##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q/A
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
  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
  þ o
 o þ




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##### Table of Contents



Explanatory Note
Form 10-Q/A Amendment No. 1
 Overview
 Business Combinations
 Restatement
    2




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MOBILITY ELECTRONICS, INC.
FORM 10-Q/A
 TABLE OF CONTENTS
 PAGE NO.PART I: FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    4Condensed Consolidated Balance Sheets

as of March 31, 2005 (restated) and December 31, 2004 (restated)
    
    
    4Condensed Consolidated Statements of Operations

for the Three Months Ended March 31, 2005
and 2004 (restated)
    
    
    5Condensed Consolidated Statements of Cash Flows

for the Three Months Ended March 31, 2005 and 2004 (restated)
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23PART II: OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    24Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    26INDEX TO EXHIBITS
    
    
    27Exhibit 31.1Exhibit 31.2Exhibit 32.1
 3




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##### Table of Contents



PART I: FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS:
 MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS  (In thousands)
 March 31,
    
    
    December 31,2005
    
    
    2004(restated)
    
    
    (restated)(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    13,230
    
    
    $
    12,768Accounts receivable, net
    
    
    16,663
    
    
    
    16,905Inventories
    
    
    8,259
    
    
    
    7,513Prepaid expenses and other current assets
    
    
    379
    
    
    
    443Total current assets
    
    
    38,531
    
    
    
    37,629Property and equipment, net
    
    
    2,103
    
    
    
    2,127Goodwill
    
    
    10,570
    
    
    
    10,570Intangible assets, net
    
    
    3,065
    
    
    
    3,059Notes receivable and other
    
    
    1,731
    
    
    
    2,032Total assets
    
    $
    56,000
    
    
    $
    55,417LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    13,591
    
    
    $
    12,411Accrued expenses and other current liabilities
    
    
    959
    
    
    
    1,514Current installments of non-current liabilities
    
    
    297
    
    
    
    328Total current liabilities
    
    
    14,847
    
    
    
    14,253Non-current liabilities, less current portion
    
    
    438
    
    
    
    463Total liabilities
    
    
    15,285
    
    
    
    14,716Stockholders equity:Convertible preferred stock
    
    
    3
    
    
    
    3Common stock
    
    
    287
    
    
    
    285Additional paid-in capital
    
    
    153,805
    
    
    
    147,547Accumulated deficit
    
    
    (107,619
    )
    
    
    (106,692
    )Deferred compensation and other
    
    
    (5,964
    )
    
    
    (646
    )Accumulated other comprehensive income
    
    
    203
    
    
    
    204Total stockholders equity
    
    
    40,715
    
    
    
    40,701Total liabilities and
stockholders equity
    
    $
    56,000
    
    
    $
    55,417
  4




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MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  (In thousands, except per share amounts)  (unaudited)
 Three Months EndedMarch 31,2005
    
    
    2004(restated)
    
    
    (restated)Revenue
    
    $
    18,358
    
    
    $
    14,044Cost of revenue
    
    
    12,881
    
    
    
    9,432Gross profit
    
    
    5,477
    
    
    
    4,612Operating expenses:Marketing and sales
    
    
    1,986
    
    
    
    1,658Research and development
    
    
    1,397
    
    
    
    1,424General and administrative
    
    
    3,059
    
    
    
    2,713Total operating expenses
    
    
    6,442
    
    
    
    5,795Loss from operations
    
    
    (965
    )
    
    
    (1,183
    )Other income (expense):Interest income (expense), net
    
    
    38
    
    
    
    (20
    )Other income, net
    
    
    
    
    
    
    22Loss from continuing operations
    
    
    (927
    )
    
    
    (1,181
    )Discontinued operations:Loss from discontinued operations of handheld software
product line
    
    
    
    
    
    
    (1
    )Net loss
    
    $
    (927
    )
    
    $
    (1,182
    )Net loss per share:Basic and dilutedContinuing operations
    
    $
    (0.03
    )
    
    $
    (0.04
    )Discontinued operations
    
    $
    
    
    
    $
    (0.00
    )Total basic net loss per share
    
    $
    (0.03
    )
    
    $
    (0.04
    )Weighted average common shares outstanding:Basic and diluted
    
    
    28,601
    
    
    
    27,651
  5




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MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (In thousands)  (unaudited)
 Three months endedMarch 31,2005
    
    
    2004(restated)
    
    
    (restated)Cash flows from operating activities:Net loss
    
    $
    (927
    )
    
    $
    (1,182
    )Less loss from discontinued operation
    
    
    
    
    
    
    1Loss from continuing operations
    
    
    (927
    )
    
    
    (1,181
    )Adjustments to reconcile net loss to net cash used in operating activities:Provision for accounts receivable and sales returns and credits
    
    
    94
    
    
    
    73Depreciation and amortization
    
    
    466
    
    
    
    491Amortization of deferred compensation
    
    
    338
    
    
    
    Impairment of tooling equipment
    
    
    82
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    162
    
    
    
    (1,425
    )Inventories
    
    
    (746
    )
    
    
    (873
    )Prepaid expenses and other assets
    
    
    (137
    )
    
    
    (190
    )Accounts payable
    
    
    1,162
    
    
    
    2,574Accrued expenses and other current liabilities
    
    
    (531
    )
    
    
    344Net cash used in operating activities
    
    
    (37
    )
    
    
    (187
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (323
    )
    
    
    (319
    )Net cash used in investing activities
    
    
    (323
    )
    
    
    (319
    )Cash flows from financing activities:Payment of non-current liabilities
    
    
    (25
    )
    
    
    (125
    )Net proceeds from issuance of common stock, exercise of options
and warrants, and repayment of stock subscription notes
receivable
    
    
    605
    
    
    
    245Net cash provided by financing activities
    
    
    580
    
    
    
    120Effects of exchange rate changes on cash and cash equivalents
    
    
    (1
    )
    
    
    13Net cash provided by (used in) discontinued operations
    
    
    243
    
    
    
    (97
    )Net increase (decrease) in cash and cash equivalents
    
    
    462
    
    
    
    (470
    )Cash and cash equivalents, beginning of period
    
    
    12,768
    
    
    
    11,024Cash and cash equivalents, end of period
    
    $
    13,230
    
    
    $
    10,554
  6




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MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (1) Restatement
   As
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    RestatedAs of and for the quarter ended March 31, 2005Balance Sheet:Goodwill
    
    $
    12,161
    
    
    $
    (1,591
    )
    
    $
    10,570Total assets
    
    
    57,591
    
    
    
    (1,591
    )
    
    
    56,000Accumulated deficit
    
    
    (106,028
    )
    
    
    (1,591
    )
    
    
    (107,619
    )Total stockholders equity
    
    
    42,306
    
    
    
    (1,591
    )
    
    
    40,715Statement of Operations:General and administrative
    
    $
    2,842
    
    
    $
    217
    
    
    $
    3,059Total operating expenses
    
    
    6,225
    
    
    
    217
    
    
    
    6,442Loss from operations
    
    
    (748
    )
    
    
    (217
    )
    
    
    (965
    )Loss from continuing operations
    
    
    (710
    )
    
    
    (217
    )
    
    
    (927
    )Net loss
    
    
    (710
    )
    
    
    (217
    )
    
    
    (927
    )Loss Per Share  Basic and Diluted:Loss per share from continuing operations
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.03
    )Total loss per share
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.03
    )
  As
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    RestatedAs of and for the quarter ended March 31, 2004Balance Sheet:Goodwill
    
    $
    13,377
    
    
    $
    (839
    )
    
    $
    12,538Total assets
    
    
    52,499
    
    
    
    (839
    )
    
    
    51,660Accumulated deficit
    
    
    (104,834
    )
    
    
    (839
    )
    
    
    (105,673
    )Total stockholders equity
    
    
    40,556
    
    
    
    (839
    )
    
    
    39,717Statement of Operations:General and administrative
    
    $
    2,304
    
    
    $
    409
    
    
    $
    2,713Total operating expenses
    
    
    5,386
    
    
    
    409
    
    
    
    5,795Loss from operations
    
    
    (774
    )
    
    
    (409
    )
    
    
    (1,183
    )Loss from continuing operations
    
    
    (772
    )
    
    
    (409
    )
    
    
    (1,181
    )Net loss
    
    
    (773
    )
    
    
    (409
    )
    
    
    (1,182
    )Loss Per Share  Basic and Diluted:Loss per share from continuing operations
    
    $
    (0.03
    )
    
    $
    (0.01
    )
    
    $
    (0.04
    )Total loss per share
    
    $
    (0.03
    )
    
    $
    (0.01
    )
    
    $
    (0.04
    )
  7




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As
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    RestatedAs of and for the year ended December 31, 2004Balance Sheet:Goodwill
    
    $
    11,944
    
    
    $
    (1,374
    )
    
    $
    10,570Total assets
    
    
    56,791
    
    
    
    (1,374
    )
    
    
    55,417Accumulated deficit
    
    
    (105,318
    )
    
    
    (1,374
    )
    
    
    (106,692
    )Total stockholders equity
    
    
    42,075
    
    
    
    (1,374
    )
    
    
    40,701
 (2) Basis of Presentation
      (3) Stock-based Compensation
  a. Stock Options
   8




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Three Months Ended March 31,2005
    
    
    2004(restated)
    
    
    (restated)Net loss:As reported
    
    $
    (927
    )
    
    $
    (1,182
    )Total stock-based employee compensation expense
determined under fair-value-based method for all
rewards, net of tax of $0 for all periods
    
    
    (1,897
    )
    
    
    (284
    )Pro forma
    
    $
    (2,824
    )
    
    $
    (1,466
    )Net loss per share  basic and diluted:As reported
    
    $
    (0.03
    )
    
    $
    (0.04
    )Pro forma
    
    $
    (0.10
    )
    
    $
    (0.05
    )
  March 31,2005
    
    2004Expected life (years)
    
    
    3.0
    
    
    
    2.5Risk-free interest rate
    
    
    4.0
    %
    
    
    2.25
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    80.0
    %
    
    
    100.0
    %
 b. Restricted Stock Units
  9




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(4) Inventories
  March 31,
    
    
    December 31,2005
    
    
    2004Raw materials
    
    $
    2,269
    
    
    $
    2,122Finished goods
    
    
    5,990
    
    
    
    5,391$
    8,259
    
    
    $
    7,513
 (5) Intangible Assets
  March 31, 2005
    
    
    December 31, 2004Average
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetLife
    
    
    Intangible
    
    
    Accumulated
    
    
    Intangible
    
    
    Intangible
    
    
    Accumulated
    
    
    Intangible(Years)
    
    
    Assets
    
    
    Amortization
    
    
    Assets
    
    
    Assets
    
    
    Amortization
    
    
    AssetsAmortized intangible
assets:License fees
    
    
    7
    
    
    $
    2,308
    
    
    $
    (908
    )
    
    $
    1,400
    
    
    $
    2,258
    
    
    $
    (843
    )
    
    $
    1,415Patents and trademarks
    
    
    3
    
    
    
    2,078
    
    
    
    (1,067
    )
    
    
    1,011
    
    
    
    1,921
    
    
    
    (994
    )
    
    
    927Trade names
    
    
    10
    
    
    
    378
    
    
    
    (98
    )
    
    
    280
    
    
    
    378
    
    
    
    (88
    )
    
    
    290Customer list
    
    
    10
    
    
    
    662
    
    
    
    (288
    )
    
    
    374
    
    
    
    662
    
    
    
    (235
    )
    
    
    427Total
    
    
    
    
    
    $
    5,426
    
    
    $
    (2,361
    )
    
    $
    3,065
    
    
    $
    5,219
    
    
    $
    (2,160
    )
    
    $
    3,059
 (6) Line of Credit
  (7) Non-current Liabilities
  March 31,
    
    
    December 31,2005l
    
    
    2004Estimate of Invision earn-out
    
    $
    685
    
    
    $
    716Liability for license fee
    
    
    50
    
    
    
    75735
    
    
    
    791Less current portion
    
    
    297
    
    
    
    328Non-current liabilities, less current portion
    
    $
    438
    
    
    $
    463
   (8) Stockholders Equity
 ( a ) Convertible Preferred Stock
  10




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( b ) Common Stock
  (9) Discontinued Operations
   Three Months EndedMarch 31,2004Revenue
    
    $
    467Cost of revenue
    
    
    141Gross profit
    
    
    326Selling, general and administrative expenses
    
    
    327Total discontinued
operations
    
    $
    (1
    )
 11




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(10) Net Income (Loss) per Share
  Three Months EndedMarch 31,2005
    
    
    2004(restated)
    
    
    (restated)Numerator:Loss from continuing operations
    
    $
    (927
    )
    
    $
    (1,181
    )Discontinued operations
    
    
    
    
    
    
    (1
    )Net loss
    
    $
    (927
    )
    
    $
    (1,182
    )Denominator:Weighted average number of common shares outstanding  basic and diluted
    
    
    28,601
    
    
    
    27,651Net loss per share  basic and diluted:Continuing operations
    
    $
    (0.03
    )
    
    $
    (0.04
    )Discontinued operations
    
    $
    
    
    
    $
    (0.00
    )Total basic net income (loss) per share
    
    $
    (0.03
    )
    
    $
    (0.04
    )Stock options, warrants and restricted stock units not included in
dilutive net income (loss) per share since
antidilutive
    
    
    2,617
    
    
    
    2,505Convertible preferred stock not included in dilutive net income (loss)
per share since antidilutive
    
    
    266
    
    
    
    298
 (11) Concentration of Credit Risk, Significant Customers and Business Segments
        12




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Three Months EndedMarch 31,2005
    
    
    2004High power mobile electronic power products
    
    $
    11,783
    
    
    $
    8,851Low power mobile electronic power products
    
    
    1,154
    
    
    
    Handheld products
    
    
    2,805
    
    
    
    2,186Expansion and docking products
    
    
    1,791
    
    
    
    1,958Accessories and other products
    
    
    825
    
    
    
    1,049Total revenues
    
    $
    18,358
    
    
    $
    14,044
 Three Months EndedMarch 31,2005
    
    
    2004North America
    
    $
    15,569
    
    
    $
    10,781Europe
    
    
    1,242
    
    
    
    2,962Asia Pacific
    
    
    1,547
    
    
    
    264All other
    
    
    
    
    
    
    37$
    18,358
    
    
    $
    14,044
 Three Months EndedMarch 31,2005
    
    2004OEM and private-label-resellers
    
    
    64
    %
    
    
    70
    %Retailers and distributors
    
    
    24
    %
    
    
    17
    %Other
    
    
    12
    %
    
    
    13
    %100
    %
    
    
    100
    %
  Three Months EndedMarch 31,2005
    
    2004High power mobile electronic power products
    
    
    34
    %
    
    
    40
    %Low power mobile electronic power products
    
    
    35
    %
    
    
    Handheld products
    
    
    34
    %
    
    
    37
    %Expansion and docking products
    
    
    61
    %
    
    
    58
    %Accessories and other products
    
    
    46
    %
    
    
    47
    %
 (12) Contingencies
  13




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(13) Subsequent Event
   
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
    
    the loss of, and failure to replace, any significant customers;
    
    the timing and success of new product introductions;
    
    product developments, introductions and the pricing of competitors;
    
    the markets acceptance of our products and technology;
    
    the timing of substantial customer orders;
    
    the availability of qualified personnel;
    
    the performance of suppliers and subcontractors; and
    
    market demand and industry and general economic or business conditions.
  14




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Restatement
   As
    
    
    
    
    
    AsReported
    
    Adjustments
    
    RestatedAs of and for the quarter ended March 31, 2005Balance Sheet:Goodwill
    
    $
    12,161
    
    
    $
    (1,591
    )
    
    $
    10,570Total assets
    
    
    57,591
    
    
    
    (1,591
    )
    
    
    56,000Accumulated deficit
    
    
    (106,028
    )
    
    
    (1,591
    )
    
    
    (107,619
    )Total stockholders equity
    
    
    42,306
    
    
    
    (1,591
    )
    
    
    40,715Statement of Operations:General and administrative
    
    $
    2,842
    
    
    $
    217
    
    
    $
    3,059Total operating expenses
    
    
    6,225
    
    
    
    217
    
    
    
    6,442Loss from operations
    
    
    (748
    )
    
    
    (217
    )
    
    
    (965
    )Loss from continuing operations
    
    
    (710
    )
    
    
    (217
    )
    
    
    (927
    )Net loss
    
    
    (710
    )
    
    
    (217
    )
    
    
    (927
    )Loss Per Share  Basic and Diluted:Loss per share from continuing operations
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.03
    )Total loss per share
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.03
    )
  As
    
    
    
    
    
    AsReported
    
    Adjustments
    
    RestatedAs of and for the quarter ended March 31, 2004Balance Sheet:Goodwill
    
    $
    13,377
    
    
    $
    (839
    )
    
    $
    12,538Total assets
    
    
    52,499
    
    
    
    (839
    )
    
    
    51,660Accumulated deficit
    
    
    (104,834
    )
    
    
    (839
    )
    
    
    (105,673
    )Total stockholders equity
    
    
    40,556
    
    
    
    (839
    )
    
    
    39,717Statement of Operations:General and administrative
    
    $
    2,304
    
    
    $
    409
    
    
    $
    2,713Total operating expenses
    
    
    5,386
    
    
    
    409
    
    
    
    5,795Loss from operations
    
    
    (774
    )
    
    
    (409
    )
    
    
    (1,183
    )Loss from continuing operations
    
    
    (772
    )
    
    
    (409
    )
    
    
    (1,181
    )Net loss
    
    
    (773
    )
    
    
    (409
    )
    
    
    (1,182
    )Loss Per Share  Basic and Diluted:Loss per share from continuing operations
    
    $
    (0.03
    )
    
    $
    (0.01
    )
    
    $
    (0.04
    )Total loss per share
    
    $
    (0.03
    )
    
    $
    (0.01
    )
    
    $
    (0.04
    )
  As
    
    
    
    
    
    AsReported
    
    Adjustments
    
    RestatedAs of and for the year ended December 31, 2004Balance Sheet:Goodwill
    
    $
    11,944
    
    
    $
    (1,374
    )
    
    $
    10,570Total assets
    
    
    56,791
    
    
    
    (1,374
    )
    
    
    55,417Accumulated deficit
    
    
    (105,318
    )
    
    
    (1,374
    )
    
    
    (106,692
    )Total stockholders equity
    
    
    42,075
    
    
    
    (1,374
    )
    
    
    40,701
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##### Table of Contents



Overview
    ®
      Critical Accounting Policies and Estimates
 16




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##### Table of Contents



Revenue Recognition.
    Inventory Valuation.
 Goodwill and Intangible Assets Valuation Goodwill and Other Intangible Assets
 17




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##### Table of Contents



Results of Operations
  Three months endedMarch 31,2005
    
    2004(restated)
    
    (restated)Revenue
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenue
    
    
    70.2
    %
    
    
    67.2
    %Gross profit
    
    
    29.8
    %
    
    
    32.8
    %Operating expenses:Sales and marketing
    
    
    10.8
    %
    
    
    11.8
    %Research and development
    
    
    7.6
    %
    
    
    10.1
    %General and administrative
    
    
    16.7
    %
    
    
    19.3
    %Total operating expenses
    
    
    35.1
    %
    
    
    41.3
    %Loss from continuing operations
    
    
    -5.3
    %
    
    
    -8.4
    %Other income (expense):Interest, net
    
    
    0.2
    %
    
    
    -0.1
    %Other, net
    
    
    0.0
    %
    
    
    0.2
    %Loss from continuing operations
    
    
    -5.0
    %
    
    
    -8.4
    %Loss from discontinued operations
    
    
    
    
    
    
    0.0
    %Net loss
    
    
    -5.0
    %
    
    
    -8.4
    %
 Comparison of Three Months Ended March 31, 2005 and 2004
 Revenue .
 Increase
    
    Percentage changefrom same period
    
    from the same periodQ1 2005
    
    Q1 2004
    
    in the prior year
    
    in the prior yearRevenue
    
    $
    18,358
    
    
    $
    14,044
    
    
    
    $4,314
    
    
    
    30.7%
  18




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##### Table of Contents



Cost of revenue, gross profit and gross margin .
 Increase (decrease)
    
    Percentage change fromfrom same period in
    
    the same period in theQ1 2005
    
    
    Q1 2004
    
    
    the prior year
    
    prior yearCost of revenue
    
    $
    12,881
    
    
    $
    9,432
    
    
    $
    3,449
    
    
    
    36.6
    %Gross profit
    
    $
    5,477
    
    
    $
    4,612
    
    
    $
    864
    
    
    
    18.7
    %Gross margin
    
    
    29.8
    %
    
    
    32.8
    %
    
    
    (3.0
    )%
    
    
    (9.1
    )%
  Sales and marketing .
 Increase
    
    Percentage changefrom same period
    
    from the same periodQ1 2005
    
    Q1 2004
    
    in the prior year
    
    in the prior yearSales and marketing
    
    $
    1,986
    
    
    $
    1,658
    
    
    $
    328
    
    
    
    19.8
    %
  Research and development .
 Decrease
    
    Percentage changefrom same period
    
    from the same periodQ1 2005
    
    Q1 2004
    
    in the prior year
    
    in the prior yearResearch and development
    
    $
    1,397
    
    
    $
    1,424
    
    
    $
    (27
    )
    
    
    (1.9
    )%
  General and administrative.
 Increase
    
    Percentage changefrom same period
    
    from the same periodQ1 2005
    
    Q1 2004
    
    in the prior year
    
    in the prior yearGeneral and
administrative
(restated)
    
    $
    3,059
    
    
    $
    2,713
    
    
    $
    346
    
    
    
    12.8
    %
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##### Table of Contents



Income taxes .
 Operating Outlook
  
    
    Improved economics in the low power adapter product line resulting from new terms in
place with RadioShack and Motorola;
    
    Continued growth in sales of portable computer power adapters driven by new products and
new direct and indirect accounts such as Wal-Mart, PC World, Staples and The Sharper Image;
    
    Continued growth in sales of low power adapters driven by new products, new accounts,
and new distribution partners such as The Carphone Warehouse, Intertan, Apple, the palmOne
and Treo online stores, and RadioShack kiosks within Sprint stores and Sams Club stores;
    
    The continued rollout of our low power products to wireless carriers, distributors, and
retailers through Motorolas distribution channels;
    
    The anticipated introduction of jointly-developed power products with Energizer in late 2005 or early 2006; and
    
    The introduction of new products based on the joint development program with M-Flex in 2006.
     20




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##### Table of Contents



Liquidity and Capital Resources
  Three Months Ended March 31,2005
    
    
    2004Net cash used in operating activities
    
    $
    (37
    )
    
    $
    (187
    )Net cash used in investing activities
    
    
    (323
    )
    
    
    (319
    )Net cash provided by financing activities
    
    
    580
    
    
    
    120Foreign currency exchange impact on cash flow
    
    
    (1
    )
    
    
    13Net cash provided by (used in) discontinued operations
    
    
    243
    
    
    
    (97
    )Increase (decrease) in cash and cash equivalents
    
    $
    462
    
    
    $
    (470
    )Cash and cash equivalents at beginning of period
    
    $
    12,768
    
    
    $
    11,024Cash and cash equivalents at end of period
    
    $
    13,230
    
    
    $
    10,554
 Cash and Cash Flow
 
    
    Net cash used in operating activities.Cash was used in operating activities for the
three months ended March 31, 2005 primarily to fund operating losses and working
capital necessary to support our growing revenue base. Specifically, cash was used to
fund accounts receivable growth that resulted from our 30.7% increase in revenues for
the three months ended March 31, 2005 as compared to March 31, 2004. Cash used to fund
growth in inventory was offset by growth in accounts payable. In 2005, we expect to
generate positive cash flow from operating activities as we expect our operating
results to be at or near breakeven with non-cash items and changes in working capital
to have a relatively neutral effect on cash flows. Our consolidated cash flow
operating metrics are as follows:
 March 31,2005
    
    2004Days outstanding in ending accounts receivable (DSOs)
    
    
    82
    
    
    
    78Inventory turns
    
    
    6
    
    
    
    4
 The increase in DSOs at March 31, 2005 compared to March 31, 2004, is primarily due
to the timing of certain shipments to Targus for which payment was received shortly after
March 31, 2005. We expect DSOs to continue to improve during 2005 as we continue to
leverage our key OEM, private-label reseller and retail customer relationships. The
improvement in inventory turns is primarily due to increased sales during the three
months ended March 31, 2005 without a corresponding increase in inventory. We expect to
continue to manage inventory growth during 2005 and we expect inventory turns to continue
to improve as we increase sales volumes in 2005.
    
    Net cash used in investing activities.For the three months ended March 31, 2005,
net cash used in investing activities was primarily for the purchase of property and
equipment. We anticipate future investment in capital equipment, primarily for tooling
equipment to be used in the production of new products.
    
    Net cash provided by financing activities.Net cash provided by financing
activities for the three months ended March 31, 2005 was primarily from net proceeds
from the exercises of stock options and warrants and payment of stock subscription
receivables. Although we expect to generate cash flows from operations sufficient to
support our operations, we may issue additional shares of stock in the future to
generate cash for growth opportunities. Subsequent to March 31, 2005 we raised an
additional $10 million in connection with strategic investments in our common stock by
RadioShack and Motorola.
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##### Table of Contents



Financing Facilities.
 Contractual Obligations.
 Payment due by period2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    More than 5 yearsOperating lease obligations
    
    $
    588
    
    
    $
    688
    
    
    $
    678
    
    
    $
    375
    
    
    $
    
    
    
    $
    Inventory Purchase obligations
    
    
    16,256
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other long-term obligations
    
    
    250
    
    
    
    195
    
    
    
    290
    
    
    
    
    
    
    
    
    
    
    
    Totals
    
    $
    17,094
    
    
    $
    883
    
    
    $
    968
    
    
    $
    375
    
    
    $
    
    
    
    $
    
 Off-Balance Sheet Arrangements.
 Acquisitions and dispositions.
    Liquidity Outlook.
 Recent Accounting Pronouncements
  22




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES
   23




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##### Table of Contents



Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting Business Combinations
 
 PART II: OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   24




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##### Table of Contents



ITEM 6. EXHIBITS
  25




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##### Table of Contents



MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
 
 SIGNATURES
  MOBILITY ELECTRONICS, INC.Dated:
November 14, 2005
    
    By:
    
    /s/ Charles R. MolloCharles R. MolloPresident, Chief Executive Officerand Chairman of the Board(Principal Executive Officer)By:
    
    /s/ Joan W. BrubacherJoan W. BrubacherExecutive Vice President and Chief Financial Officerand Authorized Officer of Registrant(Principal Financial and Accounting Officer)
 26




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##### Table of Contents



EXHIBIT INDEX
 Exhibit

Number
    
    Description of Document4.1
    
    $25 Million Threshold Warrant to Purchase Shares of Common Stock issued to Motorola, Inc., dated
as of March 31, 2005(1)4.2
    
    $50 Million Threshold Warrant to Purchase Shares of Common Stock issued to Motorola, Inc., dated
as of March 31, 2005(1)4.3
    
    $25 Million Threshold Warrant to Purchase Shares of Common Stock issued to RadioShack Corporation,
dated as of March 31, 2005(1)4.4
    
    $50 Million Threshold Warrant to Purchase Shares of Common Stock issued to RadioShack Corporation,
dated as of March 31, 2005(1)4.5
    
    Strategic Partners Investment Agreement by and among Mobility Electronics, Inc., RadioShack
Corporation and Motorola, Inc., dated as of March 31, 2005(1)10.1
    
    Form of Mobility Electronics, Inc. Omnibus Long-Term Incentive Plan Restricted Stock Unit Award
Agreement(2)10.2
    
    Form of Mobility Electronics, Inc. Non-Employee Director Long-Term Incentive Plan Restricted Stock
Unit Award Agreement(2)10.3
    
    Patent Purchase Agreement between Mobility Electronics, Inc. and Tao Logic Systems LLC(2) +31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002*
 
 *
    
    Filed herewith+
    
    Schedules and similar attachments have been omitted from this agreement. The registrant will
furnish supplementally a copy of any omitted schedule or attachment to the Commission upon request.(1)
    
    Previously filed as an exhibit to Current Report on Form 8-K filed on April 5, 2005.(2)
    
    Previously filed as an exhibit to Quarterly Report on Form 10-Q filed on May 10, 2005. 27