eLinear Form 8-K Funding
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 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): July 14, 2005
ELINEAR,
INC.
(Exact
name of registrant as specified in its charter)
DELAWARE
(State
or
other jurisdiction of incorporation)
0-27418
76-0478045
(Commission
File Number)
(I.R.S.
Employer Identification No.)
2901
West Sam Houston Pkwy, Suite E-300, Houston, Texas 77043
(Address
of principal executive offices, including zip code)
(713)
896-0500
(Registrant’s
telephone number, including area code)
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.
ྑ
Soliciting material pursuant to Rule 14a-12 under the Exchange Act.
ྑ
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act.
ྑ
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act.
On
July
14, 2005, eLinear, Inc. (the “Company”), amended that certain financing
arrangement, entered into on February 28, 2005, for a total principal amount
of
$12 million with Laurus Master Fund, Ltd. (“Laurus”),
Iroquois Capital LP (“Iroquois”), RHP Master Fund (“RHP”), Basso Private
Opportunity Holding Fund Ltd. (“Basso Private”), and Basso Multi-Strategy
Holding Fund Ltd. (“Basso Multi”, collectively, the “Investors”) by entering
into a Supplement agreement with the Investors. Pursuant to the February 28,
2005 financing arrangement, as described in the Company’s Form 8-K filed on
March 3, 2005, 80% (net of applicable fees) of the $12 million total principal
amount was held in restricted accounts for each respective investor.
The
Supplement modifies the February 2005 financing arrangement by (i) releasing
all
the funds held in the restricted account, of which $7,200,000 was pre-paid
to
the respective Investors without penalty and the remaining amount, approximately
$2,138,921, held in the restricted account was funded to the Company; (ii)
canceling the notes issued pursuant to the February 2005 financing arrangement
and issuing new notes to each Investor for their respective total principal
amount of $5,054,566.66 that included (x) the 20% (including applicable fees)
of
the February 2005 financing funded to the Company in February 2005; (y) the
funds released from the restricted accounts to the Company pursuant to the
Supplement; and (z) the interest accrued on the funds held in the restricted
account from March 2005 until July 14, 2005; (iii) granting the Investors a
right to participate in their pro
rata
portion
of 60% of any future financing of the Company for one year; and (iv) issuing
warrants exercisable after January 14, 2006 at an above market price into an
aggregate of 991,667 shares of common stock to Iroquois, RHP, Basso Private
and
Basso Multi. The terms between the Company and each of the respective Investors
are substantially similar.
The
new
notes are secured by all of the Company and its subsidiaries’ assets.
The
payment of interest and principal, under certain circumstances, may be made
with
shares of the Company common stock at a conversion price of no less than $1.00
per share. The
new
notes will accrue interest at a rate per annum equal to the “prime rate”
published in the Wall Street Journal plus seventy five basis points, as may
be
adjusted. The Company has the ability to prepay any amounts owed under these
new
notes at 115% of the principal amount. The
Company is obligated to make monthly payments, either in cash or stock as
determined by the new notes, beginning on August1, 2005 for the total principal
of the new notes, plus applicable interest (the “Monthly Payment”). The Monthly
Payment will be made (i) automatically by a conversion in stock at a “Fixed
Conversion Price”, (ii) at the discretion of the Company at a reduced conversion
price, but no less than $1.00, or (iii) in cash paid by the Company at 101%
of
the Monthly Payment. The Monthly Payments shall be automatically made, subject
to volume limitation, in Company common stock at the Fixed Conversion Price
if
(i) the shares of the Company common stock underlying the shares of the notes
are registered; and (ii) the average trading price of the Company common stock
for the five days preceding the Monthly Payment is greater than 110% of the
Fixed Conversion Price. If the Monthly Payment is not automatically converted
into shares of Company common stock because the average trading price of the
Company common stock for the five trading days prior to due date of the Monthly
Payment is less than 110% of the Fixed Conversion Price, the Company may, at
its
discretion, make the Monthly Payment in Company common stock at a conversion
price equal to 85% of the average trading price of the Company common stock
for
the five lowest closing days for the 22 trading days prior to the Company’s
notice, but in no case shall the conversion price be less than $1.00. The Fixed
Conversion Price is $1.00, subject to adjustment, but in no case reduced to
less
than $1.00.
The
Investors may convert all or any portion of the principal amounts of their
respective new notes, including any accrued interest or fees thereon at the
Fixed Conversion Price.
Notwithstanding
the foregoing, the Company’s right to issue shares of its common stock in
payment of obligations under the new notes shall be subject to the limitation
that the number of aggregate shares of common stock issued to each Investor
shall not exceed 25% of the aggregate dollar trading volume of the Company
common stock for the 22 trading days immediately preceding the date on which
the
conversion is to occur.
The
Investors may not exercise the warrants issued pursuant to the Supplement until
January 14, 2006 and are exercisable until January 14, 2013, of which 466,667
of
the warrants are exercisable at $1.50 and 525,000 are exercisable at $1.75.
The
Company has agreed to file a registration statement with the Securities and
Exchange Commission by August 13, 2005 in order to register the resale of the
shares
of
common stock underlying the new notes, the shares issuable upon exercise of
the
warrants issued in February 2005, and the warrants issued in connection with
the
Supplement. If the Company
fails to meet this deadline, if the registration statement is not declared
effective prior to October 27, 2005, if the registration statement ceases to
remain effective, or certain other events occur, the Company has agreed to
pay
the Investors liquidated damages of 1.25% of the principal amount of the new
notes per month; except that the Company will only have to pay 50% of the
liquidated damages if the registration statement is not declared effective
by
the Securities and Exchange Commission under certain circumstances.
This
summary description of the financing arrangements with the Investors does not
purport to be complete and is qualified in its entirety by reference to the
form
of the agreements and the other documents and instruments that are filed as
exhibits to this current report.
Item
2.03 Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant.
As
more fully
described above, the Company entered a supplement, on July 14, 2005, of the
financing arrangements, for up to $12 million, entered into on February 28,
2005
with the Investors. The notes issued in February 2005 were cancelled and new
notes were which are convertible, upon certain terms, by the Company and the
Investors were issued.
Item
3.02 Unregistered
Sales of Equity Securities.
As
more
fully described above, the Company issued (i) new convertible notes for up
to
$5,054,566.66, the principal amount of which is convertible into up to 5,054,567
shares of Company common stock, depending on the conversion price, which shall
not be less than $1.00, and (ii) warrants to purchase a total of 991,667 shares
of Company common stock. The Company issued the new notes and warrants pursuant
to the exemption from registration requirements of the Securities Act of 1933,
as amended, by Section 4(2).
Item
9.01 Financial
Statements and Exhibits
| |
(a)
|
Financial
Statements of Business Acquired.
|
Inapplicable.
| |
(b)
|
Pro
Forma Financial Information.
|
Exhibit
Number Exhibit
Description
| |
10.01
|
|
|
Form
of Supplement, dated July 14, 2005, by and between eLinear, Inc.
and
Investor.
|
| |
10.02
|
|
|
Form
of Warrant A, dated as of July 14, 2005, by and between eLinear,
Inc. and
Investor.
|
| |
10.03
|
|
|
Form
of Warrant B, dated as of July 14, 2005, by and between eLinear,
Inc. and
Investor.
|
| |
10.04
|
|
|
Form
of Amended and Restated Secured Convertible Term Note, dated as of
July
14, 2005, by and between eLinear, Inc. and
Investor.
|
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.
ELINEAR,
INC.
By:
/s/
Michael Lewis__________
Michael
Lewis,
Chief
Executive Officer
DATE:
July 20, 2005