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 6, 2005
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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.
On June 6, 2005, the Company entered into an agreement for a trade credit
facility with Lung Hwa Electronics, Co. Ltd. ("LHE"). LHE is a stockholder and
subcontract manufacturer and supplier of I/OMagic. Under the terms of the
facility, LHE has agreed to purchase and manufacture inventory on our behalf.
The Company can purchase up to $15.0 million of inventory either (i) through LHE
as an international purchasing office, or (ii) manufactured by LHE. For
inventory purchased through LHE the payment terms are 120 days following the
date of invoice by LHE and LHE charges the Company a 5% handling fee on a
supplier's unit price. A 2% discount of the handling fee is applied if the
Company reaches an average running monthly purchasing volume of $750,000.
Returns made by us, which are agreed to by a supplier, result in a credit to us
for the handling charge. For inventory manufactured by LHE, the payment terms
are 90 days following the date of the invoice by LHE. Upon effectiveness of the
Agreement, the Company is required to pay LHE $1.5 million as an early payment
for all invoices coming due for payment. Any early payment funds remaining three
months after the date of the Agreement shall be refunded to the Company
immediately. Once the $1.5 million has been exhausted, or three months from the
date of the Agreement has expired, whichever is sooner, the Company shall pay
LHE 10% of the purchase price on any purchase orders issued to LHE, as a
down-payment for the order, within one week of the purchase order. The Agreement
has an initial term of one year after which the Agreement will continue
indefinitely if not terminated at the end of the initial term. At the end of the
initial term and at any time thereafter, either party has the right to terminate
the facility upon 30 days' prior written notice to the other party.
The above description of the trade credit facility is qualified in its entirety
by the terms of the Agreement attached as Exhibit 10.1 of this Report.
ITEM 1.02. TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT.
In connection with the entry into the Agreement with LHE described under Item
1.01 above, the Company entered into a Termination Agreement effective June 6,
2005, attached hereto as Exhibit 10.2, that terminated the Company's previous
January 23, 2003 Agreement with LHE that provided a $10 million trade credit
facility to the Company. Under the terms of the January 23, 2003 Agreement, LHE
agreed to purchase up to $10.0 million of inventory on the Company's behalf. The
payment terms were 120 days following the date of invoice by LHE. LHE charged
the Company a 5% handling fee on a supplier's unit price. A 2% discount of the
handling fee was applied when the Company reached an average running monthly
purchasing volume of $750,000. Returns made by the Company, which were agreed to
by a supplier, resulted in a credit to the Company for the handling charge. As
security for the trade credit facility, the Company paid LHE a $1.5 million
security deposit during 2003 that was eventually applied in its entirety against
the Company's outstanding trade payables. This January 23, 2003 Agreement had an
initial term of one year after which the agreement would continue indefinitely
if not terminated at the end of the initial term. At the end of the initial term
and at any time thereafter, either party had the right to terminate the facility
upon 30 days' prior written notice to the other party.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
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Not applicable.
(b) Pro Forma Financial Information.
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Not applicable.
(c) Exhibits.
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Number Description
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10.1 Agreement between Lung Hwa Electronics Co., Ltd. and
I/OMagic Corporation dated June 6, 2005
10.2 Termination Agreement between Lung Hwa Electronics Co.,
Ltd. and I/OMagic Corporation dated June 6, 2005
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: June 10, 2005 I/OMAGIC CORPORATION
By: /s/ STEVE GILLINGS
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Steve Gillings,
Chief Financial Officer
EXHIBITS FILED WITH THIS REPORT
Number Description
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10.1 Agreement between Lung Hwa Electronics Co., Ltd. and I/OMagic
Corporation dated June 6, 2005
10.2 Termination Agreement between Lung Hwa Electronics Co., Ltd. and
I/OMagic Corporation dated June 6, 2005