**UNITED
STATES**
 **SECURITIES
AND EXCHANGE COMMISSION**
 
 **WASHINGTON,
D.C. 20549**
 
 FORM
10-QSB
 
 [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 0-07418
 
 **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
[_]
 
 As of May
12, 2005, there were outstanding 22,753,212 shares of common stock, $.02 par
value per share.
 
 Transitional
Small Business Disclosure Format (Check one): Yes [ ] No [X]
 
  
  **eLINEAR,
INC.**
 AND SUBSIDIARIES
 **INDEX
TO FORM 10-QSB**
 **March
31, 2004**
 
 
 **Part I**
    **Financial Information**Item 1.
    Financial StatementsConsolidated Balance Sheets March 31, 2005 (unaudited) and
      December 31, 2004Consolidated Statements of Operations (unaudited) Three Months
      Ended March 31, 2005 and 2004Consolidated Statements of Cash Flows (unaudited) Three
      Months Ended March 31, 2005 and 2004Notes to Unaudited Consolidated Financial
      StatementsItem 2.
    Management’s Discussion and Analysis of Results of Operations
      and Financial ConditionItem 3.
    Controls and Procedures**Part II**
    **Other Information**Item 1.
    Legal ProceedingsItem 2.
    Changes in Securities and Use of
    ProceedsItem 3.
    Defaults Upon Senior SecuritiesItem 4.
    Submission of Matters to a Vote of Security
      HoldersItem 5.
    Other InformationItem 6.
    Exhibits
 
  
  **PART I. FINANCIAL INFORMATION**
 
 Item
1.FINANCIAL
STATEMENTS
 
 **eLINEAR, INC.**
 **AND
SUBSIDIARIES**
 **CONSOLIDATED
BALANCE SHEETS**
 
 March
      31, 2005
    
    December
      31, 2004(Unaudited)**ASSETS**Current
      assets:Cash
    
    $
    1,768,022
    
    $
    898,869Cash in restricted accounts
    
    
    9,780,921
    
    
    504,580Accounts receivable, net of allowance of $353,897 and $311,569 at
      March 31, 2005 and December 31, 2004, respectively
    
    
    4,100,621
    
    
    5,010,733Inventory
    
    
    708,070
    
    
    446,446Other current assets
    
    
    130,073
    
    
    126,316Total current assets
    
    
    16,487,707
    
    
    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
    
    $
    18,764,537
    
    $
    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
    
    
    1,997,970
    
    
    1,049,974Total current liabilities
    
    
    5,401,996
    
    
    5,101,255Long-term
      debt, net
    
    
    10,533,715
    
    
    1,399,397Shareholders'
      equity:Preferred stock, $0.02 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 issuedand 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
    
    $
    18,764,537
    
    $
    9,333,397
 
 See
accompanying notes to unaudited consolidated financial
statements.
  
  **eLINEAR, INC.**
 **AND
SUBSIDIARIES**
 **CONSOLIDATED
STATEMENTS OF OPERATIONS**
 **FOR
THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004**
 **(Unaudited)**
 
 Three
      Months Ended March 31,2005
    
    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.
  
  e**LINEAR,
INC.**
 **AND
SUBSIDIARIES**
 **CONSOLIDATED
STATEMENTS OF CASH FLOWS**
 **FOR
THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004**
 **(Unaudited)**
 
 Three
      Months Ended March 31,2005
    
    2004(Restated)Cash
      flows from operating activities:Net loss
    
    $
    (3,417,367
    )
    $
    (1,480,650
    )Adjustments to reconcile net loss to cash used in operating
      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
    
    
    947,996
    
    
    53,820Net
      cash used in operating activities
    
    
    (508,039)
    
    
    (2,203,909
    )Cash
      flows from investing activities:Purchase of property and equipment
    
    
    (68,089
    )
    
    (50,800
    )Certificate of deposit
    
    
    --
    
    
    (500,000
    )Restricted cash
    
    
    (9,276,341
    )
    
    (500,000
    )Deposits
    
    
    (10,605
    )
    
    (13,159
    )Net
      cash used in investing activities
    
    
    (9,355,035
    )
    
    (1,063,959
    )Cash
      flows from financing activities:Repayment on notes payable due to officers
    
    
    --
    
    
    (215,703
    )Proceeds from financing agreement
    
    
    12,000,000
    
    
    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
    
    
    10,732,227
    
    
    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.
  
  **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.
 
 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 EndedMarch
      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 value method
    
    
    (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. In connection with the execution of this
credit facility, and in connection with the October 2004 amendment, the Company
issued Laurus seven-year warrants to purchase a total of 440,000 shares of
Company common stock at exercise prices ranging from $1.90 to $3.22 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.
 
 *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:
 
 Original
      loan draw down amount
    
    $
    3,000,000Net
      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 for 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
issued to: (i) Laurus a convertible secured note in the principal amount of
$5,000,000 and a common stock purchase warrant to purchase up to 750,000 shares
of Company common stock at an exercise price of $1.25 per share; (ii) Iroquois a
convertible secured note in the principal amount of $5,000,000 and a common
stock purchase warrant to purchase up to 750,000 shares of Company common stock
at an exercise price of $1.25 pre share; (iii) RHP a convertible secured note in
the principal amount of $1,000,000 and a common stock purchase warrant to
purchase up to 150,000 shares of Company common stock at an exercise price of
$1.25 per share; (iv) Basso Private a convertible secured note in the principal
amount of $220,000 and a common stock purchase warrant to purchase up to 33,000
shares of Company common stock at an exercise price of $1.25 per share; and (v)
Basso Multi a convertible secured note in the principal amount of $780,000 and a
common stock purchase warrant to purchase up to 117,000 shares of Company common
stock at an exercise price of $1.25 per share. The terms between the Company and
each of the respective Investors are substantially similar and the Company has
agreed to treat each of the Investors *pro
rata* with
respect to this financing, including conversion, redemption and payments
thereto.
 
 These
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 Company has agreed to register the resale of the shares of the
Company common stock underlying the Investor Notes and the shares issuable upon
exercise of the Warrants. The
Investor 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 Investors Notes at 110% of the principal amount.
 
 Under the
terms of the Investor Notes and related documents, 20% (including applicable
fees) of the principal amount of the Investor Notes was provided to Company for
immediate use upon the closing of the Investor Notes (“Amortizing Principal”),
the remaining 80% (net of applicable fees) is held in restricted accounts by
each respective Investor (“Restricted Account”). The Company is obligated to
make monthly payments, either in cash or stock as determined by the Investor
Notes, beginning on June 1, 2005 for the Amortizing Principal, 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, or (iii) in cash
paid by the Company at 110% of the Monthly Payment. The Monthly Payments shall
be automatically made in Company common stock at the Fixed Conversion Price if
(i) the shares of the Company common stock underlying the shares of the Investor
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.
As of February 28, 2005 the Fixed Conversion Price is $1.00, subject to
adjustment, but in no case less than $1.00.
 
 The
Company will receive cash disbursements (less applicable accrued interest) for
the amounts held in the Restricted Account after (i) the Amortizing Principal,
plus interest, is paid in full, (ii) the shares of the Company common stock
underlying the Investor 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.
 
 The
Investors may convert all or any portion of the principal amounts of their
respective Investor 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 Investor 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. Furthermore, the Investors are not entitled to
convert their respective Investor Notes; if the aggregate Investors beneficial
ownership of the Company’s common stock would exceed *pro
rata* 19.99%
of the outstanding shares of common stock of the Company at the time of the
conversion.
 
 The
warrants issued pursuant to this funding are exercisable by the Investors until
February 28, 2012, at $1.25 per share of Company common stock. The warrants are
exercisable immediately.
 
 In
conjunction with the Investor Notes, the Investors were paid a fee of $449,484
and received a seven-year warrant to purchase up to a total of 1,800,000 shares
of the Company’s common stock at a price $1.25 per share. 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 Investor 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 Investor Notes and is being
amortized over the term of the loan using the effective interest method. In the
event the Investors convert the Investor 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 within 45 days from February 28, 2005, to register the resale of the shares of
common stock underlying the Investor Notes and the shares issuable upon exercise
of the Warrants . If the
registration statement is not declared effective prior to 105 days from February
28, 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 Investor Notes per
month.
 
 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.
 
 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
    
    FinancingDate
    
    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
    
    
    11,769,438
    
    
    3,747,578
    
    
    1,540,012
    
    
    1,707,509
    
    
    18,764,537Capital
      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
 
 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 February 28, 2005 financing, the Company has
$9,276,340 in restricted bank accounts and 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.
  
  
 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.
 
 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 for 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
issued to: (i) Laurus a convertible secured note in the principal amount of
$5,000,000 and a common stock purchase warrant to purchase up to 750,000 shares
of Company common stock at an exercise price of $1.25 per share; (ii) Iroquois a
convertible secured note in the principal amount of $5,000,000 and a common
stock purchase warrant to purchase up to 750,000 shares of Company common stock
at an exercise price of $1.25 pre share; (iii) RHP a convertible secured note in
the principal amount of $1,000,000 and a common stock purchase warrant to
purchase up to 150,000 shares of Company common stock at an exercise price of
$1.25 per share; (iv) Basso Private a convertible secured note in the principal
amount of $220,000 and a common stock purchase warrant to purchase up to 33,000
shares of Company common stock at an exercise price of $1.25 per share; and (v)
Basso Multi a convertible secured note in the principal amount of $780,000 and a
common stock purchase warrant to purchase up to 117,000 shares of Company common
stock at an exercise price of $1.25 per share. The terms between the Company and
each of the respective Investors are substantially similar and the Company has
agreed to treat each of the Investors *pro
rata* with
respect to this financing, including conversion, redemption and payments
thereto.
 
 These
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 Company has agreed to register the resale of the shares of the
Company common stock underlying the Investor Notes and the shares issuable upon
exercise of the Warrants. The
Investor 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 Investors Notes at 110% of the principal amount.
 
 Under the
terms of the Investor Notes and related documents, 20% (including applicable
fees) of the principal amount of the Investor Notes was provided to Company for
immediate use upon the closing of the Investor Notes (“Amortizing Principal”),
the remaining 80% (net of applicable fees) is held in restricted accounts for
each respective Investors (“Restricted Account”). The Company is obligated to
make monthly payments, either in cash or stock as determined by the Investor
Notes, beginning on June 1, 2005 for the Amortizing Principal, 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, or (iii) in cash
paid by the Company at 110% of the Monthly Payment. The Monthly Payments shall
be automatically made in Company common stock at the Fixed Conversion Price if
(i) the shares of the Company common stock underlying the shares of the Investor
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.
As of February 28, 2005 the Fixed Conversion Price is $1.00, subject to
adjustment, but in no case less than $1.00.
 
 The
Company will receive cash disbursements (less applicable accrued interest) for
the amounts held in the Restricted Account after (i) the Amortizing Principal,
plus interest, is paid in full, (ii) the shares of the Company common stock
underlying the Investor 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.
 
 The
Investors may convert all or any portion of the principal amounts of their
respective Investor 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 Investor 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. Furthermore, the Investors are not entitled to
convert their respective Investor Notes; if the aggregate Investors beneficial
ownership of the Company’s common stock would exceed *pro
rata* 19.99%
of the outstanding shares of common stock of the Company at the time of the
conversion.
 
 The
warrants issued pursuant to this funding are exercisable by the Investors until
February 28, 2012, at $1.25 per share of Company common stock. The Warrants are
exercisable immediately.
 
 The
Company filed a registration statement with the Securities and Exchange
Commission within 45 days from February 28, 2005, to register the resale of the shares of
common stock underlying the Investor Notes and the shares issuable upon exercise
of the Warrants . If the
registration statement is not declared effective prior to 105 days from February
28, 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 Investor Notes per
month.
 
 **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.
 
 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.
 
 **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 EndedMarch
      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 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.
 
 *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.
 
 ·
    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 EndedMarch
      31,2005
    
    2004Net
      cash used in operating activities
    
    $
    (508,039)
    
    $
    (2,203,909
    )Net
      cash used in investing activities
    
    $
    (9,355,035)
    
    $
    (1,063,959
    )Net
      cash provided by financing activities
    
    $
    10,732,227
    
    $
    7,246,553
 
 *Changes
in cash flow.* Net cash
used in operating activities for the three months ended March 31, 2005, was
$508,029 compared to net cash used in operating activities of $2,203,909 for the
prior year period. This was an increase of $1,697,807 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 $947,996, respectively. Cash used in investing activities
increased to $9,355,035 for the current year period compared to $1,063,035 for
the prior year period. The Company purchased property and equipment of $68,809
during the current year period and had $9,276,341 of cash in restricted
accounts, which is comprised of $504,580 related to a letter of credit with
Textron Financial Corporation and $8,850,455 related to its February 2005
funding. Cash provided by financing activities increased from approximately
$7,246,553 during the 2004 period to approximately $10,732,227 for the current
year period. The Company obtained $12,000,000 in funding during the 2005 period
and was required to pay up-front financing fees to the lender of $449,484. The
Company also paid $1,728,584 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. These financing agreements are 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 $11,085,711. Included
in the working capital balance at March 31, 2005 is cash held in restricted
accounts of approximately $9,780,921, which if excluded from the working capital
balance, the Company would have working capital of $1,304,790. 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.
 
 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 $2,400,000 gross proceeds has been funded to the Company and
$9,600,000 may be funded upon satisfaction of certain conditions, of which there
can be no assurance that this will occur.
 
 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.
 
  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.
   
  **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. Changes in Securities and Use of Proceeds.
 
 **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.
 
 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
 
  
  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)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)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
    Side
      Letter dated as of February 28, 2005, by and between eLinear, Inc. and
      Investor (incorporated by reference to Exhibit 10.32 to Registrant’s Form
      SB-2 (Second Amendment), dated May 11, 2005)14.1
    Code
      of Ethics (incorporated by reference to Exhibit 14.1 to Registrant’s
      Annual Report on Form 10-KSB, dated February 13, 2004)21.1
    Subsidiaries
      of Registrant (incorporated by reference to Exhibit 21.1 to Registrant’s
      Form 10-QSB filed with the Commission on December 19, 2003)31.1
    Certification
      of Michael J. Lewis31.2
    Certification
      of Joann Agee32.1
    Certification
      for Sarbanes-Oxley Act of Michael J. Lewis32.2
    Certification
      for Sarbanes-Oxley Act of Joann Agee
 
 *  Indicates
management contract or compensatory plan or arrangement.
 
  
  **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  May 20,
2005
 Michael
Lewis    and
Director
 
 
 
 /s/
Joann Agee    Principal
Accounting Officer  May 20,
2005
 Joann
Agee    and
Controller