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) FEBRUARY 2, 2007
-----------------------
I/OMAGIC CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 000-27267 88-0290623
- ---------------------------- --------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4 MARCONI, IRVINE, CALIFORNIA 92618
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (949) 707-4800
--------------------------
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 (SEE General Instruction A.2. below):
|_| 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.
LOAN AND SECURITY AGREEMENT WITH SILICON VALLEY BANK
On February 2, 2007, I/OMagic Corporation (the "Company") entered into
a Loan and Security Agreement with Silicon Valley Bank (the "Bank"), which
provides for a revolving line of credit.
The line of credit allows the Company to borrow up to a maximum amount
equal to the lesser of (i) $10.0 million or (ii) an amount equal to 60% of
eligible accounts plus the lesser of (a) 25% of the value of eligible inventory
or (b) $3 million or (c) 33% of eligible accounts. The line of credit allows for
a sublimit of $2.5 million for all (x) outstanding letters of credit, (y)
foreign exchange contracts to purchase from or sell to the Bank a specific
amount of foreign currency and (z) the amount of the revolving line used for
cash management services, including merchant services, direct deposit of
payroll, business credit card and check cashing services. The line of credit
expires on February 2, 2009. Advances on the line of credit bear interest at a
floating rate equal to the prime rate plus 1.0%.
The obligations of the Company under the Loan and Security Agreement
are secured by substantially all of the Company's assets and guaranteed by the
Company's wholly-owned subsidiary, IOM Holdings, Inc., (the "Subsidiary")
pursuant to a Cross-Corporate Continuing Guaranty by the Company and the
Subsidiary. The obligations of the Company and the guarantee obligations of the
Subsidiary are secured pursuant to an Intellectual Property Security Agreement
executed by the Company and an Intellectual Property Security Agreement executed
by the Subsidiary.
If the Company terminates the Loan and Security Agreement prior to the
maturity date, the Company will be subject to a termination fee as follows: (i)
if the termination occurs on or before the first anniversary of the effective
date, the termination fee is equal to 1.50% of the maximum line amount; and (ii)
if the termination occurs after the first anniversary of the effective date and
on or before the second anniversary of the effective date, the termination fee
is equal to 0.50% of the maximum line amount. The credit facility is subject to
an unused line fee equal to 0.25% per annum, payable monthly based on the
average daily unused amount of the line of credit, as determined by the Bank.
The credit facility is also subject to a commitment fee of $50,000, a monthly
collateral monitoring fee of $1,250 and an anniversary fee of $50,000. In
addition, the Company must pay to the Bank customary fees and expenses for the
issuance or renewal of letters of credit and all expenses incurred by the Bank
related to the Loan and Security Agreement.
The credit facility is subject to a financial covenant on a
consolidated basis for the tangible net worth of the Company for each month
ending after February 28, 2007, which must be at least $4,750,000 plus (i) 50%
of all consideration received for equity securities and subordinated debt, plus
(ii) 50% of the net income for each fiscal quarter. "Tangible net worth" is
defined as the consolidated total assets of the Company and its subsidiaries
minus (a) any amounts attributable to (1) goodwill, (2) intangible items, and
(3) notes, accounts receivable and other obligations owing to the Company from
its officers and affiliates, and reserves not already deducted from assets,
minus (b) total liabilities, plus (c) subordinated debt.
In the event of a default and continuation of a default, the Bank may
accelerate the payment of the principal balance requiring the Company to pay the
entire indebtedness outstanding on that date. From and after an event of
default, the outstanding principal balance will bear interest until paid in full
at an increased rate per annum equal to 5% above the rate of interest in effect
from time to time under the credit facility.
The Loan and Security Agreement also contains other customary
representations, warranties and covenants.
A copy of the Loan and Security Agreement is attached hereto as
Exhibit 10.1, and is incorporated herein by reference. The foregoing description
of this agreement is qualified in its entirety by reference to the full text of
the agreement.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION
UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
The disclosures contained in Item 1.01 of this Current Report on Form
8-K are incorporated herein by this reference.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
None.
(b) PRO FORMA FINANCIAL INFORMATION.
None.
(c) EXHIBITS.
NUMBER DESCRIPTION
10.1 Loan and Security Agreement dated February 2, 2007
between I/OMagic Corporation, IOM Holdings, Inc. and
Silicon Valley Bank.
SIGNATURE
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.
Date: February 8, 2007 I/OMAGIC CORPORATION
By: /S/ THOMAS L. GRUBER
-----------------------------------------
Thomas L. Gruber, Chief Financial Officer
EXHIBITS FILED WITH THIS REPORT
NUMBER DESCRIPTION
10.1 Loan and Security Agreement dated February 2, 2007
between I/OMagic Corporation, IOM Holdings, Inc. and
Silicon Valley Bank.