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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(Mark One)


x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 2003

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 or Former Address, 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 x NO o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

YES o NO x

At November 3, 2003, there were 27,234,803 shares of the Registrants Common
Stock outstanding.



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TABLE OF CONTENTS



|                              |                                                                                               |                                                 |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  |  |  |  | 
|PART I: FINANCIAL INFORMATION
|                              | Item 1. Financial Statements:                                                                
|                              |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS          
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                              | Item 4. Controls and Procedures                                                              
|PART II:OTHER INFORMATION    
|                              | Item 1. Legal Proceedings                                                                    
|                              | Item 2. Changes in Securities and Use of Proceeds                                            
|                              | Item 3. Defaults Upon Senior Securities                                                      
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                              | Item 5. Other Information                                                                    
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                   
|EXHIBIT INDEX                
|EX-4.14                      
|EX-10.1                      
|Ex-10.2                      
|Ex-10.3                      
|Ex-31.1                      
|Ex-31.2                      
|EX-32.1                      



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##### Table of Contents



MOBILITY ELECTRONICS, INC.
FORM 10-Q

TABLE OF CONTENTS

PAGE NO.PART I: FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets
as of September 30, 2003 and December 31, 2002
    
    3Condensed Consolidated Statements of Operations
for the Three and Nine Months Ended September 30, 2003
and 2002
    
    
    4Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2003 and 2002
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19PART II: OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    19Item 2. Changes in Securities and Use of Proceeds
    
    
    19Item 3. Defaults Upon Senior Securities
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits and Reports on Form 8-K
    
    
    20SIGNATURES
    
    
    22INDEX TO EXHIBITS
    
    
    23


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PART I: FINANCIAL INFORMATION




Item 1.     Financial Statements:

MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands)

September 30,
    
    December 31,2003
    
    2002(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    11,513
    
    
    $
    3,166Accounts receivable, net
    
    
    13,124
    
    
    
    7,245Inventories
    
    
    8,700
    
    
    
    4,414Prepaid expenses and other current assets
    
    
    249
    
    
    
    176Total current assets
    
    
    33,586
    
    
    
    15,001Property and equipment, net
    
    
    2,342
    
    
    
    2,585Goodwill
    
    
    12,896
    
    
    
    8,265Intangible assets, net
    
    
    2,069
    
    
    
    2,071Other assets
    
    
    365
    
    
    
    447Total assets
    
    $
    51,258
    
    
    $
    28,369LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    9,637
    
    
    $
    6,036Accrued expenses and other current liabilities
    
    
    2,248
    
    
    
    2,990Current installments of long-term debt
    
    
    
    
    
    
    330Total current liabilities
    
    
    11,885
    
    
    
    9,356Long-term debt, less current portion
    
    
    
    
    
    
    1,385Total liabilities
    
    
    11,885
    
    
    
    10,741Stockholders equity:Convertible preferred stock
    
    
    5
    
    
    
    6Common stock
    
    
    271
    
    
    
    203Additional paid-in capital
    
    
    143,779
    
    
    
    119,444Accumulated deficit
    
    
    (103,426
    )
    
    
    (100,493
    )Stock subscription notes and deferred compensation
    
    
    (1,372
    )
    
    
    (1,574
    )Accumulated other comprehensive income
    
    
    116
    
    
    
    42Total stockholders equity
    
    
    39,373
    
    
    
    17,628Total liabilities and stockholders equity
    
    $
    51,258
    
    
    $
    28,369


See accompanying notes to unaudited condensed consolidated financial statements.

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MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts)(Unaudited)

Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2003
    
    2002
    
    2003
    
    2002Revenue
    
    $
    13,094
    
    
    $
    7,431
    
    
    $
    38,184
    
    
    $
    21,036Cost of revenue
    
    
    8,262
    
    
    
    5,760
    
    
    
    24,533
    
    
    
    15,985Gross profit
    
    
    4,832
    
    
    
    1,671
    
    
    
    13,651
    
    
    
    5,051Operating expenses:Sales and marketing
    
    
    1,738
    
    
    
    1,841
    
    
    
    5,459
    
    
    
    4,988Research and development
    
    
    1,281
    
    
    
    2,261
    
    
    
    3,528
    
    
    
    4,673General and administrative
    
    
    2,189
    
    
    
    2,249
    
    
    
    7,579
    
    
    
    5,697Total operating expenses
    
    
    5,208
    
    
    
    6,351
    
    
    
    16,566
    
    
    
    15,358Loss from operations
    
    
    (376
    )
    
    
    (4,680
    )
    
    
    (2,915
    )
    
    
    (10,307
    )Other income (expense):Interest income (expense), net
    
    
    (31
    )
    
    
    176
    
    
    
    (20
    )
    
    
    577Other income (expense), net
    
    
    1
    
    
    
    16
    
    
    
    22
    
    
    
    (63
    )Loss before cumulative effect of change
in accounting principle
    
    
    (406
    )
    
    
    (4,488
    )
    
    
    (2,913
    )
    
    
    (9,793
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,627
    )Net loss
    
    
    (406
    )
    
    
    (4,488
    )
    
    
    (2,913
    )
    
    
    (15,420
    )Beneficial conversion value of convertible preferred
stock
    
    
    
    
    
    
    
    
    
    
    (445
    )
    
    
    Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    Net loss attributable to common stockholders
    
    $
    (406
    )
    
    $
    (4,488
    )
    
    $
    (3,378
    )
    
    $
    (15,420
    )Net loss per share  basic and diluted:Loss before cumulative effect of change
in accounting principle
    
    $
    (0.02
    )
    
    $
    (0.26
    )
    
    $
    (0.15
    )
    
    $
    (0.61
    )Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.35
    )Basic and diluted
    
    $
    (0.02
    )
    
    $
    (0.26
    )
    
    $
    (0.15
    )
    
    $
    (0.96
    )Weighted average common shares outstanding:Basic and diluted
    
    
    24,709
    
    
    
    17,159
    
    
    
    22,143
    
    
    
    16,125


See accompanying notes to condensed consolidated financial statements.

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MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)

Nine months endedSeptember 30,2003
    
    2002Cash flows from operating activities:Net loss
    
    $
    (2,913
    )
    
    $
    (15,420
    )Adjustments to reconcile net loss to net cash used
in operating activities:Goodwill impairment
    
    
    
    
    
    
    5,627In-process research and development
    
    
    
    
    
    
    620Write-down of tooling equipment
    
    
    
    
    
    
    400Provision for accounts receivable
    
    
    425
    
    
    
    46Depreciation and amortization
    
    
    1,293
    
    
    
    866Amortization of deferred compensation
    
    
    90
    
    
    
    314Non-cash compensation
    
    
    68
    
    
    
    51Loss on disposal of fixed assets
    
    
    29
    
    
    
    41Changes in operating assets and liabilities, net of
acquisition activities:Accounts receivable
    
    
    (5,693
    )
    
    
    1,698Inventories
    
    
    (4,286
    )
    
    
    (56
    )Prepaid expenses and other assets
    
    
    (855
    )
    
    
    (342
    )Accounts payable
    
    
    4,413
    
    
    
    1,371Accrued expenses and other current liabilities
    
    
    (329
    )
    
    
    (300
    )Net cash used in operating activities
    
    
    (7,758
    )
    
    
    (5,084
    )Cash flows from investing activities, net of acquisition activities:Purchase of property and equipment
    
    
    (623
    )
    
    
    (333
    )Proceeds from sale of fixed assets
    
    
    4
    
    
    
    25Proceeds from sale of investment
    
    
    
    
    
    
    1,870Cash received in connection with acquisitions
    
    
    
    
    
    
    1,073Cash paid for acquisitions, net of cash received
    
    
    
    
    
    
    (6,145
    )Net cash used in investing activities
    
    
    (619
    )
    
    
    (3,510
    )Cash flows from financing activities:Repayment of long-term debt
    
    
    (82
    )
    
    
    (1
    )Net proceeds from issuance of convertible preferred stock
    
    
    1,185
    
    
    
    Net proceeds from issuance of common stock
    
    
    13,852
    
    
    
    (7
    )Net proceeds from exercise of options and warrants
    
    
    1,204
    
    
    
    Net proceeds from stock subscription receivables
    
    
    511
    
    
    
    Dividends paid on convertible preferred stock
    
    
    (20
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    16,650
    
    
    
    (8
    )Effects of exchange rate changes on cash and cash equivalents
    
    
    74
    
    
    
    51Net increase (decrease) in cash and cash equivalents
    
    
    8,347
    
    
    
    (8,551
    )Cash and cash equivalents, beginning of period
    
    
    3,166
    
    
    
    14,753Cash and cash equivalents, end of period
    
    $
    11,513
    
    
    $
    6,202


See accompanying notes to condensed consolidated financial statements.

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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), Portsmith, Inc.
(Portsmith), which includes Portsmith from February 1, 2002 (date of
acquisition) and Mobility 2001 Limited, Cutting Edge Software, Inc. (Cutting
Edge Software) from August 20, 2002 (date of acquisition), and iGo Direct
Corporation (iGo) from September 3, 2002 (date of acquisition). 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, 2002 included in the
Companys Form 10-K, filed with the SEC. The results of operations for the
three and nine months ended September 30, 2003 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.

The Company believes its critical accounting policies, consisting of
revenue recognition, inventory valuation and goodwill, 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
|-- |  | ------------------------

The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations in accounting for its employee stock options and to adopt the
disclosure only alternative treatment under Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (Statement 123).
Statement 123 requires the use of fair value option valuation models that were
not developed for use in valuing employee stock options. Under Statement 123,
deferred compensation is recorded for the excess of the fair value of the stock
on the date of the option grant, over the exercise price of the option. The
deferred compensation is amortized over the vesting period of the option.

Had the Company determined compensation cost based on the fair value at
the grant date for its stock options under Statement 123, 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 September 30,
    
    Nine months Ended September 30,2003
    
    2002
    
    2003
    
    2002Net loss applicable to common stockholders:As reported
    
    $
    (406
    )
    
    $
    (4,488
    )
    
    $
    (3,378
    )
    
    $
    (15,420
    )Total stock-based employee compensation expense
determined under fair-value-based method for all
rewards, net of tax
    
    
    (149
    )
    
    
    (194
    )
    
    
    (405
    )
    
    
    (779
    )Pro forma
    
    $
    (555
    )
    
    $
    (4,682
    )
    
    $
    (3,783
    )
    
    $
    (16,199
    )Net loss per share  basic and diluted:As reported
    
    $
    (0.02
    )
    
    $
    (0.26
    )
    
    $
    (0.15
    )
    
    $
    (0.96
    )Pro forma
    
    $
    (0.02
    )
    
    $
    (0.27
    )
    
    $
    (0.17
    )
    
    $
    (1.00
    )


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The value of stock-based employee compensation expense for the three and
nine months ended September 30, 2003 and 2002 was determined using the
Black-Scholes method with the following assumptions: (1) expected life of 2.5
years, (2) risk-free interest rate of 3.0%, (3) dividend yield of 0%, and (4)
volatility of 100%.



|3. |  | GOODWILL
|-- |  | --------

On January 1, 2002, the Company adopted Statement 142, Goodwill and Other
Intangible Assets. Under this accounting standard, goodwill and intangible
assets with indefinite lives are no longer subject to amortization but are
tested for impairment at least annually. Amortization is still required for
identifiable intangible assets with finite lives.

Statement 142 also requires the completion of the transitional impairment
test of the recorded goodwill as of the date this accounting standard is
adopted. The Company completed the first step of the transitional impairment
test during the year ended December 31, 2002, noting an indication of
impairment associated with the recorded goodwill balance of $5,627,000 as of
January 1, 2002. As part of the transitional impairment test, the Company
identified one reporting unit within its one operating business segment. The
Company then completed the second step of the transitional impairment test.
The Company recorded a goodwill impairment loss of $5,627,000 as a result of
completing its transitional impairment test, and recognized this loss as the
effect of a change in accounting principle as of January 1, 2002 in accordance
with Statement 142. This impairment loss was determined based on a comparison
of the fair value of the Company with its carrying amount, including goodwill
that resulted from prior business acquisitions. The results of the comparison
and loss measurement indicated that goodwill existing at the date of adoption
of this accounting standard was fully impaired.

As a result of the acquisitions of Portsmith, Cutting Edge Software and
iGo during 2002, the Company recorded additional goodwill of $8,265,000.

The changes in the carrying amount of goodwill follows (amounts in
thousands):

Reported balance at December 31, 2002
    
    $
    8,265Earn-out consideration paid in connection with Portsmith acquisition
    
    
    5,385Miscellaneous direct acquisition costs
    
    
    467Adjustment to Portsmith opening balance sheet
    
    
    (202
    )Adjustment to iGo opening balance sheet
    
    
    (1,019
    )Reported balance at September 30, 2003
    
    $
    12,896




|4. |  | INTANGIBLE ASSETS
|-- |  | -----------------

Intangible assets consist of the following at September 30, 2003 and
December 31, 2002 (amounts in thousands):

September 30, 2003
    
    December 31, 2002Average
    
    Gross
    
    
    
    
    
    Net
    
    Gross
    
    
    
    
    
    NetLife
    
    Intangible
    
    Accumulated
    
    Intangible
    
    Intangible
    
    Accumulated
    
    Intangible(Years)
    
    Assets
    
    Amortization
    
    Assets
    
    Assets
    
    Amortization
    
    AssetsAmortized intangible assets:License fees
    
    
    4
    
    
    $
    995
    
    
    $
    (448
    )
    
    $
    547
    
    
    $
    811
    
    
    $
    (272
    )
    
    $
    539Patents and trademarks
    
    
    3
    
    
    
    1,147
    
    
    
    (622
    )
    
    
    525
    
    
    
    868
    
    
    
    (477
    )
    
    
    391Non-compete agreements
    
    
    2
    
    
    
    159
    
    
    
    (108
    )
    
    
    51
    
    
    
    159
    
    
    
    (87
    )
    
    
    72Software
    
    
    5
    
    
    
    700
    
    
    
    (159
    )
    
    
    541
    
    
    
    675
    
    
    
    (45
    )
    
    
    630Trade names
    
    
    10
    
    
    
    378
    
    
    
    (41
    )
    
    
    337
    
    
    
    378
    
    
    
    (13
    )
    
    
    365Customer list
    
    
    10
    
    
    
    76
    
    
    
    (8
    )
    
    
    68
    
    
    
    76
    
    
    
    (2
    )
    
    
    74Total
    
    
    
    
    
    $
    3,455
    
    
    $
    (1,386
    )
    
    $
    2,069
    
    
    $
    2,967
    
    
    $
    (896
    )
    
    $
    2,071


Aggregate amortization expense for identifiable intangible assets totaled
$177,000 and $490,000 for the three and nine months ended September 30, 2003.
Aggregate amortization expense for identifiable intangible assets totaled
$145,000 and $364,000 for the three and nine months ended September 30, 2002.



|5. |  | 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 plus 2.0% (6.0% at September 30,
2003), interest only payments are due monthly, with final payment of interest
and principal due on July 31, 2004. The line of credit is secured by all assets
of the Company. The Company has no balance outstanding under the line of credit
at September 30, 2003. The line of credit is subject to financial covenants.
The Company is currently in compliance with the covenants.

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|6. |  | LONG-TERM DEBT
|-- |  | --------------

Long-term debt consists of the following (amounts in thousands):

September 30,
    
    December 31,2003
    
    2002Note payable
    
    $
    
    
    
    $
    990Estimate of Portsmith earn-out
    
    
    
    
    
    
    725
    
    
    
    1,715Less current portion
    
    
    
    
    
    
    330Long-term debt, less current portion
    
    $
    
    
    
    $
    1,385


In connection with the settlement of a lawsuit, the Company entered into a
$990,000 convertible subordinated promissory note bearing interest at four
percent per year, payable in quarterly installments of principal of $82,500
beginning in January 2003, through December 2005. The outstanding principal of
the promissory note could be converted at any time into shares of the Companys
common stock, at a conversion price of $3.00 per share. In June 2003, the
note payable was converted to common stock.

In connection with its acquisition of Portsmith, the Company recorded a
long-term liability in the amount of $725,000 as an estimate of a component of
earn-out, as this component was determinable and issuable as of December 31,
2002. The earn-out was made up of two components. The first was calculated
using a formula based on Portsmiths revenue and net income performance,
adjusted for certain items, for the year 2002. The second component of the
earn-out was based on a percentage of the fair market value of Portsmith as a
stand-alone entity as of December 31, 2002, as mutually agreed upon by the
Company and the former Portsmith stockholders. In the event the parties were
not able to come to an agreement, the fair market value will be determined by
an Independent Financial Expert as defined in the agreement.

Earn-out payments could be made in cash or shares of stock, at the
Companys discretion, with total shares of common stock issued to former
Portsmith stockholders not to exceed 3,023,863 shares. If the earn-out was
paid in shares of common stock, the number of shares to be issued was to be
based on the earn-out in dollars, divided by the market price of the Companys
common stock as of the date that the earn-out is finally determined.

On August 13, 2003, an Independent Financial Expert concluded its
valuation of Portsmith as a stand-alone entity as of December 31, 2002. Based
on the results of that valuation, the Company determined it owed $6,594,000 to
former Portsmith stockholders in aggregate earn-out consideration. The
aggregate consideration was reduced by $484,000, representing an amount owed by
a former Portsmith stockholder to the Company, resulting in total net earn-out
consideration of $6,110,000. The Company determined it would pay the earn-out
in shares of Company common stock. Accordingly, the Company determined that it
should issue to former Portsmith stockholders an additional 535,751 shares of
common stock, bringing the total number of shares issued to former Portsmith
stockholders in payment of earn-out consideration to 1,042,664 shares.



|7. |  | 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-1.09240 as of September 30, 2003. At September 30, 2003 and December 31,
2002, there were 15,000,000 shares of Series C preferred stock authorized and
448,530 and 550,212 issued and outstanding, respectively. During the period
from December 31, 2002 through September 30, 2003, 101,682 shares of Series C
preferred stock were converted into 112,368 shares of common stock at an
average rate of 1-to-1.10509.

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

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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.

In January 2003, the Company issued and sold 865,051 shares of newly
designated Series E preferred stock, par value $0.01 per share (Series E
Stock), at a purchase price of $0.7225 per share, and 729,407 shares of newly
designated Series F preferred stock, par value $0.01 per share (Series F
Stock), at a purchase price of $0.85 per share. In connection with this sale,
the Company also issued warrants to purchase an aggregate of 559,084 shares of
common stock, par value $0.01 per share, of the Company. The warrants issued to
holders of Series E Stock permitted them to purchase an aggregate of 216,263
shares of common stock, at an exercise price of $0.867 per share (the Series E
Warrants), and the warrants issued to holders of Series F Stock permitted them
to purchase an aggregate of 342,821 shares of common stock, at an exercise
price of $1.02 per share (the Series F Warrants). The Series E Stock was
purchased by a single non-affiliated investor, while the Series F Stock was
purchased by certain officers and directors of the Company and their
affiliates.

At the date of issuance of the Series E and Series F shares, a non-cash
beneficial conversion adjustment of $445,000, which represents a 15% discount
to the fair value of the common stock at the date of issuance of the Series E
shares and an estimate of the fair value of the Series E and Series F Warrants
using the Black-Scholes model, was recorded in the 2003 condensed consolidated
financial statements as an increase and decrease to additional paid-in capital.
The beneficial conversion adjustment resulted in an increase to net loss
attributable to common stockholders of $445,000, or $0.02 per common share.
The beneficial conversion adjustment was recorded upon the issuance of the
Series E and Series F convertible preferred stock, as the Series E and Series F
shares were immediately convertible upon issuance.

The following assumptions were used to determine the Black-Scholes value
of the Series E and Series F Warrants: (1) expected life of 3 years, (2)
risk-free interest rate of 3.0%, (3) dividend yield of 0%, and (4) volatility
of 100%.

As the closing price of the Companys common stock was greater than or
equal to $2.00 per share for ten consecutive trading days on June 6, 2003, all
issued and outstanding shares of Series E and Series F preferred stock
automatically converted into 1,594,458 shares of common stock at a conversion
rate of 1-to-1. Dividends on Series E and F preferred stock of $20,000 were
accrued at June 6, 2003. No shares of Series E and Series F preferred stock
were outstanding at September 30, 2003. All of the Series E Warrants have been
exercised and converted into 216,263 shares of common stock. No Series E
Warrants were outstanding at September 30, 2003. As of September 30, 2003,
there were 315,174 Series F Warrants outstanding and exercisable for 315,174
shares of common stock.

(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 therefor, 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 September 30, 2003 and December 31, 2002, there were 90,000,000 shares of
common stock authorized and 27,142,104 and 20,347,876 issued and outstanding,
respectively.

From April 2003 through August 2003, the Company issued an aggregate of
1,042,664 shares of common stock to former Portsmith stockholders, representing
payment of a $6,110,000 earn-out obligation (see Note 6).

Effective May 29, 2003, the Company issued 416,582 shares of common stock
for settlement of $650,000 of accounts payable to a vendor.

In July 2003, the Company issued 302,500 shares of common stock in
connection with the conversion of the outstanding principal balance of $908,000
of a convertible subordinated promissory note at $3.00 per share (see Note 6).

In August 2003, the Company issued 2,400,000 shares of common stock in
connection with a private offering of common stock, valued at $6.25 per share.
This offering resulted in net proceeds to the Company of $13,792,000.

Effective August 19, 2003, the Company issued 30,000 shares of common
stock to Chesapeake Ventures, L.P. in connection with its services as a
consultant, valued at $6.50 per share.

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|8. |  | NET LOSS PER SHARE
|-- |  | ------------------

The computation of basic and diluted net loss per share follows (in
thousands, except per share amounts):

Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2003
    
    2002
    
    2003
    
    2002Loss before cumulative effect of change in accounting
Principle
    
    $
    (406
    )
    
    $
    (4,488
    )
    
    $
    (2,913
    )
    
    $
    (9,793
    )Cumulative effect of change in accounting
Principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,627
    )Net loss
    
    
    (406
    )
    
    
    (4,488
    )
    
    
    (2,913
    )
    
    
    (15,420
    )Beneficial conversion value of convertible preferred
stock
    
    
    
    
    
    
    
    
    
    
    (445
    )
    
    
    Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    Net loss attributable to common stockholders
    
    $
    (406
    )
    
    $
    (4,488
    )
    
    $
    (3,378
    )
    
    $
    (15,420
    )Weighted average common shares outstanding  basic
and diluted
    
    
    24,709
    
    
    
    17,159
    
    
    
    22,143
    
    
    
    16,125Net loss per share  basic and diluted:Loss before cumulative effect of change in accounting
Principle
    
    $
    (0.02
    )
    
    $
    (0.26
    )
    
    $
    (0.15
    )
    
    $
    (0.61
    )Cumulative effect of change in accounting
Principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.35
    )Basic and diluted loss per share
    
    $
    (0.02
    )
    
    $
    (0.26
    )
    
    $
    (0.15
    )
    
    $
    (0.96
    )Stock options and warrants not included in diluted
EPS since antidilutive
    
    
    2,625
    
    
    
    2,859
    
    
    
    2,625
    
    
    
    2,859Convertible preferred stock not included in diluted
EPS since antidilutive
    
    
    449
    
    
    
    554
    
    
    
    449
    
    
    
    554




|9. |  | 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 24%, 16%, 15% and 10% of net sales for the
three months ended September 30, 2003. Two customers accounted for 24% and 18%
of net sales for the three months ended September 30, 2002. Four customers
accounted for 15%, 12%, 11% and 10% of net sales for the nine months ended
September 30, 2003. Two customers accounted for 22% and 20% of net sales for
the nine months ended September 30, 2002.

Five customers accounts receivable balances accounted for 21%, 17%, 16%,
12% and 10% of net accounts receivable at September 30, 2003. Three customers
accounts receivable balances accounted for 32%, 19% and 11% of net accounts
receivable at December 31, 2002.

Export sales were approximately 12% of the Companys net sales for the
three months ended September 30, 2003 and 2002, respectively. Export sales were
approximately 13% and 17% of the Companys net sales for the nine months ended
September 30, 2003 and 2002, respectively. The principal international market
served by the Company was Europe.

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.

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The following tables summarize the Companys revenues by product line, as
well as its revenues by geography (in thousands).

Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2003
    
    2002
    
    2003
    
    2002Power products
    
    $
    8,183
    
    
    $
    2,091
    
    
    $
    19,486
    
    
    $
    5,165Handheld hardware products
    
    
    912
    
    
    
    2,375
    
    
    
    7,832
    
    
    
    6,224Handheld software products
    
    
    297
    
    
    
    152
    
    
    
    801
    
    
    
    152Expansion and docking products
    
    
    1,436
    
    
    
    1,538
    
    
    
    5,221
    
    
    
    4,895Accessories and other products
    
    
    1,686
    
    
    
    1,142
    
    
    
    3,958
    
    
    
    4,052Technology transfer fees
    
    
    580
    
    
    
    133
    
    
    
    886
    
    
    
    548Total revenues
    
    $
    13,094
    
    
    $
    7,431
    
    
    $
    38,184
    
    
    $
    21,036


Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2003
    
    2002
    
    2003
    
    2002United States
    
    $
    11,579
    
    
    $
    6,534
    
    
    $
    33,074
    
    
    $
    17,452Europe
    
    
    1,283
    
    
    
    793
    
    
    
    4,500
    
    
    
    3,288All other
    
    
    232
    
    
    
    104
    
    
    
    610
    
    
    
    296$
    13,094
    
    
    $
    7,431
    
    
    $
    38,184
    
    
    $
    21,036




|10. |  | SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
|--- |  | --------------------------------------------------------------------

The following table summarizes the Companys non-cash investing and
financing activities (in thousands).

Nine Months EndedSeptember 30,2003
    
    2002Common stock issued in connection with acquisitions, net
    
    $
    5,907
    
    
    $
    5,026Issuance of shares of common stock for settlement of accounts payable
    
    $
    812
    
    
    $
    Issuance of shares of common stock for settlement of long-term debt
    
    $
    908
    
    
    $
    Stock subscription receivable
    
    $
    195
    
    
    $
    280Issuance of shares of common stock for compensation
    
    $
    43
    
    
    $
    Warrants issued in connection with the amendment of line-of-credit
    
    $
    25
    
    
    $
    




|11. |  | CONTINGENCIES AND LITIGATION
|--- |  | ----------------------------

The Company is involved in various claims and legal actions in the
ordinary course of business. In the opinion of management, based on
consultation with legal counsel, the ultimate disposition of these matters will
not have a material adverse effect on the Companys financial position, results
of operations or liquidity. Accordingly, the accompanying
condensed consolidated financial statements do not include a provision for
losses, if any, that might result from the ultimate disposition of these
matters.




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 the temporary impact
of the decrease in sales of handheld connectivity products and subsequent
return of sales to historical levels in fiscal year 2004; future increases in
gross margin percentages; projections of increases in future revenue; the
availability of cash and liquidity for the next twelve months; expectations of
industry trends; beliefs relating to the Companys distribution capabilities
and brand identity; and expectations regarding new product introductions. These
forward-looking statements are based largely on managements expectations and
involve known and unknown risks, uncertainties and other factors, which may
cause the actual results, performance or achievements of the Company, or
industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Certain risks that could cause results to differ materially from
managements expectations are described below in this report under the heading
Risk Factors. Additional factors that could cause actual results to differ
materially from those expressed in these forward-looking statements include,
among others, the following:



| |  | loss of, and failure to replace, any significant customers;
|- |  | -----------------------------------------------------------



| |  | timing and success of new product introductions;
|- |  | ------------------------------------------------



| |  | product developments, introductions and pricing of competitors;
|- |  | ---------------------------------------------------------------

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| |  | timing of substantial customer orders;
|- |  | --------------------------------------



| |  | availability of qualified personnel;
|- |  | ------------------------------------



| |  | 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.

The following discussion and analysis of our financial condition and
results of operations should be read together with our condensed consolidated
financial statements and notes thereto contained in this report.

Overview

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 greater utilization of their mobile devices and the
ability to access information more readily. Our products include power,
handheld connectivity and PCI expansion products.

We sell our products to original equipment manufacturers, or OEMs,
distributors, resellers, retailers and end-users. A substantial portion of our
revenue is concentrated among a selected number of OEMs, including IBM and
Symbol Technologies, Inc. We expect that we will continue to be dependent upon
a select number of OEMs and resellers for a significant portion of our revenue
in future periods.

We recently entered into strategic reseller agreements with Fellowes, Inc.
and Kensington Technology Group, Inc. to market and distribute our power
products on a private label basis. We sell to retailers including CompUSA Inc.
and RadioShack Corporation and through distributors such as Ingram Micro Inc.
and Tech Data Corporation. Direct sales to OEMs and resellers accounted for
approximately 42% and 69% of revenue for the nine months ended September 30,
2003 and September 30, 2002, respectively. Sales through retailers and
distributors accounted for approximately 45% and 11% of revenue for the nine
months ended September 30, 2003 and September 30, 2002, respectively. We also
sell directly to end users through our company websites.

We derive a portion of our revenue outside the United States, principally
in Europe. International sales accounted for approximately 13% and 17% of our
revenue for the nine months ended September 30, 2003 and September 30, 2002,
respectively. International sales can be denominated in currencies other than
U.S. dollars, which can have a foreign currency exchange impact on our
financial statements.

Company Background

We were formed as a limited liability company under the laws of the State
of Delaware in May 1995, and were converted to a Delaware corporation by a
merger effected in August 1996, in which we were the surviving entity. We
changed our name from Electronics Accessory Specialists International, Inc. to
Mobility Electronics, Inc. on July 23, 1998.

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 Split
Bridge technology. While we have had some success with Split Bridge in the
corporate notebook 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 notebook computers, personal
digital assistants, or PDAs, mobile phones, smartphones, digital cameras and
DVD 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. We focus on power, handheld connectivity and PCI expansion products.

Acquisitions

We have made selective acquisitions to enable us to consolidate our
leadership position in our existing markets. We intend to continue to evaluate
selective acquisition opportunities to expand our capability and product
offerings.

In September 2002, we acquired iGo Corporation, now iGo Direct
Corporation, a leading computer solutions provider. iGo distributes its
products through distributors and directly through its catalog and Internet
channels and is a well-recognized brand name in the portable computer power and
accessories market. We believe the acquisition of iGo broadens our revenue base
and strengthens our distribution capabilities and brand identity.

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In August 2002, we acquired Cutting Edge Software, Inc., a leading
developer and provider of software solutions for handheld computing devices.
Cutting Edge Software currently provides software that allows users of Palm and
Symbian operating systems devices to utilize popular word processing,
spreadsheet and presentation programs. Cutting Edge Software has also developed
software that allows users to remotely access files stored on a desktop
computer from a wireless PDA or smartphone. This acquisition, in conjunction
with the Portsmith acquisition, enhances our product and service offering
within the rapidly growing wireless handheld computing device market.

In February 2002, we acquired Portsmith, Inc., an industry leader in
providing connectivity solutions for handheld computing devices. This
acquisition provided us with an entrance into the rapidly growing handheld
computing device market. Portsmith currently provides a range of Ethernet,
modem and other connectivity products for handheld devices such as Palm,
Handspring Visor, HP iPAQ and other mainstream PDA products, and intends to
undertake a number of other product development programs that expand on these
solutions.

In October 2000, we acquired all of the assets of Mesa Ridge Technologies,
Inc. d/b/a Magma, a privately held company. Magma provides a range of PCI
expansion products for the computer industry which utilize traditional PCI
bridge technology and Magmas patented expansion technology. The acquisition of
Magma solidified our position as a market leader in the PCI expansion business
by providing products, distribution channels, key customers, and additional
resources that can leverage our Split Bridge technology and accelerate our
growth and development in this market segment.

Description of Operating Accounts

Revenue.Revenue generally consists of sales of product, net of returns
and allowances. To date, our revenue has come predominantly from AC and DC
power adapters, handheld connectivity products, expansion products, and
accessories.

Cost of Revenue.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.

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.

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.

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.

Interest, Net.Interest, net consists primarily of interest earned on our
cash balances and short-term investments, net of interest expense. Our interest
expense relates to our line of credit entered into in October 2002.

Results of Operations

The following table sets forth certain consolidated financial data for the
periods indicated expressed as a percentage of total revenue for the periods
indicated:

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Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,Unaudited
    
    Unaudited2003
    
    2002
    
    2003
    
    2002Revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenue
    
    
    63.1
    %
    
    
    77.5
    %
    
    
    64.2
    %
    
    
    76.0
    %Gross profit
    
    
    36.9
    %
    
    
    22.5
    %
    
    
    35.8
    %
    
    
    24.0
    %Operating expenses:Sales and marketing
    
    
    13.3
    %
    
    
    24.8
    %
    
    
    14.3
    %
    
    
    23.7
    %Research and development
    
    
    9.8
    %
    
    
    30.4
    %
    
    
    9.2
    %
    
    
    22.2
    %General and administrative
    
    
    16.7
    %
    
    
    30.3
    %
    
    
    19.9
    %
    
    
    27.1
    %Total operating expenses
    
    
    39.8
    %
    
    
    85.5
    %
    
    
    43.4
    %
    
    
    73.0
    %Loss from operations
    
    
    -2.9
    %
    
    
    -63.0
    %
    
    
    -7.6
    %
    
    
    -49.0
    %Other income (expense):Interest, net
    
    
    -0.2
    %
    
    
    2.4
    %
    
    
    -0.1
    %
    
    
    2.7
    %Other, net
    
    
    0.0
    %
    
    
    0.2
    %
    
    
    0.1
    %
    
    
    -0.3
    %Loss before cumulative effect of change in accounting principle
    
    
    -3.1
    %
    
    
    -60.4
    %
    
    
    -7.6
    %
    
    
    -46.6
    %Cumulative effect of change in accounting principle
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    -26.7
    %Net loss
    
    
    -3.1
    %
    
    
    -60.4
    %
    
    
    -7.6
    %
    
    
    -73.3
    %Beneficial conversion costs of preferred stock
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    -1.2
    %
    
    
    0.0
    %Net loss attributable to common stockholders
    
    
    -3.1
    %
    
    
    -60.4
    %
    
    
    -8.8
    %
    
    
    -73.3
    %


Three Months Ended September 30, 2003 Compared to Three Months Ended September
30, 2002

Revenue.Revenue increased by $5.7 million, or 76.2%, to $13.1 million
for the three months ended September 30, 2003 from $7.4 million for the three
months ended September 30, 2002. The increase in revenue is primarily due to
the introduction of our new JuiceTM combination AC/DC universal power adapter
in January 2003. As a result, sales of power products increased by $6.1
million, or 291.3%, to $8.2 million during the three months ended September 30,
2003 as compared to $2.1 million for the three months ended September 30, 2002.
Sales of handheld connectivity products decreased by approximately $1.3
million, or 52.2%, to $1.2 million during the three months ended September 30,
2003 as compared to $2.5 million for the same period in the prior year. The
decrease in sales of handheld connectivity products is due primarily to
inventory reduction initiatives by our major customer for this product line.
We expect this sales decrease to be temporary and we anticipate that sales of
handheld connectivity products will return to historical levels in 2004. We
also expect increases in sales of power products in 2004.

Cost of revenue.Cost of revenue increased by $2.5 million, or 43.4%, to
$8.3 million for the three months ended September 30, 2003 from $5.8 million
for the three months ended September 30, 2002. The increase in cost of revenue
was due primarily to the 76.2% increase in revenue. Cost of revenue as a
percentage of revenue decreased to 63.1% for the three months ended September
30, 2003 from 77.5% for the three months ended September 30, 2002. The
reduction in cost of revenue as a percentage of revenue is primarily
attributable to the spreading of fixed overhead expenses over increases in
sales volumes and higher product margins as a result of the increase in sales
of new power products during the three months ended September 30, 2003.

Gross profit.Gross profit increased by $3.2 million, or 189.2%, to $4.8
million for the three months ended September 30, 2003, from $1.7 million for
the three months ended September 30, 2002. Gross margins increased to 36.9%
for the three months ended September 30, 2003 from 22.5% for the three months
ended September 30, 2002. The increase in gross margins was primarily due to
the introduction of our new Juice combination AC/DC universal power adapter in
January 2003. Gross profit was also positively impacted by the spreading of
fixed overhead expenses over increases in sales volumes. We expect gross
margins to increase in future periods due to projected future revenue increases
and as a result of the introduction of new, higher margin products.

Sales and marketing.Sales and marketing expenses decreased by $103,000,
or 5.6% to $1.7 million for the three months ended September 30, 2003 from $1.8
million for the three months ended September 30, 2002. The decrease was
primarily as a result of decreases in European selling and marketing
activities. As a percentage of revenue, sales and

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marketing expenses decreased to 13.3% for the three months ended September
30, 2003 from 24.8% for the three months ended September 30, 2002.

Research and development.Research and development expenses decreased by
$1.0 million, or 43.3%, to $1.3 million for the three months ended September
30, 2003 from $2.3 million for the three months ended September 30, 2002.
Research and development expenses as a percentage of revenue decreased to 9.8%
for the three months ended September 30, 2003 from 30.4% for the three months
ended September 30, 2002. For the three months ended September 30, 2002,
research and development expense included $620,000 of in-process research and
development recorded in connection with the acquisition of Cutting Edge
Software and $400,000 associated with the write-down of certain tooling
equipment. Excluding these charges, research and development expense for the
three months ended September 30, 2002 was $1.2 million. We anticipate
increases in research and development expenses during 2003 as we continue to
develop new power and handheld connectivity products.

General and administrative.General and administrative expenses were $2.2
million for the three months ended September 30, 2003 and September 30, 2002,
respectively. General and administrative expenses as a percentage of revenue
decreased to 16.7% for the three months ended September 30, 2003 from 30.3% for
the three months ended September 30, 2002. We expect general and
administrative expenses as a percent of revenue to continue to decrease as we
expect revenues to increase in 2004.

Interest, net.Interest, net decreased by $207,000 to $(31,000) for the
three months ended September 30, 2003 from $176,000 for the three months ended
September 30, 2002. Interest income was $37,000 and $177,000 for the three
months ended September 30, 2003 and 2002, respectively. Interest expense was
$68,000 and $1,000 for the three months ended September 30, 2003 and 2002,
respectively. The decrease was primarily due to the reduction in average cash
balance and interest paid on borrowings during the three months ended September
30, 2003 compared to the three months ended September 30, 2002.

Income taxes.We have incurred losses from inception to date; therefore,
no provision for income taxes was required for the three months ended September
30, 2003 and 2002. 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 the three
months ended September 30, 2003.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended September
30, 2002

Revenue.Revenue increased by $17.2 million, or 81.5%, to $38.2 million
for the nine months ended September 30, 2003 from $21.0 million for the nine
months ended September 30, 2002. The increase in revenue is primarily due to
the introduction of our new Juice combination AC/DC universal power adapter in
January 2003. As a result, sales of power products increased by $14.3 million,
or 277.3%, to $19.5 million during the nine months ended September 30, 2003 as
compared to $5.2 million for the nine months ended September 30, 2002. Sales
of handheld connectivity products increased by approximately $2.3 million, or
35.4%, to $8.6 million during the nine months ended September 30, 2003 as
compared to $6.4 million for the same period in the prior year. The increase
in handheld products revenue was due, primarily, to an increase in sales to our
major customer during the nine months ended September 30, 2003 as compared to
the nine months ended September 30, 2002.

Cost of revenue.Cost of revenue increased by $8.5 million, or 53.5%, to
$24.5 million for the nine months ended September 30, 2003 from $16.0 million
for the nine months ended September 30, 2002. The increase in cost of revenue
was due primarily to the 81.5% increase in revenue. Cost of revenue as a
percentage of revenue decreased to 64.2% for the nine months ended September
30, 2003 from 76.0% for the nine months ended September 30, 2002. The reduction
in cost of revenue as a percentage of revenue is primarily attributable to the
spreading of fixed overhead expenses over increases in sales volumes and higher
product margins as a result of the introduction of new products during the
first nine months of 2003.

Gross profit.Gross profit increased by $8.6 million, or 170.3%, to $13.7
million for the nine months ended September 30, 2003, from $5.1 million for the
nine months ended September 30, 2002. Gross margins increased to 35.8% for the
nine months ended September 30, 2003 from 24.0% for the nine months ended
September 30, 2002. The increase in gross margins was primarily due to the
introduction of our new Juice combination AC/DC universal power adapter in
January 2003. Gross profit was also positively impacted by the spreading of
fixed overhead expenses over increases in sales volumes. We expect gross
margins to increase in future periods due to projected future revenue increases
and due to increasing sales of new, higher margin products.

Sales and marketing.Sales and marketing expenses increased by $472,000,
or 9.5% to $5.5 million for the nine months ended September 30, 2003 from $5.0
million for the nine months ended September 30, 2002. The increase was
primarily the result of increases in selling and marketing programs resulting
from our acquisitions of Portsmith, Cutting Edge Software and iGo. As a
percentage of revenue, sales and marketing expenses decreased to 14.3% for the
nine months ended September 30, 2003 from 23.7% for the nine months ended
September 30, 2002.

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Research and development.Research and development expenses decreased by
$1.2 million, or 24.5%, to $3.5 million for the nine months ended September 30,
2003 from $4.7 million for the nine months ended September 30, 2002. Research
and development expenses as a percentage of revenue decreased to 9.2% for the
nine months ended September 30, 2003 from 22.2% for the nine months ended
September 30, 2002. For the nine months ended September 30, 2002, research and
development expense included $620,000 of in-process research and development
recorded in connection with the acquisition of Cutting Edge Software and
$400,000 associated with the write-down of certain tooling equipment.
Excluding these charges, research and development expense for the nine months
ended September 30, 2002 was $3.7 million. Compared to this amount, research
and development expenses decreased by $125,000, or 3.4%, for the nine months
ended September 30, 2003. We anticipate increases in research and development
expenses during 2003 as we continue to develop new power and handheld
connectivity products.

General and administrative.General and administrative expenses increased
by $1.9 million, or 33.0%, to $7.6 million for the nine months ended September
30, 2003 from $5.7 million for the nine months ended September 30, 2002. The
increase is due primarily to the increase in infrastructure relating to our
acquisitions of Portsmith, Cutting Edge Software and iGo during 2002. The
increase was also due to costs incurred in connection with a litigation with
Comarco, Inc. of approximately $750,000 and an increase of approximately
$400,000 in bad debt expense. General and administrative expenses as a
percentage of revenue decreased to 19.8% for the nine months ended September
30, 2003 from 27.1% for the nine months ended September 30, 2002.

Interest, net.Interest, net decreased by $597,000 to $(20,000) for the
nine months ended September 30, 2003 from $577,000 for the nine months ended
September 30, 2002. Interest income was $103,000 and $578,000 for the nine
months ended September 30, 2003 and 2002, respectively. Interest expense was
$123,000 and $1,000 for the nine months ended September 30, 2003 and 2002,
respectively. The decrease was primarily due to the reduction in average cash
balance and interest paid on borrowings during the nine months ended September
30, 2003 compared to the nine months ended September 30, 2002.

Income taxes.We have incurred losses from inception to date; therefore,
no provision for income taxes was required for the nine months ended September
30, 2003 and 2002. 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 the nine
months ended September 30, 2003.

Liquidity and Capital Resources

We have funded our operations primarily through equity and debt financing,
as the cash required to fund our operating activities has exceeded cash
generated by revenue. As of September 30, 2003, we had approximately $11.5
million in cash and cash equivalents and $21.7 million in working capital. As
of December 31, 2002, we had approximately $3.2 million in cash and cash
equivalents and $5.6 million in working capital.

Net cash used in operating activities was $7.8 million and $5.1 million
for the nine months ended September 30, 2003 and 2002, respectively. Cash used
in operating activities for the nine months ended September 30, 2003 was
primarily attributed to our net loss and increases in accounts receivable of
$5.7 million and inventories of $4.3 million. Cash used in operating activities
was offset, in part, by an increase in accounts payable of $4.4 million,
non-cash expenses such as depreciation of property and equipment and
amortization of intangible assets of $1.3 million, and other non-cash expenses
of $612,000.

Net cash used in investing activities was $619,000 and $3.5 million for
the nine months ended September 30, 2003 and 2002, respectively. For the nine
months ended September 30, 2003, net cash used in investing activities was
primarily for the purchase of property and equipment.

Net cash provided by financing activities was $16.7 million for the nine
months ended September 30, 2003. Net cash used in financing activities was
$8,000 for the nine months ended September 30, 2002. Net cash provided by
financing activities for the nine months ended September 30, 2003 was primarily
from net proceeds from the sale of Series E and Series F preferred stock of
$1.2 million and net proceeds from the issuance of common stock of $15 million.

As of September 30, 2003, we had approximately $88 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 cannot be determined.

In October 2002, we entered into a $10.0 million bank line of credit. The
line bears interest at prime plus 2.0%, which was 6.0% as of September 30,
2003, interest only payments due monthly, with final payment of interest and
principal due on July 31, 2004. The line of credit is secured by all of our
assets and subject to financial covenants, with which we were in

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compliance as of September 30, 2003. We had no outstanding balance
against this line of credit as of September 30, 2003. Under the terms of the
line, we can borrow up to 80% of eligible accounts receivable. At September 30,
2003, our net borrowing base capacity was $6.5 million.

In January 2003, we raised $1.2 million from an offering of preferred stock.
Specifically, we issued and sold 865,051 shares of newly designated Series E
preferred stock, par value $0.01 per share, or Series E Stock, at a purchase
price of $0.7225 per share, and 729,407 shares of newly designated Series F
preferred stock, par value $0.01 per share, or Series F Stock, at a purchase
price of $0.85 per share. In connection with this sale, we also issued warrants
to purchase an aggregate of 559,084 shares of our common stock. The warrants
issued to holders of Series E Stock permitted them to purchase an aggregate of
216,263 shares of common stock, at an exercise price of $0.867 per share and
the warrants issued to holders of Series F Stock permitted them to purchase an
aggregate of 342,821 shares of common stock, at an exercise price of $1.02 per
share. The Series E Stock was purchased by a single non-affiliated investor,
while the Series F Stock was purchased by certain of our officers, directors
and affiliates including Charles Mollo, Jeffrey Harris, Larry Carr, Joan
Brubacher, Timothy Jeffries, Janice Breeze-Mollo, Oxley LLLP, New Vistas
Investment Corporation and New Horizons Enterprises, Inc. On June 6, 2003, all
outstanding shares of Series E Stock and Series F Stock were converted into
common stock at a ratio of 1-to-1. All of the Series E Warrants have been
exercised and converted into 216,263 shares of common stock, and no Series E
Warrants were outstanding at September 30, 2003. As of September 30, 2003,
there were 315,174 Series F Warrants outstanding and exercisable for 315,174
shares of common stock.

In August 2003, we completed a private placement with a group of
institutional investors in which we sold 2.4 million shares of common stock at
$6.25 per share, resulting in gross proceeds of $15 million before fees and
expenses of approximately $1.2 million. This offering resulted in net proceeds
of approximately $13.8 million.

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 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. Financing arrangements, however,
may not be available to us, or may be available in amounts or on terms that are
not acceptable to us.

Inflation

We do not believe inflation has a material effect on our operations.

Recent Accounting Pronouncements

On May 15, 2003, the Financial Accounting Standards Board issued Statement
No. 150, Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity.The Statement requires issuers to classify as
liabilities (or assets in some circumstance) three classes of freestanding
financial instruments that embody obligations for the issuer. Generally, the
Statement is effective for financial instruments entered into or modified after
May 31, 2003 and is otherwise effective at the beginning of the first interim
period beginning after September 15, 2003. We adopted the provisions of the
Statement on July 1, 2003. There was no impact from the adoption of this
statement.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (Interpretation 46). Interpretation 46 clarifies
the application of Accounting Research Bulletin No. 51, Consolidated Financial
Statements, to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. The recognition and
measurement provisions of Interpretation 46 are effective for newly created
variable interest entities formed after January 31, 2003, and for existing
variable interest entities, on the first interim or annual reporting period
beginning after September 15, 2003. We adopted the provisions of Interpretation
46 for existing variable interest entities on July 1, 2003. As of September
30, 2003, we do not have any variable interest entities.

In November 2002, the Emerging Issues Task Force (EITF) reached a
consensus on Issue No. 00-21, Revenue Arrangements with Multiple
Deliverables. EITF Issue No. 00-21 provides guidance on how to account for
arrangements that involve the delivery or performance of multiple products,
services and/or rights to use assets. The provisions of EITF Issue No. 00-21
will apply to revenue arrangements entered into in periods beginning after June
15, 2003. We have adopted the provisions of EITF Issue No. 00-21 on July 1,
2003, which did not have a material effect on our consolidated financial
statements.

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

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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 our product at any time after
purchase. 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. We also reduce our measurements of
accounts receivable by the estimated profit margins associated with returns,
calculated using sales price less cost of sales. Gross sales to the
distribution channel accounted for approximately 45% for the nine months ended
September 30, 2003 and 12% of revenue for the year ended December 31, 2002.

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. If actual market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required.

Goodwill.In conjunction with the implementation of Statement of Financial
Accounting Standard No. 142, Goodwill and Other Intangible Assets, SFAS No.
142, we performed a goodwill impairment evaluation as of January 1, 2002
relating to the goodwill that was recorded at December 31, 2001. Based on the
results of that impairment evaluation, we determined the recorded goodwill at
December 31, 2001 of approximately $5.6 million was fully impaired. We recorded
the impairment write-down as a cumulative effect of change in accounting
principle in accordance with the new accounting standard.

As a result of our acquisitions of Portsmith, Cutting Edge Software and
iGo during 2002, we have recorded additional goodwill of approximately $12.9
million as of September 30, 2003. In accordance with SFAS No. 142, we evaluated
the newly acquired goodwill for impairment and determined that the recorded
goodwill was not impaired as of December 31, 2002.

The impairment evaluation process is based on both a discounted future
cash flow approach and a market comparable approach. The discounted cash flow
approach uses our estimates of future market growth rates, market share,
revenue and costs, as well as appropriate discount rates. If we fail to achieve
our assumed revenue growth rates or assumed gross margin, we may incur charges
for impairment of goodwill in the future. For these reasons, we believe that
the accounting estimate related to goodwill impairment is a critical accounting
estimate.

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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 line of credit resulting from a
hypothetical 1.0% (100 basis point) change in interest rates, was not material
at September 30, 2003.




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. v. Mobility Electronics, Inc., Portsmith, Inc.,
Charles R. Mollo, Joan W. Brubacher, Jeffrey R. Harris, Robert P. Dilworth,
Larry M. Carr, William O. Hunt, Jerre L. Stead and Darryl Baker, pending in the
District Court of the Fourth Judicial District of Idaho, Ada County, Cause No.
CV-0C-0302562D. This lawsuit initially was commenced on April 2, 2003, by
Holmes Lundt, former President and CEO of Portsmith, Inc., our wholly-owned
subsidiary, and his wife, but additional plaintiffs were added, and several of
our officers and directors were added as defendants. The lawsuit arises out of
our acquisition of Portsmith from the plaintiffs and others, and also arises
out of our termination of Mr. Lundt. The plaintiffs are alleging breach of
contract, fraud, securities fraud, and breach of an alleged covenant of good
faith and fair dealing, conspiracy, and are seeking monetary damages and/or
rescission of the Portsmith merger agreement. Among other things, Mr. Lundt has
disputed our use of the $5.86 per share market value that we used to calculate
the shares of common stock to be issued to the former Portsmith stockholders in
connection with the payment of earn-out consideration. The plaintiffs obtained
an ex parte temporary restraining order on April 3, 2003, which order, in
essence, reinstated Mr. Lundt to his former positions with Portsmith and
restrained us from participating in the management of Portsmith, and the
plaintiffs contemporaneously applied for a preliminary injunction. At an
evidentiary hearing held on April 9, 2003, the Court dissolved the temporary
restraining order and denied plaintiffs request for a preliminary injunction.
We have filed an answer in the lawsuit and have also filed counterclaims and
affirmative defenses against the plaintiffs. We recently filed a motion to
compel arbitration of part of the dispute and to stay the remainder,
which motion was denied. We intend to vigorously defend against the
claims as well as pursue our own claims against the plaintiffs, either in
arbitration or in court.

As previously reported in our Report on Form 10-Q for the quarter ended
June 30, 2003, we settled disputes with Comarco Wireless Technologies, Inc. on
July 12, 2003.

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 2.     Changes in Securities and Use of Proceeds

Effective July 1, 2003, we issued 302,500 shares of common stock to the
Liggitt Family Trust in connection with the conversion of a $907,500
convertible subordinated promissory note that was originally issued in November
2002 in connection with the settlement of a lawsuit. Effective August 19,
2003, we issued 30,000 shares of common stock to Chesapeake Ventures, L.P. in
connection with its services as a consultant for an aggregate offering price of
$195,000, payable through a $300 cash payment and a promissory note in the
amount of $194,700. Effective August 21, 2003, we issued 535,751 shares of

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common stock to the former stockholders of Portsmith in connection with
the payment of earn-out consideration relating to the February 2002 acquisition
of Portsmith. Effective August 29, 2003, we issued 2,400,000 shares of common
stock to a group of institutional investors for an aggregate offering price of
$15 million in connection with a private offering of our common stock.

The issuances set forth above were made in reliance upon the exemptions
from registration requirements of the Securities Act of 1933, as amended (the
Securities Act), contained in Section 4(2) on the basis that such
transactions did not involve a public offering and were made without general
solicitation or advertising. When appropriate, we determined that the
purchasers of securities described above were sophisticated investors who had
the financial ability to assume the risk of their investment in our securities
and acquired such securities for their own account and not with a view to any
distribution thereof to the public. The certificates evidencing the securities
bear legends stating that the securities are not to be offered, sold or
transferred other than pursuant to an effective registration statement under
the Securities Act or an exemption from such registration requirements.

We are currently restricted from paying dividends in accordance with the
terms of our bank line of credit.




Item 3.     Defaults Upon Senior Securities

None




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

None




Item 5.     Other Information

None




Item 6.     Exhibits and Reports on Form 8-K

(a) Exhibits:

ExhibitNumber
    
    Description of Document3.1
    
    Certificate of Incorporation of the Company (1)3.2
    
    Articles of Amendment to the Certificate of Incorporation of the Company dated as of September 17, 1997 (3)3.3
    
    Articles of Amendment to the Certificate of Incorporation of the Company dated as of September 10, 1997 (1)3.4
    
    Articles of Amendment to the Certificate of Incorporation of the Company dated as of July 20, 1998 (1)3.5
    
    Articles of Amendment to the Certificate of Incorporation of the Company dated as of February 3, 2000 (1)3.6
    
    Articles of Amendment to the Certificate of Incorporation of the Company dated as of March 31, 2000 (3)3.7
    
    Certificate of Designations, Preferences, Rights and Limitations of Series C Preferred Stock (1)3.8
    
    Certificate of the Designations, Preferences, Rights and Limitations of Series D Preferred Stock (2)3.9
    
    Certificate of the Designations, Preferences, Rights and Limitations of Series E Preferred Stock of
Mobility Electronics, Inc. (6)3.10
    
    Certificate of the Designations, Preferences, Rights and Limitations of Series F Preferred Stock of
Mobility Electronics, Inc. (6)3.11
    
    Certificate of Designations, Preferences, Rights and Limitations of Series G Junior Participating
Preferred Stock of Mobility Electronics, Inc. (7)3.12
    
    Amended Bylaws of the Company (1)4.1
    
    Specimen of Common Stock Certificate (4)4.2
    
    Form of Warrant to Purchase Shares of common stock of the Company used with the Series C Preferred Stock
Private Placements (3)**4.3
    
    Form of Series C Preferred Stock Purchase Agreement used in 1998 and 1999 Private Placements (1)**4.4
    
    Form of Series C Preferred Stock and Warrant Purchase Agreement used in 1999 and 2000 Private Placements
(1)**


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4.5
    
    Form of Warrant to Purchase common stock of the Company issued to certain holders in connection with the
Contribution and Indemnification Agreement by and among Janice L. Breeze, Jeffrey S. Doss, Charles S.
Mollo, Cameron Wilson, the Company and certain Stockholders of the Company, dated November 2, 1999 (2)**4.6
    
    Lockup Agreement by and between Mobility Electronics, Inc. and Jeff Musa dated August 20, 2002 (5)4.7
    
    Form of Series E Preferred Stock and Warrant Purchase Agreement (6)**4.8
    
    Form of Series F Preferred Stock and Warrant Purchase Agreement (6)**4.9
    
    Form of Warrant issued to purchasers of Series E Stock (6)4.10
    
    Form of Warrant issued to purchasers of Series F Stock (6)4.11
    
    Registration Rights Agreement by and between Jeff Musa and the Company (Exhibit H on the Agreement and
Plan of Merger by and among Cutting Edge Software, Inc., Jeff Musa, the Company and CES Acquisition, Inc.,
dated August 20, 2002) (5)4.12
    
    Rights Agreement between the Company and Computershare Trust Company, dated June 11, 2003 (7)4.13
    
    Form of Common Stock Purchase Agreement relating to private placement completed August 29, 2003.**(8)4.14
    
    Form of Warrant to Purchase Common Stock of the Company issued to Silicon Valley Bank on September 3,
2003.*10.1
    
    Amendment to Loan Documents by and between Silicon Valley Bank, the Company and certain of its
subsidiaries, dated January 31, 2003.*10.2
    
    Amendment to Loan Documents by and between Silicon Valley Bank, the Company and certain of its
subsidiaries, dated March 31, 2003.*10.3
    
    Amendment to Loan Documents by and between Silicon Valley Bank, the Company and certain of its
subsidiaries, dated August 25, 2003.*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                                                                                                             
|--- |  | ---------------------------------------------------------------------------------------------------------------------------
|   
|**  |  | Each of these agreements is identical in all material respects except for
the Purchasers.                                  
|   
|(1) |  | Previously filed as an exhibit to Registration Statement No. 333-30264
dated February 11, 2000.                            
|   
|(2) |  | Previously filed as an exhibit to Amendment No. 1 to Registration Statement
No. 333-30264 on Form S-1 dated
March 28, 2000.
|   
|(3) |  | Previously filed as an exhibit to Amendment No. 2 to Registration Statement
No. 333-30264 on Form S-1 dated
May 4, 2000.   
|   
|(4) |  | Previously filed as an exhibit to Amendment No. 3 to Registration Statement
No. 333-30264 on Form S-1 dated May 18, 2000.  
|   
|(5) |  | Previously filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 2002.                     
|   
|(6) |  | Previously filed as an exhibit to Current Report on Form 8-K filed on
January 14, 2003.                                    
|   
|(7) |  | Previously filed as an exhibit to Current Report on Form 8-K filed on June
19, 2003.                                       
|   
|(8) |  | Previously filed as an exhibit to Registration Statement No. 333-108623
filed on September 9, 2003.                        

(b) Reports onForm 8-K:

We filed the following reports on Form 8-K during the quarter ended
September 30, 2003:



|1) |  | Form 8-K dated July 23, 2003, furnishing under Items 7 and 9, our press release, dated July 22, 2003,
announcing our results of operations for the quarter ended June 30, 2003.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2) |  | Form 8-K dated July 28, 2003, furnishing under Items 12 and 7, a copy of the transcript of our
conference call held July 22, 2003.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------



|3) |  | Form 8-K dated September 2, 2003, reporting under Items 5 and 7, the completion of our private placement.
|-- |  | ---------------------------------------------------------------------------------------------------------

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##### Table of Contents






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: November 12, 2003
    
    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(Principal Financial and Accounting Officer)


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##### Table of Contents






EXHIBIT INDEX

ExhibitNumber
    
    Description of Document3.1
    
    Certificate of Incorporation of the Company (1)3.2
    
    Articles of Amendment to the Certificate of Incorporation of the Company dated as of September 17, 1997 (3)3.3
    
    Articles of Amendment to the Certificate of Incorporation of the Company dated as of September 10, 1997 (1)3.4
    
    Articles of Amendment to the Certificate of Incorporation of the Company dated as of July 20, 1998 (1)3.5
    
    Articles of Amendment to the Certificate of Incorporation of the Company dated as of February 3, 2000 (1)3.6
    
    Articles of Amendment to the Certificate of Incorporation of the Company dated as of March 31, 2000 (3)3.7
    
    Certificate of Designations, Preferences, Rights and Limitations of Series C Preferred Stock (1)3.8
    
    Certificate of the Designations, Preferences, Rights and Limitations of Series D Preferred Stock (2)3.9
    
    Certificate of the Designations, Preferences, Rights and Limitations of Series E Preferred Stock of
Mobility Electronics, Inc. (6)3.10
    
    Certificate of the Designations, Preferences, Rights and Limitations of Series F Preferred Stock of
Mobility Electronics, Inc. (6)3.11
    
    Certificate of Designations, Preferences, Rights and Limitations of Series G Junior Participating
Preferred Stock of Mobility Electronics, Inc. (7)3.12
    
    Amended Bylaws of the Company (1)4.1
    
    Specimen of Common Stock Certificate (4)4.2
    
    Form of Warrant to Purchase Shares of common stock of the Company used with the Series C Preferred Stock
Private Placements (3)**4.3
    
    Form of Series C Preferred Stock Purchase Agreement used in 1998 and 1999 Private Placements (1)**4.4
    
    Form of Series C Preferred Stock and Warrant Purchase Agreement used in 1999 and 2000 Private Placements
(1)**4.5
    
    Form of Warrant to Purchase common stock of the Company issued to certain holders in connection with the
Contribution and Indemnification Agreement by and among Janice L. Breeze, Jeffrey S. Doss, Charles S.
Mollo, Cameron Wilson, the Company and certain Stockholders of the Company, dated November 2, 1999 (2)**4.6
    
    Lockup Agreement by and between Mobility Electronics, Inc. and Jeff Musa dated August 20, 2002 (5)4.7
    
    Form of Series E Preferred Stock and Warrant Purchase Agreement (6)**4.8
    
    Form of Series F Preferred Stock and Warrant Purchase Agreement (6)**4.9
    
    Form of Warrant issued to purchasers of Series E Stock (6)4.10
    
    Form of Warrant issued to purchasers of Series F Stock (6)4.11
    
    Registration Rights Agreement by and between Jeff Musa and the Company (Exhibit H on the Agreement and
Plan of Merger by and among Cutting Edge Software, Inc., Jeff Musa, the Company and CES Acquisition, Inc.,
dated August 20, 2002) (5)4.12
    
    Rights Agreement between the Company and Computershare Trust Company, dated June 11, 2003 (7)4.13
    
    Form of Common Stock Purchase Agreement relating to private placement completed August 29, 2003.**(8)4.14
    
    Form of Warrant to Purchase Common Stock of the Company issued to Silicon Valley Bank on September 3,
2003.*10.1
    
    Amendment to Loan Documents by and between Silicon Valley Bank, the Company and certain of its
subsidiaries, dated January 31, 2003.*10.2
    
    Amendment to Loan Documents by and between Silicon Valley Bank, the Company and certain of its
subsidiaries, dated March 31, 2003.*10.3
    
    Amendment to Loan Documents by and between Silicon Valley Bank, the Company and certain of its
subsidiaries, dated August 25, 2003.*


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##### Table of Contents



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                                                                                                             
|--- |  | ---------------------------------------------------------------------------------------------------------------------------
|   
|**  |  | Each of these agreements is identical in all material respects except for
the Purchasers.                                  
|   
|(1) |  | Previously filed as an exhibit to Registration Statement No. 333-30264
dated February 11, 2000.                            
|   
|(2) |  | Previously filed as an exhibit to Amendment No. 1 to Registration Statement
No. 333-30264 on Form S-1 dated
March 28, 2000.
|   
|(3) |  | Previously filed as an exhibit to Amendment No. 2 to Registration Statement
No. 333-30264 on Form S-1 dated
May 4, 2000.   
|   
|(4) |  | Previously filed as an exhibit to Amendment No. 3 to Registration Statement
No. 333-30264 on Form S-1 dated May 18, 2000.  
|   
|(5) |  | Previously filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 2002.                     
|   
|(6) |  | Previously filed as an exhibit to Current Report on Form 8-K filed on
January 14, 2003.                                    
|   
|(7) |  | Previously filed as an exhibit to Current Report on Form 8-K filed on June
19, 2003.                                       
|   
|(8) |  | Previously filed as an exhibit to Registration Statement No. 333-108623
filed on September 9, 2003.                        

All other schedules and exhibits are omitted because they are not
applicable or because the required information is contained in the Financial
Statements or Notes thereto.

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