**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 June 30, 2005
 
 o
              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 24,566,022 shares of common stock, $.02
      par value per share.





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




*Table
          of Contents*


**eLINEAR,
      INC.**


**AND
      SUBSIDIARIES**


**INDEX
      TO FORM 10-QSB**


**June
      30, 2005**





Page
      No.


**Part
                I**
            **Financial
                Information**Item
                1.
            Financial
                StatementsConsolidated
                Balance Sheets June 30, 2005 (unaudited) and December
                31, 2004
            3Consolidated
                Statements of Operations (unaudited) Three
                and Six Months Ended June 30, 2005 and 2004
            4Consolidated
                Statements of Cash Flows (unaudited) Six
                Months Ended June 30, 2005 and 2004
            5Notes
                to Unaudited Consolidated Financial Statements
            6Item
                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.
            Unregistered
                Sales of Equity 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





2
 *Table
          of Contents*


**PART
      I. FINANCIAL INFORMATION**





Item
      1. FINANCIALSTATEMENTS





**eLINEAR,
      INC.**


**AND
      SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**




June
                  30,
              
              December
                  31,2005
              
              2004(Unaudited)**ASSETS**Current
                  assets:Cash
              
              $
              361,751
              
              $
              898,869Cash
                  in restricted account
              
              
              504,580
              
              
              504,580Accounts
                  receivable, net of allowance of $355,303 at June 30, 2005 and $311,569
                  at
                  December 31, 2004, respectively
              
              
              5,977,203
              
              
              5,010,733Inventory
              
              
              812,222
              
              
              446,446Other
                  current assets
              
              
              143,741
              
              
              126,316Total
                  current assets
              
              
              7,799,497
              
              
              6,986,944Property
                  and equipment, net
              
              
              741,460
              
              
              805,798Other
                  assets:Goodwill
              
              
              1,100,000
              
              
              1,100,000Deferred
                  financing costs, net
              
              
              101,800
              
              
              132,346Contract
                  rights, net
              
              
              202,295
              
              
              273,693Deposits
              
              
              45,220
              
              
              34,616Total
                  other assets
              
              
              1,449,315
              
              
              1,540,655Total
                  assets
              
              $
              9,990,272
              
              $
              9,333,397**LIABILITIES
                  AND SHAREHOLDERS' EQUITY**Current
                  liabilities:Accounts
                  payable, trade
              
              $
              1,880,215
              
              $
              1,266,738Line
                  of credit - revolver
              
              
              3,700,219
              
              
              2,784,543Accrued
                  liabilities
              
              
              2,117,715
              
              
              1,049,974Notes
                  payable and rescission liability
              
              
              2,736,000
              
              
              --Unamortized
                  debt discounts
              
              
              (2,431,955
              )Total
                  current liabilities
              
              
              8,002,154
              
              
              5,101,255Long-term
                  debt, net
              
              
              387,997
              
              
              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, 23,913,281
                  and
                  21,622,598 shares issued and outstanding at June 30, 2005 and December
                  31,
                  2004, respectively
              
              
              478,266
              
              
              432,452Additional
                  paid-in capital
              
              
              16,908,122
              
              
              12,228,744Accumulated
                  deficit
              
              
              (15,786,267
              )
              
              (9,828,451
              )Total
                  shareholders’ equity
              
              
              1,600,121
              
              
              2,832,745Total
                  liabilities and shareholders' equity
              
              $
              9,990,272
              
              $
              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 AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004**


**(Unaudited)**





For
                the Three Months Ended
            
            For
                the Six Months EndedJune
                30,
            
            June
                30,2005
            
            2004
            
            2005
            
            2004Revenue:Products
            
            $
            7,616,038
            
            $
            4,861,464
            
            $
            12,476,480
            
            $
            8,818,089Services
            
            
            1,584,273
            
            
            469,545
            
            
            2,209,853
            
            
            687,998Other
            
            
            38,897
            
            
            --
            
            
            65,150
            
            
            --Total
                revenue
            
            
            9,239,208
            
            
            5,331,009
            
            
            14,751,483
            
            
            9,506,087Cost
                of revenue:Products
            
            
            6,683,329
            
            
            3,962,931
            
            
            10,953,668
            
            
            7,477,079Services
            
            
            835,771
            
            
            569,981
            
            
            1,165,189
            
            
            770,595Cost
                of revenue
            
            
            7,519,100
            
            
            4,532,912
            
            
            12,118,857
            
            
            8,247,674Gross
                profit
            
            
            1,720,108
            
            
            798,097
            
            
            2,632,626
            
            
            1,258,413Operating
                expenses:Selling,
                general and administrative expenses:Payroll
                and related expenses
            
            
            1,792,084
            
            
            1,048,114
            
            
            3,598,827
            
            
            1,583,112Office
                administration
            
            
            368,005
            
            
            491,151
            
            
            738,747
            
            
            720,245Professional
                services
            
            
            538,077
            
            
            90,213
            
            
            948,841
            
            
            391,204Impairment
                of goodwill
            
            
            --
            
            
            --
            
            
            --
            
            
            451,925Other
            
            
            830,127
            
            
            727,467
            
            
            2,225,033
            
            
            1,099,628Total
                selling, general and administrative
            
            
            3,528,293
            
            
            2,356,945
            
            
            7,511,448
            
            
            4,246,114Depreciation
                and amortization
            
            
            144,217
            
            
            22,179
            
            
            277,268
            
            
            30,684Total
                operating expenses
            
            
            3,672,510
            
            
            2,379,124
            
            
            7,788,716
            
            
            4,276,798Loss
                from operations
            
            
            (1,952,402
            )
            
            (1,581,027
            )
            
            (5,156,090
            )
            
            (3,018,385
            )Other
                income (expense):Interest
                expense
            
            
            (647,604
            )
            
            (669,218
            )
            
            (880,038
            )
            
            (712,490
            )Interest
                income and other
            
            
            59,556
            
            
            10,635
            
            
            78,312
            
            
            10,635Total
                other income (expense)
            
            
            (588,048
            )
            
            (658,583
            )
            
            (801,726
            )
            
            (701,855
            )Net
                loss
            
            $
            (2,540,450
            )
            $
            (2,239,610
            )
            $
            (5,957,816
            )
            $
            (3,720,240
            )Net
                loss per share:Basic
                and diluted
            
            $
            (0.11
            )
            $
            (0.11
            )
            $
            (0.26
            )
            $
            (0.20
            )Weighted
                average number of common shares
              outstanding:Basic
                and diluted
            
            
            22,999,600
            
            
            20,546,234
            
            
            22,591,271
            
            
            18,736,127





See
      accompanying notes to unaudited consolidated financial
      statements.


4
 *Table
          of Contents*


e **LINEAR,
      INC.**


**AND
      SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004**


**(Unaudited)**




2005
              
              2004Cash
                  flows from operating activities:Net
                  loss
              
              $
              (5,957,816
              )
              $
              (3,720,240
              )Adjustments
                  to reconcile net loss to cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              307,807
              
              
              30,684Impairment
                  of goodwill
              
              
              --
              
              
              451,920Bad
                  debt expense
              
              
              43,734
              
              
              46,000Amortization
                  of debt discounts
              
              
              371,688
              
              
              626,124Stock
                  and stock option based compensation
              
              
              1,148,070
              
              
              603,608Extension
                  of warrant expiration date
              
              
              27,871
              
              
              --Changes
                  in assets and liabilities:Accounts
                  receivable
              
              
              (1,010,204
              )
              
              (2,634,347
              )Inventory
              
              
              (365,776
              )
              
              (85,800
              )Other
                  current assets
              
              
              (17,425
              )
              
              --Accounts
                  payable
              
              
              613,477
              
              
              (405,383
              )Payable
                  to officers
              
              
              --
              
              
              (36,336
              )Accrued
                  liabilities
              
              
              1,138,663
              
              
              405,244Other
              
              
              --
              
              
              1,980Net
                  cash used in operating activities
              
              
              (3,699,911
              )
              
              (4,716,546
              )Cash
                  flows from investing activities:Purchase
                  of property and equipment
              
              
              (141,525
              )
              
              (310,794
              )Certificate
                  of deposit
              
              
              --
              
              
              (506,032
              )Cash
                  in restricted account
              
              
              --
              
              
              (500,000
              )Deposits
              
              
              (10,604
              )
              
              (15,435
              )Net
                  cash used in investing activities
              
              
              (152,129
              )
              
              (1,332,261
              )Cash
                  flows from financing activities:Repayment
                  of notes payable due to officers
              
              
              --
              
              
              (215,703
              )Proceeds
                  from financing agreement
              
              
              2,736,000
              
              
              2,780,500Payment
                  of up-front financing costs
              
              
              (449,484
              )
              
              (273,000
              )Borrowings
                  (repayment) of financing agreement
              
              
              915,656
              
              
              (444,759
              )Proceeds
                  from exercise of stock options
              
              
              112,750
              
              
              345,594Proceeds
                  from sale of common stock, net
              
              
              --
              
              
              4,586,103Net
                  cash provided by financing activities
              
              
              3,314,922
              
              
              6,778,735Net
                  increase (decrease) in cash
              
              
              (537,118
              )
              
              729,928Cash
                  and cash equivalents, beginning of period
              
              
              898,869
              
              
              554,483Cash
                  and cash equivalents, end of period
              
              $
              361,751
              
              $
              1,284,411Supplemental
                  cash flow disclosures:Interest
                  paid
              
              $
              185,116
              
              $
              110,569Supplemental
                  non-cash disclosures:Debt
                  converted into equity
              
              $
              1,150,000
              
              $
              --





See
      accompanying notes to unaudited consolidated financial
      statements.


5
 *Table
          of Contents*


**eLINEAR,
      INC.**


**AND
      SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**June
      30, 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 June 30,
      2005, and the results of operations and cash flows for the three and six months
      ended June 30, 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
      June
      30, 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 was
      approved by the Company’s shareholders on June 2, 2005. As of June 30, 2005,
      there were 520,000 incentive stock options outstanding under the 2005 Plan
      at
      exercise prices ranging from $0.73 to $1.10 per share, vesting over a four
      year
      period and expiring five years from the date of grant and 150,000 non-qualified
      stock options outstanding issued to the Company’s CEO at an exercise price of
      $0.10 per share, immediately exercisable and expiring in December
      2009.





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. During the six months ended June 30, 2005, 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 six month period
      ended June 30, 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
      $176,618 related to options issued to non-employees and its CEO which vested
      during the period. The options were expensed based on the fair value calculated
      using the Black Scholes pricing model using the following assumptions: 86%
      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.




Six
                  Months Ended
                June
                  30,2005
              
              2004Net
                  loss, as reported
              
              $
              (5,957,816
              )
              $
              (3,720,240
              )Add:
                  Stock-based employee compensation included in reported net
                  loss
              
              
              50,015
              
              
              3,246Stock
                  based compensation under fair valuemethod
              
              
              (642,818
              )
              
              (121,246
              )Pro
                  forma net loss
              
              $
              (6,550,619
              )
              $
              (3,838,240
              )Net
                  loss per share:Basic
                  and diluted - as reported
              
              $
              (0.26
              )
              $
              (0.20
              )Stock
                  based compensation under fair valuemethod
              
              
              (0.03
              )
              
              (0.01
              )Basic
                  and diluted - pro forma
              
              $
              (0.29
              )
              $
              (0.21
              )





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 86%, risk-free interest
      rate of 1.5%, and expected life of 48 months.





Note
              2.
            Impairment





As
      of
      June 30, 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 (6.00% as of June 30, 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 June 30, 2005, the Company had $3,700,219
      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. In May 2005, the Company allowed Laurus to convert
      $200,000 principal amount at $0.59 per share into 340,020 shares of common
      stock. In June 2005, the Company allowed Laurus to convert $125,000 principal
      amount at $0.90 per share into 138,889 shares of common stock. During the six
      months ended June 30, 2005, Laurus was issued 1,303,909 shares for this
      conversion feature and reduced the principal amount of the note by $1,150,000.
      The term note is secured by a blanket lien on all of the Company’s assets. As of
      June 30, 2005, the Company had $850,000 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.





8
 *Table
          of Contents*





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 June 30, 2005:





Original
                loan draw down amount
            
            $
            3,000,000Add:
                Net amount of borrowings
            
            
            1,825,198Face
                value of amount borrowed
            
            
            4,825,198Conversion
                to equity
            
            
            (275,000
            )Fee
                paid to Laurus
            
            
            (219,500
            )Beneficial
                conversion amount
            
            
            (1,039,620
            )Amortization
                of debt discounts
            
            
            797,138Laurus
                debt, net as of June 30, 2005
            
            $
            4,088,216





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 a $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.




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 June 30, 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 June
      30, 2005:





Original
                loan amount
            
            $
            2,736,000Fees
                paid
            
            
            (449,484
            )Amortization
                of fees
            
            
            49,943Beneficial
                conversion amount
            
            
            (1,003,201
            )Amortization
                of beneficial conversion amount
            
            
            111,467Debt
                discount for warrants issued
            
            
            (1,283,299
            )Amortization
                of debt discounts
            
            
            142,619Debt,
                net as of June 30, 2005
            
            $
            304,045





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





Note
              4.
            Common
                Stock





The
      Company issued 1,303,909 shares of common stock to Laurus during the six months
      ended June 30, 2005 for conversion of $1,150,000 principal amount of Laurus’
long-term debt.





The
      Company issued 105,000 shares of common stock for stock options exercised during
      the six months ended June 30, 2005 resulting in proceeds totaling
      $112,750.





10
 *Table
          of Contents*




The
      Company issued 881,776 shares of its common stock valued at $921,437 to third
      parties for consulting services during the six months ended June 30, 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 June 30,
      2005:





Exercise
                Price
            Financing
              Date
            Outstanding
                Warrants
            Expiration
                Date$0.70
            December
                2003
            26,611
            December
                2005$1.00
            January
                2004
            666,859
            August
                2005$1.00
            February
                2004
            240,000
            August
                2005$1.55
            January
                2004
            381,719
            August
                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 June 30, 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.


11
 *Table
          of Contents*




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 June 30, 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 June 30, 2005**Dollars
                ($)
            Consulting
                Services
            
            Network
                and Storage Solutions
            
            Communications
                Deployment
            
            Security
              Solutions
            
            ConsolidatedRevenue
            
            27,861
            
            
            6,347,098
            
            
            1,642,925
            
            
            1,221,324
            
            
            9,239,208Segment
                profit (loss)
            
            (2,697,254
            )
            
            387,923
            
            
            100,030
            
            
            (331,149
            )
            
            (2,540,450
            )Total
                assets
            
            10,841,087
            
            
            4,570,493
            
            
            1,711,689
            
            
            2,201,925
            
            
            19,325,194Capital
                expenditures
            
            9,448
            
            
            23,833
            
            
            --
            
            
            40,155
            
            
            73,436Depreciation
                andamortization
            
            30,589
            
            
            34,603
            
            
            1,476
            
            
            77,549
            
            
            144,217








**For
                the Six Months Ended June 30, 2005**Dollars
                ($)
            Consulting
                Services
            
            Network
                and Storage Solutions
            
            Communications
                Deployment
            
            Security
              Solutions
            
            ConsolidatedRevenue
            
            33,073
            
            
            10,725,479
            
            
            1,962,377
            
            
            2,030,554
            
            
            14,751,483Segment
                profit (loss)
            
            (5,310,501
            )
            
            (107,947
            )
            
            70,994
            
            
            (610,362
            )
            
            (5,957,816
            )Total
                assets
            
            10,841,087
            
            
            4,570,493
            
            
            1,711,689
            
            
            2,201,925
            
            
            19,325,194Capital
                expenditures
            
            37,177
            
            
            48,306
            
            
            --
            
            
            56,042
            
            
            141,525Depreciation
                andamortization
            
            55,521
            
            
            67,521
            
            
            2,952
            
            
            151,274
            
            
            277,268







**For
                the Three Months Ended June 30, 2004**Dollars
                ($)
            Consulting
                Services
            
            Network
                and Storage Solutions
            
            Communications
                Deployment
            
            Security
              Solutions
            
            ConsolidatedRevenue
            
            220
            
            
            4,773,855
            
            
            556,934
            
            
            --
            
            
            5,331,009Segment
                loss
            
            (1,869,568
            )
            
            (352,527
            )
            
            (17,515
            )
            
            --
            
            
            (2,239,610
            )Total
                assets
            
            3,469,416
            
            
            4,848,968
            
            
            528,379
            
            
            --
            
            
            8,846,763Capital
                expenditures
            
            136,844
            
            
            122,598
            
            
            552
            
            
            --
            
            
            259,994Depreciation
                andamortization
            
            8,676
            
            
            13,310
            
            
            193
            
            
            --
            
            
            22,179








**For
                the Six Months Ended June 30, 2004**Dollars
                ($)
            Consulting
                Services
            
            Network
                and Storage Solutions
            
            Communications
                Deployment
            
            Security
              Solutions
            
            ConsolidatedRevenue
            
            47,165
            
            
            8,730,480
            
            
            728,442
            
            
            --
            
            
            9,506,087Segment
                loss
            
            (3,142,861
            )
            
            (447,030
            )
            
            (130,349
            )
            
            --
            
            
            (3,720,240
            )Total
                assets
            
            3,469,416
            
            
            4,848,968
            
            
            528,379
            
            
            --
            
            
            8,846,763Capital
                expenditures
            
            152,219
            
            
            157,458
            
            
            1,117
            
            
            --
            
            
            310,794Depreciation
                andamortization
            
            11,397
            
            
            17,469
            
            
            1,818
            
            
            --
            
            
            30,684





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.





12
 *Table
          of Contents*




Note
              7.
            Significant
                Concentration





One
      customer accounted for approximately 17.8% of sales for the six months ended
      June 30, 2005. No other customers represented more than 10% of sales of the
      Company for the six months ended June 30, 2005. The Company did not have any
      customers which had in excess of 10% of the Company’s accounts receivable
      balance at June 30, 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.




Note
              9.
            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.





13
 *Table
          of Contents*




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.





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.


14
 *Table
          of Contents*





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
      June 30, 2005, and its results of operations for the six-month periods ended
      June 30, 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.





15
 *Table
          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
      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.





16
 *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.





17
 *Table
          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
      June 30, 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.





18




**Results
      of Operations and Financial Condition**





**Six
      Months** **Ended June 30, 2005 to Six Months Ended June 30, 2004**





The
      following table sets forth certain operating information regarding the Company
      for the three months ended June 30, 2005 and 2004:





Six
                Months Ended
              June
                30,2005
            
            2004Revenue
            
            $
            14,751,483
            
            $
            9,506,087Cost
                of revenue
            
            
            12,118,857
            
            
            8,247,674Gross
                profit
            
            
            2,632,626
            
            
            1,258,413Selling,
                general and administrative expenses
            
            
            7,511,448
            
            
            4,246,114Depreciation
                and amortization
            
            
            277,268
            
            
            30,684Loss
                from operations
            
            
            (5,156,090
            )
            
            (4,276,798
            )Other
                income (expense)
            
            
            (801,726
            )
            
            (701,855
            )Net
                loss
            
            $
            (5,957,816
            )
            $
            (3,720,240
            )Net
                loss per share - basic and diluted
            
            $
            (0.26
            )
            $
            (0.20
            )





*Revenue.* Total
      revenue for the six months ended June 30, 2005 was $14,751,483 which was an
      increase of 55% over the prior year period of $9,506,087. Revenue from the
      consulting services business segment for the 2005 period was $33,073, which
      was
      less than one percent of total revenue for the 2005 period.





Revenue
      generated from the network and storage solutions business segment for the 2005
      period was $10,725,479, which was an increase of $1,994,999, or 23%, over the
      2004 period. The network and storage solutions business segment contributed
      73%
      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
      $1,962,377, which was 13% of total revenue. This was an increase of $1,223,935,
      or 169%, 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 $2,030,554 for the six months
      ended June 30, 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 six months ended June 30, 2005, one customer provided
      in excess of 10% of the Company’s revenue. This customer provided 17.8% 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 six months ended June 30, 2005 was $12,118,857, an
      increase of $3,871,183, or 47%, over the 2004 period of $8,247,674. 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.





19
 *Table
          of Contents*




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 increased from 85% for 2004 period
      to 88% for fiscal 2005. 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 $10,953,668 for the 2005 period. The Company anticipates
      that cost of revenue will increase as revenue increases.





*Gross
      profit.* Total
      gross profit increased from $1,258,413 for the six months ended June 30, 2004,
      to $2,632,626 for the six months ended June 30, 2005. The increase in gross
      profit was a result of an increase in revenue from all business segments. Total
      gross profit as a percentage of revenue increased from 13% for the 2004 period
      to 18% 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 six months ended June 30, 2005, were $7,788,716,
      an
      increase of $3,511,918, or 82%, over the 2004 period of $4,276,798. 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
                  June 30, 2004, the Company had 46 employees which had increased
                  to 127 as
                  of June 30, 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 $2,015,715, which costs are composed of payroll,
                  payroll
                  taxes, sales commissions and employee
                  benefits.





§
              Office
                  administration expenses increased from $720,245 for the 2004 period
                  to
                  $738,747 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, consulting and
                  directors’ fees, increased from $391,204 for the previous year period to
                  $948,841 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
                  litigation.





§
              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 $1,099,628 for the prior year period to
                  $2,225,033
                  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 six months ended June 30, 2005 approximated $1,434,633. Other
                  components include employee stock option expense of $50,015, non-cash
                  stock compensation expense of $251,762, travel and entertainment
                  of
                  approximately $265,251 and bad debt expense of approximately
                  $75,523.





20
 *Table
          of Contents*




·
              Depreciation
                  and amortization increased from $30,684 for the 2004 period to
                  $277,268
                  for the 2005 period and is comprised of depreciation of fixed assets
                  acquired during the 2004 period and amortization of deferred financing
                  costs and contract rights which were not incurred during the 2004
                  period.





*Interest
      Expense.* Interest
      expense for the six months ended June 30, 2005, increased to $880,038 from
      $712,490 for the prior year. The increase was primarily attributable to the
      amortization of debt discounts and interest charges associated with the
      Company’s 2004 and 2005 fundings and the accrual and payment of interest on its
      February 2005 financing, of which the Company received 2,736,000 and paid total
      fees for the total possible financing of up to $12,000,000.





*Net
      Loss* .
      The net
      loss for the six months ended June 30, 2005 was 5,957,816, or $0.26 per share
      basic and diluted, compared to a net loss of $3,720,240, or $0.20 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
      six months ended June 30, 2005 and 2004:





Six
                Months Ended
              June
                30,2005
            
            2004Net
                cash used in operating activities
            
            $
            (3,699,911
            )
            $
            (4,716,546
            )Net
                cash used in investing activities
            
            $
            (152,129
            )
            $
            (1,332,261
            )Net
                cash provided by financing activities
            
            $
            3,314,922
            
            $
            6,778,735





*Changes
      in cash flow.* Net cash
      used in operating activities for the six months ended June 30, 2005, was
      $3,699,911 compared to net cash used in operating activities of $4,716,546
      for
      the prior year period. This was an decrease of $1,016,635 over the prior year
      period. The Company reported a net loss of $5,957,816 and an increase in
      accounts receivable and inventory associated with increased sales of $1,010,204
      and $365,776, respectively and an increase in other current assets of $17,425.
      These uses of cash were offset by non-cash charges totaling $1,899,170 and
      increases in accounts payable and accrued liabilities of $613,477 and
      $1,138,663, respectively. Cash used in investing activities decreased to
      $152,129 for the current year period compared to $1,332,261 for the prior year
      period. The Company purchased property and equipment of $141,525 during the
      current year period and paid deposits of $10,604. Cash provided by financing
      activities increased from approximately $6,778,735 during the 2004 period to
      approximately $3,314,922 for the current year period. The Company obtained
      $2,736,000 in funding during the 2005 period and was required to pay up-front
      financing fees to the lender of $449,484. The Company also borrowed $915,656
      principal amount on its Laurus credit facility and received cash of $112,750
      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 financing agreement with for up to $12,000,000 certain investors
      and
      received gross proceeds of $2,736,000, the remaining $9,264,000 is held by
      the
      Investors in a restricted account. 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
      June 30, 2005, the Company had cash balances in non-restricted accounts of
      $361,751 and negative working capital of approximately $202,657. Included in
      the
      negative working capital balance at June 30, 2005 is cash held in restricted
      accounts of approximately $504,580, which if excluded from the working capital
      balance, the Company would have negative working capital of $707,237. Also
      included in the negative working capital balance is $2,736,000 classified as
      “Notes payable and rescission liability” from its February 2005 funding. On July
      14, 2005, the Company supplemented its February 2005 financing agreement and
      will transfer $2,736,000 classified as “Notes payable and rescission liability”
to long-term debt on its financial statements as of July 31, 2005. 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.





21
 *Table
          of Contents*




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 the
      Company entered into a supplement agreement with the investors on July 14,
      2005.
      See “Note 9. Subsequent Event” for a discussion of the supplemented financing
      agreement.





The
      Company believes it has sufficient capital to fund operations through the end
      of
      September 2005. Thereafter, the Company will be required to obtain access to
      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. As such, there is no assurance that
      we
      can raise additional capital from external sources, the failure of which could
      cause us to sell assets or curtail operations.






**Off-Balance
      Sheet Arrangements**





As
      more
      fully described in “Recent Developments”, pursuant to the February 28, 2005
      financing, the $9,264,000 portion of the total financing of $12,000,000 was
      held
      in a restricted account and the ability of the Company to obtain the funds
      was
      contingent on several factors. As of July 14, 2005, the Company entered into
      a
      supplement agreement and as a result of which, the Company does not have any
      off-balance sheet arrangements. See “Note 9. Subsequent Event” for a discussion
      of the supplemented financing agreement.







**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.




22
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Item
                3.
              Controlsand
                  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 June 30, 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.


23
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**PART
      II**  **OTHER
      INFORMATION**





Item
              1.
            LegalProceedings





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
      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. The arbitration
      hearing is set for November 8 and 9, 2005.


Item
                2.
              Recent
                  Sales of Unregistered
                  Securities


There
        were no sales of unregistered securities made by the Company during the quarter
        ended June 30, 2005.





Item
              3.
            Defaults
                Upon Senior Securities - None





Item
              4.
            Submission
                of Matters to a Vote of Security
                Holders





On
      June
      2, 2004, with a written consent to action without a meeting of the majority
      of
      the shareholders of eLinear, Inc., the following resolutions were deemed to
      be
      adopted to the same extent and to have the same force and effect as if adopted
      by a formal meeting of shareholders of the Company duly called and held for
      the
      purpose of adopting and acting upon such resolutions:





**RESOLVED,** that
      the
      Majority Shareholders hereby elect Kevan M. Casey, Tommy Allen, Michael Lewis,
      J. Leonard Ivins, Carl A. Chase and Ryan Cravey as directors to serve until
      their successors are elected, appointed and duly qualified; and that the
      Majority Shareholders direct the officers to implement this
      resolution.





**RESOLVED** ,
      that
      the Majority Shareholders hereby adopt the 2005 Employee Stock Purchase Plan,
      and that the Majority Shareholders direct the officers to implement this
      resolution.





**RESOLVED** ,
      that
      the Majority Shareholders hereby adopt the 2005 Stock Option Plan and accept
      the
      recommendation of the audit committee to appoint and retain Lopez, Blevins,
      Bork
& Associates LLP as the Company’s independent auditors for its current
      fiscal year; and that the Majority Shareholders direct the officers to implement
      this resolution.





Item
              5.
            Other
                Information - None




24
 *Table
          of Contents*


Item
              6.
            Exhibits





Exhibit No.
            
            Description2.1
            
            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)  25
  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)  26
  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).10.36
                
                2005
                    Employee Stock Purchase Plan (incorporated by reference to Exhibit
                    A to
                    Registrant’s Definitive Information Statement, dated May 6, 2005)
                    *10.37
                
                2005
                    Stock Option Plan (incorporated by reference to Exhibit A to
                    Registrant’s
                    Definitive Information Statement, dated May 6, 2005) *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




27
 *Table
          of Contents*


**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


28