**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**





**WASHINGTON,
      D.C. 20549**





FORM
      10-QSB/A (SECOND AMENDMENT)


[X]
                QUARTERLY
                    REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                    OF
                    1934
 
 For
          the
          quarterly period ended March 31, 2005
 
 [
                    ]
                TRANSITION
                    REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                    OF 1934
                    for the transition period from
 _________________
          to _______________


Commission
      File Number 0-27418




eLINEAR,
                INC.(Exact
                name of small business
                issuer as specified in its charter)Delaware
            
            76-0478045(State
                or other jurisdiction of incorporation or organization)
            
            (IRS
                Employer Identification No.)2901
                West Sam Houston Parkway
                North, Suite E-300, Houston, Texas 77043(Address
                of principal
                executive offices)(713)
                896-0500(Issuer’s
                telephone
                number)




Check
      whether the issuer has (1) filed all reports required to be filed by Section
      13
      or 15(d) of the Exchange Act during the past 12 months (or for 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





As
      of
      August 5, 2005, there were outstanding 24,566,002 shares of common stock, $.02
      par value per share.





Transitional
      Small Business Disclosure Format (Check one): Yes o    No
x













**eLINEAR,
      INC.**


**AND
      SUBSIDIARIES**


**INDEX
      TO FORM 10-QSB/A**


**March
      31, 2005**





Page
      No.


**Part
                I**
            **Financial
                Information**Item
                1.
            Financial
                StatementsConsolidated
                Balance Sheets March 31, 2005
                (unaudited) and December
                31, 2004
            3Consolidated
                Statements of Operations (unaudited) Three
                Months Ended March 31, 2005 and 2004
            4Consolidated
                Statements of Cash Flows (unaudited) Three
                Months Ended March 31, 2005 and 2004
            5Notes
                to Unaudited Consolidated Financial
                Statements
            6Item
                2.
            Management’s
                Discussion and Analysis of Results of 
                Operations
                and Financial Condition
            13Item
                3.
            Controls
                and Procedures
            20**Part
                II**
            **Other
                Information**Item
                1.
            Legal
                Proceedings
            22Item
                2.
            Changes
                in Securities and Use of
                Proceeds
            22Item
                3.
            Defaults
                Upon Senior Securities
            23Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            23Item
                5.
            Other
                Information
            23Item
                6.
            Exhibits
            24





2
 *Table
            of Contents*





**PART
      I. FINANCIAL INFORMATION**


Item
                  1.
              FINANCIAL
                  STATEMENTS




**eLINEAR,
      INC.**


**AND
      SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**





March
                31,
            
            December
                31,2005
            
            2004(Unaudited)(Restated)**ASSETS**Current
                assets:Cash
            
            $
            1,768,022
            
            $
            898,869Cash
                in restricted account
            
            
            504,580
            
            
            504,580Accounts
                  receivable, net of allowance of $353,897 at March 31, 2005and
                  $311,569 at December 31, 2004, respectively
            
            
            4,100,621
            
            
            5,010,733Inventory
            
            
            708,070
            
            
            446,446Other
                current assets
            
            
            130,073
            
            
            126,316Total
                current assets
            
            
            7,211,366
            
            
            6,986,944Property
                and equipment, net
            
            
            776,542
            
            
            805,798Other
                assets:Goodwill
            
            
            1,100,000
            
            
            1,100,000Deferred
                financing costs, net
            
            
            117,073
            
            
            132,346Contract
                rights
            
            
            237,994
            
            
            273,693Deposits
            
            
            45,221
            
            
            34,616Total
                other assets
            
            
            1,500,288
            
            
            1,540,655Total
                assets
            
            $
            9,488,196
            
            $
            9,333,397**LIABILITIES
                AND SHAREHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable, trade
            
            $
            1,454,522
            
            $
            1,266,738Line
                of credit - revolver
            
            
            1,949,504
            
            
            2,784,543Accrued
                liabilities
            
            
            1,985,628
            
            
            1,049,974Notes
                payable and rescission liability
            
            
            2,736,000
            
            
            --Unamortized
                debt discounts
            
            
            (2,659,980
            )
            
            --Total
                current liabilities
            
            
            5,465,674
            
            
            5,101,255Long-term
                debt, net
            
            
            1,193,696
            
            
            1,399,397Shareholders'
                equity:Preferred
                  stock, $.02 par value, 10,000,000 shares authorized,none
                  issued
            
            
            --
            
            
            --Common
                  stock, $.02 par value, 100,000,000 shares authorized,22,638,212
                  and 21,622,598 shares issued and outstanding at March 31, 2005
                  and
                  December 31, 2004, respectively
            
            
            452,764
            
            
            432,452Additional
                paid-in capital
            
            
            15,621,880
            
            
            12,228,744Accumulated
                deficit
            
            
            (13,245,818
            )
            
            (9,828,451
            )Total
                shareholders’ equity
            
            
            2,828,826
            
            
            2,832,745Total
                liabilities and shareholders' equity
            
            $
            9,488,196
            
            $
            9,333,397





See
      accompanying notes to unaudited consolidated financial statements.





3
 *Table
            of Contents*





**eLINEAR,
      INC.**


**AND
      SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004**


**(Unaudited)**





2005
            
            2004Revenue:Products
            
            $
            4,860,442
            
            $
            3,956,625Services
            
            
            625,580
            
            
            218,453Other
            
            
            26,253
            
            
            --Total
                revenue
            
            
            5,512,275
            
            
            4,175,078Cost
                of revenue:Products
            
            
            4,270,339
            
            
            3,514,148Services
            
            
            329,418
            
            
            200,614Total
                cost of revenue
            
            
            4,599,757
            
            
            3,714,762Gross
                profit
            
            
            912,518
            
            
            460,316Operating
                expenses:Selling,
                general and administrative expenses:Payroll
                and related expenses
            
            
            1,806,743
            
            
            534,998Office
                administration
            
            
            370,742
            
            
            229,094Professional
                services
            
            
            410,764
            
            
            300,991Impairment
                of goodwill
            
            
            --
            
            
            451,925Other
            
            
            1,394,906
            
            
            372,161Total
                selling, general and administrative
            
            
            3,983,155
            
            
            1,889,169Depreciation
                and amortization
            
            
            133,051
            
            
            8,505Total
                operating expenses
            
            
            4,116,206
            
            
            1,897,674Loss
                from operations
            
            
            (3,203,688
            )
            
            (1,437,358
            )Other
                income (expense):Interest,
                net
            
            
            (232,435
            )
            
            (43,272
            )Other
            
            
            18,756
            
            
            --Total
                other income (expense)
            
            
            (213,679
            )
            
            (43,272
            )Net
                loss
            
            $
            (3,417,367
            )
            $
            (1,480,630
            )Net
                loss per share:Basic
                and diluted
            
            $
            (0.15
            )
            $
            (0.09
            )Weighted
                average number of common shares outstanding:Basic
                and diluted
            
            
            22,178,405
            
            
            16,917,987





See
      accompanying notes to unaudited consolidated financial statements.





4
 *Table
            of Contents*





e **LINEAR,
      INC.**


**AND
      SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004**


**(Unaudited)**





2005
            
            2004(Restated)
            
            (Restated)Cash
                flows from operating activities:Net
                loss
            
            $
            (3,417,367
            )
            $
            (1,480,650
            )Adjustments
                  to reconcile net loss to cash used inoperating
                  activities:Depreciation
                and amortization
            
            
            148,317
            
            
            8,505Impairment
                of goodwill
            
            
            --
            
            
            451,920Bad
                debt expense
            
            
            42,328
            
            
            --Amortization
                of debt discounts
            
            
            145,302
            
            
            54,044Stock
                and stock option based compensation
            
            
            807,327
            
            
            239,474Extension
                of warrant expiration date
            
            
            27,871
            
            
            --Changes
                in assets and liabilities:Accounts
                receivable
            
            
            867,784
            
            
            (915,881
            )Inventory
            
            
            (261,624
            )
            
            (117,600
            )Other
                current assets
            
            
            (3,757
            )
            
            (17,173
            )Accounts
                payable
            
            
            187,784
            
            
            (449,032
            )Payable
                to officers
            
            
            --
            
            
            (31,336
            )Accrued
                liabilities
            
            
            935,654
            
            
            53,820Net
                cash used in operating activities
            
            
            (520,381
            )
            
            (2,203,909
            )Cash
                flows from investing activities:Purchase
                of property and equipment
            
            
            (68,089
            )
            
            (50,800
            )Certificate
                of deposit
            
            
            --
            
            
            (500,000
            )Cash
                in restricted account
            
            
            --
            
            
            (500,000
            )Deposits
            
            
            (10,605
            )
            
            (13,159
            )Net
                cash used in investing activities
            
            
            (78,694
            )
            
            (1,063,959
            )Cash
                flows from financing activities:Repayment
                on notes payable due to officers
            
            
            --
            
            
            (215,703
            )Proceeds
                from financing agreement
            
            
            2,736,000
            
            
            2,539,515Payment
                of up-front financing costs
            
            
            (449,484
            )
            
            --Repayment
                of financing agreement
            
            
            (835,039
            )
            
            --Proceeds
                from exercise of stock options
            
            
            16,750
            
            
            338,150Proceeds
                from sale of common stock, net
            
            
            --
            
            
            4,584,591Net
                cash provided by financing activities
            
            
            1,468,227
            
            
            7,246,553Net
                increase in cash
            
            
            869,153
            
            
            3,978,685Cash
                and cash equivalents, beginning of period
            
            
            898,869
            
            
            554,483Cash
                and cash equivalents, end of period
            
            $
            1,768,022
            
            $
            4,553,168Supplemental
                cash flow disclosures:Interest
                paid
            
            $
            71,859
            
            $
            6,342Supplemental
                non-cash disclosures:Debt
                converted into equity
            
            $
            275,000
            
            $
            --





See
      accompanying notes to unaudited consolidated financial statements.





5
 *Table
            of Contents*





**eLINEAR,
      INC.**


**AND
      SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2005**








Note
                1.
            Organization
                and Nature of Business





*Statement
      of Information Furnished*





The
      accompanying unaudited consolidated financial statements of eLinear, Inc. and
      Subsidiaries (the “Company” or “eLinear”) have been prepared pursuant to the
      rules and regulations for interim financial information and the instructions
      to
      Form 10-QSB and Regulation S-B. Accordingly, certain information and footnote
      disclosures normally included in financial statements prepared in accordance
      with generally accepted accounting principles in the United States have been
      omitted. In the opinion of management, the unaudited consolidated financial
      statements contain all adjustments (consisting of only normal recurring
      accruals) necessary to present fairly the financial position as of March 31,
      2005, and the results of operations and cash flows for the three months ended
      March 31, 2005 and 2004.





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements and
      reported amounts of revenue, and expenses during the reporting period. Operating
      results for interim periods are not necessarily indicative of the results that
      may be expected for the complete fiscal year. The accompanying unaudited
      consolidated financial statements should be read in conjunction with the audited
      consolidated financial statements and notes thereto included in the Company’s
      Annual Report on Form 10-KSB for the year ended December 31, 2004, filed with
      the Securities and Exchange Commission.





*Stock
      Options*





At
      March
      31, 2005, the Company had stock-based compensation plans, which are more fully
      described in Note 9 in the Company’s Annual Report on Form 10-KSB. In addition,
      on December 21, 2004, the Board of Directors adopted the 2005 Stock Option
      Plan
      (the “2005 Plan”), which allows for the issuance of up to 4,000,000 stock
      options to directors, executive officers, employees and consultants of the
      Company who are contributing to the Company’s success. The 2005 Plan must be
      approved by the Company’s shareholders before any stock options may be issued
      pursuant to the 2005 Plan. As of March 31, 2005, there were no options
      outstanding under the 2005 Plan. The Company did not grant any options to
      employees, directors or consultants under any of its stock option plans during
      the three months ended March 31, 2005.





The
      Company applies and intends to continue to apply the recognition and intrinsic
      value measurement principles of Accounting Principles Board (APB) Opinion No.
      25, “Accounting for Stock Issued to Employees,” and related Interpretations in
      accounting for those plans. The Company recorded $50,015 of stock-based
      compensation expense for stock options issued to employees which is reflected
      in
      the net loss for the three month period ended March 31, 2005, because certain
      options granted had exercise prices less than the market value of the underlying
      common stock on the date of the grant. In addition, the Company recorded stock
      based compensation expense totaling $28,925 related to options issued to a
      director which vested during the period. The director options were expensed
      based on the fair value calculated using the Black Scholes pricing model using
      the following assumptions: 88% volatility, four year life, 1.5% discount rate
      and 0% dividend yield.





6
 *Table
            of Contents*





The
      following table illustrates the effect on net income and earnings per share
      if
      eLinear had applied the fair value recognition provisions of FASB Statement
      No.
      123, Accounting for Stock-Based Compensation, to stock-based employee
      compensation.





Three
                Months Ended
              March
                31,2005
            
            2004Net
                loss, as reported
            
            $
            (3,417,367
            )
            $
            (1,480,630
            )Add:
                Stock-based employee compensation included in reported net
                loss
            
            
            50,015
            
            
            --Stock
                based compensation under fair valuemethod
            
            
            (415,190
            )
            
            --Pro
                forma net loss
            
            $
            (3,782,542
            )
            $
            (1,480,630
            )Net
                loss per share:Basic
                and diluted - as reported
            
            $
            (0.15
            )
            $
            (0.09
            )Stock
                based compensation under fair valuemethod
            
            
            (0.02
            )
            
            --Basic
                and diluted - pro forma
            
            $
            (0.17
            )
            $
            (0.09
            )





The
      fair
      value of each option granted is estimated on the date of grant using the
      Black-Scholes option-pricing model with the following weighted average
      assumptions: dividend yield 0.0%, expected volatility of 88%, risk-free interest
      rate of 1.5%, and expected life of 48 months.





Note
                2.
            Impairment





As
      of
      March 31, 2005, the Company had $1,100,000 of goodwill resulting from the
      acquisition of NewBridge. Goodwill represents the excess of cost over the fair
      value of the net tangible assets acquired and is not amortized. However,
      goodwill is subject to an impairment assessment at least annually which may
      result in a charge to operations if the fair value of the reporting segment
      in
      which the goodwill is reported declines. In March 2004, the Company recorded
      impairment expense totaling $451,920 related to 100% of the goodwill recorded
      with the 2003 NetView acquisition. In March 2004, the consulting services
      business segment lost its largest consulting contract and the other operations
      that had been acquired in the acquisition had declined due to the loss of a
      key
      employee after the acquisition. Based on projected estimated future cash flows
      from that business segment, management determined a full impairment charge
      was
      required. In September 2004, the Company performed a valuation analysis of
      the
      discounted projected estimated future cash flows of NewBridge and the Company
      elected to write down a portion of the goodwill related to NewBridge of
      $391,114. Due to the large amount of goodwill presently on the Company’s
      financial reports, if an impairment is required, the Company’s financial
      condition and results of operations would be negatively affected.





Note
                3.
            Credit
                Facilities





*February
      2004 Funding*





In
      February 2004, the Company obtained a secured revolving note with Laurus Master
      Fund, Ltd. (“Laurus”). Under the terms of the agreement, the Company can borrow
      up to $5,000,000 at an annual interest rate of prime plus .75% (with a minimum
      rate of 4.75%). The agreement contains two notes: a minimum secured note
      totaling $2,000,000 (“term note”) and a revolving credit facility totaling
      $3,000,000 (“revolver”) based on eligible accounts receivable.





*Line
      of Credit - Revolver*





The
      Laurus revolver provides for borrowings of up to the lesser of; (i) $3 million
      or (ii) 90% of the Company’s eligible accounts receivable. The Company borrowed
      $1,000,000 under the revolving facility on the date of the agreement. The
      revolving credit facility has a term of three years and accrues interest on
      outstanding balances at the rate of prime (5.50% as of March 31, 2005) plus
      0.75% (with a minimum rate of 4.75%). The Company is permitted to go over its borrowing limit, which is referred to as getting an
      “overadvance,” if the Company gets the approval of Laurus. These overadvances
      typically accrue interest at a rate of 1.5% per month, but until August 2004,
      the Company was not required to pay this interest amount on any overadvances.
      In
      October 2004, Laurus agreed to fund an additional $500,000, which loan was
      not
      deemed an overadvance. This credit facility is secured by all of the Company’s
      assets. In consideration for the issuance of seven-year warrants to purchase
      150,000 shares of the Company’s common stock at $1.90 per share and the
      forgiveness of penalties owed to Laurus in the approximate amount of $153,000
      as
      of October 31, 2004, the Company agreed in October 2004 to reduce the conversion
      price of the credit facility from $2.91 to $1.00 per share. The Company recorded
      $338,925 of interest expense in the fourth quarter of 2004 for this beneficial
      conversion feature. At the option of the holder, the outstanding balance on
      the
      credit facility can be converted into shares of Company common stock at a
      conversion price of $1.00 per share. The Company has the ability to prepay
      any
      amounts owed under this credit facility at 115% of the principal
      amount. As
      amounts are drawn on this line of credit, to the extent the current market
      price
      exceeds the fixed conversion price, additional interest expense will be
      recognized for this beneficial conversion feature. All stock conversion prices
      and exercise prices are subject to adjustment for stock splits, stock dividends
      or similar events. The Company paid back the $1,000,000 revolver during the
      quarter ended June 30, 2004. As of March 31, 2005, the Company had $1,949,504
      outstanding under the revolver.





7
 *Table
            of Contents*





*Term
      Note*





The
      term
      note has a term of three years. The Company has the option of paying scheduled
      interest and principal, or prepaying all or a portion of the term note with
      shares of its common stock at the fixed conversion price of $1.00 per share,
      provided that the shares are registered with the Securities and Exchange
      Commission or with cash at 115% of the outstanding balance. Laurus also has
      the
      option to convert all or a portion of the term note into shares of the Company’s
      common stock at any time, subject to certain limitations, at a fixed conversion
      price of $1.00 per share. During the three months ended March 31, 2005, Laurus
      was issued 275,000 shares for this conversion feature and reduced the principal
      amount of the note by $275,000. The term note is secured by a blanket lien
      on
      all of the Company’s assets. As of March 31, 2005, the Company had $1,725,000
      outstanding under the term note.





In
      conjunction with the Laurus credit facility, Laurus was paid a fee of $219,500
      and received a seven-year warrant to purchase up to a total of 440,000 shares
      of
      the Company’s common stock at prices ranging from $1.90 to $3.22 per share. The
      warrants, which are exercisable immediately, were valued at $529,338 using
      a
      modified Black-Scholes option pricing model. The value of these warrants and
      the
      fees paid to Laurus were recorded as a discount to the term note and are being
      amortized over the term of the loan using the effective interest
      method.





The
      credit facility is considered to have a beneficial conversion feature since
      the
      fair market value of the common stock issuable upon conversion of the term
      note
      exceeded the value allocated to the term note on the date of issuance. The
      difference between the market value of the shares issuable upon conversion
      and
      the value allocated to the term note of $510,282 is considered to be the value
      of the beneficial conversion feature. The value of the beneficial conversion
      feature has also been recorded as a discount to the term note and is being
      amortized over the term of the loan using the effective interest method. In
      the
      event the investors convert the debentures prior to the maturity of the
      agreements, then generally accepted accounting principles require the Company
      to
      expense the unamortized balance of the debt discount in full.





In
      addition to the $219,500 fee paid to Laurus, the Company paid $273,000 in
      finder’s fees to vSource Capital. The $273,000 was capitalized as deferred
      financing costs and is being amortized using the effective interest method
      over
      the term of the loan agreement.





During
      the quarter ended June 30, 2004, the Company paid back the original $1,000,000
      it had drawn under the revolver during the quarter ended March 31, 2004.
      Therefore, the Company expensed one third of the discounts recorded in
      connection with the credit facility on the date the funds were repaid resulting
      in additional non-cash interest expense of approximately $420,000 during the
      quarter ended June 30, 2004.





The
      following table illustrates the borrowings and repayments made by the Company
      and the beneficial conversion features and amortization on the Laurus credit
      facility through March 31, 2005:





8
 *Table
            of Contents*








Original
                loan draw down amount
            
            $
            3,000,000Add:
                Net amount of borrowings
            
            
            949,504Face
                value of amount borrowed
            
            
            3,949,504Conversion
                to equity
            
            
            (275,000
            )Fee
                paid to Laurus
            
            
            (219,500
            )Beneficial
                conversion amount
            
            
            (1,039,620
            )Amortization
                of debt discounts
            
            
            727,817Laurus
                debt, net as of March 31, 2005
            
            $
            3,143,201





As
      part
      of the above credit
      facility ,
      the
      Company agreed to file a registration statement with the SEC in order to
      register the resale of any shares issuable upon conversion of up to $2 million
      of the credit
      facility and upon
      the exercise of the warrants. The terms of its agreement with Laurus required
      it
      to file the registration statement and have the registration statement declared
      effective by a definitive period of time, not to exceed 150 days from February
      23, 2004, or within 15 days of the Company’s previous registration statement
      being declared effective by the SEC, whichever is earlier. The Company’s
      previous registration statement was declared effective on September 10, 2004.
      The Company failed to meet this deadline and as compensation to Laurus, the
      Company agreed to reduce the conversion price of the credit facility from $2.91
      per share to $1.00 per share. In
      consideration for the issuance of seven-year warrants to purchase 150,000 shares
      of the Company’s common stock at $1.90 per share, Laurus forgave approximately
      $153,000 in penalties. Laurus is
      limited to owning or beneficially owning a maximum of 4.99% of the Company’s
      outstanding shares of common stock. In addition, each time the Company borrows
      $2 million under the credit facility, the Company will be required to file
      an
      additional registration statement covering the possible conversion of that
      amount of the note. The Company’s registration statement filed with the SEC to
      register the conversion shares and shares underlying the warrants was declared
      effective by the SEC on December 30, 2004. The Company is not obligated at
      any
      time to repurchase any portion of the Laurus conversion shares nor the shares
      underlying the warrants.





*Textron
      Financial Corporation Credit Facility*





During
      February 2004, the Company retired its $1,000,000 line of credit with Textron
      Financial Corporation with the proceeds from the Laurus credit facility and
      entered into a new $500,000 credit facility with Textron collateralized with
      a
      $500,000 letter of credit.





*February
      2005 Funding*








On
      February 28, 2005, the Company entered into financing arrangements to receive
      up
      to a total principal amount of $12 million with Laurus ,
      Iroquois Capital LP (“Iroquois”), RHP Master Fund (“RHP”), Basso Private
      Opportunity Holding Fund Ltd. (“Basso Private”), and Basso Multi-Strategy
      Holding Fund Ltd. (“Basso Multi”), (collectively, the “Investors”) in which it
      initially received $2,736,000 in cash and the ability upon certain conditions
      to
      receive the remaining amount of the total financing of $9,264,000, such
      financing as been subsequently amended. The $9,264,000 is held in restricted
      accounts at the sole dominion and control of each respective Investor. The
      Company may only receive the amounts (less
      applicable accrued interest) held
      in
      the restricted account after
      (i)
      the initial amount received, plus interest, is paid in full, (ii) the shares
      of
      the Company common stock underlying the notes are registered; and (iii) either
      the Company or the Investor converts any amounts held in the Restricted Accounts
      into shares of the Company’s common stock.  If
      the
      Company converts the amounts held in the restricted account, the amounts shall
      be converted at either (i) a price equal to 85% of the average of the five
      lowest closing prices of the Company common stock during the 22 trading days
      immediately prior to the date of a respective repayment notice if the average
      closing price of the Company common stock is less than 110% of the Fixed
      Conversion Price, but in no instance may such shares by converted for less
      than
      $1.00; or (ii) at the Fixed Conversion Price if the average closing price of
      the
      Company common stock for the five consecutive trading days immediately preceding
      the respective repayment notice is greater than or equal to 115% of the Fixed
      Conversion Price.




Under
      the
      terms of these notes and related documents, the is Company is obligated to
      make
      monthly interest payments for interest accrued on the initial $2,736,000, the
      interest begins accruing on April 1, 2005. The Company is obligated to make
      monthly payments, either in cash or stock as determined by the terms of the
      notes, beginning on June 1, 2005 for the initial $2,736,000, plus applicable
      interest (the “Monthly Payment”). The Monthly Payment will be made (i)
      automatically by a conversion in stock at $1.00, (ii) at the discretion of
      the
      Company at a reduced conversion price, or (iii) in cash paid by the Company
      at
      101% of the Monthly Payment.





9
 *Table
            of Contents*





In
      addition to the notes the Company issued 1,800,000 warrants to the Investors. The
      warrants are exercisable by the Investors until February 28, 2012, at $1.25
      per
      share of Company common stock. All
      of
      the warrants are immediately exercisable with no requirement to return to the
      Company should the initial $2,736,000 is not be paid in full.





These
      notes are secured by all of the Company and its subsidiaries’ assets.





In
      conjunction with the notes, the Investors were paid a fee of $449,484. The
      warrants, which are exercisable immediately, were valued at $1,283,479 using
      a
      modified Black-Scholes option pricing model. The value of these warrants and
      the
      fees paid to the Investors were recorded as a discount to the notes and are
      being amortized over the term of the loan using the effective interest
      method.





The
      credit facility is considered to have a beneficial conversion feature since
      the
      fair market value of the common stock issuable upon conversion of the term
      note
      exceeded the value allocated to the term note on the date of issuance. The
      difference between the market value of the shares issuable upon conversion
      and
      the value allocated to the term note of $1,003,201 is considered to be the
      value
      of the beneficial conversion feature. The value of the beneficial conversion
      feature has also been recorded as a discount to the notes and is being amortized
      over the term of the loan using the effective interest method. In the event
      the
      Investors convert the notes prior to the maturity of the agreements, then
      generally accepted accounting principles require the Company to expense the
      unamortized balance of the debt discount in full.





The
      Company filed a registration statement with the Securities and Exchange
      Commission to register the resale of the shares
      of
      common stock underlying the notes and the shares issuable upon exercise of
      the
      Warrants .
      During
      June 2005, the Securities and Exchange Commission notified the Company that
      it
      believed the filing of this registration statement violated Section 5 of the
      Securities Act. If a violation of Section 5 occurred, the Investors related
      to
      the February 2005 funding have obtained the right to require the Company to
      repay to the Investors the original amount of the notes of $2,736,000 plus
      interest from the initial date of funding for a period of one year following
      the
      date of the violation. The Company has recorded $2,736,000 as a current
      liability identified as “N otes
      payable and rescission liability” on its balance sheet as of March 31, 2005, as
      such amount was funded to the Company in immediately available funds and is
      recorded as a current liability.





The
      following table illustrates the borrowings made by the Company, the fees paid,
      the value of the warrants issued and the beneficial conversion feature and
      amortization of such amounts, pursuant to the February 2005 funding as of March
      31, 2005:





Original
                loan amount
            
            $
            2,736,000Fees
                paid
            
            
            (449,484
            )Amortization
                of fees paid, March 2005
            
            
            12,489Beneficial
                conversion feature
            
            
            (1,003,201
            )Amortization
                of beneficial conversion feature, March 2005
            
            
            27,867Debt
                discount on warrants issued
            
            
            (1,283,299
            )Amortization
                of debt discounts, March 2005
            
            
            35,648Notes
                payable at March 31, 2005
            
            $
            76,020





See
“Note
      10. Subsequent Events” for a discussion of the July 14, 2005 amendment to the
      February 28, 2005 financing.





Note
                4.
            Common
                Stock





The
      Company issued 275,000 shares of common stock to Laurus during the three months
      ended March 31, 2005 for conversion of $275,000 principal amount of Laurus’
long-term debt.





The
      Company issued 25,000 shares of common stock for stock options exercised during
      the three months ended March 31, 2005 resulting in proceeds totaling
      $16,750.





10
 *Table
            of Contents*





The
      Company issued 715,616 shares of its common stock valued at $728,387 to third
      parties for consulting services during the three months ended March 31, 2005.
      The Company measured the transactions at the date of issuance at the quoted
      market price. There are no performance commitments or penalties for
      non-performance, therefore, the Company recorded the services at the date of
      issuance.





Note
                5.
            Common
                Stock Warrants





In
      connection with its debt and equity fundings, the Company has issued warrants
      to
      acquire common stock at various prices with various expiration dates. The
      following table summarizes the warrants outstanding as of March 31,
      2005:





Exercise
                Price
            Financing
              Date
            Outstanding
              Warrants
            Expiration
                Date$0.70
            December
                2003
            26,611
            December
                2005$1.00
            January
                2004
            666,859
            June
                2005$1.00
            February
                2004
            240,000
            June
                2005$1.55
            January
                2004
            381,719
            June
                2005$1.89
            January
                2004
            1,296,388
            January
                2009$2.50
            February
                2004
            386,500
            February
                2006$3.00
            February
                2004
            676,500
            February
                2009$3.05
            February
                2004
            200,000
            February
                2011$3.19
            February
                2004
            50,000
            February
                2011$3.22
            February
                2004
            40,000
            February
                2011$1.90
            October
                2004
            150,000
            October
                2011$1.25
            February
                2005
            1,800,000
            February
                2012Total
            
            5,914,577





All
      warrants are exercisable at March 31, 2005. The Company has not filed and is
      not
      required to file a registration statement for the warrants issued for its
      December 2003 financing, which warrants expire in December 2005.





Note
                6.
            Industry
                Segments





The
      Company has adopted the provisions of Statements of Financial Accounting
      Standards No. 131, “Disclosures about Segments of an Enterprise and Related
      Information” (“SFAS 131”). At March 31, 2005, the Company’s four business units,
      NetView, NewBridge, eLinear and TanSeco, have separate management teams and
      infrastructures that offer different products and services;.





**For
                the Three Months Ended March 31, 2005**Dollars
                ($)
            
            Consulting
              Services
            
            Network
                and
              Storage
              Solutions
            
            Communications
              Deployment
            
            Security
              Solutions
            
            ConsolidatedRevenue
            
            
            5,212
            
            
            4,378,381
            
            
            319,452
            
            
            809,230
            
            
            5,512,275Segment
                loss
            
            
            (2,613,249
            )
            
            (495,870
            )
            
            (29,037
            )
            
            (279,211
            )
            
            (3,417,367
            )Total
                assets
            
            
            2,493,097
            
            
            3,747,578
            
            
            1,540,012
            
            
            1,707,509
            
            
            9,488,196Capital
                expenditures
            
            
            27,729
            
            
            24,473
            
            
            --
            
            
            15,887
            
            
            68,089Depreciation
                and amortization
            
            
            24,932
            
            
            32,918
            
            
            1,476
            
            
            73,725
            
            
            133,051








**For
                the Three Months Ended March 31, 2004**Dollars
                ($)
            
            Consulting
              Services
            
            Network
                and
              Storage
              Solutions
            
            Communications
              Deployment
            
            Security
              Solutions
            
            ConsolidatedRevenue
            
            
            46,945
            
            
            3,956,625
            
            
            171,508
            
            
            --
            
            
            4,175,078Segment
                profit (loss)
            
            
            (1,273,293
            )
            
            94,503
            
            
            (112,834
            )
            
            --
            
            
            (1,480,630
            )Total
                assets
            
            
            4,653,444
            
            
            3,929,364
            
            
            1,739,373
            
            
            --
            
            
            10,322,181Capital
                expenditures
            
            
            15,375
            
            
            34,860
            
            
            565
            
            
            --
            
            
            50,800Depreciation
            
            
            2,721
            
            
            4,159
            
            
            1,626
            
            
            --
            
            
            8,505




11
 *Table
            of Contents*





The
      accounting policies of the reportable segments are the same. The Company
      evaluates the performance of its operating segments based on income before
      net
      interest expense, income taxes, depreciation expense, accounting changes and
      non-recurring items.





Note
                7.
            Significant
                Concentration





One
      customer accounted for approximately 12 % of sales for the three months ended
      March 31, 2005. No other customers represented more than 10% of sales of the
      Company for the three months ended March 31, 2005. The Company did not have
      any
      customers which had in excess of 10% of the Company’s accounts receivable
      balance at March 31, 2005.





Note
                8.
            Restricted
                Cash





In
      conjunction with the Company’s credit facility with Textron Financial
      Corporation, the Company was required to deposit $500,000 in a restricted cash
      account and issue Textron a $500,000 letter of credit.





12
 *Table
            of Contents*





Note
                9.
            Restatement
                of Previously Reported Balance Sheet and Statement of Cash
                Flows





The
      Company filed the financial statements in its Form 10-QSB/A (First Amendment)
      and accounted for the restricted cash received in its February 2005 funding
      as
“receivable from investors” as a long-term asset. In addition, the Company
      recorded as a current liability the gross proceeds received from its February
      2005 funding in response to notification from the SEC that the Company may
      be in
      violation of Section 5 of the Securities Act. The Company has restated its
      balance sheet to (i) eliminate the receivable from investors from its balance
      sheet; (ii) reduce the amount in notes payable by the amount of the restricted
      cash received from the investors; (iii) increased the amount in notes payable
      and rescission liability by the actual amount which could be rescinded; (iv)
      added a new line item to show the total amount of unamortized debt discounts,
      net of current amortization and (v) offset accrued interest by the amount of
      interest earned by the Company on the restricted accounts. In addition, the
      Company has restated its statement of cash flows to reflect the above listed
      adjustments.





A
      summary
      of the restatement is as follows:





13
 *Table
            of Contents*





**Balance
      Sheet**





March
                31, 2005
            
            Restatement
            
            March
                31, 2005(Unaudited)
            
            
            
            (Unaudited)(Restated)
            
            
            
            (Restated)**ASSETS**Current
                assets:Cash
            
            $
            1,768,022
            
            
            
            
            $
            1,768,022Cash
                in restricted account
            
            
            504,580
            
            
            
            
            
            504,580Accounts
                  receivable, net of allowance of $353,897 at March 31, 2005and
                  $311,569 at December 31, 2004, respectively
            
            
            4,100,621
            
            
            
            
            
            4,100,621Inventory
            
            
            708,070
            
            
            
            
            
            708,070Other
                current assets
            
            
            130,073
            
            
            
            
            
            130,073Total
                current assets
            
            
            7,211,366
            
            
            
            
            
            7,211,366Property
                and equipment, net
            
            
            776,542
            
            
            
            
            
            776,542Other
                assets:Receivable
                from investors
            
            
            9,276,341
            
            
            (9,276,341
            )
            
            --Goodwill
            
            
            1,100,000
            
            
            
            
            
            1,100,000Deferred
                financing costs, net
            
            
            117,073
            
            
            
            
            
            117,073Contract
                rights
            
            
            237,994
            
            
            
            
            
            237,994Deposits
            
            
            45,221
            
            
            
            
            
            45,221Total
                other assets
            
            
            10,776,629
            
            
            
            
            
            1,500,288Total
                assets
            
            $
            18,764,537
            
            
            
            
            $
            9,488,196**LIABILITIES
                AND SHAREHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable, trade
            
            $
            1,454,522
            
            
            
            
            $
            1,454,522Line
                of credit - revolver
            
            
            1,949,504
            
            
            
            
            
            1,949,504Accrued
                liabilities
            
            
            1,997,970
            
            
            (12,342
            )
            
            1,985,628Notes
                payable and rescission liability
            
            
            2,400,000
            
            
            336,000
            
            
            2,736,000Unamortized
                debt discounts
            
            
            --
            
            
            (2,659,980
            )
            
            (2,659,980
            )Total
                current liabilities
            
            
            7,801,996
            
            
            
            
            
            5,465,674Long-term
                debt, net
            
            
            8,133,715
            
            
            (6,940,019
            )
            
            1,193,696Shareholders'
                equity:Preferred
                  stock, $.02 par value, 10,000,000 shares authorized, none
                  issued
            
            
            --
            
            
            
            
            
            --Common
                  stock, $.02 par value, 100,000,000 shares authorized,22,638,212
                  and 21,622,598 shares issued and outstanding at March 31, 2005
                  and
                  December 31, 2004, respectively
            
            
            452,764
            
            
            
            
            
            452,764Additional
                paid-in capital
            
            
            15,621,880
            
            
            
            
            
            15,621,880Accumulated
                deficit
            
            
            (13,245,818
            )
            
            
            
            
            (13,245,818
            )Total
                shareholders’ equity
            
            
            2,828,826
            
            
            
            
            
            2,828,826Total
                liabilities and shareholders' equity
            
            $
            18,764,537
            
            
            
            
            $
            9,488,196




14
 *Table
            of Contents*





**Statement
      of Cash Flows**





Three
                Months Ended
            
            
            
            Three
                Months EndedMarch
                31,
            
            
            
            March
                31,2005
            
            Restatement
            
            2005(Unaudited)
            
            
            
            (Unaudited)(Restated)Cash
                flows from operating activities:Net
                loss
            
            $
            (3,417,367
            )
            
            
            
            $
            (3,417,367
            )Adjustments
                to reconcile net loss to cash used in operating
                activities:Depreciation
                and amortization
            
            
            148,317
            
            
            
            
            
            148,317Bad
                debt expense
            
            
            42,328
            
            
            
            
            
            42,328Amortization
                of debt discounts
            
            
            145,302
            
            
            
            
            
            145,302Stock
                and stock option based compensation
            
            
            807,327
            
            
            
            
            
            807,327Extension
                of warrant expiration date
            
            
            27,871
            
            
            
            
            
            27,871Changes
                in assets and liabilities:Accounts
                receivable
            
            
            867,784
            
            
            
            
            
            867,784Inventory
            
            
            (261,624
            )
            
            
            
            
            (261,624
            )Other
                current assets
            
            
            (3,757
            )
            
            
            
            
            (3,757
            )Accounts
                payable
            
            
            187,784
            
            
            
            
            
            187,784Accrued
                liabilities
            
            
            947,996
            
            
            (12,342
            )
            
            935,654Net
                cash used in operating activities
            
            
            (508,039
            )
            
            
            
            
            (520,381
            )Cash
                flows from investing activities:Purchase
                of property and equipment
            
            
            (68,089
            )
            
            
            
            
            (68,089
            )Receivable
                from investors
            
            
            (9,276,341
            )
            
            9,276,341
            
            
            --Deposits
            
            
            (10,605
            )
            
            
            
            
            (10,605
            )Net
                cash used in investing activities
            
            
            (9,355,035
            )
            
            
            
            
            (78,694
            )Cash
                flows from financing activities:Proceeds
                from financing agreement
            
            
            12,000,000
            
            
            (9,264,000
            )
            
            2,736,000Payment
                of up-front financing costs
            
            
            (449,484
            )
            
            
            
            
            (449,484
            )Repayment
                of financing agreement
            
            
            (835,039
            )
            
            
            
            
            (835,039
            )Proceeds
                from exercise of stock options
            
            
            16,750
            
            
            
            
            
            16,750Net
                cash provided by financing activities
            
            
            10,732,227
            
            
            
            
            
            1,468,227Net
                increase in cash
            
            
            869,153
            
            
            
            
            
            869,153Cash
                and cash equivalents, beginning of period
            
            
            898,869
            
            
            
            
            
            898,869Cash
                and cash equivalents, end of period
            
            $
            1,768,022
            
            
            
            
            $
            1,768,022Supplemental
                cash flow disclosures:Interest
                paid
            
            $
            71,859
            
            
            
            
            $
            71,859Supplemental
                non-cash disclosures:Debt
                converted into equity
            
            $
            275,000
            
            
            
            
            $
            275,000





15
 *Table
            of Contents*





Note
                10.
            Subsequent
                Event




On
      July
      14, 2005, the Company amended that 2005 financing arrangement, entered into
      on
      February 28, 2005, for a total principal amount of $12 million with the
      Investors. The
      supplement modifies the February 2005 financing arrangement by (i) releasing
      all
      the funds held in the restricted account, of which $7,200,000 was paid to the
      respective Investors without penalty and the remaining amount, approximately
      $2,138,921, held in the restricted account was funded to the Company; (ii)
      amending and restating the notes issued pursuant to the February 2005 financing
      arrangement with the new total principal amount of $5,054,567 that included
      (x)
      the twenty percent (20%) (including applicable fees) of the February 2005
      financing funded to the Company in February 2005; (y) the funds released from
      the restricted accounts to the Company pursuant to the supplement; and (z)
      the
      interest accrued on the funds held in the restricted account from March 2005
      until July 14, 2005; (iii) granting the Investors a right to participate in
      their *pro
      rata* portion
      of 60% of any future financing of the Company for one year; and (iv) issuing
      warrants exercisable after January 14, 2006 at exercise prices ranging from
      $1.50 to $1.75 per share into an aggregate of 991,667 shares of common stock
      to
      Iroquois, RHP, Basso Private and Basso Multi. The terms between the Company
      and
      each of the respective Investors are substantially similar.





The
      new
      notes are secured by all of the Company and its subsidiaries’ assets. The
      payment of interest and principal, under certain circumstances, may be made
      with
      shares of the Company common stock at a conversion price of no less than $1.00
      per share. The
      new
      notes will accrue interest at a rate per annum equal to the “prime rate”
published in the Wall Street Journal plus seventy five basis points, as may
      be
      adjusted. The Company has the ability to prepay any amounts owed under these
      new
      notes at 115% of the principal amount. T he
      Company is obligated to make monthly payments, either in cash or stock as
      determined by the new notes, beginning on August 1, 2005 for the total principal
      of the new notes, plus applicable interest (the “Monthly Payment”). The Monthly
      Payment will be made (i) automatically by a conversion in stock at a “Fixed
      Conversion Price”, (ii) at the discretion of the Company at a reduced conversion
      price, but no less than $1.00, or (iii) in cash paid by the Company at 101%
      of
      the Monthly Payment. The Monthly Payments shall be automatically made, subject
      to volume limitation, in Company common stock at the Fixed Conversion Price
      if
      (i) the shares of the Company common stock underlying the shares of the notes
      are registered; and (ii) the average trading price of the Company common stock
      for the five days preceding the Monthly Payment is greater than 110% of the
      Fixed Conversion Price. If the Monthly Payment is not automatically converted
      into shares of Company common stock because the average trading price of the
      Company common stock for the five trading days prior to the due date of the
      Monthly Payment is less than 110% of the Fixed Conversion Price, the Company
      may, at its discretion, make the Monthly Payment in Company common stock at
      a
      conversion price equal to 85% of the average trading price of the Company common
      stock for the five lowest closing days for the 22 trading days prior to the
      Company’s notice, but in no case shall the conversion price be less than $1.00.
      The Fixed Conversion Price is $1.00, subject to adjustment, but in no case
      reduced to less than $1.00.





The
      Investors may convert all or any portion of the principal amounts of their
      respective new notes, including any accrued interest or fees thereon at the
      Fixed Conversion Price.





Notwithstanding
      the foregoing, the Company’s right to issue shares of its common stock in
      payment of obligations under the new notes shall be subject to the limitation
      that the number of aggregate shares of common stock issued to each Investor
      shall not exceed 25% of the aggregate dollar trading volume of the Company
      common stock for the 22 trading days immediately preceding the date on which
      the
      conversion is to occur.





The
      Investors may not exercise the warrants issued pursuant to the Supplement until
      January 14, 2006 and are exercisable until January 14, 2013, of which 466,667
      of
      the warrants are exercisable at $1.50 and 525,000 are exercisable at $1.75.
      The
      warrants were valued at $632,707 using a modified Black-Scholes option pricing
      model. The value of these warrants will be recorded as a discount to the new
      notes and will be amortized over the remaining term of the loan (31 months)
      using the effective interest method.





The
      new
      notes are considered to have a beneficial conversion feature since the fair
      market value of the common stock issuable upon conversion of the term note
      exceeded the value allocated to the term note on the date of issuance. The
      difference between the market value of the shares issuable upon conversion
      and
      the value allocated to the term note of $538,032 is considered to be the value
      of the beneficial conversion feature. The value of the beneficial conversion
      feature will also be recorded as a discount to the notes and will be amortized
      over the remaining term of the loan (31 months) using the effective interest
      method. In the event the Investors convert the notes prior to the maturity
      of
      the agreements, then generally accepted accounting principles require the
      Company to expense the unamortized balance of the debt discount in
      full.





16
 *Table
            of Contents*





The
      following table illustrates the borrowings made by the Company and the
      beneficial conversion features and amortization on this funding as of July
      14,
      2005:





New
                loan on July 14, 2005
            
            
            2,318,567Beneficial
                conversion amount
            
            
            (538,032
            )Debt
                discount for warrants issued
            
            
            (632,707
            )Debt,
                net as of July 14, 2005
            
            $
            1,147,828





The
      Company has agreed to file a registration statement with the Securities and
      Exchange Commission by August 13, 2005 in order to register the resale of the shares
      of
      common stock underlying the new notes, the shares issuable upon exercise of
      the
      warrants issued in February 2005, and the warrants issued in connection with
      the
      Supplement. If the C ompany
      fails to meet this deadline, if the registration statement is not declared
      effective prior to October 27, 2005, if the registration statement ceases to
      remain effective, or certain other events occur, the Company has agreed to
      pay
      the Investors liquidated damages of 1.25% of the principal amount of the new
      notes per month; except that the Company will only have to pay 50% of the
      liquidated damages if the registration statement is not declared effective
      by
      the Securities and Exchange Commission under certain circumstances.




17
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Item
                2.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
                CONDITION





*The
      following discussion and analysis of the Company’s financial condition as of
      March 31, 2005, and its results of operations for the three-month periods ended
      March 31, 2005 and 2004, should be read in conjunction with the audited
      consolidated financial statements and notes included in eLinear’s Form 10-KSB
      for the year ended December 31, 2004, filed with the Securities and Exchange
      Commission.*





**Overview**





The
      Company currently consists of four operating segments:





§
            Consulting
                services. The Company offers consulting services, creative web site
                design, web site content management software and technical project
                management and development
                services.





§
            Product
                fulfillment and network and storage solutions. Through NetView the
                Company
                offers a complete solution to its customers for the acquisition,
                management and configuration of complex storage and network server
                installations.





§
            Communications
                deployment. Through NewBridge the Company provides structured cabling,
                which is a set of cabling and connectivity products that integrate
                voice,
                data, video and various management systems, cabling infrastructure
                design
                and implementation, which is the design and implementation of the
                structured cabling systems, security installation and monitoring
                and
                digital services of voice, data and video over fiber optic networks
                to its
                residential and commercial
                customers.





·
            Security
                solutions. Through TanSeco the Company has business centered on premise
                security solutions which includes a three-year contract with RadioShack
                Corporation to install kiosks throughout the United States, 24X7
                security
                monitoring contracts with a variety of commercial customers and project
                work installing security devices and fiber/cable in client locations
                across the US.





The
      Company operated as a technology consulting business from December 1999 until
      its acquisition of NetView in April 2003. It acquired its Internet consulting
      business as a result of a reverse merger with Imagenuity, Inc. (“Imagenuity”) in
      1999. Since 1999 to date, its Internet consulting business consisted of Internet
      consulting services, creative web site design, web site content management
      and
      software and technical project management and development services. For the
      fiscal year ended December 31, 2004, the consulting segment contributed less
      than 1% of its revenue. Immediately prior to acquiring the business of
      Imagenuity, eLinear, which at the time was named Kinetiks.com, Inc.
      (“Kinetiks.com”) did not engage in any business activities except for
      negotiating and compromising debt and searching for merger candidates. While
      Kinetics.com was the survivor in the merger, from an accounting standpoint
      the
      transaction was accounted for as though it was a recapitalization of Imagenuity
      and a sale of shares by Imagenuity in exchange for the net assets of
      Kinetics.com. On July 31, 2000, the Company changed its name to eLinear,
      Inc.





The
      Company completed the acquisitions of NetView and NewBridge during 2003. In
      April 2003, the Company issued 12,961,979 shares
      of common stock for all of the outstanding common stock of NetView. After the
      merger the stockholders of NetView owned approximately 90% of eLinear.





Although
      NetView became a wholly-owned subsidiary, for accounting purposes this
      transaction was treated as an acquisition of eLinear and a recapitalization
      of
      NetView using the purchase method of accounting. The acquisition resulted in
      goodwill of $451,920. Since NetView is deemed to be the acquiring company for
      accounting purposes, the financial information for the year ended December
      31,
      2003 is information derived from the financial statements of
      NetView.





In
      July
      2003, the Company completed the acquisition of all the outstanding shares of
      NewBridge. Pursuant to the transaction, eLinear issued 850,000 shares of its
      common stock valued at $935,000, using the market price on July 31, 2003, and
      options to purchase 300,000 shares of common stock valued at $274,000 using
      the
      Black-Scholes option pricing model, to the shareholders of NewBridge. The
      acquisition was accounted for using the purchase method of accounting resulting
      in goodwill of $1,491,102, as restated.





18
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            of Contents*





In
      November 2004, the Company acquired all of the outstanding and issued stock
      of
      TanSeco from RadioShack. As a result, TanSeco became a wholly-owned subsidiary
      of eLinear. The Company purchased the stock with cash and acquired inventory,
      fixed assets and security monitoring contracts. Concurrent with this
      transaction, TanSeco entered into a three-year services agreement with
      RadioShack whereby TanSeco will provide the installation, service, repair and
      inspection of security, closed circuit television and fire systems used by
      RadioShack for the security of its more than 5,000 company-owned stores, kiosks
      and other physical locations.





**Recent
      Developments**





On
      February 28, 2005, the Company entered into financing arrangements to receive
      up
      to a total principal amount of $12 million with Laurus ,
      Iroquois Capital LP (“Iroquois”), RHP Master Fund (“RHP”), Basso Private
      Opportunity Holding Fund Ltd. (“Basso Private”), and Basso Multi-Strategy
      Holding Fund Ltd. (“Basso Multi”), (collectively, the “Investors”) in which it
      initially received $2,736,000 in cash and the ability upon certain conditions
      to
      receive the remaining amount of the total financing of $9,264,000. The
      $9,264,000 is held in restricted accounts at the sole dominion and control
      of
      each respective Investor. The Company may only receive the amounts (less
      applicable accrued interest) held
      in
      the restricted account after
      (i)
      the initial amount received, plus interest, is paid in full, (ii) the shares
      of
      the Company common stock underlying the notes are registered; and (iii) either
      the Company or the Investor converts any amounts held in the Restricted Accounts
      into shares of the Company’s common stock.  If
      the
      Company converts the amounts held in the restricted account, the amounts shall
      be converted at either (i) a price equal to 85% of the average of the five
      lowest closing prices of the Company common stock during the 22 trading days
      immediately prior to the date of a respective repayment notice if the average
      closing price of the Company common stock is less than 110% of the Fixed
      Conversion Price, but in no instance may such shares by converted for less
      than
      $1.00; or (ii) at the Fixed Conversion Price if the average closing price of
      the
      Company common stock for the five consecutive trading days immediately preceding
      the respective repayment notice is greater than or equal to 115% of the Fixed
      Conversion Price.




Under
      the
      terms of these notes and related documents, the is Company is obligated to
      make
      monthly interest payments for interest accrued on the initial $2,736,000, the
      interest begins accruing on April 1, 2005. The Company is obligated to make
      monthly payments, either in cash or stock as determined by the terms of the
      notes, beginning on June 1, 2005 for the initial $2,736,000, plus applicable
      interest (the “Monthly Payment”). The Monthly Payment will be made (i)
      automatically by a conversion in stock at $1.00 per share, (ii) at the
      discretion of the Company at a reduced conversion price, or (iii) in cash paid
      by the Company at 101% of the Monthly Payment.





In
      addition to the notes the Company issued 1,800,000 warrants to the Investors. The
      warrants are exercisable by the Investors until February 28, 2012, at $1.25
      per
      share of Company common stock. All
      of
      the warrants are immediately exercisable with no requirement to return to the
      Company should the initial $2,736,000 is not be paid in full.





These
      notes are secured by all of the Company and its subsidiaries’ assets.





In
      conjunction with the notes, the Investors were paid a fee of $449,484. The
      warrants, which are exercisable immediately, were valued at $1,283,479 using
      a
      modified Black-Scholes option pricing model. The value of these warrants and
      the
      fees paid to the Investors were recorded as a discount to the notes and are
      being amortized over the term of the loan using the effective interest
      method.





The
      credit facility is considered to have a beneficial conversion feature since
      the
      fair market value of the common stock issuable upon conversion of the term
      note
      exceeded the value allocated to the term note on the date of issuance. The
      difference between the market value of the shares issuable upon conversion
      and
      the value allocated to the term note of $1,003,201 is considered to be the
      value
      of the beneficial conversion feature. The value of the beneficial conversion
      feature has also been recorded as a discount to the notes and is being amortized
      over the term of the loan using the effective interest method. In the event
      the
      Investors convert the notes prior to the maturity of the agreements, then
      generally accepted accounting principles require the Company to expense the
      unamortized balance of the debt discount in full.





19
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            of Contents*





The
      Company filed a registration statement with the Securities and Exchange
      Commission to register the resale of the shares
      of
      common stock underlying the notes and the shares issuable upon exercise of
      the
      Warrants .
      During
      June 2005, the Securities and Exchange Commission notified the Company that
      it
      believed the filing of this registration statement violated Section 5 of the
      Securities Act. If a violation of Section 5 occurred, the Investors related
      to
      the February 2005 funding have obtained the right to require the Company to
      repay to the Investors the original amount of the notes of $2,736,000 plus
      interest from the initial date of funding for a period of one year following
      the
      date of the violation. The Company has recorded $2,736,000 as a current
      liability identified as “N otes
      payable and rescission liability” on its balance sheet as of March 31, 2005, as
      such amount was funded to the Company in immediately available funds and is
      recorded as a current liability.





On
      July
      14, 2005, the Company amended the 2005 financing arrangement, entered into
      on
      February 28, 2005. The
      supplement modifies the February 2005 financing arrangement by (i) releasing
      all
      the funds held in the restricted account, of which $7,200,000 was paid to the
      respective Investors without penalty and the remaining amount, approximately
      $2,138,921, held in the restricted account was funded to the Company; (ii)
      amending and restating the notes issued pursuant to the February 2005 financing
      arrangement with the new total principal amount of $5,054,567 that included
      (x)
      the twenty percent (20%) (including applicable fees) of the February 2005
      financing funded to the Company in February 2005; (y) the funds released from
      the restricted accounts to the Company pursuant to the supplement; and (z)
      the
      interest accrued on the funds held in the restricted account from March 2005
      until July 14, 2005; (iii) granting the Investors a right to participate in
      their *pro
      rata* portion
      of 60% of any future financing of the Company for one year; and (iv) issuing
      warrants exercisable after January 14, 2006 at exercise prices ranging from
      $1.50 to $1.75 per share into an aggregate of 991,667 shares of common stock
      to
      Iroquois, RHP, Basso Private and Basso Multi. The terms between the Company
      and
      each of the respective Investors are substantially similar.





The
      new
      notes are secured by all of the Company and its subsidiaries’ assets. The
      payment of interest and principal, under certain circumstances, may be made
      with
      shares of the Company common stock at a conversion price of no less than $1.00
      per share. The
      new
      notes will accrue interest at a rate per annum equal to the “prime rate”
published in the Wall Street Journal plus seventy five basis points, as may
      be
      adjusted. The Company has the ability to prepay any amounts owed under these
      new
      notes at 115% of the principal amount. T he
      Company is obligated to make monthly payments, either in cash or stock as
      determined by the new notes, beginning on August 1, 2005 for the total principal
      of the new notes, plus applicable interest (the “Monthly Payment”). The Monthly
      Payment will be made (i) automatically by a conversion in stock at a “Fixed
      Conversion Price”, (ii) at the discretion of the Company at a reduced conversion
      price, but no less than $1.00, or (iii) in cash paid by the Company at 101%
      of
      the Monthly Payment. The Monthly Payments shall be automatically made, subject
      to volume limitation, in Company common stock at the Fixed Conversion Price
      if
      (i) the shares of the Company common stock underlying the shares of the notes
      are registered; and (ii) the average trading price of the Company common stock
      for the five days preceding the Monthly Payment is greater than 110% of the
      Fixed Conversion Price. If the Monthly Payment is not automatically converted
      into shares of Company common stock because the average trading price of the
      Company common stock for the five trading days prior to the due date of the
      Monthly Payment is less than 110% of the Fixed Conversion Price, the Company
      may, at its discretion, make the Monthly Payment in Company common stock at
      a
      conversion price equal to 85% of the average trading price of the Company common
      stock for the five lowest closing days for the 22 trading days prior to the
      Company’s notice, but in no case shall the conversion price be less than $1.00.
      The Fixed Conversion Price is $1.00, subject to adjustment, but in no case
      reduced to less than $1.00.





The
      Investors may convert all or any portion of the principal amounts of their
      respective new notes, including any accrued interest or fees thereon at the
      Fixed Conversion Price.





Notwithstanding
      the foregoing, the Company’s right to issue shares of its common stock in
      payment of obligations under the new notes shall be subject to the limitation
      that the number of aggregate shares of common stock issued to each Investor
      shall not exceed 25% of the aggregate dollar trading volume of the Company
      common stock for the 22 trading days immediately preceding the date on which
      the
      conversion is to occur.





The
      Investors may not exercise the warrants issued pursuant to the Supplement until
      January 14, 2006 and are exercisable until January 14, 2013, of which 466,667
      of
      the warrants are exercisable at $1.50 and 525,000 are exercisable at $1.75.
      The
      warrants were valued at $632,707 using a modified Black-Scholes option pricing
      model. The value of these warrants will be recorded as a discount to the new
      notes and will be amortized over the remaining term of the loan (31 months)
      using the effective interest method.





20
 *Table
            of Contents*





The
      new
      notes are considered to have a beneficial conversion feature since the fair
      market value of the common stock issuable upon conversion of the term note
      exceeded the value allocated to the term note on the date of issuance. The
      difference between the market value of the shares issuable upon conversion
      and
      the value allocated to the term note of $538,032 is considered to be the value
      of the beneficial conversion feature. The value of the beneficial conversion
      feature will also be recorded as a discount to the notes and will be amortized
      over the remaining term of the loan (31 months) using the effective interest
      method. In the event the Investors convert the notes prior to the maturity
      of
      the agreements, then generally accepted accounting principles require the
      Company to expense the unamortized balance of the debt discount in
      full.





The
      following table illustrates the borrowings made by the Company and the
      beneficial conversion features and amortization on this funding as of July
      14,
      2005:





New
                loan on July 14, 2005
            
            
            2,318,567Beneficial
                conversion amount
            
            
            (538,032
            )Debt
                discount for warrants issued
            
            
            (632,707
            )Debt,
                net as of July 14, 2005
            
            $
            1,147,828





The
      Company has agreed to file a registration statement with the Securities and
      Exchange Commission by August 13, 2005 in order to register the resale of the shares
      of
      common stock underlying the new notes, the shares issuable upon exercise of
      the
      warrants issued in February 2005, and the warrants issued in connection with
      the
      Supplement. If the C ompany
      fails to meet this deadline, if the registration statement is not declared
      effective prior to October 27, 2005, if the registration statement ceases to
      remain effective, or certain other events occur, the Company has agreed to
      pay
      the Investors liquidated damages of 1.25% of the principal amount of the new
      notes per month; except that the Company will only have to pay 50% of the
      liquidated damages if the registration statement is not declared effective
      by
      the Securities and Exchange Commission under certain circumstances.










**Critical
      Accounting Policies**





*General*





The
      Consolidated Financial Statements and Notes to Consolidated Financial Statements
      contain information that is pertinent to this management’s discussion and
      analysis. The preparation of financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosure of any contingent assets and liabilities.
      Management believes these accounting policies involve judgment due to the
      sensitivity of the methods, assumptions and estimates necessary in determining
      the related asset and liability amounts. Management believes it has exercised
      proper judgment in determining these estimates based on the facts and
      circumstances available to its management at the time the estimates were made.
      The significant accounting policies are described in the Company's audited
      consolidated financial statements included with its Form 10-KSB for the year
      ended December 31, 2004.





*Revenue
      Recognition*





The
      Company’s revenue recognition policy is objective in that it recognizes revenue
      when products are shipped or services are delivered. Accordingly, there are
      no
      estimates or assumptions that have caused deviation from its revenue recognition
      policy. Additionally, the Company has a limited amount of sales returns which
      would affect its revenue earned.





The
      Company accounts for arrangements that contain multiple elements in accordance
      with EITF 00-21, "Revenue Arrangements with Multiple Deliverables". When
      elements such as hardware, software and consulting services are contained in
      a
      single arrangement, or in related arrangements with the same customer, the
      Company allocates revenue to each element based on its relative fair value,
      provided that such element meets the criteria for treatment as a separate unit
      of accounting. The price charged when the element is sold separately generally
      determines fair value. In the absence of fair value for a delivered element,
      the
      Company allocates revenue first to the fair value of the undelivered elements
      and allocates the residual revenue to the delivered elements. In the absence
      of
      fair value for an undelivered element, the arrangement is accounted for as
      a
      single unit of accounting, resulting in a delay of revenue recognition for
      the
      delivered elements until the undelivered elements are fulfilled. The Company
      limits the amount of revenue recognition for delivered elements to the amount
      that is not contingent on the future delivery of products or services or subject
      to customer-specified return or refund privileges.





21
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            of Contents*





The
      Company recognizes revenue from the sale of manufacturer’s maintenance and
      extended warranty contracts in accordance with EITF 99-19 net of its costs
      of
      purchasing the related contracts.





*Allowance
      for Doubtful Accounts*





The
      Company maintains an allowance for doubtful accounts, which reflects the
      estimate of losses that may result from the inability of some of the Company’s
      customers to make required payments. The estimate for the allowance for doubtful
      accounts is based on known circumstances regarding collectability of customer
      accounts and historical collections experience. If the financial condition
      of
      one or more of the Company’s customers were to deteriorate, resulting in an
      impairment of their ability to make payments, additional allowances may be
      required. Material differences between the historical trends used to estimate
      the allowance for doubtful accounts and actual collection experience could
      result in a material change to the Company’s consolidated results of operations
      or financial position.





*Goodwill*





As
      of
      March 31, 2005, the Company had $1,100,000 of goodwill resulting from the
      acquisition of NewBridge. Goodwill represents the excess of cost over the fair
      value of the net tangible assets acquired and is not amortized. However,
      goodwill is subject to an impairment assessment at least annually which may
      result in a charge to operations if the fair value of the reporting segment
      in
      which the goodwill is reported declines. In September 2004, the Company
      performed a valuation analysis of the discounted projected estimated future
      cash
      flows of NewBridge and the Company elected to write down a portion of the
      goodwill related to NewBridge. Due to the large amount of goodwill presently
      on
      the Company’s financial reports, if an impairment is required, the Company’s
      financial condition and results of operations would be negatively affected.
      During March 2004, the Company recorded an impairment charge of approximately
      $451,000 related to the goodwill associated with the NetView
      acquisition.





*Accounting
      for Stock-Based Compensation*





The
      Company accounts for stock-based compensation based on the provisions of
      Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
      Employees,” as amended by the Financial Accounting Standards Board
      Interpretation No. 44, “Accounting for Certain Transactions Involving Stock
      Compensation.” Accounting Principles Board Opinion No. 25 and Financial
      Accounting Standards Board Interpretation No. 44 state that no compensation
      expense is recorded for stock options or other stock-based awards to employees
      that are granted with an exercise price equal to or above the estimated fair
      value per share of the company’s common stock on the grant date. The Company
      adopted the disclosure requirements of Statement of Financial Accounting
      Standards No. 123, “Accounting for Stock-Based Compensation,” which requires
      compensation expense to be disclosed based on the fair value of the options
      granted at the date of the grant.





In
      December 2002, the Financial Accounting Standards Board issued its Statement
      No.
      148, “Accounting for Stock-Based Compensation — Transition and Disclosure—an
      amendment of Financial Accounting Standards Board Statement No. 123.” This
      Statement amends Statement of Financial Accounting Standards No. 123, to provide
      alternative methods of transition for an entity that voluntarily changes to
      the
      fair value based method of accounting for stock-based employee compensation.
      It
      also amends the disclosure provisions of Statement of Financial Accounting
      Standards No. 123 to require prominent disclosure about the effects on reported
      net income of an entity’s accounting policy decisions with respect to
      stock-based employee compensation. The transition and annual disclosure
      provisions of Statement of Financial Accounting Standards No. 148 are effective
      for fiscal years ending after December 15, 2002, and the interim disclosure
      provisions were effective for the first interim period beginning after December
      15, 2002. The Company did not voluntarily change to the fair value based method
      of accounting for stock-based employee compensation, therefore, the adoption
      of
      Statement of Financial Accounting Standards No. 148 did not have a material
      impact on its operations and/or financial position.





22
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            of Contents*





**Results
      of Operations and Financial Condition**





**Three
      Months** **Ended March 31, 2005 to Three Months Ended March 31, 2004**





The
      following table sets forth certain operating information regarding the Company
      for the three months ended March 31, 2005 and 2004:





Three
                Months Ended
              March
                31,2005
            
            2004Revenue
            
            $
            5,512,275
            
            $
            4,175,078Cost
                of revenue
            
            
            4,599,757
            
            
            3,714,762Gross
                profit
            
            
            912,518
            
            
            460,316Selling,
                general and administrative expenses
            
            
            3,983,155
            
            
            1,889,169Depreciation
                and amortization
            
            
            133,051
            
            
            8,505Loss
                from operations
            
            
            (3,203,688
            )
            
            (1,437,358
            )Other
                income (expense)
            
            
            (213,679
            )
            
            (43,272
            )Net
                loss
            
            $
            (3,417,367
            )
            $
            (1,480,630
            )Net
                loss per share - basic and diluted
            
            $
            (0.15
            )
            $
            (0.09
            )





*Revenue.* Total
      revenue for the three months ended March 31, 2005 was $5,512,275 which was
      an
      increase of 32% over the prior year period of $4,175,078. Revenue from the
      consulting services business segment for the 2005 period was $5,212, which
      was
      less than 1 % of total revenue. The consulting services business segment has
      seen a significant decline in customer utilization during 2004 and
      2005.





Revenue
      generated from the network and storage solutions business segment for the 2005
      period was $4,378,381, which was an increase of $421,756, or 11 %, over the
      2004
      period. The network and storage solutions business segment contributed 79 %
      of
      total revenue for the 2005 period. The Company was able to increase its revenue
      over the 2004 period primarily by the addition of sales personnel who had
      previous customer relationships and during 2004 the Company opened a sales
      office in Dallas, Texas with satellite offices in Austin, Texas and Oklahoma
      City, Oklahoma. The increase in revenue was due to an increase in the amount
      of
      product sold and was not affected by an increase in pricing. eLinear intends
      to
      focus on adding additional customers and personnel to service these
      customers.





Revenue
      from the communications deployment business segment for the 2005 period was
      $319,452, which was 6 % of total revenue. This was an increase of $147,944,
      or
      86 %, over the 2004 period. The Company continues to add new customers in this
      area and has increased its business from its existing customer
      base.





Revenue
      from the security solutions business segment was $809,230 for the three months
      ended March 31, 2005. The Company acquired TanSeco in November 2004 and,
      therefore, there was no revenue included for the 2004 period.





Of
      the
      revenue generated for the three months ended March 31, 2005, one customer
      provided in excess of 10% of the Company’s revenue. This customer provided 12%
      of the Company’s revenue during the 2005 period. The loss of that customer may
      have an adverse financial effect on the Company.





*Cost
      of revenue.* Total
      cost of revenue for the three months ended March 31, 2005 was $4,599,757, an
      increase of $884,995, or 24%, over the 2004 period of $3,714,762. For the
      network and storage solutions business segment, cost of revenue is comprised
      primarily of the costs associated with acquiring hardware and software to fill
      customer orders. For the consulting services business segment, cost of revenue
      consists primarily of full-time personnel and contract employee costs associated
      with projects the Company provides to its customers for a fee. For the
      communications deployment and security solutions business segments, cost of
      revenue consists primarily of materials and personnel to build the customer
      infrastructure.





The
      primary component of the increase in cost of revenue was the cost of procuring
      hardware and software to fill an expanded number of customer orders. The cost
      of
      hardware and software as a percent of revenue decreased from 89% for 2004 period
      to 88% for fiscal 2004. The Company’s principal suppliers of hardware and
      software products are Hewlett Packard and Cisco. The Company anticipates they
      will continue to be its principal suppliers in the future. Total cost of
      products amounted to $4,270,339 for the 2005 period. The Company anticipates
      that cost of revenue will increase as revenue increases.





23
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            of Contents*





*Gross
      profit.* Total
      gross profit increased from $460,316 for the three months ended March 31, 2004,
      to $912,518 for the three months ended March 31, 2005. The increase in gross
      profit was a result of an increase in revenue from all business segments, with
      the exception of the consulting services business segment. Total gross profit
      as
      a percentage of revenue increased from 11% for the 2004 period to 17% for the
      2005 period. The Company has experienced a better profit margin from all its
      business segments during the 2005 period..





*Operating
      expenses.* Total
      operating expenses for the three months ended March 31, 2005, were $4,116,206,
      an increase of $2,218,532, or 117%, over the 2004 period of $1,897,674. The
      various components of this increase are as follows








§
            The
                Company has added additional personnel in its network and storage
                solutions business segment to facilitate the rapid increase in customer
                orders, and it has reduced personnel in its consulting services business
                segment, reflecting an increase in the use of subcontractors to execute
                on
                projects as opposed to hiring full-time employees. The Company has
                also
                added approximately 35 employees through its acquisition of TanSeco.
                At
                March 31, 2004, the Company had 26 employees which had increased
                to 127 as
                of March 31, 2005. Additionally during 2004, the Company opened a
                sales
                office in Dallas, Texas and satellite offices in Austin, Texas and
                Oklahoma City, Oklahoma. The net effect was an increase in payroll
                and
                related costs of $1,271,745, which costs are composed of payroll,
                payroll
                taxes, sales commissions and employee
                benefits.





§
            Office
                administration expenses increased from $229,094 for the 2004 period
                to
                $370,742 for the 2005 period. The primary components of office
                administration are office rent, office administration, business insurance
                and dues and subscriptions. The Company incurred initial start-up
                costs
                when opening its sales offices in Dallas, Austin and Oklahoma City
                and
                relocating its corporate headquarters in Houston, Texas. The Company
                believes office administration expenses will remain at their current
                levels for the foreseeable future.





§
            Professional
                services, which is comprised of legal, accounting and consulting
                fees,
                increased from $300,991 for the previous year period to $410,764
                for the
                current year period. The Company has incurred additional legal, accounting
                and outside services fees during the current fiscal year in association
                with its financings and current litigation which was partially offset
                by a
                reduction in contract services. The Company incurred non-cash stock
                compensation expense of approximately $120,000 for common stock issued
                to
                consultants during the 2005 period.





§
            In
                March 2004 the consulting services reporting unit lost its largest
                consulting contract and the other operations that it had prior to
                the
                NetView acquisition with additional revenue declines due to the loss
                of a
                key consulting services employee after the acquisition. Based on
                projected
                future cash flows from the reporting unit, management determined
                a full
                impairment charge of $451,925 was required which was recorded in
                the 2004
                period. There was no impairment recorded during the 2005
                period.





§
            Other
                expenses increased from $372,161 for the prior year period to $1,394,906
                for the current year period. The Company is continuing an investor
                awareness/marketing program which it began during 2004 to reach out
                to
                current and potential investors and provide them with current news
                releases and information about eLinear as well as to establish nationwide
                name recognition to build the “eLinear” name brand for future business.
                This program consists of investor conferences, electronic media
                distribution, newspaper coverage, third party representation through
                introduction to institutional entities and radio coverage. The program
                was
                designed by in-house eLinear employees. The cost of this program
                during
                the three months ended March 31, 2005 approximated $1,048,000. Other
                components include employee stock option expense of $78,940, travel
                and
                entertainment of approximately $128,000 and bad debt expense of
                approximately $42,328.





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·
            Depreciation
                and amortization increased from $8,505 for the 2004 period to $148,317
                for
                the 2005 period and is comprised of depreciation of fixed assets
                acquired
                during the 2004 period and amortization of deferred financing costs
                which
                were not incurred during the 2004
                period.





*Interest
      Expense.* Interest
      expense for the three months ended March 31, 2005, increased to $196,787 from
      $43,272 for the prior year. The increase was attributable to the amortization
      of
      debt discounts and interest charges associated with the Company’s 2004 and 2005
      fundings.





*Net
      Loss* .
      The net
      loss for the three months ended March 31, 2005 was $3,417,367, or $0.15 per
      share basic and diluted, compared to a net loss of $1,480,630, or $0.09 per
      share basic and diluted, for the previous year.





**Liquidity
      and Capital Resources**





The
      following summary table presents comparative cash flows of the Company for
      the
      three months ended March 31, 2005 and 2004:





Three
                Months Ended
              March
                31,2005
            
            2004Net
                cash used in operating activities
            
            $
            (520,381
            )
            $
            (2,203,909
            )Net
                cash used in investing activities
            
            $
            (78,694
            )
            $
            (1,063,959
            )Net
                cash provided by financing activities
            
            $
            1,468,227
            
            $
            7,246,553





*Changes
      in cash flow.* Net cash
      used in operating activities for the three months ended March 31, 2005, was
      $520,381 compared to net cash used in operating activities of $2,203,909 for
      the
      prior year period. This was a decrease of $1,683,528 over the prior year period.
      The Company reported a net loss of $3,417,367 and an increase in inventory
      associated with increased sales of $261,624. These uses of cash were offset
      by
      non-cash charges totaling $1,171,145, collections of accounts receivable of
      $867,784 and increases in accounts payable and accrued liabilities of $187,784
      and $935,654, respectively. Cash used in investing activities was $78,694 for
      the current year period compared to $1,063,959 for the prior year period. The
      Company purchased property and equipment of $68,089 during the current year
      period and incurred deposits of $10,605. Cash provided by financing activities
      decreased from approximately $7,246,553 during the 2004 period to approximately
      $1,468,227 for the current year period. The Company obtained the right to up
      to
      $12,000,000, of which $9,264,000 is held in restricted accounts which are in
      the
      sole dominion and control of the Investor, and was required to pay up-front
      financing fees to the lenders of $449,484. The Company also paid $835,039
      principal amount on its Laurus credit facility and received cash of $16,750
      through the exercise of stock options.





*Capital
      Resources* .
      The
      Company has funded its operations through the sale of common stock, the exercise
      of stock options and warrants, lines of credit, the Laurus financing agreement
      and the February 2005 financing agreement. During February 2005, the Company
      obtained a $12,000,000 financing agreement with certain investors and received
      gross proceeds of $2,400,000. This financing agreement is more fully described
      in Note 3 to the financial statements. The Company also has a financing
      agreement with Laurus Master Fund and a line of credit with Textron Financial
      Corporation.





*Liquidity.* As
      of
      March 31, 2005, the Company had cash balances in non-restricted accounts of
      $1,768,022 and positive working capital of approximately $1,745,692. At March
      31, 2005, the Company has $2,736,000 principal amount due investors in relation
      to its February 2005 funding. For accounting purposes, this amount has been
      reduced by the amount of fees paid for funding, the beneficial conversion amount
      of the note and the debt discount associated with the warrants issued pursuant
      to the funding, less the applicable amortization of these items. Also included
      in the working capital balance at March 31, 2005 is cash held in restricted
      accounts of approximately $504,580. If the restricted cash was excluded and
      the
      full $2,736,000 principal amount was included in the working capital balance,
      the Company would have negative working capital of approximately $1,082,870.
      The
      Company has completed two financings and two sales of stock during 2004 and
      2005, all of which included warrants. If all the warrants outstanding are
      exercised the Company could raise up to approximately $10,396,000.





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On
      February 28, 2005, the Company entered into financing arrangements for a total
      principal amount of $12 million as described in - “Recent Developments”. Of this
      financing $2,736,000 gross proceeds has been funded to the Company and
      $9,264,000 may be funded upon satisfaction of certain conditions, of which
      there
      can be no assurance that this will occur. See Note 10. “Subsequent Event” for a
      discussion of the supplement to the February 2005 funding.





The
      Company believes it has sufficient capital to fund operations through the end
      of
      June 2005. Thereafter, the Company will be required to obtain access to the
      restricted cash or other financing. If the Company is required to obtain
      additional financing, it will be required to do so on a best efforts basis,
      as
      it currently has no commitments for any further financing.





**Off-Balance
      Sheet Arrangements**





The
      Company does not have any off-balance sheet arrangements.





**New
      Accounting Pronouncements**





In
      December 2004, the Financial Accounting Standards Board, or FASB, issued
      Statement of Financial Accounting Standards No. 123R “Share-Based Payment” (SFAS
      123R). This statement revises SFAS No. 123, supersedes APB No. 25, and requires
      companies to recognize the cost of employee stock options and other awards
      of
      stock-based compensation based on the fair value of the award as of the grant
      date. The effective date of this pronouncement is as of the beginning of the
      first interim or annual period that begins after June 15, 2005. The adoption
      of
      FASB No. 123R will not have a material effect on the Company’s consolidated
      financial position, results of operations or cash flows.





In
      December 2004, the FASB published the following two final FASB Staff Positions,
      effective immediately. FAS 109-1, "Application of FASB Statement No. 109,
      Accounting for Income Taxes, to the Tax Deduction on Qualified Production
      Activities Provided by the American Jobs Creation Act of 2004," giving guidance
      on applying FASB Statement No. 109, Accounting for Income Taxes, to the tax
      deduction on qualified production activities provided by the American Jobs
      Creation Act of 2004. FAS 109-2 "Accounting and Disclosure Guidance for that
      Foreign Earnings Repatriation Provision within the American Jobs Creation Act
      of
      2004" provides guidance on the Act's repatriation provision. The Company does
      not believe that the adoption of FAS 109-1 or FAS 109-2 will have a material
      impact on its consolidated financial position, results of operations or cash
      flows.





In
      November 2004, the FASB Emerging Issues Task Force, or EITF, reached a consensus
      in applying the conditions in Paragraph 42 of SFAS No. 144, "Accounting for
      the
      Impairment or Disposal of Long-Lived Assets, in Determining Whether to Report
      Discontinued Operations" (EITF 03-13). Evaluation of whether operations and
      cash
      flows have been eliminated depends on whether (1) continuing operations and
      cash
      flows are expected to be generated, and (2) the cash flows, based on their
      nature and significance, are considered direct or indirect. This consensus
      should be applied to a component that is either disposed of or classified as
      held for sale in fiscal periods beginning after December 15, 2004. The Company
      does not believe that the adoption of EITF 03-13 will have a material impact
      on
      its consolidated financial position, results of operations or cash
      flows.





In
      November 2004, the FASB issued SFAS No. 151, "Inventory Costs—An Amendment of
      ARB No. 43, Chapter 4" (SFAS No. 151). SFAS No. 151 amends the guidance in
      ARB
      No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal
      amounts of idle facility expense, freight, handling costs, and wasted material
      (spoilage). Among other provisions, the new rule requires that items such as
      idle facility expense, excessive spoilage, double freight, and rehandling costs
      be recognized as current-period charges regardless of whether they meet the
      criterion of "so abnormal" as stated in ARB No. 43. SFAS No. 151 is effective
      for fiscal years beginning after June 15, 2005 and is required to be adopted
      by
      the Company in the first quarter of fiscal 2006, beginning on January 1, 2006.
      The Company does not believe the adoption of SFAS No. 151 will have a material
      impact on the consolidated financial position, results of operations and cash
      flows.





26
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Item
                3.
            Controls
                and Procedures




In
      accordance with the Securities Exchange Act of 1934 (“Exchange Act”), the
      Company carried out an evaluation, under the supervision and with the
      participation of management, including its Chief Executive Officer and Principal
      Accounting Officer, of the effectiveness of its disclosure controls and
      procedures as of the end of the period covered by this report. Based on this
      evaluation, the Company’s Chief Executive Officer and Principal Accounting
      Officer concluded that the Company’s disclosure controls and procedures were
      effective as of March 31, 2005, to provide reasonable assurance that information
      required to be disclosed in its reports filed or submitted under the Exchange
      Act is recorded, processed, summarized and reported within the time periods
      specified in the Securities and Exchange Commission’s rules and
      forms.





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**PART
      II**  **OTHER
      INFORMATION**





Item
                1.
            Legal
                Proceedings





From
      time
      to time, the Company may become involved in litigation arising in the ordinary
      course of its business. The Company is presently not subject to any material
      legal proceedings outside of the ordinary course of business except as set
      forth
      below:





On
      December 16, 1999, eLinear and Imagenuity were served with a complaint captioned
      Chris Sweeney v. Kinetics.com, Inc. and Imagenuity, Inc., Circuit Court, Duval
      County, Florida, Civil Case Number 1999-7252-CA. The complaint alleged a breach
      of an alleged oral modification of a written employment agreement between the
      plaintiff, Chris Sweeney, and Imagenuity and alleged breaches by eLinear and
      Imagenuity of fiduciary obligations which the plaintiff claims were owed to
      him.
      Plaintiff is seeking as damages 20% of the Company’s common stock received by
      the sole shareholder of Imagenuity in connection with the merger of Imagenuity
      with and into eLinear’s subsidiary. After the filing of the complaint, eLinear’s
      subsidiary, eLinear Corporation, was added as a defendant. The Company intends
      to vigorously contest the case. While the Company believes the case to have
      no
      merit, at this stage it is impossible to predict the amount or range of
      potential loss, if any.





In
      December 1999, the Company counter-sued Chris Sweeney in a lawsuit captioned
      eLinear Corporation v. Chris Sweeney, United States District Court, District
      of
      Colorado, Case Number 99-WM-2434. The complaint sought a determination of the
      rights of the parties with respect to the termination of Chris Sweeney’s
      employment agreement with Imagenuity. The lawsuit was indefinitely stayed
      pending resolution of the Florida litigation discussed above.





On
      October 17, 2003, the Company filed a civil suit against Jon Ludwig, its former
      CEO, for the following causes of action: breach of fiduciary duty; negligent
      misrepresentation; theft of trade secrets; theft/conversion of property;
      wrongful interference with existing and prospective contracts; and civil
      conspiracy. This case is currently in the 127th Judicial District in the
      District Court of Harris County, Texas. Ipath, a direct competitor of the
      Company and the current employer of defendant Ludwig, was added as an additional
      defendant. The Company is alleging that iPath conspiracy, wrongful interference
      with existing and prospective contracts, and fraud for its complicity with
      Ludwig in the latter’s breach of fiduciary duty. The trial date has been set for
      April 18, 2005.





On
      November 11, 2004, the Company filed a demand for arbitration with the American
      Arbitration Association against McData Corporation for breach of contract
      relating to the termination of the contract in June 2004. Arbitrators are being
      appointed and discovery is in the early stage.





**Item
                2.**
            Recent
                Sales of Unregistered Securities





Set
      forth
      below is certain information concerning all issuances of securities by the
      Company during the fiscal quarter ended March 31, 2005, that were not registered
      under the Securities Act.





During
      January 2005, the Company issued 76,916 shares to two companies and one
      individual for consulting services valued at $90,000.





During
      February 2005, the Company issued 125,000 shares to a company for consulting
      services valued at $125,000.





During
      March 2005, the Company issued 300,000 shares to a company and an individual
      for
      consulting services valued at $297,000.




During
      the quarter ended March 31, 2005, the Company did not make any repurchases
      of
      its common stock.





All
      of
      the above transactions were completed pursuant to Section 4(2) of the Securities
      Act. With respect to issuances made pursuant to Section 4(2) of the Securities
      Act, the transactions did not involve any public offering and were sold to
      a
      limited group of persons. Each recipient either received adequate information
      about the Company or had access, through employment or other relationships,
      to
      such information, and the Company determined that each recipient had such
      knowledge and experience in financial and business matters that they were able
      to evaluate the merits and risks of an investment in the Company.





28
 *Table
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Except
      as
      otherwise noted, all sales of the Company’s securities were made by officers of
      the Company who received no commission or other remuneration for the
      solicitation of any person in connection with the respective sales of securities
      described above. The recipients of securities represented their intention to
      acquire the securities for investment only and not with a view to or for sale
      in
      connection with any distribution thereof and appropriate legends were affixed
      to
      the share certificates and other instruments issued in such
      transactions.








Item
                3.
            Defaults
                Upon Senior Securities - None





Item
                4.
            Submission
                of Matters to a Vote of Security Holders -
                None





Item
                5.
            Other
                Information - None




29
 *Table
            of Contents*





Item
                6.
            Exhibits





Exhibit
      No.   Description





2.1
            Agreement
                and Plan of Merger, dated October 11, 1999, between Registrant, eLinear
                Corporation and Imagenuity, Inc. (incorporated by reference to Exhibit
                A-1
                to Registrant’s Current Report on Form 8-K, dated October 25,
                1999)





2.2
            Agreement
                and Plan of Merger, dated April 15, 2003, between Registrant, NetView
                Acquisition Corp. and NetView Technologies, Inc. (incorporated by
                reference to Exhibit 2.2 to Registrant’s Annual Report on form 10-KSB,
                dated April 15, 2002)





3.1
            Articles
                of Incorporation of Registrant (incorporated by reference to Registrant’s
                Form 10-KSB for the period ended December 31,
                1995)





3.2
            Bylaws
                of Registrant (incorporated by reference to Registrant’s Form 10-KSB for
                the period ended December 31, 1995)





3.3
            Amended
                and Restated Certificate of Incorporation of Registrant (incorporated
                by
                reference to Registrant’s Form 10-QSB for the period ended June 30,
                2000)





4.1
            Specimen
                of Registrant’s Common Stock Certificate (incorporated by reference to
                Registrant’s Form 10-KSB for the period ended December 31,
                1995)





10.1
            Employment
                Agreement with Tommy Allen (incorporated by reference to Exhibit
                10.3 to
                Registrant’s Annual Report on Form 10-KSB, dated April 15, 2003)
                *





10.2
            2000
                Stock Option Plan (incorporated by reference to Exhibit 4.1 to
                Registrant’s Definitive Proxy Statement on Schedule 14A, dated June 30,
                2000) *




10.3
            Amendment
                No. 1 to Registrant’s 2000 Stock Option Plan (incorporated by reference to
                Exhibit 4.2 to Registrant’s Form S-8, dated July 31, 2001)
                *





10.4
            Amended
                and Restated 2003 Stock Option Plan (incorporated by reference to
                Exhibit
                10.1 to Registrant’s Form S-8, dated January 14, 2003)
                *





10.5
            Form
                of Indemnification Agreement for all officers and directors of Registrant
                (incorporated by reference to Registrant’s Form 10-QSB filed with the
                Commission on October 24, 2000)





10.6
            Securities
                Purchase Agreement dated as of January 12, 2004 between eLinear,
                Inc. and
                the Investors named therein (incorporated by reference to Exhibit
                10.1 to
                Registrant’s Form 8-K, dated January 28,
                2004)





10.7
            Form
                of Class A Warrant issued to each of the Investors in the Securities
                Purchase Agreements dated as of January 12, 2004 (incorporated by
                reference to Exhibit 10.2 to Registrant’s Form 8-K, dated January 28,
                2004)





10.8
            Form
                of Class B Warrant issued to each of the Investors in the Securities
                Purchase Agreements dated as of January 12, 2004 (incorporated by
                reference to Exhibit 10.3 to Registrant’s Form 8-K, dated January 28,
                2004)





10.9
            Registration
                Rights Agreement issued to each of the Investors in the Securities
                Purchase Agreements dated as of January 12, 2004 (incorporated by
                reference to Exhibit 10.4 to Registrant’s Form 8-K, dated January 28,
                2004)




30
 *Table
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10.10
            Employment
                Agreement with Ramzi Milad Nassar (incorporated by reference to Exhibit
                10.12 to Registrant’s Annual Report on Form 10-KSB, dated February 13,
                2004) *





10.11
            Securities
                Purchase Agreement dated as of February 4, 2004 between eLinear,
                Inc. and
                the Investors named therein (incorporated by reference to Exhibit
                10.13 to
                Registrant’s Annual Report on Form 10-KSB, dated February 13,
                2004)





10.12
            Form
                of Class A Warrant issued to each of the Investors in the Securities
                Purchase Agreements dated as of February 4, 2004 (incorporated by
                reference to Exhibit 10.14 to Registrant’s Annual Report on Form 10-KSB,
                dated February 13, 2004)





10.13
            Form
                of Class B Warrant issued to each of the Investors in the Securities
                Purchase Agreements dated as of February 4, 2004 (incorporated by
                reference to Exhibit 10.15 to Registrant’s Annual Report on Form 10-KSB,
                dated February 13, 2004)





10.14
            Registration
                Rights Agreement issued to each of the Investors in the Securities
                Purchase Agreements dated as of February 4, 2004 (incorporated by
                reference to Exhibit 10.16 to Registrant’s Annual Report on Form 10-KSB,
                dated February 13, 2004)





10.15
            Common
                Stock Purchase Warrant Agreement dated as of February 23, 2004 by
                and
                between eLinear, Inc. and Laurus Master Fund, LLC (incorporated by
                reference to Exhibit 10.18 to Registrant’s Form 8-K, dated February 26,
                2004)





10.16
            Secured
                Revolving Note Agreement dated as of February 23, 2004 by and between
                eLinear, Inc., NetView Technologies, Inc. and NewBridge Technologies,
                Inc.
                and Laurus Master Fund, LLC (incorporated by reference to Exhibit
                10.19 to
                Registrant’s Form 8-K, dated February 26,
                2004)





10.17
            Secured
                Convertible Minimum Borrowing Note Agreement dated as of February
                23, 2004
                by and between eLinear, Inc., NetView Technologies, Inc. and NewBridge
                Technologies, Inc. and Laurus Master Fund, LLC (incorporated by reference
                to Exhibit 10.20 to Registrant’s Form 8-K, dated February 26,
                2004)





10.18
            Minimum
                Borrowing Note Registration Rights Agreement dated as of February
                23, 2004
                by and between eLinear, Inc. and Laurus Master Fund, LLC (incorporated
                by
                reference to Exhibit 10.21 to Registrant’s Form 8-K, dated February 26,
                2004)





10.19
            Funds
                Escrow Agreement dated as of February 23, 2004 by and between eLinear,
                Inc., NetView Technologies, Inc. and NewBridge Technologies, Inc.
                and
                Laurus Master Fund, LLC (incorporated by reference to Exhibit 10.22
                to
                Registrant’s Form 8-K, dated February 26,
                2004)





10.20
            eLinear,
                Inc. 2004 Stock Option Plan (incorporated by reference to Exhibit
                A to
                Registrant’s Definitive Information Statement, dated October 15, 2004)
                *





10.21
            Employment
                Agreement dated January 15, 2005, with Michael Lewis (incorporated
                by
                reference to Exhibit 10.21 to Registrant’s Annual Report on Form 10-KSB,
                dated March 18, 2005) *





10.22
            Amendment
                to the Security Agreement and Ancillary Agreement with Laurus Master
                Funs,
                LLC (incorporated by reference to Exhibit 10.24 to Registrant’s Form SB-2
                dated November 5, 2004)





10.23
            Stock
                Purchase Agreement of TanSeco Systems, Inc. (incorporated by reference
                to
                Exhibit 10.25 to Registrant’s Form SB-2 dated November 5,
                2004)





10.24
            Service
                Agreement with RadioShack Corporation (incorporated by reference
                to
                Exhibit 10.26 to Registrant’s Form SB-2 dated November 5,
                2004)





10.25
            Form
                of Master Security Agreement, dated as of February 28, 2005, by and
                between eLinear, Inc., NetView Technologies, Inc., NewBridge Technologies,
                Inc., TanSeco Systems, Inc. and Investor (incorporated by reference
                to
                Exhibit 10.1 to Registrant’s Form 8-K dated March 3,
                2005)




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10.26
            Form
                of Common Stock Purchase Warrant Agreement, dated as of February
                28, 2005,
                by and between eLinear, Inc. and Investor (incorporated by reference
                to
                Exhibit 10.2 to Registrant’s Form 8-K dated March 3,
                2005)





10.27
            Form
                of Secured Convertible Term Note, dated as of February 28, 2005,
                by and
                between eLinear, Inc. and Investor (incorporated by reference to
                Exhibit
                10.3 to Registrant’s Form 8-K dated March 3,
                2005)





10.28
            Form
                of Restricted Account Agreement, dated as of February 28, 2005, by
                and
                between eLinear, Inc., the bank and Investor (incorporated by reference
                to
                Exhibit 10.4 to Registrant’s Form 8-K dated March 3,
                2005)





10.29
            Form
                of Registration Rights Agreement, dated as of February 28, 2005,
                by and
                between eLinear, Inc. and Investor (incorporated by reference to
                Exhibit
                10.5 to Registrant’s Form 8-K dated March 3,
                2005)





10.30
            Form
                of Stock Purchase Agreement, dated as of February 28, 2005, by and
                between
                eLinear, Inc. and Investor (incorporated by reference to Exhibit
                10.6 to
                Registrant’s Form 8-K dated March 3,
                2005)





10.31
            Consulting
                Agreement dated December 22, 2005 with Kevan Casey (incorporated
                by
                reference to Exhibit 10.31 to Registrant’s Annual Report on Form 10-KSB,
                dated March 18, 2005) *





10.32
            Form
                of Supplement, dated July 14, 2005, by and between Company and Investor.
                (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K dated
                July 20, 2005).





10.33
            Form
                of Warrant, dated as of July 14, 2005, by and between eLinear, Inc.
                and
                Investor. . (incorporated by reference to Exhibit 10.1 to Registrant’s
                Form 8-K dated July 20, 2005).





10.34
            Form
                of Warrant, dated as of July 14, 2005, by and between eLinear, Inc.
                and
                Investor. . (incorporated by reference to Exhibit 10.1 to Registrant’s
                Form 8-K dated July 20, 2005).





10.35
            Form
                of Amended and Restated Secured Convertible Term Note, dated as of
                July
                14, 2005, by and between the eLinear, Inc. and Investor. (incorporated
                by
                reference to Exhibit 10.1 to Registrant’s Form 8-K dated July 20, 2005).





31.1
            Certification
                of Michael J. Lewis





31.2
            Certification
                of Joann Agee





32.1
            Certification
                for Sarbanes-Oxley Act of Michael J.
                Lewis





32.2
            Certification
                for Sarbanes-Oxley Act of Joann
                Agee





*  Indicates
      management contract or compensatory plan or arrangement.





32
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**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereto duly
      authorized.





Signature
            
            Title
            
            Date/s/
                Michael Lewis
            
            Chief
                Executive Officer
            
            August
                12, 2005Michael
                Lewis
            
            and
                Director/s/
                Joann Agee
            
            Principal
                Accounting Officer
            
            August
              12, 2005Joann
                Agee
            
            and
                Controller






33