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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q (Mark One)þ
    
    QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2005 OR o
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from __________________ to _________________ Commission file number: 0-30907 MOBILITY ELECTRONICS, INC. (Exact Name of Registrant as Specified in its Charter)
 Delaware
(State or Other Jurisdiction of Incorporation) 0-30907
    
    86-0843914(Commission File Number)
    
    (IRS Employer Identification No.)17800 N. Perimeter Dr., Suite 200, Scottsdale, Arizona
    
    85255(Address of Principal Executive Offices)
    
    (Zip Code)
 (480) 596-0061
(Registrants telephone number, including area code) Not applicable
(Former Name, Former Address, and Former Fiscal Year if Changed Since Last Report) Indicate by check mark whether registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES þ            NO o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). YES þ            NO o At May 9, 2005, there were 30,150,606 shares of the Registrants Common Stock outstanding.




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MOBILITY ELECTRONICS, INC.
FORM 10-Q TABLE OF CONTENTS  
 PAGE NO.PART I: FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004
    
    
    3Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and 2004
    
    
    4Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    21PART II: OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 6. Exhibits
    
    
    22SIGNATURES
    
    
    23INDEX TO EXHIBITS
    
    
    24Exhibit 10.1Exhibit 10.2Exhibit 10.3Exhibit 31.1Exhibit 31.2Exhibit 32.1
  - 2 -




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PART I: FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS: MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands) March 31,
    
    
    December 31,2005
    
    
    2004(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    13,230
    
    
    $
    12,768Accounts receivable, net
    
    
    16,663
    
    
    
    16,905Inventories
    
    
    8,259
    
    
    
    7,513Prepaid expenses and other current assets
    
    
    379
    
    
    
    443Total current assets
    
    
    38,531
    
    
    
    37,629Property and equipment, net
    
    
    2,103
    
    
    
    2,127Goodwill
    
    
    12,161
    
    
    
    11,944Intangible assets, net
    
    
    3,065
    
    
    
    3,059Notes receivable and other
    
    
    1,731
    
    
    
    2,032Total assets
    
    $
    57,591
    
    
    $
    56,791LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    13,591
    
    
    $
    12,411Accrued expenses and other current liabilities
    
    
    959
    
    
    
    1,514Current installments of non-current liabilities
    
    
    297
    
    
    
    328Total current liabilities
    
    
    14,847
    
    
    
    14,253Non-current liabilities, less current portion
    
    
    438
    
    
    
    463Total liabilities
    
    
    15,285
    
    
    
    14,716Stockholders equity:Convertible preferred stock
    
    
    3
    
    
    
    3Common stock
    
    
    287
    
    
    
    285Additional paid-in capital
    
    
    153,805
    
    
    
    147,547Accumulated deficit
    
    
    (106,028
    )
    
    
    (105,318
    )Deferred compensation and other
    
    
    (5,964
    )
    
    
    (646
    )Accumulated other comprehensive income
    
    
    203
    
    
    
    204Total stockholders equity
    
    
    42,306
    
    
    
    42,075Total liabilities and stockholders equity
    
    $
    57,591
    
    
    $
    56,791
 See accompanying notes to unaudited condensed consolidated financial statements. - 3 -




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MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts)(unaudited) Three Months EndedMarch 31,2005
    
    
    2004Revenue
    
    $
    18,358
    
    
    $
    14,044Cost of revenue
    
    
    12,881
    
    
    
    9,432Gross profit
    
    
    5,477
    
    
    
    4,612Operating expenses:Marketing and sales
    
    
    1,986
    
    
    
    1,658Research and development
    
    
    1,397
    
    
    
    1,424General and administrative
    
    
    2,842
    
    
    
    2,304Total operating expenses
    
    
    6,225
    
    
    
    5,386Loss from operations
    
    
    (748
    )
    
    
    (774
    )Other income (expense):Interest income (expense), net
    
    
    38
    
    
    
    (20
    )Other income, net
    
    
    
    
    
    
    22Loss from continuing operations
    
    
    (710
    )
    
    
    (772
    )Discontinued operations:Loss from discontinued operations of handheld software product line
    
    
    
    
    
    
    (1
    )Net loss
    
    $
    (710
    )
    
    $
    (773
    )Net loss per share:Basic and dilutedContinuing operations
    
    $
    (0.02
    )
    
    $
    (0.03
    )Discontinued operations
    
    $
    
    
    
    $
    (0.00
    )Total basic net loss per share
    
    $
    (0.02
    )
    
    $
    (0.03
    )Weighted average common shares outstanding:Basic and diluted
    
    
    28,601
    
    
    
    27,651
 See accompanying notes to unaudited condensed consolidated financial statements. - 4 -




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MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(unaudited) Three months endedMarch 31,2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (710
    )
    
    $
    (773
    )Less loss from discontinued operation
    
    
    
    
    
    
    1Loss from continuing operations
    
    
    (710
    )
    
    
    (772
    )Adjustments to reconcile net loss to net cash used in operating activities:Provision for accounts receivable and sales returns and credits
    
    
    94
    
    
    
    73Depreciation and amortization
    
    
    466
    
    
    
    491Amortization of deferred compensation
    
    
    338
    
    
    
    Impairment of tooling equipment
    
    
    82
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    162
    
    
    
    (1,425
    )Inventories
    
    
    (746
    )
    
    
    (873
    )Prepaid expenses and other assets
    
    
    (354
    )
    
    
    (599
    )Accounts payable
    
    
    1,162
    
    
    
    2,574Accrued expenses and other current liabilities
    
    
    (531
    )
    
    
    344Net cash used in operating activities
    
    
    (37
    )
    
    
    (187
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (323
    )
    
    
    (319
    )Net cash used in investing activities
    
    
    (323
    )
    
    
    (319
    )Cash flows from financing activities:Payment of non-current liabilities
    
    
    (25
    )
    
    
    (125
    )Net proceeds from issuance of common stock, exercise of options
and warrants, and repayment of stock subscription notes receivable
    
    
    605
    
    
    
    245Net cash provided by financing activities
    
    
    580
    
    
    
    120Effects of exchange rate changes on cash and cash equivalents
    
    
    (1
    )
    
    
    13Net cash provided by (used in) discontinued operations
    
    
    243
    
    
    
    (97
    )Net increase (decrease) in cash and cash equivalents
    
    
    462
    
    
    
    (470
    )Cash and cash equivalents, beginning of period
    
    
    12,768
    
    
    
    11,024Cash and cash equivalents, end of period
    
    $
    13,230
    
    
    $
    10,554
 See accompanying notes to unaudited condensed consolidated financial statements. - 5 -




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MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (1) Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of Mobility
Electronics, Inc. (Mobility or the Company) which was formerly known as Electronics Accessory
Specialists International, Inc., and its wholly-owned subsidiaries, Magma, Inc. (Magma), Mobility
Idaho, Inc. (Idaho) which was formerly known as Portsmith, Inc., Mobility 2001 Limited, Mobility
Texas Inc. (Texas) which was formerly known as Cutting Edge Software, Inc., and iGo Direct
Corporation (iGo). All significant intercompany balances and transactions have been eliminated in
the accompanying condensed consolidated financial statements. The accompanying condensed consolidated financial statements are unaudited and have been
prepared in accordance with accounting principles generally accepted in the United States of
America, pursuant to rules and regulations of the Securities and Exchange Commission (the SEC).
In the opinion of management, the accompanying condensed consolidated financial statements include
normal recurring adjustments that are necessary for a fair presentation of the results for the
interim periods presented. Certain information and footnote disclosures have been condensed or
omitted pursuant to such rules and regulations. These condensed consolidated financial statements
should be read in conjunction with the Companys audited consolidated financial statements and
notes thereto for the fiscal year ended December 31, 2004 included in the Companys Form 10-K,
filed with the SEC. The results of operations for the three months ended March 31, 2005 are not
necessarily indicative of results to be expected for the full year or any other period. The preparation of the condensed consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America requires management to
make a number of estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going
basis, the Company evaluates its estimates, including those related to bad debts, sales returns,
inventories, warranty obligations, and contingencies and litigation. The Company bases its
estimates on historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions. Certain amounts included in the 2004 condensed consolidated financial statements have been
reclassified to conform to the 2005 financial statement presentation. The Company believes its critical accounting policies, consisting of revenue recognition,
inventory valuation and goodwill valuation affect its more significant judgments and estimates used
in the preparation of its consolidated financial statements. These policies are discussed in Item
2, Managements Discussion and Analysis of Financial Condition and Results of Operations. (2) Stock-based Compensation At March 31, 2005, the Company accounted for stock-based compensation under the intrinsic
value recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25). These plans provide for the grant of incentive stock options and restricted
stock units to eligible employees. a. Stock Options Following the guidance of APB 25, no stock-based employee compensation expense is reflected in
net income for employee stock options granted under the plans to date, as all options granted had
an exercise price at least equal to the fair market value of shares of common stock on the date of
the grant. The Financial Accounting Standards Board recently published Statement of Financial Accounting
Standards No. 123 (Revised 2004), Share-Based Payment (SFAS 123R). On April 14, 2005, the U.S.
Securities and Exchange Commission adopted a new rule amending the compliance dates for SFAS 123R.
In accordance with the new rule, the accounting provisions of SFAS 123R will be effective for the
Company in 2006. The Company will adopt the provisions of SFAS 123R using a modified prospective
application. Under modified prospective application, SFAS 123R, which provides certain changes to
the method for valuing share-based compensation among other changes, will apply to new awards and
to awards that are outstanding on the effective date and are subsequently modified or cancelled.
Compensation expense for outstanding awards for which the vesting period has not been completed as
of the effective date will be recognized over the remaining vesting period using the compensation
cost calculated for pro forma disclosure purposes under SFAS 123R. At March 31, 2005, - 6 -




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unamortized compensation expense, as determined in accordance with SFAS 123R, that the Company
expects to record during fiscal 2006 was approximately $98,000. The Company determined it would not
issue any stock options in future periods, and accordingly, does not expect to incur additional
expense. The Company is in the process of determining how the guidance regarding valuing
share-based compensation as prescribed in SFAS 123R will be applied to valuing share-based awards
granted after the effective date and the impact the recognition of compensation expense related to
such awards will have on its financial statements. On March 11, 2005, in response to the issuance of SFAS 123R, the Companys Compensation and
Human Resources Committee of the Board of Directors approved accelerating the vesting of all
unvested stock options held by current employees, including executive officers and directors with
an exercise price of $6.00 or greater. Unvested options to purchase 540,369 shares became
exercisable as a result of the vesting acceleration. The decision to accelerate vesting of these options was made primarily to avoid recognizing
compensation expense in the statement of operations in future financial statements upon the
effectiveness of SFAS 123R. The Company estimates that the maximum future compensation expense that
will be avoided, based on an implementation date for SFAS 123R of January 1, 2006, will be
approximately $1,609,000, of which approximately $409,000 is related to options held by executive
officers and directors of the Company. The acceleration did not generate significant compensation
expense as accounted for under APB 25, as the majority of options for which vesting was accelerated
had exercise prices that exceeded the market price of the Companys common stock on March 11, 2005.
The pro-forma results presented in the table below include approximately $1,609,000 of
compensation expense for the three months ended March 31, 2005 resulting from the vesting
acceleration. Had the Company determined compensation cost based on the fair value at the grant date for its
stock options under SFAS 123R, the Companys net loss and net loss per share would have been
increased to the pro forma amount indicated below (amounts in thousands, except per share): Three Months Ended March 31,2005
    
    
    2004Net loss:As reported
    
    $
    (710
    )
    
    $
    (773
    )Total stock-based employee compensation expense
determined under fair-value-based method for all
rewards, net of tax of $0 for all periods
    
    
    (1,897
    )
    
    
    (284
    )Pro forma
    
    $
    (2,607
    )
    
    $
    (1,057
    )Net loss per share  basic and diluted:As reported
    
    $
    (0.02
    )
    
    $
    (0.03
    )Pro forma
    
    $
    (0.09
    )
    
    $
    (0.04
    )
 The value of stock-based employee compensation expense for the three months ended March 31,
2005 and 2004 was determined using the Black-Scholes method with the following assumptions: March 31,2005
    
    
    2004Expected life (years)
    
    
    3.0
    
    
    
    2.5Risk-free interest rate
    
    
    4.0
    %
    
    
    2.25
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    80.0
    %
    
    
    100.0
    %
 b. Restricted Stock Units During the first quarter of 2005, the Company granted 788,750 restricted stock units (RSUs)
to certain key employees pursuant to the Mobility Electronics, Inc. Omnibus Long-Term Incentive
Plan. The awards are accounted for using the measurement and recognition principles of APB 25.
Accordingly, unearned compensation is measured at the date of grant and recognized as compensation
expense over the period in which the RSUs vest. RSUs awarded during the first quarter of 2005 will
vest after five years, but may vest earlier if specific performance criteria are met. At March 31,
2005, $5,774,000 of unearned compensation is recorded as a reduction in stockholders equity as a
result of the RSUs. For the three months ended March 31, 2005, the Company recorded $327,000 of
stock-based compensation expense relating to the RSUs in selling, general and administrative
expense. - 7 -




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(3) Inventories Inventories consist of the following (amounts in thousands): March 31,
    
    
    December 31,2005
    
    
    2004Raw materials
    
    $
    2,269
    
    
    $
    2,122Finished goods
    
    
    5,990
    
    
    
    5,391$
    8,259
    
    
    $
    7,513
 (4) Goodwill The changes in the carrying amount of goodwill are as follows (amounts in thousands): Reported balance at December 31, 2004
    
    $
    11,944Miscellaneous direct acquisition costs related to
original indemnification of iGo officers
    
    
    217Reported balance at March 31, 2005
    
    $
    12,161
 (5) Intangible Assets Intangible assets consist of the following at March 31, 2005 and December 31, 2004 (amounts in
thousands): March 31, 2005
    
    
    December 31, 2004Average
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetLife
    
    
    Intangible
    
    
    Accumulated
    
    
    Intangible
    
    
    Intangible
    
    
    Accumulated
    
    
    Intangible(Years)
    
    
    Assets
    
    
    Amortization
    
    
    Assets
    
    
    Assets
    
    
    Amortization
    
    
    AssetsAmortized intangible
assets:License fees
    
    
    7
    
    
    $
    2,308
    
    
    $
    (908
    )
    
    $
    1,400
    
    
    $
    2,258
    
    
    $
    (843
    )
    
    $
    1,415Patents and trademarks
    
    
    3
    
    
    
    2,078
    
    
    
    (1,067
    )
    
    
    1,011
    
    
    
    1,921
    
    
    
    (994
    )
    
    
    927Trade names
    
    
    10
    
    
    
    378
    
    
    
    (98
    )
    
    
    280
    
    
    
    378
    
    
    
    (88
    )
    
    
    290Customer list
    
    
    10
    
    
    
    662
    
    
    
    (288
    )
    
    
    374
    
    
    
    662
    
    
    
    (235
    )
    
    
    427Total
    
    
    
    
    
    $
    5,426
    
    
    $
    (2,361
    )
    
    $
    3,065
    
    
    $
    5,219
    
    
    $
    (2,160
    )
    
    $
    3,059
 (6) Line of Credit In October 2002, the Company entered into a $10,000,000 line of credit with a bank. The line
bears interest at prime (5.75% at March 31, 2005), interest only payments are due monthly, with
final payment of interest and principal due on July 31, 2006. The line of credit is secured by all
assets of the Company. The Company had no outstanding balance against the line of credit at March
31, 2005 and 2004. The line of credit is subject to financial covenants. The Company is currently
in compliance with the covenants. At March 31, 2005, the Company had borrowing base capacity of
$9,359,000. (7) Non-current Liabilities Non-current liabilities consist of the following (amounts in thousands): March 31,
    
    
    December 31,2005
    
    
    2004Estimate of Invision earn-out
    
    $
    685
    
    
    $
    716Liability for license fee
    
    
    50
    
    
    
    75735
    
    
    
    791Less current portion
    
    
    297
    
    
    
    328Non-current liabilities, less current portion
    
    $
    438
    
    
    $
    463
 In connection with its acquisition of certain assets of Invision Software and Invision
Wireless, the Company recorded a liability of $847,000, which represents the excess of the fair
value of assets acquired over the initial consideration paid for those assets. This liability will
be reduced by earn-out payments when the contingent consideration is earned. Accordingly, the
Company has recorded a current portion of this liability of $272,000 based on its estimate of
contingent consideration to be earned during 2005. The Company made actual earn-out payments of
$31,000 during the three months ended March 31, 2005. In connection with its settlement of litigation with General Dynamics during 2003, the Company
obtained a ten year trademark license from General Dynamics in exchange for $400,000, plus $1,000
in interest charges. During 2003, the Company made a $201,000 installment payment. In January
2004, the Company made a $125,000 installment payment. In - 8 -




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January 2005, the Company made a $25,000 installment payment. Future installments are payable
as follows: $25,000 on January 15, 2006, which has been recorded as a current liability, and
$25,000 on January 15, 2007. (8) Stockholders Equity (a) Convertible Preferred Stock Series C preferred stock is convertible into shares of common stock. The initial conversion
rate was one for one, but is subject to change if certain events occur. Generally, the conversion
rate will be adjusted if the Company issues any non-cash dividends on outstanding securities,
splits its securities or otherwise effects a change to the number of its outstanding securities.
The conversion rate will also be adjusted if the Company issues additional securities at a price
that is less than the price that the Series C preferred stockholders paid for their shares. Such
adjustments will be made according to certain formulas that are designed to prevent dilution of the
Series C preferred stock. The Series C preferred stock can be converted at any time at the option
of the holder, and will convert automatically, immediately prior to the consummation of a firm
commitment public offering of common stock pursuant to a registration statement filed with the
Securities and Exchange Commission having a per share price equal to or greater than $24.00 per
share and a total gross offering amount of not less than $15,000,000. The rate of conversion was
1-to-1.0883 as of March 31, 2005. At March 31, 2005 and December 31, 2004, there were 15,000,000
shares of Series C preferred stock authorized and 266,041 and 270,541 issued and outstanding,
respectively. During the period from December 31, 2004 through March 31, 2005, 4,500 shares of
Series C preferred stock were converted into 4,897 shares of common stock at an average rate of
1-to-1.0883. The Company may not pay any cash dividends on its common stock while any Series C preferred
stock remains outstanding without the consent of the Series C preferred stockholders. Holders of
Series C preferred stock are entitled to vote on all matters submitted for a vote of the holders of
common stock. Holders will be entitled to one vote for each share of common stock into which one
share of Series C preferred stock could then be converted. In the event of liquidation or
dissolution, the holders of Series C preferred stock will be entitled to receive the amount they
paid for their stock, plus accrued and unpaid dividends out of the Companys assets legally
available for such payments prior to the holders of securities junior to the Series C preferred
stock receiving payments. (b) Common Stock Holders of shares of common stock are entitled to one vote per share on all matters submitted
to a vote of the Companys stockholders. There is no right to cumulative voting for the election of
directors. Holders of shares of common stock are entitled to receive dividends, if and when
declared by the board of directors out of funds legally available therefore, after payment of
dividends required to be paid on any outstanding shares of preferred stock. Upon liquidation,
holders of shares of common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to the liquidation preferences of any outstanding shares of
preferred stock. Holders of shares of common stock have no conversion, redemption or preemptive
rights. At March 31, 2005 and December 31, 2004, there were 90,000,000 shares of common stock
authorized and 28,739,910 and 28,490,373 issued and outstanding, respectively. (9) Discontinued Operations During 2004, the Company sold substantially all assets of its Texas subsidiary, which
developed and marketed a handheld software product line, for $3,477,500 plus assumed liabilities of
$467,000. The Company received $387,500 in cash, $200,000 held in a short-term escrow fund, which
was released to the Company in March 2005, $415,000 in a short-term receivable and $2,475,000
million in notes receivable in exchange for assets with a book value of $3,235,000. During the
quarter ended March 31, 2005, the Company received an additional $350,000 as contingent
consideration. In connection with this sale of assets, the Company has recorded a deferred gain of
$881,000 as a reduction of the notes receivable. Recognition of the gain will occur when
collectibility of notes receivable is reasonably assured. - 9 -




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The results of operations from the handheld software product line have been presented in the
condensed consolidated statements of operations as discontinued operations. Following is a summary
of the discontinued operations related to the Companys Texas subsidiary that were sold in 2004
(amounts in thousands): Three Months
EndedMarch
31,
2004Revenue
    
    $
    467Cost of revenue
    
    
    141Gross profit
    
    
    326Selling, general and administrative expenses
    
    
    327Total discontinued operations
    
    $
    (1
    )
 (10) Net Income (Loss) per Share The computation of basic and diluted net loss per share follows (in thousands, except per
share amounts): Three Months EndedMarch 31,2005
    
    
    2004Numerator:Loss from continuing operations
    
    $
    (710
    )
    
    $
    (772
    )Discontinued operations
    
    
    
    
    
    
    (1
    )Net loss
    
    $
    (710
    )
    
    $
    (773
    )Denominator:Weighted average number of common shares outstanding  basic and diluted
    
    
    28,601
    
    
    
    27,651Net loss per share  basic and diluted:Continuing operations
    
    $
    (0.02
    )
    
    $
    (0.03
    )Discontinued operations
    
    $
    
    
    
    $
    (0.00
    )Total basic net income (loss) per share
    
    $
    (0.02
    )
    
    $
    (0.03
    )Stock options, warrants and restricted stock units not included in
dilutive net income (loss) per share since antidilutive
    
    
    2,617
    
    
    
    2,505Convertible preferred stock not included in dilutive net income (loss)
per share since antidilutive
    
    
    266
    
    
    
    298
 (11) Concentration of Credit Risk, Significant Customers and Business Segments Financial instruments that potentially subject the Company to concentrations of credit risk
consist principally of cash and trade accounts receivable. The Company places its cash with high
credit quality financial institutions and generally limits the amount of credit exposure to the
amount of FDIC coverage. However, periodically during the year, the Company maintains cash in
financial institutions in excess of the FDIC insurance coverage limit of $100,000. The Company
performs ongoing credit evaluations of its customers financial condition but does not typically
require collateral to support customer receivables. The Company establishes an allowance for
doubtful accounts based upon factors surrounding the credit risk of specific customers, historical
trends and other information. Four customers accounted for 25%, 13%, 12%, and 12% of net sales for the three months ended
March 31, 2005. Three customers accounted for 31%, 11%, and 10% of net sales for the three months
ended March 31, 2004. Three customers accounts receivable balances accounted for 33%, 17% and 12% of net accounts
receivable at March 31, 2005. Three customers accounts receivable balances accounted for 29%, 17%
and 10% of net accounts receivable at December 31, 2004. - 10 -




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Allowance for doubtful accounts was $250,000 and $311,000 at March 31, 2005 and December 31,
2004, respectively. Allowance for sales returns was $196,000 and $183,000 at March 31, 2005 and
December 31, 2004, respectively. Export sales were approximately 15% and 23% of the Companys net sales for the three months
ended March 31, 2005 and 2004, respectively. The principal international markets served by the
Company were Europe and Asia Pacific. The Company is engaged in the business of the sale of computer peripheral products. While the
Companys chief operating decision maker (CODM) evaluates revenues and gross profits based on
products lines, routes to market and geographies, the CODM only evaluates operating results for the
Company taken as a whole. As a result, in accordance with FASB Statement No. 131, Disclosures
about Segments of an Enterprise and Related Information, the Company has determined it has one
operating business segment, the sale of computer peripheral products. The following tables summarize the Companys revenues by product line, as well as its revenues
by geography and the percentages of revenue by route to market (amounts in thousands): Three Months EndedMarch 31,2005
    
    
    2004High power mobile electronic power products
    
    $
    11,783
    
    
    $
    8,851Low power mobile electronic power products
    
    
    1,154
    
    
    
    Handheld products
    
    
    2,805
    
    
    
    2,186Expansion and docking products
    
    
    1,791
    
    
    
    1,958Accessories and other products
    
    
    825
    
    
    
    1,049Total revenues
    
    $
    18,358
    
    
    $
    14,044
 Three Months EndedMarch 31,2005
    
    
    2004North America
    
    $
    15,569
    
    
    $
    10,781Europe
    
    
    1,242
    
    
    
    2,962Asia Pacific
    
    
    1,547
    
    
    
    264All other
    
    
    
    
    
    
    37$
    18,358
    
    
    $
    14,044
 Three Months EndedMarch 31,2005
    
    
    2004OEM and private-label-resellers
    
    
    64
    %
    
    
    70
    %Retailers and distributors
    
    
    24
    %
    
    
    17
    %Other
    
    
    12
    %
    
    
    13
    %100
    %
    
    
    100
    %
 The following table summarizes the Companys profit margins by product lines. Profit margins,
as indicated below, are computed on the basis of direct product cost only, which does not include
overhead cost that is factored into consolidated gross profit margin. Three Months EndedMarch 31,2005
    
    
    2004High power mobile electronic power products
    
    
    34
    %
    
    
    40
    %Low power mobile electronic power products
    
    
    35
    %
    
    
    Handheld products
    
    
    34
    %
    
    
    37
    %Expansion and docking products
    
    
    61
    %
    
    
    58
    %Accessories and other products
    
    
    46
    %
    
    
    47
    %
 (12) Contingencies Holmes Lundt, et al., plaintiffs, and Jason Carnahan, et. al., intervenors, v. Mobility
Electronics, Inc., Portsmith, Inc., Charles R. Mollo, Joan W. Brubacher, and Jeffrey R. Harris,
pending in the District Court of the Fourth Judicial District of Idaho, Ada County, Case No.
CV-0C-0302562D. This lawsuit initially was commenced on April 2, 2003, by Holmes Lundt, former
President and CEO of Mobility Idaho, Inc. (formerly Portsmith, Inc.), the Companys wholly-owned
subsidiary, and his wife, but additional plaintiffs were added, and several of the Companys
officers and directors were added as defendants. The
claims asserted arise substantially out of the transactions surrounding the Companys
acquisition of Portsmith in February 2002. Among other things, plaintiffs and intervenors disputed
that the Company appropriately calculated and paid the earn-out consideration called for by the
Portsmith merger agreement. The court issued an order on April 15, 2004 granting the Companys
motion for partial summary judgment on this pricing issue, meaning the court agreed that the
Company had - 11 -




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properly calculated the pricing of the shares issued by the Company in the Portsmith
merger. The plaintiffs then filed a motion requesting that the court reconsider its order granting
the Companys motion for partial summary judgment on the pricing issue. The court held a hearing
on this motion on October 27, 2004, and issued a ruling on November 18, 2004 denying the
plaintiffs motion, again affirming that the Company appropriately calculated the pricing of the
shares issued by the Company in the Portsmith merger. Subsequently, the Carnahan plaintiffs filed
a second amended complaint with the court on December 13, 2004, the Lundt plaintiffs filed a third
amended complaint with the court on February 14, 2005, and a new set of plaintiffs, also former
stockholders of Portsmith, filed an initial complaint with the court on February 18, 2005 titled
Jess Asla, et. al., plaintiffs v. Mobility Electronics, Inc., Charles Mollo and Joan Brubacher,
pending in the District Court of the Fourth Judicial District of Idaho, Ada County, Case No.
CV-OC-0501139. All three of these complaints assert claims for breach of contract, breach of an
alleged covenant of good faith and fair dealing, unjust enrichment, declaratory judgment, breach of
fiduciary duty, constructive trust, conversion, and interference with prospective economic
advantage. The Lundt plaintiffs also assert claims for breach of Mr. Lundts employment agreement,
and wrongful termination of Mr. Lundt. All three complaints seek monetary damages. On March 17,
2005, the Company filed separate motions to dismiss the complaints brought by the Lundt and
Carnahan plaintiffs. The plaintiffs have not yet responded to the Companys motion to dismiss.
This case is currently set for trial in January 2006. The Company intends to vigorously defend
against the claims as well as pursue its own claims against the plaintiffs. Certain former officers of iGo Corporation are seeking potential indemnification claims
against the Companys wholly owned subsidiary, iGo Direct Corporation, relating to a Securities and
Exchange Commission matter involving such individuals (but not involving the Company) that relates
to matters that arose prior to the Companys acquisition of iGo Corporation in September 2002. The
Company is pursuing coverage under iGos directors and officers liability insurance policy as it
relates to this potential iGo indemnification matter. In the event this coverage is not received,
iGo may be responsible for costs and expenses associated with this matter. The Company is from time to time involved in various legal proceedings incidental to the
conduct of its business. The Company believes that the outcome of all such pending legal
proceedings will not in the aggregate have a material adverse effect on its business, financial
condition, results of operations or liquidity. (13) Subsequent Event On March 31, 2005, the Company, RadioShack and Motorola entered into several agreements to
restructure their existing strategic relationship. The material agreements include a Strategic
Partners Investment Agreement among the parties pursuant to which Motorola and RadioShack each
purchased 689,656 shares of Mobilitys common stock at a price of $7.25 per share, for a total
aggregate issuance by Mobility of 1,379,312 shares of its common stock and total aggregate gross
proceeds to Mobility of $10 million; two warrants for each of RadioShack and Motorola which provide
each with the right to purchase up to an additional 1,190,476 shares of Mobilitys common stock at
a price of $8.40 per share upon the achievement of certain performance results by Mobility,
providing for a potential aggregate issuance by Mobility of an additional 2,380,952 shares of its
common stock; and separate Sales Representative Agreements by and between Mobility and each of
Motorola and RadioShack, pursuant to which the parties will engage in the sale of power products
for low power mobile electronic devices. The $10 million investment was funded, and the purchased
shares were issued by the Company, on April 1, 2005. On May 6, 2005, the Company sold a portfolio of 46 patents and patents pending related to its
Split Bridge and serialized PCI intellectual property for gross proceeds of $13.0 million. Per the
terms of the agreement, the Company will receive a perpetual, non-exclusive license to utilize the
patent portfolio in its ongoing connectivity business. The Company will further continue to retain
all of its patents and patents pending related to its power and other connectivity technologies. 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements contained in this report constitute forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The words believe,
expect, anticipate and other similar statements of expectations identify forward-looking
statements. Forward-looking statements in this report include expectations regarding our
anticipated revenue, gross margin, and related expenses for 2005; the availability of cash and
liquidity; expectations of industry trends; beliefs relating to our distribution capabilities and
brand identity; expectations regarding new product introductions; the anticipated strength of our
patent portfolio; and our expectations regarding the outcome and anticipated impact of various
litigation proceedings in which we are involved. These forward-looking statements are based
largely on managements expectations and involve known and unknown risks, uncertainties and other
factors, which may cause our actual results, performance or achievements, or industry results, to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Factors that could
cause or contribute to such differences include those set forth in other reports that we file with
the Securities and Exchange Commission. Additional factors that could cause actual results to
differ materially from those expressed in these forward-looking statements include, among others,
the following: - 12 -




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
    the loss of, and failure to replace, any significant customers;
    the timing and success of new product introductions;
    product developments, introductions and the pricing of competitors;
    the markets acceptance of our products and technology;
    the timing of substantial customer orders;
    the availability of qualified personnel;
    the performance of suppliers and subcontractors; and
    market demand and industry and general economic or business conditions. In light of these risks and uncertainties, there can be no assurance that the forward-looking
statements contained in this report will prove to be accurate. We undertake no obligation to
publicly update or revise any forward-looking statements, or any facts, events, or circumstances
after the date hereof that may bear upon forward-looking statements. Overview Increased functionality and the ability to access and manage information remotely are driving
the proliferation of mobile electronic devices and applications. The popularity of these devices is
benefiting from reductions in size, weight and cost and improvements in functionality, storage
capacity and reliability. Each of these devices needs to be powered and connected when in the
home, the office, or on the road, and can be accessorized, representing an opportunity for one or
more of our products. We use our proprietary technology to design and develop products that make mobile electronic
devices more efficient and cost effective, thus enabling professionals and consumers more effective
use of these mobile electronic devices and the ability to access information more readily. Our
products include power, handheld, expansion and docking and accessory products. We sell our products to OEMs, private-label resellers, distributors, resellers, retailers and
end-users. We have entered into strategic agreements with each of RadioShack and Motorola to act as
sales representatives for the sale of our power products. We have also entered into a strategic
reseller agreement with Targus to market and distribute our power products on a private-label
basis. We sell to retailers such as RadioShack and through distributors such as Ingram Micro. We
also sell directly to end users through our company websites and provide customized solutions to
corporate customers. Direct sales to OEMs and private-label resellers accounted for approximately
64% of revenue for the three months ended March 31, 2005 and 70% of revenue for the three months
ended March 31, 2004. Sales through retailers and distributors accounted for approximately 24% of
revenue for the three months ended March 31, 2005 and 17% of revenue for the three months ended
March 31, 2004. The balance of our revenue during these periods was derived from direct sales to
end users. In the future, we expect that we will be dependent upon a relatively small number of
customers for a significant portion of our revenue, including most notably RadioShack, Targus, IBM,
Dell, Symbol and Ingram Micro. Our early focus was on the development of DC power adapters and remote peripheral component
interface, or PCI, bus technology and products based on our proprietary Split Bridge®
technology. We invested heavily in our leading edge Split Bridge technology. While we have had some
success with Split Bridge in the corporate portable computer market with sales of universal docking
stations, it became clear in early 2002 that this would not be the substantial opportunity we
originally envisioned. While we continue to produce and sell products and selectively evaluate
opportunities using our Split Bridge technology, we are no longer committing substantial resources
to this technology. In 2002, we repositioned ourselves as a provider of power and connectivity products for mobile
electronic devices, including portable computers, PDAs, mobile phones, smartphones, digital cameras
and MP3 players. Through a combination of acquisitions and internal development, we created a much
broader base of innovative products for use with mobile electronic devices by capitalizing on our
base of technology and distribution channels. Our 2004 development efforts focused significantly on the development of our power adapter
products. In particular, we collaborated with RadioShack and Motorola to develop and market a line
of power adapters, including cigarette lighter adapters, mobile AC adapters, and low power
universal AC/DC adapters, specifically designed for the low power mobile electronic device market.
Each of these devices incorporates our patented tip technology and the combination AC/DC adapter
also allows users to simultaneously charge a second device with our optional DualPower accessory. Our focus in 2005 is to continue to proliferate power products that incorporate our patented
tip technology, for both high power and low power mobile electronic devices. In April 2005, we
entered into new strategic agreements with RadioShack and Motorola under which we have formed a
division specifically focused on the development and sale of low power adapter products. In
connection with these strategic agreements, RadioShack and Motorola will each act as sales
representatives for the sale of our power products. In addition, RadioShack and Motorola have each
made strategic investments in our company to assist us in these efforts. - 13 -




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Our long-term goal is to establish an industry standard for all mobile electronic device power
adapters based on our patented tip technology. We also believe there are long-term growth
opportunities for our handheld products and technology related to the new smartphones that are
being introduced by the major phone manufacturers. Our ability to execute successfully on our near and long-term objectives depends largely upon
the general market acceptance of our tip technology which allows users to charge multiple devices
with a single adapter and our ability to protect this technology through our intellectual property.
Additionally, we must execute on the customer relationships that we have developed and continue to
design, develop, manufacture and market new and innovative technology and products that are
embraced by these customers and the overall market in general. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based
upon our consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation of these financial
statements requires management to make a number of estimates and judgments that affect the reported
amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debt expense,
warranty obligations and contingencies and litigation. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments
and estimates used in the preparation of our consolidated financial statements: Revenue Recognition.Revenue from product sales is recognized upon shipments and transfers of
ownership from us or our contract manufacturers to the customers. Allowances for sales returns and

credits are provided for in the same period the related sales are recorded. Should the actual
return or sales credit rates differ from our estimates, revisions to the estimated allowance for
sales returns and credits may be required. Our recognition of revenue from product sales to distributors, resellers and retailers, or the
distribution channel, is affected by agreements we have giving certain customers rights to return
up to 15% of their prior quarters purchases, provided that they place a new order for equal or
greater dollar value of the amount returned. We also have agreements with certain customers that
allow them to receive credit for subsequent price reductions, or price protection. At the time we
recognize revenue, upon shipment and transfer of ownership, we reduce our measurements of those
sales and the related cost of sales by our estimates of future returns and price protection by
recording an allowance for sales returns in the amount of the difference between the sales price
and the cost of goods sold as a reduction of accounts receivable. Gross sales to the distribution
channel accounted for approximately 24% for the three months ended March 31, 2005 and 17% of
revenue for the three months ended March 31, 2004. For our products, a historical correlation exists between the amount of distribution channel
inventory and the amount of returns that actually occur. The greater the inventory held by our
distributors, the more product returns we expect. For each of our products, we monitor levels of
product sales and inventory at our distributors warehouses and at retailers as part of our effort
to reach an appropriate accounting estimate for returns. In estimating returns, we analyze
historical returns, current inventory in the distribution channel, current economic trends, changes
in consumer demand, introduction of new competing products and acceptance of our products. In recent years, as a result of a combination of the factors described above, we have reduced
our gross sales to reflect our estimated amounts of returns and price protection. It is also
possible that returns could increase rapidly and significantly in the future. Accordingly,
estimating product returns requires significant management judgment. In addition, different return
estimates that we reasonably could have used would have had a material impact on our reported sales
and thus have had a material impact on the presentation of the results of operations. For those
reasons, we believe that the accounting estimate related to product returns and price protection is
a critical accounting estimate. Inventory Valuation.Inventories consist of finished goods and component parts purchased both
partially and fully assembled. We have all normal risks and rewards of our inventory held by
contract manufacturers. Inventories are stated at the lower of cost (first-in, first-out method) or
market. Inventories include material and overhead costs. Overhead costs are allocated to inventory
based on a percentage of material costs. We monitor usage reports to determine if the carrying
value of any items should be adjusted due to lack of demand for the items. We make a downward
adjustment to the value of our inventory for estimated obsolescence or unmarketable inventory equal
to the difference between the cost of inventory and the estimated market value based upon
assumptions about future demand and market conditions. We recorded downward - 14 -




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adjustments to
inventory of $1,000 during the three months ended March 31, 2005 and $118,000 during the three
months ended March 31, 2004. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required. Goodwill and Intangible Assets ValuationUnder Statement of Financial Accounting Standard No.
142, Goodwill and Other Intangible Assets(SFAS 142), we are required to evaluate recorded goodwill
annually, or when events indicate the goodwill may be impaired. The impairment evaluation process
is based on both a discounted future cash flows approach and a market comparable approach. The
discounted cash flows approach uses our estimates of future market growth rates, market share,
revenue and costs, as well as appropriate discount rates. We test goodwill for impairment on an
annual basis as of December 31. We evaluated goodwill for impairment as of December 31, 2004 and
determined that recorded goodwill was not impaired at that time. Recorded goodwill was reduced by
approximately $2.0 million as a result of the sale of the assets of Mobility Texas, Inc. during
2004. During the quarter ended March 31, 2005, no triggering events occurred that would lead us to
believe that goodwill was impaired as of March 31, 2005. We also test our recorded intangible assets whenever events indicate the recorded intangible
assets may be impaired. Our intangible asset impairment approach is based on a discounted cash
flows approach using assumptions noted above. If we fail to achieve our assumed growth rates or assumed gross margin, we may incur charges
for impairment in the future. For these reasons, we believe that the accounting estimates related
to goodwill and intangible assets are critical accounting estimates. Results of Operations The following table presents certain selected consolidated financial data for the periods
indicated expressed as a percentage of total revenue: Three months endedMarch 31,2005
    
    
    2004Revenue
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenue
    
    
    70.2
    %
    
    
    67.2
    %Gross profit
    
    
    29.8
    %
    
    
    32.8
    %Operating expenses:Sales and marketing
    
    
    10.8
    %
    
    
    11.8
    %Research and development
    
    
    7.6
    %
    
    
    10.1
    %General and administrative
    
    
    15.5
    %
    
    
    16.4
    %Total operating expenses
    
    
    33.9
    %
    
    
    38.4
    %Loss from continuing operations
    
    
    -4.1
    %
    
    
    -5.4
    %Other income (expense):Interest, net
    
    
    0.2
    %
    
    
    -0.1
    %Other, net
    
    
    0.0
    %
    
    
    0.2
    %Loss from continuing operations
    
    
    -3.9
    %
    
    
    -5.5
    %Loss from discontinued operations
    
    
    
    
    
    
    0.0
    %Net loss
    
    
    -3.9
    %
    
    
    -5.5
    %
 - 15 -




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##### Table of Contents



Comparison of Three Months Ended March 31, 2005 and 2004 Revenue.Revenue generally consists of sales of products, net of returns and allowances. To
date, our revenues have come predominantly from power adapters, handheld products, expansion and
docking products, and accessories. The following table summarizes the year-over-year comparison of
our revenue for the periods indicated (amounts in thousands): Increase
    
    
    Percentage changefrom same period
    
    
    from the same periodQ1 2005
    
    
    Q1 2004
    
    
    in the prior year
    
    
    in the prior yearRevenue
    
    $
    18,358
    
    
    $
    14,044
    
    
    $
    4,314
    
    
    
    30.7
    %The increase in revenue is primarily due to continued sales growth of our family of
combination AC/DC, AC only and DC only universal power adapters during the three months ended March
31, 2005. As a result, sales of power products increased by $4.1million, or 46.2% to $12.9 million
during the three months ended March 31, 2005 as compared to $8.9 million for the three months ended
March 31, 2004. Sales of all other product lines increased by $228,000 during the three months
ended March 31, 2005 as compared to the three months ended March 31, 2004.Cost of revenue, gross profit and gross margin.Cost of revenue generally consists of costs
associated with components, outsourced manufacturing and in-house labor associated with assembly,
testing, packaging, shipping and quality assurance, depreciation of equipment and indirect
manufacturing costs. Gross profit is the difference between revenue and cost of revenue. Gross
margin is gross profit stated as a percentage of revenue. The following table summarizes the
year-over-year comparison of our cost of revenue, gross profit and gross margin for the periods
indicated (amounts in thousands):Increase (decrease)
    
    
    Percentage changefrom same period
    
    
    from the same periodQ1 2005
    
    
    Q1 2004
    
    

in the prior year
    
    

in the prior yearCost of revenue
    
    $
    12,881
    
    
    $
    9,432
    
    
    $
    3,449
    
    
    
    36.6
    %Gross profit
    
    $
    5,477
    
    
    $
    4,612
    
    
    $
    864
    
    
    
    18.7
    %Gross margin
    
    
    29.8
    %
    
    
    32.8
    %
    
    
    (3.0
    )%
    
    
    (9.1
    )%The increase in cost of revenue was due primarily to the 30.7% volume increase in
revenue, as well as to shifts in customer mix and product mix as compared to the three months ended
March 31, 2004. Cost of revenue as a percentage of revenue increased to 70.2% for the three months
ended March 31, 2005 from 67.2% for the three months ended March 31, 2004, resulting in decreased
gross margin. The decrease in gross profit and corresponding gross margin is primarily
attributable to a shift in product mix. Most significantly, approximately 50% of revenue from
sales of high power adapters for mobile electronic devices was derived from sales of higher gross
margin combination AC/DC adapters for the three months ended March 31, 2005, compared to 75% during
the three months ended March 31, 2004. Also, during the three months ended March 31, 2005, we
discounted sales prices on older-model DVD power adapter products in anticipation of the
introduction of a new version of the adapter, resulting in a profit margin of 17% on sales of these
products.Sales and marketing.Sales and marketing expenses generally consist of salaries, commissions
and other personnel related costs of our sales, marketing and support personnel, advertising,
public relations, promotions, printed media and travel. The following table summarizes the
year-over-year comparison of our sales and marketing expenses for the periods indicated (amounts in
thousands):Increase
    
    
    Percentage changefrom same period
    
    
    from the same periodQ1 2005
    
    
    Q1 2004
    
    
    in the prior year
    
    
    in the prior yearSales and marketing
    
    $
    1,986
    
    
    $
    1,658
    
    
    $
    328
    
    
    
    19.8
    %The increase in sales and marketing expenses primarily resulted from costs associated
with addition of seven sales and marketing personnel and additional marketing costs associated with
the rollout of new power adapter products. As a percentage of revenue, sales and marketing
expenses decreased to 10.8% for the three months ended March 31, 2005 from 11.8% for the three
months ended March 31, 2004.Research and development.Research and development expenses consist primarily of salaries and
personnel-related costs, outside consulting, lab costs and travel related costs of our product
development group. The following table summarizes the year-over-year comparison of our research
and development expenses for the periods indicated (amounts in thousands):Decrease
    
    
    Percentage changefrom same period
    
    
    from the same periodQ1 2005
    
    
    Q1 2004
    
    
    in the prior year
    
    
    in the prior yearResearch and development
    
    $
    1,397
    
    
    $
    1,424
    
    
    $
    (27
    )
    
    
    (1.9
    )%
 - 16 -




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The decrease in research and development expenses primarily resulted from the timing of
expenses incurred in connection with the continued development of our family of power adapter
products. As a percentage of revenue, research and development expenses decreased to 7.6% for the
three months ended March 31, 2005 from 10.1% for the three months ended March 31, 2004. General and administrative.General and administrative expenses consist primarily of salaries
and other personnel-related expenses of our finance, human resources, information systems,
corporate development and other administrative personnel, as well as facilities, professional fees,
depreciation and amortization and related expenses. The following table summarizes the
year-over-year comparison of our general and administrative expenses for the periods indicated
(amounts in thousands): Increase
    
    
    Percentage changefrom same period
    
    
    from the same periodQ1 2005
    
    
    Q1 2004
    
    
    in the prior year
    
    
    in the prior yearGeneral and administrative
    
    $
    2,842
    
    
    $
    2,304
    
    
    $
    538
    
    
    
    23.3
    %
 The increase in general and administrative expenses primarily resulted from non-cash
expenses of $327,000 related to the amortization of equity compensation granted during the three
months ended March 31, 2005. General and administrative expense was also impacted by increased
legal expenses of $228,000, principally in connection with the defense of our intellectual
property, increased expense for amortization of intangibles, primarily patents and trademarks, and
directors fees. General and administrative expenses as a percentage of revenue decreased to 15.5%
for the three months ended March 31, 2005 from 16.4% for the three months ended March 31, 2004. Income taxes.We have incurred losses from inception to date; therefore, no provision for
income taxes was required for the three months ended March 31, 2005 and 2004. Based on historical
operating losses and projections for future taxable income, it is more likely than not that we will
not fully realize the benefits of the net operating loss carryforwards. Thus, we have not recorded
a tax benefit from our net operating loss carryforwards for either of the three months ended March
31, 2005 or March 31, 2004. Operating Outlook In the second quarter of 2005, we expect total revenue to range between $20 million and $21
million, and diluted earnings per share to range between $0.00 and $(0.01). From a long-term
perspective, we believe there are a number of major catalysts that will drive future growth and
profitability:  
    Improved economics in the low power adapter product line resulting from new terms in
place with RadioShack and Motorola;
    Continued growth in sales of portable computer power adapters driven by new products and
new direct and indirect accounts such as Wal-Mart, PC World, Staples and The Sharper Image;
    Continued growth in sales of low power adapters driven by new products, new accounts,
and new distribution partners such as The Carphone Warehouse, Intertan, Apple, the palmOne
and Treo online stores, and RadioShack kiosks within Sprint stores and Sams Club stores;
    The continued rollout of our low power products to wireless carriers, distributors, and
retailers through Motorolas distribution channels;
    The anticipated introduction of jointly-developed power products with Energizer in late 2005 or early 2006; and
    The introduction of new products based on the joint development program with M-Flex in 2006. We expect gross margin to increase throughout 2005 from our 29.8% gross margin for the three
months ended March 31, 2005. We expect gross margin to increase as we anticipate spreading higher
sales volume over relatively fixed operating overhead expenses, particularly as we rollout sales of
low power adapters to many of the new customers indicated above. Also, the continuation of sales
of low power adapters to RadioShack on a net basis, with no related cost of goods sold, will
contribute to increased overall gross margin. We believe that operating expenses will increase by approximately 25-30% during 2005. We
expect sales and marketing expenses to remain relatively consistent, or to increase slightly, as
our anticipated revenue growth continues to come from - 17 -




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distribution channels that do not require significant additional investment in sales and
marketing expenses. Research and development expenses are expected to increase significantly
during 2005 as we continue to aggressively develop new and innovative products. We also expect
general and administrative expenses to increase in 2005 primarily as a result of non-cash expenses
associated with equity compensation issued to directors and employees and expenses associated with
litigation in which we are currently involved. We are currently a party to various legal proceedings. We do not believe that the ultimate
outcome of these legal proceedings will have a material adverse effect on our financial position or
overall trends in results of operations. However, litigation is subject to inherent uncertainties
and unfavorable rulings could occur. If an unfavorable ruling were to occur in any specific
period, such a ruling could have a material adverse impact on the results of operations of that
period, or future periods. As a result of our planned research and development efforts, we expect to further expand our
intellectual property position by aggressively filing for additional patents on an ongoing basis.
A portion of these costs are recorded as research and development expense as incurred and a portion
are capitalized and amortized as general and administrative expense. We may also incur additional
legal and related expenses associated with the defense and enforcement of our intellectual property
portfolio, which could increase our general and administrative expenses beyond those currently
planned. Liquidity and Capital Resources The following table sets forth for the period presented certain consolidated cash flow
information (amounts in thousands): Three Months Ended March 31,2005
    
    
    2004Net cash used in operating activities
    
    $
    (37
    )
    
    $
    (187
    )Net cash used in investing activities
    
    
    (323
    )
    
    
    (319
    )Net cash provided by financing activities
    
    
    580
    
    
    
    120Foreign currency exchange impact on cash flow
    
    
    (1
    )
    
    
    13Net cash provided by (used in) discontinued operations
    
    
    243
    
    
    
    (97
    )Increase (decrease) in cash and cash equivalents
    
    
    462
    
    
    
    (470
    )Cash and cash equivalents at beginning of period
    
    
    12,768
    
    
    
    11,024Cash and cash equivalents at end of period
    
    $
    13,230
    
    
    $
    10,554
 Cash and Cash Flow. Our cash balances are held in the United States and the United
Kingdom. Our intent is that the cash balances will remain in these countries for future growth and
investments and we will meet any liquidity requirements in the United States through ongoing cash
flows, external financing, or both. Our primary use of cash has been to fund our operating losses,
working capital requirements, acquisitions and capital expenditures necessitated by our growth.
The growth of our business has required, and will continue to require, investments in accounts
receivable and inventories. Our primary sources of liquidity have been funds provided by issuances
of equity securities and borrowings under our line of credit.  
    Net cash used in operating activities.Cash was used in operating activities for the
three months ended March 31, 2005 primarily to fund operating losses and working
capital necessary to support our growing revenue base. Specifically, cash was used to
fund accounts receivable growth that resulted from our 30.7% increase in revenues for
the three months ended March 31, 2005 as compared to March 31, 2004. Cash used to fund
growth in inventory was offset by growth in accounts payable. In 2005, we expect to
generate positive cash flow from operating activities as we expect our operating
results to be at or near breakeven with non-cash items and changes in working capital
to have a relatively neutral effect on cash flows. Our consolidated cash flow
operating metrics are as follows: March 31,2005
    
    
    2004Days outstanding in ending accounts receivable (DSOs)
    
    
    82
    
    
    
    78Inventory turns
    
    
    6
    
    
    
    4
  The increase in DSOs at March 31, 2005 compared to March 31, 2004, is primarily due
to the timing of certain shipments to Targus for which payment was received shortly after
March 31, 2005. We expect DSOs to continue to improve during 2005 as we continue to
leverage our key OEM, private-label reseller and retail customer relationships. The
improvement in inventory turns is primarily due to increased sales during the three
months ended March 31, 2005 without a corresponding increase in inventory. We expect to
continue to manage inventory growth during 2005 and we expect inventory turns to continue
to improve as we increase sales volumes in 2005. - 18 -




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
    Net cash used in investing activities.For the three months ended March 31, 2005,
net cash used in investing activities was primarily for the purchase of property and
equipment. We anticipate future investment in capital equipment, primarily for tooling
equipment to be used in the production of new products.
    Net cash provided by financing activities.Net cash provided by financing
activities for the three months ended March 31, 2005 was primarily from net proceeds
from the exercises of stock options and warrants and payment of stock subscription
receivables. Although we expect to generate cash flows from operations sufficient to
support our operations, we may issue additional shares of stock in the future to
generate cash for growth opportunities. Subsequent to March 31, 2005 we raised an
additional $10 million in connection with strategic investments in our common stock by
RadioShack and Motorola. As of March 31, 2005, we had approximately $157 million of federal, foreign and state net
operating loss carryforwards which expire at various dates. We anticipate that the sale of common
stock in our initial public offering coupled with prior sales of common stock will cause an annual
limitation on the use of our net operating loss carryforwards pursuant to the change in ownership
provisions of Section 382 of the Internal Revenue Code of 1986, as amended. This limitation is
expected to have a material effect on the timing of our ability to use the net operating loss
carryforward in the future. Additionally, our ability to use the net operating loss carryforward is
dependent upon our level of future profitability, which currently cannot be determined. Financing Facilities.In July 2004, we amended our $10.0 million bank line of credit. The
line bears interest at prime, interest only payments are due monthly, with final payment of
interest and principal due on July 31, 2006. The line of credit is secured by all of our assets and
subject to financial covenants, with which we were in compliance as of March 31, 2005. We had no
outstanding balance against this line of credit as of March 31, 2005. Under the terms of the line,
we can borrow up to 80% of eligible accounts receivable. At March 31, 2005, our net borrowing base
capacity was approximately $9.4 million. Contractual Obligations.In our day-to-day business activities, we incur certain commitments
to make future payments under contracts such as operating leases and purchase orders. Maturities
under these contracts are set forth in the following table as of March 31, 2005 (amounts in
thousands): Payment due by period2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    More than 5 yearsOperating lease obligations
    
    $
    588
    
    
    $
    688
    
    
    $
    678
    
    
    $
    375
    
    
    $
    
    
    
    $
    Inventory Purchase obligations
    
    
    16,256
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other long-term obligations
    
    
    250
    
    
    
    195
    
    
    
    290
    
    
    
    
    
    
    
    
    
    
    
    Totals
    
    $
    17,094
    
    
    $
    883
    
    
    $
    968
    
    
    $
    375
    
    
    $
    
    
    
    $
    
 Off-Balance Sheet Arrangements.We have no off-balance sheet financing arrangements. Acquisitions and dispositions.In the past we have made acquisitions of other companies to
complement our product offerings and expand our revenue base. In September 2002 we acquired iGo
Corporation through one of our wholly owned subsidiaries, iGo Direct Corporation. Certain former
officers of iGo Corporation are now seeking potential indemnification claims against iGo Direct
Corporation relating to a Securities and Exchange Commission matter involving such individuals (but
not involving us) that relates to matters that arose prior to our acquisition of iGo Corporation.
We are pursuing coverage under iGos directors and officers liability insurance policy for this
potential iGo indemnification matter. In the event this coverage is not received, iGo may be
responsible for costs and expenses associated with this matter. During 2004, we sold the assets of our handheld software product line for approximately $1.0
million in cash and current receivables, and approximately $2.5 million in notes receivable.
Proceeds from the sale exceed book value of the assets sold by approximately $881,000. This gain
has been deferred until collectibility of the notes receivable is reasonably assured. On May 6, 2005, we sold a portfolio of patents and patents pending relating to our Split
Bridge and serialized PCI intellectual property for gross proceeds of $13.0 million. Our future strategy includes the possible acquisition of other businesses to continue to
expand or complement our operations. The magnitude, timing and nature of any future acquisitions
will depend on a number of factors, including the availability of suitable acquisition candidates,
the negotiation of acceptable terms, our financial capabilities and general economic and business
conditions. Financing of future acquisitions would result in the utilization of cash, incurrence
of additional debt, or both. Our future strategy may also include the possible disposition of
assets that are not considered integral to our business, which would likely result in the
generation of cash. - 19 -




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Liquidity Outlook.Based on our projections, we believe that our existing cash and cash
equivalents will be sufficient to meet our working capital and capital expenditure requirements for
at least the next 12 months. If we require additional capital resources to grow our business
internally or to acquire complementary technologies and businesses at any time in the future, we
may use our line of credit or seek to sell additional equity or debt securities. The sale of
additional equity or convertible debt securities would result in more dilution to our stockholders.
In addition, additional capital resources may not be available to us in amounts or on terms that
are acceptable to us. Recent Accounting Pronouncements In December 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123 (Revised 2004) (SFAS 123R), Share-Based Payment, which revised
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation.
This statement supercedes APB Opinion No. 25, Accounting for Stock Issued to Employees. The
revised statement addresses the accounting for share-based payment transactions with employees and
other third parties, eliminates the ability to account for share-based compensation transactions
using APB 25, and requires that the compensation costs relating to such transactions be recognized
in the consolidated statement of operations. On April 15, 2005, the U.S. Securities and Exchange
Commission adopted a new rule amending the compliance dates for SFAS 123R. In accordance with the
new rule, the accounting provisions of SFAS 123R will be effective for the Company in 2006. The
Company will adopt the provisions of SFAS 123R using a modified prospective application. Under
modified prospective application, SFAS 123R, which provides certain changes to the method for
valuing share-based compensation among other changes, will apply to new awards and to awards that
are outstanding on the effective date and are subsequently modified or cancelled. Compensation
expense for outstanding awards for which the vesting period has not been completed as of the
effective date will be recognized over the remaining vesting period using the compensation cost
calculated for pro forma disclosure purposes under SFAS 123R. In December 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 153 (SFAS 153), Exchanges of Nonmonetary Assetsan amendment of APB
Opinion No. 29. SFAS 153 amends the guidance in APB Opinion No. 29, Accounting for Nonmonetary
Transactions, based on the principle that exchanges of nonmonetary assets should be measured based
on the fair value of the assets exchanged. The guidance in Opinion 29, however, included certain
exceptions to that principle. SFAS 153 amends Opinion 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change significantly as a result
of the exchange. The provisions of SFAS 153 are effective for nonmonetary asset exchanges occurring
in fiscal periods beginning after June 15, 2005. The provisions of SFAS 153 are not expected to
have a material effect on the Companys consolidated financial statements. In November 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 151 (SFAS 151), Inventory Costsan amendment of ARB No. 43, Chapter 4.
SFAS 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). This statement requires that those items be recognized as current-period
charges. In addition, SFAS 151 requires that allocation of fixed production overheads to the costs
of conversion be based on the normal capacity of the production facilities. The provisions of SFAS
151 are effective for inventory costs incurred during fiscal years beginning after June 15, 2005.
The provisions of SFAS 151 are not expected to have a material effect on the Companys consolidated
financial statements. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain market risks in the ordinary course of our business. These risks
result primarily from changes in foreign currency exchange rates and interest rates. In addition,
our international operations are subject to risks related to differing economic conditions, changes
in political climate, differing tax structures and other regulations and restrictions. To date we have not utilized derivative financial instruments or derivative commodity
instruments. We do not expect to employ these or other strategies to hedge market risk in the
foreseeable future. We invest our cash in money market funds, which are subject to minimal credit
and market risk. We believe that the market risks associated with these financial instruments are
immaterial. See Liquidity and Capital Resources for further discussion of our financing facilities and
capital structure. Market risk, calculated as the potential change in fair value of our cash and
cash equivalents and line of credit resulting from a hypothetical 1.0% (100 basis point) change in
interest rates, was not material at March 31, 2005. 
 - 20 -




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ITEM 4. CONTROLS AND PROCEDURES Based upon their evaluations of the effectiveness of the design and operation of our
disclosure controls and procedures as of the end of the period covered by this report, the Chief
Executive Officer and Chief Financial Officer have concluded that our disclosure controls and
procedures were adequate and designed to ensure that information required to be disclosed by us in
this report is recorded, processed, summarized and reported by the filing date of this report, and
that such information is accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. There has been no change in our internal control over financial reporting during the
most recent fiscal quarter that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting. 
 PART II: OTHER INFORMATION 
 ITEM 1. LEGAL PROCEEDINGS Holmes Lundt, et al., plaintiffs, and Jason Carnahan, et. al., intervenors, v. Mobility
Electronics, Inc., Portsmith, Inc., Charles R. Mollo, Joan W. Brubacher, and Jeffrey R. Harris,
pending in the District Court of the Fourth Judicial District of Idaho, Ada County, Case No.
CV-0C-0302562D. This lawsuit initially was commenced on April 2, 2003, by Holmes Lundt, former
President and CEO of Mobility Idaho, Inc. (formerly Portsmith, Inc.), the Companys wholly-owned
subsidiary, and his wife, but additional plaintiffs were added, and several of the Companys
officers and directors were added as defendants. The claims asserted arise substantially out of the
transactions surrounding the Companys acquisition of Portsmith in February 2002. Among other
things, plaintiffs and intervenors disputed that the Company appropriately calculated and paid the
earn-out consideration called for by the Portsmith merger agreement. The court issued an order on
April 15, 2004 granting the Companys motion for partial summary judgment on this pricing issue,
meaning the court agreed that the Company had properly calculated the pricing of the shares issued
by the Company in the Portsmith merger. The plaintiffs then filed a motion requesting that the
court reconsider its order granting the Companys motion for partial summary judgment on the
pricing issue. The court held a hearing on this motion on October 27, 2004, and issued a ruling on
November 18, 2004 denying the plaintiffs motion, again affirming that the Company appropriately
calculated the pricing of the shares issued by the Company in the Portsmith merger. Subsequently,
the Carnahan plaintiffs filed a second amended complaint with the court on December 13, 2004, the
Lundt plaintiffs filed a third amended complaint with the court on February 14, 2005, and a new set
of plaintiffs, also former stockholders of Portsmith, filed an initial complaint with the court on
February 18, 2005 titled Jess Asla, et. al., plaintiffs v. Mobility Electronics, Inc., Charles
Mollo and Joan Brubacher, pending in the District Court of the Fourth Judicial District of Idaho,
Ada County, Case No. CV-OC-0501139. All three of these complaints assert claims for breach of
contract, breach of an alleged covenant of good faith and fair dealing, unjust enrichment,
declaratory judgment, breach of fiduciary duty, constructive trust, conversion, and interference
with prospective economic advantage. The Lundt plaintiffs also assert claims for breach of Mr.
Lundts employment agreement, and wrongful termination of Mr. Lundt. All three complaints seek
monetary damages. On March 17, 2005, the Company filed separate motions to dismiss the complaints
brought by the Lundt and Carnahan plaintiffs. The plaintiffs have not yet responded to the
Companys motion to dismiss. This case is currently set for trial in January 2006. The Company
intends to vigorously defend against the claims as well as pursue its own claims against the
plaintiffs. On May 7, 2004, the Company filed separate complaints with the International Trade Commission
(the ITC) in Washington, DC and the United States District Court for the Eastern District of
Texas, Case No. 5:04-CV-103, against Formosa Electronic Industries, Inc., Micro Innovations Corp.
and SPS, Inc. On July 13, 2004, the Company filed an amended complaint with the United States
District Court for the Eastern District of Texas to add Sakar International Inc. and Worldwide
Marketing Ltd. as parties to the federal district court action. With the exception of Formosa, the
Company subsequently reached favorable settlements with each of the other defendants and dismissed
them from both the ITC and federal district court actions. In addition, the Company subsequently
and voluntarily terminated its ITC action against Formosa and is instead aggressively pursuing all
of its claims against Formosa through the federal district court action in the United States
District Court for the Eastern District of Texas. The Companys current second amended complaint
filed with the court in January 2005, titled Mobility Electronics, Inc. v. Formosa Electronic
Industries Inc., Case No. 504-CV-103, pending in the United States District Court for the Eastern
District of Texas, alleges infringement of one or more of U.S. Patent Nos. 5,347,211, 6,064,177,
6,650,560, 6,700,808, and 6,775,163 owned by the Company, as well as misappropriation of trade
secrets, conversion, violation of the Texas Theft Liability Act, conspiracy, and fraudulent
concealment. The Company has also filed an application for preliminary injunction against Formosa.
The Company, in its complaint, seeks a permanent injunction against further use of its trade
secrets and further infringement of these patents, as well as compensatory and treble damages.
Formosa, in January 2005, filed a motion to dismiss. A hearing on Mobilitys application for
preliminary injunction is expected to occur in late May or June 2005 and a trial has tentatively
been scheduled for November 2005. The Company intends to vigorously pursue its claims in this
action. On August 26, 2004, the Company and iGo Direct Corporation, the Companys wholly owned
subsidiary, filed a complaint against Twin City Fire Insurance Co. in the United States District
Court for the District of Nevada, Case No. CV-N-04-0460-HDM-RAM. The complaint alleges several
causes of action in connection with Twin Citys refusal to cover, under director and liability
insurance policies issued to iGo by Twin City, fees and expenses incurred in connection with the
defense - 21 -




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of certain former officers of iGo relating to a Securities and Exchange Commission matter that
arose prior to the Companys acquisition of iGo Corporation in September 2002. Twin City filed an
answer to this complaint on September 20, 2004. On January 10, 2005, the Company filed a motion
for summary judgment seeking an order from the court that, as a matter of law, Twin City breached,
and continues to breach, its obligations under the director and liability insurance policies. Twin
City, on February 17, 2005, filed a motion for continuance of, and opposition to, the Companys
motion for summary judgment. On March 17, 2005, the Company filed a reply motion in support of its
motion for summary judgment and opposition to Twin Citys motion for continuance. On April 11,
2005 and April 29, 2005, Twin City filed reply motions in support of its motion for continuance.
The Company and iGo Direct Corporation intend to vigorously pursue their claims in this action. We are from time to time involved in various legal proceedings other than those set forth
above incidental to the conduct of our business. We believe that the outcome of all such pending
legal proceedings will not in the aggregate have a material adverse effect on our business,
financial condition, results of operations or liquidity. 
 ITEM 6. EXHIBITS The Exhibit Index and required Exhibits are immediately following the Signatures to this Form
10-Q are filed as part of, or hereby incorporated by reference into, this Form 10-Q. - 22 -




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MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES 
 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MOBILITY ELECTRONICS, INC. Dated: May 10, 2005
    
    By:
    
    /s/ Charles R. MolloCharles R. MolloPresident, Chief Executive Officer
and Chairman of the Board(Principal Executive Officer)By:
    
    /s/ Joan W. BrubacherJoan W. BrubacherExecutive Vice President and Chief Financial Officer
and Authorized Officer of Registrant(Principal Financial and Accounting Officer)
 - 23 -




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EXHIBIT INDEX ExhibitNumber
    
    Description of Document4.1
    
    $25 Million Threshold Warrant to Purchase Shares of Common Stock issued to Motorola, Inc., dated
as of March 31, 2005(1)4.2
    
    $50 Million Threshold Warrant to Purchase Shares of Common Stock issued to Motorola, Inc., dated
as of March 31, 2005(1)4.3
    
    $25 Million Threshold Warrant to Purchase Shares of Common Stock issued to RadioShack Corporation,
dated as of March 31, 2005(1)4.4
    
    $50 Million Threshold Warrant to Purchase Shares of Common Stock issued to RadioShack Corporation,
dated as of March 31, 2005(1)4.5
    
    Strategic Partners Investment Agreement by and among Mobility Electronics, Inc., RadioShack
Corporation and Motorola, Inc., dated as of March 31, 2005(1)10.1
    
    Form of Mobility Electronics, Inc. Omnibus Long-Term Incentive Plan Restricted Stock Unit Award
Agreement*10.2
    
    Form of Mobility Electronics, Inc. Non-Employee Director Long-Term Incentive Plan Restricted Stock
Unit Award Agreement*10.3
    
    Patent Purchase Agreement between Mobility Electronics, Inc. and Tao Logic Systems LLC* +31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002*
   *  Filed herewith +
  Schedules and similar attachments have been omitted from this agreement. The registrant will
furnish supplementally a copy of any omitted schedule or attachment to the Commission upon request. (1)
 Previously filed as an exhibit to Current Report on Form 8-K filed on April 5, 2005. - 24 -