
(Note 7)                -0-         -0-          -0-            150,000

Net loss           ($175,811)       -0-          -0-           (175,881)
                  ----------      -------    ----------     ------------
Balance,
September 30,
2004                $210,211      810,160    $(986,342)       $ 465,630

Issuance of shares
of common stock
under employee
stock purchase
plan                    -0-          -0-         -0-             10,591

Issuance of shares
of common stock for
Directors
compensation            -0-          -0-         -0-             33,217

Issuance of shares
of common stock in
conjunction with
Optometrics
acquisition             -0-           -0-        -0-             68,379

Issuance of share
of preferred stock
net of stock
issuance costs
of $10,000              -0-           -0-        -0-            690,000

Stock compensation
expense relating to
outstanding
stock options           -0-           -0-        -0-              1,670

Dividends paid on
preferred stock      (39,410)         -0-        -0-            (39,410)

Net profit           173,019          -0-        -0-            173,019
                     -------       -------    --------        ---------
Balance,
September 30, 2005   343,820       810,160  $(986,342)       $1,403,096
                    ========      =========   =========       ==========

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, 2005 AND 2004

                                                   2005              2004
                                                ---------        -----------

Cash flows from operating activities:
    Net profit (loss)                          $173,019          $(175,881)
     Adjustments to reconcile net
      profit (loss) to net
      cash provided by (used in)
      operating activities
        Stock compensation expense                1,670               -0-
        Depreciation and amortization           194,782            147,715
        Deferred taxes                          (24,250)              -0-
         (Increase) decrease in:
           Accounts receivable                 (216,554)           (66,357)
           Inventories                          (43,466)            66,007
           Prepaid expenses and
            other current assets                 13,882             22,279
          Increase (decrease) in:
           Accounts payable                      (3,944)            52,696
           Accrued expenses and
            other current liabilities             7,305             41,335
                                               ---------        -----------
Net cash provided by (used in)
   operating activities                         102,444             87,794
                                               ---------        -----------
Cash flows from investing activities:
     Purchases of property,
       plant and equipment                      (97,979)           ( 5,834)
     Decrease in certificates of deposit            -0-            200,000
     Cash paid for acquisition of
        Optometrics LLC asset                  (700,000)               -0-
     Cash paid for acquisition
        costs of Optometrics                    (67,976)               -0-
     Other assets                                   -0-              3,925
                                               ---------        -----------
Net cash provided by (used in)
 investing activities                          (865,955)           198,091
                                               ---------        -----------
Cash flows from financing activities:
     Issuance of common stock                    51,930            150,519
     Issuance of preferred stock                690,000                -0-
     Proceeds from short-term debt              102,143                -0-
     Proceeds from long-term debt               193,305                -0-
     Repayments of long-term debt              (163,882)          (304,817)
     Deferred financing costs incurred          (17,273)               -0-
     Preferred stock dividends paid             (39,410)               -0-
                                               ---------        -----------
Net cash provided by (used in)
 financing activities                           816,813           (154,298)
                                               ---------        -----------
Net increase (decrease) in
  cash and cash equivalents                      53,302            131,587

Cash and cash equivalents, beginning            254,908            123,321
                                               ---------        -----------
Cash and cash equivalents, ending             $ 308,210        $   254,908
                                              ==========        ===========

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, 2005 AND 2004

Note 1 - Summary of Significant Policies

Nature of Operations

      The  Company  is primarily engaged in the fabrication  and
marketing   of   customized  optical  components   and   optical
materials.   The  Company's products and services  are  used  in
optical  instrument and laser manufacturing industries, as  well
as in the medical industry.  Other applications include usage in
the manufacturing of optical lenses and spectrometers.

     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,    Optometrics    Corporation,    Dynasil
International  Incorporated,  and  Hibshman  Corporation.    All
significant intercompany transactions have been eliminated.

Business Acquisition

      On  March 8, 2005, Dynasil Corporation of America, through
its   newly   formed   wholly   owned  subsidiary,   Optometrics
Corporation,  acquired the operating assets and assumed  certain
liabilities of Optometrics, LLC, a worldwide supplier of optical
components.   The  assets  acquired from  Optometrics,  LLC  are
operated  under  the  Optometrics Corporation  name.  The  total
purchase  price  for  Optometrics, LLC was  $877,946.   Cash  of
$700,000  was  paid  by the Company and 300,000  shares  of  the
Company's  common  stock were issued to  the  former  owners  of
Optometrics,  LLC,  valued  at  $0.23  per  share,  or  $68,400.
Acquisition costs of $109,546 were incurred.  The business
acquisition was recorded under the purchase method of accounting
which requires that the total consideration be allocated to the
assets acquired and liabilities assumed based on their fair values.
The excess of the purchase price over the fair value of the net
tangible assets acquired of $78,414 was allocated to intangibles,
specifically to the acquired customer base.

     The  results of operations of Optometrics Corporation  have
been  included  in  the consolidated financial  statements  from
March   9,  2005,  the  effective  date  of  acquisition.    The
allocation of purchase price is summarized below:

     Cash and cash equivalents                  $   50,585
     Accounts receivable                           310,461
     Inventories                                   428,871
     Prepaid expenses and other current assets     128,150
     Property and equipment                        410,575
     Intangibles- acquired customer base            78,414
     Current Liabilities assumed                  (242,449)
     Long-term debt liabilities assumed           (286,661)
                                                  --------
     Total purchase price                         $877,946
                                                  ========

The  following unaudited pro forma results of operations  assume
that Optometrics

                                         F-6
<PAGE>

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004

Note 1 - Summary of Significant Policies (continued)

Corporation  had been acquired at the beginning of  fiscal  year
2005.

                                     Twelve Months Ended
                                     Ended September 30, 2005
      Sales                                 $6,421,314
      Net income                            $  248,024
      Net income per common share - Basic   $      .05
      Net income per common share - Diluted $      .04

Use of Estimates

      The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America  requires management to make estimates  and  assumptions
that  affect  the  amounts  of assets and  liabilities  and  the
disclosures of contingent assets and liabilities at the date  of
the  financial statements and the reported amounts  of  revenues
and  expenses during the reporting period.  Actual results could
differ from those estimates.

Revenue Recognition

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

Shipping and Handling Costs

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

Inventories

     Inventories are stated at the lower of average cost or
market.  Cost is determined using the first-in, first-out (FIFO)
method.  Inventories consist primarily of raw materials, work-in-
process and finished goods.  The Company evaluates inventory
levels and expected usage on a periodic basis and records
adjustments for impairments as required.

Property, Plant and Equipment and Depreciation and Amortization

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

      The estimated useful lives of assets for financial
reporting purposes are as follows:  building and improvements, 8
to 25 years; machinery and equipment, 5 to 10 years; office
furniture and fixtures, 5 to 10 years; transportation equipment
5 years. Maintenance and repairs are charged to expense as
incurred; major renewals and betterments are capitalized.  When
items of property, plant and equipment are sold or retired, the
related costs and accumulated depreciation are removed from the
accounts and any gain or loss is included in income.
                                   F-7
<PAGE>


DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004

Note 1 - Summary of Significant Policies (continued)

Impairment of Long-Lived Assets

     The  Company  reviews its long-lived assets for  impairment
whenever  events or changes in circumstances indicate  that  the
carrying   amount   of   an  asset  may  not   be   recoverable.
Recoverability of assets to be held and used is  measured  by  a
comparison  of  the carrying amount of an asset to  undiscounted
future  net cash flows to be generated by the assets.  If  these
assets  are  considered to be impaired,  the  impairment  to  be
recognized  is  measured by the amount  by  which  the  carrying
amount  of  the  assets exceeds the fair value  of  the  assets.
Based on these reviews, no asset impairment charges were made to
the  carrying value of long-lived assets during the years  ended
September 30, 2005 and 2004.

Other Assets

     Other assets include an intangible asset consisting of  the
acquired  customer base of Optometrics, LLC and are  carried  at
cost  less  accumulated amortization. Amortization  is  computed
using  the  straight-line method over the economic life  of  the
respective asset, or seven years. It is the Company's policy  to
assess periodically the carrying amount of its intangible assets
to  determine if there has been an impairment to their  carrying
value.  There was no impairment at September 30,  2005.    Other
assets   also  includes  deferred  financing  costs  which   are
amortized using the straight-line method over 5 and 7 years.

Advertising

       The   Company  expenses  all  advertising  as   incurred.
Advertising expense for the years ended September 30,  2005  and
2004 was $83,868 and $14,688.

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 carry  forwards.
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.

Net Income (Loss) Per Common Share

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

                                     F-8
<PAGE>


DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004

Note 1 - Summary of Significant Policies (continued)

loss, diluted net income (loss) per common share exclude the
impact of potential shares since they would have resulted in an
anti-dilutive effect.

Net Income (Loss) Per Share

      Common stock options of 526,459, common stock warrants  of
1,200,000 and 700,000 shares of convertible preferred  stock  as
of   September  30,  2005  represent  common  stock  equivalents
included in the calculation of the diluted net income (loss) per
common share.  As of September 30, 2004, common stock options of
135,000  and  stock  warrants of 1,200,000  representing  common
stock equivalents have been excluded from the calculation of net
loss  per  common share as their effect is anti-dilutive.    The
computation  of basic and diluted net income (loss)  per  common
share is as follows:
                                                  2004         2005
    Net income (loss)                           $ 173,019   $(175,881)
    Less:  Preferred stock dividends            $ (39,410)       -0-
                                                 --------    --------
    Income (loss) allocable to
         common shareholders                    $ 133,609   $(175,881)
                                                 ========    ========

    Weighted average shares outstanding
     Basic                                      3,603,315   2,241,617
    Effect of dilutive securities
       Stock Options                               61,802        -0-
       Stock Warrants                             606,112        -0-
       Convertible Preferred Stock                300,033        -0-
                                                 --------    --------
       Dilutive                                 4,571,262   2,241,617
                                                 ========    ========

Stock Based Compensation

     The  Company accounts for its stock compensation under  the
provisions  of  Statement of Financial Accounting Standards  No.
123,  "Accounting  for  Stock-Based  Compensation",  ("SFAS  No.
123"),  as amended by SFAS No. 148, " Accounting for Stock-based
Compensation - Transition and Disclosure."  As permitted by SFAS
No.  123,  the Company measures compensation cost in  accordance
with  Accounting  Principles Board Opinion No.  25  ("APB  25"),
"Accounting   for  Stock  Issued  to  Employees",  and   related
interpretations.    For   stock   options   and   warrants,   no
compensation  expense is reflected in net income, as  all  stock
options and warrants granted had an exercise price equal  to  or
greater than the market value of the underlying common stock  on
the  date  of  grant.  In addition, no compensation  expense  is
recognized  for common stock purchases under the Employee  Stock
Purchase  Plan.  Stock options granted to consultants and  other
non-employees are reported at fair value in accordance with SFAS
No. 123.

     Pro forma information regarding net income and earnings per
share is required by SFAS No. 123 and has been determined as  if
the  Company  had accounted for its stock plans under  the  fair
value  method of SFAS No. 123.  The following table  illustrates
the effect on net income (loss) and net income (loss) per common
share  if  the  Company had recorded the  fair  value  of  stock
options and warrants as compensation expense.
                                                  2005          2004
  Net income (loss), as reported                $173,019   ($ 175,881)
  Add:  Stock-based employee compensation
        expense included in reported net income    1,670          -0-
  Less: Total stock-based employee
        compensation expense determined under
        fair method for all options            ($33,668)          -0-
                                             ----------     ----------
     Pro forma net income (loss)               $141,021    ($ 175,881)

                                      F-9
<PAGE>

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004

Note 1 - Summary of Significant Policies (continued)

                                                     2005        2004
                                                   --------- ----------
  Net income (loss) per common share, as reported
    Basic                                          $  0.04   ($  0.08)
    Diluted                                        $  0.03   ($  0.08)

   Pro forma net income (loss) per common share
     Basic                                         $  0.03   ($  0.08)
     Diluted                                       $  0.02   ($  0.08)

     In December 2004, FASB issued SFAS No. 123 (Revised 2004),
"Share-Based Payment." SFAS No. 123R is a revision of SFAS No.
123 and supersedes APB Opinion No. 25, "Accounting for Stock
Issued to Employees" . SFAS No. 123R requires all share-based
payment to employees, including grants of employee stock
options, to be recognized in the financial statements based on
their fair values and the effective date will be as of the
beginning of the first fiscal year that begins after December
15, 2005. Management intends to comply with this Statement at
the scheduled effective date for the relevant financial
statements of the Company. Management believes the effects of
adopting this revision to FASB 123, will approximate recording
those amounts currently reported as compensation herein on a pro-
forma basis as allowed under FASB 123.

Financial Instruments

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

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

Concentration of Credit Risk

     The  Company  maintains  allowances  for  potential  credit
losses and has not experienced any significant losses related to
the  collection of its accounts receivable.  As of September 30,
2005 and 2004, approximately $269,735 and $27,028 or 31% and  9%
of the Company's accounts receivable are due from foreign sales.

     The  Company maintains cash and cash equivalents at various
financial   institutions   in  New  Jersey,   Pennsylvania   and
Massachusetts.  Accounts at each institution are insured by  the
Federal  Deposit  Insurance  Corporation  up  to  $100,000.   At
September  30,  2005,  the  Company's  uninsured  bank  balances
totaled $97,711. The Company has not experienced any significant
losses on its cash and cash equivalents.

Recent Accounting Pronouncements

FASB 151 - Inventory Costs
     In  November 2004, the FASB issued FASB Statement No.  151,
which  revised  ARB  No.43, relating to  inventory  costs.  This
revision  is to clarify the accounting for abnormal  amounts  of
idle  facility  expense,  freight,  handling  costs  and  wasted
material (spoilage). This Statement requires that these items be
recognized as a current period,
                                     F-10
<PAGE>

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004

Note 1 - Summary of Significant Accounting Policies (continued)

charge  regardless of whether they meet the criterion  specified
in  ARB  43.  In  addition  this  Statement  requires  that  the
allocation  of  fixed  production  overheads  to  the  costs  of
conversion  be  based  on  normal  capacity  of  the  production
facilities. This Statement is effective for financial statements
for   fiscal  years  beginning  after  June  15,  2005.  Earlier
application  is  permitted for inventory costs  incurred  during
fiscal  years beginning after the date this Statement is issued.
Management  believes this Statement will have no impact  on  the
financial statements of the Company once adopted.

FASB 153 - Exchanges of Non-monetary Assets

     In  December 2004, the FASB issued FASB Statement No.  153.
This  Statement addresses the measurement of exchanges  of  non-
monetary  assets. The guidance in APB Opinion No. 29, Accounting
for  Non-monetary Transactions, is based on the  principle  that
exchanges of non-monetary assets should be measured based on the
fair  value  of  the  assets exchanged.  The  guidance  in  that
Opinion, however, included certain exceptions to that principle.
This Statement amends Opinion 29 to eliminate the exception  for
non-monetary exchanges of similar productive assets and replaces
it with a general exception for exchanges of non-monetary assets
that  do  not have commercial substance. A non-monetary exchange
has  commercial substance if the future cash flows of the entity
are  expected  to  change  significantly  as  a  result  of  the
exchange.
     This  Statement  is effective for financial statements  for
fiscal  years beginning after June 15, 2005. Earlier application
is  permitted  for non-monetary asset exchanges incurred  during
fiscal  years beginning after the date this Statement is issued.
Management  believes this Statement will have no impact  on  the
financial statements of the Company once adopted.

FIN 47 - Accounting for Asset Retirement Obligations

     In  March  2005,  FASB Interpretation No.47  "FIN  47"  was
issued,  which  clarifies certain terminology as  used  in  FASB
Statement  No. 143, Accounting for Asset Retirement Obligations.
In  addition  it clarifies when an entity would have  sufficient
information  to reasonably estimate the fair value of  an  asset
retirement obligation. FIN 47 is effective no later than the end
of  fiscal years ending after December 15, 2005. Early  adoption
of FIN 47 is encouraged. Management believes the adoption of FIN
47  will  have  no  impact on the financial  statements  of  the
Company, once adopted.

FASB 154 - Accounting Changes and Error Corrections

     In  May 2005, the FASB issued FASB Statement No. 154, which
replaces  APB  Opinion  No.20 and FASB  No.  3.  This  Statement
provides  guidance  on the reporting of accounting  changes  and
error   corrections.   It  established,  unless   impracticable,
retrospective application as the required method for reporting a
change  in  accounting  principle in  the  absence  of  explicit
transition requirements to a newly adopted accounting principle.
The  Statement  also  provides guidance when  the  retrospective
application for reporting of a change in accounting principle is
impracticable.  The reporting of a correction  of  an  error  by
restating  previously  issued  financial  statements   is   also
addressed  by  this Statement. This Statement is  effective  for
financial  statements for fiscal years beginning after  December
15,  2005.  Earlier  application  is  permitted  for  accounting
changes and corrections of errors made in fiscal years beginning
after  the  date  this Statement is issued. Management  believes
this  Statement will have no impact on the financial  statements
of the Company, once adopted.

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.

                                      F-11
<PAGE>



DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004

Note 2 - Inventories

     Inventories at September 30, 2005 and 2004 consisted of the
following:

                                2005            2004

          Raw Materials       $322,902       $148,278
          Work-in-Process      246,921        114,170
          Finished Goods       272,326        107,365
                              --------       ---------
                              $842,149       $369,813
                              =========      =========
Note 3 - Property, Plant and Equipment

     Property, plant and equipment at September 30, 2005 and
2004 consist of the following:
                                            2005           2004
          Land                             $   261       $  261
          Building and improvements      1,047,758    1,012,966
          Machinery and equipment        2,914,224    2,477,540
          Office furniture and fixtures    268,326      231,246
          Transportation equipment          53,419       53,419
                                        ----------   ----------
                                         4,283,988    3,775,432
          Less accumulated depreciation  3,539,224    3,355,714
                                        ----------   ----------
                                         $ 744,764    $ 419,718
                                        ==========   ==========

     Included  in  the  cost  of  machinery  and  equipment   at
September 30, 2005 and 2004 is $53,981 and $-0- representing the
cost of assets under capitalized lease obligations.  Accumulated
depreciation at September 30, 2005 and 2004 for the  capitalized
leases was $5,744 and $-0-.

     Depreciation expense for the years ended September 30, 2005
and  2004  was  $183,509 and $144,307 of which $5,744  and  $-0-
represents  depreciation  of  assets  under  capitalized   lease
obligations.

Note 4 - Other Assets

     Other assets at September 30, 2005 and 2004 consist of the
following:

                                                       2005     2004

      Deferred financing costs                    $ 41,010   $ 23,737
      Intangible asset - acquired customer base     78,414       -0-
      Deposits                                         600        600
                                                  --------   --------
                                                   120,024     24,337
      Less accumulated amortization                 32,289     21,016
                                                  --------   --------
                                                  $ 87,735  $   3,321

     Amortization expense for the years ended September 30, 2005
and 2004 was $11,273 and $3,408.

Note 5 - Debt
     On  March 8, 2005, the Company entered into loan agreements
permitting  borrowings up to a total of $700,000  with  Citizens
Bank  of Massachusetts ("Citizens Bank") in connection with  the
acquisition of Optometrics, LLC of
                                      F-12
<PAGE>

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004

Note 5 - Debt (continued)
which the initial borrowing was $550,000.  The terms of the Loan
Agreements  provide the Company with a $300,000 term  loan  (the
"Term Loan") and a $400,000 revolving credit facility (the "Line
of  Credit").  The proceeds were used to payoff the debt of  the
former  Optometrics,  LLC,  to fund  the  acquisition,  and  for
general working capital purposes.

Note Payable to Bank

     The  note  payable to bank represents borrowings under  the
Line of Credit, which bear interest at a variable rate equal  to
Citizens Bank's prime rate plus 0.5%.  The initial borrowing  on
the Line of Credit was $250,000 and is the amount outstanding as
of  September 30, 2005.  The performance of this obligation  and
the   Term  Loan  are  secured  by  the  assets  of  Optometrics
Corporation  with  a corporate guarantee by the  Company  and  a
second  lien on the Company's New Jersey assets other than  real
estate
     As part of the credit agreement, the Company is required to
comply   with   certain  financial  covenants  for   Optometrics
Corporation.   At  September  30,  2005,  the  Company   is   in
compliance  with its financial covenants related to  its  credit
agreement with Citizens Bank.

Long-Term Debt

  Long-term debt at September 30, 2005 and 2004 consisted of the
following:

                                                       2005         2004

  Note payable to bank in monthly installments of
  $10,000 plus interest at the Bank's prime rate plus
  0.5%(6.75% and 5.0% at September 30, 2005 and
  2004), final payment of $278,889 due July 1, 2007,
  secured by first mortgage on Berlin, New
  Jersey property and substantially all of the
  New Jersy assets of the Company                      $488,889        608,889


  Capital lease obligations payable in total monthly
  installments of $1,409 including interest at rates
  ranging from 5.5% to 12.9% due and payable through
  June 2007 secured by related equipment                 14,047          -0-

  Note payable to bank in monthly installments of
  $5,835 including interest at 6.25%, through March
  2010, secured by the assets of Optometrics Corporation
  with a Corporate guarantee by the Company and a second
  lien on New Jersey assets other than real estate.     $274,179         -0-
                                                     -----------   ----------
                                                       $777,115       $608,889
  Less current portion                                 (184,403)      (120,000)
                                                     -----------   -----------
                                                     $  592,712       $488,889
                                                     ===========   ============

     As of September 30, 2005, the current portion includes
$10,199 payable under capital lease obligations.

     The aggregate maturities of long-term debt, as of September
30, 2005 are as follows:
             September 30, 2007                    $430,478
             September 30, 2008                      61,484
             September 30, 2009                      65,520
             September 30, 2010                      35,230
                                                   --------
                   Total                           $592,712

                                      F-13
     <PAGE>

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004

Note 6 - Income Taxes

      The  Company's income tax expense (benefit) for the  years
ended September 30, 2005 and 2004 are as follows:



                                             2005               2004

      Current
       Federal                             $34,900           $  -0-
       State                                14,600              -0-
       Utilization of NOL carryforwards    (36,000)             -0-
                                           --------         --------
                                           $13,500              -0-
                                           --------         --------
     Deferred
       Federal                             (22,250)             -0-
       State                                (2,000)             -0-
                                           --------          -------
                                          $(24,250)          $  -0-

      Income tax benefit                 $( 10,750)          $  -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,  2005
and 2004 are as follows:

                                                  2005       2004
Taxes at statutory rates applied to income
 (loss) before income taxes                     $54,200    ($59,800)
Increase (reduction) in tax resulting from:
  Depreciation                                 ( 18,400)   ( 20,000)
  Accounts receivable                          (  8,600)       -0-
  Inventories                                     2,300    (  1,600)
  Vacation pay                                    3,900         200
  Other                                           1,700        -0-
  State income taxes                             14,400    ( 21,500)
  Benefit of net operating loss carryforwards  ( 36,000)       -0-
  Adjustments to valuation allowance           ( 24,250)    102,700
                                             ----------  ----------
                                               ($10,750)    $ -0-
                                             ==========  ==========

     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, 2005  and  2004  are  as
follows:

                                           F-14
<PAGE>



DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004

Note 6 - Income Taxes (continued)
                                        2005              2004
                                   ---------          ----------
Inventories                        $  15,300           $  19,500
Vacation pay                           2,900               6,600
Accounts receivable                    2,000               2,000
Depreciation                          99,000             124,300
Net operating loss carryforwards     512,300             568,300
Less valuation allowance            (607,250)           (720,700)
                                   ---------          ----------
                                   $  24,250           $    0
                                   =========          ==========

     Based  on the company's history of significant fluctuations
in  net  earnings,  the  Company established  a  full  valuation
allowance  as  of  September  30, 2004  and  prior  due  to  the
uncertainty as to the realization of certain net operating  loss
carryforwards.   With  the asset acquisition of Optometrics  LLC
in  March  2005,  the Company now believes that  some  of  these
carryforwards  will be realized, and has adjusted the  valuation
allowance accordingly.

     At  September  30,  2005,  the  Company  has  approximately
$1,300,000 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  $760,000 of net operating loss  carryforwards  to
offset  certain future state taxable income, expiring in various
years through 2013.

Note 7 - Stockholders' Equity

     On September 23, 2004, in a privately negotiated
transaction, the Company 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 became the Company's President and Chief
Executive Officer.

Convertible Preferred Stock

     On March 8, 2005, the Company completed a private placement
of  700,000  shares  of  Series  A  10%  Cumulative  Convertible
preferred  stock for cash proceeds of $700,000.  The  stock  was
sold  at  a  price of $1.00 per share.  Total expenses  for  the
stock  placement  were $10,000.  Each share of  preferred  stock
carries  a  10% per annum cumulative dividend payable  quarterly
and  is convertible to 2.2222 shares of common stock at any time
by  holders, subject to adjustment for certain subsequent  sales
of  common  stock or securities convertible into or exchangeable
for  common stock, and is callable starting March 9, 2007 by the
Company at a redemption price of $1.00 per share.

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


                                      F-15
<PAGE>



DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004

Note 7 - Stockholders' Equity (continued)

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 2,250,000 shares, of which 1,046,554
shares of common stock are available for future purchases  under
the plan at September 30, 2005.

     A  summary  of  stock option activity for the  years  ended
September 30, 2005 and 2004 is presented below:
                                                       Exercise Price
                                              Shares      Per Share
                                             --------- --------------
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

Granted in 2005                               436,459   $.40 - $0.65
Exercised in 2005                               -0-
Cancelled in 2005                             (45,000)  $1.50
                                             ---------
Options outstanding at September 30, 2005     526,459   $.40 - $1.50
                                             =========

Options exercisable at September 30, 2005      526,459  $.40 - 1.50
                                             =========

     During  the  years ended September 30, 2005, 436,459  stock
options  were granted at prices ranging from $0.40 to $0.65  per
share  and no options were exercised.  During the twelve  months
ended  September  30,  2004, no stock options  were  granted  or
exercised.   The  Company cancelled 45,000 and  132,000  options
during   the   years  ended  September  30,   2005   and   2004,
respectively.   Compensation expense  relating  to  non-employee
stock options granted during the years ended September 30,  2005
and  2004 were $1,670 and $-0-, respectively.  During the twelve
months  ended  September  30, 2005, the Company  issued  165,987
shares of common stock valued at $0.14 to $0.66 per share to the
Board   of  Directors  in  satisfaction  of  accrued  and   2005
directors' fees totaling $33,217.

      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, 2005.

The fair value of the stock options granted and warrants issued
were estimated on the date of grant using the Black Scholes
option-pricing model.

                                    F-16
<PAGE>





DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004

Note 7 - Stockholders' Equity (continued)

     Based  on  the  assumptions presented below,  the  weighted
average fair value of the options granted during the year  ended
September 30, 2005 was $.17 per share, and the fair value of the
warrants issued during the year ended September 30, 2004 was $-0-
per warrant.
                                   2005         2004

      Expected life in years            5         3.25
      Risk-free interest rate        4.80%        4.80%
      Expected volatility           16.47%        6.35%
      Dividend yield                 0.00%        0.00%

Employee Stock Purchase Plan

     The  Company  has  an  Employee Stock Purchase  Plan  which
permits substantially all employees to purchase common stock  at
a  purchase price of 85% of the fair market value of the shares.
Under the plan, a total of 450,000 shares have been reserved for
issuance  of  which  146,164  shares  have  been  issued  as  of
September 30, 2005.

     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, 2005
and 2004, 50,777, and 2,323 shares of common stock were issued
under the plan for aggregate purchase prices of $10,570, and
$519, respectively.

Note 8 - Profit Sharing Plan

     The  Company  has two 401(k) Plans for the benefit  of  its
employees.   The Company made contributions to the  plan  during
the  years ended September 30, 2005 and 2004 of $20,246 and  $0,
respectively.

Note 9 - Related Party Transactions

      During  the years ended September 30, 2005 and  2004,  the
Company made sales of $106,347 and $83,961, respectively,  to  a
company  in which a member of the board of directors is also  an
officer.    As of September 30, 2005 and 2004, amounts due  from
this  customer  included in accounts receivable  were  $-0-  and
$15,310,  respectively.   During the year  ended  September  30,
2005,   $65,710  of  building  lease  payments  were   paid   to
Optometrics Holdings, LLC in which the Company's Chief Financial
Officer has an interest.

Note 10 - Vendor Concentration

      The  company purchased $887,898 and $536,636  of  its  raw
material from one supplier during the years ended September  30,
2005 and 2004. As of September 30, 2005 and 2004, amounts due to
that  supplier  included in accounts payable were  $134,854  and
$101,729.


                                     F-17
<PAGE>

DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004

Note 11 - Supplemental Disclosure of Cash Flow Information:

                                                2005        2004

     Cash paid during the year for:
        Interest                              $51,289      $41,824
                                              ========     =======
        Income taxes                        $ 5,193        $   -0-
                                             ========      =======

     Non-cash investing and financing activities:

     Acquisition of Assets of
       Optometrics, LLC on March 8, 2005:

       Fair market value of
           current assets acquired          $918,067
       Property, plant and equipment         410,575
       Intangible asset -
         acquired customer base              78,414
       Fair market value of
         liabilities assumed              ( 529,110)
       Acquisition costs incurred         ( 109,546)
       Issuance of 300,000 shares of
         common stock to sellers          (  68,400)
                                          ---------
      Net  cash paid for
        Optometrics, LLC                 $  700,000


      The  Company  issued  700,000 shares of  preferred  stock,
valued  at $1.00 per share, and received cash of $700,000.   The
Company  incurred  stock  issuance  costs  of  $10,000  for  net
proceeds  of  $690,000, of which $600,000 was used to  fund  the
Optometrics asset acquisition.

      In connection with the asset acquisition, the Company also
obtained  total  debt proceeds of $550,000,  of  which  $100,000
funded  the balance of the cash payment to the sellers,  $67,976
funded the acquisition costs, $264,751 paid off the debt assumed
of  Optometrics, LLC, $17,273 paid the deferred financing costs,
and $100,000 was used for general working capital purposes.

Note 12 - Subsequent Events

       On October 5, 2005, 2,817 shares of stock were issued for
Directors compensation for the quarter ending September 30,
2005.

      The Company expects to issue 20,358 shares of stock to the
Company's President in partial satisfaction of his accrued bonus
for the year ended September 30, 2005 of $12,214.  In accordance
with  his employment agreement, existing stock options at  $0.40
per share will be utilized to purchase these shares.



                              F-18
<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
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
18,  2005. All directors will hold office until their successors
are elected at the next annual meeting of the shareholders.

     Our executive officers and directors, and their ages at
November 30, 2005, are as follows:

Name                              Age     Position
---------------                   ---     --------
James Saltzman                     62     Chairman of the Board
Craig T. Dunham                    49     President, CEO, Director
David Manzi                        44     Director
Laura Lunardo                      53     CFO, COO Optometrics
Fran Ciancarelli                   57     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 2005 with the reporting requirements of Section 16(a)  of
the  Securities  Exchange Act of 1934 except for the  following:
The Form 3 filings for Mr. Saltzman dated November 23, 2004, the
Form 3 filing for Ms. Lunardo dated May 13, 2005, and the Form 3
filing  for Mr. Ciancarelli dated May 23, 2005 were late due  to
delays  getting  Edgar access codes from the SEC.   The  form  4
filings   for  stock  issued  for  regular  quarterly  directors
compensation for Mr. Saltzman and Mr. Manzi dated July 13,  2005
were  several months late due to an administrative oversight  by
the Company.

    Craig T. Dunham, 49, President and CEO, has been with the
Company since October 1, 2004 when he replaced John Kane as a
Director. Prior to joining

                               -9-
<PAGE>

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, 62, 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.

      David Manzi, 44, 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.

      Laura Lunardo, 53, CFO and Chief Operating Officer of
Optometrics Corporation, has been with the Company since the
March 2005 Optometrics LLC transaction.  Previously, she had
been a partner in Optometrics LLC with

                                   -10-
<PAGE>
primary  responsibilities  for Sales  &  Marketing,  Accounting,
Finance  and  Administration and she was the CFO of  Optometrics
USA, Inc., the predecessor corporation to Optometrics LLC, since
1984.   Ms.  Lunardo  earned her B.S.  degree  in  Business  and
Accounting from Boston University in 1976.

      Francis  M. Ciancarelli, 57, Vice President of  Sales  and
Marketing  has  been  with the organization since  April,  2005.
Prior  to  this  position  he was an owner  in  a  family  glass
business,  Precision Electronic Glass (PEG), where he served  on
the  Board  of  Directors  and as Vice President  of  Sales  and
Marketing  from  April 1987 through May 2004.   Mr.  Ciancarelli
worked for AT&T from June 1972 through March 1987 where he  held
various   responsibilities  related  to  electronics   in   both
supervisory  and management roles, with his last  assignment  as
Technical  Training Development and Delivery Manager  for  AT&T.
Mr.  Ciancarelli  served  in the US Air  Force  from  June  1966
through  May  1969 in top secret electronic counter intelligence
equipment  maintenance  assignment. He left  with  an  honorable
discharge as a Vietnam Veteran.


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.


 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($)
---------    ----    ---------    ---------  ----------   -----------   ---------   --------- ----------
Craig Dunham 2005     110,000      12,214
President
And CEO

John Kane    2005      28,590
Former       2004     110,000
President    2003     110,000
CEO, CFO,
Treasurer

</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 a performance
bonus  based  on  a percentage of net income and  an  additional
annual  bonus  at the discretion of our Board of Directors.  The
annual performance bonus is paid one third in cash and the other
two  thirds is paid in stock where Mr. Dunham has the option  to
utilize his existing warrants or options to set the share price.
The  agreement also provides for a 401(k) pension  plan,  health
insurance benefits and a company car (or car allowance).

An   employment   agreement   with   Frank   Denton,   President
Optometrics, commenced on March 9, 2005 and ended following  his
death on March 23, 2005.

                              -11-
<PAGE>
The  employment  agreement  with  Laura  Lunardo,  CFO  and  COO
Optometrics, commenced on March 9, 2005 and will continue for  a
two year period, after which the agreement is subject to renewal
for  one year terms. Under the employment agreement, Ms. Lunardo
has agreed to work for us full time, and receives an annual base
salary  of  $90,000 for the first twelve months and $95,000  for
the  second twelve months. Ms. Lunardo'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).

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, 2005 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 (1)(4)               2,864,438                 50.9%
           385 Cooper Road
           West Berlin, NJ 08091

Common     Saltzman Partners (1)(2)            367,009                  9.8%
           4 Tower Bridge
           Suite 100
           West Conshohocken, PA  19428

Common     James Saltzman  (1)(2)(3)           312,012                  7.9%
           777 Germantown Pike
           Plymouth Meeting, PA  19437

Common     David Manzi (1)(5)                  124,761                  3.3%
           c/o Special Optics
           315 Richard Mine Road
           Wharton, NJ 07885

Common     Laura Lunardo                       150,000                  4.0%
           8 Nemco Way
           Ayer, MA 01432

Common     Francis Ciancarelli (1)(6)          185,000                  4.7%
           385 Cooper Road
           West Berlin, NJ 08091


All Officers and Directors
as a Group (1)                               3,636,211                 60.0%

------------
(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,  2005   was
3,756,784.

(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 and options to purchase  80,000
shares of the companies common stock at $0.40 per share.

                              -12-
<PAGE>

(4)Includes  warrants  to  purchase  1,200,000  shares  of   the
Company's common stock at an exercise price of $0.225 per share,
options  to  purchase  80,000 shares at  $0.40  per  share,  and
preferred stock convertible to 584,438 shares.

(5)Includes  options to purchase 80,000 shares of the  Company's
stock at $0.40 per share.

(6)Includes options to purchase 185,000 shares of the  Company's
stock at $0.65 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

2.01*     Asset  purchase agreement, dated as of February  17, 2005 between
          Dynasil Corporation of America, Optometrics LLC, Frank Denton, and
          Laura Lunardo filed on Form 8-K/A dated May 24, 2005.

2.02*     Lease agreement, dated March 8, 2005 between Dynasil Corporation of
          America, Optometrics Corporation, and Optometrics Holdings LLC
          filed on Form 8-K/A dated May 24, 2005.

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

3.02*     Restated Certificate of Incorporation of Dynasil Corporation of
          America dated May 6, 2005, filed as an exhibit to Form 10-QSB dated
          May 16, 2005.

10.01*    1996 Stock Incentive Plan, filed as an exhibit to Registrant's
          Registration Statement on Form 10-SB, filed October 1, 1999

10.02*    1999 Stock Incentive Plan, filed as an exhibit to Registrant's
          Registration Statement on Form 10-SB, filed October 1, 1999

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

10.04*    Audit Committee Charter filed as an exhibit on Form 10-KSB dated
          September 30, 2001.

10.05*    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.

10.06*    Employment Agreement of Craig T. Dunham dated October 1, 2004,
          filed on form 10-KSB on December 21, 2004.

10.07*    Employment Agreement of Laura Lunardo effective March 8, 2005,
          filed on Form 10-QSB dated May 16, 2005.

10.08*    Loan agreement dated March 8, 2005 with Citizen's Bank for a
          $400,000 revolving line of credit, filed on Form 10-QSB dated
          May 16, 2005.

                                      -13-
<PAGE>



10.09*    Loan agreement dated March 8, 2005 with Citizen's Bank for a
          $300,000 term loan, filed on Form 10-QSB dated May 16, 2005.


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

99.1      Press release, dated December 19, 2005, issued by Dynasil
          Corporation  of America announcing its financial results for the
          fourth quarter ending September 30, 2005.

* Incorporated herein by reference

(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:
      - None

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,  2005 and 2004 and the  reviews  of  the
financial statements included in the Company's Forms 10-
QSB during those fiscal years are $38,100  and $33,780,
respectively.

(b)  Audit Related Fees

The   aggregate  fees  billed  or  to  be  billed   for
professional   services  rendered  by   the   Company's
principal  accountant for audit related  fees  for  the
fiscal  years  ended September 30, 2005 and  2004  were
$15,000  and $-0-, respectively.  The fiscal year  2005
fees  related  to  due  diligence for  the  Optometrics
acquisition.

(c)   Tax Fees

The  Company  incurred fees of $  12,600  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.  The
fiscal year 2005 fees included tax analysis relating to
the Optometrics acquisition.

(d)  All Other Fees

Company  incurred  no other fees during  the  last  two
fiscal years for products and services 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.

                                      -14-
<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 19, 2005
      ---------------------------------
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 19, 2005
    ---------------------      Directors

BY: /s/ David Manzi            Director                  December 19, 2005
    ---------------------

BY: /s/ Craig T. Dunham        President and CEO         December 19, 2005
    ---------------------

BY: /s/ Laura Lunardo          CFO and Principal         December 19, 2005
    ---------------------       Accounting Officer

                                      -15-
<PAGE>



                                             EXHIBIT 31.1 (a)

     CERTIFICATION PURSUANT TO RULE 13a-14(a)/15D-14(a) and
              SECTION 302 OF THE SARBANES-OXLEY ACT


I, Craig T. Dunham, the President and Chief Executive Officer of
Dynasil Corporation of America, certify that:

1. I have reviewed this annual report on Form 10-KSB of Dynasil
Corporation of America;

2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the small business issuer as of,
and for, the periods presented in this annual report;

4. The small business issuer's other certifying officer(s)and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e))and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the small business issuer and have:

     a) Designed such disclosure controls and procedures, or
     caused such disclosure controls and procedures to be
     designed under our supervision, to ensure that material
     information relating to the small business issuer,
     including its consolidated subsidiaries, is made known to
     us by others within those entities, particularly during the
     period in which this report is being prepared;

     b) Designed such internal control over financial reporting,
     or caused such internal control over financial reporting to
     be designed under our supervision, to provide reasonable
     assurance regarding the reliability of financial reporting
     and the preparation of financial statements for external
     purposes in accordance with generally accepted accounting
     principles;

     c) Evaluated the effectiveness of the small business
     issuer's disclosure controls and procedures and presented
     in this report our conclusions about the effectiveness of
     the disclosure controls and procedures as of the end of the
     period covered by this report based on such evaluation; and

     d) Disclosed in this report any change in the small
     business issuer's internal control over financial reporting
     that occurred during the small business issuer's most
     recent fiscal quarter (the small business issuer's fourth
     fiscal quarter in the case of an annual report) that has
     materially affected, or is reasonably likely to materially
     affect, the small business issuer's internal control over
     financial reporting; and


                              -16-
<Page>


5. The small business issuer's other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the small business issuer's
auditors and the audit committee of the small business issuer's
board of directors (or persons performing the equivalent
functions):

     a) All significant deficiencies and material weaknesses in
     the design or operation of internal control over financial
     reporting which are reasonably likely to adversely affect
     the small business issuer's ability to record, process,
     summarize and report financial information; and

     b) Any fraud, whether or not material, that involves management
     or other employees who have a significant role in the small business
     issuer's internal control over financial reporting.



Date: December 19, 2005       /s/ Craig Dunham
                              -----------------------------
                              President and Chief Executive Officer







                                      -17-
<PAGE>






                                             EXHIBIT 31.1 (b)


     CERTIFICATION PURSUANT TO RULE 13a-14(a)/15D-14(a) and
              SECTION 302 OF THE SARBANES-OXLEY ACT


I, Laura Lunardo, Chief Financial Officer of Dynasil Corporation
of America, certify that:


1. I have reviewed this annual report on Form 10-KSB of Dynasil
Corporation of America;

2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the small business issuer as of,
and for, the periods presented in this annual report;

4. The small business issuer's other certifying officer(s)and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e))and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the small business issuer and have:

     a) Designed such disclosure controls and procedures, or
     caused such disclosure controls and procedures to be
     designed under our supervision, to ensure that material
     information relating to the small business issuer,
     including its consolidated subsidiaries, is made known to
     us by others within those entities, particularly during the
     period in which this report is being prepared;


     b) Designed such internal control over financial reporting,
     or caused such internal control over financial reporting to
     be designed under our supervision, to provide reasonable
     assurance regarding the reliability of financial reporting
     and the preparation of financial statements for external
     purposes in accordance with generally accepted accounting
     principles;

     c) Evaluated the effectiveness of the small business
     issuer's disclosure controls and procedures and presented
     in this report our conclusions about the effectiveness of
     the disclosure controls and procedures as of the end of the
     period covered by this report based on such evaluation; and

     d) Disclosed in this report any change in the small
     business issuer's internal control over financial reporting
     that occurred during the small business issuer's most
     recent fiscal quarter (the small business issuer's fourth
     fiscal quarter in the case of an annual report) that has
     materially affected, or is reasonably likely to materially
     affect, the small business issuer's internal control over
     financial reporting; and

                              -18-
<PAGE>

5. The small business issuer's other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the small business issuer's
auditors and the audit committee of the small business issuer's
board of directors (or persons performing the equivalent
functions):

     a) All significant deficiencies and material weaknesses in
     the design or operation of internal control over financial
     reporting which are reasonably likely to adversely affect
     the small business issuer's ability to record, process,
     summarize and report financial information; and

     b) Any fraud, whether or not material, that involves management
     or other employees who have a significant role in the small business
     issuer's internal control over financial reporting.



Date: December 19, 2005       /s/ Laura Lunardo
                              -----------------------------
                              Chief Financial Officer







                                      -19-
<PAGE>



                                                  EXHIBIT 32.1


        CERTIFICATION PURSUANT TO 18 U.S.C.SECTION 1350,
            AS ADOPTED PURSUANT TO SECTION 906 OF THE
                   SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of DYNASIL CORPORATION OF
AMERICA (the "Company") on Form 10KSB for the year ended
September 30, 2005 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Craig T.
Dunham, President and Chief Executive Officer and Laura Lunardo,
Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

        (1) The Report fully complies with the requirements of
        section 13(a) or 15(d) of the Securities Exchange Act of
        1934; and

        (2) The information contained in the Report fairly
        presents, in all material respects, the financial
        condition and result of operations of the Company.



                                    /s/ Craig Dunham
                                   -------------------
                                   Craig Dunham
                                   President, Chief Executive
                                   Officer

                                   /s/ Laura Lunardo
                                   -------------------
                                   Laura Lunardo
                                   Chief Financial Officer

December 19, 2005


                              -20-
<PAGE>