<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _________ TO ____________.
COMMISSION FILE NUMBER 0-27418
ELINEAR, INC.
----------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0478045
--------------------------------- ---------------------
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
10055 WESTMOOR DRIVE
WESTMINSTER, CO 80021
-----------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 534-1408
-----------------------------------------------------------------------------
(FORMER NAME, IF CHANGED SINCE LAST REPORT)
CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(d) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR
SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2)
HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON EQUITY AS OF OCTOBER 20, 2000: 17,500,000 SHARES OF COMMON STOCK,
$.001 PAR VALUE PER SHARE.
<PAGE> 2
INDEX
Part I. Financial Information*
PAGE
----
Item 1. Condensed Financial Statements (Unaudited)
Balance Sheets 2
Statements of Operations 3
Statement of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Condensed Financial Statements
(Unaudited) 6
Item 2. Management's Discussion and Analysis or Plan
of Operation 9
Part II. Other Information
Item 1. Legal Proceedings 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
------------------
* The accompanying financial information is not covered by an Independent
Certified Public Accountant's Report.
<PAGE> 3
ITEM 1: FINANCIAL STATEMENTS
ELINEAR, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED)
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents 30,167 939,493
Accounts receivable, net 347,062 32,490
Other current assets 31,622 3,000
Total current assets 408,851 974,983
Property and equipment, net 122,625 38,423
Other assets 3,121 7,547
Total assets 534,597 1,020,953
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 127,813 38,384
Accrued liabilities 15,401 8,956
Deferred income -- 9,250
Total current liabilities 143,214 56,590
Commitments -- --
Stockholders' equity:
Preferred stock; $.001 par value; 500,000 shares authorized; 0 shares
outstanding as of September 30, 2000;
250,000 shares outstanding as of December 31, 1999 -- 250
Common stock; $.001 par value; 75,000,000 shares
authorized; 17,500,000 shares outstanding 17,500 17,500
Additional paid in capital 1,374,633 948,650
Accumulated deficit (1,000,750) (2,037)
Total stockholders' equity 391,383 964,363
Total liabilities and stockholders' equity 534,597 1,020,953
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
2
<PAGE> 4
ELINEAR, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPT.30, NINE MONTHS ENDED SEPT.30,
------------------------- ----------------------------
2000 1999 2000 1999
------- ------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues 408,314 151,625 1,269,495 686,925
Operating expenses:
Wages and benefits 437,065 72,385 1,062,186 172,963
Professional services 75,580 660 204,451 2,497
Travel and entertainment 40,276 12,580 116,710 36,319
Rent 22,521 11,617 93,192 17,135
Sales and marketing 54,703 9,544 173,575 10,686
Insurance -- 1,874 8,218 2,773
Telephone 13,525 6,275 34,480 11,410
Depreciation 9,216 -- 22,692 --
Other 78,528 3,825 126,059 10,265
Total operating expenses 731,414 118,760 1,841,563 264,048
Income (loss) from operations (323,100) 32,865 (572,068) 422,877
Other income (expense):
Acquisition of fully vested common stock
options (441,764) -- (441,764) --
Interest income 964 541 13,924 2,220
Other income (expense) 806 467 1,195 (2,762)
Income (loss) before income taxes or
proforma income tax (763,094) 33,873 (998,713) 422,335
Income taxes (Proforma income tax expense) -- (12,194) -- 152,041)
(Net loss) proforma net income (763,094) 21,679 (998,713) 270,294
Basic and fully diluted earnings (loss)
per share (proforma for 1999) (.04) .001 (.04) .01
Weighted average shares outstanding:
Basic 17,500,000 26,774,013 25,136,364 26,774,013
Fully diluted 17,500,000 28,715,263 25,136,364 28,715,263
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 5
ELINEAR, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON PREFERRED PAID IN EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
------ ------ ------ ------ ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, Jan 1,2000 17,500,000 17,500 250,000 250 948,650 (2,037) 964,363
Issuance of stock options -- -- -- -- 3,203 -- 3,203
Retirement of preferred shares -- -- (250,000) (250) 250 -- --
Acquisition of fully vested
common stock options -- -- -- -- 422,530 -- 422,530
Net loss for the period 0 0 0 0 0 (998,713) (998,713)
Balance, September 30, 2000 17,500,000 17,500 -- -- 1,374,633 (1,000,750) 391,383
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 6
ELINEAR, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2000 1999
--------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) (998,713) 270,294
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Expenses funded from issuance of options 3,203 --
Expenses funded from acquisition of fully
vested common stock options 441,764 --
Depreciation 22,691 --
Changes in operating assets and liabilities:
Accounts receivable (143,572) (162,679)
Advances to employees 3,000 --
Other assets (27,196) (2,798)
Accounts payable 89,429 (6,914)
Accrued expenses 6,445 141,665
Deferred income (9,250) --
Net cash provided by (used in) operating
activities (612,199) 239,568
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (126,127) (25,803)
Net cash used in investing activities (126,127) (25,803)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to "S" corporation stockholders -- (53,279)
Payment on due to stockholders (171,000) --
Net cash used in financing activities (171,000) (53,279)
Net increase (decrease) in cash and cash equivalents (909,326) 160,486
Cash and cash equivalents at beginning of
period 939,493 36,269
Cash and cash equivalents at end of period 30,167 196,755
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 7
ELINEAR, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
1. The financial statements and notes thereto should be read in
conjunction with the financial statements and notes for the year ended December
31, 1999.
2. In the opinion of management, all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the results of
operations for the period presented have been included. The results of
operations for the nine months ended September 30, 2000 and 1999 are not
necessarily indicative of the results for a full year.
3. Background of company and basis of presentation
In October 1999, Imagenuity, Inc. ("Imagenuity") executed an Agreement
and Plan of Merger (the "Plan") with Kinetiks.com, Inc. ("Kinetiks") and
Kinetiks' wholly owned subsidiary Elinear Corporation. The Plan was subject to
Kinetiks successfully completing a private placement in the amount of $1,000,000
from the sale of 2,500,000 shares of Kinetiks common stock, the execution of an
Inducement Agreement whereby two shareholders of Kinetiks were to deliver a
written indemnity by which these two shareholders assumed and agreed to hold
Kinetiks, Elinear and Imagenuity and their officers, directors and shareholders
harmless from Kinetiks liabilities, and due diligence. Additionally, the Plan
required that the sole shareholder of Imagenuity indemnify Kinetiks and Elinear
from and against any and all loss, liability, damage and expense suffered or
incurred by Kinetiks or Elinear resulting from or arising out of the defense of
the threatened action by a former shareholder of Imagenuity. In satisfaction of
the requirement, the sole shareholder of Imagenuity delivered to Kinetiks and
Elinear an Indemnification and Pledge Agreement covering 4,500,000 shares of
stock.
The requirements of the Plan were satisfied on December 9, 1999;
accordingly, Imagenuity was entitled to receive 22,500,000 shares of Kinetiks
common stock. Because the authorized number of common shares of Kinetiks was
insufficient to satisfy the number of shares to be issued to the sole
shareholder of Imagenuity, Kinetiks issued 10,000,000 shares of its common stock
and 250,000 shares of its preferred stock that are convertible into 12,500,000
shares of its common stock.
The Plan also provided that since Imagenuity was an S corporation for
income tax purposes, the sole shareholder of Imagenuity was entitled to receive
distributions of approximately $315,000, to satisfy the income taxes that would
be allocated to this shareholder. Imagenuity paid this shareholder approximately
$144,000 in October 1999, and paid the remaining portion in the amount of
approximately $171,000 in February 2000.
This reorganization has been accounted for as though it were a
recapitalization of Imagenuity and a sale of shares by Imagenuity in exchange
for the net assets of Kinetiks.
Upon the completion of the merger, Imagenuity terminated its S
corporation status for income tax purposes. The accompanying 1999 financial
statements include proforma income tax expense in the statement of operations
which presents the income tax expense that would have been recorded had
Imagenuity not been a pass through entity for income tax purposes.
On July 31, 2000, Kinetiks changed its name to eLinear, Inc. (the
"Company").
4. Major customer information:
6
<PAGE> 8
During the three and nine months ended September 30, 2000, the Company
generated revenues from two customers that represented 58% and 15%, and 59% and
13% of total sales, respectively. One customer comprised 95% and 93%,
respectively of revenues for the three and nine months ended September 30, 1999.
5. Litigation
A former employee of Imagenuity, Chris Sweeney, filed a lawsuit against
Imagenuity alleging breach of his employment agreement and filed suit against
Kinetiks alleging breach of its fiduciary obligation to deliver the
proportionate number of shares that the former employee claims is due to him
pursuant to the merger with Kinetiks. The lawsuit demands judgment against
Imagenuity and Kinetiks that would require Imagenuity and Kinetiks to deliver to
the former employee 20% of the issued and outstanding shares of stock of
Imagenuity or its equivalent in shares of Kinetiks.
Elinear has filed an action against the former employee requesting a
declaratory judgment that the former employee's interest in Imagenuity was
terminated effective October 4, 1999. The Company believes that the former
employee's action is without merit and plans to vigorously defend itself.
Elinear believes that should it be unsuccessful in defending itself, an
unfavorable outcome would not have a material impact on the financial statements
taken as a whole.
6. Stockholders' Equity:
Stock Option Plan
On March 31, 2000, the Company's board of directors approved the 2000
Stock Option Plan (the "Plan") under which up to 4,000,000 shares of common
stock may be issued. On July 27, 2000, our stockholders approved the Plan. Under
the Plan, incentive and nonqualified stock options may be granted to employees,
directors, and consultants of the Company. Incentive stock options are granted
at an exercise price of not less than 100% (110% for individuals owning 10% or
more of the Company's common stock at the time of grant) of the stock's fair
market value at the time of grant. Nonqualified stock options may be granted at
an exercise price determined by the Company.
Pursuant to the Plan, during April 2000, the Company granted 1,460,000
incentive stock options and 714,000 nonqualified stock options to various
employees, directors and consultants. The options generally vest over a
four-year period and expire ten years from the date of grant. The exercise price
of the options granted were predominantly at $1.97, which approximated the fair
market value at the date of grant.
Additionally in April 2000, the Company granted 3,600,000 nonqualified
options to employees not pursuant to any plan. These options vest over a
one-year period (or immediately upon termination of employment) and expire ten
years from the date of grant. The exercise price of these options was $1.97,
which approximated the fair market value at the date of grant.
The Company recognized compensation expense to non-employee directors
of approximately $1,600 in the second quarter of 2000 associated with the
issuance of 100,000 of these options. Had the accounting provisions of FAS 123
been adopted for options issued to employees, compensation expense of
approximately $83,000 would have been recorded during the nine months ended
September 30, 2000 based on the Black-Scholes option pricing model, and net loss
for the nine months ended September 30, 2000 would have been ($1,082,000). There
would have been no effect on net loss per share.
7
<PAGE> 9
Surrender of Preferred Stock
On June 15, 2000, all 250,000 preferred shares of the Company's $.001
par value Series A Convertible Preferred Stock, owned by the primary
stockholder, were voluntarily surrendered for cancellation to the Company. These
shares were convertible into 12,500,000 shares of common stock and had voting
rights equal to 12,500,000 shares of common stock. The effect of this
transaction increased additional paid-in capital by the book value of the
preferred stock and eliminated the dilutive effect on the Company's common
stock.
Reacquisition of common stock options and sale of software utilization
and operating rights
On August 21, 2000, the Company ceased its operations in Florida.
Simultaneously, the Company's then Chief Operating Officer's employment was
terminated. In connection with these transactions, the Company reacquired
933,000 of the Company's fully vested common stock options from the former COO
in consideration for the transfer to a company controlled by the former COO of
all the assets associated with the Company's Florida operations and the rights
to use its proprietary Web CAS software. The $269,234 cost of the stock option
reacquisition has been recognized in the statement of operations for the three
and nine months ended September 30, 2000 based upon the estimated fair value of
the options at the date of transfer.
Other reacquisition of common stock options
On September 14, 2000 the Company's principal stockholder and Chairman
of the Board conveyed 710,000 shares of the Company's common stock to a former
officer of the Company in consideration of the surrender and cancellation by
that officer of 800,000 of the Company's fully vested common stock options. The
$172,530 estimated fair value of the common stock conveyed by the principal
stockholder for the benefit of the Company was recognized as cost of
reacquisition of vested common stock options in the statement of operations for
the three and nine months ended September 30, 2000.
Cancellation of common stock options
In connection with the Company's disposal of its Florida operations and
other personnel reductions, 1,393,000 common stock options held by terminated
employees were cancelled under provisions of the original option grant.
Stock options outstanding
At September 30, 2000, stock options outstanding were as follows:
<TABLE>
<CAPTION>
WEIGHTED AVG.
WEIGHTED AVG. REMAINING
NUMBER EXERCISE PRICE EXERCISE PERIOD
------ -------------- ---------------
<S> <C> <C> <C> <C>
Subject to 2000 Stock Option Plan 581,000 $1.87 43 months
Other non-qualified 1,867,000 $1.97 43 months
</TABLE>
8
<PAGE> 10
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Quarterly Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and is thus prospective. The forward-looking
statements contained herein are subject to certain risks and uncertainties that
could cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, competitive pressures, changing economic pressures,
those discussed in the Section entitled "Management's Discussion and Analysis or
Plan of Operation," and other factors, some of which may be outside of our
control. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect events or circumstances that arise
after the date hereof. We undertake no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date hereof. Readers should refer to and carefully review the information in
future documents that we file with the Securities and Exchange Commission.
OVERVIEW:
We sell Internet professional services to clients to align their
personnel, processes and systems in an electronic enterprise. An electronic
enterprise utilizes Internet-based technologies allowing clients to transact
business, communicate information and share knowledge among employees, customers
and suppliers.
We deliver our services through a consulting model that we refer to as
ROII-Return on Internet Investment. This entails analysis, design and support of
clients' strategic plans and business needs as they relate to electronic
commerce. In addition to providing complete customer Internet applications, we
also market services that solve specific business problems for clients. Those
services are based on the "develop once, sell many" template driven approach.
Typically, these services focus on the small to medium business market segment,
but they may be scaled to meet the requirements of most businesses. These
services include use of our proprietary "WebCAS" Website content management
service.
RESULTS OF OPERATIONS:
REVENUES: Revenue for the nine months ended September 30, 2000
increased $582,570 to 1,269,495 from $686,925 for the nine months ended
September 30, 1999. Revenue for the three months ended September 30, 2000
increased $256,689 to $408,314 from $151,625 for the three months ended
September 30, 1999. This increase reflects increases in both the size and number
of client projects.
OPERATING EXPENSE: Operating Expenses for the nine months ended
September 30, 2000 increased $1,577,515 to $1,841,563 from $264,048 for the nine
months ended September 30,1999. Compared to 1999, expenses for 2000 represented
costs of developing sales and marketing programs to sustain the Company's growth
model, which was abandoned in mid-September, 2000 due to a lack of working
capital and an inability to attract outside working capital because of external
market conditions. By September 30, 2000, headcount was reduced to 15 compared
to a high of 31 during the quarter.
OTHER EXPENSES: Other expenses for the three and nine months ended
September 30, 2000 include $441,764 of costs associated with the Company's
reacquisition of fully vested common stock options from two former officers that
did not occur in 1999.
9
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES:
At September 30, 2000, we had $30,167 in cash and cash equivalents. We
funded our operations primarily from cash generated from operations and from the
issuance of equity securities. For the nine months ended September 30, 2000,
cash used by operations was $612,199. For the nine months ended September 30,
1999, cash used by operations was $239,568.
For the nine months ended September 30, 2000 cash used in investing
activities was $126,127. For the nine months ended September 30, 1999, cash used
in investing activities was $25,803. The primary use of cash in investing
activities during the nine months to September 30, 2000 and 1999 was for
purchases of furniture and equipment for the expansion of the Internet
consulting business. This expansion program was abandoned mid September, 2000.
Net cash used in financing activities was $171,000 and $53,279 for the
nine months ended September 30, 2000 and 1999, respectively. During the first
nine months of 2000, cash used in financing activities was related to the
payment due a shareholder associated with the reverse merger completed in
December 1999. During the nine months ended September 30, 1999, cash used in
financing activities was related to distributions to an "S" corporation
stockholder of Imagenuity.
Management believes that its current working capital may not be
sufficient to cover the current reduced level of operations during the remainder
of this fiscal year and the next calendar year. As such, there can be no
assurance that cash generated from operating activities will be sufficient to
cover our current level of operations. The Company may need to seek external
financing sources in the future. However, there can be no assurances that such
financing sources will be available on terms acceptable to the Company or at
all.
We currently derive a majority of our revenue from our single largest
client. The possible loss of this client or a highly reduced scope of the
continuing relationship will have an adverse material impact on our financial
condition. During early October 2000, all work on behalf of this major client
was suspended by the client until the major client chooses to re-authorize the
current level of eLinear consulting services. There is no guarantee that such
re-authorization will occur.
Based on the current level of working capital and the inability to
attract external working capital under current market conditions, we may not
have enough working capital to sustain the current, already reduced, level of
operations. Since mid-September, 2000, we have reduced our head count by over
50%, from 31 to 15, and closed two corporate and sales offices in Florida,
reduced by 50% office space in Houston, and are working on arranging the
cancellation of additional expansion office space in Florida.
All corporate, marketing and sales and operational activities have been
consolidated in Denver and Houston where all of our remaining clients are
located.
10
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 9, 1999, Imagenuity, Inc. ("Imagenuity") merged with and
into our wholly-owned subsidiary, eLinear Corporation. Prior to the completion
of the merger, Imagenuity redeemed 125 shares of its stock (representing 20% of
the then current outstanding shares of Imagenuity) from an officer, Chris
Sweeney. Mr. Sweeney initiated an action in the Fourth Judicial Circuit Court,
Duval County, Florida against us for alleged breach of his employment contract,
which we contend was terminable at will. We have filed an action in the United
States District Court of Colorado requesting a declaration that Mr. Sweeney's
rights as a shareholder of Imagenuity were terminated effective October 4, 1999
and that he is not entitled to any remedy other than the redemption price of
$5,000 set forth in his written employment agreement with Imagenuity. The action
in Colorado has been placed on administrative closure pending the outcome of the
Florida proceeding.
ITEM 5. OTHER INFORMATION
In August 2000, as a result of unexpectedly high overhead and leasing
costs incurred in connection with the opening of our two corporate and sales
offices in the State of Florida this year, coupled with slower than anticipated
sales growth with respect to such Florida-based offices, we relocated our
headquarters to Colorado and simultaneously closed our Florida operations. In
connection therewith, we sold certain assets related to our Florida operations,
including those held through our wholly-owned subsidiary, Elinear Corporation,
to Inobbar, L.L.C. ("Inobbar"), a Florida limited liability company formed and
operated by Jay Vickers and John Kaercher, in exchange for the surrender by Mr.
Vickers of an option to purchase 933,333 shares of our common stock and
Inobbar's assumption of certain of our liabilities and obligations described
below. Messrs. Vickers and Kaercher were employees of our company prior to the
sale of those assets, and Mr. Vickers was our Chief Operating Officer. In
connection with this sale, they have resigned from their positions with our
company. The assets sold to Inobbar include most assets related to our Florida
operations, but did not include any of our accounts receivable. In connection
with the sale, the parties agreed to mutually release each other from any claims
arising prior to the closing of the sale and Inobbar assumed certain or our
obligations and liabilities, including obligations relating to two of the
month-to-month real property leases in Tampa and Plantation, Florida, certain
obligations to employees at the Tampa and Plantation offices, and certain other
contracts and obligations relating to the Tampa and Plantation offices. The
Asset Purchase Agreement relating to the Florida sale is filed as an exhibit to
this Form 10-QSB, and this summary is qualified in its entirety by reference to
the Asset Purchase Agreement.
In August 2000, Paul Piciocchi resigned as our Executive Vice President
of Mergers and Acquisitions and Director. In connection with these resignations,
Mr. Piciocchi surrendered options to purchase up to 1,000,000 shares of our
common stock in exchange for the transfer of 710,000 shares of our common stock
by Mr. Jon Ludwig, our Chairman of the Board, President and Chief Executive
Officer, to Mr. Piciocchi. Mr. Ludwig retains voting control over the shares
transferred for up to one year. See "Part I - Management's Discussion and
Analysis."
In September 2000, we terminated Paul Thomas from his position as our
Chief Financial Officer. We terminated his employment agreement for what
management believes to be cause (as defined in Mr. Thomas' employment
agreement), causing Mr. Thomas to forfeit all severance payment rights and stock
option rights under his employment arrangement with us.
We currently derive a majority of our revenue from our single largest
client. The possible loss of this client or a highly reduced scope of the
continuing relationship will have an adverse material impact on our financial
condition. During early October 2000, all work on behalf of this major client
was suspended by the client until the client chooses to re-authorize the current
level of eLinear consulting services. There can be no assurances that such
re-authorization will occur or at what level our services will be resumed. See
"Part I -- Management's Discussion and Analysis."
11
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
(2) Agreement and Plan of Merger, dated October 11, 1999, between the
Company, eLinear Corporation and Imagenuity, Inc. - incorporated herein by
reference from the Company's Current Report on Form 8-K filed with the
Commission on October 25, 1999.
(3)(i) Certificate of Incorporation of Kinetiks.com, Inc. -
incorporated herein by reference from the Company's Form 10-KSB for the period
ending December 31, 1995.
(3)(ii) By-laws of Kinetiks.com Inc. - incorporated herein by reference
from the Company's Form 10-KSB for the period ending December 31, 1995.
(3)(iii) Amended and Restated Certificate of Incorporation of
Kinetiks.com, Inc. - incorporated herein by reference from the Company's Form
10-QSB for the period ending June 30, 2000.
(10)(i) Employment Agreement between the Company and John Ludwig dated
December, 1999 - incorporated herein by reference from the Company's Form
10-KSB/A filed with the Commission on May 1, 2000.
(10)(ii) Asset Purchase Agreement dated August 21, 2000 among eLinear,
Inc., eLinear Corporation, Inobbar, LLC, Jay Vickers and John Kaercher.
(10)(iii) Form of Indemnification Agreement for all officers and
directors.
(27) Financial Data Schedule
(b) REPORTS ON FORM 8-K:
We filed a Form 8-K with the Commission on September 12, 2000 in which
we reported under Item 5 that, as a result of unexpected overhead and leasing
costs incurred in the State of Florida, we were relocating our headquarters to
Colorado and simultaneously closing our Florida operations and negotiating to
sell certain assets related to our Florida operations, including those held
through our wholly-owned subsidiary, Elinear Corporation, to Inobbar, L.L.C., a
Florida limited liability company formed by Jay Vickers and John Kaercher.
Messrs. Vickers and Kaercher were officers of our company at such time.
12
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ELINEAR, INC.
By: /s/ JON LUDWIG
---------------------
Jon Ludwig, President
Dated: October 20, 2000
13
