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) APRIL 18, 2008
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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.
NEW LOAN AND SECURITY AGREEMENT WITH SILICON VALLEY BANK
On April 18, 2008, I/OMagic Corporation (the "Company") and its
wholly-owned subsidiary, IOM Holdings, Inc. (the "Subsidiary"), entered into a
Loan and Security Agreement dated as of April 18, 2008 (the "Loan and Security
Agreement") with Silicon Valley Bank (the "Bank"), which provides for a credit
facility based on the Company's accounts receivable. The Loan and Security
Agreement serves to amend and restated a previous Loan and Security Agreement
dated January 29, 2007 among the parties and described below under the heading
"Prior Loan and Security Agreement with Silicon Valley Bank."
The credit facility allows the Company to finance its accounts receivable
and borrow up to a maximum aggregate amount of $7.0 million; provided, that the
Company may only borrow up to a limit of 60% of each eligible account or such
other percentage as the Bank establishes. The line of credit expires on January
29, 2009. Advances on the line of credit bear interest at a floating rate equal
to the prime rate published from time to time by the Bank plus 2.5%. The credit
facility requires that the Company pay a collateral handling fee of $2,000 per
month and other customary fees and expenses.
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
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.
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 5.0% above the rate of interest in
effect from time to time under the credit facility.
The Loan and Security Agreement also contains other customary terms,
conditions, 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.
AMENDMENT TO LOAN DOCUMENTS
On April 18, 2008, the Company and the Subsidiary entered into an
Amendment to Loan Documents with the Bank, which provides that the loan
documents executed in connection with the Company's prior credit facility with
the Bank dated January 29, 2007 shall apply to the Loan and Security Agreement
described above, including the following documents: All standard documents of
the Bank entered into by the Company and/or the Subsidiary in connection with
Letters of Credit and/or Foreign Exchange Contracts; all security agreements,
collateral assignments and mortgages, including but not limited to those
relating to patents, trademarks, copyrights and other intellectual property; all
lockbox agreements and/or blocked account agreements; and all UCC-1 financing
statements and other documents filed with governmental offices which perfect
liens or security interests in favor of the Bank. In addition, that certain
Cross-Corporate Continuing Guaranty executed by the Company and the Subsidiary
in favor of the Bank and dated January 29, 2007 shall continue in full force and
effect and shall apply to all obligations of the Company and the Subsidiary
whether under the Loan and Security Agreement or any other new loan documents.
PRIOR LOAN AND SECURITY AGREEMENT WITH SILICON VALLEY BANK
On January 29, 2007, the Company and the Subsidiary entered into a Loan
and Security Agreement (the "Prior Agreement") with the Bank which provided for
a revolving line of credit. The line of credit expired on January 29, 2009. On
December 12, 2007, the Company entered into an Amendment to Loan and Security
Agreement with the Bank that amended the Prior Agreement and provided a waiver
of the violation of, and amended, the Company's tangible net worth financial
covenant, and reduced the maximum amount of available borrowings under the line
of credit.
As amended, the line of credit allowed the Company to borrow up to a
maximum amount equal to the lesser of (a) $7.0 million, or (b) an amount equal
to 60% of eligible accounts plus the lesser of (1) 20% of the value of eligible
inventory, (2) $750,000 (provided that on and after March 30, 2008, such amount
will be $0.00), and (3) 33% of eligible accounts. As amended, the line of credit
imposed a financial covenant that required the Company to have minimum tangible
net worth for the month ended February 28, 2007 and each month ending thereafter
of $3,500,000, plus (i) 50% of all consideration received after January 27, 2007
for equity securities and subordinated debt, plus (ii) 50% of our net income in
each fiscal quarter ending after January 27, 2007. As amended, amounts
outstanding under the line of credit were to accrue interest at a per annum rate
equal to the prime rate of interest published from time to time by the Bank plus
2.50%. In addition, the Company was to pay to the Bank customary fees and
expenses, including an early termination fee of 0.50% of the maximum line amount
in the event the Company terminated the facility prior to January 27, 2009, an
unused line fee equal to 0.25% per annum and payable monthly, a commitment fee
of $50,000, a monthly collateral monitoring fee of $1,250 and an anniversary fee
of $50,000, as well as for the issuance or renewal of letters of credit and all
expenses incurred by the Bank related to the Prior Agreement. The Company's
obligations under the line of credit with the Bank were secured by substantially
all of its assets.
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.
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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 Loan and Security Agreement dated as of April 18, 2008
between I/OMagic Corporation, IOM Holdings, Inc. and
Silicon Valley Bank
10.2 Amendment to Loan Documents dated April 18, 2008 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: April 22, 2008 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 Loan and Security Agreement dated as of April 18, 2008 between
I/OMagic Corporation, IOM Holdings, Inc. and Silicon Valley Bank
10.2 Amendment to Loan Documents dated April 18, 2008 between I/OMagic
Corporation, IOM Holdings, Inc. and Silicon Valley Bank