UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to section 13 or 15(d) of The Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported): June 29,
2012
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Dynasil Corporation of America
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(Exact name of registrant as specified in its charter)
Delaware 000-27503 22-1734088
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
44 Hunt Street, Watertown, MA 02472
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(Address of principal executive offices)
(617)-668-6855
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(Registrant's telephone number, including area code)
Not Applicable
______________________________________________
(Former name or former address, if changed since last
report)
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-
2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-
4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
Waiver Letter and Amendment under Loan Agreement
As disclosed in the Company's Form 10-Q filed May 15, 2012
for the period ended March 31, 2012, due to the incurrence
of the Entine Indebtedness (see below), together with the
delay in collections relating to the processing of the
Company's invoices with governmental customers and the
increased spending on commercialization and R&D activities,
the Company then believed it would not satisfy certain
financial covenants as of June 30, 2012 under the Loan and
Security Agreement with Sovereign Bank, N.A. (the "Lender"),
dated July 7, 2010, as amended on April 1, 2011 and April
12, 2012 (the "Original Loan Agreement").
As disclosed in the Company's Form 8-K filed on June 8,
2012, the Company has incurred indebtedness in favor of
certain entities affiliated with Dr. Gerald Entine
(together, "Entine") in the aggregate principal amount of
$1,857,546 (the "Entine Indebtedness"). The Company
incurred the Entine Indebtedness in satisfaction of its
obligation to repurchase certain shares of Dynasil common
stock from Entine pursuant to a put right exercised by Dr.
Entine on February 12, 2012.
On June 29, 2012, the Company entered into a letter
agreement (the "Waiver Letter") with the Lender as well as
Amendment No. 3 (the "Amendment") to the Original Loan
Agreement. Under the Waiver Letter, the Lender agreed to
waive non-compliance by the Company with certain financial
covenants under the Original Loan Agreement as of June 30,
2012, subject to the Company's compliance with the terms of
the Amendment, including completing the Required Capital
Raise on or before September 30, 2012 and applying the
proceeds as described below. The Company is currently
seeking alternative financing sources that will satisfy the
Required Capital Raise on or before September 30, 2012,
however, there is no guarantee that the Company will be able
to complete any such financing in accordance with the terms
of the Amendment. If the Company is unable to satisfy the
Required Capital Raise prior to September 30, 2012, or
otherwise fails to comply with the terms of the Amendment,
it will be in default under the Original Loan Agreement.
The Amendment also made certain other changes to the
Original Loan Agreement, including certain financial
covenants, limitations on capital expenditures and the
termination of the Company's acquisition line of credit, in
each case as described in more detail below. The Amendment
did not change the interest rates on outstanding
indebtedness under the Original Loan Agreement.
This summary of the terms and conditions of the Waiver
Letter and the Amendment does not purport to be complete and
is qualified in its entirety by reference to the full text
of the Waiver Letter and the Amendment, which are filed as
Exhibits 10.1 and 10.2 to this Current Report on Form 8-K.
o Required Capital Raise on or before September 30, 2012
Under the Amendment, the Company agreed with the Lender that
the Company would raise, on or before September 30, 2012, at
least $2,000,000 in gross proceeds from the sale of its
capital stock and/or the incurrence of new indebtedness
which is subordinated to the indebtedness in favor of the
Lender, on terms and conditions acceptable to the Lender in
its sole discretion (the "Required Capital Raise"). The
proceeds of the Required Capital Raise must first be used to
repay all amounts outstanding under the Entine Indebtedness
by September 30, 2012, and thereafter for general working
capital needs.
o Amendment to Leverage Ratio Covenants
For the Consolidated Maximum Leverage Ratio (Consolidated
Total Funded Debt to Consolidated EBITDA, as defined in the
Amendment), the Amendment (i) revised the required ratio for
September 30, 2012 from 3.25x to 4.5x; (ii) revised the
required ratio for December 31, 2012 from 3.00x to 4.5x; and
(iii) revised the required ratio for March 31, 2013 and for
each rolling four quarters thereafter from 3.00x to 4.0x.
The Amendment also includes a new Consolidated Maximum
Adjusted Leverage Ratio covenant, which is Consolidated
Total Funded Debt (excluding subordinated debt) to
Consolidated EBITDA, as defined in the Amendment. The
Amendment requires the Company to maintain a Consolidated
Maximum Adjusted Leverage Ratio equal to or less than (i)
3.25x to 1.00x for each of the rolling four quarter periods
ending on September 30, 2012 and December 31, 2012, and (ii)
3.00x to 1.00x for each rolling four quarter period ending
on or after March 31, 2013.
For the purposes of calculating both the Consolidated
Maximum Leverage Ratio and the Consolidated Maximum Adjusted
Leverage Ratio, Consolidated EBITDA (as defined in the
Amendment) will be (i) at September 30, 2012, the actual
Consolidated EBITDA for the 3 months then ended times 4;
(ii) at December 31, 2012, the actual Consolidated EBITDA
for the 6 months then ended times 2; and (iii) at March 31,
2013, the actual Consolidated EBITDA for the 9 months then
ended times 4/3 (provided that the add-backs for costs are
not annualized).
o Amendment to Fixed Charge Coverage Ratio Covenants
For the Consolidated Fixed Charge Coverage Ratio, the
Amendment (i) revised the required ratio for September 30,
2012 from 1.10x to 1.00x; (ii) revised the required ratio
for December 31, 2012 from 1.20x to 1.00x; (iii) revised the
required ratio for March 31, 2013 from 1.20x to 1.05x; (iv)
revised the required ratio at 6/30/13 from 1.20x to 1.10x;
and (v) did not change the required ratio at September 30,
2013 (remained at 1.20x).
The Consolidated Fixed Charge Coverage Ratio is defined as
Consolidated EBITDA (as defined in the Amendment) for the
applicable period divided by the sum of (a) the Company's
consolidated interest expense for such period, plus (b) the
aggregate principal amount of scheduled payments on the
Company's indebtedness made during such period (excluding
any repayment of the Entine Indebtedness), plus (c) the sum
of all cash dividends and other cash distributions to the
Company's shareholders during such period, plus (d) the sum
of all taxes paid in cash by the Company during such period,
less (e) up to $75,000 paid to the IRS, to the extent
characterized as interest expense, in connection with
certain historical tax filings (the "IRS Payments").
For the purposes of calculating the Consolidated Fixed
Charge Coverage Ratio, Consolidated EBITDA will be (i) at
September 30, 2012, the actual Consolidated EBITDA for the 3
months then ended times 4; (ii) at December 31, 2012, the
actual Consolidated EBITDA for the 6 months then ended times
2; and (iii) at March 31, 2013, the actual Consolidated
EBITDA for the 9 months then ended times 4/3 (provided that
the add-backs for Entine Indebtedness repayment and the IRS
Payments are not annualized).
o Restriction on Capital Expenditures
For the fiscal year ending September 30, 2012, the Amendment
reduced the limitation on the Company's capital expenditures
from $3.25 million to $2.25 million and for fiscal years
ending September 30, 2013 and each fiscal year thereafter,
the Amendment raised the limitation on the Company's capital
expenditures from $2.00 million to $2.25 million
o Termination of Acquisition Line of Credit
The Amendment also accelerated the termination date of the
Company's $5 million acquisition line of credit to June 29,
2012, which will prohibit the Company from drawing down the
approximately $1 million of previously available undrawn
funds.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit Description
Number
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10.1 Amendment No. 3 to Loan and Security Agreement, dated
as of June 29, 2012, between Dynasil Corporation of
America and Sovereign Bank, N.A.
10.2 Waiver of Default Letter, dated as of June 29, 2012,
from Sovereign Bank, N.A. to Dynasil Corporation of
America.
10.3 Loan and Security Agreement, dated as of July 7,
2010, by and between Sovereign
Bank, N.A., as Lender, and Dynasil Corporation of
America, as Company (filed as Exhibit 10.1 to
Dynasil's current report on 8-K dated July 14, 2010
and incorporated herein by reference).
10.4 Amendment No. 1 to Amended and Restated Loan and
Security Agreement, dated as of April 12, 2012, by
and between Sovereign Bank, N.A., as Lender, and
Dynasil Corporation of America, as Company (filed as
Exhibit 10.1 to Dynasil's current report on Form 10-Q
for the period ending March 31, 2011, dated May 16,
2011 and incorporated herein by reference).
10.5 Amendment No. 2 to Amended and Restated Loan and
Security Agreement, dated as of April 12, 2012, by
and between Sovereign Bank, N.A., as Lender, and
Dynasil Corporation of America, as Company (filed as
Exhibit 10.1 to Dynasil's current report on Form 8-K
dated April 16, 2012 and incorporated herein by
reference).
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
DYNASIL CORPORATION OF AMERICA
Date: July 5, 2012 By: /s/ Richard Johnson
Name: Richard Johnson
Title: Chief Financial Officer
Exhibit Index
Exhibit Description
Number
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10.1 Amendment No. 3 to Loan and Security Agreement, dated
as of June 29, 2012, between Dynasil Corporation of
America and Sovereign Bank, N.A.
10.2 Waiver of Default Letter, dated as of June 29, 2012,
from Sovereign Bank, N.A. to Dynasil Corporation of
America.
10.3 Loan and Security Agreement, dated as of July 7,
2010, by and between Sovereign
Bank, N.A., as Lender, and Dynasil Corporation of
America, as Company (filed as Exhibit 10.1 to
Dynasil's current report on 8-K dated July 14, 2010
and incorporated herein by reference).
10.4 Amendment No. 1 to Amended and Restated Loan and
Security Agreement, dated as of April 12, 2012, by
and between Sovereign Bank, N.A., as Lender, and
Dynasil Corporation of America, as Company (filed as
Exhibit 10.1 to Dynasil's current report on Form 10-Q
for the period ending March 31, 2011, dated May 16,
2011 and incorporated herein by reference).
10.5 Amendment No. 2 to Amended and Restated Loan and
Security Agreement, dated as of April 12, 2012, by
and between Sovereign Bank, N.A., as Lender, and
Dynasil Corporation of America, as Company (filed as
Exhibit 10.1 to Dynasil's current report on Form 8-K
dated April 16, 2012 and incorporated herein by
reference).