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) MAY 9, 2007
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I/OMAGIC CORPORATION
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(Exact name of registrant as specified in its charter)
NEVADA 000-27267 33-0773180
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4 MARCONI, IRVINE, CALIFORNIA 92618
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (949) 707-4800
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NOT APPLICABLE
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(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.
STRATEGIC ALLIANCE SHARE PURCHASE AGREEMENT WITH JIANGXI GREATSOURCE DISPLAY
TECH. CO. LTD.
On May 9, 2007, I/OMagic Corporation (the "Company") entered into a
Strategic Alliance Share Purchase Agreement (the "Purchase Agreement") with
Jiangxi Greatsource Display Tech. Co. Ltd. ("Jiangxi"), which provides for the
purchase of 21,750,000 shares of the Company's common stock by Jiangxi for an
aggregate of $95,000,000.
Pursuant to the Purchase Agreement, the purchase of the shares of the
Company's common stock is to occur in three separate closings as follows: (1)
the first closing is to occur on September 30, 2007 and is to include the
issuance of 8,000,000 shares of the Company's common stock to Jiangxi for a
payment of $24,000,000; (2) the second closing is to occur between March 31,
2008 and May 31, 2008 and is to include the issuance of 10,000,000 shares of the
Company's common stock to Jiangxi for a payment of $41,000,0000; and (3) the
third closing is to occur on May 31, 2008 and is to include the issuance of
3,750,000 shares of the Company's common stock to Jiangxi for a payment of
$30,000,000.
In the next 30 days, the Company and Jiangxi are to negotiate the terms and
conditions of (1) a registration rights agreement to register the shares of the
Company's common stock purchased by Jiangxi pursuant to the Purchase Agreement;
(2) an employment agreement between the Company and Tony Shahbaz, the Company's
president and chief executive officer; (3) a voting agreement between Jiangxi
and the Company; and (4) such other agreements as the parties deem necessary.
Pursuant to the Purchase Agreement, on June 10, 2007, the Company is to
appoint a nominee of Jiangxi to the board of directors of the Company.
To the extent the transactions covered by the Purchase Agreement require
filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), within 10 days of the execution date of the Purchase
Agreement the Company and Jiangxi are to file with the Federal Trade Commission
and the United States Department of Justice all reports and other documents
required to be filed by such party and promptly comply with any requests for
additional information by the Federal Trade Commission or the United States
Department of Justice, in each case such that the initial 30 day waiting period
applicable to the transactions contemplated by the Purchase Agreement under the
HSR Act shall expire as soon as practicable.
In addition to customary closing conditions, the closings under the
Purchase Agreement are contingent upon (1) Jiangxi obtaining governmental
approvals in the People's Republic of China to secure the funds necessary to
purchase the shares contemplated by the Purchase Agreement; (2) expiration or
termination of the waiting period under the HSR Act; (3) the Company's common
stock being designated for quotation or listed on the OTC Bulletin Board; (4)
filing of all reports that the Company is obligated to file under the Securities
Exchange Act of 1934, as amended; and (5) removal of the "E" modifier appended
to the Company's trading symbol. Also, either party may terminate the Purchase
Agreement on or before June 8, 2007 based on the results of such party's due
diligence.
The disclosures in Item 2.03 and 5.02 are hereby incorporated by reference.
The Strategic Alliance Share Purchase Agreement also contains other
customary representations, warranties, covenants and closing conditions.
A copy of the Strategic Alliance Share Purchase 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 DIRECT FINANCIAL OBLIGATION.
Pursuant to the Purchase Agreement, Jiangxi is to provide the Company with
a trade credit facility in an aggregate amount not to exceed $15,000,0000. Such
credit facility is to terminate on the date of the third closing. The credit
facility may only be used in connection with purchases of products from
suppliers to the Company. For each purchase of products in reliance on the
credit facility, the Company must promptly comply with payment terms equal to
net 75 days.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.
The disclosures in Item 1.01 are hereby incorporated by reference.
The shares of the Company's common stock to be issued pursuant to the
Purchase Agreement are being issued in reliance upon exemptions from securities
registration afforded by Rule 506 of Regulation D or Regulation S as promulgated
by the United States Securities and Exchange Commission under the Securities Act
of 1933, as amended.
ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT.
The disclosures in Item 1.01 are hereby incorporated by reference.
Based on the number of shares of the Company's common stock outstanding as
of the filing of this Current Report on Form 8-K, Jiangxi will hold
approximately 70% of the outstanding shares of the Company's common stock after
the consummation of the purchase and sale of all 21,750,000 shares of the
Company's common stock as contemplated in the Purchase Agreement.
ITEM 5.02 COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.
The employment agreement with Mr. Shahbaz described in Item 1.01 is to
provide for, among other things, the opportunity for Mr. Shahbaz to receive a
bonus in connection with the successful negotiation of the Purchase Agreement,
which bonus is to be payable in the form of shares of the Company's common stock
at each of the closing dates as follows: (1) at the first closing, such number
of shares when combined with the number of shares owned by Mr. Shahbaz prior to
such issuance is to result in Mr. Shahbaz having a direct ownership interest in
the Company equal to 25.76% of the then outstanding shares calculated on a
fully-diluted basis; (2) at the second closing, such number of shares when
combined with the number of shares owned by Mr. Shahbaz prior to such issuance
is to result in Mr. Shahbaz having a direct ownership interest in the Company
equal to 16.60% of the then outstanding shares calculated on a fully-diluted
basis; and (3) at the third closing, such number of shares when combined with
the number of shares owned by Mr. Shahbaz prior to such issuance is to result in
Mr. Shahbaz having a direct ownership interest in the Company equal to 9.90% of
the then outstanding shares calculated on a fully-diluted basis. Such shares are
to be registered by the company on Form S-8. The employment agreement is subject
to approval by the Company's board of directors. Because Mr. Shahbaz is a
director of the Company, the employment agreement constitutes an interested
director transaction.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
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None.
(b) Pro Forma Financial Information.
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None.
(c) Exhibits.
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Number Description
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10.1 Strategic Alliance Share Purchase Agreement dated May 9, 2007
between I/OMagic Corporation and Jiangxi Greatsource Display
Tech. Co. Ltd.
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: May 14, 2007 I/OMAGIC CORPORATION
By: /S/ THOMAS L. GRUBER
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Thomas L. Gruber, Chief Financial Officer
EXHIBITS FILED WITH THIS REPORT
Number Description
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10.1 Strategic Alliance Share Purchase Agreement dated May 9, 2007 between
I/OMagic Corporation and Jiangxi Greatsource Display Tech. Co. Ltd.