UNITED
STATES
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, 2008
Industrial Enterprises of America,
Inc.
(Exact
name of registrant as specified in its charter)
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Nevada
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001-32881
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13-3963499
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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651 Holiday
Drive, Suite 300, Pittsburgh, Pennsylvania 15220
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code:
(412)
928-2056
(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:
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Section 1 - Registrant’s Business
and Operations
Item 1.01 Entry into a Material
Definitive Agreement.
On October 11, 2007, Industrial
Enterprises of America, Inc., a Nevada corporation (the “Company”), and its
subsidiaries, Unifide Industries, Limited Liability Company, a New Jersey
limited liability company, Pitt Penn Oil Co., LLC, an Ohio limited liability
company, EMC Packaging, Inc., a Delaware corporation, Todays Way Manufacturing
LLC, a New Jersey limited liability company, and Pitt Penn Holding Co., LLC, an
Ohio limited liability company (the subsidiaries together with the Company,
collectively, the “Borrowers”), entered into a Credit Agreement, as amended (the
“Credit Agreement”) and a promissory note (the “Note”) with Sovereign Bank (the
“Lender”) in connection with a revolving credit line
facility. Pursuant to the terms of the Credit Agreement, the Lender
may make revolving credit loans to the Borrowers, on a joint and several basis,
in an aggregate principal amount not to exceed $5,000,000.
As previously disclosed in its Current
Report on Form 8-K
filed
with
the
Securities
and Exchange Commission (the “SEC”) on
February 19, 2008, the Company received a notice of default under the Credit
Agreement on February 12, 2008. As a result of the default, the
Lender notified the Company
that
it would no longer make any loans or advances to the Company, the Lender
increased the rate of interest to the default rate
under the Credit Agreement
and the Lender revised certain terms of
the Credit Agreement relating to Eligible Accounts, Eligible Inventory and
Borrowing Base. The Lender further reserved the right to exercise all
other remedies under the Credit Agreement, the First Continued, Amended and
Restated Security Agreement dated October 11, 2007 and the Note (collectively
the “Loan Documents”), including the right to declare all outstanding
borrowings
immediately due and
payable.
On May 23, 2008, the Borrowers entered
into a Forbearance Agreement with the Lender (the “Forbearance Agreement”),
pursuant to which the Lender agreed to forbear from further exercising its
rights under the Loan Documents until October 30, 2008 (the “Forbearance
Termination Date”), or earlier in the event of a default under the Forbearance
Agreement. The Lender has no obligation to make any additional loans
to the Borrowers. All borrowings outstanding under the Credit
Agreement will continue to incur interest at the default rate, and the Borrowers
will make monthly interest payments on the outstanding principal at the prime
rate plus one percent. In addition, the Borrowers will pay the Lender
a Forbearance Fee of $25,000.
The Forbearance Agreement imposes
certain covenants on the Borrowers including: (i) limitations on the use of
proceeds; (ii) maintaining accounts at the Lender; (iii) budgeting and operating
results reporting requirements; and (iv) certain other customary
covenants. In addition, the Company covenanted to file: (i) its
Annual Report on Form 10-K for fiscal year ended June 30, 2007 on or before June
30, 2008; (ii) its Quarterly Reports on Forms 10-Q for fiscal quarters ended
September 30, 2007, December 31, 2007 and March 31, 2008 on or before July 31,
2008; and (iii) its Annual Report on Form 10-K for fiscal year ended June 30,
2008 on or before September 30, 2008. The Forbearance Agreement also
requires the Borrowers to retain an investment banker, on terms and conditions
satisfactory to the Lender, and authorize the investment banker to commence a
marketing effort for all, or substantially all, of the assets of the Borrowers,
to evaluate any resulting proposals, and to facilitate such sales or other
transactions on behalf of the Borrowers as the investment banker deems necessary
to repay any outstanding borrowings in full on or before the Forbearance
Termination Date.
The Forbearance Agreement sets forth
certain events of default, including (i) a dispute by the Borrowers regarding
the enforceability of the Forbearance Agreement or any Loan Document, or any
term or condition of either, (ii) in the event that any material provision of
the Forbearance Agreement or any Loan Document is found to be invalid or
unenforceable, (iii) any additional default under the Loan Documents, (iv) a
material adverse change in the financial condition or credit worthiness of any
Borrower and (v) other customary events of default.
In connection with the execution of the
Forbearance Agreement, Pitt Penn Oil Co., LLC executed a mortgage against its
property in Creighton, Pennsylvania in favor of the Lender, to secure the
Borrowers’ obligations under the Loan Documents.
The foregoing summary of the
Forbearance Agreement and the Credit Agreement are not complete and are
qualified in their entirety by reference to the full text of the Forbearance
Agreement and the Credit Agreement. A copy of the Forbearance
Agreement is attached to this Current Report on Form 8-K as Exhibit 10.1 and is
incorporated by reference into this Item 1.01.
Section 2 – Financial
Information
Item 2.03 Creation of a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement of a
Registrant.
The information set forth in Item 1.01
of this Current Report is incorporated by reference into this Item
2.03.
Item 2.04 Triggering Events That
Accelerate or Increase a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement.
As previously disclosed in its Current
Report on Form 8-K
filed with the SEC on January 18, 2008
, the Company entered into a Loan and
Securities Purchase Agreement (the “Agreement”) with
Black Nickel Vision Fund
LLC,
an institutional and
accredited investor (the “Investor”). Pursuant to the terms of the
Agreement, the Investor purchased $
750,000
of the Company’s 10% P
romissory Notes (the “2008 Notes”), and
agreed to purchase an additional $750,000 upon the occurrence of certain
events.
The
2008 Notes
bea
r interest at a rate of 10% per year and
have a maturity date of
July 15, 2008.
The
2008 Notes
also contain customary
events of default provisions.
The Agreement provide
d
, among other things, that
in the
event that the Company was not current in its reporting obligations under the
Securities Exchange Act of 1934, as amended, for any reason on or before March
15, 2008
(the “Filing
Deadline”)
, the Company shall issue the Investor, on March 16, 2008, a
certificate evidencing 1,500,000 shares of the Company’s common stock (the
“Common Stock”).
Also as
previously disclosed in its Current
Report on Form 8-K
filed with the SEC o
n March 26, 2008, the Company entered
into Amendment 1 (the “Amendment”) to the Agreement with the
Investor. As discussed above, the Agreement required the Company to
become current in its reporting obligations by the Filing Deadline, or to issue
additional shares of Common Stock
to the Investor
. The Amendment modified the
Filing Deadline to be April 22, 2008, and added certain provisions related to a
potential sale of the Company, or substantially all of the assets of the
Company, prior to the earlier of (i) the Filing Deadline, or (ii) the date the
Company becomes current in its reporting obligations.
On May 9, 2008, the Company received
from the Investor a notice of default (the “Notice”). The Notice cited an
event of default which occurred as a result of the Company’s failure to meet the
modified Filing Deadline, and demanded that the Company issue 1,500,000 shares
of Common Stock to the Investor. Additionally, the Notice alleged
that the Company was in default of the 2008 Notes for certain misrepresentations
made by the Company. As a result of the alleged default of the 2008
Notes, the Investor has claimed that the 2008 Notes are immediately due and
payable.
The
Investor
has
also
commenced a lawsuit
alleging the breaches and demanding the
remedies set forth above.
On May
12
, 2008 the Company issued the Investor
1,500,000 shares of Common Stock. The Company issued the Common Stock
in a
private placement exempt from
Federal securities
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended,
and Regulation D promulgated thereunder.
The issuance of the Common Stock was
exempt from registration
pursuant to Section 4(2) of the
Securities Act of 1933, as amended
, because (i) no form of solicitation or
general advertising was used in connection with the sale, (ii)
the
Investor is an institutional and
accredited investor and (iii)
the
Investor did not purchase the Common
Stock with a view towards, or for resale in connection with, the public sale
or distribution thereof.
The information set forth in Item 1.01
of this Current Report is also incorporated by reference into this Item
2.04.
Section 3 – Securities and Trading
Markets
Item 3.02 Unregistered Sale of Equity
Securities
The information set forth in Item 2.04
of this Current Report is incorporated by reference into this Item
3
.0
2
.
Section 8 – Other
Events
Item 8.01 Other
Events.
The information set forth in Item 2.04
of this Current Report is incorporated by reference into this Item
8.01.
Section 9 – Financial Statements
and Exhibits
Item 9.01 Financial Statements and
Exhibits.
(d)
Exhibits.
Exhibit
No.
Description
10.2 Credit
Agreement, dated
October 11,
2007
, incorporated by
reference to the Company’s Current Report on Form 8-K filed on February 19,
2008
10.3 Letter
Amendment to Credit Agreement, dated March 27, 2008,
incorporated by
reference to the Company’s Current
Report on Form 8-K filed on April 2, 2008
.
SIGNATURES
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.
Industrial Enterprises of America,
Inc.
(Registrant)
May 30, 2008
By:
/s/ James
Margulies
James Margulies
Chief
Executive Officer
Industrial Enterprises o... (CE) (USOTC:IEAM)
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