##### 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, 2007
 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
(Commission File Number)
    
    86-0843914
(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
  o þ o
  o þ




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##### 



MOBILITY ELECTRONICS, INC.
FORM 10-Q
 TABLE OF CONTENTS
  
 PAGE NO.PART I: FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets
as of March 31, 2007 and December 31, 2006
    
    
    3Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 2007
and 2006
    
    
    4Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2007 and 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    21PART II: OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    22Item 8. Other Information
    
    
    22Item 9. Exhibits
    
    
    22SIGNATURES
    
    
    23INDEX TO EXHIBITS
    
    
    24EX-31.1EX-31.2EX-32.1
  2




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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 31,2007
    
    
    2006(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    14,014
    
    
    $
    9,201Short-term investments
    
    
    5,913
    
    
    
    8,142Accounts receivable, net
    
    
    17,394
    
    
    
    20,855Inventories
    
    
    9,078
    
    
    
    12,350Prepaid expenses and other current assets
    
    
    549
    
    
    
    406Total current assets
    
    
    46,948
    
    
    
    50,954Property and equipment, net
    
    
    2,761
    
    
    
    2,980Goodwill
    
    
    3,912
    
    
    
    3,912Intangible assets, net
    
    
    3,040
    
    
    
    3,095Long-term investments
    
    
    2,352
    
    
    
    4,636Notes receivable and other assets
    
    
    1,559
    
    
    
    287Total assets
    
    $
    60,572
    
    
    $
    65,864LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    8,769
    
    
    $
    12,010Accrued expenses and other current liabilities
    
    
    2,470
    
    
    
    3,067Deferred revenue
    
    
    1,403
    
    
    
    1,357Current portion of non-current liabilities
    
    
    
    
    
    
    25Total current liabilities
    
    
    12,642
    
    
    
    16,459Non-current liabilities, less current portion
    
    
    
    
    
    
    Total liabilities
    
    
    12,642
    
    
    
    16,459Stockholders equity:Common stock
    
    
    318
    
    
    
    317Additional paid-in capital
    
    
    167,996
    
    
    
    167,436Accumulated deficit
    
    
    (120,570
    )
    
    
    (118,527
    )Accumulated other comprehensive income
    
    
    186
    
    
    
    179Total stockholders equity
    
    
    47,930
    
    
    
    49,405Total liabilities and stockholders equity
    
    $
    60,572
    
    
    $
    65,864
  3




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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 31,2007
    
    
    2006Revenue
    
    $
    18,863
    
    
    $
    22,837Cost of revenue
    
    
    13,457
    
    
    
    15,880Gross profit
    
    
    5,406
    
    
    
    6,957Operating expenses:Marketing and sales
    
    
    2,757
    
    
    
    2,029Research and development
    
    
    1,677
    
    
    
    1,873General and administrative
    
    
    3,586
    
    
    
    4,391Total operating expenses
    
    
    8,020
    
    
    
    8,293Loss from operations
    
    
    (2,614
    )
    
    
    (1,336
    )Other income (expense):Interest income, net
    
    
    267
    
    
    
    303Litigation settlement expense
    
    
    
    
    
    
    (250
    )Other income, net
    
    
    304
    
    
    
    20Net loss
    
    $
    (2,043
    )
    
    $
    (1,263
    )Basic and diluted net loss per common share
    
    $
    (0.06
    )
    
    $
    (0.04
    )Basic and diluted weighted average common shares outstanding
    
    
    31,740
    
    
    
    30,929
  4




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##### Table of Contents



MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (In thousands)  (unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (2,043
    )
    
    $
    (1,263
    )Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:Provision for accounts receivable and sales returns and credits
    
    
    78
    
    
    
    37Depreciation and amortization
    
    
    517
    
    
    
    459Stock compensation expense
    
    
    518
    
    
    
    518Changes in operating assets and liabilities:Accounts receivable
    
    
    3,383
    
    
    
    (347
    )Inventories
    
    
    3,272
    
    
    
    (1,714
    )Prepaid expenses and other assets
    
    
    (1,555
    )
    
    
    269Accounts payable
    
    
    (3,266
    )
    
    
    (2,143
    )Accrued expenses and other current liabilities
    
    
    (551
    )
    
    
    (2,620
    )Net cash provided by (used in) operating activities
    
    
    353
    
    
    
    (6,804
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (103
    )
    
    
    (469
    )Sale of investments
    
    
    4,516
    
    
    
    5,163Net cash provided by investing activities
    
    
    4,413
    
    
    
    4,694Cash flows from financing activities:Payment of non-current liabilities
    
    
    (25
    )
    
    
    (25
    )Net proceeds
from issuance of common stock, and exercise of options and warrants
    
    
    67
    
    
    
    286Net cash provided by financing activities
    
    
    42
    
    
    
    261Effects of exchange rate changes on cash and cash equivalents
    
    
    5
    
    
    
    10Net increase (decrease) in cash and cash equivalents
    
    
    4,813
    
    
    
    (1,839
    )Cash and cash equivalents, beginning of period
    
    
    9,201
    
    
    
    13,637Cash and cash equivalents, end of period
    
    $
    14,014
    
    
    $
    11,798
  5




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##### Table of Contents



MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (1) Basis of Presentation
    (2) Stock-based Compensation
    6




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2004 Directors Plan
    
    
    2004 Omnibus PlanWeighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageValue per
    
    
    
    
    
    
    Value perNumber
    
    
    Share
    
    
    Number
    
    
    ShareOutstanding, December 31, 2006
    
    
    164,400
    
    
    $
    8.20
    
    
    
    914,164
    
    
    $
    7.36Granted
    
    
    
    
    
    
    
    
    
    
    707,075
    
    
    
    3.35Canceled
    
    
    
    
    
    
    
    
    
    
    (159,829
    )
    
    
    6.33Released to common stock
    
    
    
    
    
    
    
    
    
    
    (24,511
    )
    
    
    7.62Released for settlement of taxes
    
    
    
    
    
    
    
    
    
    
    (9,812
    )
    
    
    7.61Outstanding, March 31, 2007
    
    
    164,400
    
    
    $
    8.20
    
    
    
    1,427,087
    
    
    $
    5.47
  (3) Investments
     March 31, 2007
    
    
    December 31, 2006Net
    
    
    
    
    
    
    
    
    
    
    NetUnrealized
    
    
    
    
    
    
    
    
    
    
    UnrealizedHolding
    
    
    Aggregate
    
    
    
    
    
    
    HoldingAmortized
    
    
    Gains
    
    
    Fair
    
    
    Amortized
    
    
    Gains
    
    
    AggregateCost
    
    
    (Losses)
    
    
    Value
    
    
    Cost
    
    
    (Losses)
    
    
    Fair ValueU.S. corporate securities:Commercial paper
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,822
    
    
    $
    
    
    
    $
    3,822Corporate notes and bonds
    
    
    4,162
    
    
    
    (2
    )
    
    
    4,160
    
    
    
    2,974
    
    
    
    1
    
    
    
    2,975Asset backed
securities  fixed
    
    
    649
    
    
    
    
    
    
    
    649
    
    
    
    645
    
    
    
    
    
    
    
    6454,811
    
    
    
    (2
    )
    
    
    4,809
    
    
    
    7,441
    
    
    
    1
    
    
    
    7,442U.S. government securities
    
    
    1,102
    
    
    
    2
    
    
    
    1,104
    
    
    
    700
    
    
    
    
    
    
    
    700$
    5,913
    
    
    $
    
    
    
    $
    5,913
    
    
    $
    8,141
    
    
    $
    1
    
    
    $
    8,142
 7




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##### Table of Contents



March 31, 2007
    
    
    December 31, 2006Net
    
    
    
    
    
    
    
    
    
    
    NetUnrealized
    
    
    
    
    
    
    
    
    
    
    UnrealizedHolding
    
    
    Aggregate
    
    
    
    
    
    
    HoldingAmortized
    
    
    Gains
    
    
    Fair
    
    
    Amortized
    
    
    Gains
    
    
    AggregateCost
    
    
    (Losses)
    
    
    Value
    
    
    Cost
    
    
    (Losses)
    
    
    Fair ValueU.S. corporate securities:Corporate notes and bonds
    
    $
    1,156
    
    
    $
    (1
    )
    
    $
    1,155
    
    
    $
    2,344
    
    
    $
    (6
    )
    
    $
    2,338U.S. government securities
    
    
    1,195
    
    
    
    2
    
    
    
    1,197
    
    
    
    2,297
    
    
    
    1
    
    
    
    2,298$
    2,351
    
    
    $
    1
    
    
    $
    2,352
    
    
    $
    4,641
    
    
    $
    (5
    )
    
    $
    4,636
 (4) Inventories
  March 31,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    1,222
    
    
    $
    2,160Finished goods
    
    
    7,856
    
    
    
    10,190$
    9,078
    
    
    $
    12,350
  (5) Goodwill
  High-Power Group
    
    $
    3,675Low-Power Group
    
    
    237Reported balance at March 31, 2007
    
    $
    3,912
 (6) Intangible Assets
  March 31, 2007
    
    
    December 31, 2006Average
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetLife
    
    
    Intangible
    
    
    Accumulated
    
    
    Intangible
    
    
    Intangible
    
    
    Accumulated
    
    
    Intangible(Years)
    
    
    Assets
    
    
    Amortization
    
    
    Assets
    
    
    Assets
    
    
    Amortization
    
    
    AssetsAmortized intangible
assets:License fees
    
    
    7
    
    
    $
    934
    
    
    $
    (592
    )
    
    $
    342
    
    
    $
    934
    
    
    $
    (571
    )
    
    $
    363Patents and trademarks
    
    
    5
    
    
    
    3,270
    
    
    
    (1,489
    )
    
    
    1,781
    
    
    
    3,134
    
    
    
    (1,371
    )
    
    
    1,763Trade names
    
    
    10
    
    
    
    429
    
    
    
    (180
    )
    
    
    249
    
    
    
    429
    
    
    
    (168
    )
    
    
    261Customer list
    
    
    5
    
    
    
    813
    
    
    
    (145
    )
    
    
    668
    
    
    
    813
    
    
    
    (105
    )
    
    
    708Total
    
    
    
    
    
    $
    5,446
    
    
    $
    (2,406
    )
    
    $
    3,040
    
    
    $
    5,310
    
    
    $
    (2,215
    )
    
    $
    3,095
   8




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##### Table of Contents



(7) Line of Credit
  (8) Income Taxes
   (9) Stockholders Equity
  (10) Net Loss per Share
  Three Months EndedMarch 31,2007
    
    
    2006Numerator:Net loss
    
    $
    (2,043
    )
    
    $
    (1,263
    )Denominator:Weighted
average number of common shares outstanding  basic and diluted
    
    
    31,740
    
    
    
    30,929Net loss per
share  basic and diluted
    
    $
    (0.06
    )
    
    $
    (0.04
    )Stock options not included in dilutive net loss per share since anti-dilutive
    
    
    428
    
    
    
    45Warrants not included in dilutive net loss per share since anti-dilutive
    
    
    1,195
    
    
    
    
 (11) Business Segments, Concentration of Credit Risk and Significant Customers
  9




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##### Table of Contents



Three Months EndedMarch 31,2007
    
    
    2006Revenues:High-Power Group
    
    $
    13,261
    
    
    $
    14,003Low-Power Group
    
    
    4,211
    
    
    
    2,676Connectivity Group
    
    
    1,391
    
    
    
    6,158$
    18,863
    
    
    $
    22,837
 Three Months EndedMarch 31,2007
    
    
    2006Operating income (loss):High-Power Group
    
    $
    1,925
    
    
    $
    2,336Low-Power Group
    
    
    (115
    )
    
    
    (170
    )Connectivity Group
    
    
    (838
    )
    
    
    889Corporate
    
    
    (3,586
    )
    
    
    (4,391
    )$
    (2,614
    )
    
    $
    (1,336
    )
  March 31,
    
    
    December 31,2007
    
    
    2006Assets:High-Power Group
    
    $
    22,040
    
    
    $
    26,253Low-Power Group
    
    
    12,874
    
    
    
    13,362Connectivity Group
    
    
    3,383
    
    
    
    4,220Corporate
    
    
    22,275
    
    
    
    22,029$
    60,572
    
    
    $
    65,864
   Three Months EndedMarch 31,2007
    
    
    2006High-power mobile electronic power products
    
    $
    13,083
    
    
    $
    12,986Low-power mobile electronic power products
    
    
    3,384
    
    
    
    3,006Foldable keyboard products
    
    
    823
    
    
    
    Accessories and other products
    
    
    174
    
    
    
    687Handheld products
    
    
    180
    
    
    
    4,579Expansion and docking products
    
    
    1,219
    
    
    
    1,579Total revenues
    
    $
    18,863
    
    
    $
    22,837
 Three Months EndedMarch 31,2007
    
    
    2006North America
    
    $
    15,167
    
    
    $
    19,996Europe
    
    
    1,154
    
    
    
    1,347Asia Pacific
    
    
    2,536
    
    
    
    1,489All other
    
    
    6
    
    
    
    5$
    18,863
    
    
    $
    22,837
 10




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##### Table of Contents



Three Months EndedMarch 31,2007
    
    
    2006OEM and private-label-resellers
    
    
    63
    %
    
    
    62
    %Retailers and distributors
    
    
    29
    %
    
    
    27
    %Other
    
    
    8
    %
    
    
    11
    %100
    %
    
    
    100
    %
  Three Months EndedMarch 31,2007
    
    2006High-power mobile electronic power products
    
    
    38
    %
    
    
    38
    %Low-power mobile electronic power products
    
    
    49
    %
    
    
    50
    %Foldable keyboard products
    
    
    45
    %
    
    
    Accessories and other products
    
    
    51
    %
    
    
    48
    %Handheld products
    
    
    1
    %
    
    
    37
    %Expansion and docking products
    
    
    59
    %
    
    
    57
    %
      (12) Contingencies
    (13) Subsequent Events
  11




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
    
    the loss of, and failure to replace, any significant customers such as Dell and
Lenovo;
    
    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®, iGo®, and iGo dualpower®, 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.
 12




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##### Table of Contents



Overview
   High-Power Group.
 Low-Power Group.
  Distribution Channels.
 Strategy.
 13




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##### Table of Contents



Recent Developments
    ®
  Critical Accounting Policies and Estimates
  14




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##### Table of Contents



Results of Operations
  Three months endedMarch 31,2007
    
    
    2006Revenue
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenue
    
    
    71.3
    %
    
    
    69.5
    %Gross profit
    
    
    28.7
    %
    
    
    30.5
    %Operating expenses:Sales and marketing
    
    
    14.6
    %
    
    
    8.9
    %Research and development
    
    
    8.9
    %
    
    
    8.2
    %General and administrative
    
    
    19.0
    %
    
    
    19.2
    %Total operating expenses
    
    
    42.5
    %
    
    
    36.3
    %Loss from operations
    
    
    -13.8
    %
    
    
    -5.8
    %Other income (expense):Interest, net
    
    
    1.4
    %
    
    
    1.3
    %Other, net
    
    
    1.6
    %
    
    
    -1.0
    %Net loss
    
    
    -10.8
    %
    
    
    -5.5
    %
 Comparison of Three Months Ended March 31, 2007 and 2006
 Revenue .
 Increase (decrease)
    
    
    Percentage changefrom same period
    
    
    from the same periodQ1 2007
    
    
    Q1 2006
    
    

in the prior year
    
    
    in the prior yearHigh-Power Group
    
    $
    13,261
    
    
    $
    14,003
    
    
    $
    (742
    )
    
    
    (5.3
    )%Low-Power Group
    
    
    4,211
    
    
    
    2,676
    
    
    
    1,535
    
    
    
    57.4
    %Connectivity Group
    
    
    1,391
    
    
    
    6,158
    
    
    
    (4,767
    )
    
    
    (77.4
    )%Total Revenue
    
    $
    18,863
    
    
    $
    22,837
    
    
    $
    (3,974
    )
    
    
    (17.4
    )%
 High-Power Group.
 Low-Power Group.
 15




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##### Table of Contents



Connectivity Group.
 Cost of revenue, gross profit and gross margin .
 Decrease from same
    
    Percentage change fromperiod in the prior
    
    the same period in theQ1 2007
    
    Q1 2006
    
    year
    
    prior yearCost of revenue
    
    $
    13,457
    
    
    $
    15,880
    
    
    $
    (2,423
    )
    
    
    (15.3
    )%Gross profit
    
    $
    5,406
    
    
    $
    6,957
    
    
    $
    (1,551
    )
    
    
    (22.3
    )%Gross margin
    
    
    28.7
    %
    
    
    30.5
    %
    
    
    (1.8
    )%
    
    
    (5.9
    )%
  Sales and marketing .
 Increase
    
    Percentage changefrom same period in
    
    from the same periodQ1 2007
    
    Q1 2006
    
    the prior year
    
    in the prior yearSales and marketing
    
    $
    2,757
    
    
    $
    2,029
    
    
    $
    728
    
    
    
    35.9
    %
  16




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##### Table of Contents



Research and development .
 Decrease
    
    Percentage changefrom same period in
    
    from the same periodQ1 2007
    
    Q1 2006
    
    the prior year
    
    in the prior yearResearch and development
    
    $
    1,677
    
    
    $
    1,873
    
    
    $
    (196
    )
    
    
    (10.5
    )%
  General and administrative.
 Decrease
    
    Percentage changefrom same period in
    
    from the same periodQ1 2007
    
    Q1 2006
    
    the prior year
    
    in the prior yearGeneral and administrative
    
    $
    3,586
    
    
    $
    4,391
    
    
    $
    (805
    )
    
    
    (18.3
    )%
  Interest income, net.
 Decrease
    
    Percentage changefrom same period in
    
    from the same periodQ1 2007
    
    Q1 2006
    
    the prior year
    
    in the prior yearInterest income
    
    $
    281
    
    
    $
    323
    
    
    $
    (42
    )
    
    
    (13.0
    )%Interest expense
    
    $
    (14
    )
    
    $
    (20
    )
    
    $
    6
    
    
    
    30.0
    %Net interest income
(expense)
    
    $
    267
    
    
    $
    303
    
    
    $
    (36
    )
    
    
    (11.9
    )%
 Other income, net .
 Litigation settlement .
 Income taxes .
 17




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##### Table of Contents



Operating Outlook
  
    
    the disposition of the assets of the Connectivity Group will allow management to focus
its efforts on growing the Low-Power and High-Power Groups;
    
    the continued penetration of both the domestic and international wireless carrier,
dealer/agent, and distributor markets by our Low-Power Group;
    
    expanded sales of power products in the retail channel through our strategic reseller
agreement with Targus and sales to retailers and distributors of our iGo branded products;
and
    
    a strong new product pipeline that will provide consumers with innovative power products
offering a broad range of features and price points.
      Liquidity and Capital Resources
  Three Months Ended March 31,2007
    
    
    2006Net cash provided by (used in) operating activities
    
    $
    353
    
    
    $
    (6,804
    )Net cash provided by investing activities
    
    
    4,413
    
    
    
    4,694Net cash provided by financing activities
    
    
    42
    
    
    
    261Foreign currency exchange impact on cash flow
    
    
    5
    
    
    
    10Increase (decrease) in cash and cash equivalents
    
    $
    4,813
    
    
    $
    (1,839
    )Cash and cash equivalents at beginning of period
    
    $
    9,201
    
    
    $
    13,637Cash and cash equivalents at end of period
    
    $
    14,014
    
    
    $
    11,798
 Cash and Cash Flow
 18




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##### Table of Contents




    
    Net cash provided by operating activities.Cash was provided by operating activities
for the three months ended March 31, 2007 primarily as a result of collections of
accounts receivable and sales of inventories, partially offset by use of cash to pay
suppliers. Later in 2007, we expect to use cash in operating activities as we expect
to incur operating losses, 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 31,2007
    
    2006Days outstanding in ending accounts receivable (DSOs)
    
    
    83
    
    
    
    75Inventory turns
    
    
    6
    
    
    
    4
 The increase in DSOs at March 31, 2007 compared to March 31, 2006, is primarily due
to the timing of payments received from our large private-label reseller customer,
Targus. We expect DSOs to improve during 2007 as we expect to improve collections from
Targus. The increase in inventory turns was primarily due to impairment charges recorded
during 2006 relating our Connectivity inventories. We expect to manage inventory growth
during 2007 and we expect inventory turns to continue to improve as we focus on our
strategy to grow low-power and high-power revenues in 2007.
    
    Net cash provided by investing activities.For the three months ended March 31,
2007, net cash was provided by investing activities as we generated proceeds from the
sale of investments of $4.5 million, partially offset by 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, 2007 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.
  Financing Facilities.
 19




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##### Table of Contents



Contractual Obligations.
 Payment due by period2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    More than 5 yearsOperating lease obligations
    
    $
    696
    
    
    $
    492
    
    
    $
    19
    
    
    $
    
    
    
    $
    
    
    
    $
    Inventory Purchase obligations
    
    
    14,007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other long-term obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Totals
    
    $
    14,703
    
    
    $
    492
    
    
    $
    19
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Off-Balance Sheet Arrangements.
 Acquisitions and Dispositions.
      Liquidity Outlook.
 Recent Accounting Pronouncements
  20




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##### Table of Contents



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 8. OTHER INFORMATION
  
 ITEM 9. EXHIBITS
  22




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##### Table of Contents



MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
 
 SIGNATURES
  MOBILITY ELECTRONICS, INC.Dated: May 9, 2007
    By:
    /s/ Charles R. MolloCharles R. MolloPresident, Chief Executive
Officer
and Chairman of the Board
(Principal Executive Officer)By:
    /s/ Joan W. BrubacherJoan W. BrubacherExecutive Vice President and  Chief
Financial Officer
and Authorized Officer of Registrant
(Principal Financial 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 Document31.1
    
    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 24