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 10, 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 March 9, 2005, the Company entered into a Loan and Security Agreement
(the "Loan Agreement") for an asset-based line of credit with GMAC Commercial
Finance LLC ("GMAC"). The line of credit allows the Company to borrow up to a
maximum of $10.0 million. The line of credit expires on March 9, 2008 and is
secured by substantially all of the Company's assets.
On June 30, 2005, the Company entered into a First Amendment to Loan and
Security Agreement (the "Amendment") with GMAC that amended a certain financial
covenant under the Loan Agreement. The Loan Agreement was amended to exclude the
Company's Fixed Charge Coverage Ratio financial covenant for the Measurement
Periods ended April 30 and May 31, 2005. As of June 10, 2005, the Company was in
breach of the Fixed Charge Coverage Ratio financial covenant for the Measurement
Period ended April 30, 2005; however, as a result of the Amendment, the Company
is no longer in breach of this covenant. The Company did not breach the Fixed
Charge Coverage Ratio financial covenant for the Measurement Period ended May
31, 2005.
ITEM 2.04. TRIGGERING EVENTS THAT ACCELERATE OR INCREASE A DIRECT FINANCIAL
OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT.
Item 1.01 above is incorporate herein by reference.
Under the Loan Agreement, the Company was required to maintain a specified
Fixed Charge Coverage Ratio for the Measurement Periods ended April 30 and May
31, 2005. On June 10, 2005, the Company breached the Fixed Charge Coverage Ratio
financial covenant for the Measurement Period ended April 30, 2005. The covenant
required a Fixed Charge Coverage Ratio of at least 1.0 to 1.0, calculated based
on the Company's earnings before interest, taxes, depreciation and amortization.
As of the Measurement Period ended April 30, 2005, the Company's Fixed Charge
Coverage Ratio was negative 5.4 to 1.0. As of June 10, 2005, the Company owed
approximately $3,172,721 under its credit facility with GMAC. Under the terms of
the Loan Agreement, in an event of default, including as a result of the
Company's failure to maintain the required Fixed Charge Coverage Ratio for
certain specified Measurement Periods, GMAC has the option to declare all
obligations under the Loan Agreement immediately due and payable in full, cease
making loans or advances under the Loan Agreement, terminate the Loan Agreement,
and take all necessary actions to protect its security interest in the Company's
assets. As a result of the Amendment described in Item 1.01 above, the Company
is no longer in breach of the Fixed Charge Coverage Ratio financial covenant.
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 First Amendment to Loan and Security Agreement between
GMAC Commercial Finance LLC and I/OMagic Corporation
dated June 30, 2005*
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(*) Incorporated by reference to the Registrant's registration statement on
Form S-1/A No. 5 filed by the Registrant with the Securities and Exchange
Commission on July 5, 2005 (Reg. No. 333-115208).
SIGNATURE
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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: July 7, 2005 I/OMAGIC CORPORATION
By: /s/ STEVE GILLINGS
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Steve Gillings,
Chief Financial Officer