-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AbR9gSkDXfnYpOsZrlnwzukgklUCJ/cpASnZ8cjvgVliqQ7Umq+Z3aU5mJcBsQDg Q0TRG/ajFYG1bX3I6l/C7A== 0000950137-07-006768.txt : 20070504 0000950137-07-006768.hdr.sgml : 20070504 20070504101637 ACCESSION NUMBER: 0000950137-07-006768 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20070331 FILED AS OF DATE: 20070504 DATE AS OF CHANGE: 20070504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELULAR CORP CENTRAL INDEX KEY: 0000915324 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 363885440 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23212 FILM NUMBER: 07818280 BUSINESS ADDRESS: STREET 1: 647 N LAKEVIEW PKWAY STREET 2: 920 DEERFIELD PKWY CITY: VERNON HILLS STATE: IL ZIP: 60061 BUSINESS PHONE: 8474654500 MAIL ADDRESS: STREET 1: 647 NORTH LAKEVIEW PARKWAY CITY: VERNON HILLS STATE: IL ZIP: 60061 10-Q 1 c14852e10vq.htm QUARTERLY REPORT e10vq
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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 0-23212
Telular Corporation
(Exact name of Registrant as specified in its charter)
     
Delaware
(State or other jurisdiction of
incorporation or organization) 		  36-3885440
(I.R.S. Employer
Identification No.)
311 South Wacker Drive, Suite 4300, Chicago, Illinois 60606-6622
(Address of principal executive offices and zip code)
(312) 379-8397
(Registrant’s telephone number, including area code)
Indicate by check mark whether the 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 þ       No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o                      Accelerated filer þ                      Non-accelerated filer o
Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o       No þ
The number of shares outstanding of the Registrant’s common stock, par value $.01, as of April 20, 2007, the latest practicable date, was 18,239,807 shares.
 
 

 

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TELULAR CORPORATION
Index
             
        Page No.  
Part I — Financial Information        
   
 
        
Item 1.  
Financial Statements:
        
   
 
        
        3  
   
 
        
        4  
   
 
        
        5  
   
 
        
        6  
   
 
        
        7  
   
 
        
Item 2.       14  
   
 
        
Item 3.       19  
   
 
        
Item 4.       19  
   
 
        
Part II — Other Information        
   
 
        
Item 1.       19  
   
 
        
Item 1A.       20  
   
 
        
Item 6.       20  
   
 
        
Signatures     21  
   
 
        
Exhibit Index     22  
 Certification
 Certification
 Certification

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TELULAR CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
                 
    March 31,     September 30,  
    2007     2006  
    (Unaudited)          
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 7,962     $ 6,799  
Restricted cash
     950       —  
Trade accounts receivable, net
     21,570       25,495  
Inventories, net
     8,082       12,405  
Prepaid expenses and other current assets
     511       1,887  
 
            
Total current assets
     39,075       46,586  
 
                
Property and equipment, net
     4,028       4,625  
Other assets:
                
Goodwill
     2,043       2,043  
Other intangible assets, net
     1,496       4,247  
Deposits and other
     364       436  
 
            
Total other assets
     3,903       6,726  
 
            
Total assets
   $ 47,006     $ 57,937  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
Trade accounts payable
   $ 5,953     $ 9,488  
Accrued liabilities
     5,236       6,324  
Working capital line of credit
     —       3,313  
 
            
Total current liabilities
     11,189       19,125  
 
                
Stockholders’ equity:
                
Common stock; $.01 par value; 75,000,000 shares authorized; 18,239,807 and 18,066,411 outstanding at March 31, 2007 and September 30, 2006, respectively
     182       181  
Additional paid-in capital
     169,840       168,852  
Deficit
     (134,205 )     (130,221 )
 
            
Total stockholders’ equity
     35,817       38,812  
 
            
Total liabilities and stockholders’ equity
   $ 47,006     $ 57,937  
 
            
See accompanying notes

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TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(Unaudited)
                                 
    Three Months Ended March 31,     Six Months Ended March 31,  
    2007     2006     2007     2006  
 
                                
Revenue
                                
Net product sales
   $ 16,723     $ 21,703     $ 35,604     $ 42,933  
Service revenue
     4,228       2,660       7,989       5,193  
 
                        
Total revenue
     20,951       24,363       43,593       48,126  
 
                                
Cost of sales
                                
Net product cost of sales
     13,201       19,000       27,431       36,721  
Service cost of sales
     2,204       1,422       4,420       2,803  
 
                        
Total cost of sales
     15,405       20,422       31,851       39,524  
 
                                
Gross margin
     5,546       3,941       11,742       8,602  
 
                                
Operating expenses
                                
Engineering and development expenses
     1,932       1,877       3,921       3,595  
Selling and marketing expenses
     2,859       2,448       5,711       5,434  
General and administrative expenses
     1,453       1,515       2,802       2,729  
Amortization
     1,198       150       2,751       300  
Goodwill impairment loss
     —       —       563       —  
 
                        
Total operating expenses
     7,442       5,990       15,748       12,058  
 
                                
Loss from operations
     (1,896 )     (2,049 )     (4,006 )     (3,456 )
 
                                
Other income, net
     58       116       22       265  
 
                        
 
                                
Net loss
   $ (1,838 )   $ (1,933 )   $ (3,984 )   $ (3,191 )
 
                        
 
                                
Net loss per common share:
                                
Basic
   $ (0.10 )   $ (0.12 )   $ (0.22 )   $ (0.20 )
Diluted
   $ (0.10 )   $ (0.12 )   $ (0.22 )   $ (0.20 )
 
                                
Weighted average number of common shares outstanding:
                                
Basic
     18,126,714       16,133,518       18,097,779       16,126,890  
Diluted
     18,126,714       16,133,518       18,097,779       16,126,890  
See accompanying notes

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TELULAR CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Dollars in thousands)
(Unaudited)
                                 
            Additional           Total
    Common   Paid-In           Stockholders’
    Stock   Capital   Deficit   Equity
Balance at September 30, 2006
   $ 181     $ 168,852     $ (130,221 )   $ 38,812  
 
                                
Comprehensive income:
                                
Net loss for period from October 1, 2006 to March 31, 2007
     —       —       (3,984 )     (3,984 )
 
                                
Stock based compensation expense
     —       370       —       370  
Stock options exercised
     —       11       —       11  
Restricted stock award
     —       45       —       45  
Stock issued in connection with CSI earn-out
     1       562       —       563  
 
                                
     
Balance at March 31, 2007
   $ 182     $ 169,840     $ (134,205 )   $ 35,817  
     
See accompanying notes

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TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
                 
    Six Months Ended March 31,  
    2007     2006  
Operating Activities:
                
Net loss
   $ (3,984 )   $ (3,191 )
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation
     881       808  
Amortization
     2,751       300  
Goodwill impairment loss
     563       —  
Stock based compensation expense
     389       450  
Common stock issued for services
     —       9  
Loss on disposal of assets
     54       —  
Changes in assets and liabilities, net of the effects of acquisition:
                
Trade accounts receivable
     3,925       (9,659 )
Inventories
     4,323       (1,019 )
Prepaid expenses and other assets
     1,474       (367 )
Trade accounts payable
     (3,535 )     5,280  
Accrued liabilities
     (1,088 )     1,257  
 
            
Net cash provided by (used in) operating activities
     5,753       (6,132 )
 
                
Investing Activities:
                
Acquisition of property and equipment
     (338 )     (1,024 )
Proceeds from sale of marketable securities
     —       12,075  
Increase in restricted cash
     (950 )     (2,000 )
 
            
Net cash provided by (used in) investing activities
     (1,288 )     9,051  
 
            
 
                
Financing Activities:
                
Expenditures related to the issuance of common stock
     —       (21 )
Proceeds from the exercise of stock options
     11       51  
Proceeds from the working capital line of credit
     5,737       —  
Payment on the working capital line credit
     (9,050 )     —  
 
            
Net cash provided by (used in) financing activities
     (3,302 )     30  
 
            
 
                
Net increase in cash and cash equivalents
     1,163       2,949  
 
                
Cash and cash equivalents, beginning of period
   $ 6,799     $ 10,023  
 
            
Cash and cash equivalents, end of period
   $ 7,962     $ 12,972  
 
            
See accompanying notes

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TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007
(Unaudited, dollars in thousands, except share data)
1.   Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. In the opinion of management, the accompanying financial statements include all adjustments considered necessary for a fair presentation. Operating results for the six months ended March 31, 2007, are not necessarily indicative of the results that may be expected for the full fiscal year ending September 30, 2007. For additional information, please refer to the consolidated financial statements and the footnotes included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2006.
2.   Earnings Per Share
Basic earnings per share of common stock is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share of common stock is computed by dividing net earnings by the weighted average number of shares of common stock and common stock equivalents, which relate entirely to the assumed exercise of stock options and warrants. In the event of a net loss for the period, both basic and diluted earnings per share of common stock are computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. The weighted average number of shares of common stock outstanding for computation of basic and diluted earnings per share was 18,126,714 and 16,133,518, for the three months ended March 31, 2007 and 2006, respectively. The weighted average number of common shares outstanding for computation of basic and diluted earnings per share was 18,097,779 and 16,126,890, for the six months ended March 31, 2007 and 2006, respectively.
The shares outstanding used to compute diluted earnings per share for the three and six months ended March 31, 2007 and 2006 excluded the following stock options and warrants because their inclusion in the computation would have been antidilutive:
                                 
    Three Months Ended March 31,   Six Months Ended March 31,
    2007   2006   2007   2006
 
                                
Stock options
     1,801,345       1,565,531       1,801,345       1,565,531  
Warrants
     3,020,848       2,699,992       3,020,848       2,699,992  
 
                                
 
                                
 
     4,822,193       4,265,523       4,822,193       4,265,523  
 
                                
3.   Stock Based Compensation
The Company has an officer and employee stock incentive plan and a non-employee director stock incentive plan. The costs of stock options granted is calculated based on their grant date fair value and recognized over the vesting period. The fair value of stock options granted and warrants issued is estimated at the grant date or issuance date using a Black-Scholes stock option valuation model. Key factors in determining the valuation of a grant under the Black-Scholes model are: a volatility factor of the expected market price of the Company’s

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TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007
(Unaudited, dollars in thousands, except share data )
common stock, a risk-free interest rate, a dividend yield on the Company’s common stock and the expected term of the option.
On October 31, 2006, the Company issued restricted stock awards to all outside directors. This restricted stock has trading limitations which will be removed on October 31, 2007. The total value of these awards was $45 based on the price of the Company’s common stock on the date of issuance. The cost will be taken as a charge to operating expenses on a pro-rata basis over the twelve month period. There was no similar grant made in fiscal year 2006.
During the three and six month periods ended March 31, 2007 and 2006, the Company recognized stock-based compensation expense as follows:
                                 
    Three Months Ended March 31,     Six Months Ended March 31,  
    2007     2006     2007     2006  
 
                                
Stock based compensation:
                                
Stock options
   $ 167     $ 238     $ 370     $ 450  
Restricted stock
     11       —       19       —  
 
                        
 
   $ 178     $ 238     $ 389     $ 450  
 
                        
4.   Restricted Cash
Beginning in February 2003, the Venezuelan government imposed restrictions on the acquisition and payment of foreign currencies. On December 14, 2006, the Company entered a Guaranty Agreement (the “Agreement”) with one of its customers located in Venezuela, Compania Anonima Nacional Telefonos De Venezuela (“CANTV”). Under the Agreement, CANTV recognized its debt to the Company of $950 related to an unpaid invoice and deposited this amount with the Company. The Agreement stipulates that the funds shall not be applied or used by the Company as total or partial payment of any unpaid invoices unless, within 365 days of the date of the Agreement, payment is not approved and made by the Venezuelan government. If such a payment on the unpaid invoice is made before December 14, 2007, the Company will return the funds. If payment is not made by December 14, 2007, the Company has the right to offset the unpaid invoice with the $950. These funds have been recorded as restricted cash by the Company.
5.   Trade Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable represents sales made to customers on credit. An allowance for doubtful accounts is maintained based upon estimated losses resulting from the inability of customers to make payments for goods and services. Trade accounts receivable, net of the allowance for doubtful accounts, as of March 31, 2007 and September 30, 2006 are as follows:

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TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007
(Unaudited, dollars in thousands, except share data)
                 
    March 31,     September 30,  
    2007     2006  
    (Unaudited)          
 
                
Trade receivables
   $ 21,868     $ 25,839  
Less: allowance for doubtful accounts
     298       344  
 
            
 
   $ 21,570     $ 25,495  
 
            
6.   Inventories
The components of inventories consist of the following:
                 
    March 31,     September 30,  
    2007     2006  
    (Unaudited)          
 
                
Raw materials
   $ 4,482     $ 6,335  
Finished goods
     5,761       7,845  
 
            
 
     10,243       14,180  
 
                
Less: reserve for obsolescence
     (2,161 )     (1,775 )
 
                
 
            
 
   $ 8,082     $ 12,405  
 
            
7.   Goodwill and Other Intangibles
Goodwill as of March 31, 2007 and September 30, 2006 is as follows:
                         
    Fixed Cellular     Fixed Cellular        
    Terminals     Phones     Total  
Balance at September 30, 2006
   $ 2,043     $ —     $ 2,043  
 
                        
2007 activity:
                        
Additional goodwill
     —       563       563  
Impairment of goodwill
     —       (563 )     (563 )
 
                        
 
                  
Balance at March 31, 2007 (unaudited)
   $ 2,043     $ —     $ 2,043  
 
                  

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TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007
(Unaudited, dollars in thousands, except share data)
On May 8, 2006, the Company acquired substantially all of the assets and assumed certain liabilities relating to the fixed wireless division of CSI Wireless Inc. and CSI Wireless LLC (together, the “Sellers” or “CSI”). Pursuant to an earn-out provision in the Asset Purchase Agreement (the “Purchase Agreement”) the Company recognized an obligation to issue additional shares of common stock during the first quarter of fiscal year 2007, and subsequently, issued 150,990 additional shares of common stock to the Sellers in the second quarter of fiscal year 2007. The value of these shares of common stock, $563, was recorded as additional goodwill to the Fixed Cellular Phones (FCP) segment. In fiscal year 2006, it was determined that all of the goodwill attributed to the FCP segment was impaired and a charge was taken to operations. Accordingly, this additional goodwill was also determined to be impaired and the charge of $563 was taken in the first quarter of fiscal year 2007.
Other intangible assets as of March 31, 2007 and September 30, 2006 are as follows:
                                                 
    March 31, 2007     September 30, 2006  
            Accumulated                     Accumulated        
    Cost     Amortization     Net     Cost     Amortization     Net  
Other Intangible Assets:
                                                
Capitalized technology
   $ 3,840     $ (2,910 )   $ 930     $ 3,840     $ (2,250 )   $ 1,590  
Customer relationships
     3,070       (2,645 )     425       3,070       (637 )     2,433  
Other
     293       (152 )     141       293       (69 )     224  
 
                                    
Total other intangible assets
   $ 7,203     $ (5,707 )   $ 1,496     $ 7,203     $ (2,956 )   $ 4,247  
 
                                    
In the first quarter of fiscal year 2007, the Company reviewed the estimated lives of the intangible assets it purchased from CSI on May 8, 2006. It was determined that a portion of one customer relationship was no longer realizable. As a result, an additional amortization charge of $572 and $1,372 was recorded for the three and six months ended March 31, 2007, respectively. The effect of this change in the estimated life of the intangible was to reduce net income by $572 and $1,372 and reduce earnings per share by $.03 and $.08 for the three and six month periods ending March 31, 2007, respectively.
8   Line of Credit
On June 27, 2006, the Company entered into a two year Loan and Security Agreement (the “Line of Credit Agreement”) and a Non-Recourse Receivable Purchase Agreement (the “Receivable Purchase Agreement”) with Silicon Valley Bank (SVB). The Line of Credit Agreement provides for a working capital line of credit secured by accounts receivable with borrowings based upon eligible accounts receivable at 80% of their face value. The Receivable Purchase Agreement provides for the sale of accounts receivable to SVB. Each agreement has a credit limit of $10,000 and there is an aggregate credit limit of $15,000 covering borrowings or purchases under both agreements. The Company repays the loan as receivables are collected. Interest charged under the line of credit agreement can vary from SVB’s prime rate to SVB’s prime rate plus 2%. At March 31, 2007, the Company had no outstanding borrowings under the Line of Credit Agreement.
In connection with the agreements, the Company issued 320,856 warrants to purchase or convert into the Company’s Common Stock. The warrants are exercisable immediately at $1.87 per share and were valued at $356 using the Black-Scholes pricing model. The value of the warrants has been recorded as a loan origination fee and is being amortized over the term of the agreements.

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TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007
(Unaudited, dollars in thousands, except share data)
9.   Commitments
On April 28, 2006, the Company entered into an agreement with ACT Electronics, Inc. (“ACT”) under which ACT will provide fulfillment services and manufacture final assemblies of the Company’s products. Either party may terminate the agreement upon 90 days prior written notice to the other party. Under the agreement, the Company has the right to offset amounts due to the Company from ACT against amounts owed to ACT by the Company. As of March 31, 2007, the Company had $10,269 in open purchase commitments pursuant to this agreement.
On September 11, 2006, the Company entered into an agreement with Speedy-Tech Electronics Ltd. (“Speedy”) relating to the manufacturing of final assemblies of the Company’s products. Either party may terminate the agreement upon 90 days prior written notice to the other party. Under the agreement, the Company has the right to offset amounts due to the Company from Speedy against amounts owed to Speedy by the Company. As of March 31, 2007, the Company had $1,740 in open purchase commitments pursuant to this agreement.
10.   Segment and Major Customer Disclosures
The Company has two reportable business segments: Fixed Cellular Terminals (FCT) and Fixed Cellular Phones (FCP). The FCT segment consists of feature-rich, high end fixed cellular terminals, including the Telguard family of products and services. The FCP consists of high-volume, low cost fixed cellular phones.
The FCT market is mostly in North America and consists of vertical applications ranging from wireless residential and commercial alarm systems to machine-to-machine and portable dial tone applications. The FCP market is prevalent in countries outside of North America with low fixed line penetration.
Summarized below are the Company’s revenues and net income (loss) by reportable segment.
                                 
    Three Months Ended March 31,     Six Months Ended March 31,  
    2007     2006     2007     2006  
Revenue:
                                
Fixed Cellular Terminals
   $ 16,327     $ 7,351     $ 30,897     $ 14,490  
Fixed Cellular Phones
     4,624       17,012       12,696       33,636  
 
                        
 
   $ 20,951     $ 24,363     $ 43,593     $ 48,126  
 
                        
Net Income (Loss):
                                
Fixed Cellular Terminals
   $ 667     $ 378     $ 1,457     $ 983  
Fixed Cellular Phones
     (2,563 )     (2,427 )     (5,463 )     (4,439 )
 
                                
Non-segment other income (expense)
     58       116       22       265  
 
                        
 
   $ (1,838 )   $ (1,933 )   $ (3,984 )   $ (3,191 )
 
                        
For the three month period ended March 31, 2007, the Company had three customers that accounted for 50% of the FCT revenues. These customers were located in the United States (39%) and in Mexico (11%). For the six month period ended March 31, 2007, the Company had two customers located in the United States that accounted for 41% of the FCT revenues.

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TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007
(Unaudited, dollars in thousands, except share data)
For the three months ended March 31, 2007, the Company had five customers that accounted for 98% of the FCP revenues. These customers are located in Mexico (43%), Guatemala (18%) El Salvador (14%), South Africa (11%) and the United States (12%). For the six month period ended March 31, 2007, the Company had three customers that accounted for 69% of the FCP revenues. These customers are located in Mexico (43%), Guatemala (17%) and Venezuela (9%).
Total export sales for the three and six month periods ended March 31, 2007 were 30% and 35% of total Company revenues, respectively. FCT export sales for the three and six month period ended March 31, 2007 were 10% and 8% of total Company revenues, respectively and FCP export sales for the three and six month periods ended March 31, 2007 were 20% and 27% of total revenues, respectively.
11.   Supplemental Disclosures of Cash Flow Information
                 
    Six Months Ended
    March 31,
    2007   2006
 
                
Supplemental disclosure of cash flow information:
                
Interest paid
   $ 106     $ —  
 
                
Supplemental disclosure of non-cash investing and financing activities:
                
Restricted common stock awarded as director compensation - 18,072 shares
   $ 45     $ —  
Common stock issued to CSI in connection with the earn-out provisions of the Purchase Agreement - 150,990 shares
   $ 563     $ —  
12.   Business Combination
On May 8, 2006, the Company acquired substantially all of the assets and assumed certain liabilities relating to the fixed wireless division of CSI Wireless Inc. and CSI Wireless LLC (together, the “Sellers”). As a result of the acquisition, the Company established a greater presence with key customers in Latin America and obtained advanced technology for wireless public telephony. Pursuant to the Asset Purchase Agreement (the “Purchase Agreement”), the Company initially paid $3,044 in cash and issued 1,931,745 shares of its common stock with a fair value of $5,505 as consideration in the acquisition. In addition the Company incurred $851 in direct costs related to the acquisition and recorded $197 of liabilities in connection with the purchase. Earn-out provisions of the transaction may require the Company to issue additional shares of common stock at measurement dates through June 30, 2007. The purchase was accounted for using the purchase method in accordance with SFAS No. 141, Business Combinations. The Company’s Statements of Operations include the results of operations for the purchased assets and liabilities since May 8, 2006.
The initial preliminary aggregate purchase price was $9,400, consisting of $3,044 of cash, 1,931,745 shares of the Company’s Common Stock valued at $5,505 and direct costs of the acquisition of $851. The fair value of the common stock was determined based on the average market price of the Company’s Common Stock over the five day period ended two days after the terms of the Purchase Agreement were finalized. In the first quarter of fiscal year 2007, an additional $563 of increased purchase price was recorded as goodwill and as a liability to be

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TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007
(Unaudited, dollars in thousands, except share data)
settled with common stock of the Company pursuant to one of the earn-out provisions of the Purchase Agreement. In the second quarter of fiscal year 2007, the Company issued 150,990 of its common stock to the Sellers in settlement of the earn-out liability. The fair value of the common stock was determined based on the average market price of the Company’s common stock over the five day period ended two days after December 31, 2006. The additional goodwill was determined to be impaired and a charge of $563 was recorded to operations in the first quarter of fiscal year 2007. See financial statement footnote 7. The final earn-out measurement date is June 30, 2007, and the Company currently expects that it will not be required to issue additional shares of common stock. The following table summarizes the preliminary estimated fair value of the assets acquired and the liabilities assumed at the date of acquisition, including the additional value of the earn-out:
         
    May 8, 2006  
Inventory
   $ 69  
Prepaid expenses and deposits
     112  
Property and equipment
     2,349  
Acquired technology
     840  
Customer relationships
     3,070  
Other intangible assets
     293  
Goodwill
     4,097  
 
      
Total assets acquired
     10,830  
 
      
 
        
Reserve on purchase orders commitments
     517  
Accrued warranty reserve
     40  
Capital lease obligations
     113  
Liabilities in connection with the purchase
     197  
 
      
Total liabilities assumed
     867  
 
      
Net assets acquired
   $ 9,963  
 
      
The following summarized unaudited pro forma financial information for the three and six months ended March 31, 2006, assumes the acquisition occurred as of October 1, 2005:
                 
    Three Months   Six Months
    Ended March 31,   Ended March 31,
    2006   2006
 
                
Net revenues
   $ 30,057     $ 64,052  
Net loss
     (3,279 )     (4,907 )
Basic and diluted net loss per common share
   $ (0.18 )   $ (0.27 )
The pro forma results include depreciation of property and equipment acquired and the amortization of intangibles acquired and excludes revenues and cost of sales associated with a product and customer relationship not purchased and interest income as a result of the cash paid for the acquisition. The pro forma results are not necessarily indicative of the results that would have occurred if the acquisition had actually been completed on October 1, 2005, nor are they necessarily indicative of future consolidated results of operations.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Telular Corporation (Telular or the Company) is focused on global markets that have mature cellular and PCS networks (collectively cellular) that can be utilized for new applications and services that extend the cellular network’s capability. Specifically, Telular designs, develops, distributes and supports products and services that provide expanded connectivity and functionality to cellular networks. These product and service offerings add value to the cellular networks and take advantage of their economics, pervasiveness, convenience and architecture. These products provide the capability to connect alarm panels, telephones, fax machines and data modems directly to cellular networks. Bridging the gap between wireline customer premises equipment and cellular networks, these technologies provide the Company’s products with the “look and feel” of the wireline network, providing critical communications and security needs in a variety of environments. We refer to this concept as “Fixed Cellular.”
The growth of Fixed Cellular in any given market is dependent to a considerable extent upon the growth of cellular telephone service in that market as a cost-effective alternative to or substitute for landline telephone systems. Consequently, in managing the business and making decisions about where to invest resources, the Company’s management collects data and follows trends in the following areas of the cellular industry:
•   The cost of cellular airtime rates to consumers
 
•   The cost of cellular equipment technology and components
 
•   The capabilities of deployed cellular systems
 
•   Consumer attitudes toward cellular technology
 
•   Competitive and substitute products in the market place
 
•   Global economic conditions and economic conditions in key markets for Fixed Wireless
 
•   Telephony regulation in key markets for Fixed Wireless
Based upon trends noted from data collected in the above areas, such as improved economic conditions in Latin America and substantial growth in the adoption of Fixed Wireless in Asia and the United States, the Company believes that the market for Fixed Cellular will experience substantial growth over the next five years.
The Company operates two businesses organized into separate reporting segments: Fixed Cellular Terminals (FCT) and Fixed Cellular Phones (FCP). The Company is focusing additional resources on the FCT business where the introduction of TELGUARD ® digital products continues to drive FCT sales above FCP sales. We have been in the process of transitioning the Company to focus on our TELGUARD ® higher value business and are transforming the FCP business into a cash-generating segment.
The FCT market is primarily in North and South America and consists of a number of vertical applications ranging from wireless residential and commercial alarm systems addressed by TELGUARD ® to Internet access provided by PHONECELL ® FCT’s. The FCT market is addressed primarily through indirect channels consisting of distributors, representatives and agents along with in-house sales and customer support teams.
The FCP market is prevalent in countries outside of North America with low fixed line penetration. Cellular carriers offering services in this market are price driven as they target residential and small business markets where equipment subsidies are often used to reach the requisite end user price points. The FCP market is extremely competitive and we are taking actions in the market in order to differentiate our products. We pursue the FCP market through direct sales and localized distribution support to a tightly focused set of wireless network operators with high volume potential.
The Company generates its revenue by making and selling products and providing services related to those products. It recognizes revenue when its products ship from various manufacturing locations to customers and when the service is performed. Although the Company has a broad base of customers worldwide, much of its FCP revenue is generated from large contracts, the timing of which is often unpredictable.

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The Company’s operating expense levels are based in large part on expectations of future revenues. If anticipated sales in any quarter do not occur as expected, expenditure and inventory levels could be disproportionately high, and the Company’s operating results for that quarter, and potentially for future quarters, could be adversely affected. Certain factors that could significantly impact expected results are described in Cautionary Statements that are set forth in Exhibit 99 to the Company’s Form 10-K for the fiscal year ended September 30, 2006.
Results of Operations
Second quarter fiscal year 2007 compared to second quarter fiscal year 2006
Net product sales. Net product sales of $16.7 million for the three months ended March 31, 2007, decreased 23% compared to the same period last year.
TELGUARD ® Terminal Products. Sales of TELGUARD ® products increased 257%, or $6.1 million, to $8.5 million during the second quarter of fiscal year 2007 compared to the same period of fiscal year 2006. This increase is due primarily increased market penetration resulting from lower cost TELGUARD ® digital products.
Terminal Products (exclusive of TELGUARD ® products). Sales of terminal products increased 55%, or $1.3 million, to $3.6 million during the second quarter of fiscal year 2007 compared to the same period of fiscal year 2006. This increase was primarily the result of increased sales in developing markets where end users are increasingly using our products for Internet access and to allow legacy telephone equipment to utilize wireless networks.
Phone Products. Sales of FCP products during the second quarter of fiscal year 2007 of $4.6 million decreased 73% or $12.3 million, over the same period last year as a result of a decline in global demand for CDMA-based products as well as increased competition.
Service revenue. Service revenue increased 59% to $4.2 million during the second quarter of fiscal year 2007 from $2.7 million during the same period last year. The increase is primarily the result of the increased services related to TELGUARD ® products cumulatively activated over the past 12 months.
Gross margin. Gross margin for the three months ended March 31, 2007 of $5.5 million, or 26% of total revenue, compares to $3.9 million, or 16% of total revenue, for the same period last year. The increase in gross margin as a percentage of total revenue is the result of an increased mix of TELGUARD ® product and services in the Company’s revenues.
Engineering and development expenses. Engineering and development expenses of $1.9 million for the three months ended March 31, 2007, increased 3%, or $0.1 million compared to the same period of fiscal year 2006. The increase is primarily due to severance charges related to the Company’s reduction in workforce.
Selling and marketing expenses. Selling and marketing expenses of $2.9 million for the three months ended March 31, 2007, increased 17% compared to the same period of fiscal year 2007. This increase reflects the severance charges for the reduction in workforce and an increase in expenses related to a distributor rebate program in the FCT segment.
General and administrative expenses. General and administrative expenses of $1.5 million for the three months ended March 31, 2007, decreased 4%, or $0.1 million compared to the same period of fiscal year 2006. This decrease was primarily due to a decrease in legal expenses related to corporate development activities in fiscal year 2006.
Amortization. Amortization expense of $1.2 million for the three months ended March 31, 2007, increased 699% compared to the same period of fiscal year 2006. This increase was the result of amortization associated with intangible assets purchased in the May 8, 2006 acquisition of the fixed wireless division business of CSI Wireless Inc.
Net loss. The Company recorded a net loss of $1.8 million for the second quarter of fiscal year 2007 compared to a net loss of $1.9 million for the second quarter of fiscal year 2006. The decrease in net loss this year is the result of increased gross margins offset by increases in operating expenses and amortization. Net income in the second quarter from the FCT segment of $0.7 million compares to net income of $0.4 million last year. Net loss in the second quarter from the FCP segment was $2.6 million compared to net loss of $2.4 million last year.

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Net loss per Common Share. Net loss per share of $0.10 for the second quarter of fiscal year 2007 compares to net loss per share of $0.12 for the second quarter of fiscal year 2006.
First six months fiscal year 2007 compared to first six months fiscal year 2006
Net product sales. Net product sales of $35.6 million for the six months ended March 31, 2007, decreased 17% compared to the same period last year.
TELGUARD ® Terminal Products. Sales of TELGUARD ® products increased 291%, or $12.6 million, to $16.9 million during the first six months of fiscal year 2007 compared to the same period of fiscal year 2006. This increase is due primarily to increased market penetration resulting from lower cost TELGUARD ® digital products.
Terminal Products (exclusive of TELGUARD ® products). Sales of terminal products increased 21%, or $1.1 million, to $6.0 million during the first six months of fiscal year 2007 compared to the same period of fiscal year 2006. This increase was primarily the result of increased sales in developing markets where end users are increasingly using our products for Internet access and to allow legacy telephone equipment to utilize wireless networks.
Phone Products. Sales of FCP products during the first six months of fiscal year 2007 of $12.7 million decreased 62% or $20.7 million, over the same period last year as a result of a decline in global demand for CDMA-based products as well as increased competition.
Service revenue. Service revenue increased 54% to $8.0 million during the first six months of fiscal year 2007 from $5.2 million during the same period last year. The increase is primarily the result of the increased services related to TELGUARD ® products cumulatively activated during the period.
Gross margin. Gross margin for the six months ended March 31, 2007 of $11.7 million, or 27% of total revenue, compares to $8.6 million, or 18% of total revenue, for the same period last year. The increase in gross margin as a percentage of total revenue is the result of an increased mix of TELGUARD ® product and services in the Company’s revenues.
Engineering and development expenses. Engineering and development expenses of $3.9 million for the six months ended March 31, 2007, increased 9%, or $0.3 million compared to the same period of fiscal year 2006. The increase is due to severance charges related to the Company’s reduction in workforce, an increase in outside contract engineering that was used to augment engineering resources and an increase in compensation expense as a result of the addition of former CSI employees.
Selling and marketing expenses. Selling and marketing expenses of $5.7 million for the six months ended March 31, 2007, increased 5% compared to the same period of fiscal year 2007. This increase reflects the severance charges for the reduction in workforce and an increase in expenses related to a distributor marketing program in the FCT segment.
General and administrative expenses. General and administrative expenses of $2.8 million for the six months ended March 31, 2007, increased 3%, or $0.1 million compared to the same period of fiscal year 2006. This increase was primarily due to the allocation of idle plant capacity to general and administrative expenses offset by a decrease in professional fees.
Amortization. Amortization expenses of $2.8 million for the six months ended March 31, 2007, increased 817% compared to the same period of fiscal year 2006. This increase was the result of amortization associated with intangible assets purchased in the May 8, 2006 acquisition of the fixed wireless division business of CSI Wireless Inc.
Goodwill impairment Goodwill impairment loss of $0.6 million for the six months ended March 31, 2007, compares to no loss in the same period of fiscal year 2006. This loss in the current period resulted from the allocation of $0.6 million to goodwill relating to an earn-out provision contained in the Purchase Agreement with CSI (see financial statement footnote 7). This additional goodwill was related to the FCP segment, all of which was determined to be impaired in fiscal 2006. Accordingly, this goodwill was taken as an impairment charge in the first quarter of fiscal year 2007.

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Net loss. The Company recorded a net loss of $4.0 million for the first six months of fiscal year 2007 compared to a net loss of $3.2 million for the first six months of fiscal year 2006. The increase in net loss this year is primarily the result of increased amortization, offset by increased gross margin. Net income in the first six months quarter from the FCT segment of $1.5 million compares to net income of $1.0 million last year. Net loss in the first six months from the FCP segment was $5.5 million compared to net loss of $4.4 million last year
Net loss per Common Share. Net loss per share of $0.22 for the first six months of fiscal year 2007 compares to net loss per share of $0.20 for the same period of fiscal year 2006.
Financial Position
Management regularly reviews net working capital in addition to cash to determine if it has enough cash to operate the business. On March 31, 2007, the Company had $7.9 million of unrestricted cash and cash equivalents and a working capital surplus of $27.9 million.
The Company generated $5.8 million of cash from operations during the first six months of fiscal year 2007 compared to cash used of $6.1 million during the same period of fiscal year 2006. Cash provided by operations during the first six months of fiscal year 2007 includes $4.0 million of the net loss, offset by $4.6 million of non-cash charges and $5.1 million due to net favorable changes in working capital as follows: (1) a decreases in trade accounts receivable as a result of more timely collections of existing receivables; (2) a decrease in inventories as a result of better management of production schedules, thereby limiting inventory growth; (3) a decrease in prepaid expenses and other assets primarily as a result of applying a prepayment made to our Contract Manufacturer for outstanding invoices, (4) a decrease in trade payables from reduced production, mainly in the FCP segment and (5) a decrease in accrued liabilities resulting from the timing of payments.
The FCT segment generated $1.6 million and $3.7 million of cash from operations during the three and six month periods ended March 31, 2007, respectively. The FCP segment generated $1.7 million and 2.1 million of cash from operations primarily from the improved collection of trade accounts receivable during the three and six month periods ended March 31, 2007, respectively.
Cash of $1.3 million was used in investing activities during the first six months of fiscal year 2007 compared to cash generated from investing activities of $9.1 million during the same period of the prior year, a net decrease of $10.4 million. This decrease was due to (1) the sale of $12.1 million of marketable securities which generated cash in the first six months of fiscal year 2006 compared to no sales of marketable securities in the same period of fiscal year 2007, (2) a $1.0 million decrease in restricted cash period over period, and (3) $0.7 million less used for the acquisition of property and equipment.
Cash of $3.3 million was used in financing activities in the first six months of fiscal year 2007 to pay down the working line of credit with Silicon Valley Bank. There were no borrowings under this credit facility in the same period of the prior year (see financial statement footnote 8).
Based upon its current operating plan, the Company believes its existing capital resources, including the line of credit with Silicon Valley Bank, will enable it to maintain its current and planned operations. Cash requirements may vary and are difficult to predict given the volatility of demand in certain of the developing markets targeted by the Company. The Company expects to maintain levels of cash reserves which are required to undertake major product development initiatives and to qualify for large sales opportunities.
Critical Accounting Policies
The Company’s financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. The Company believes that the following represent the critical accounting policies that currently affect the presentation of the Company’s financial condition and results of operations.

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Reserve for Obsolescence
Significant management judgment is required to determine the reserve for obsolete or excess inventory. The Company currently considers inventory quantities greater than a one-year supply as well as any additional, specifically identified inventory to be excess. The Company also provides for the total value of inventories that are determined to be obsolete based on criteria such as customer demand and changing technologies. At March 31, 2007 and September 30, 2006, the inventory reserves were $2.2 million and $1.8 million, respectively. Changes in strategic direction, such as discontinuance or expansion of product lines, changes in technology or changes in market conditions, could result in significant changes in required reserves.
Goodwill
The Company evaluates the fair value and recoverability of the goodwill of each of its business segments whenever events or changes in circumstances indicate the carrying value of the asset may not be recoverable or at least annually. In determining fair value and recoverability, the Company makes projections regarding future cash flows. These projections are based on assumptions and estimates of growth rates for the related business segment, anticipated future economic conditions, the assignment of discount rates relative to risk associated with companies in similar industries and estimates of terminal values. An impairment loss is assessed and recognized in operating earnings when the fair value of the asset is less than its carrying amount.
Income Taxes
The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. Currently, the Company has significant deferred tax assets principally related to the carryforward of net operating losses. Deferred tax assets are reviewed regularly for recoverability, and when necessary, valuation allowances are established based on historical tax losses, projected future taxable income, and expected timing of reversals of existing temporary differences. Valuation allowances have been provided for all deferred tax assets, as management makes assessments about the realizability of such deferred tax assets. Changes in the Company’s expectations could result in significant adjustments to the valuation allowances, which would significantly impact the Company’s results of operations.
Forward Looking Information
The Company includes certain estimates, projections and other forward-looking statements in its reports and in other publicly available material. Statements regarding expectations, including performance assumptions and estimates relating to capital requirements, as well as other statements that are not historical facts, are forwarding-looking statements.
These statements reflect management’s judgments based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, customer growth and retention, pricing, operating costs and the economic environment.
The words “estimate”, “project”, “intend”, “expect”, “believe”, “target” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are found throughout Management’s Discussion and Analysis. The reader should not place undue reliance on forward-looking statements, which speak only as of the date of this report. The Company is not obligated to and expressly disclaims any obligation to publicly release any revisions to forward-looking statements to reflect events after the date of this report or unforeseen events. Other risks and uncertainties are discussed in Exhibit 99 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006 which is hereby incorporated by reference.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes regarding the Company’s market risk position from the information provided in its Annual Report on From 10-K for the fiscal year ended September 30, 2006.
The Company frequently invests available cash and cash equivalents in short term instruments such as certificates of deposit, commercial paper and money market accounts. Although the rate of interest paid on such investments may fluctuate over time, each of the Company’s investments is made at a fixed interest rate over the duration of the investment. All of these investments have maturities of less than 90 days. The Company believes its exposure to market risk fluctuations for these investments is not material as of March 31, 2007.
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of trade accounts receivable. To reduce its exposure to the credit risks of international customers, with the exception of customers with ownership interests by credit-worthy, primarily US-based companies, the Company generally receives payment prior to shipment, receives irrevocable letters of credit that are confirmed by U.S. banks, or purchases commercial credit insurance. In rare instances, the Company extends credit to foreign customers without the protection of prepayments, letters of credits or credit insurance. The Company performs ongoing credit evaluations and charges amounts to operations when they are determined to be uncollectible. Because of the steps taken above to mitigate credit risks of international customers, the Company believes that its exposure to credit risk is not material.
To mitigate the effects of currency fluctuations on the Company’s results of operations, the Company conducts all of its international transactions in U.S. dollars.
Item 4. CONTROLS AND PROCEDURES
The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 ( the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. As of the end of the period covered by this report an evaluation of the effectiveness of the Company’s disclosure controls and procedures was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO). Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective.
During the quarter ended March 31, 2007, there were no changes in the Company’s internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15, each promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings that arose in the ordinary course of its business. While any litigation contains an element of uncertainty, management believes that the outcome of all pending legal proceedings will not have a material adverse effect on the Company’s consolidated results of operation or financial position. However, because of the nature and inherent uncertainties of litigation, should the outcome of any legal actions be unfavorable, the Company may be required to pay damages and other expenses, which could have a material adverse effect on the Company’s financial position and results of operations.

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Item 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in our annual report on Form 10-K for the fiscal year ended September 30, 2006.
Item 6. EXHIBITS
The following documents are filed as Exhibits to this report:
         
Number   Description   Reference
 
        
31.1
  Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.   Filed herewith
 
        
31.2
  Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.   Filed herewith
 
        
32
  Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   Furnished herewith

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
         
  Telular Corporation
 		  
Date May 4, 2007  By:   /s/ Michael J. Boyle    
    Michael J. Boyle   
    President & Chief Executive Officer   
 
     
Date May 4, 2007  /s/ Jeffrey L. Herrmann    
  Jeffrey L. Herrmann   
  Executive Vice President, Chief Operating Officer & Chief Financial Officer   
 
     
Date May 4, 2007  /s/ Robert Deering    
  Robert Deering   
  Controller & Chief Accounting Officer   

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Exhibit Index
         
Number   Description   Reference
 
        
31.1
  Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.   Filed herewith
 
        
31.2
  Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.   Filed herewith
 
        
32
  Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   Furnished herewith

22

EX-31.1 2 c14852exv31w1.htm CERTIFICATION exv31w1
 

Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael J. Boyle, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Telular Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
     a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
         
     
Date: May 4, 2007  /s/ Michael J. Boyle    
  Michael J. Boyle   
  President and Chief Executive Officer   

 

EX-31.2 3 c14852exv31w2.htm CERTIFICATION exv31w2
 

         
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffrey L. Herrmann, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Telular Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
     a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
         
     
Date: May 4, 2007  /s/ Jeffrey L. Herrmann    
  Jeffrey L. Herrmann   
  Executive Vice President, Chief Operating Officer & Chief Financial Officer   

 

EX-32 4 c14852exv32.htm CERTIFICATION exv32
 

         
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Solely for the purposes of complying with 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned President and Chief Executive Officer and the Executive Vice President, Chief Operating Officer and Chief Financial Officer of Telular Corporation (the “Company”), hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
         
   
/s/ Michael J. Boyle        
Michael J. Boyle     
President and Chief Executive Officer     
May 4, 2007    
         
     
/s/ Jeffrey L. Herrmann      
Jeffrey L. Herrmann     
Executive Vice President, Chief Operating Officer and Chief Financial Officer     
May 4, 2007    

 

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