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Subsequent Events
6 Months Ended
Mar. 31, 2012
Subsequent Events [Abstract]  
Subsequent Events [Text Block]

Note 14 – Subsequent Events

 

On April 12, 2012, Dynasil Corporation of America (the “Company”) entered into Amendment No. 2 to Loan and Security Agreement (“Amendment No. 2”) with Sovereign Bank, N.A. (the “Lender”) which amends the Loan and Security Agreement, dated July 7, 2010, as amended by Amendment No. 1 to Loan and Security Agreement, dated April 1, 2011 (the “Original Loan Agreement”).

 

Amendment No. 2 extends the Scheduled Termination Date for the Revolving Line of Credit from July 7, 2012 to July 7, 2013 or such other later date as may be agreed to in writing by Lender, and makes certain adjustments to the required financial covenants, as described below.

 

Amendment No. 2 adjusts the consolidated maximum leverage ratio required by the Original Loan Agreement to equal to or less than (i) 3.00 to 1.00 for any period ended on or before December 31, 2011 or on or after December 31, 2012, (ii) 3.75 to 1.00 for the rolling four quarter period ended on March 31, 2012, (iii) 3.25 to 1.00 for the rolling four quarter period ending on June 30, 2012, and (iv) 3.25 to 1.00 for the rolling four quarter period ending on September 30, 2012. The required fixed charge coverage ratio for each of those periods had previously been equal to or less than 3.0 to 1.0.

 

Additionally, Amendment No. 2 adjusts the consolidated fixed charge coverage ratio required by the Original Loan Agreement to not less than (i) 1.20 to 1.00 for any period ended on or before December 31, 2011 or on or after December 31, 2012, (ii) 0.90 to 1.00 for the rolling four quarter period ended on March 31, 2012, (iii) 1.05 to 1.00 for the rolling four quarter period ending on June 30, 2012, and (iv) 1.10 to 1.00 for the rolling four quarter period ending on September 30, 2012. The consolidated fixed charge coverage ratio for each of those periods had previously been not less than 1.20 to 1.00.

 

Amendment No. 2 also adjusts the limit on Unfunded Capital Expenditures (as defined in the Original Loan Agreement) by the Company to $3,250,000.00 in the aggregate (tested as of the last day of each fiscal quarter ended after September 30, 2011 on a year-to-date basis). During each Fiscal Year of the Company ending after September 30, 2012, the Company shall not incur Unfunded Capital Expenditures in excess of $2,000,000.00 in the aggregate (tested as of the last day of each fiscal quarter ended after September 30, 2012 on a year-to-date basis). The limit on Unfunded Capital Expenditures had previously been $1,700,000 (tested as of the last day of each fiscal quarter ended after September 30, 2011 on a year-to-date basis).

 

The foregoing summary of the terms and conditions of Amendment No. 2 does not purport to be complete and is qualified in its entirety by reference to the full text of Amendment No. 2 to Loan and Security Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 10-Q.

 

All debt under the Sovereign Bank Loan and Security Agreement has been recorded as a current liability as the Company believes that it will not satisfy its financial covenants under the Sovereign Bank Loan Agreement as of June 30, 2012.

 

The Company has evaluated subsequent events through the date that the financial statements were released.