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**UNITED STATES SECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 20549**

**Form 10-Q**

| **(Mark One)**                                     |                                                                                            |
|----------------------------------------------------|-------------------------------------------------------------------------------------------------|
|                                               |                                                                                            |
| x                                                  | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE   SECURITIES EXCHANGE ACT OF 1934.**  |
|                                               |                                                                                            |
| **For the Quarterly Period Ended   April 2, 2006** |
|                                               |                                                                                            |
| **OR**                                             |
|                                               |                                                                                            |
| o                                                  | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE   SECURITIES EXCHANGE ACT OF 1934.** |

| **For   the transition period   from                   to** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                       |
| **Commission File Number 0-24758**                                                                                                                         |
|                                                                                                                                                       |
| **Micro   Linear Corporation**                                                                                                                             |
| *(Exact name of Registrant as specified in its   charter)*                                                                                                 |

| **Delaware**                                                       |   | **94-2910085**                           |
|--------------------------------------------------------------------|--------|------------------------------------------|
|                                                                    |   |                                          |
| *(State or other jurisdiction of   incorporation or organization)* |   | *(I.R.S. Employer   Identification No.)* |
|                                                               |   |                                     |
| **2050 Concourse Drive   San Jose, California**                    |   | **95131**                                |
|                                                                    |   |                                          |
| *(Address   of principal executive offices)*                       |   | *(Zip  Code)*                       |
|                                                               |   |                                     |

**Registrant’s telephone number, including area code: (408) 433-5200**

          Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such 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  o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and  large accelerated filer”  (as defined in Rule 12b-2 of the Exchange Act).    Check one.

| Large accelerated   filer  o | No  Accelerated filer  o | Non- accelerated filer     x |
|----------------------------------------|-----------------------------------------|----------------------------------------|

          Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   o  No  x

          The number of shares of the Registrant’s Common Stock outstanding as of April 25, 2006, net of shares held in treasury, was 12,990,403.

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**TABLE OF CONTENTS**

|                                                                                                              |                                                                                                 | **PAGE** |
|-------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------|----------|
|                                                                                                              |                                                                                                 |          |
| **PART I FINANCIAL   INFORMATION**                                                                                | 3                                                                                                    |
| Item 1. Financial Statements   (Unaudited except for Condensed Consolidated Balance Sheet at December 31,   2005) | 3                                                                                                    |
|                                                                                                              | Condensed Consolidated Balance   Sheets at March 31, 2006 and December 31, 2005                      | 3        |
|                                                                                                              | Condensed Consolidated Statements   of Operations for the three months ended March 31, 2006 and 2005 | 4        |
|                                                                                                              | Condensed Consolidated Statements   of Cash Flows for the three months ended March 31, 2006 and 2005 | 5        |
|                                                                                                              | Notes to Unaudited Condensed   Consolidated Financial Statements                                     | 6        |
| Item 2. Management’s Discussion   and Analysis of Financial Condition and Results of Operations              | 14                                                                                                   |
| Item 3. Quantitative and Qualitative   Disclosures about Market Risk                                              | 21                                                                                                   |
| Item 4. Controls and Procedures                                                                                   | 21                                                                                                   |
| **PART II OTHER   INFORMATION**                                                                                   | 22                                                                                                   |
| Item 1A. Risk Factors                                                                                             | 22                                                                                                   |
| Item 6. Exhibits                                                                                                  | 31                                                                                                   |
| **SIGNATURES**                                                                                                    | 32                                                                                                   |
| **Index to Exhibits**                                                                                             | 33                                                                                                   |

2

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**PART I. FINANCIAL INFORMATION**

**Item 1. *Financial Statements***

**MICRO LINEAR CORPORATION**

**CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands)**

|                                                                                                                        |   | **March 31,   2006** |    | **December   31,   2005** |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|----------------------|---------|---------------------------|--------|
|                                                                                                                        |   |                      |         |                      |        |  |   |
|                                                                                                                        |   | **(Unaudited)**      |    |                      |   |
| **Assets**                                                                                                                  |   |                 |    |                      |   |   |   |
| Current assets:                                                                                                             |   |                 |    |                      |   |   |   |
| Cash   and cash equivalents                                                                                                 |   | $                    | 9,548   |                      | $      | 7,637 |   |
| Short-term   investments                                                                                                    |   |                 | 1,938   |                      |   | 3,500 |   |
| Accounts   receivable, net of allowance for doubtful accounts of  $90 at March 31, 2006 and $97 at December   31, 2005 |   |                 | 2,772   |                      |   | 2,638 |   |
| Inventories                                                                                                                 |   |                 | 1,484   |                      |   | 1,927 |   |
| Other   current assets                                                                                                      |   |                 | 271     |                      |   | 297 |   |
|                                                                                                                        |   |                      |         |                      |        |  |   |
| Total   current assets                                                                                                      |   |                 | 16,013  |                      |   | 15,999 |   |
| Property and equipment, net                                                                                                 |   |                 | 329     |                      |   | 410 |   |
| Other assets                                                                                                                |   |                 | 17      |                      |   | 17 |   |
|                                                                                                                        |   |                      |         |                      |        |  |   |
| Total   assets                                                                                                              |   | $                    | 16,359  |                      | $      | 16,426 |   |
|                                                                                                                        |   |                      |         |                      |        |  |   |
| **Liabilities   and Stockholders’ Equity**                                                                             |   |                 |    |                      |   |   |   |
| Current liabilities:                                                                                                        |   |                 |    |                      |   |   |   |
| Accounts   payable                                                                                                          |   | $                    | 1,843   |                      | $      | 1,269 |   |
| Accrued   compensation and benefits                                                                                         |   |                 | 718     |                      |   | 625 |   |
| Deferred   revenue                                                                                                          |   |                 | 606     |                      |   | 991 |   |
| Other   accrued liabilities                                                                                                 |   |                 | 338     |                      |   | 664 |   |
|                                                                                                                        |   |                      |         |                      |        |  |   |
| Total   current liabilities                                                                                                 |   |                 | 3,505   |                      |   | 3,549 |   |
| Stockholders’ equity:                                                                                                  |   |                 |    |                      |   |   |   |
| Common   stock                                                                                                              |   |                 | 16      |                      |   | 16 |   |
| Additional   paid-in capital                                                                                                |   |                 | 63,355  |                      |   | 63,281 |   |
| Accumulated   deficit                                                                                                       |   |                 | (30,278 | )                         |   | (30,183 | ) |
| Accumulated   other comprehensive loss                                                                                      |   |                 | (6      | )                         |   | (4 | ) |
| Treasury   stock                                                                                                            |   |                 | (20,233 | )                         |   | (20,233 | ) |
|                                                                                                                        |   |                      |         |                      |        |  |   |
| Total   stockholders’ equity                                                                                           |   |                 | 12,854  |                      |   | 12,877 |   |
|                                                                                                                        |   |                      |         |                      |        |  |   |
| Total   liabilities and  stockholders’ equity                                                                     |   | $                    | 16,359  |                      | $      | 16,426 |   |
|                                                                                                                        |   |                      |         |                      |        |  |   |

**See accompanying notes to unaudited condensed consolidated financial statements.**

3

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**MICRO LINEAR CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) (Unaudited)**

|                                                                                              |   | **THREE   MONTHS ENDED   March 31,** |   |
|---------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                                                              |   |                                      |   |
|                                                                                              |   | **2006**                             |   | **2005** |   |
|                                                                                              |   |                                      |        |   |  |  |   |
| Net revenue                                                                                       |   | $                                    | 5,246  |   | $ | 4,247 |   |
| Cost of goods sold*                                                                               |   |                                 | 2,341  |   |   | 2,044 |   |
|                                                                                              |   |                                      |        |   |  |  |   |
| Gross   margin                                                                                    |   |                                 | 2,905  |   |   | 2,203 |   |
|                                                                                              |   |                                      |        |   |  |  |   |
| Operating expenses:                                                                               |   |                                 |   |   |   |   |   |
| Research   and development*                                                                       |   |                                 | 1,652  |   |   | 2,197 |   |
| Selling,   general and administrative*                                                            |   |                                 | 1,465  |   |   | 1,606 |   |
|                                                                                              |   |                                      |        |   |  |  |   |
| Total   operating expenses                                                                        |   |                                 | 3,117  |   |   | 3,803 |   |
|                                                                                              |   |                                      |        |   |  |  |   |
| Loss   from operations                                                                            |   |                                 | (212   | ) |   | (1,600 | ) |
| Interest and other income                                                                         |   |                                 | 120    |   |   | 93 |   |
| Interest and other expense                                                                        |   |                                 | (1     | ) |   | (4 | ) |
|                                                                                              |   |                                      |        |   |  |  |   |
| Loss   before income taxes                                                                        |   |                                 | (93    | ) |   | (1,511 | ) |
| Provision for income taxes                                                                        |   |                                 | 2      |   |   | 1 |   |
|                                                                                              |   |                                      |        |   |  |  |   |
| Net   loss                                                                                        |   | $                                    | (95    | ) | $ | (1,512 | ) |
|                                                                                              |   |                                      |        |   |  |  |   |
| Loss per share basic and   diluted:                                                               |   |                                 |   |   |   |   |   |
| Net   loss per share                                                                              |   | $                                    | (0.01  | ) | $ | (0.12 | ) |
|                                                                                              |   |                                      |        |   |  |  |   |
| Weighted   average number of shares used in per share computation                                 |   |                                 |   |   |   |   |   |
|                                                                                              |   |                                 | 12,990 |   |   | 12,459 |   |
|                                                                                              |   |                                      |        |   |  |  |   |
| *includes   the following amounts related to stock-based compensation costs for employee   awards |   |                                 |   |   |   |   |   |
| Cost   of goods sold                                                                              |   | $                                    | 1      |   | $ | —   |   |
| Research   and development                                                                        |   |                                 | 14     |   |   | 2 |   |
| Selling,   general and administrative                                                             |   |                                 | 59     |   |   | 24 |   |
|                                                                                              |   |                                      |        |   |  |  |   |
| Total                                                                                             |   | $                                    | 74     |   | $ | 26 |   |
|                                                                                              |   |                                      |        |   |  |  |   |

**See accompanying notes to unaudited condensed consolidated financial statements.**

4

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**MICRO LINEAR CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)**

|                                                                                        |   | **THREE   MONTHS ENDED   March 31,** |               |
|---------------------------------------------------------------------------------------------|--------|--------------------------------------|--------------------|
|                                                                                        |   |                                      |               |
|                                                                                        |   | **2006**                             |               | **2005** |   |
|                                                                                        |   |                                      |                    |   |  |  |   |
| Operating activities:                                                                       |   |                                 |               |   |   |   |   |
| Net   loss                                                                                  |   | $                                    | (95                | ) | $ | (1,512 | ) |
| Adjustments   to reconcile net loss to net cash provided by (used in) operating activities: |   |                                 |               |   |   |   |   |
| Depreciation   and amortization                                                             |   |                                 | 81                 |   |   | 72 |   |
| Non-cash   stock based compensation                                                         |   |                                 | 74                 |   |   | 26 |   |
| Reduction   of doubtful accounts receivable                                                 |   |                                 | (7                 | ) |   | (27 | ) |
| Provision   for excess inventory                                                            |   |                                 | 21                 |   |   | 47 |   |
| Changes   in assets and liabilities:                                                        |   |                                 |               |   |   |   |   |
| Accounts   receivable                                                                       |   |                                 | (127               | ) |   | 212 |   |
| Inventories                                                                                 |   |                                 | 422                |   |   | (146 | ) |
| Other   current assets                                                                      |   |                                 | 26                 |   |   | (151 | ) |
| Accounts   payable                                                                          |   |                                 | 574                |   |   | 650 |   |
| Accrued   compensation and benefits, and other accrued liabilities                          |   |                                 | (233               | ) |   | 410 |   |
| Deferred   revenue                                                                          |   |                                 | (385               | ) |   | 195 |   |
|                                                                                        |   |                                      |                    |   |  |  |   |
| Net   cash provided by (used in) operating activities                                       |   |                                 | 351                |   |   | (224 | ) |
|                                                                                        |   |                                      |                    |   |  |  |   |
| Investing activities:                                                                       |   |                                 |               |   |   |   |   |
| Purchases   of property and equipment                                                       |   |                                 | —   |   |   | (173 | ) |
| Purchases   of short-term investments                                                       |   |                                 | (222               | ) |   | (2,656 | ) |
| Proceeds   from sales and maturities of short-term investments                              |   |                                 | 1,782              |   |   | 2,387 |   |
|                                                                                        |   |                                      |                    |   |  |  |   |
| Net   cash provided by (used in) investing activities                                       |   |                                 | 1,560              |   |   | (442 | ) |
|                                                                                        |   |                                      |                    |   |  |  |   |
| Financing activities:                                                                       |   |                                 |               |   |   |   |   |
| Proceeds   from exercise of stock options                                                   |   |                                 | —   |   |   | 21 |   |
|                                                                                        |   |                                      |                    |   |  |  |   |
| Net   cash provided by financing activities                                                 |   |                                 | —   |   |   | 21 |   |
|                                                                                        |   |                                      |                    |   |  |  |   |
| Net   increase (decrease) in cash and cash equivalents                                      |   |                                 | 1,911              |   |   | (645 | ) |
| Cash   and cash equivalents at beginning of period                                          |   |                                 | 7,637              |   |   | 10,920 |   |
|                                                                                        |   |                                      |                    |   |  |  |   |
| Cash   and cash equivalents at end of period                                                |   | $                                    | 9,548              |   | $ | 10,275 |   |
|                                                                                        |   |                                      |                    |   |  |  |   |

**See accompanying notes to unaudited condensed consolidated financial statements.**

5

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**MICRO LINEAR CORPORATION**

**NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**1. Organization and Summary of Significant Accounting Policies**

***Organization***

          Micro Linear Corporation is a fabless semiconductor company specializing in wireless integrated circuit solutions, which are used in a variety of wireless products serving a global market. These transceivers are used in many streaming wireless applications such as cordless phones, Personal Handyphone System (PHS) handsets, security cameras, game controllers, cordless headsets and other personal electronic appliances. In addition, we offer networking products consisting mainly of media conversion products that enable implementation of cost effective fiber to the home or FTTH systems.  Headquartered in San Jose, California, Micro Linear’s products are available through its authorized representatives and distributors worldwide.

***Fiscal Year***

          We report results of operations on the basis of fifty-two or fifty-three week periods, ending on the Sunday closest to December 31. Fiscal year 2005 ended on January 1, 2006. The first quarter of 2006 ended on April 2, 2006 and the first quarter of 2005 ended on April 3, 2005. For presentation purposes, the accompanying financial statements refer to the calendar year end and month end of each respective period.

***Principles of Consolidation***

          The consolidated financial statements include the accounts of Micro Linear Corporation and our wholly-owned subsidiary in the United Kingdom. All significant inter-company accounts and transactions have been eliminated.

          The Company has designated the U.S. dollar as the functional currency for its United Kingdom subsidiary since that subsidiary is dependent on the parent company’s economic environment. The gains and losses resulting from the transactions of the United Kingdom subsidiary are recorded as other income and expense. For the first quarter of 2006 and 2005, transaction gains and losses were not significant.

***Basis of Presentation***

          The consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America and reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary to state fairly the financial position, results of operations, and cash flows for the periods presented. The unaudited condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes in the Annual Report on Form 10-K for the year ended January 1, 2006, filed with the Securities and Exchange Commission (“SEC”) on April 3, 2006.

***Use of Estimates***

          The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, and such differences may be material to the financial statements.

***Reclassifications***

          Certain prior period balances have been reclassified to conform to the current financial statement presentation.  These reclassifications have no impact on previously reported results of operation or stockholder’s equity.

6

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**2. Financial Statement Details**

***Inventories consist of the following (in thousands):***

|                             |   | **March 31,   2006** |   | **December   31,   2005** |   |
|----------------------------------|--------|----------------------|--------|---------------------------|--------|
|                             |   |                      |        |                      |        |  |   |
| Work-in-process                  |   | $                    | 568    |                      | $      | 614 |   |
| Finished goods                   |   |                 | 503    |                      |   | 745 |   |
| Inventory held by   distributors |   |                 | 413    |                      |   | 568 |   |
|                             |   |                      |        |                      |        |  |   |
| Total inventories                |   | $                    | 1,484  |                      | $      | 1,927 |   |
|                             |   |                      |        |                      |        |  |   |

***Provision for Income Taxes***

          The provision for income taxes for the three months ended March 31, 2006 and for the comparable period of 2005 consists mainly of state taxes and some minor taxes incurred by our branch office in Japan.  We did not record a benefit for income taxes related to our net losses in the U.S., as we believe that the available objective evidence creates sufficient uncertainty regarding the realization of the deferred tax assets such that we have recorded a full valuation allowance. The effective tax rate for the three months March 31, 2006 was 2.2% and the effective tax rate for the three months ended March 31, 2005 was 0.07%.

***Comprehensive Income (Loss)***

          For the three months ended March 31, 2006 and 2005, comprehensive loss, which consists of the net loss for the periods and unrealized gain or loss on short-term marketable securities, was as follows (in thousands):

|                                                   |   | **Three   Months Ended   March 31,** |   |
|--------------------------------------------------------|--------|--------------------------------------|--------|
|                                                   |   |                                      |   |
|                                                   |   | **2006**                             |   | **2005** |   |
|                                                   |   |                                      |        |   |  |  |   |
| Net  loss*                                        |   | $                                    | (95    | ) | $ | (1,512 | ) |
| Accumulated other   comprehensive gain (loss):         |   |                                 |   |   |   |   |   |
| Unrealized   gain (loss) on marketable securities, net |   |                                 | (2     | ) |   | 1 |   |
|                                                   |   |                                      |        |   |  |  |   |
| Comprehensive loss                                     |   | $                                    | (97    | ) | $ | (1,511 | ) |
|                                                   |   |                                      |        |   |  |  |   |

|                                                                                                                                             |
|---------------------------------------------------------------------------------------------------------------------------------------------|
| * Net loss for the three months ended March 31, 2006 and 2005 includes $74,000 and $26,000, respectively of stock-based compensation costs. |

**3. Operations by Geographic Regions**

**The following is a summary of revenue by geographical regions (in thousands):**

|              |   | **Three   Months Ended   March 31,** |               |
|-------------------|--------|--------------------------------------|--------------------|
|              |   |                                      |               |
|              |   | **2006**                             |               | **2005** |   |
|              |   |                                      |                    |   |  |  |   |
| Net revenue:      |   |                                 |               |   |   |   |   |
| United   States   |   | $                                    | 197                |   | $ | 265 |   |
| Japan             |   |                                 | 2,614              |   |   | 2,201 |   |
| Hong   Kong       |   |                                 | 1,959              |   |   | 1,294 |   |
| Other   Asia      |   |                                 | 74                 |   |   | 58 |   |
| Canada            |   |                                 | —   |   |   | 86 |   |
| Europe            |   |                                 | 402                |   |   | 343 |   |
|              |   |                                      |                    |   |  |  |   |
| Total net revenue |   | $                                    | 5,246              |   | $ | 4,247 |   |
|              |   |                                      |                    |   |  |  |   |

7

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**4. Restructuring Charges**

          In the second quarter of 2004 we provided $0.2 million for our remaining lease obligations, net of expected sublease payments, on our Utah facility, which we vacated in the first quarter of 2004 when we entered into a sublease agreement for these premises. As of March 31, 2006, the remaining balance of our restructuring reserve relates to our continuing obligations for costs of the Utah facility in excess of expected sublease payments (in thousands):

**5.  Stockholders’ Equity**

***     Stock Option Plans***

| Balance, December 31, 2005 |   | $      | 73  |   |
|----------------------------|--------|--------|-----|--------|
| Cash payments              |   |   | (17 | )      |
|                       |   |        |     |   |
| Balance March 31, 2006     |   | $      | 56  |   |
|                       |   |        |     |   |

          In August 1992, we adopted the 1991 Stock Option Plan (the “1991 Plan”), under which employees and consultants may be granted incentive stock options to purchase shares of Micro Linear’s common stock at not less than the fair value on the date of grant, or nonstatutory stock options to purchase common stock at not less than 85% of the fair value on the date of grant. To date, no stock options have been granted with an exercise price less than the fair value on the date of grant.

          In May 1997, the Board of Directors and stockholders approved an amendment to the 1991 Plan to provide for an annual increase in the number of shares of common stock reserved for issuance under the Plan equal to 4% of fully diluted shares for a two-year period commencing on January 1, 1998. The number of shares reserved increased by 588,720 and 575,885 in fiscal years 1999 and 1998, respectively. At the Annual Meeting of Stockholders on August 9, 2001, stockholders approved an amendment to the 1991 Stock Option Plan to extend the term of the plan by ten years, to May 22, 2011. We have reserved 5,028,605 shares for issuance under the terms of the 1991 Plan at March 31, 2006.

          In March 1998, we adopted the 1998 Nonstatutory Stock Option Plan (the “1998 Plan”), under which employees, directors and consultants may be granted nonstatutory stock options to purchase shares of Micro Linear common stock. Executive officers may only receive options under the 1998 Plan as an inducement essential to their initial employment. We initially reserved 600,000 shares for issuance under the terms of the 1998 Plan.

          In January 1999, the Board of Directors amended the 1998 Plan and approved an increase in the shares reserved for option grants under the 1998 Plan from 600,000 to 1,000,000 shares. In February 2000, the Board of Directors amended the 1998 Plan and approved an increase in the shares reserved for option grants under the 1998 Plan from 1,000,000 to 1,500,000 shares. Between May and July of 2002, the Board of Directors amended the 1998 Plan and approved increases in the shares reserved for option grants under the 1998 Plan totaling 565,794 shares. We have reserved 2,065,794 shares for issuance under the terms of the 1998 Plan at December 31, 2005.

          Through fiscal year 2002, our standard stock option agreements under the 1991 and 1998 Plans provided that 25% of the stock subject to the option will vest upon each of the first and second anniversaries from the vesting commencement date, and the remainder of the shares subject to the option will vest monthly over the next two years. Beginning with our 2003 fiscal year, our standard stock option agreements under the 1991 and 1998 Plans provide that 25% of the stock subject to the option will vest upon the first anniversary from the vesting commencement date, and the remainder of the shares subject to the option will vest monthly over the next three years. Generally, the terms of these plans provide that options expire ten years from the date of grant.

          On February 27, 2006, we announced a tender offer for the exchange of employee stock options currently outstanding, which were all issued at exercise prices that are greater than the current fair market value of our common stock, for new options that were issued at the approximate fair market value of our common stock.  The fair market value of our common stock was $1.67, as determined based on the average of the closing prices as reported by the Nasdaq National Market for the 18 consecutive trading days ending immediately prior to March 28, 2006, the grant date. Under the terms of the tender offer 2,028,283 options were surrendered by employees, having a weighted average exercise price of $4.08 in exchange for 1,876,947 options all with an exercise price of $1.67.  The new options will vest over a two year period, with 25% of the options vesting six months after the grant date and 4.167%vesting each month over the subsequent eighteen months.  The new options will have a five year term.  The purpose of this exchange offer was to provide an effective long-term incentive compensation program to our employees. 

8

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          Activity and price information regarding the 1991 and 1998 plans are as follows:

|                           |   |                        |       |                   | **Outstanding   Options** |                                  |
|--------------------------------|--------|-----------------------------|------------|------------------------|---------------------------|---------------------------------------|
|                           |   |                        |       |                   |                           |                                  |
|                           |   | **Available   for   Grant** |       | **Number of   Shares** |                      | **Weighted Average   Exercise Price** |   |
|                           |   |                             |            |                   |                           |                                       |   |  |  |   |
| Balance at December 31,   2005 |   |                        | 1,401,392  |                   |                      | 3,258,173                             |   | $ | 4.04 |   |
| Options   granted              |   |                        | (1,876,947 | )                      |                      | 1,876,947                             |   |   | 1.67 |   |
| Options   forfeited            |   |                        | 2,578,037  |                   |                      | (2,578,037                            | ) |   | 4.23 |   |
|                           |   |                             |            |                   |                           |                                       |   |   |   |   |
| Balance at March 31, 2006      |   |                        | 2,102,482  |                   |                      | 2,557,083                             |   | $ | 2.61 |   |
|                           |   |                             |            |                   |                           |                                       |   |   |   |   |

***     Director Stock Option Plan***

          The Director Stock Option Plan (the Director Plan) was adopted by stockholders in October 1994. Under the Director Plan, we initially reserved 80,000 shares of common stock at an exercise price equal to the fair market value of our common stock on the date of grant. The Director Plan provides that each person who was an outside director on October 13, 1994, and each outside director who subsequently becomes a member of the Board of Directors, shall be automatically granted an option to purchase 10,000 shares on the date on which such person first becomes an outside director, whether through election by the stockholders or appointment by the Board of Directors to fill a vacancy. In addition, each outside director was to automatically receive a nonstatutory option to purchase 7,000 shares of common stock upon such director’s annual re-election to the Board, provided the director had been a member ofthe Board of Directors for at least six months upon the date of re-election.

          At their annual meeting in June 1998, the stockholders approved an amendment to the Director Plan, which increased from 80,000 to 180,000 the number of shares available for grants.

          At their annual meeting in June 2000, the stockholders approved an amendment to the Director Plan which: 1) increased the shares available for grant from 180,000 to 680,000; 2) increased the option grant to each outside director who subsequently becomes a member of the Board of Directors from 10,000 to 50,000 shares on the date on which such person first becomes an outside director, whether through election by stockholders or by appointment by the Board of Directors; and 3) increased the option grant from 7,000 to 10,000 shares to each outside director upon the director’s annual re-election by the Board of Directors, provided the director has been a member of the Board of Directors for at least six months upon the date of re-election.

          The 50,000 share grant vests at the rate of 25% of the option shares upon the first and second anniversaries of the date of grant and 1/48th of the option shares per month thereafter, and the 10,000 share grant vests monthly over a twelve-month period, in each case unless cancelled sooner upon termination of the optionee’s status as a director or otherwise pursuant to the Director Plan.

          On May 23, 2005, the Board of Directors approved an amendment to the 1994 Director Options Plan to provide for the acceleration of all unvested options granted to directors thereunder in the event of a change of control of the Company. It also approved a resolution to amend all option grants to non-employee members of the Board of Directors pursuant to the 1994 Director Plan and the 1998 Nonstatutory Stock Option Plan to provide for full acceleration of all remaining options in the event of a change in control. The 1994 Director Plan expired on August 2, 2004.

          Option activity under the Directors’ Plan is as follows: 

|                                              |   |                      |               |                   | **Options   Outstanding** |                                  |
|---------------------------------------------------|--------|---------------------------|--------------------|------------------------|---------------------------|---------------------------------------|
|                                              |   |                      |               |                   |                           |                                  |
|                                              |   | **Available   for Grant** |               | **Number of   Shares** |                      | **Weighted   Average Exercise Price** |   |
|                                              |   |                           |                    |                   |                           |                                       |   |  |  |   |
| Balance at December 31,   2005 and March 31, 2006 |   |                      | —   |                   |                      | 232,000                               |   | $ | 5.19 |   |
|                                              |   |                           |                    |                   |                           |                                       |   |   |   |   |

9

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          Information regarding the weighted average contractual terms, exercise prices and intrinsic value for options outstanding under all of the Company’s stock option plans is as follows:

|                                                |   | **Outstanding   Options**  |      |
|-----------------------------------------------------|--------|---------------------------------|-----------|
|                                                |   |                                 |      |
|                                                |   | **Number of   Shares**          |      | **Weighted   Average   Remaining   Contractual   Term (in   years)** |   | **Weighted   Average   Exercise   Price** |   | **Aggregate   Intrinsic   Value (in   thousands)** |   |
|                                                |   |                                 |      |  |   |  |   |  |   |
| Options fully vested and   options expected to vest |   |                            | 2,306,078 |   |   | 5.5 |   | $ | 2.52 |   | $ | 450 |   |
| Options excercisable                                |   |                            | 737,366   |   |   | 6.3 |   | $ | 4.29 |   | $ | 0 |   |

          The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing stock price of $1.91 as of March 31, 2006, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options exercisable as of March 31, 2006 was 1.9 million. 

          On March 28, 2006 we completed a repricing of the employee stock options pursuant to a tender offer announced on February 27, 2006.  In accordance with the tender offer we issued approximately 1.9 million new options in exchange for the surrender of approximately 2.0 million outstanding options.  There were no other new stock option grants made during the three months ended March 31, 2006.  The fair value of each new stock option granted was $0.99, as determined utilizing a Black-Scholes model  pursuant to the guidance provided by SFAS No. 123(R).  As required by SFAS No. 123(R) we determined the Black-Scholes fair value of the new options granted as well as the current fair value of the outstanding options surrendered to calculate the incremental fair value of the options.  The incremental value of the new options issued was $0.4 million and will be amortized over the twoyear vesting period of the new options.   There were no stock option exercises during the three month period ended March 31, 2006.  The intrinsic value of stock options exercised during the three month period ending March 31, 2005 was approximately $9,000. 

          The Company settles employee stock option exercises with newly issued common shares. 

***Employee Stock Purchase Plan***

          We adopted our current Employee Stock Purchase Plan (the “1998 Purchase Plan”) in September 1998. An aggregate of 200,000 shares of common stock were initially reserved for issuance under the 1998 Purchase Plan. The 1998 Purchase Plan provides that all employees may purchase common stock on specified dates via payroll deductions, at 85% of its fair market value on the Enrollment Date or approximately six months later at the Exercise Date, whichever is lower. The 1998 Purchase Plan provides for an annual increase in the shares available for purchase equal to a) the lesser of the number of shares of Common Stock repurchased by Micro Linear during the prior year or b) the number of shares of Common Stock issued under the Plan in the prior year, or c) a lesser amount determined by the Board. The compensation cost in connection with the plan for the three months ended March 31, 2006 was approximately$1,000.  As of March 31, 2006, there were 101,191 shares available for purchase under the 1998 Purchase Plan.

**6. Earnings (Loss) Per Share**

          Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share includes the effect of all potentially dilutive common stock outstanding during the period. Diluted earnings (loss) per share excludes potential common stock if the effect is anti-dilutive. We compute diluted earnings (loss) per share using the treasury stock method for stock options outstanding.  The dilutive effect of outstanding options is reflected in diluted earnings (loss) per share by application of the treasury stock method, which includes consideration of unrecognized stock-based compensation and tax benefit as required by SFAS No. 123(R).

10

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          A total of 2,789,083 and 4,166,703 shares of potential common stock related to stock options were not included in the dilutive net loss per share calculation for the three months ended March 31, 2006 and 2005 because their effect would be anti-dilutive.  The effect of recording stock-based compensation costs on basic and diluted loss per share in accordance with the implementation of SFAS No. 123R was $0.01 per share for the three months ended March 31, 2006.

**7. Stock-based Compensation**

          Effective January 2, 2006, Micro Linear adopted the provisions of SFAS No. 123(R), “Share-Based Payment.”  SFAS No. 123(R) establishes accounting for stock-based awards exchanged for employee services.  Accordingly, stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as expense over the employee requisite service period.  We previously applied APB No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations and provided the required pro forma disclosures of SFAS No. 123, “Accounting for Stock-Based Compensation”. 

**Prior to the adoption of SFAS No. 123(R)**

          Prior to the adoption of SFAS No. 123(R), the Company  accounted for stock-based compensation in accordance with APB25 and provided the disclosures required under SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosures.” No employee stock-based compensation was reflected in net income for the period ended March 31, 2005, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.  

          The pro-forma information for the three months ended March 31, 2005 was as follows:

|                                                                                                                                  |   | **Three   months ended   March 31, 2005** |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                                                                                  |   |                                           |   |
| Net loss, as reported                                                                                                                 |   | $                                         | (1,512 | ) |
| Deduct: Stock-based   compensation expense determined under fair value based method for employee   awards, net of related tax effects |   |                                      | (226   | ) |
|                                                                                                                                  |   |                                           |        |   |
| Pro forma net loss                                                                                                                    |   | $                                         | (1,738 | ) |
|                                                                                                                                  |   |                                           |        |   |
| Pro forma net loss per   share:                                                                                                       |   |                                      |   |   |
| Basic   and diluted                                                                                                                   |   | $                                         | (0.14  | ) |
| Reported net loss per   share:                                                                                                        |   |                                      |   |   |
| Basic   and diluted                                                                                                                   |   | $                                         | (0.12  | ) |

**Impact of the adoption of SFAS No. 123(R)**

          Micro Linear elected to adopt the modified prospective application method as provided by SFAS No. 123R.  Accordingly, during the three months ended March 31, 2006, we recorded stock-based compensation cost totaling the amount that would have been recognized had the fair value method been applied since the effective date of SFAS No. 123.  Previously reported amounts have not been restated.  For the three months ended March 31, 2006, we recorded stock-based compensation costs of $74,000 or $0.01 per share.

          On March 28, 2006 we granted approximately 1.9 million new options in exchange for the surrender of approximately 2.0 million outstanding options.  The details of this transaction are described in Note 8 below.  There were no other options granted during the three months ended March 31, 2006.

          As of March 31, 2006, the unrecorded deferred stock-based compensation expense related to stock options was $0.8 million and will be recognized over an estimated weighted average amortization period of 1.8 years.

12

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          With adoption of SFAS No. 123(R) on January 2, 2006, we began to capitalize a portion of stock-based compensation as inventory.  The effect of this adoption on inventory as of March 31, 2006 and on cost of goods sold for the three months ended March 31, 2006 was not significant.   

**Valuation Assumptions**

          We estimate the fair value of stock options using a Black-Scholes valuation model, consistent with the provisions of SFAS No. 123(R), SEC SAB No. 107 and our prior period pro forma disclosures of stock-based compensation (determined under a fair value method as prescribed by SFAS No. 123).  The fair value of each option grant issued subsequent to the adoption of SFAS123(R) is estimated on the date of grant using the Black-Scholes option valuation model and the straight-line attribution approach.  

          The weighted average estimated fair values of shares issued under the Employee Stock Purchase Plan for the three months ended March 31, 2006 and 2005 were $0.46 and $1.44 respectively.  The weighted average fair values at the grant date of options granted under the employee and directors’ stock option plans for the three months ended March 31, 2006 and 2005 were $0.99 and $1.52 respectively.

          The following weighted-average assumptions were used for options granted during the three months ended March 31, 2006 and March 31, 2005: 

|                              |   | **Three   months ended   March 31,** |               |
|-----------------------------------|--------|--------------------------------------|--------------------|
|                              |   |                                      |               |
|                              |   | **2006**                             |               | **2005** |   |
|                              |   |                                      |               |  |   |
| Stock option plan:                |   |                                 |               |   |   |   |   |
| Expected stock price   volatility |   |                                 | 65                 | % |   | 47 | % |
| Risk free interest rate           |   |                                 | 4.79               | % |   | 3.59 | % |
| Dividend yield                    |   |                                 | —   |   |   | —   |   |
| Expected term (in years)          |   |                                 | 3.01               |   |   | 2.49 |   |
| Stock purchase plan:              |   |                                 |               |   |   |   |   |
| Expected stock price   volatility |   |                                 | 50                 | % |   | 51 | % |
| Risk free interest rate           |   |                                 | 4.81               | % |   | 2.88 | % |
| Dividend yield                    |   |                                 | —   |   |   | —   |   |
| Expected term (in years)          |   |                                 | .5                 |   |   | .5 |   |

          The expected volatility assumptions were based on historical price volatility in accordance with SFAS No. 123(R) and SAB 107.  The historical price volatility was measured on a daily basis.  

          The risk-free interest rate assumptions were based upon the implied yields from the U.S. Treasury zero-coupon yield curve with a remaining term equal to the remaining term of the options.

          The expected term of employee stock options under our employee and director’s stock option plans represents the weighted-average period the stock options are expected to remain outstanding.  The expected term for stock options granted during the three months ended March 31, 2006 was estimated based on the simplified calculation of expected term, described in SAB 107 due to changes in the vesting terms and contractual life of current option grants compared to the Company’s historical grants. The expected term for stock options granted during the three months ended March 31, 2005 was based on historical employee exercise patterns.  Shares issued under the Employee Stock Purchase Plan are issued approximately six months subsequent to the Enrollment Date.

13

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**8. Tender Offer for Exchange of Outstanding Employee Stock Options**

          On February 27, 2006, we announced a tender offer for the exchange of employee stock options currently outstanding, that were all issued at exercise prices that are greater than the current fair market value of our common stock, for new options which were issued at the approximate fair market value of our common stock.  The fair market value of our common stock was $1.67, as determined based on the average of the closing prices as reported by the Nasdaq National Market for the 18 consecutive trading days ending immediately prior to March 28, 2006, the grant date. Under the terms of the tender offer 2,028,283 options were surrendered by employees, having a weighted average exercise price of $4.08 in exchange for  1,876,947 options all with an exercise price of $1.67.  The new options will vest over a two year period, with 25% of the options vesting six months after the grant date and 4.167%vesting each month over the subsequent eighteen months.  The new options will have a five year term.  The purpose of this exchange offer was to provide an effective long-term incentive compensation program to our employees.  

          Under the terms of the exchange offer employees residing in the United States, except for our Chief Executive Officer, Mr. Richardson, Vice President of Engineering, Mr. Dix, and Vice President of Operations and Chief Financial Officer, Mr. Schradle, were eligible to surrender their existing options, pursuant to the accelerated vesting that was approved by our Board of Director’s in December 2005, for an equivalent number of new options.  Our Chief Executive Officer, Mr. Richardson, participated in this offer but under the terms of the offer he surrendered 1.3 of his existing options for each new option granted.  Mr. Richardson surrendered all of his eligible options, a total of 510,000 options with a weighted average exercise price of $3.52 for 392,306 new options all with an exercise price of $1.67. In addition, Mr. Richardson retained 60,000 options that were granted to him for hisservice as a member of our Board of Director’s and were not eligible for exchange under this tender offer.  Our Vice President of Engineering, Mr. Dix, and Vice President of Operations and Chief Financial Officer, Mr. Schradle, also participated in this offer but under the terms of the offer they surrendered 1.1 of their existing options for each new option granted. Mr. Dix surrendered 125,000 of his existing options with a weighted average exercise price of $3.60 in exchange for 113,634 new options, all with an exercise price of $1.67.  Mr. Dix retained 128,200 of his existing options with a weighted average exercise price of $2.60.  Mr. Schradle surrendered 245,000 of his existing options with a weighted average exercise price of $4.86 in exchange for 222,724 of new options, all with an exercise price of $1.67.  Our Vice President of Worldwide Sales and Applications, Mr. Moore, surrendered 70,000 of his existing options with a weighted average exercise price of $4.32 inexchange for 70,000 new options, all with an exercise price of $1.67.  Mr. Moore retained 30,000 of his existing options with a weighted average exercise price of $2.69.  Our Vice President of Business Development, Mr. Manno, surrendered 145,000 of his existing options with a weighted average exercise price of $2.57 in exchange for 145,000 new options, all with an exercise price of $1.67.  

          We used the Black-Scholes valuation model to estimate the value of new options granted and the value of existing options surrendered under this exchange program.  It should be noted that the Black-Scholes valuation model is intended for use in estimating the fair value of publicly traded options that have no vesting restrictions and are fully transferable, which differs significantly from the terms of both the new options and the surrendered options. In addition, it should be noted that options valuation models, such as Black-Scholes, require the input of highly subjective assumptions, including the expected stock price volatility and the expected life of the options before exercise, which greatly affect the calculated grant date fair value. 

**Item 2. *Management’s Discussion and Analysis of Financial Condition and Results**of Operations***

*          The statements in this report or incorporated by reference that are not**historical are forward-looking statements and include, without limitation,**statements under the caption, “Management’s Discussion and Analysis of**Financial Condition and Results of Operations.” Terms such as “may,” “will,”**“could,” “should,” “project,” “believe,” “anticipate,” “expect,” “plan,”**“estimate,” “forecast,” “potential,” “intend,” “continue” and variations of**these words or similar expressions are intended to identify forward-looking**statements.*

*          These forward-looking statements include, but are not limited to,**statements regarding: our critical accounting policies, the volume and timing of the shipments of our wireless products, our expectation that average selling prices will**continue to**decline, our wireless products gross margin, our expectation that our operating results will continue to fluctuate, reliance on period-to-period comparison of our operating results, our dependency on sales of digital cordless phone and network equipment manufacturers, our expectation that we will incur losses in the future, manufacturing overhead costs, our**beliefs regarding deferred tax assets, including our beliefs that the available**objective evidence creates sufficient uncertainty regarding the realization of**the deferred tax assets such that we have recorded a full valuation allowance,**our expectation thatinternational revenue will account for the substantial**majority of our total net revenue for the foreseeable future, our intention to**expend significant resources in the development of new products during the**foreseeable future, our expectation that our research and development costs will decrease in the coming quarters, our expectations regarding trade payables and accrued liability balances, our**expectation that we will be able to provide for these**expenditures without any additional sources of financing and our belief that**existing cash resources are sufficient to fund any anticipated operating losses**and purchases of capital equipment and provide adequate working capital for the**next 12 months, our dependency on key customers and distributors, our intention to develop and market new products and to sell these products at higher prices, benefits of and our plans to continue using outside foundries, our dependency on key personnel, the effectof recent accounting pronouncement on our financial condition and operating results, our internal controls, expenses related to complying with the Sarbanes-Oxley Act and our disclosure controls and procedures..*

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*          Forward-lookingstatements are subject to risks and uncertainties that**could cause actualresults to differ materially from those projected. These**risks anduncertainties include, but are not limited to, our dependence on key**products and customers, changes in the demand for our products andseasonal**factors affecting certain of our products, our ability toattract and retain**customers and distribution partners for existing andnew products, our ability**to develop and introduce new and enhancedproducts in a timely manner, our**dependence on international sales andrisks associated with international**operations, our dependence on outsidefoundries and test subcontractors in the**manufacturing process and otheroutside suppliers, our ability to recruit and**retain qualified employees,the strength of competitive offerings and the**prices being charged by those competitors, and the risks set forth below under**Part II, Item 1A“Risk Factors.”*

*          These forward-looking statements are made only as of the date of this**report. We do not undertake to update or revise the forward-looking statements,**whether as a result of new information, future events or otherwise. We caution**you not to give undue weight to any of the forward-looking statements. You**should not regard the inclusion of forward-looking information as a**representation by us or any other person that we will achieve our objectives or**plans.*

**Critical Accounting Policies**

          Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. These form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of Micro Linear’sBoard of Directors. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies reflect its more significant estimates and assumptions used in the preparation of its consolidated financial statements. They include those regarding (1) revenue recognition, (2) estimating accrued liabilities and allowance for doubtful accounts, (3) inventory and related allowance for obsolete and excess inventory, (4) accounting for income taxes, (5) valuation of long-lived assets, and (6) stock-based compensation costs.

          The critical accounting policies are described in Item 7A, “Management Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended January 1, 2006 and have not changed materially as of March 31, 2006 with the exception of the following:

***Stock-based Compensation***

          Effective January 2, 2006, we adopted the fair value recognition provisions of SFAS No. 123(R), using the modified prospective application transition method, and therefore have not restated prior periods’ results.  Under the fair value recognition provisions of SFAS No. 123(R), we recognize stock based compensation net of an estimated forfeiture rate and only recognize compensation cost for those shares expected to vest over the requisite service period of the award.  Prior to the adoption of SFAS No. 123(R), we accounted for share-based payments under APB Opinion No. 25, “Accounting for Stock Issued to Employees”.

          Determining the appropriate fair value model and calculated the fair value of share-based payment awards require the input of highly subjective assumptions, including the expected life of the share-based payment awards and stock price volatility.  The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment.  As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.  In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest.  If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different fromwhat we have recorded in the current period.  See Note 7 to the Condensed Consolidated Financial Statements for a further discussion on stock-based compensation.  

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**Overview**

          Micro Linear Corporation is a fabless semiconductor company specializing in wireless integrated circuit solutions, which are used in a variety of wireless products serving global markets. These transceivers are used in many streaming wireless applications, such as cordless phones, Personal Handyphone Systems, or PHS, handsets, wireless speakers, security cameras, game controllers, cordless headsets and other personal electronic appliances. Headquartered in San Jose, California, our products are available through our authorized representatives and distributors worldwide.

          Micro Linear was founded in 1983, and until 2000 we were a supplier of advanced analog and mixed signal integrated circuits to the computer, communications, telecommunications, consumer and industrial markets. During 2000, we divested our manufacturing test operation and our non-communication product lines and focused our marketing, engineering and product development on new communications products, most notably wireless integrated circuits. During 2001, we established ourselves as a volume supplier of RF transceivers to the digital cordless telephone segment of the communications market. In 2005, we completed the development of a transceiver for use in PHS products. We began initial shipments of this transceiver in the second quarter of 2005. Shipments of PHS transceivers were not significant in comparison to total shipments in the first quarter of 2006.  Wireless product revenue represented 80% oftotal net revenue for the first quarter of 2006 compared to 74% of total net revenue for the first quarter of 2005.

          Currently, in addition to our transceivers designed for digital cordless telephones and PHS products, we offer a full line of high data-rate ISM-band transceivers for applications such as wireless speakers and headphones, game controllers, voice headsets and other electronic appliances. Micro Linear offers a broad line of transceivers that address the most popular unlicensed bands: 900 MHz, 2.4 GHz, and 5.8 GHz. To simplify system design and decrease time to market, we also offer starter kits and reference designs.

**Results of Operations**

          The following tables present certain consolidated statements of operations data for the periods indicated (unaudited):

|                                  |   | **For the   Three Months Ended March 31** |   |
|---------------------------------------|--------|-------------------------------------------|--------|
|                                  |   |                                           |   |
|                                  |   | **2006**                                  |   | **2005** |   |
|                                  |   |                                           |   |  |   |
|                                  |   |                                      |   |   |   | **% of Net   Revenue** |   |   |   |   |   | **% of Net   Revenue** |   |
|                                  |   |                                      |   |   |  |  |   |   |   |   |  |  |   |
|                                  |   | **($ in thousands)**                      |   |
| Net revenue                           |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
| Wireless                              |   | $                                         | 4,210  |   |   | 80.3 | % | $ | 3,145 |   |   | 74.1 | % |
| Networking                            |   |                                      | 1,036  |   |   | 19.7 |   |   | 1,102 |   |   | 25.9 |   |
|                                  |   |                                           |        |   |  |  |   |  |  |   |  |  |   |
| Total net revenue                     |   |                                      | 5,246  |   |   | 100.0 |   |   | 4,247 |   |   | 100.0 |   |
| Cost of goods sold                    |   |                                      | 2,341  |   |   | 44.6 |   |   | 2,044 |   |   | 48.1 |   |
|                                  |   |                                           |        |   |  |  |   |  |  |   |  |  |   |
| Gross   margin                        |   |                                      | 2,905  |   |   | 55.4 |   |   | 2,203 |   |   | 51.9 |   |
| Operating expenses:                   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
| Research   and development            |   |                                      | 1,652  |   |   | 31.5 |   |   | 2,197 |   |   | 51.7 |   |
| Selling,   general and administrative |   |                                      | 1,465  |   |   | 27.9 |   |   | 1,606 |   |   | 37.8 |   |
|                                  |   |                                           |        |   |  |  |   |  |  |   |  |  |   |
| Total   operating expenses            |   |                                      | 3,117  |   |   | 59.4 |   |   | 3,803 |   |   | 89.5 |   |
|                                  |   |                                           |        |   |  |  |   |  |  |   |  |  |   |
| Loss from operations                  |   |                                      | (212   | ) |   | (4.0 | ) |   | (1,600 | ) |   | (37.7 | ) |
| Interest and other income             |   |                                      | 120    |   |   | 2.3 |   |   | 93 |   |   | 2.2 |   |
| Interest and other expense            |   |                                      | (1     | ) |   | (0.1 | ) |   | (4 | ) |   | (0.9 | ) |
|                                  |   |                                           |        |   |  |  |   |  |  |   |  |  |   |
| Loss before income taxes              |   |                                      | (93    | ) |   | (1.8 | ) |   | (1,511 | ) |   | (35.6 | ) |
| Provision for taxes                   |   |                                      | 2      |   |   | 0.4 |   |   | 1 |   |   | 0.2 |   |
|                                  |   |                                           |        |   |  |  |   |  |  |   |  |  |   |
| Net loss                              |   | $                                         | (95    | ) |   | (1.8 | )% | $ | (1,512 | ) |   | (35.6 | )% |
|                                  |   |                                           |        |   |  |  |   |  |  |   |  |  |   |

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***Net Revenue***

|       |   | **Three   months ended   March 31, 2006** |   | **% Change   2005 to 2006** |   | **Three   months ended   March 31, 2005** |   |
|------------|--------|-------------------------------------------|--------|-----------------------------|--------|-------------------------------------------|--------|
|       |   |                                           |        |                        |        |                                           |   |  |  |   |
|       |   | **($ in   thousands)**                    |   |
| Wireless   |   | $                                         | 4,210  |                        |   | 33.9                                      | %      | $ | 3,145 |   |
| Networking |   |                                      | 1,036  |                        |   | (6.0                                      | )%     |   | 1,102 |   |
|       |   |                                           |        |                        |   |                                      |   |  |  |   |
| Total      |   | $                                         | 5,246  |                        |   | 23.5                                      | %      | $ | 4,247 |   |
|       |   |                                           |        |                        |   |                                      |   |  |  |   |

          Our wireless product line consists mainly of RF transceivers in the 5.8GHz, 2.4 GHz, and 900MHz frequency bands as well as transceivers designed for use by PHS handset manufacturers. Our transceivers are used in a variety of applications, including digital cordless telephones, PHS handsets, and wireless speakers and headphones. Our networking product line consists mainly of media conversion products that enable implementation of cost effective fiber to the home, or FTTH, systems.

          Net revenue during the first quarter of 2006 increased $1.0 million from the comparable first quarter of 2005. Revenue from wireless products, consisting mostly of digital cordless telephone transceivers, increased approximately $1.1 million and revenue from networking products decreased approximately $0.1 million from the comparable first quarter of 2005.  Our 2006 first quarter revenue was the highest first quarter revenue for Micro Linear since the year 2002.  Unit shipments increased 77% during the first quarter of 2006, as compared to the first quarter of 2005, while average selling prices declined by 28%.  

          Despite a decrease in average selling prices by 26%, our wireless product revenues increased 34%.  This increase was primarily driven by increases in sales of our 5.8 GHz digital cordless telephone transceiver to Uniden Corporation and sales of our 900MHz transceivers to Giant Electronics, Ltd., a subcontractor for Plantronics Corporation. While we expect that overall unit shipments of our wireless products in 2006 will remain significantly above the levels achieved in 2005, we also expect that there will be a continued decline of our average selling prices driven mainly from the continued erosion in selling prices of our maturing wireless products.

          Sales of PHS transceivers were not significant in the first quarter of 2006, as we continue to experience longer than expected sales cycle for our first generation PHS transceivers. While we have achieved some design wins for these transceivers, the manufacturing volumes of the PHS handsets that our end-customers are using them in have been small. A small number of additional PHS manufacturers are continuing to evaluate ML1900, however, some potential customers have made the decision to defer utilizing our first generation PHS products because they do not meet such manufacturers’ performance criteria.  Some have decided to wait and evaluate our second generation transceiver, the ML1905 when and if it becomes available, while others have chosen products offered by our competitors. We are expecting to deliver sample platforms of the ML1905 in the second quarter of 2006 and to have productiondevices available for production shipment in the second half of 2006.  While we expect to see some volume shipments of our PHS transceivers during 2006, and remain encouraged by the PHS market opportunity for Micro Linear, there can be no assurance when or if our PHS transceivers will begin shipping in significant volumes.

          Sales of our networking products were $1.0 million for the first quarter of 2006, down from $1.1 million in the comparable first quarter of 2005.  Unit shipments of our networking products decreased 19% as compared to the year-ago quarter.  The decrease in revenue and unit shipments from the year-ago quarter was due to lower demand for certain of our networking products which have approached end-of-life.  This decrease in shipment volumes was substantially offset by a 16% increase in average selling prices due to a shift in product mix.  

          International revenue for the first quarter of 2006 totaled $5.0 million, or 96% of net revenue compared to $4.0 million, or 94% for the first quarter of 2005. Domestic revenue was approximately 4% of net revenue for the first three months of 2006 and 6% of net revenue for the first three months of 2005. We expect that international revenue will account for the substantial majority of our total net revenue for the foreseeable future.

          In the first quarter of 2006 and the comparable period of 2005 sales to Uniden Corporation and Giant Electronics, Ltd., a subcontract manufacturer for Plantronics Inc., each accounted for more than 10% of our net revenue.  

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***Gross Margin***

|         |   | **Three   months endedMarch 31, 2006** |   | **% Change   2005 to 2006** |   | **Three   months ended   March 31, 2005** |   |
|--------------|--------|----------------------------------------|--------|-----------------------------|--------|-------------------------------------------|--------|
|         |   |                                        |        |                        |        |                                           |   |  |  |   |
|         |   | **($ in   thousands)**                 |   |
| Gross Margin |   | $                                      | 2,905  |                        |   | 31.9%                                     |   | $ | 2,203 |   |
| %            |   |                                   | 55%    |                        |   |                                      |   |   | 52% |   |

          Gross margin is affected by the unit volume of product shipments, selling prices, product mix, manufacturing subcontract costs, manufacturing utilization, product yields and manufacturing overhead costs. It is also periodically affected by costs incurred in connection with start-up and installation of new processes technologies at outside manufacturing foundries and test subcontractors. Gross margin is also affected by increases in inventory provisions required for excess and obsolete inventories, as well as sales of excess or obsolete inventories in which reserves have been provided.  Inventory write-downs involve significant estimation.  Actual results could be different from these estimates, which could result in either additional charges in future periods and reduction of gross margins, or benefits from sale of previously written down inventory and increases in gross margin.

          Our overall gross margin percentage for the first quarter of 2006 increased to 55% from 52% in the comparable first quarter of 2005. Direct product costs increased 7% in relation to revenue during the first quarter of 2006 but this increase was offset by a decrease in manufacturing overhead expenses of 10%, in relation to revenue. This reduction in manufacturing overhead stemmed mainly from headcount reductions.  We also implemented SFAS No. 123(R) on January 2, 2006.  During the first quarter of 2006, stock option compensation expense included in product costs in accordance with the provisions of SFAS No 123(R) was not significant. Manufacturing overhead expenses in the first quarter of 2005 included approximately $0.2 million in non-recurring employee severance costs and we realized cost savings of approximately $0.2 million in the first quarter of 2006 from the elimination of severalmanufacturing positions during fiscal 2005.  As a result of eliminating these positions we expect that the manufacturing overhead rate will remain lower in fiscal 2006 than the overhead rate we experienced in fiscal 2005.

          Gross margin for our wireless products was 50% for the first quarter of 2006 as compared to 45% for the first quarter of 2005. Average selling prices of our wireless products decreased 26% in the first quarter of 2006, as compared to the first quarter of 2005, but were offset by a 19% decrease in direct product costs.  Excluding the manufacturing overhead savings discussed above, wireless product margins decreased 5% as a percentage of revenue during the first quarter of 2006 compared to the first quarter of 2005. We expect to see deterioration in wireless product gross margins in fiscal 2006, from the first quarter levels, as the average selling prices of our maturing wireless products decrease.

          Gross margin for our networking products was 76% for the first quarter of 2006 up from 70% for the first quarter of 2005. The average selling prices for our networking products in the first quarter of 2006 increased 16% and direct product costs increased 74% from the comparable first quarter of 2005 due to shifts in product mix, which included a higher percentage of our lower margin media converter products.   Excluding the manufacturing overhead savings discussed above, networking product margins decreased 7% as a percentage of revenue during the first quarter of 2006 compared to the first quarter of 2005. 

          During the first quarter of 2006 we sold approximately $46,000 of excess product inventory that was previously written off and recognized charges for approximately $20,000 to provide reserves for additional excess inventories. During the first quarter of 2005 we sold approximately $41,000 of excess product inventory that was previously written off and recognized charges for approximately $46,000 to provide reserves for additional excess inventories. Sales of these previously written off products are recognized at 100% margin.

***Research and Development Expenses (R&D)***

|    |   | **Three   months endedMarch 31, 2006** |   | **% Change   2005 to 2006** |   | **Three   months ended   March 31, 2005** |   |
|---------|--------|----------------------------------------|--------|-----------------------------|--------|-------------------------------------------|--------|
|    |   |                                        |        |                        |        |                                           |   |  |  |   |
|    |   | **($ in   thousands)**                 |   |
| R&D |   | $                                      | 1,652  |                        |   | (24.8                                     | )%     | $ | 2,197 |   |

 

          Research and development expenses include costs associated with the definition, design and development of new products. These expenses are comprised primarily of compensation and associated costs related to development personnel, computer-aided design software expense, prototype costs, depreciation and amortization expense, and allocated occupancy costs for this function.

          We expense wafers and production mask sets related to new products as research and development costs until products based on new designs are fully characterized, support published data sheets and satisfy reliability tests.

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          Research and development costs will vary from quarter to quarter depending on the stage of products in development. Research and development expenses decreased $0.5 million in the first quarter of 2006 as compared to the first quarter of 2005 due mainly from a decrease in employee related expenses resulting from the elimination of approximately nine development positions during the fourth quarter of 2005. In addition, we implemented SFAS No. 123(R) on January 2, 2006 and during the three months ended March 31, 2006, stock option compensation expense included in research and development expenses was approximately $14,000.

          We intend to expend significant resources in the development of new products during the foreseeable future. However, we expect that research and development expense will continue to run at a lower rate than experienced in 2005 due mainly to headcount reductions and other cost savings that were implemented during the fourth quarter of 2005. 

***Selling, General and Administrative Expenses (SG&A)***

|     |   | **Three   months ended   March 31, 2006** |   | **% Change   2005 to 2006** |   | **Three   months ended   March 31, 2005** |   |
|----------|--------|-------------------------------------------|--------|-----------------------------|--------|-------------------------------------------|--------|
|     |   |                                           |        |                        |        |                                           |   |  |  |   |
|     |   | **($ in thousands)**                      |   |
| SG&A |   | $                                         | 1,465  |                        |   | (8.8                                      | )%     | $ | 1,606 |   |

          Selling, general and administrative expenses consist primarily of compensation and associated costs relating to sales, marketing and administrative personnel, consulting costs, commissions paid to our worldwide sales representatives, travel costs, legal and auditing costs, insurance costs, and allocated occupancy costs for these functions.

          SG&A expense decreased $0.1 million in the first quarter of 2006 as compared to the first quarter of 2005.  During the first quarter of 2006 we completed a tender offer for the re-pricing of employee stock options and incurred additional consulting and legal costs related to this effort of approximately $0.2 million.  In addition, we implemented SFAS No. 123(R) on January 2, 2006 and during the three months ended March 31, 2006, stock option compensation expense was approximately $59,000. The increase in these costs were offset by a reduction in expenses due to the postponement of our project for implementation of Section 404 of the Sarbanes-Oxley Act and by a reduction in travel related expenses.

***Interest and Other Income and Interest and Other Expense***

|                       |   | **Three   months ended   March 31, 2006** |   | **% Change   2005 to 2006** |   | **Three   months ended   March 31, 2005** |   |
|----------------------------|--------|-------------------------------------------|--------|-----------------------------|--------|-------------------------------------------|--------|
|                       |   |                                           |        |                        |        |                                           |   |  |  |   |
|                       |   | **($ in thousands)**                      |   |
| Interest and other income  |   | $                                         | 120    |                        |   | 29.0                                      | %      | $ | 93 |   |
| Interest and other expense |   | $                                         | (1     | )                           |   | 75.0                                      | %      | $ | (4 | ) |

          The increase in interest and other income for the first three of 2006, as compared to the first three months of 2005, was primarily due to higher short-term interest rates in 2006. Interest and other expense consists mainly of minor foreign currency fluctuations for our branch office in Japan for the first three months of 2006 and 2005.

***Provision for Income Taxes***

|                       |   | **Three   months ended   March 31, 2006** |   | **% Change   2005 to 2006** |   | **Three   months ended   March 31, 2005** |   |
|----------------------------|--------|-------------------------------------------|--------|-----------------------------|--------|-------------------------------------------|--------|
|                       |   |                                           |        |                        |        |                                           |   |  |  |   |
|                       |   | **($ in   thousands)**                    |
| Provision for income taxes |   | $                                         | 2      |                        |   | 100                                       | %      | $ | 1 |   |

          The provision for income taxes for the three months ended March 31, 2006 and for the comparable period of 2005 consists mainly of state taxes and some minor taxes incurred by our branch office in Japan.  We did not record a benefit for income taxes related to our net losses in the U.S., as we believe that the available objective evidence creates sufficient uncertainty regarding the realization of the deferred tax assets such that we have recorded a full valuation allowance. The effective tax rate for the three months March 31, 2006 was 2.2% and the effective tax rate for the three months ended March 31, 2005 was 0.07%.

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**Liquidity and Capital Resources**

|                                                   |   | **For the   Three Months Ended   March 31,** |               |
|--------------------------------------------------------|--------|----------------------------------------------|--------------------|
|                                                   |   |                                              |               |
|                                                   |   | **2006**                                     |               | **2005** |   |
|                                                   |   |                                              |                    |   |  |  |   |
|                                                   |   | **(in   thousands)**                         |               |
| Net cash provided by (used   in) operating activities  |   | $                                            | 351                |   | $ | (224 | ) |
| Net cash provided by (used   in) investing activities  |   |                                         | 1,560              |   |   | (442 | ) |
| Net cash provided by   financing activities            |   |                                         | —   |   |   | 21 |   |
|                                                   |   |                                              |                    |   |  |  |   |
| Net increase (decrease) in   cash and cash equivalents |   | $                                            | 1,911              |   | $ | (645 | ) |
|                                                   |   |                                              |                    |   |  |  |   |

          Net cash provided by operating activities during the first three months of 2006 was primarily due to the decrease in our inventories of $0.4 million and an increase of $0.6 million increase in our trade payables. These were offset by our net operating loss of $95,000 and decreases in deferred revenue and other accrued liabilities of $0.4 million and $0.2 million respectively.  The $95,000 net loss for the three months ended March 31, 2006 included $74,000 of non-cash stock-based compensation expense recognized in accordance with the provisions of SFAS No. 123(R), which was adopted on January 2, 2006. Non-cash depreciation and amortization charges were $0.1 million for the first three months of 2006 and for the comparable period of 2005. Other major uses of cash during the first three months were operating expenses and our cost of manufacturing products. We expect trade payables and our accruedliability balances to continue to fluctuate from period to period due to variations in our production cycle and timing of other operating expenses. Net cash used in operating activities during the first three months of 2005 was mainly due to our net operating loss of $1.5 million which was offset by an increase in total liabilities of $1.3 million.

          Net cash provided by investing activities during the first three months of 2006 was primarily due to net sales and maturities of short-term investments of $1.5 million. We had no major purchases of capital equipment during the first quarter of 2006 and we anticipate that we will be able to provide for ongoing capital expenditures over the next twelve months without the need to secure additional sources of financing.  Net cash used in investing activities during the first three months of 2005 was primarily due to net purchases of short-term investments of $0.3 million and purchases of capital  equipment of $0.2 million.   

          Net cash provided by financing activities consists mainly of proceeds from the issuance of common stock in connection with the exercise of employee stock options. Proceeds from stock option exercises were zero for the first three months of 2006 and $21,000 for the comparable period of 2005. 

          Working capital was $12.5 million as of March 31, 2006 and December 31, 2005. Working capital at March 31, 2006 includes cash and cash equivalents of $9.5 million and short-term investments of $1.9 million.

          We anticipate that existing cash resources are sufficient to fund any anticipated operating losses, purchases of capital equipment, and provide adequate working capital for at least the next 12 months. Our liquidity is affected by many factors, including, among others, the extent to which we pursue additional wafer fabrication capacity from existing foundry suppliers or new suppliers, capital expenditures, the level of our product development efforts, and other factors related to the uncertainties of the industry and global economies. Accordingly, there can be no assurance that events in the future will not require us to seek additional capital sooner or, if so required, that such capital will be available on terms acceptable to us.

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**Item 3. *Quantitative and Qualitative Disclosures about Market Risk***

**Interest Rate Risk**

          As of March 31, 2006, our investment portfolio consisted of U.S. government obligations, commercial paper and money market funds, typically with maturities of less than 12 months. Some of these securities are subject to interest rate risk, and will decline in value if market interest rates increase. If market interest rates were to increase immediately and uniformly by 10% as of March 31, 2006, the decline in the fair value of the portfolio would not be material.

**Foreign Currency Exchange Risk**

          We have international facilities and are, therefore, subject to foreign currency rate exposure. We limit our foreign currency risks principally by maintaining minimal foreign currency balances. Since our exposure related to exchange rate volatility has not been significant, we do not currently hedge this exposure.

**Item 4. *Controls and Procedures***

          (a) *Evaluation of disclosure controls and procedures.*We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide onlyreasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls are designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

          Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

          (b) *Changes in internal control over financial reporting.*There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation described in Item 4(a) above that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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**PART II. OTHER INFORMATION**

**Item 1A. *Risk Factors***

**Factors That May Affect Future Operating Results**

          The risks and uncertainties described below are not the only ones we face. If any of the following risks actually occurs, our business, financial condition or results of operations could be materially and adversely affected:

***Our operating results are difficult to predict and are likely to fluctuate******significantly. They may fail to meet or exceed the expectations of securities******analysts or investors, causing our stock price to decline.***

          Our operating results are difficult to predict and have fluctuated significantly in the past. They are likely to continue to fluctuate in the future as a result of many factors, some of which are outside of our control.  Some of the factors that may cause these fluctuations include:

|   | • | the level and timing of spending by our customers,   both in the U.S. and in foreign markets;                                     |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                              |
|   | • | changes in market demand, including seasonal and   cyclical fluctuations;                                                         |
|   |   |                                                                                                                              |
|   | • | timing, amount, cancellation or rescheduling of   customer orders;                                                                |
|   |   |                                                                                                                              |
|   | • | fluctuations in manufacturing yields;                                                                                             |
|   |   |                                                                                                                              |
|   | • | timing of revenue recognition from contracts, which   may span several quarters;                                                  |
|   |   |                                                                                                                              |
|   | • | competitive market conditions;                                                                                                    |
|   |   |                                                                                                                              |
|   | • | the announcement or introduction of new or enhanced   products by us, or competitors, or both;                                    |
|   |   |                                                                                                                              |
|   | • | any delay in the introduction of new or enhanced   products by us or a delay in the sales cycle of such products;                 |
|   |   |                                                                                                                              |
|   | • | market acceptance of our new products, including our   new PHS products,  and continuing   demand for our existing products; |
|   |   |                                                                                                                              |
|   | • | cost and availability of wafers, other components   and testing services;                                                         |
|   |   |                                                                                                                              |
|   | • | mix of products sold;                                                                                                             |
|   |   |                                                                                                                              |
|   | • | fluctuations in end user demand for wireless   products manufactured by our customers which incorporate our technology;           |
|   |   |                                                                                                                              |
|   | • | economic conditions specific to the networking and   wireless industries and markets, as well as general economic conditions;     |
|   |   |                                                                                                                              |
|   | • | ability to hire and retain qualified technical and   other personnel;                                                             |
|   |   |                                                                                                                              |
|   | • | development of new industry standard communication   protocols;                                                                   |
|   |   |                                                                                                                              |
|   | • | demand placed on foundries may exceed available   supply resulting in supply allocations or long lead times; and                  |
|   |   |                                                                                                                              |
|   | • | availability and performance of advanced silicon   process technologies from foundry sources.                                     |

          We believe that period-to-period comparisons of our operating results will not necessarily be meaningful. You should not rely on these comparisons as an indication of our future performance. If our operating results in one or more future periods fail to meet or exceed the expectations of securities analysts or investors, the trading price of our common stock may fluctuate, possibly by a significant amount.

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***The markets in which we operate are intensely competitive, and many competitors******are larger and more established. If we do not compete successfully, our******business could be harmed.***

          Intense international and domestic competition, decreasing selling prices, rapid technological change, short product life cycles and cyclical patterns characterize the markets for our products. Competitors include significantly larger corporations. New entrants in these markets could provide additional competition. Most of our competitors are substantially larger and have greater financial, technical, marketing and other resources than we do. Many of these large organizations are in a better position to withstand any significant reduction in spending by customers in these markets. They often have broader product lines and market focus, and will therefore not be as susceptible to downturns in a particular market. In addition, many competitors have focused on the wireless market for longer than we have, and therefore have more long-standing and established relationships with domestic and foreigncustomers.

          The computer networking equipment and wireless markets have undergone a period of rapid growth and consolidation in recent years. We expect our dependence on sales to digital cordless phone and network equipment manufacturers to continue. Our business and results of operations would be harmed in the event of a significant slowdown in the digital cordless phone or computer networking equipment market. In addition, as a result of competitive pricing pressures, we have experienced lower margins on some of our products. Such pricing pressures will continue to have an adverse effect on our results of operations, and our business could suffer unless they can be offset by higher margins on other products or lower operating expenses.

          We do not currently manufacture our own semiconductor wafers. As a result, we are vulnerable to process technology advances competitors use to manufacture products offering higher performance and lower cost. Larger companies with wafer manufacturing facilities, broader product lines, greater technical and financial resources and greater service and support capabilities have an advantage in this market.

          In addition, our products are generally sole-sourced to our customers. If our customers were to develop other sources for our products, our operating results would be harmed.

***The market for wireless applications is characterized by rapid technological******change. Our future success depends on our ability to respond to these changes.***

          Rapidly changing technology, frequent product introductions and evolving industry standards make it difficult to accurately predict the market’s future growth rate, size or technological direction. In view of the evolving nature of this market, suppliers of wireless products may decide to adopt alternative standards or technologies that are incompatible with our products. If we are unable to design, develop, manufacture and sell products that are compatible with these new standards or technologies, our business and operating results would be harmed.

***We need to develop and introduce new and enhanced products in a timely manner******to successfully compete in our industry.***

          Continuing technological advancement, changes in customer requirements and evolving industry standards characterize the wireless and computer equipment networking markets. To compete successfully, we must design, develop, manufacture and sell new or enhanced products that:

|   | • | provide increasingly higher levels of performance   and reliability;  |
|--------|--------|-----------------------------------------------------------------------|
|   |   |                                                                  |
|   | • | meet performance or other objective specified   parameters;           |
|   |   |                                                                  |
|   | • | are cost effective;                                                   |
|   |   |                                                                  |
|   | • | are brought to market in a timely manner;                             |
|   |   |                                                                  |
|   | • | are in accordance with existing or evolving industry   standards; and |
|   |   |                                                                  |
|   | • | achieve market acceptance.                                            |

          The development of these new circuits is highly complex. We have sometimes experienced delays in completing the development of new products. Successful product development and introduction depends on many factors, including:

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|   | • | proper new product definition;                                        |
|--------|--------|-----------------------------------------------------------------------|
|   |   |                                                                  |
|   | • | timely completion and introduction of new product   designs;          |
|   |   |                                                                  |
|   | • | availability of foundry capacity;                                     |
|   |   |                                                                  |
|   | • | acceptable manufacturing yields; and                                  |
|   |   |                                                                  |
|   | • | market acceptance of our products and our customers’   products. |

          We must be able to adjust to changing market conditions quickly and cost-effectively to compete successfully. Furthermore, we must introduce new products in a timely manner, and achieve market acceptance for these products. If we do not accurately predict our customers’ or potential customers’ requirements or if the products we design do not meet these requirements, or the performance criteria required by our customers or potential customers, our sales may suffer and we may not generate sufficient revenue to offset the costs incurred with developing such products. For example, we have experienced a longer than expected sales cycle for our new PHS products as our first generation PHS products did not meet the performance criteria of certain potential customers. As a result, these customers have deferred utilizing our first generation products and will evaluate our second generation transceiver,the ML1905, when and if it becomes available.  In addition, our customers’ products that incorporate our products must be introduced in a timely manner and achieve market acceptance. If we, or our customers, fail to develop and introduce new products successfully, our business and operating results would suffer.

          To successfully develop and market certain of our planned products, we may need to enter into technology development or licensing agreements with third parties. If we cannot enter into such agreements on acceptable terms, our ability to develop and market new products could suffer, and our business and operating results would be adversely affected.

          Customers typically take a long time to evaluate our new products. It takes three to six months or more for customers to test new products, and at least an additional three to 12 months until customers begin significant production of products incorporating our products. We may therefore experience a lengthy delay between product development and the generation of revenue from new products. Delays inherent in such a long sales cycle raise additional risks that customers may decide to cancel or change their product plans. Such changes could result in the loss of anticipated sales. Our business, financial condition, and results of operations would suffer if customers reduce or delay orders, or choose not to release products incorporating our products.

***We have a history of losses and, because of continued investment in product******development, expect to incur losses in the future. We may not become******profitable.***

          We have incurred quarterly net losses from June 2000 through March 2006, except for a profit in the third quarter of 2002, which was attributable to an income tax refund, and a net profit for the third quarter of 2004, which occurred from the sale of our land and buildings. Because of those losses, we had an accumulated deficit of $30.3 million as of March 31, 2006.

          Successful engineering development and market penetration in the product areas we have chosen to compete in require high levels of engineering and product development expense. We intend to continue to spend significant amounts on new product and technology development. The products we develop may not achieve market acceptance and may not generate sufficient sales to offset the engineering costs incurred during such product development.  For example, we are experiencing a longer than expected sales cycle for our first generation PHS transceivers and we may not generate sales from these products in the near future or ever.  Our networking products are reaching maturity, and revenue from this product line has declined and is expected to decline further over the next 12 months. We expect to incur losses in the future and may not achieve our goals of net income and cash flow.

***To the extent that our existing resources and cash generated from operations******are insufficient to fund our future activities, we may need to raise additional******capital. If funds are not available on acceptable terms, we may not be able to******hire or retain employees, fund our operations or compete effectively.***

          We believe that our existing capital resources and cash generated from operations will enable us to maintain our operations for at least the next 12 months. However, if our capital requirements or results of operations vary materially from those currently planned, we may require additional financing sooner than anticipated. If additional funds are raised through the issuance of debt securities, these securities could have rights, preferences and privileges senior to our common stock, and the terms of this debt could impose 

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restrictions on our operations. The sale of additional equity or convertible debt securities could result in additional dilution to our stockholders. We cannot be certain that additional financing will be available in amounts or on terms acceptable to us, if at all. If adequate funds are not available to us on acceptable terms, our ability to hire, train or retain employees, to fund our operations and sales and marketing efforts, take advantage of unanticipated opportunities, develop or enhance services or products, or respond to competitive pressures would be significantly limited, which could harm our business, financial condition and operating results.

***We depend on networking, wireless, and telecommunications spending for our******revenue. Any decrease or delay in spending in these industries would negatively******impact future operating results and financial condition.***

          Demand for our products in the future will depend on the amount and timing of spending by network providers, manufacturers of wireless consumer products, and telecommunications equipment suppliers. Spending in these areas depends upon a variety of factors, including competitive pressures, discretionary consumer spending patterns, and general economic conditions.

          During the past few years, new orders slowed, customers cancelled or placed holds on existing orders, and new order levels fluctuated, due to developments in the general economy and capital markets. This situation could recur in the future. Because the majority of our revenue comes from sales to a few customers, a delay in orders from one customer could have a significant negative effect on future revenue.

          Relatively short product life cycles characterize the computer network equipment and digital cordless telephone markets. If one or more of our significant customers were to select circuits manufactured by a competitor for future products, our business would suffer. The loss of one or more of our current customers, failure to attract new customers, or disruption of our sales and distribution channels could harm our business and operating results.

***Our customer base is concentrated. The loss of one or more key customers or******distributors would harm our business.***

          A significant majority of our net revenue comes from sales to relatively few customers. Sales to our ten largest customers, excluding domestic distributors, accounted for approximately 92% of net revenue for the three months ended March 31, 2006, and approximately 88% net revenue for the comparable period in 2005. Two customers, Uniden Corporation and Giant Electronics, Ltd., a subcontract manufacturer for Plantronics, Inc., together accounted for 68% of our net revenue for the first quarter of 2006. Sales to domestic distributors accounted for approximately 3% net revenue for both the three months ended March 31, 2006, and comparable period in 2005. We anticipate that a limited number of key customers and distributors will continue to provide a significant portion of our net revenue for the foreseeable future. Our future success depends on our ability to retain our current customers and attract newcustomers. A reduction, delay or cancellation of orders from one or more significant customers could materially harm our operating results. In addition, our operating results could be adversely affected if one or more of our major customers were to develop other sources for the products we now supply them.

          Generally, customers may cancel or reschedule orders to purchase standard products without significant penalty until 30 days prior to requested shipment. Customers frequently revise delivery schedules, and the quantities of products to be delivered, to reflect changes in their needs. Since backlog can be canceled or rescheduled, our backlog at any time is not necessarily indicative of future revenue.

***We depend on international sales and are subject to the risks associated with******international operations, which may negatively affect our business.***

          Sales to customers outside of the United States represented 96% of net revenue for the three months ended March 31, 2006, and 94% net revenue for the comparable period in 2005. We expect that international sales will continue to generate a substantial proportion of net revenue for the foreseeable future. Our international operations are subject to a number of risks, including:

|   | • | changes in regulations and laws of foreign   governments and telecommunications standards;                 |
|--------|--------|------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                       |
|   | • | import and export legislation and license   requirements, tariffs, taxes, quotas and other trade barriers; |
|   |   |                                                                                                       |
|   | • | compliance with foreign laws, treaties and technical   standards;                                          |
|   |   |                                                                                                       |
|   | • | delays resulting from difficulty in obtaining export   licenses for certain technology;                    |
|   |   |                                                                                                       |
|   | • | fluctuations in currency exchange rates;                                                                   |

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|   | • | difficulty in collecting accounts receivable;                                                                                                                |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                         |
|   | • | difficulty in managing foreign operations;                                                                                                                   |
|   |   |                                                                                                                                                         |
|   | • | loss of one or more international distributors;                                                                                                              |
|   |   |                                                                                                                                                         |
|   | • | geopolitical risks, changes in diplomatic and trade   relationships and economic instability; and                                                            |
|   |   |                                                                                                                                                         |
|   | • | political and economic instability, including wars,   acts of terrorism, political unrest, boycotts and any related conflicts or   similar events worldwide. |

          Substantially all of our international sales must be licensed by the Office of Export Administration of the U.S. Department of Commerce. To date, we have not experienced any material difficulties in obtaining export licenses. In the future, if we have difficulties or delays in obtaining expert licenses, we may be unable to sell our products to international customers, which could harm our operating results.

          Our international sales are typically denominated in U.S. dollars. Fluctuations in currency exchange rates could cause our products to become relatively more expensive to customers in a particular country, while competitors’ products denominated in local currencies become less expensive. This may lead to a reduction in sales or profitability in that country, which could adversely affect our business.

          Gains and losses on the conversion to U.S. dollars of accounts receivable, accounts payable and other international assets and liabilities may contribute to fluctuations in operating results. In addition, international customers typically take longer to pay for purchases than customers in the United States. If foreign markets do not continue to develop, or foreign sales cycles prove unpredictable, our revenue and business would be adversely affected.

***Selling prices for wireless products typically decrease, which could lead to******lower operating results.***

          Average selling prices for products in the wireless markets have rapidly declined due to many factors, including:

|   | • | rapidly changing technologies;                 |
|--------|--------|------------------------------------------------|
|   |   |                                           |
|   | • | price-performance enhancements;                |
|   |   |                                           |
|   | • | product introductions by competitors;          |
|   |   |                                           |
|   | • | price pressure from significant customers; and |
|   |   |                                           |
|   | • | product maturity and obsolescence.             |

          The decline in the average selling prices of our products may cause substantial fluctuations in our operating results. We continue to develop and market new products that incorporate valued new features and sell at higher prices. Failure to deliver new products offering increased value would result in a decline in both revenue and margins, harming our business, financial condition, and results of operations.

***Defects in our products, product returns and product liability could result in******a decrease in customers and revenue, unexpected expenses and loss of market******share.***

          Complex products such as ours frequently contain errors, defects, and bugs upon release. These errors, defects and bugs are sometimes discovered after we begin to ship products. We expend significant resources to remedy these problems, but occasionally have faced legal claims by customers and others. Product defects can also cause interruptions, delays or cancellations of sales to customers, in addition to claims against us, all of which could adversely affect our operating results.

***We depend on the health of the semiconductor industry, which is highly******cyclical. The decline in demand in the semiconductor industry could affect our******financial condition and results of operations.***

          The semiconductor industry experiences significant downturns and wide fluctuations in supply and demand. The industry also experiences significant fluctuations in anticipation of changes in general economic conditions. This causes significant variances in product demand and production capacity, and aggravates both our manufacturing costs and product selling prices. These cyclical patterns, which we expect to continue, may substantially harm our business, financial condition, and results of operations.

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***Because we do not have long-term commitments from our distributors or******customers, we must estimate customer demand, and errors in our estimates can******have negative effects on our inventory levels, sales and operating results.***

          Our sales are made on the basis of individual purchase orders rather than long-term purchase commitments. We regularly request indications from customers as to their future plans and requirements, to ensure that we will be prepared to meet production demand for our products. However, we may not receive anticipated purchase orders for our products. We must be able to effectively manage the expenses and inventory risks associated with meeting potential demand. If we fail to meet customers’ supply expectations, we may lose business from such customers. If we expend resources and purchase materials, or enter into commitments to acquire materials and manufacture products, and customers do not purchase these products, we may be required to write off excess inventory in accordance with our inventory policy, which could harm and our business and operating results. 

          Design wins, which require significant expenditures, often precede the generation of volume sales by a year or more. The value of any design win will largely depend upon the commercial success of the customer’s product, and on the extent to which the design of the customer’s product accommodates components manufactured by our competitors. We cannot assure that we will achieve design wins, or that any design win will result in significant future revenue.

***We depend on a limited number of outside foundries and test subcontractors in******the manufacturing process, and any failure to obtain sufficient foundry or******testing capacity could significantly delay our ability to ship our products,******damage our customer relationships, and result in reduced revenue.***

          We utilize outside foundries for all wafer production. We believe that utilizing outside foundries enables us to focus on our design strengths, minimize fixed costs and capital expenditures and access diverse manufacturing technologies. We currently intend to continue to rely exclusively upon our outside foundries for our wafer fabrication requirements. However, there are significant risks associated with the reliance on outside foundries, including the lack of assured wafer supply and control over delivery schedules, delays in obtaining access to key process technologies, and limited control over manufacturing yields and production costs.

          The manufacture of integrated circuits is a highly complex and technically demanding process. We have diversified our sources of wafer supply and have worked closely with our foundries to minimize the likelihood of reduced manufacturing yields. However, our foundries have sometimes experienced lower than anticipated manufacturing yields, particularly in connection with the introduction of new products and the installation and start-up of new processes. Reduced yields have, at times, negatively affected our operating results, a situation which may recur in the future.

          Dependence on foundries located outside of the United States subjects us to numerous risks, including exchange rate fluctuations, export and import restrictions, trade sanctions, political instability and tariff increases. One of our main foundries is located in Singapore, which presents specific risks due to political instability in that region.

          We purchase wafers from outside foundries pursuant to customers’ purchase orders. We generally do not have a guaranteed level of wafer capacity or wafer costs at our foundries. Our wafer suppliers could prioritize capacity for other uses, or reduce or eliminate deliveries to us on short notice. In addition, we depend upon a limited number of foundries for our wafer requirements. Any sudden demand for an increased amount of wafers, or sudden reduction or elimination of any source of wafers, could result in a material delay in the shipment of products. Disruptions in supply, which have occurred in the past, may occur in the future. If such a disruption occurred, and we were unable to qualify alternative manufacturing sources for our products in a timely manner, or if such sources were unable to produce wafers with acceptable manufacturing yields, our business and operating results would be materiallyand adversely affected.

          We rely on four outside test service subcontractors to test our products. The same risks described in the paragraphs above, concerning guaranteed capacity, dependence upon a limited number of test service subcontractors, and disruptions in service, also apply to our test and assembly subcontractors.

          Rapid technological change and frequent new product introductions characterize the markets for our products. To remain competitive, we must develop or obtain access to new semiconductor process technologies in order to reduce die size, increase die performance and functional complexity, and improve manufacturing yields. If we are unable to obtain access to advanced wafer processing technologies, limiting our ability to introduce competitive products on a timely basis, our future operating results would be harmed.

27

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          Minute levels of contaminants in the semiconductor manufacturing environment, defects in the masks used to print circuits on a wafer, difficulties in the fabrication process and other factors can cause a substantial percentage of wafers to be rejected or a significant number of die on each wafer to be nonfunctional. Many of these manufacturing problems are difficult to diagnose and time consuming and expensive to remedy. Our foundries have, at times, experienced lower than anticipated yields, which have adversely affected production and operating results.

          The manufacturing processes utilized by our foundries are continuously being improved in order to increase yield and product performance. Process changes can, however, result in interruptions in production or significantly reduced yields. New process technologies and new products are especially susceptible to wide variations in manufacturing yields and efficiency. Irregularities, adverse yield fluctuations or other manufacturing problems at our foundries could result in production interruption or delivery delays, which would harm our business and results of operations.

          We have granted nontransferable, limited process licenses to some of our foundries to utilize our processes to manufacture and sell wafers to other customers. We protect our proprietary technology, particularly our design methodology, but may not be able to prevent its misappropriation by our foundries or others.

***We and the independent foundries and subcontractors we use to manufacture and******test our products are subject to environmental laws. Failure to comply with******these laws could delay manufacturing of our products and result in unexpected******expenses.***

          Our wafer suppliers and test and assembly subcontractors are subject to a variety of U.S. and foreign government regulations related to the discharge or disposal of toxic, volatile or otherwise hazardous chemicals used in their manufacturing processes. Failure by our suppliers or subcontractors to comply with environmental regulations could result in fines, suspension of production or cessation of operations. Environmental regulations could also require our suppliers or subcontractors to acquire equipment or incur other expenses to comply with environmental regulations. If our suppliers or subcontractors incur substantial additional expenses, product costs could significantly increase, adversely affecting our results of operations.

          We are also subject to a variety of environmental regulations relating to our operations. If we fail to comply with present and future regulations, the government could impose fines on us, or compel us to suspend or cease operations. If we or our suppliers or subcontractors fail to control the use or discharge of hazardous substances, we could be subject to civil or criminal liabilities, which could harm our business and operating results.

***Because competition for qualified personnel is intense, we may not be******successful in attracting and retaining personnel, which could have an impact******upon the development or sales of our products.***

          Our future success will depend to a significant extent on our ability to attract, retain and motivate qualified personnel, especially those with engineering design experience and expertise. We may not be successful in attracting and retaining such qualified personnel.

          Competitors may attempt to recruit our employees. While employees are required to sign standard agreements concerning confidentiality and ownership of inventions, we do not have employment contracts or non-competition agreements with most of our personnel. The loss of the services of key employees, the inability to attract or retain qualified personnel, or delays in hiring personnel, particularly engineers and other technical personnel, could negatively affect our business and prevent us from achieving our business goals.

***Our success depends on our ability to protect our intellectual property and******proprietary rights.***

          We attempt to protect our intellectual property rights through patents, trademarks, copyrights, licensing arrangements, maintaining certain technology as trade secrets and other measures. However, any patent, trademark, copyright or other intellectual property rights we own may be invalidated, circumvented or challenged. We cannot be certain that our intellectual property rights will provide competitive advantages, or that any pending or future patent applications will be issued with the scope of the claims sought by us. Competitors may develop technologies that are similar or superior to our technology, duplicate our technology or design around the patents that we own. In addition, effective patent, copyright and trade secret protection may be unavailable or limited in certain foreign countries in which we do business.

28

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          We believe that the future success of our business will depend on our ability to translate technological expertise and innovation into new and enhanced products. We enter into confidentiality or license agreements with our employees, consultants, vendors and customers, and limit access to and distribution of our proprietary information. Nevertheless, we may not be able to prevent the misappropriation of our technology.

          In addition, we have taken legal action to enforce our patents and other intellectual property rights, protect our trade secrets, determine the validity and scope of the proprietary rights of others, and defend against claims of infringement or invalidity. If a third party makes a valid claim, and we cannot obtain a license to the technology on reasonable terms, our operations could be harmed.

          We may be subject to legal proceedings and claims from time to time in the ordinary course of our business, including claims of alleged infringement of the proprietary rights and other intellectual property rights of third parties. Intellectual property litigation is expensive and time-consuming, and could divert our management’s attention away from running our business.

***We have in the past, and may in the future, be parties to legal proceedings******that could have a negative financial impact on us.***

          From time to time we have received correspondence from vendors, distributors, customers or end-users of our products regarding disputes with respect to contract rights, product performance or other matters that occur in the ordinary course of business. Some of these disputes may involve us in costly litigation or other actions, the outcome of which cannot be determined in advance and may adversely affect our business. The defense of lawsuits or other actions could divert our management’s attention away from running our business. In addition, negative developments with respect to litigation could cause the price of our common stock to decline significantly.

***Our stock price has been and will likely continue to be volatile because of******stock market fluctuations that affect the price of technology stocks. A decline******in our stock price could result in securities class action litigation against******us, which could divert management’s attention and harm our business.***

          Our stock price has been and is likely to continue to be highly volatile. Between January 1, 2006 and March 31, 2006 our stock price has traded as high as $2.08 on March 21, 2006 and as low as $1.46 on March 1, 2006. Our stock price could fluctuate significantly due to a number of factors, including:

|   | • | variations in our actual or anticipated operating   results;                                                             |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                     |
|   | • | delays in the introduction of new products or delay   in the sales cycle for new products, including our PHS products;   |
|   |   |                                                                                                                     |
|   | • | sales of substantial amounts of our stock;                                                                               |
|   |   |                                                                                                                     |
|   | • | announcements about us or about our competitors,   including technological innovation or new products;                   |
|   |   |                                                                                                                     |
|   | • | litigation and other developments relating to our   patents or other proprietary rights or those of our competitors;     |
|   |   |                                                                                                                     |
|   | • | conditions in the computer networking equipment and   wireless markets;                                                  |
|   |   |                                                                                                                     |
|   | • | governmental regulation and legislation; and                                                                             |
|   |   |                                                                                                                     |
|   | • | changes in securities analysts’ estimates of our   performance, or our failure to meet analysts’ expectations. |

          Many of these factors are beyond our control. In addition, the stock markets in general, and the NASDAQ National Market and the market for technology companies in particular, have experienced extreme price and volume fluctuations recently. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors may decrease the market price of our common stock, regardless of our actual operating performance. In the past, companies that have experienced volatility in the market prices of their stock have been the objects of securities class action litigation. If we were the objects of securities class action litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

***Our Certificate of Incorporation and Bylaws, Stockholder Rights Plan and******Delaware law contain provisions that could discourage a change in control, even******if the change in control would be beneficial to our stockholders.***

29

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          Provisions of our Amended and Restated Certificate of Incorporation, Bylaws, the 1998 Shareholder Rights Plan, our stock option plans and Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock.

          Under the Shareholder Rights Plan, adopted in August 1998, each share of our outstanding common stock carries one Right to purchase 1/1000 of a share of  Series A Participating Preferred Stock at an exercise price of $30.00 per Right. If someone acquires 15% or more of our common stock, each Right not owned by a holder of 15% or more of our common stock entitles the holder, upon payment of the $30.00 exercise price, to receive common stock having a current market value of $60.00. This issuance of additional common stock would significantly reduce the percentage of common stock held by a potential acquirer. The Rights expire in August 2008.

          In addition, Section 203 of the Delaware General Corporation Law and the terms of our stock option plans may discourage, delay or prevent a change in control of Micro Linear. Specifically, Section 203 prohibits a Delaware corporation from engaging in any business combination with an interested stockholder for three years after the date the stockholder became an interested stockholder unless specific conditions are met. Also, in the event outstanding options granted pursuant to certain of our stock option plans are not assumed by an acquiring corporation, the unvested portion of such options may be accelerated upon a change of control. In addition, some individual stock option grants provide for the partial or complete acceleration of vesting upon a change of control.

***Compliance with the laws and regulations affecting public companies may cause us to incur increased costs.***

          The laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002 and rules adopted by the SEC and NASDAQ, could cause us to incur increased costs as we evaluate the implications of these rules and respond to these requirements. These rules could make it more difficult for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, or as executive officers. We are presently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of suchcosts.

***Changes to financial accounting standards may affect our results of operations******and cause us to change our business practices.***

          We prepare our financial statements to conform with generally accepted accounting principles, or GAAP, in the United States. These accounting principles are subject to interpretation by the American Institute of Certified Public Accountants, the SEC and various bodies formed to interpret and create appropriate accounting policies. A change in those policies can have a significant effect on our reported results and may affect our reporting of transactions completed before a change is announced. Changes to those rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business. For example, accounting policies affecting many aspects of our business, including rules relating to employee stock option grants, have recently been revised or are under review. The Financial Accounting Standards Board and other agencies have finalized changes toGAAP that required us, in the first quarter of 2006, to record a charge to earnings for employee stock option grants and other equity incentives. We may have significant and ongoing accounting charges resulting from option grant and other equity incentive expensing that could reduce our overall net income. In addition, since we historically have used equity-related compensation as a component of our total employee compensation program, the accounting change could make the use of equity-related compensation less attractive to us and therefore make it more difficult to attract and retain employees.

***While we believe that we currently have adequate internal controls over financial reporting, we are exposed to risks from recent legislation requiring companies to evaluate those internal controls.***

          Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to report on, and our independent auditors to attest to, the effectiveness of our internal control structure and procedures for financial reporting. We have an ongoing program to perform the system and process evaluation and testing necessary to comply with these requirements. This legislation is relatively new and neither companies nor accounting firms have significant experience in complying with its requirements. As a result, we expect to incur increased expense and to devote additional management resources to Section 404 compliance. In the event that our chief executive officer, chief financial officer or independent registered public accounting firm determine that our internal controls over financial reporting are not effective as defined under Section 404, investor perceptions of our company may be adversely affected and couldcause a decline in the market price of our stock. We are not required to comply with the provisions of Section 404 of the Sarbanes-Oxley Act until 2007.

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**Item 6. *Exhibits***

| **Exhibit   Number** |   | **Description   of Document**                                                                                                                                                                                                                        |
|----------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      |   |                                                                                                                                                                                                                                                      |
| 10.1#                |   | Micro Linear Corporation Amended & Restated 1994   Stock Option Plan and form of Stock Option Agreement (incorporated by   reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K   filed on March 2, 2006).              |
|                 |   |                                                                                                                                                                                                                                                 |
| 10.2#                |   | Micro Linear Corporation Amended & Restated 1998   Nonstatutory Stock Option Plan and form of Stock Option Agreement   (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report   on Form 8-K filed on March 2, 2006). |
|                 |   |                                                                                                                                                                                                                                                 |
| 10.3                 |   | International Distributor Agreement dated November 30, 2004 between the Registrant and Clavis, a division of Macnica, Inc.                                                                                                                           |
|                 |   |                                                                                                                                                                                                                                                 |
|  10.4           |   | Addendum to Distribution Agreement dated December 5, 2005 between the Registrant and Clavis, a division of Macnica, Inc.                                                                                                                             |
|                 |   |                                                                                                                                                                                                                                                 |
| 31.1                 |   | Rule 13a-14(a) Certification by the Chief Executive   Officer                                                                                                                                                                                        |
|                 |   |                                                                                                                                                                                                                                                 |
| 31.2                 |   | Rule 13a-14(a) Certification by the Chief Financial   Officer                                                                                                                                                                                        |
|                 |   |                                                                                                                                                                                                                                                 |
| 32.1*                |   | Section 1350 Certification by the Chief Executive   Officer                                                                                                                                                                                          |
|                 |   |                                                                                                                                                                                                                                                 |
| 32.2*                |   | Section 1350 Certification by the Chief Financial   Officer                                                                                                                                                                                          |

|        |
|--------|
| #      | Denotes a management contract or compensatory plan   or arrangement. |
|   |   |
| *      | In accordance with Item 601(b)(32)(ii) of Regulation   S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s   Reports on Internal Control Over Financial Reporting and Certification of   Disclosure in Exchange Act Periodic Reports, the certifications furnished in   Exhibit 32.1 and Exhibit 32.2 are deemed to accompany this Form 10-Q and will   not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such   certifications will not be deemed to be incorporated by reference into any   filing under the Securities Act or the Exchange Act, except to the extent   that the registrant specifically incorporates it by reference. |

31

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**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, thereunto duly authorized.

|               | MICRO LINEAR CORPORATION |
|--------------------|--------------------------|
|               |                     |   |
|               |                     |   |
| Date: May 17, 2006 | By                       | /s/ TIMOTHY A. RICHARDSON |
|               |                     |  |
|               |                     | Timothy A. Richardson |
|               |                     | *President and Chief**Executive Officer   (Principal Executive Officer)* |
|               |                     |   |
| Date: May 17, 2006 | By                       | /s/ MICHAEL W. SCHRADLE |
|               |                     |  |
|               |                     | Michael W. Schradle |
|               |                     | *Chief Financial Officer   (Principal Financial and**Accounting   Officer)* |

32

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**INDEX TO EXHIBITS**

| **Exhibit   Number** |   | **Description   of Document**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|----------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.1#                |   | Micro Linear Corporation Amended &Restated 1994 Stock Option Plan and form of Stock Option Agreement (incorporatedby reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-Kfiled on March 2, 2006).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.2#                |   | Micro Linear Corporation Amended &Restated 1998 Nonstatutory Stock Option Plan and form of Stock Option Agreement(incorporated by reference to Exhibit 10.2 to the Registrant’s CurrentReport on Form 8-K filed on March 2, 2006).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.3                 |   | InternationalDistributor Agreement dated November 30, 2004 between the Registrant and Clavis,a division of Macnica, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|  10.4           |   | Addendum toDistribution Agreement dated December 5, 2005 between the Registrant and Clavis,a division of Macnica, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 31.1                 |   | Rule 13a-14(a) Certification by the Chief Executive   Officer
 

 

 

31.2

 

Rule 13a-14(a) Certification by the Chief Financial   Officer
 

 

 

32.1*

 

Section 1350 Certification by the Chief Executive   Officer
 

 

 

32.2*

 

Section 1350 Certification by the Chief Financial   Officer.
#

Denotes a management contract or compensatory plan   or arrangement.

 

 

*

In accordance with Item 601(b)(32)(ii) of Regulation   S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s   Reports on Internal Control Over Financial Reporting and Certification of   Disclosure in Exchange Act Periodic Reports, the certifications furnished in   Exhibit 32.1 and Exhibit 32.2 are deemed to accompany this Form 10-Q and will   not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such   certifications will not be deemed to be incorporated by reference into any   filing under the Securities Act or the Exchange Act, except to the extent   that the registrant specifically incorporates it by reference.

33 |