##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 0-30907
 MOBILITY ELECTRONICS, INC.
 (Exact Name of Registrant as Specified in its Charter)
 Delaware
 (State or Other Jurisdiction of Incorporation)
 0-30907
    
    86-0843914(Commission File Number)
    
    (IRS Employer Identification No.)17800 N. Perimeter Dr., Suite 200, Scottsdale, Arizona
    
    85255(Address of Principal Executive Offices)
    
    (Zip Code)
 (480) 596-0061
 (Registrants telephone number, including area code)
 Not applicable
 (Former Name, Former Address, and Former Fiscal Year if Changed Since Last Report)
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ
    1




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##### 



MOBILITY ELECTRONICS, INC.
FORM 10-Q
 TABLE OF CONTENTS
 PAGE NO.PART I
    
    FINANCIAL INFORMATION
    
    
    1Item 1.
    
    Unaudited Condensed Consolidated Financial Statements:
    
    
    1Condensed Consolidated Balance Sheets
    
    
    1Condensed Consolidated Statements Of Operations
    
    
    2Condensed Consolidated Statements Of Cash Flows
    
    
    3Notes To Unaudited Condensed Consolidated Financial Statements
    
    
    4Item 2.
    
    Managements Discussion and Analysis Of Financial Condition and Results of Operations
    
    
    11Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4.
    
    Controls and Procedures
    
    
    21PART II
    
    OTHER INFORMATION
    
    
    21Item 1.
    
    Legal Proceedings
    
    
    21Item 1A.
    
    Risk Factors
    
    
    22Item 9.
    
    Exhibits
    
    
    22SIGNATURES
    
    
    23EXHIBIT INDEX
    
    
    24EX-31.1EX-31.2EX-32.1
  i




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##### Table of Contents



PART I FINANCIAL INFORMATION
 
 ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
 MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands)
 ( unaudited )
 March 31,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    20,788
    
    
    $
    15,908Short-term investments
    
    
    6,201
    
    
    
    9,026Accounts receivable, net
    
    
    11,092
    
    
    
    16,924Inventories
    
    
    4,281
    
    
    
    7,406Prepaid expenses and other current assets
    
    
    313
    
    
    
    446Total current assets
    
    
    42,675
    
    
    
    49,710Property and equipment, net
    
    
    1,407
    
    
    
    1,553Intangible assets, net
    
    
    1,828
    
    
    
    1,926Notes receivable and other assets, net
    
    
    687
    
    
    
    961Total assets
    
    $
    46,597
    
    
    $
    54,150LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    5,398
    
    
    $
    11,694Accrued expenses and other current liabilities
    
    
    2,755
    
    
    
    3,680Deferred revenue
    
    
    335
    
    
    
    936Total current liabilities
    
    
    8,488
    
    
    
    16,310Minority interest
    
    
    384
    
    
    
    384Total liabilities
    
    
    8,872
    
    
    
    16,694Stockholders equity:Common stock
    
    
    317
    
    
    
    314Additional paid-in capital
    
    
    168,482
    
    
    
    168,010Accumulated deficit
    
    
    (131,326
    )
    
    
    (131,091
    )Accumulated other comprehensive income
    
    
    252
    
    
    
    223Total stockholders equity
    
    
    37,725
    
    
    
    37,456Total liabilities and stockholders equity
    
    $
    46,597
    
    
    $
    54,150
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##### Table of Contents



MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 (unaudited)
 Three Months EndedMarch 31,2008
    
    
    2007Revenue
    
    $
    18,938
    
    
    $
    18,863Cost of revenue
    
    
    13,360
    
    
    
    13,457Gross profit
    
    
    5,578
    
    
    
    5,406Operating expenses:Sales and marketing
    
    
    2,014
    
    
    
    2,757Research and development
    
    
    793
    
    
    
    1,677General and administrative
    
    
    4,099
    
    
    
    3,586Total operating expenses
    
    
    6,906
    
    
    
    8,020Loss from operations
    
    
    (1,328
    )
    
    
    (2,614
    )Other income:Interest income, net
    
    
    267
    
    
    
    267Other income, net
    
    
    154
    
    
    
    304Litigation settlement income
    
    
    672
    
    
    
    Net loss
    
    $
    (235
    )
    
    $
    (2,043
    )Basic and diluted net loss per common share
    
    $
    (0.01
    )
    
    $
    (0.06
    )Basic and diluted weighted average common shares outstanding
    
    
    31,581
    
    
    
    31,740
  2




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##### Table of Contents



MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (unaudited)
 Three Months EndedMarch 31,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (235
    )
    
    $
    (2,043
    )Adjustments to reconcile net loss to net cash provided by operating activities:Provision for accounts receivable and sales returns and credits
    
    
    (30
    )
    
    
    78Depreciation and amortization
    
    
    379
    
    
    
    517Stock compensation expense
    
    
    636
    
    
    
    518Changes in operating assets and liabilities:Accounts receivable
    
    
    5,861
    
    
    
    3,383Inventories
    
    
    3,125
    
    
    
    3,272Prepaid expenses and other assets
    
    
    323
    
    
    
    (1,555
    )Accounts payable
    
    
    (6,484
    )
    
    
    (3,266
    )Accrued expenses and other current liabilities
    
    
    (1,527
    )
    
    
    (551
    )Net cash provided by operating activities
    
    
    2,048
    
    
    
    353Cash flows from investing activities:Purchase of property and equipment
    
    
    (49
    )
    
    
    (103
    )Sale of investments
    
    
    2,833
    
    
    
    4,516Net cash provided by investing activities
    
    
    2,784
    
    
    
    4,413Cash flows from financing activities:Payment of non-current liabilities
    
    
    
    
    
    
    (25
    )Net proceeds from issuance of common stock and exercise of options and warrants
    
    
    28
    
    
    
    67Net cash provided by financing activities
    
    
    28
    
    
    
    42Effects of exchange rate changes on cash and cash equivalents
    
    
    20
    
    
    
    5Net increase in cash and cash equivalents
    
    
    4,880
    
    
    
    4,813Cash and cash equivalents, beginning of period
    
    
    15,908
    
    
    
    9,201Cash and cash equivalents, end of period
    
    $
    20,788
    
    
    $
    14,014
  3




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##### Table of Contents



MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 (1) Basis of Presentation
    Recent Accounting Pronouncements
    4




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##### Table of Contents



(2) Variable Interest Entities
    Mobility(Amounts in thousands)
    
    VIE
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    525
    
    
    $
    20,788Short-term investments
    
    
    
    
    
    
    6,201Accounts receivable, net
    
    
    196
    *
    
    
    11,092Inventories
    
    
    892
    
    
    
    4,281Prepaid expenses and other current assets
    
    
    15
    
    
    
    313Total current assets
    
    
    1,628
    
    
    
    42,675Property and equipment, net
    
    
    101
    
    
    
    1,407Intangible assets, net
    
    
    
    
    
    
    1,828Notes receivable (payable) and other assets
    
    
    (1,070
    )*
    
    
    687Total assets
    
    $
    659
    
    
    $
    46,597
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##### Table of Contents



Mobility(Amounts in thousands)
    
    VIE
    
    
    ConsolidatedLIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    208
    
    
    $
    5,398Accrued expenses and other current liabilities
    
    
    161
    *
    
    
    2,755Deferred revenue
    
    
    
    
    
    
    335Total current liabilities
    
    
    369
    
    
    
    8,488Minority interest
    
    
    
    
    
    
    384Total liabilities
    
    
    369
    
    
    
    8,872Stockholders equity:
    
    
    290
    
    
    
    37,725Total liabilities and stockholders equity
    
    $
    659
    
    
    $
    46,597
 
 *
    
    Reflects the elimination of intercompany accounts and notes receivable. (3) Fair Value Measurement
    (4) Investments
    6




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##### Table of Contents



March 31, 2008
    
    
    December 31, 2007Net
    
    
    
    
    
    
    
    
    
    
    NetUnrealized
    
    
    
    
    
    
    
    
    
    
    UnrealizedHolding
    
    
    Aggregate
    
    
    
    
    
    
    HoldingAmortized
    
    
    Gains
    
    
    Fair
    
    
    Amortized
    
    
    Gains
    
    
    AggregateCost
    
    
    (Losses)
    
    
    Value
    
    
    Cost
    
    
    (Losses)
    
    
    Fair ValueU.S. corporate securities:Commercial paper
    
    $
    3,282
    
    
    $
    1
    
    
    $
    3,283
    
    
    $
    3,821
    
    
    $
    1
    
    
    $
    3,822Corporate notes and bonds
    
    
    1,705
    
    
    
    5
    
    
    
    1,710
    
    
    
    2,902
    
    
    
    
    
    
    
    2,9024,987
    
    
    
    6
    
    
    
    4,993
    
    
    
    6,723
    
    
    
    1
    
    
    
    6,724U.S. government securities
    
    
    1,199
    
    
    
    9
    
    
    
    1,208
    
    
    
    2,298
    
    
    
    4
    
    
    
    2,302$
    6,186
    
    
    $
    15
    
    
    $
    6,201
    
    
    $
    9,021
    
    
    $
    5
    
    
    $
    9,026
 (5) Inventories
  March 31,
    
    
    December 31,2008
    
    
    2007Raw materials
    
    $
    943
    
    
    $
    1,029Finished goods
    
    
    3,338
    
    
    
    6,377$
    4,281
    
    
    $
    7,406
 (6) Intangible Assets
  March 31, 2008
    
    
    December 31, 2007Average
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetLife
    
    
    Intangible
    
    
    Accumulated
    
    
    Intangible
    
    
    Intangible
    
    
    Accumulated
    
    
    Intangible(Years)
    
    
    Assets
    
    
    Amortization
    
    
    Assets
    
    
    Assets
    
    
    Amortization
    
    
    AssetsAmortized intangible
assets:License fees
    
    
    7
    
    
    $
    334
    
    
    $
    (294
    )
    
    $
    40
    
    
    $
    334
    
    
    $
    (280
    )
    
    $
    54Patents and trademarks
    
    
    5
    
    
    
    3,453
    
    
    
    (1,882
    )
    
    
    1,571
    
    
    
    3,368
    
    
    
    (1,726
    )
    
    
    1,642Trade names
    
    
    10
    
    
    
    429
    
    
    
    (226
    )
    
    
    203
    
    
    
    429
    
    
    
    (214
    )
    
    
    215Customer lintangibles
    
    
    5
    
    
    
    33
    
    
    
    (19
    )
    
    
    14
    
    
    
    33
    
    
    
    (18
    )
    
    
    15Total
    
    
    
    
    
    $
    4,249
    
    
    $
    (2,421
    )
    
    $
    1,828
    
    
    $
    4,164
    
    
    $
    (2,238
    )
    
    $
    1,926
  (7) Notes Receivable and Other Assets
   7




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##### Table of Contents



(8) Line of Credit
  (9) Stockholders Equity
  (10) Stock-based Compensation
    Nasdaq Rule2004 Directors Plan
    
    
    2004 Omnibus Plan
    
    
    4350(i)(1)(a)(iv) GrantWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageValue
    
    
    
    
    
    
    Value
    
    
    
    
    
    
    Valueper
    
    
    
    
    
    
    per
    
    
    
    
    
    
    perNumber
    
    
    Share
    
    
    Number
    
    
    Share
    
    
    Number
    
    
    ShareOutstanding, December 31, 2007
    
    
    194,667
    
    
    $
    4.64
    
    
    
    1,158,165
    
    
    $
    4.88
    
    
    
    1,000,000
    
    
    $
    2.13Granted
    
    
    
    
    
    
    
    
    
    
    817,500
    
    
    $
    1.30
    
    
    
    
    
    
    
    Canceled
    
    
    (32,000
    )
    
    $
    6.88
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Released to common stock
    
    
    
    
    
    
    
    
    
    
    (261,019
    )
    
    $
    5.43
    
    
    
    
    
    
    
    Released for settlement of taxes
    
    
    
    
    
    
    
    
    
    
    (120,059
    )
    
    $
    5.36
    
    
    
    
    
    
    
    Outstanding, March 31, 2008
    
    
    162,667
    
    
    $
    4.19
    
    
    
    1,594,587
    
    
    $
    2.93
    
    
    
    1,000,000
    
    
    $
    2.13
    8




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##### Table of Contents



(11) Net Loss per Share
  Three Months EndedMarch 31,2008
    
    
    2007Basic net loss per share computation:Numerator:Net loss
    
    $
    (235
    )
    
    $
    (2,043
    )Denominator:Weighted average number of common shares outstanding
    
    
    31,581
    
    
    
    31,740Basic net loss per share:
    
    $
    (0.01
    )
    
    $
    (0.06
    )Diluted net loss per share computation:Numerator:Net loss
    
    $
    (235
    )
    
    $
    (2,043
    )Denominator:Weighted average number of common shares outstanding
    
    
    31,581
    
    
    
    31,740Effect of dilutive stock options, warrants, and restricted
stock units
    
    
    
    
    
    
    31,581
    
    
    
    31,740Diluted net gain (loss) per share:
    
    $
    (0.01
    )
    
    $
    (0.06
    )Stock options not included in dilutive loss per share since
antidilutive
    
    
    287
    
    
    
    428Warrants not included in dilutive loss per share since antidilutive
    
    
    600
    
    
    
    1,195
 (12) Business Segments, Concentration of Credit Risk and Significant Customers
    Three Months EndedMarch 31,2008
    
    
    2007Revenues:High-Power Group
    
    $
    11,120
    
    
    $
    13,261Low-Power Group
    
    
    6,267
    
    
    
    4,211Connectivity Group
    
    
    1,551
    
    
    
    1,391$
    18,938
    
    
    $
    18,863
 9




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##### Table of Contents



Three Months EndedMarch 31,2008
    
    
    2007Operating income (loss):High-Power Group
    
    $
    1,406
    
    
    $
    1,925Low-Power Group
    
    
    1,106
    
    
    
    (115
    )Connectivity Group
    
    
    (86
    )
    
    
    (838
    )Corporate
    
    
    (3,754
    )
    
    
    (3,586
    )$
    (1,328
    )
    
    $
    (2,614
    )
  March 31,
    
    
    December 31,2008
    
    
    2007Assets:High-Power Group
    
    $
    12,377
    
    
    $
    19,035Low-Power Group
    
    
    5,353
    
    
    
    7,810Connectivity Group
    
    
    1,818
    
    
    
    2,199Corporate
    
    
    27,049
    
    
    
    25,106$
    46,597
    
    
    $
    54,150
   Three Months EndedMarch 31,2008
    
    
    2007High-power mobile electronic power products
    
    $
    11,095
    
    
    $
    13,083Low-power mobile electronic power products
    
    
    5,787
    
    
    
    3,384Handheld products
    
    
    1
    
    
    
    180Expansion and docking products
    
    
    1,550
    
    
    
    1,219Portable keyboard products
    
    
    480
    
    
    
    823Accessories and other products
    
    
    25
    
    
    
    174Total revenues
    
    $
    18,938
    
    
    $
    18,863
 Three Months EndedMarch 31,2008
    
    
    2007North America (principally United States)
    
    $
    16,660
    
    
    $
    15,167Europe
    
    
    1,156
    
    
    
    1,154Asia Pacific
    
    
    1,122
    
    
    
    2,536All other
    
    
    
    
    
    
    6$
    18,938
    
    
    $
    18,863
 Three Months EndedMarch 31,2008
    
    2007OEM and private-label-resellers
    
    
    50
    %
    
    
    63
    %Retailers and distributors
    
    
    46
    %
    
    
    29
    %Other
    
    
    4
    %
    
    
    8
    %100
    %
    
    
    100
    %
  10




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(13) Litigation Settlement
  (14) Contingencies
    
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  11




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
    
    the loss of, and failure to replace, any significant customers;
    
    the inability to timely and successfully complete product development efforts and
introduce new products, including internal development projects and those being pursued
with strategic partners;
    
    the ineffectiveness of our sales and marketing strategy;
    
    the inability to create broad consumer awareness and acceptance for our products and
technology;
    
    the timing and success of competitive product development efforts, new product
introductions and pricing;
    
    the ability to expand and protect our proprietary rights and intellectual property;
    
    the timing of substantial customer orders;
    
    the lack of available qualified personnel;
    
    the inability to successfully resolve pending and unanticipated legal matters;
    
    the lack of available qualified suppliers and subcontractors and/or their inability
to meet our specification, performance, and quality requirements; and
    
    market demand and industry and general economic or business conditions.
  Mobility Electronics® and iGo® are trademarks or registered trademarks of Mobility
Electronics, Inc. or its subsidiaries in the United States and other countries. Other names and
brands may be claimed as the property of others.
 Overview
   12




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High-Power Group.
 Low-Power Group.
     Recent Developments
   13




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##### Table of Contents



®
 Critical Accounting Policies and Estimates
  14




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##### Table of Contents



Results of Operations
  Three months endedMarch 31,2008
    
    2007Revenue
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenue
    
    
    70.5
    %
    
    
    71.3
    %Gross profit
    
    
    29.5
    %
    
    
    28.7
    %Operating expenses:Sales and marketing
    
    
    10.6
    %
    
    
    14.6
    %Research and development
    
    
    4.2
    %
    
    
    8.9
    %General and administrative
    
    
    21.6
    %
    
    
    19.0
    %Total operating expenses
    
    
    36.4
    %
    
    
    42.5
    %Loss from operations
    
    
    -6.9
    %
    
    
    -13.8
    %Other income (expense):Interest, net
    
    
    1.4
    %
    
    
    1.4
    %Other, net
    
    
    0.8
    %
    
    
    1.6
    %Litigation settlement income
    
    
    3.5
    %
    
    
    Net loss
    
    
    -1.2
    %
    
    
    -10.8
    %
 Comparison of Three Months Ended March 31, 2008 and 2007
 Revenue .
 Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Increase/(decrease)
    
    
    Percentage changeMarch 31,
    
    
    March 31,
    
    
    from same period
    
    
    from the same period2008
    
    
    2007
    
    
    in the prior year
    
    
    in the prior yearHigh-Power Group
    
    $
    11,121
    
    
    $
    13,261
    
    
    $
    (2,140
    )
    
    
    (16.1
    )%Low-Power Group
    
    
    6,266
    
    
    
    4,211
    
    
    
    2,055
    
    
    
    48.8
    %Connectivity Group
    
    
    1,551
    
    
    
    1,391
    
    
    
    160
    
    
    
    11.5
    %Total Revenue
    
    $
    18,938
    
    
    $
    18,863
    
    
    $
    75
    
    
    
    0.4
    %
 High-Power Group.
 15




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Low-Power Group.
 Connectivity Group.
 Cost of revenue, gross profit and gross margin .
 Three Months
    
    Three MonthsEnded
    
    Ended
    
    Increase/(decrease)
    
    Percentage change fromMarch 31,
    
    March 31,
    
    from same period in
    
    the same period in the2008
    
    2007
    
    the prior year
    
    prior yearCost of revenue
    
    $
    13,360
    
    
    $
    13,457
    
    
    $
    (97
    )
    
    
    (0.7
    )%Gross profit
    
    $
    5,578
    
    
    $
    5,406
    
    
    $
    172
    
    
    
    3.2
    %Gross margin
    
    
    29.5
    %
    
    
    28.7
    %
    
    
    0.8
    %
    
    
    2.8
    %
  Sales and marketing .
 Three Months
    
    Three MonthsEnded
    
    Ended
    
    Decrease
    
    Percentage changeMarch 31,
    
    March 31,
    
    from same period
    
    from the same period2008
    
    2007
    
    in the prior year
    
    in the prior yearSales and marketing
    
    $
    2,014
    
    
    $
    2,757
    
    
    $
    (743
    )
    
    
    (26.9
    )%
 16




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##### Table of Contents



Research and development .
 Three Months
    
    Three MonthsEnded
    
    Ended
    
    Decrease from
    
    Percentage change fromMarch 31,
    
    March 31,
    
    same period
    
    the same period in the2008
    
    2007
    
    in the prior year
    
    prior yearResearch and development
    
    $
    793
    
    
    $
    1,677
    
    
    $
    (884
    )
    
    
    (52.7
    )%
  General and administrative.
 Three Months
    
    Three MonthsEnded
    
    Ended
    
    Increase
    
    Percentage changeMarch 31,
    
    March 31,
    
    from same period
    
    from the same period2008
    
    2007
    
    in the prior year
    
    in the prior yearGeneral and administrative
    
    $
    4,099
    
    
    $
    3,586
    
    
    $
    513
    
    
    
    14.3
    %
  Interest income (expense) net.
 Other income (expense) net .
 Litigation settlement income .
 17




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##### Table of Contents



Minority interest.
 Income taxes .
 Operating Outlook
  
    
    The continued penetration of both the domestic and international wireless carrier,
dealer/agent, and distributor markets for our low-power products;
    
    Continued growth in sales of power products for high-power mobile electronic devices
driven by further growth in private label reseller accounts and expanded international
distribution;
    
    Continued investment in enhancements to grow direct online sales through igo.com and
retail partner web sites;
    
    A strong new product pipeline that will provide consumers with innovative power products
offering a broad range of features and price points;
    
    An emphasis on development marketing of products that are environmentally friendly; and
    
    Improvements in operational execution.
       18




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##### Table of Contents



Liquidity and Capital Resources
  Three Months Ended March 31,2008
    
    
    2007Net cash provided by operating activities
    
    $
    2,048
    
    
    $
    353Net cash provided by investing activities
    
    
    2,784
    
    
    
    4,413Net cash provided by financing activities
    
    
    28
    
    
    
    42Foreign currency exchange impact on cash flow
    
    
    20
    
    
    
    5Increase in cash and cash equivalents
    
    $
    4,880
    
    
    $
    4,813Cash and cash equivalents at beginning of period
    
    $
    15,908
    
    
    $
    9,201Cash and cash equivalents at end of period
    
    $
    20,788
    
    
    $
    14,014
 Cash and Cash Flow
 
    
    Net cash provided by operating activities.Cash was provided by operating activities
for the three months ended March 31, 2008 primarily as a result of collections of
accounts receivable and sales of inventories, partially offset by use of cash to pay
suppliers. Later in 2008, we expect to use some cash in operating activities as we
expect to incur operating losses, with changes in working capital having a relatively
neutral effect on cash flows. Our consolidated cash flow operating metrics are as
follows:
 March 31,2008
    
    2007Days outstanding in ending accounts receivable (DSOs)
    
    
    53
    
    
    
    83Inventory turns
    
    
    12
    
    
    
    6
 The decrease in DSOs at March 31, 2008 compared to March 31, 2007, was primarily due to
the reductions in accounts receivable from Dell and Lenovo due to the loss of those
accounts, combined with the faster timing of payments received from our large
private-label reseller customer, Targus. We expect DSOs will increase for the balance of
2008 as a result of anticipated timing of cash receipts from our customers. The decrease
in inventory turns was primarily due to excess and obsolete inventory charges recorded
during 2007 relating to our connectivity, low-power and keyboard inventories. We expect
to manage inventory growth during 2008, but we expect inventory turns to decrease for the
balance of 2008.
    
    Net cash provided by investing activities.For the three months ended March 31,
2008, net cash was provided by investing activities as we generated proceeds from the
sale of investments of $2.8 million. We anticipate future investment in capital
equipment, primarily for tooling equipment to be used in the production of new
products.
    
    Net cash provided by financing activities.Net cash provided by financing
activities for the three months ended March 31, 2008 was primarily from net proceeds
from the exercises of stock options and warrants. Although we expect to generate cash
flows from operations sufficient to support our operations, we may issue additional
shares of stock in the future to generate cash for growth opportunities.
  19




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##### Table of Contents



Financing Facilities.
 Contractual Obligations.
 Payment due by period2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    More than 5 yearsOperating lease obligations
    
    $
    302
    
    
    $
    48
    
    
    $
    8
    
    
    $
    6
    
    
    $
    
    
    
    $
    Inventory purchase obligations
    
    
    13,706
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other long-term obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Totals
    
    $
    14,008
    
    
    $
    48
    
    
    $
    8
    
    
    $
    6
    
    
    $
    
    
    
    $
    
  Off-Balance Sheet Arrangements.
 Acquisitions and dispositions.
   Liquidity Outlook.
 20




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##### Table of Contents



Recent Accounting Pronouncements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting
 
 PART II OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   21




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##### Table of Contents



ITEM 1A. RISK FACTORS
  
 ITEM 6. EXHIBITS
  22




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##### Table of Contents



MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
 
 SIGNATURES
  MOBILITY ELECTRONICS, INC.Dated: May 9, 2008
    By:
    /s/ Michael D. HeilMichael D. HeilPresident, Chief Executive Officer
and Chairman of the Board
(Principal Executive Officer)By:
    /s/ Joan W. BrubacherJoan W. BrubacherExecutive Vice President and Chief Financial Officer
and Authorized Officer of Registrant
(Principal Financial Officer)By:
    /s/ Darryl S. BakerDarryl S. BakerVice President, Chief Accounting Officer and
Controller 23




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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 June 17, 1997 (2)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 (2)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 (3)3.9
    
    Certificate of the Designations, Preferences, Rights and Limitations of Series E Preferred Stock of
Mobility Electronics, Inc. (4)3.10
    
    Certificate of the Designations, Preferences, Rights and Limitations of Series F Preferred Stock of
Mobility Electronics, Inc. (4)3.11
    
    Certificate of Designations, Preferences, Rights and Limitations of Series G Junior Participating
Preferred Stock of Mobility Electronics, Inc. (5)3.12
    
    Amended and Restated Bylaws of the Company (6)10.1
    
    Mobility Electronics, Inc. 2008 Executive Bonus Program (7)10.2
    
    Amendment No. 1 to Mobility Electronics, Inc. Omnibus Long-Term Incentive Plan Restricted Stock Unit Award
Agreement by and between the Company and Michael D. Heil, dated March 19, 2008. (7)10.3
    
    Form Mobility Electronics, Inc. Omnibus Long-Term Incentive Plan Restricted Stock Unit Agreement, dated
March 19, 2008. (7)10.4
    
    Amendment No. 1 to $2.5 Million Secured Promissory Note, dated April 11, 2008. (8)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**
    
    Furnished herewith(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. 2 to Registration Statement No. 333-30264 on
Form S-1 dated May 4, 2000.(3)
    
    Previously filed as an exhibit to Amendment No. 1 to Registration Statement No. 333-30264 on
Form S-1 dated March 28, 2000.(4)
    
    Previously filed as an exhibit to Current Report on Form 8-K filed January 14, 2003.(5)
    
    Previously filed as an exhibit to Current Report on Form 8-K filed June 19, 2003.(6)
    
    Previously filed as an exhibit to Form 10-Q for the period ended March 31, 2005.(7)
    
    Previously filed as an exhibit to Current Report on Form 8-K filed March 21, 2008.(8)
    
    Previously filed as an exhibit to Current Report on Form 8-K filed April 16, 2008. 24