10-Q 1 d90023e10-q.txt FORM 10-Q FOR QUARTER ENDED JUNE 30, 2001 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 2001 OR [ ] 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 86-0843914 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7955 EAST REDFIELD ROAD SCOTTSDALE, ARIZONA 85260 (480) 596-0061 (Address and telephone number of principal executive offices) Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] At June 30, 2001, there were 14,768,001 shares of the Registrant's Common Stock outstanding. 2 MOBILITY ELECTRONICS, INC. FORM 10-Q TABLE OF CONTENTS
PAGE NO. -------- PART I: FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000 3 Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2001 and 2000 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 PART II: OTHER INFORMATION Item 1. Legal Proceedings 15 Item 2. Changes in Securities and Use of Proceeds 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURE 19 INDEX TO EXHIBITS 20
-2- 3 PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS: MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31, 2001 2000 ------------- ------------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 18,560,906 $ 30,369,490 Accounts receivable, net 6,821,569 6,905,679 Inventories 5,897,554 6,370,881 Prepaid expenses and other current assets 512,204 136,782 ------------- ------------- Total current assets 31,792,233 43,782,832 ------------- ------------- Property and equipment, net 2,289,013 1,682,637 Goodwill, less accumulated amortization of $465,824 (unaudited) and $155,275 at June 30, 2001 and December 31, 2000, respectively 5,745,128 6,055,677 Other assets, net 6,111,659 4,153,111 ------------- ------------- Total assets $ 45,938,033 $ 55,674,257 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,019,680 $ 4,479,044 Accrued expenses and other current liabilities 2,413,899 2,254,195 Current installments of capital lease obligations 13,224 36,636 ------------- ------------- Total current liabilities 6,446,803 6,769,875 ------------- ------------- Total liabilities 6,446,803 6,769,875 ------------- ------------- Stockholders' equity: Convertible preferred stock - Series C, $.01 par value; authorized 15,000,000 shares; 809,588 (unaudited) and 1,263,708 shares issued and outstanding at June 30, 2001 and December 31, 2000, respectively 8,096 12,637 Common stock, $.01 par value; authorized 90,000,000 shares; 14,768,001 (unaudited) and 14,323,100 shares issued and outstanding at June 30, 2001 and December 31, 2000, respectively 147,680 143,231 Additional paid-in capital 113,015,411 113,614,659 Accumulated deficit (71,747,968) (61,945,917) Stock subscription and deferred compensation (1,915,959) (2,920,228) Accumulated other comprehensive income - foreign currency translation adjustment (16,030) -- ------------- ------------- Total stockholders' equity 39,491,230 48,904,382 ------------- ------------- Total liabilities and stockholders' equity $ 45,938,033 $ 55,674,257 ============= =============
See accompanying notes to condensed consolidated financial statements. -3- 4 MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended Six Months Ended June 30, June 30, ---------------------------- ---------------------------- 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Revenue: Net product sales $ 6,905,099 $ 6,289,680 $ 13,980,743 $ 11,291,685 Technology transfer fees 100,000 -- 200,000 -- ------------ ------------ ------------ ------------ Total revenue 7,005,099 6,289,680 14,180,743 11,291,685 Cost of revenue: Product sales 7,241,060 4,822,047 12,819,953 8,429,333 Technology transfer -- -- -- -- ------------ ------------ ------------ ------------ Total cost of revenue 7,241,060 4,822,047 12,819,953 8,429,333 ------------ ------------ ------------ ------------ Gross profit (loss) (235,961) 1,467,633 1,360,790 2,862,352 ------------ ------------ ------------ ------------ Operating expenses: Sales and marketing 2,468,924 1,838,918 4,700,018 2,983,219 Research and development 1,698,565 927,549 3,204,890 1,878,206 General and administrative 2,061,140 1,262,616 4,070,776 2,498,162 ------------ ------------ ------------ ------------ Total operating expenses 6,228,629 4,029,083 11,975,684 7,359,587 ------------ ------------ ------------ ------------ Loss from operations (6,464,590) (2,561,450) (10,614,894) (4,497,235) Other income (expense): Interest income (expense), net 339,926 (604,953) 811,233 (1,533,888) Other income, net 6,884 80 18,789 2,290 Foreign currency exchange loss (22,259) (16,100) (17,179) (35,934) ------------ ------------ ------------ ------------ Loss before provision for income taxes (6,140,039) (3,182,423) (9,802,051) (6,064,767) Provision for income taxes -- -- -- -- ------------ ------------ ------------ ------------ Net loss (6,140,039) (3,182,423) (9,802,051) (6,064,767) Beneficial conversion costs of preferred stock -- -- -- (48,663) ------------ ------------ ------------ ------------ Net loss attributable to common stockholders $ (6,140,039) $ (3,182,423) $ (9,802,051) $ (6,113,430) ============ ============ ============ ============ Net loss per share: Basic and diluted $ (0.41) $ (0.46) $ (0.67) $ (0.93) ============ ============ ============ ============ Weighted average common shares outstanding: Basic and diluted 14,820,471 6,869,711 14,650,129 6,596,966 ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements. -4- 5 MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six months ended June 30, ---------------------------- 2001 2000 ------------ ------------ Cash flows from operating activities: Net loss $ (9,802,051) $ (6,064,767) Adjustments to reconcile net loss to net cash used in operating activities: Provision for accounts receivable 192,983 60,000 Provision for obsolete inventory 2,200,000 5,000 Depreciation and amortization 826,595 359,073 Amortization of deferred loan costs 8,693 1,106,650 Amortization of deferred compensation 403,202 658,827 Changes in operating assets and liabilities: Accounts receivable (108,873) (3,984,962) Inventories (1,726,673) (572,554) Prepaid expenses and other assets (998,245) (767,671) Accounts payable (459,364) 939,329 Accrued expenses and other current liabilities 158,704 570,836 ------------ ------------ Net cash used in operating activities (9,305,029) (7,690,239) ------------ ------------ Cash flows from investing activities: Purchase of property and equipment (1,062,840) (291,794) Cash paid for note receivable (640,000) -- Cash paid to exercise stock purchase warrant (764,000) -- ------------ ------------ Net cash used in investing activities (2,466,840) (291,794) ------------ ------------ Cash flows from financing activities: Cash received from lines of credit -- 65,933 Repayment of note payable -- (166,667) Repayment of long-term debt and capital lease obligations (23,412) (216,080) Net proceeds from issuance of common stock 2,223 -- Net proceeds from issuance of preferred stock -- 4,996,148 Proceeds from exercise of warrants 504 212,038 ------------ ------------ Net cash provided by (used in) financing activities (20,685) 4,891,372 ------------ ------------ Effects of exchange rate changes on cash and cash equivalents (16,030) -- ------------ ------------ Net decrease in cash and cash equivalents (11,808,584) (3,090,661) Cash and cash equivalents, beginning of period 30,369,490 4,792,313 ------------ ------------ Cash and cash equivalents, end of period $ 18,560,906 $ 1,701,652 ============ ============
See accompanying notes to condensed consolidated financial statements. -5- 6 MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements include the accounts of Mobility Electronics, Inc. ("Mobility" or the "Company") which was formerly known as Electronics Accessory Specialists International, Inc., and its wholly-owned subsidiaries, Magma, Inc. and Mobility Europe Holdings, Inc. All significant intercompany balances and transactions have been eliminated in the accompanying condensed consolidated financial statements. The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America, pursuant to rules and regulations of the Securities and Exchange Commission (the "SEC"). In the opinion of management, the accompanying condensed consolidated financial statements include normal recurring adjustments that are necessary for a fair presentation of the results for the interim periods presented. Certain information and footnote disclosures have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2000 included in our Form 10-K, filed with the SEC. The results of operations for the three and six months ended June 30, 2001 are not necessarily indicative of results to be expected for the full year or any other period. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Reclassifications Certain amounts included in the June 30, 2000 condensed consolidated financial statements have been reclassified to conform to the June 30, 2001 financial statement presentation. (b) Segment Reporting The Company has only one operating business segment, the sale of peripheral computer equipment and related technology. 3. ACQUISITION On January 1, 2001, the Company purchased essentially all of the assets of its European distributor for $281,784 and assumed its leases, employee contracts and other business contracts in order to better facilitate the sale of the Company's products in Europe. The European operations have been organized as a subsidiary of Mobility Europe Holdings, Inc., which was formed in January 2001 under the laws of the state of Delaware and is owned entirely by the Company. The acquisition has been accounted for as a purchase and, accordingly, the purchase price has been allocated to the assets acquired based upon the estimated fair values at the date of acquisition. No goodwill resulted from the purchase. On May 18, 2001, the Company acquired certain assets, including a product line, inventory related to that product line, and patent rights, of CNF Mobile Solutions, a manufacturer of computer peripheral products, for $685,000 cash. $585,000 of the total purchase price has been capitalized as inventory and intangibles and the remaining $100,000 has been recorded as a component of operating expenses. Other costs associated with the transaction totaling $116,000 have also been recorded as a component of operating expenses. -6- 7 MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. INVENTORY Inventories consist of the following:
June 30, December 31, 2001 2000 ----------- ------------ Raw materials $ 2,718,577 $ 3,167,319 Finished goods 3,178,977 3,203,562 ----------- ------------ $ 5,897,554 $ 6,370,881 =========== ============
5. STOCKHOLDERS' EQUITY (a) Preferred Stock During the period from December 31, 2000 through June 30, 2001, 454,120 shares of Series C preferred stock were converted into 312,607 shares of common stock at a rate of 1-to-0.68130 for conversions through March 1, 2001 and at a rate of 1-to-0.69095 for those conversions beginning March 2, 2001 and thereafter. The Series C preferred stock is convertible into shares of common stock. The rate of conversion is 1-to-0.69065 as of March 2, 2001. The initial conversion rate was 1-for-1, but was subject to change if certain events occur. Generally, the conversion rate will be adjusted if the Company issues any non-cash dividends on outstanding securities, splits its securities or otherwise effects a change to the number of its outstanding securities. The conversion rate will also be adjusted if the Company issues additional securities at a price that is less than the price that the Series C preferred stockholders paid for their shares. Such adjustments will be made according to certain formulas that are designed to prevent dilution of the Series C preferred stock. The Series C preferred stock can be converted at any time at the option of the holder, and will convert automatically, immediately prior to the consummation of a firm commitment public offering of common stock pursuant to a registration statement filed with the Securities and Exchange Commission having a per share price equal to or greater than $24.00 per share and a total gross offering amount of not less than $15,000,000. The Company may not pay any cash dividends on its common stock while any Series C preferred stock remains outstanding without the consent of the Series C preferred stockholders. Holders of Series C preferred stock are entitled to vote on all matters submitted for a vote of the holders of common stock. Holders will be entitled to one vote for each share of common stock into which one share of Series C preferred stock could then be converted. In the event of liquidation or dissolution, the holders of Series C preferred stock will be entitled to receive the amount they paid for their stock, plus accrued and unpaid dividends out of the Company's assets legally available for such payments prior to the holders of securities junior to the Series C preferred stock receiving payments. (b) Common Stock On March 2, 2001, the Company sold 206,898 shares of common stock to two officers of the Company and an affiliate of one of the officers at a purchase price of $2.90 per share. Each investor paid $690 in cash (or $2,070 in total) and executed and delivered to the Company a three-year Promissory Note, in the original principal amount of $199,311 each (or $597,933 in total), and bearing interest at a rate of 6.33% per annum. Each Promissory Note is secured by the shares of common stock so issued and is recorded in stock subscriptions, which is a component of shareholders' equity. In June 2000, the Company sold 100,000 shares of common stock at a price of $12.00 per share to a company in exchange for $1,000 in cash and a $1,199,000 promissory note bearing interest at 6% per annum and secured by these shares of common stock. As of December 31, 2000, the $1,199,000 outstanding principal balance was reflected as a component of deferred compensation and stock subscriptions. On June 30, 2001, the shareholder tendered the shares of common stock back to the Company in lieu of payment of principal and interest on the promissory note. The shares of stock were simultaneously retired by the Company. -7- 8 MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Holders of shares of common stock are entitled to one vote per share on all matters submitted to a vote of the Company's stockholders. There is no right to cumulative voting for the election of directors. Holders of shares of common stock are entitled to receive dividends, if and when declared by the board of directors, out of funds legally available therefor, after payment of dividends required to be paid on any outstanding shares of preferred stock. Upon liquidation, holders of shares of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to the liquidation preferences of any outstanding shares of preferred stock. Holders of shares of common stock have no conversion, redemption or preemptive rights. 6. LINES OF CREDIT On February 2, 2001, the Company cancelled its line of credit. 7. CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS Two customers accounted for 29% each of total revenue of the Company for the six months ended June 30, 2001. Three customers accounted for 30%, 20% and 14% of total revenue of the Company for the six months ended June 30, 2000. 8. CONTINGENCIES AND LITIGATION The Company is involved in various claims and legal actions in the ordinary course of business. In the opinion of management, based on consultation with legal counsel, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position, results of operations or liquidity. Accordingly, the accompanying condensed consolidated financial statements do not include a provision for losses, if any, that might result from the ultimate disposition of these matters. 9. NET LOSS PER SHARE The computation of basic and diluted net loss per share follows:
Three months ended Six months ended June 30, June 30, ---------------------------- ---------------------------- 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Net loss $ (6,140,039) $ (3,182,423) $ (9,802,051) $ (6,064,767) Beneficial conversion costs of preferred stock -- -- -- (48,663) ------------ ------------ ------------ ------------ Net loss attributable to common stockholders $ (6,140,039) $ (3,182,423) $ (9,802,051) $ (6,113,430) ============ ============ ============ ============ Weighted average common shares outstanding - basic and diluted 14,820,471 6,869,711 14,650,129 6,596,966 ============ ============ ============ ============ Net loss per share - basic and diluted $ (0.41) $ (0.46) $ (0.67) $ (0.93) ============ ============ ============ ============
-8- 9 MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The following table summarizes securities outstanding which were not included in the calculation of diluted net loss per share since their inclusion would be antidilutive:
June 30 ----------------------- 2001 2000 ---------- ---------- Stock options and warrants 3,203,753 3,124,376 ========== ========== Convertible preferred stock 809,588 2,447,808 ========== ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: - loss of, and failure to replace, any significant customers; - timing and success of new product introductions; - product developments, introductions and pricing of competitors; - timing of substantial customer orders; - availability of qualified personnel; - performance of suppliers and subcontractors; - market demand and industry and general economic or business conditions; - the "Risk Factors" set forth in our Registration Statement on Form S-1 (No. 333-54666), dated January 31, 2001; and - other factors to which this report refers. The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and notes thereto contained in this report. OVERVIEW Mobility designs, develops and markets connectivity devices and accessories for the computer industry and for a broad range of related microprocessor applications. Our major focus is on developing remote peripheral component interface, or PCI bus, technology and products using our proprietary Split Bridge(TM) technology. We also design, develop and market a range of connectivity and power products for portable computers. These products include docking stations that utilize universal serial bus, or USB, technology, monitor stands and in air/in car chargers to power portable computers. We are still in the process of designing, developing and upgrading our Split Bridge(TM) technology and products, and as a result, to date our revenues have come predominantly from our connectivity and power products. The PCI bus is the electrical transmission path linking the computer's central processing unit with its memory and other peripheral devices, such as modems, disk drives and local area networks, or LANs. Our proprietary Split Bridge(TM) technology consists of a Split Bridge(TM) link, typically two customized semiconductors, known as application-specific integrated circuits, or ASIC chips, two connectors and a high-speed, bi-directional cable. Our technology for the first time allows the primary PCI bus of any computer to be extended to a remote location, up to 17 feet, with virtually no software requirements or performance degradation, thereby enabling architectural designs of computer systems and applications that previously were not feasible. -9- 10 We have structured our resources to pursue the market opportunities related to PCI expansion and connectivity. We plan to focus on the deployment of our patented Split Bridge(TM) technology. We will continue to support the power product and USB connectivity products, but anticipate ultimately that the PCI expansion and connectivity products and technology will provide the bulk of future revenue growth. We sell our products directly to OEMs and the retail channel, as well as through distributors. We have also established a few select worldwide private label accounts, most notably IBM, NEC and Targus. A substantial portion of our net product sales are concentrated among a number of OEMs, including Compaq, Dell, Hewlett-Packard, IBM, NEC, Targus and Toshiba. A portion of our sales to IBM are made through Kingston Technologies, who acts as their fulfillment hub manager for sales in the United States and Malaysia. Direct sales to OEMs accounted for approximately 87.2% of net product sales for the six months ended June 30, 2001 and 68.7% of net product sales for the six months ended June 30, 2000. Direct sales to OEMs have increased as a percentage of net product sales as we have successfully promoted our power products and monitor stands in the OEM market. We expect that we will continue to be dependent upon a number of OEMs for a significant portion of our net product sales in future periods, although no OEM is presently obligated to purchase a specified amount of products. A portion of our sales to distributors and resellers is generally under terms that provide for certain stock balancing return privileges and price protection. Accordingly, we make a provision for estimated sales returns and other allowances related to those sales. Returns, which have been netted in the product sales presented herein, were approximately 4.6% of net product sales for the six months ended June 30, 2001 and 6.3% of net product sales for the six months ended June 30, 2000. The major distributors are allowed to return up to 15.0% of their prior quarter's purchases under the stock balancing programs, provided that they place a new order for equal or greater dollar value of the stock balancing return. We derive a significant portion of our net product sales outside the United States, principally in France, Germany and the United Kingdom, to OEMs, retailers and a limited number of independent distributors. International sales accounted for approximately 31.2% of our net product sales for the six months ended June 30, 2001. We expect product sales outside the United States to continue to account for a large portion of our future net product sales. International sales are generally denominated in the currency of our foreign customers. A decrease in the value of foreign currencies relative to the U.S. dollar could result in a significant decrease in U.S. dollar sales received by us for our international sales. That risk may be increased as a result of the introduction in January 1999 of the new "Euro" currency in European countries that are part of the European Monetary Union, or EMU. During 2002, all EMU countries are expected to completely replace their national currencies with the Euro. However, we cannot determine the impact this may have on our business because a significant amount of uncertainty exists as to the effect the Euro will have on the marketplace and because all of the final rules and regulations have not yet been defined and finalized by the European Commission regarding the Euro currency. We intend to develop and implement a plan to mitigate this risk once the final rules and regulations are established. We have not engaged in hedging transactions with respect to our net foreign currency exposure. To the extent that we implement hedging activities in the future with respect to foreign currency transactions, there can be no assurance that we will be successful in such hedging activities. Various factors have in the past affected and may continue in the future to affect our gross profits, including but not limited to, our product mix, lower volume production and higher fixed costs for newly introduced product platforms and technologies, market acceptance of newly introduced products and the position of our products in their respective lifecycles. The initial stages of our product introductions are generally characterized by lower volume production which is accompanied by higher costs, especially for specific products which are initially purchased in small volumes during the development lifecycle. -10- 11 RESULTS OF OPERATIONS The following table presents certain selected consolidated financial data for the periods indicated expressed as a percentage of total revenue:
Three months ended Six months ended June 30, June 30, --------------------- --------------------- Unaudited Unaudited --------------------- --------------------- 2001 2000 2001 2000 -------- -------- -------- -------- Revenue: Net product sales 98.6% 100.0% 98.6% 100.0% Technology transfer 1.4% 0.0% 1.4% 0.0% -------- -------- -------- -------- Total revenue 100.0% 100.0% 100.0% 100.0% Cost of revenue: Product sales 103.4% 76.7% 90.4% 74.7% Technology transfer 0.0% 0.0% 0.0% 0.0% -------- -------- -------- -------- Total cost of revenue 103.4% 76.7% 90.4% 74.7% -------- -------- -------- -------- Gross profit (loss) (3.4)% 23.3% 9.6% 25.3% Operating expenses: Sales and marketing 35.2% 29.2% 33.1% 26.4% Research and development 24.3% 14.7% 22.6% 16.6% General and administrative 29.4% 20.1% 28.7% 22.1% -------- -------- -------- -------- Total operating expenses 88.9% 64.0% 84.4% 65.1% -------- -------- -------- -------- Loss from operations (92.3)% (40.7)% (74.8)% (39.8)% Other income (expense): Interest income (expense), net 4.8% (9.6)% 5.7% (13.6)% Other income, net 0.1% 0.0% 0.1% 0.0% Foreign currency exchange loss (0.3)% (0.3)% (0.1)% (0.3)% -------- -------- -------- -------- Loss before provision for income taxes (87.7)% (50.6)% (69.1)% (53.7)% Provision for income taxes 0.0% 0.0% 0.0% 0.0% -------- -------- -------- -------- Net loss (87.7)% (50.6)% (69.1)% (53.7)% Beneficial conversion costs of preferred stock 0.0% 0.0% 0.0% (0.4)% -------- -------- -------- -------- Net loss attributable to common stockholders (87.7)% (50.6)% (69.1)% (54.1)% ======== ======== ======== ========
Comparison of Three Months Ended June 30, 2001 and 2000 Net product sales. Net product sales consist of sales of product net of returns and allowances. We recognize sales at the time goods are shipped and the ownership of the goods is transferred to the customer, and maintain a reserve for stock rotation transactions with the distribution channel. Net product sales increased 9.8% to $6.9 million for the three months ended June 30, 2001 from $6.3 million for the three months ended June 30, 2000. The increase was primarily attributable to the sales of PCI expansion products by our Magma subsidiary, which was acquired on October 2, 2000. An increase in our core power products line was partially offset by reductions in monitor stands and the USB products, as well as a delay in shipping our newest Split Bridge(TM) based docking products. Technology transfer fees. Technology transfer fees consist of revenue from the licensing and transferring by the Company of its Split Bridge(TM) technology and architecture. Revenue from technology transfer fees is recognized ratably over the term of the sales agreement. During the three months ended June 30, 2001, the Company recognized a technology transfer fee of $100,000 or 1.4% of total revenue. There were no technology transfer fees in the six months ended June 30, 2000 as we had not yet begun to market our Split Bridge(TM) technology. Cost of revenue - product sales. Cost of revenue - product sales consists primarily of costs associated with components, outsourced manufacturing and in-house labor associated with assembly, testing, packaging, shipping, quality assurance, depreciation of equipment and indirect manufacturing costs. Cost of revenue - product sales increased 50.2% to $7.2 million for the three months ended June 30, 2001 from $4.8 million for the three months ended June 30, 2000. The increase in cost of revenue - product sales was due in part to the 9.8% volume increase in net product sales. The balance of the increase was due to a $2.0 million charge to cost of revenue - product sales for excess and obsolete inventory and a shift in our -11- 12 product mix. Our power products, which represented a larger portion of net product sales in the three months ended June 30, 2001, have a higher product cost when compared to our other product lines. Cost of revenue - product sales as a percentage of net product sales increased to 103.4% for the three months ended June 30, 2001 from 76.7% for the three months ended June 30, 2000. Excluding the $2.0 million inventory charge, cost of revenue - product sales as a percentage of net product sales for the three months ended June 30, 2001 decreased slightly to 75.9% from the 76.7% for the three months ended June 30, 2000. Cost of revenue - technology transfer. Cost of revenue - technology transfer consists of engineering expenses related to the Split Bridge(TM) technology. There were no costs of revenue - technology transfer for the three months ended June 30, 2001, as the technology transfer fees for the period consisted solely of fees for existing technology. Gross profit. Gross profit decreased to (3.4%) of total revenue for the three months ended June 30, 2001 from 23.3% of total revenue for the three months ended June 30, 2000. The gross profit rate decline was the result of the $2.0 million charge to cost of revenue - product sales for excess and obsolete inventory. Excluding this charge, gross profit increased to 25.2% of total revenue for the three months ended June 30, 2001 from 23.3% of total revenue for the three months ended June 30, 2000. This slight increase is due primarily to the 100% gross profit margin recognized on technology transfer fees. Sales and marketing. Sales and marketing expenses generally consist of salaries, commissions and other personnel related costs of our sales, marketing and support personnel, advertising, public relations, promotions, printed media and travel. Sales and marketing expenses increased 34.3% to $2.5 million for the three months ended June 30, 2001 from $1.8 million for the three months ended June 30, 2000. The increase was primarily attributed to the creation of a direct sales organization in Europe. We established a warehouse facility in the United Kingdom and two direct sales offices, one in the United Kingdom and the other in France. In addition, we expanded our direct sales force domestically and incurred incremental expenses associated with the addition of the Magma subsidiary, but most of this increased expense was offset by a reduction in marketing programs. As a percentage of total revenue, sales and marketing expenses increased to 35.2% for the three months ended June 30, 2001 from 29.2% for the three months ended June 30, 2000. Many of the incremental expenses were added to support the launch of the EasiDock(TM) 1000 and EasiDock(TM) 5000 product lines which began shipping very late in the second quarter of 2001. As a result, limited revenues were recognized from these product lines in the second quarter. Research and development. Research and development expenses consist primarily of salaries and personnel-related costs, facilities, outside consulting, lab costs and travel related costs of our product development group. Research and development expenses increased 83.1% to $1.7 million for the three months ended June 30, 2001 from $928,000 for the three months ended June 30, 2000. Research and development expenses as a percentage of total revenue increased to 24.3% for the three months ended June 30, 2001 from 14.7% for the three months ended June 30, 2000. The increase is due to the additional engineering costs associated with the acquisition of Magma, the addition of an in-house ASIC development group to pursue the development of our next generation ASIC chips and the expenses associated with completing the EasiDock(TM) 1000 and EasiDock(TM) 5000 products. General and administrative. General and administrative expenses consist primarily of salaries and other personnel-related expenses of our finance, human resources, information systems, corporate development and other administrative personnel, as well as professional fees, depreciation and amortization and related expenses. General and administrative expenses also include non-cash compensation, which is the result of the issuance of common stock, warrants and stock options at a price deemed to be less than market value to employees and outside consultants for services rendered, and goodwill amortization which relates to the acquisition of Magma in October, 2000. General and administrative expenses increased 63.2% to $2.1 million for the three months ended June 30, 2001 from $1.3 million for the three months ended June 30, 2000. The increase is due to additional general and administrative expenses associated with our Magma subsidiary, the implementation of a new ERP system which has resulted in higher consulting fees, software maintenance and personnel costs in our information systems department and higher legal and professional fees associated with being a public company. The increase is also due in part to the amortization of Magma goodwill totalling $155,000 for the three months ended June 30, 2001. As a percentage of total revenue, general and administrative expenses increased to 29.4% for the three months ended June 30, 2001 from 20.1% for the three months ended June 30, 2000. As we begin to recognize increased revenues from the sale of our new Split Bridge(TM) products, we anticipate that general and administrative expenses as a percentage of revenue will decrease. Interest income (expense), net. For the three months ended June 30, 2001, net interest income consists of interest earned on our cash balances and short-term investments. For the three months ended June 30, 2000, net interest expense consists of interest on our bank revolving lines of credit and promissory notes as well as our subordinated debt and convertible debentures, partially offset by interest earned on our cash balances and short-term investments. Net interest income for the three months ended June 30, 2001 was $340,000 compared to net interest expense of $605,000 for the three months ended June 30, 2000. The change was primarily due to the payoff of debt with our IPO proceeds and interest earned on our IPO proceeds. Income taxes. We have incurred losses from inception to date; therefore, no provision for income taxes was required for the three months ended June 30, 2001 and 2000. -12- 13 Comparison of Six Months Ended June 30, 2001 and 2000 Net product sales. Net product sales increased 23.8% to $14.0 million for the six months ended June 30, 2001 from $11.3 million for the six months ended June 30, 2000. The increase was primarily attributable to the sales of PCI expansion products by our Magma subsidiary, which was acquired on October 2, 2000. Increases in our core power and monitor stand product lines was partially offset by reductions in the USB products and a delay in shipping our Split Bridge(TM) based docking products. Technology transfer fees. During the six months ended June 30, 2001, the Company recognized a technology transfer fee of $200,000 or 1.4% of total revenue. There were no technology transfer fees in the first six months of 2000 as we had not yet begun to market our Split Bridge(TM) technology. Cost of revenue - product sales. Cost of revenue - product sales increased 52.1% to $12.8 million for the six months ended June 30, 2001 from $8.4 million for the six months ended June 30, 2000. Nearly half of the increase in cost of revenue - product sales was due to the 23.8% volume increase in net product sales. The balance of the increase was due to a $2.2 million charge to cost of revenue - product sales for excess and obsolete inventory in the second quarter of 2001 and a shift in our product mix. Our power products, which represented a larger portion of net product sales in the first half of 2001, have a higher product cost when compared to our other product lines. Cost of revenue - product sales as a percentage of net product sales increased to 90.4% for the six months ended June 30, 2001 from 74.7% for the six months ended June 30, 2000. Excluding the $2.2 million inventory charge, cost of revenue - product sales as a percentage of net product sales for the six months ended June 30, 2001 increased to 77.4% from the 74.7% for the six months ended June 30, 2000. Cost of revenue - technology transfer. Cost of revenue - technology transfer consists of engineering expenses related to the Split Bridge(TM) technology. There were no costs of revenue - technology transfer for the six months ended June 30, 2001, as the technology transfer fees for the period consisted solely of fees for existing technology. Gross profit. Gross profit decreased to 9.6% of total revenue for the six months ended June 30, 2001 from 25.3% of total revenue for the six months ended June 30, 2000. The gross profit rate decline was due primarily to the $2.2 million charge to cost of revenue - product sales for excess and obsolete inventory. Excluding this charge, gross profit decreased to 23.7% of total revenue for the six months ended June 30, 2001 from 25.3% of total revenue for the six months ended June 30, 2000. This decrease is due to the change in product mix, partly offset by the 100% gross profit margin recognized on technology transfer fees. Sales and marketing. Sales and marketing expenses increased 57.5% to $4.7 million for the six months ended June 30, 2001 from $3.0 million for the six months ended June 30, 2000. The increase was primarily attributed to the creation of a direct sales organization in Europe. We established a warehouse facility in the United Kingdom and two direct sales offices, one in the United Kingdom and the other in France. In addition, we expanded our direct sales force domestically and incurred incremental expenses associated with the addition of the Magma subsidiary, but most of this increased expense was offset by a reduction in marketing programs. As a percentage of total revenue, sales and marketing expenses increased to 33.1% for the six months ended June 30, 2001 from 26.4% for the six months ended June 30, 2000. Many of the incremental expenses were added to support the launch of the EasiDock(TM) 1000 and EasiDock(TM) 5000 product lines which began shipping very late in the second quarter of 2001. As a result, limited revenues were recognized from these product lines in the six months ended June 30, 2001. Research and development. Research and development expenses increased 70.6% to $3.2 million for the six months ended June 30, 2001 from $1.9 million for the six months ended June 30, 2000. Research and development expenses as a percentage of total revenue increased to 22.6% for the six months ended June 30, 2001 from 16.6% for the six months ended June 30, 2000. The increase is due to the additional engineering costs associated with the acquisition of Magma, the addition of an in-house ASIC development group to pursue the development of our next generation ASIC chips and the expenses associated with completing the EasiDock(TM) 1000 and EasiDock(TM) 5000 products. General and administrative. General and administrative expenses increased 63.0% to $4.1 million for the six months ended June 30, 2001 from $2.5 million for the six months ended June 30, 2000. The increase is due to additional general and administrative expenses associated with our Magma subsidiary, the implementation of a new ERP system which has resulted in higher consulting fees, software maintenance and personnel costs in our information systems department and higher legal and professional fees associated with being a public company. The increase is also due in part to the amortization of Magma goodwill totaling $310,000 for the six months ended June 30, 2001. As a percentage of total revenue, general and administrative expenses increased to 28.7% for the six months ended June 30, 2001 from 22.1% for the six months ended June 30, 2000. As we begin to recognize increased revenues from the sale of our new Split Bridge(TM) products, we anticipate that general and administrative expenses as a percentage of revenue will decrease. Interest income (expense), net. Net interest income for the six months ended June 30, 2001 was $811,000 compared to net interest expense of $1.5 million for the six months ended June 30, 2000. The change was primarily due to the payoff of debt with our IPO proceeds and interest earned on our IPO proceeds. Income taxes. We have incurred losses from inception to date; therefore, no provision for income taxes was required for the six months ended June 30, 2001 and 2000. -13- 14 LIQUIDITY AND CAPITAL RESOURCES Since inception, we have funded our operations primarily through debt and equity financing, as the cost of our operating activities has exceeded our revenue. Our operating activities used cash of $9.3 million and $7.7 million for the six months ended June 30, 2001 and 2000, respectively. Net cash used in operating activities for the six months ended June 30, 2001 was primarily attributed to our net loss and an increase in inventories, offset in part by non-cash expenses such as depreciation of property and equipment, amortization of deferred compensation and intangibles, and provision for obsolete inventory. Our investing activities used cash of $2.5 million and $292,000 for the six months ended June 30, 2001 and 2000, respectively. For the six months ended June 30, 2001, cash used in investing activities was for the purchase of property and equipment, cash paid for a note receivable and cash paid to exercise a stock purchase warrant. Our financing activities used cash of $21,000 for the six months ended June 30, 2001 and provided cash of $4.9 million for the six months ended June 30, 2000. Net cash used in financing activities for the six months ended June 30, 2001 was primarily used to pay down capital lease obligations. Our cash and cash equivalents decreased to $18.6 million at June 30, 2001, compared to $30.4 million at December 31, 2000. Our net working capital at those same dates was $25.3 million and $37.0 million, respectively. At June 30, 2001 our available sources of liquidity were our cash and cash equivalents. Our future capital requirements include financing the growth of working capital items such as accounts receivable and inventories, and the purchase of equipment and fixtures to accomplish future growth. We believe that our cash and cash equivalents on hand will be sufficient to satisfy our expected cash and working capital requirements for the next twelve months. At December 31, 2000 we had approximately $47.5 million of federal net operating loss carryforwards which expire at various dates. We anticipate that the sale of common stock in the IPO coupled with prior sales of common stock will cause an annual limitation on the use of our net operating loss carryforwards pursuant to the change in ownership provisions of Section 382 of the Internal Revenue Code of 1986, as amended. This limitation is expected to have a material effect on the timing of our ability to use the net operating loss carryforward in the future. Additionally, our ability to use the net operating loss carryforward is dependent upon our level of future profitability, which cannot be determined. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In July 2001, the FASB issued Statement No. 141, Business Combinations ("Statement 141"), and Statement No. 142, Goodwill and Other Intangible Assets ("Statement 142"). Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. Statement 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The Company is required to adopt the provisions of Statement 141 immediately, except with regard to business combinations initiated prior to July 1, 2001, which it expects to account for using the pooling-of-interests method, and Statement 142 effective January 1, 2002. Furthermore, any goodwill and any intangible asset determined to have an indefinite useful life that are acquired in a purchase business combination completed after June 30, 2001 will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-Statement 142 accounting literature. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized prior to the adoption of Statement 142. Statement 141 will require upon adoption of Statement 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Upon adoption of Statement 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test -14- 15 the intangible asset for impairment in accordance with the provisions of Statement 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period. In connection with the transitional goodwill impairment evaluation, Statement 142 will require the Company to perform an assessment of whether there is an indication that goodwill is impaired as of the date of adoption. To accomplish this the Company must identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Company will then have up to six months from the date of adoption to determine the fair value of each reporting unit and compare it to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and the Company must perform the second step of the transitional impairment test. In the second step, the Company must compare the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of it assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with Statement 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Company's statement of earnings. And finally, any unamortized negative goodwill existing at the date Statement 142 is adopted must be written off as the cumulative effect of a change in accounting principle. As of the date of adoption, the Company expects to have unamortized goodwill in the amount of $5.4 million, which will be subject to the transition provisions of Statements 141 and 142. At that same date, the Company will have no unamortized identifiable intangible assets and no unamortized negative goodwill. Amortization expense related to goodwill was $155,000 and $310,000 for the year ended December 31, 2000 and the six months ended June 30, 2001, respectively. Because of the extensive effort needed to comply with adopting Statements 141 and 142, it is not practicable to reasonably estimate the impact of adopting these Statements on the Company's financial statements at the date of this report, including whether any transitional impairment losses will be required to be recognized as the cumulative effect of a change in accounting principle. ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain market risks in the ordinary course of our business. These risks result primarily from changes in foreign currency exchange rates and interest rates. In addition, our international operations are subject to risks related to differing economic conditions, changes in political climate, differing tax structures and other regulations and restrictions. To date we have not utilized derivative financial instruments or derivative commodity instruments. We do not expect to employ these or other strategies to hedge market risk in the foreseeable future. We invest our cash in money market funds and other short term, highly liquid investments, which are subject to minimal credit and market risk. We believe that the market risks associated with these financial instruments are immaterial. PART II: OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS: Mobility Electronics, Inc. v. SBS Technologies, Inc. No. CIV01-0409 PHX JAT; filed on March 5, 2001 in the United States District Court for the District of Arizona. In this lawsuit, the Company alleges patent infringement against SBS Technologies on two patents owned by the Company; U.S. Patent No. 6,070,214 entitled "Serially Linked Bus Bridge for Expanding Access Over a First Bus to a Second Bus" and U.S. Patent No. 6,088,752 entitled "Method and Apparatus for Exchanging Information Between Buses and a Portable Computer and Docking Station Through a Bridge Employing a Serial Link." In its Original Complaint, the Company alleges that certain products designed, manufactured and/or sold by SBS infringe these two patents. SBS has filed an answer denying infringement and a counterclaim seeking a declaratory judgment of non-infringement of patents and a declaratory judgment of patent invalidity and unenforceability, as well as tortious interference with prospective contractual relations. The Company in its answer to SBS's counterclaims has denied any such liability. A scheduling order has not yet been entered by the court. No discovery has occurred. The Company intends to vigorously pursue its claims and defend against the counterclaims. Mobility Electronics, Inc. v. Targus Group International, Inc., Comarco, Inc. and Comarco Wireless Technologies, Inc. No. CV2001-012640 was filed on July 23, 2001 in the Arizona Superior Court for Maricopa County, Arizona. In this -15- 16 lawsuit, the Company seeks specific performance of a contract with Targus Group International, Inc. for the distribution and sale of the Company's computer universal Auto/Air/AC power adapter product line and damages for breach of contract. The Company also seeks damages for fraud, negligent misrepresentation and misappropriation of trade secrets against Targus. The Company further seeks damages for tortious interference with contract against Comarco, Inc. and Comarco Wireless Technologies, Inc. No answer has yet been filed by any defendant. The Company, either through the litigation or otherwise, intends to insure that contractual obligations are enforced. Mobility Electronics, inc. v. Comarco, inc. and Comarco Wireless Technologies, Inc. was filed on August 10, 2001 in the United States District Court for the District of Arizona. In this lawsuit, the Company alleges infringement of U.S. Patent No. 5,347,211 entitled "Selectable Output Power Converter." The Company has amended its Complaint to further seek declaratory judgments of non-infringement, patent invalidity and/or patent unenforceability of three patents allegedly owned by Comarco: U.S. Patent Nos. 6,172,884, 6,091,661 and 5,838,554. The Company intends to vigorously pursue its claims in this litigation. No answer or responsive pleading has yet been filed. We are from time to time involved in various other legal proceedings incidental to the conduct of our business. We believe that the outcome of all such other pending legal proceedings will not in the aggregate have a material adverse effect on our business, financial condition, results of operations or liquidity. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Recent Sales of Unregistered Securities. On March 2, 2001, we issued 68,966 shares of common stock to each of Jeffrey S. Doss, Donald W. Johnson and La Luz Enterprises, L.L.C., an affiliate of Charles R. Mollo, at a purchase price of $2.90 per share. Each of the purchasers paid $690 in cash and executed and delivered to the Company a three-year promissory note, in the original principal amount of $199,311, and bearing interest at the rate of 6.33% per annum. Each promissory note is secured by the shares of common stock so issued and, in addition, the promissory note issued by La Luz Enterprises, L.L.C. is guaranteed by Mr. Mollo. There were no underwriters employed in connection with these transactions. These issuances to Messrs. Doss and Johnson as well as to La Luz Enterprises, L.L.C. were made in reliance on Section 4(2) of the Securities Act and Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. Each purchaser in these transactions represented their intention to acquire the securities for investment only and not with a view to the distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. All recipients either received adequate information about us or had access, through employment or other relationships, to such information. All recipients were knowledgeable, sophisticated and experienced in making investment decisions of this kind and received adequate information about the Company. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None ITEM 5. OTHER INFORMATION: None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: (a) Exhibits:
Exhibit Number Description ------- ----------- 3.1 -- 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.(3) 3.3 -- Articles of Amendment to the Certificate of Incorporation of the Company dated as of September 10 1997.(1) 3.4 -- Articles of Amendment to the Certificate of Incorporation of the Company dated as of July 20, 1998.(1) 3.5 -- Articles of Amendment to the Certificate of Incorporation of the Company dated as of February 3, 2000.(1) 3.6 -- Certificate of Designations, Preferences, Rights and Limitations of Series C Preferred Stock.(1)
-16- 17 3.7 -- Amended Bylaws of the Company.(1) 3.8 -- Certificate of the Designations, Preferences, Rights and Limitations of Series D Preferred Stock.(2) 3.9 -- Articles of Amendment to the Certificate of Incorporation of the Company dated as of March 31, 2000.(3) 4.1 -- Specimen of Common Stock Certificate.(4) 4.2 -- Form of 12% Convertible Debenture of the Company.(1) 4.3 -- Registration Rights Agreement by and between the Company and Miram International, Inc. dated July 29, 1997. (1) 4.4 -- Form of Unit Purchase Agreement used in 1998 Private Placements for the Purchase of Up To 900 Units, Each Consisting of 1,000 shares of the Company's Common stock.(1) 4.5 -- Form of Unit Purchase Agreement used in 1997 Private Placements for the Purchase of Up To 875 Units, Each Consisting of 2,000 shares of the Company's common stock and warrants to purchase 500 shares of the Company's Common Stock. (1) 4.6 -- Form of Warrant to Purchase Shares of common stock of the Company used with the 13% Bridge Notes and Series C Preferred Stock Private Placements. (3) 4.7 -- Form of 13% Bridge Promissory Note and Warrant Purchase Agreement used in March 1999 Private Placement.(1) 4.8 -- Form of 13% Bridge Promissory Note and Warrant Purchase Agreement used in July 1999 Private Placement.(1) 4.9 -- Form of 13% Bridge Note issued in July 1999 Private Placements.(1) 4.10 -- 13% Bridge Note Conversion Notice expired June 30, 1999.(1) 4.11 -- Form of Series C Preferred Stock Purchase Agreement used in 1998 and 1999 Private Placements.(1) 4.12 -- Form of Series C Preferred Stock and Warrant Purchase Agreements used in 1999 and 2000 Private Placements.(1) 4.13 -- Series C Preferred Stock Purchase Agreement executed May 3, 1999, between the Company, Philips Semiconductors VLSI, Inc. (f/k/a VSLI Technology, Inc.) and Seligman Communications and Information Fund, Inc.(1) 4.14 -- Amended and Restated Stock Purchase Warrant issued by the Company to Finova Capital Corporation (f/k/a Sirrom Capital Corporation) dated as of March 25, 1998.(1) 4.15 -- Stock Purchase Warrant issued by the Company to Finova Capital Corporation (f/k/a Sirrom Capital Corporation) dated as of March 25, 1998.(1) 4.16 -- Series C Preferred Stock and Warrant Purchase Agreement dated October 29, 1999, between the Company and Seligman Communications and Information Fund, Inc.(1) 4.17 -- Contribution and Indemnification Agreement by and among Janice L. Breeze, Jeffrey S. Doss, Charles R. Mollo, Cameron Wilson, the Company and certain Stockholders of the Company dated April 20, 1998.(1) 4.18 -- Form of Warrant to Purchase common stock of the Company issued to certain holders in Connection with that certain Contribution and Indemnification Agreement by and among Janice L. Breeze, Jeffrey S. Doss, Charles S. Mollo, Cameron Wilson, the Company and certain Stockholders of the Company dated April 20, 1998.(1) 4.19 -- Form of Warrant to Purchase common stock of the Company issued to certain holders in Connection with that certain Contribution and Indemnification Agreement by and among Janice L. Breeze, Jeffrey S. Doss, Charles S. Mollo, Cameron Wilson, the Company and certain Stockholders of the Company dated November 2, 1999.(2) 4.20 -- Form of Warrant to Purchase Common Stock of the Company issued in the 1997 4.21 -- Form of 13% Bridge Note issued in March 1999 Private Placement.(2) 4.23 -- Investor Rights Agreement dated October 29, 1999 by and between the Company and Seligman Communications and Information Fund, Inc. entered into in connection with The Series C Preferred Stock and Warrant Purchase Agreement Series C Preferred Stock and Warrant Purchase Agreement dated October 29, 1999.(2) 4.24 -- Form of Warrant to Purchase Shares of Common Stock issued in connection with the Loan Extension Agreement dated February 29, 2000.(2) 4.25 -- Investors' Rights Agreement executed May 3, 1999 between the Company, Philips Semiconductors VLSI, Inc. f/k/a VLSI Technology, Inc.) and Seligman Communications and Information Fund, Inc.(3) 4.26 -- Registration Rights granted by the Company to Cybex Computer Products Corporation in connection with the Strategic Partner Agreement dated March 6, 2000.(3) 4.27 -- 13% Bridge Note Conversion Notice used in July 1999 Private Placement.(4) 10.1 -- Form of Stock Purchase Agreement, dated as of March 2, 2001, by and between the Company and each of Jeffrey S. Doss, Donald W. Johnson and La Luz Enterprises, L.L.C.(8) 10.2 -- Form of Promissory Note, dated March 2, 2001, in the principal amount of $199,311, and issued by each of Jeffrey S. Doss, Donald W. Johnson and La Luz Enterprises, L.L.C. to the Company (8) 10.3 -- Form of Pledge and Security Agreement, dated as of March 2, 2001, by and between the Company and each of Jeffrey S. Doss, Donald W. Johnson and La Luz Enterprises, L.L.C.(8)
-17- 18 10.4 -- Guaranty, dated as of March 2, 2001, issued by Charles R. Mollo in favor of the Company (8) 24.1 -- None
-------- (1) Previously filed as an exhibit to Registration Statement No. 333-30264 dated February 11, 2000. (2) Previously filed as an exhibit to Amendment No. 1 to Registration Statement No. 333-30264 dated March 28, 2000. (3) Previously filed as an exhibit to Amendment No. 2 to Registration Statement No. 333-30264 dated May 4, 2000. (4) Previously filed as an exhibit to Amendment No. 4 to Registration Statement No. 333-30264 dated May 26, 2000. (5) Previously filed as an exhibit to Post-Effective Amendment No. 1 to Registration Statement No. 333-30264 dated July 24, 2000. (6) Previously filed as an exhibit to Form 10-Q dated August 14, 2000. (7) Previously filed as an exhibit to Form 8-K dated October 17, 2000. (8) Previously filed as an exhibit to Form 10-K dated April 2, 2001. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended June 30, 2001. -18- 19 MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MOBILITY ELECTRONICS, INC. Dated: August 14, 2001 By: /s/ RICHARD W. WINTERICH ------------------------ Richard W. Winterich Vice President and Chief Financial Officer and Authorized Officer of Registrant (Principal Financial and Accounting Officer) -19- 20 MOBILITY ELECTRONICS, INC. INDEX TO EXHIBITS
Exhibit Number Description ------- ----------- 3.1 -- 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.(3) 3.3 -- Articles of Amendment to the Certificate of Incorporation of the Company dated as of September 10 1997.(1) 3.4 -- Articles of Amendment to the Certificate of Incorporation of the Company dated as of July 20, 1998.(1) 3.5 -- Articles of Amendment to the Certificate of Incorporation of the Company dated as of February 3, 2000.(1) 3.6 -- Certificate of Designations, Preferences, Rights and Limitations of Series C Preferred Stock.(1) 3.7 -- Amended Bylaws of the Company.(1) 3.8 -- Certificate of the Designations, Preferences, Rights and Limitations of Series D Preferred Stock.(2) 3.9 -- Articles of Amendment to the Certificate of Incorporation of the Company dated as of March 31, 2000.(3) 4.1 -- Specimen of Common Stock Certificate.(4) 4.2 -- Form of 12% Convertible Debenture of the Company.(1) 4.3 -- Registration Rights Agreement by and between the Company and Miram International, Inc. dated July 29, 1997. (1) 4.4 -- Form of Unit Purchase Agreement used in 1998 Private Placements for the Purchase of Up To 900 Units, Each Consisting of 1,000 shares of the Company's Common stock.(1) 4.5 -- Form of Unit Purchase Agreement used in 1997 Private Placements for the Purchase of Up To 875 Units, Each Consisting of 2,000 shares of the Company's common stock and warrants to purchase 500 shares of the Company's Common Stock. (1) 4.6 -- Form of Warrant to Purchase Shares of common stock of the Company used with the 13% Bridge Notes and Series C Preferred Stock Private Placements. (3) 4.7 -- Form of 13% Bridge Promissory Note and Warrant Purchase Agreement used in March 1999 Private Placement.(1) 4.8 -- Form of 13% Bridge Promissory Note and Warrant Purchase Agreement used in July 1999 Private Placement.(1) 4.9 -- Form of 13% Bridge Note issued in July 1999 Private Placements.(1) 4.10 -- 13% Bridge Note Conversion Notice expired June 30, 1999.(1) 4.11 -- Form of Series C Preferred Stock Purchase Agreement used in 1998 and 1999 Private Placements.(1) 4.12 -- Form of Series C Preferred Stock and Warrant Purchase Agreements used in 1999 and 2000 Private Placements.(1) 4.13 -- Series C Preferred Stock Purchase Agreement executed May 3, 1999, between the Company, Philips Semiconductors VLSI, Inc. (f/k/a VSLI Technology, Inc.) and Seligman Communications and Information Fund, Inc.(1) 4.14 -- Amended and Restated Stock Purchase Warrant issued by the Company to Finova Capital Corporation (f/k/a Sirrom Capital Corporation) dated as of March 25, 1998.(1) 4.15 -- Stock Purchase Warrant issued by the Company to Finova Capital Corporation (f/k/a Sirrom Capital Corporation) dated as of March 25, 1998.(1) 4.16 -- Series C Preferred Stock and Warrant Purchase Agreement dated October 29, 1999, between the Company and Seligman Communications and Information Fund, Inc.(1) 4.17 -- Contribution and Indemnification Agreement by and among Janice L. Breeze, Jeffrey S. Doss, Charles R. Mollo, Cameron Wilson, the Company and certain Stockholders of the Company dated April 20, 1998.(1) 4.18 -- Form of Warrant to Purchase common stock of the Company issued to certain holders in Connection with that certain Contribution and Indemnification Agreement by and among Janice L. Breeze, Jeffrey S. Doss, Charles S. Mollo, Cameron Wilson, the Company and certain Stockholders of the Company dated April 20, 1998.(1) 4.19 -- Form of Warrant to Purchase common stock of the Company issued to certain holders in Connection with that certain Contribution and Indemnification Agreement by and among Janice L. Breeze, Jeffrey S. Doss, Charles S. Mollo, Cameron Wilson, the Company and certain Stockholders of the Company dated November 2, 1999.(2) 4.20 -- Form of Warrant to Purchase Common Stock of the Company issued in the 1997 4.21 -- Form of 13% Bridge Note issued in March 1999 Private Placement.(2)
-20- 21 4.23 -- Investor Rights Agreement dated October 29, 1999 by and between the Company and Seligman Communications and Information Fund, Inc. entered into in connection with The Series C Preferred Stock and Warrant Purchase Agreement Series C Preferred Stock and Warrant Purchase Agreement dated October 29, 1999.(2) 4.24 -- Form of Warrant to Purchase Shares of Common Stock issued in connection with the Loan Extension Agreement dated February 29, 2000.(2) 4.25 -- Investors' Rights Agreement executed May 3, 1999 between the Company, Philips Semiconductors VLSI, Inc. f/k/a VLSI Technology, Inc.) and Seligman Communications and Information Fund, Inc.(3) 4.26 -- Registration Rights granted by the Company to Cybex Computer Products Corporation in connection with the Strategic Partner Agreement dated March 6, 2000.(3) 4.27 -- 13% Bridge Note Conversion Notice used in July 1999 Private Placement.(4) 10.1 -- Form of Stock Purchase Agreement, dated as of March 2, 2001, by and between the Company and each of Jeffrey S. Doss, Donald W. Johnson and La Luz Enterprises, L.L.C.(8) 10.2 -- Form of Promissory Note, dated March 2, 2001, in the principal amount of $199,311, and issued by each of Jeffrey S. Doss, Donald W. Johnson and La Luz Enterprises, L.L.C. to the Company (8) 10.3 -- Form of Pledge and Security Agreement, dated as of March 2, 2001, by and between the Company and each of Jeffrey S. Doss, Donald W. Johnson and La Luz Enterprises, L.L.C.(8) 10.4 -- Guaranty, dated as of March 2, 2001, issued by Charles R. Mollo in favor of the Company (8) 24.1 -- None
-------- (1) Previously filed as an exhibit to Registration Statement No. 333-30264 dated February 11, 2000. (2) Previously filed as an exhibit to Amendment No. 1 to Registration Statement No. 333-30264 dated March 28, 2000. (3) Previously filed as an exhibit to Amendment No. 2 to Registration Statement No. 333-30264 dated May 4, 2000. (4) Previously filed as an exhibit to Amendment No. 4 to Registration Statement No. 333-30264 dated May 26, 2000. (5) Previously filed as an exhibit to Post-Effective Amendment No. 1 to Registration Statement No. 333-30264 dated July 24, 2000. (6) Previously filed as an exhibit to Form 10-Q dated August 14, 2000. (7) Previously filed as an exhibit to Form 8-K dated October 17, 2000. (8) Previously filed as an exhibit to Form 10-K dated April 2, 2001. All other schedules and exhibits are omitted because they are not applicable or because the required information is contained in the Financial Statements or Notes thereto. -21-