10-Q 1 d12687.txt 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 Quarterly Period Ended March 31, 2003. 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 0-23212 Telular Corporation (Exact name of Registrant as specified in its charter) Delaware 36-3885440 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 647 North Lakeview Parkway Vernon Hills, Illinois 60061 (Address of principal executive offices) (Zip Code) (847) 247-9400 (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 X No ------ ----- The number of shares outstanding of the Registrant's common stock, par value $.01, as of March 31, 2003, the latest practicable date, was 12,820,421 shares. 1 TELULAR CORPORATION Index
Part I - Financial Information Page No. -------- Item 1. Financial Statements: Consolidated Balance Sheets March 31, 2003 (unaudited) and September 30, 2002 3 Consolidated Statements of Operations (unaudited) Three Months Ended March 31, 2003 and March 31, 2002 4 Consolidated Statements of Operations (unaudited) Six Months Ended March 31, 2003 and March 31, 2002 5 Consolidated Statement of Stockholders' Equity (unaudited) Period from September 30, 2002 to March 31, 2003 6 Consolidated Statements of Cash Flows (unaudited) Six Months Ended March 31, 2003 and March 31, 2002 7 Notes to the Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosures about Market Risk 15 Item 4. Controls and Procedures 16 Part II - Other Information Item 1. Legal Proceedings 17 Item 2. Changes in Securities and Recent Sales of Unregistered Securities 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 6. Exhibits and Reports on Form 8-K 18 Signatures 21 Certifications 22 Exhibit Index 24
2 TELULAR CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data)
March 31, September 30, 2003 2002 ----------- ------------- ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 31,646 $ 33,812 Restricted cash - 3,789 Trade receivables, net of allowance for doubtful accounts of $104 at March 31, 2003 and September 30, 2002 7,241 9,613 Inventories, net 9,863 7,192 Prepaid expenses and other current assets 803 859 ---------- --------- Total current assets 49,553 55,265 Property and equipment, net 2,971 3,328 Other assets: Excess of cost over fair value of net assets acquired, less accumulated amortization of $2,342 at March 31, 2003 and September 30, 2002 2,554 2,554 Other intangible assets, less accumulated amortization of $875 and $625 at March 31, 2003 and September 20, 2002, respectively 125 375 Deposits and other 303 303 ---------- --------- Total other assets 2,982 3,232 ---------- --------- Total assets $ 55,506 $ 61,825 ========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 6,435 $ 9,531 Accrued liabilities 1,415 1,758 Revolving line of credit - 3,789 ---------- --------- Total current liabilities 7,850 15,078 Stockholders' equity: Common stock; $.01 par value; 75,000,000 shares authorized; 12,820,421 and 12,882,866 outstanding at March 31, 2003 and September 30, 2002, respectively 128 129 Additional paid-in capital 149,306 149,531 Deficit (101,778) (102,913) ---------- --------- Total stockholders' equity 47,656 46,747 ---------- --------- Total liabilities and stockholders' equity $ 55,506 $ 61,825 ========== =========
See accompanying notes 3 TELULAR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share data) (Unaudited)
Three Months Ended March 31, 2003 2002 ----------- ----------- Revenues $ 13,788 $ 19,217 Cost of sales 9,856 13,643 ----------- ----------- 3,932 5,574 Engineering and development expenses 1,814 1,644 Selling and marketing expenses 2,085 2,410 General and administrative expenses 1,057 1,219 Amortization 125 125 ----------- ----------- Income (loss) from operations (1,149) 176 Other income (expense), net (23) 35 ----------- ----------- Income (loss) before income taxes (1,172) 211 Income taxes, net of tax benefit - - ----------- ----------- Net income (loss) $ (1,172) $ 211 =========== =========== Net income (loss) per common share: Basic $ (0.09) $ 0.02 Diluted $ (0.09) $ 0.02 Weighted average number of common shares outstanding: Basic 12,810,327 12,856,301 Diluted 12,810,327 13,014,722
See accompanying notes 4 TELULAR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share data) (Unaudited)
Six Months Ended March 31, 2003 2002 ----------- ----------- Revenues $ 39,542 $ 26,412 Cost of sales 27,900 19,208 ----------- ----------- 11,642 7,204 Engineering and development expenses 3,496 3,209 Selling and marketing expenses 4,147 4,253 General and administrative expenses 2,270 2,251 Amortization 250 250 ----------- ----------- Income (loss) from operations 1,479 (2,759) Other income (expense), net (344) 140 ----------- ----------- Income (loss) before income taxes 1,135 (2,619) Income taxes, net of tax benefit - - ----------- ----------- Net income (loss) $ 1,135 $ (2,619) =========== =========== Net income (loss) per common share: Basic $ 0.09 $ (0.20) Diluted $ 0.09 $ (0.20) Weighted average number of common shares outstanding: Basic 12,828,713 12,838,464 Diluted 12,978,667 12,838,464
See accompanying notes 5 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, 2002 $ 129 $ 149,531 $ (102,913) $ 46,747 Net income for period from October 1, 2002 to March 31, 2003 - - 1,135 1,135 Deferred compensation related to stock options - 70 - 70 Stock options exercised - 32 - 32 Stock issued in connection with services and compensation - 78 - 78 Purchase of treasury stock, at cost (1) (405) - (406) ------------------------------------------------------------------------ Balance at March 31, 2003 $ 128 $ 149,306 $ (101,778) $ 47,656 ========================================================================
See accompanying notes 6 TELULAR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Six Months Ended March 31, 2003 2002 -------- -------- Operating Activities: Net income (loss) $ 1,135 $ (2,619) Adjustments to reconcile net income (loss) to net cash used in operating activities Depreciation 641 646 Amortization 250 250 Compensation expense related to stock options 70 70 Common stock issued for services and compensation 78 85 Loss on sale of short term investment - 15 Changes in assets and liabilities: Trade receivables 2,372 (7,777) Inventories (2,671) 1,609 Prepaid expenses, deposits and other 56 (106) Trade accounts payable (3,096) 1,958 Accrued liabilities (343) 266 -------- -------- Net cash used in operating activities (1,508) (5,603) Investing Activities: Proceeds from the sale of short term investment - 1 Decrease (increase) in restricted cash 3,789 (789) Acquisition of property and equipment (284) (505) Advance to shareholder - (750) -------- -------- Net cash provided by (used in) investing activities 3,505 (2,043) -------- -------- Financing Activities: Proceeds from the issuance of common stock 32 117 Borrowings, net (3,789) 789 Purchase of treasury stock, at cost (406) - -------- -------- Net cash provided by (used in) financing activities (4,163) 906 -------- -------- Net decrease in cash and cash equivalents (2,166) (6,740) Cash and cash equivalents, beginning of period 33,812 36,385 -------- -------- Cash and cash equivalents, end of period $ 31,646 $ 29,645 ======== ========
See accompanying notes 7 TELULAR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2003 (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, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and six months ended March 31, 2003, are not necessarily indicative of the results that may be expected for the full fiscal year ending September 30, 2003. For further information, 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, 2002. 2. Inventories The components of inventories consist of the following (000's): March 31, September 30, 2003 2002 ----------- ------------- (unaudited) Raw materials $ 5,411 $ 4,066 Finished goods 5,049 3,591 ------- ------- 10,460 7,657 Less: Reserve for obsolescence 597 465 ------- ------- $ 9,863 $ 7,192 ======= ======= 3. Advance to Shareholder In 1992, the Telular Group L.P., predecessor of the Company, entered into a contribution agreement with DNIC Brokerage Company (DNIC) pursuant to which DNIC contributed a variety of assets including certain patents and license agreements, to the Company. Under the contribution agreement, DNIC retained the right to receive the first $250 per year in annual royalty payments pursuant to the contributed license agreements. On October 10, 2001, the Company entered into an agreement with DNIC, pursuant to which the Company agreed to advance an amount not to exceed $750 of future royalties to DNIC to be used solely for the purpose of purchasing the Company's common stock in open market transactions. Beginning on October 1, 2001, all royalties received by the Company for the benefit of DNIC will first be applied to amounts advanced to DNIC by the Company, and any remaining royalties will be paid to DNIC. The advances bear interest at the prime rate as published in the Wall Street Journal. In October and November 2001, the Company advanced a total of $750 to DNIC under the terms of this arrangement. On March 31, 2003 and September 30, 2002, the current portion of the outstanding balance of $250 was recorded in other current assets, and the long-term portion of the outstanding balance of $250, was recorded in other assets. DNIC is a shareholder of the Company, who as of December 6, 2002 held approximately 1.1 million shares of the Company's Common Stock. 8 TELULAR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2003 (Unaudited, dollars in thousands, except share data) 4. Revolving Line of Credit On December 31, 2002, the Company's Loan and Security Agreement (the Agreement) with Wells Fargo Business Credit Inc. (Wells) matured. On December 30, 2002, the Company repaid the full balance of the loan outstanding under the Agreement and obtained releases from all security interests in assets of the Company held by Wells. In accordance with the Agreement, 100% of the outstanding amount of the Loan was collaterized with restricted cash, which was used to repay the outstanding balance of the Loan. 5. Redeemable Preferred Stock and Preferred Stock On March 31, 2003 and September 30, 2002, the Company had 21,000 shares of $0.01 par value Redeemable Preferred Stock authorized and none outstanding and 9,979,000 shares of $0.01 par value Preferred Stock authorized and none outstanding. 6. Stock Repurchase The Company's Board of Directors authorized the repurchase of up 1,000,000 shares of the Company's Common Stock commencing on November 6, 2002. As of March 31, 2003, the Company had acquired 106,213 shares at a total cost of $406. 7. Stock Based Compensation Effective January 1, 2003, the Company adopted Statement of Financial Accounting Standards 148, "Accounting for Stock-Based Compensation- Transition and Disclosure (SFAS 148), which requires that pro forma information regarding net income, earnings per share and stock-based employee compensation be presented in interim financial information for any period in which stock-based employee awards are outstanding. No stock-based employee compensation expense is reflected in net income (loss), as all options granted had an exercise price equal to market value of the Common Stock on the date of grant. The Company's pro forma information is as follows:
Three Months Ended Six Months Ended March 31, March 31, 2003 2002 2003 2002 ------- ------ ----- ------- Net income (loss) as reported $(1,172) $ 211 $,135 $(2,619) Stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax effects 95 367 190 733 ------- ------ ----- ------- Pro forma net income (loss) $(1,267) $ (156) $ 945 $(3,352) ======= ====== ===== ======= Net income (loss) per share: Basic - as reported $ (0.09) $ 0.02 $0.09 $ (0.20) Basic - pro forma $ (0.10) $(0.01) $0.07 $ (0.26) Diluted - as reported $ (0.09) $ 0.02 $0.09 $ (0.20) Diluted - pro forma $ (0.10) $(0.01) $0.07 $ (0.26)
9 TELULAR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2003 (Unaudited, dollars in thousands, except share data) 8. Earnings Per Share Basic and diluted net income (loss) per common share are computed based upon the weighted-average number of shares of common stock outstanding. Common shares issuable upon the exercise of options and warrants are not included in the per share calculations if the effect of their inclusion would be anti-dilutive. The following is a reconciliation of the weighted average number of common shares outstanding for the basic and diluted earnings per share computation:
Three Months Ended March 31, 2003 2002 ----------- ----------- Net income (loss) $(1,172,000) $ 211,000 =========== =========== Weighted average number of common shares outstanding Basic 12,810,327 12,856,301 Effect of dilutive employee stock options -- 158,421 ----------- ----------- Diluted 12,810,327 13,014,722 =========== =========== Net income (loss) per share Basic $ (0.09) $ 0.02 Diluted $ (0.09) $ 0.02
Six Months Ended March 31, 2003 2002 ----------- ----------- Net income (loss) $ 1,135,000 $(2,619,000) =========== =========== Weighted average number of common shares outstanding Basic 12,828,713 12,838,464 Effect of dilutive employee stock options 149,954 -- ----------- ----------- Diluted 12,978,667 12,838,464 =========== =========== Net income (loss) per share Basic $ 0.09 $ (0.20) Diluted $ 0.09 $ (0.20)
9. Segment Disclosures The Company, which is organized on the basis of products and services, has two reportable business segments, Fixed Wireless Terminals and Security Products. The Company designs, develops, manufactures and markets both fixed wireless terminals and security products. Fixed wireless terminals provide the capability to connect standard wireline telecommunications customer premises equipment with cellular-type transceivers for use in wireless communication networks. Security products provide wireless backup systems for commercial and residential alarm systems. 10 TELULAR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2003 (Unaudited, dollars in thousands, except share data) Summarized below are the Company's segment revenue and net income (loss) by reportable segment: Six Months Ended March 31, 2003 2002 -------- -------- Revenue Fixed Wireless Terminals $ 33,199 $ 20,471 Security Products 6,343 5,941 -------------------- $ 39,542 $ 26,412 Net Income (Loss) Fixed Wireless Terminals $ 1,887 $ (2,024) Security Products (752) (595) -------------------- $ 1,135 $ (2,619) For the six months ended March 31, 2003, one customer, located in Mexico, accounted for 74% of the fixed wireless terminal net product sales and two customers, both located in the USA, accounted for 49% and 10% respectively, of the security products net product sales. For the six months ended March 31, 2002, two customers located in Mexico and Nigeria, accounted for 58% and 11%, respectively, of the fixed wireless terminal net product sales and two customers, both located in the USA, accounted for 51% and 9%, respectively of the security products net product sales. Export sales of fixed wireless terminals represent 90% and 89% of total fixed wireless net product sales for the first six months of fiscal years 2003 and 2002, respectively. Export sales of security products were insignificant for the first six months of fiscal years 2003 and 2002. 10. Commitments In December 2002, the Company entered into an agreement with a third-party contractor whereby the contractor will develop and integrate new product hardware and software. The Company's total commitment under the agreement is $1.3 million, subject to the completion of certain project milestones with payments due in various amounts through July 14, 2003. The contractor may also receive additional compensation for early completion of the project as specified in the agreement. As of March 31, 2003, the Company had a commitment of $1.0 million remaining under the agreement. 11. Subsequent Event On April 14, 2003, the Company acquired a fixed wireless CDMA subscriber unit license from QUALCOMM Inc. (QUALCOMM). The Company paid for the up-front license fee by agreeing to make cash installment payments and by issuing 166,309 shares of the Company's Common Stock. 11 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The Company designs, develops, manufactures and markets products based on its proprietary interface technologies, which provide the capability to connect standard telecommunications equipment, including standard telephones, fax machines, data modems and alarm panels with wireless communication networks in the cellular and PCS frequency bands (collectively cellular). Applications of the Company's technology include Wireless Local Loop, a primary access service where wireline systems are unavailable, unreliable or uneconomical. The Company's business segments are divided between its two principal product lines: PHONECELL(R), a line of cellular Fixed Wireless Terminals and cellular Fixed Wireless Desktop Phones (collectively Fixed Wireless Terminals or FWTs), and TELGUARD(R), a line of Wireless Security Products. Currently, the Company is devoting a substantial portion of its resources to international market development, extension of its core product line to new cellular wireless standards, expansion, protection and licensing of its intellectual property rights and development of underlying radio technology. 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 Pursuant to the Securities Litigation Reform Act that is set forth in Exhibit 99 to the Company's Form 10-K for the fiscal year ended September 30, 2002. Results of Operations Second quarter fiscal year 2003 compared to second quarter fiscal year 2002 Revenues. Total revenue of $13.8 million decreased $5.4 million, or 28%, for the three months ended March 31, 2003 compared to the same period last year. PHONECELL(R) products sales of $10.7 decreased 34%, or $5.5 million, during the second quarter of fiscal year 2003 compared to the same period of fiscal year 2002. This decrease was the result of reduced shipments of desktop phones to Radiomovil Dipsa (Telcel) Mexico under the Company's supply agreement, as amended with Telcel. TELGUARD(R) revenues increased 5%, or $0.1 million, during the second quarter of fiscal year 2003 compared to the same period last year. Cost of sales. Cost of sales decreased $3.8 million, or 28%, for the three months ended March 31, 2003 compared to the same period last year. Cost of sales for the second quarter of fiscal year 2003 of $9.9 million, or 71% of total revenue, compares to $13.6 million, or 71% of total revenue, for the second quarter of fiscal year 2002. The decrease in cost of sales during the second quarter of fiscal year 2003 is due primarily to the lower sales volume. Engineering and Development Expenses. Engineering and development expenses increased $0.2 million, or 10% for the second quarter of fiscal year 2003 compared to the same period of fiscal year 2002. The increase is due primarily to the added expense from substantial investments in CDMA2000(R) 1XRTT products. Selling and Marketing Expenses. Selling and marketing expenses for the second quarter of fiscal year 2003 decreased 13%, or $0.3 million, compared to the same period of fiscal year 2002. The decrease is due primarily to lower commission expense as a result of the lower sales volume. General and Administrative Expenses (G&A). G&A for the three months ended March 31, 2003, decreased 13%, or $0.2 million, compared to the same period last year. The decrease consists primarily of lower performance bonuses based on reduced profitability. Other Income. Other income for the second quarter of fiscal year 2003 decreased $0.1 million, compared to the same period during fiscal year 2002. The decrease is primarily due to lower interest income, as a result of lower interest rates compared to those for the same period last year. 12 Net income. The Company recorded net loss of $1.2 million for the three months ended March 31, 2003, compared to a net income of $0.2 million for the second quarter of last year. The decrease is primarily the result of the lower sales volume. Net income per Common Share. Basic net loss per share of $(0.09) for the three months ended March 31, 2003, compares to basic net income per share of $0.02 for the same period last year. The decrease is primarily the result of the lower sales volume. First six months of fiscal year 2003 compared to first six months of fiscal year 2002 Revenues. Total revenue of $39.5 million for the six months ended March 31, 2003 increased 50% from $26.4 million for the six months ended March 31, 2002. Sales of PHONECELL(R) products increased 62% from $20.5 million during the first six months of fiscal year 2002 to $33.2 million during the same period of fiscal year 2003. This increase was the result of a rise in shipments of desktop phones to Telcel under the Company's supply agreement with Telcel. TELGUARD(R) revenues increased 7% from $5.9 million during the six months ended March 31, 2002 to $6.3 million during the six months ended March 31, 2003. Cost of sales. Cost of sales of $27.9 million increased 45%, or $8.7 million for the six months ended March 31, 2003 compared to the same period last year. Cost of sales for the first six months of fiscal year 2003 is 71% of total revenue, compared to 73% of total revenue for the same period last year. The increase in cost of sales during the first six months of fiscal year 2003 is primarily the result of the increase in sales volume. The decrease in cost of sales as a percentage of total revenue is attributable to the fact that the cost of sales includes certain fixed costs that do not change as total revenues increase. Engineering and Development Expenses. Engineering and development expenses for the first six months of fiscal year 2003 increased 9%, or $0.3 million, compared to the same period of fiscal year 2002. The increase is due primarily to the added expense from substantial investments in CDMA2000(R) 1XRTT products. Other Income. Other income during the first six months of fiscal year 2003 decreased by $0.5 million compared to the same period of fiscal 2002. The decrease is primarily due to lower interest income, as a result of lower interest rates compared to those for the same period last year. Net Income (Loss). The Company recorded net income of $1.1 million for the first six months of fiscal year 2003 compared to a net loss of $2.6 million for the first six months of fiscal year 2002. The improvement is primarily the result of the increased sales volume. Net income (loss) per Common Share. A basic net income per share of $0.09 for the first six months of fiscal year 2003 compares to a basic net loss per share of $0.20 for the first six months of fiscal year 2002. The improvement is primarily the result of the increased sales volume. Liquidity and Capital Resources On March 31, 2003, the Company had $31.6 million in cash and cash equivalents with a working capital surplus of $41.7 million. During the first six months of fiscal year 2003, the Company used $1.5 million of cash in operations, compared to $5.6 million of cash used during the same period of fiscal year 2002, an improvement of $4.1 million. The improvement primarily resulted from the $3.8 million improvement in net income from fiscal year 2002 to fiscal year 2003. Cash provided by investing activities of $3.5 million during the first six months of fiscal year 2003 compares to cash used of $2.0 million during the same period of fiscal year 2002. The amount for the first six months of fiscal year 2003 consists primarily of a $3.8 million decrease in restricted cash, which was used to repay the revolving line of 13 credit (offset by the same amount of cash from financing activities). Investing activities also included capital spending for product testing equipment of $0.3 million during the first half of fiscal year 2003, which compares to $0.5 million for the same period of fiscal year 2002. Fiscal year 2002 investing activities also included $0.8 million in cash advanced against future royalties to a shareholder of the Company (See Note 3 to the Consolidated Financial Statements). Cash used in financing activities of $4.2 million during the first half of fiscal year 2003 compares to $0.9 million of cash provided by financing activities during the same period of fiscal year 2002. The fiscal year 2003 amount consists primarily of $3.8 million used to repay the Company's revolving line of credit. This is compared to $0.8 million provided by borrowings under the same facility during the first half of fiscal year 2002 (each transaction is offset by the same amount of restricted cash from investing activities). The Company also used $0.4 million in cash for the purchase of treasury stock during the first half of fiscal year 2003 (See Note 6 to the Consolidated Financial Statements). Based upon its current operating plan, the Company believes its existing capital resources will enable it to maintain its current and planned operations. Cash requirements may vary and are difficult to predict given the nature of the developing markets targeted by the Company. The Company expects to maintain significant levels of cash reserves, which are required to undertake major product development initiatives, expand marketing and sales development worldwide, fund stock repurchases (See Note 6 to the Consolidated Financial Statements) and qualify for large sales opportunities. The Company generally requires its foreign customers to prepay, to obtain letters of credit or to qualify for export credit insurance underwritten by third-party credit insurance companies prior to the Company making international shipments. Also, 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. 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. Inventories The Company values inventories at lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method, including material, labor and factory overhead. 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 based on current year activity 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, 2003, and September 30, 2002, the inventory reserves were $0.6 million and $0.5 million, respectively. Changes in strategic direction, such as discontinuance of product lines, changes in technology or changes in market conditions, could result in significant changes in required reserves. Impairment The Company periodically 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. In analyzing 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, regulatory and political conditions, the assignment of discount rates relative to risk and estimates of terminal values. The Company also considers the volatility of its stock price and a potential control premium which would most likely be realized in an equity event. An impairment loss is assessed and 14 recognized in operating earnings when the fair value of the asset is less than its carrying amount. Outlook The statements contained in this outlook are based on current expectations. These statements are forward looking, and actual results may differ materially. Based upon observed trends, the Company believes that the market for cellular FWTs will experience substantial growth over the next five years. The Company has identified significant growth opportunities in Africa, Brazil, China, Europe, India, Mexico, Venezuela and the USA. Each of these markets will develop at a different pace, and the sales cycles for these regions are likely to be several months or quarters. Further, economic conditions play an important role in the timing of market development for the Company's products. In connection with the present global economic slowdown, political uncertainties in Venezuela and the war in Iraq, the Company's prospects for continued growth have been accordingly reduced in the near term. However, as economic conditions improve, the Company is well positioned with a wide range of products to capitalize on these market opportunities. The amount and frequency of product shipments to Telcel pursuant to the existing supply agreement depends on many factors, including market conditions in Mexico and Telcel's agreements with other suppliers. The outcome of pending and future negotiations for orders and the timing of shipments will have a significant impact on the Company's future revenues and profitability. Forward Looking Information Please be advised that some of the information in this filing presents the Company's intentions, beliefs, judgments and expectations of the future and are forward-looking statements. It is important to note that the Company's actual results could differ materially from these forward looking statements. For example, there are a number of uncertainties as to the degree and duration of the revenue momentum, which could impact the Company's ability to be profitable as lower sales may likely result in lower margins. In addition, product development expenditures, which are expected to benefit future periods, are likely to have a negative impact on near term-earnings. Other risks and uncertainties, which are discussed in Exhibit 99 to the Company's 10-K for the fiscal year ended September 30, 2002, include the risk that technological change will render the Company's technology obsolete, the ability to protect intellectual property rights in its products, the fact that unfavorable economic conditions could lead to lower product sales, the risk of litigation, the Company's ability to develop new products, the Company's dependence on suppliers and contractors, the Company's reliance on a limited number of customers for most product sales, the Company's ability to maintain quality control, the risk of doing business in developing markets, the Company's dependence on research and development, the uncertainty of additional funding, dilution of ownership to stockholders resulting from financing activities, the volatility of the Common Stock price, intense industry competition including competition from its licensees and new market entrants with cellular phone docking station products and the uncertainty in the development of wireless service generally. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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 fluctuates for these investments is not material as of March 31, 2003. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of trade accounts receivable. For international sales, the Company generally receives either payment prior to shipment or irrevocable letters of credit that are confirmed by U.S. banks to reduce its credit risk. Further, the Company may purchase credit insurance for significant open accounts outside of the United States. The Company performs ongoing credit evaluations and charges amounts to operations when they are determined to be uncollectible. 15 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 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Within the 90-day period prior to the filing of this report, an evaluation 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), of the effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective. Subsequent to the date of their most recent evaluation, there have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls. 16 PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS On October 5, 2000, the Company filed suit against Vox2, Inc., of Northborough, Massachusetts, which manufactures a cellular interface product named the Vox Link. The Company alleged infringement of its US Patents: 4,659,096; 5,715,296; and 5,946,616, and sought injunction, damages and attorney fees and costs. On January 7, 2003, the US District Court entered an order of default judgement against the defendant and permanently enjoined the defendant from use of the Company's patents. The Company is involved in the above and other legal proceedings, which 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. Item 2. CHANGES IN SECURITIES AND RECENT SALES OF UNREGISTERED SECURITIES Recent Sales of Unregistered Securities During the three months ended March 31, 2003, the Company issued 9,189 shares of Common Stock valued at $20,754 to the law of firm of Much Shelist (formerly Hamman and Benn) for legal services. These issuances were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, as they did not involve a public offering of securities. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Shareholders was held on January 28, 2003. The number of shares issued and outstanding and entitled to vote was 12,818,424. There were present at said meeting, in person or by proxy, shareholders holding 12,571,158 shares of common stock, that is 98% of the stock outstanding, and entitled to vote, which constituted a quorum. The following persons received a majority of the votes cast for Directors, specifically stated as: For Withheld Kenneth E. Millard 11,908,659 662,499 John E. Berndt 11,959,263 611,895 Larry J. Ford 11,959,613 611,545 Daniel D. Giacopelli 11,986,569 584,589 Richard D. Haning 11,815,169 755,989 Mitchell H. Saranow 12,144,407 426,751 The results of the vote to approve the Company's Non-Employee Directors' Stock Incentive Plan and the initial funding of the Plan with 300,000 shares of Common Stock for issuance of options and other permitted awards is as follows: For Against Withheld 11,477,144 1,065,070 28,944 All nominees for Director were elected and the Company's Non-Employee Directors' Stock Incentive Plan and related initial funding have been approved. 17 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (listed by number according to Exhibit table of Item 601 in Regulation S-K)
Number Description Reference ------ ----------- --------- 3.1 Certificate of Incorporation Filed as Exhibit 3.1 to Registration Statement No. 33-72096 (the Registration Statement) 3.2 Amendment No. 1 to Certificate Filed as of Incorporation Exhibit 3.2 to the Registration Statement 3.3 Amendment No. 2 to Certificate Filed as of Incorporation Exhibit 3.3 to the Registration Statement 3.4 Amendment No. 3 to Certificate Filed as of Incorporation Exhibit 3.4 to Form 10-Q filed February 16, 1999 3.5 Amendment No.4 to Certificate Filed as of Incorporation Exhibit 3.5 to Form 10-Q filed February 16, 1999 3.6 By-Laws Filed as Exhibit 3.4 to the Registration Statement 4.1 Certificate of Designations, Preferences, Filed as Exhibit 99.2 and Rights of Series A Convertible Preferred Form 8-K filed Stock April 25, 1997 10.1 Employment Agreement with Filed as Exhibit 10.1 Kenneth E. Millard dated to Form 10-Q filed January 1, 2003 February 14, 2003 10.2 Stock Option Agreement with Filed as Exhibit 10.2 Kenneth E. Millard dated to Form 10-Q filed January 28, 2003 February 14, 2003 10.3 Appointment of Larry J. Ford Filed as Exhibit 10.2 to Form 10-Q filed May 1, 1995 10.4 Settlement and Release of Claims Filed as Exhibit 10.25 Agreement with Motorola (1) to Form 10-Q filed February 14, 2001 (1) 10.5 Agreement for the Purchase of Telular Filed as Exhibit 10.1 Fixed Telephony Digital Cellular to Form 8-K filed Telephones Dated as of September 13, September 13, 2000 (1) 2000, among Telular Corporation, Radiomovil DIPSA, S.A. de C.V., and BrightStar de Mexico S.A. de C.V. (1) 10.6 Nonqualified Stock Option Agreement, Filed as Exhibit 4.9 to dated as of October 31, 2000, by and Registration Statement on between the Company and Larry J. Ford Form S-8, Registration No. 333-61970 filed May 31, 2001 10.7 Nonqualified Stock Option Agreement, Filed as Exhibit 4.10 to dated as of October 26, 1999, by and Registration Statement on between the Company and Larry J. Ford Form S-8, Registration No. 333-61970 filed May 31, 2001
18
10.8 Nonqualified Stock Option Agreement, Filed as Exhibit 4.11 to dated as of October 27, 1998, by and Registration Statement on between the Company and Larry J. Ford Form S-8, Registration No. 333-61970 filed May 31, 2001 10.9 Nonqualified Stock Option Agreement, Filed as Exhibit 4.12 to dated as of February 28, 1997, by and Registration Statement on between the Company and Larry J. Ford Form S-8, Registration No. 333-61970 filed May 31, 2001 10.10 Nonqualified Stock Option Agreement, Filed as Exhibit 4.15 to dated as of October 31, 2000, by and Registration Statement on between the Company and John E. Berndt Form S-8, Registration No. 333-61970 filed May 31, 2001 10.11 Nonqualified Stock Option Agreement, Filed as Exhibit 4.16 to dated as of October 26, 1999, by and Registration Statement on between the Company and John E. Berndt Form S-8, Registration No. 333-61970 filed May 31, 2001 10.12 Nonqualified Stock Option Agreement, Filed as Exhibit 4.17 to dated as of October 27, 1998, by and Registration Statement on between the Company and John E. Berndt Form S-8, Registration No. 333-61970 filed May 31, 2001 10.13 Nonqualified Stock Option Agreement, Filed as Exhibit 4.18 to dated as of February 28, 1997, by and Registration Statement on between the Company and John E. Berndt Form S-8, Registration No. 333-61970 filed May 31, 2001 10.14 Nonqualified Stock Option Agreement, Filed as Exhibit 10.38 to dated as of July 25, 2001, by and Form 10-K filed between the Company and Mitchell H. Saranow December 21, 2001 10.15 Nonqualified Stock Option Agreement, Filed as Exhibit 10.39 to dated as of August 30, 2001, by and Form 10-K filed between the Company and Richard D. Haning December 21, 2001 10.16 Advance Agreement dated as of Filed as Exhibit 10.40 to October 9, 2001, by and between the Form 10-K filed Company and DNIC Brokerage Company December 21, 2001 10.17 Nonqualified Stock Option Agreement, Filed as Exhibit 10.41 to dated as of October 30, 2001, by and Form 10-K filed between the Company and John E. Berndt December 21, 2001 10.18 Nonqualified Stock Option Agreement, Filed as Exhibit 10.42 to dated as of October 30, 2001, by and Form 10-K filed between the Company and Larry J. Ford December 21, 2001 10.19 Nonqualified Stock Option Agreement, Filed as Exhibit 10.43 to dated as of October 30, 2001, by and Form 10-K filed between the Company and Richard D. Haning December 21, 2001 10.20 Nonqualified Stock Option Agreement, Filed as Exhibit 10.44 to dated as of October 30, 2001, by and Form 10-K filed between the Company and Mitchell H. Saranow December 21, 2001 10.21 Amendment 1 dated June 20, 2002, to the Filed as Exhibit 10.45 to September 13, 2000 Agreement for the Form 10-Q filed Purchase of Telular Fixed Telephony August 14, 2002 Digital Cellular Telephones among Telular Corporation, et.al. (1)
19
10.22 Telular Corporation Non-employee Filed as Exhibit 10.22 Directors' Stock Incentive Plan to Form 10-Q filed February 14, 2003 10.23 Telular Corporation Common Stock Filed herewith Purchase Agreement dated April 14, 2003, by and among Telular Corporation and QUALCOMM Incorporated 99.1 Certification Pursuant to 18 Filed herewith U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(1) Certain portions of this exhibit have been omitted and filed separately with the United States Securities and Exchange Commission pursuant to a request for confidential treatment. The omitted portions have been replaced by an * enclosed by brackets ([*]). (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the three months ended March 31, 2003. The Company furnished a Form 8-K to report its earnings in a press release on April 24, 2003. 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized. Telular Corporation ------------------- Date May 15, 2003 By: /s/ Kenneth E. Millard ------------------------ ------------------------------------- Kenneth E. Millard Chairman and Chief Executive Officer Date May 15, 2003 /s/ Jeffrey L. Herrmann ------------------------ ------------------------------------- Jeffrey L. Herrmann Executive Vice President, Chief Operating Officer and Chief Financial Officer Date May 15, 2003 /s/ Robert L. Zirk ------------------------ ------------------------------------- Robert L. Zirk Controller and Chief Accounting Officer 21 CERTIFICATIONS I, Kenneth E. Millard, the Chairman and Chief Executive Officer of Telular Corporation (the "Company"), certify that: 1. I have reviewed this quarterly report on Form 10-Q of the Company; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report; 4. The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and have: a) designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the Company's disclosure controls and procedures on March 31, 2003 (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data and have identified for the Company's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls; and 6. The Company's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 /s/ Kenneth E. Millard ------------------------------------ Kenneth E. Millard Chairman and Chief Executive Officer 22 I, Jeffrey L. Herrmann, Executive Vice President, Chief Operating Officer and Chief Financial Officer of Telular Corporation (the "Company"), certify that: 1. I have reviewed this quarterly report on Form 10-Q of the Company; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report; 4. The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and have: a) designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the Company's disclosure controls and procedures on March 31, 2003 (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data and have identified for the Company's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls; and 6. The Company's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 /s/ Jeffrey L. Herrmann ----------------------- Jeffrey L. Herrmann Executive Vice President, Chief Operating Officer & Chief Financial Officer 22 Exhibit Index
Number Description Reference ------ ----------- --------- 3.1 Certificate of Incorporation Filed as Exhibit 3.1 to Registration Statement No. 33-72096 (the Registration Statement) 3.2 Amendment No. 1 to Certificate Filed as of Incorporation Exhibit 3.2 to the Registration Statement 3.3 Amendment No. 2 to Certificate Filed as of Incorporation Exhibit 3.3 to the Registration Statement 3.4 Amendment No. 3 to Certificate Filed as of Incorporation Exhibit 3.4 to Form 10-Q filed February 16, 1999 3.5 Amendment No.4 to Certificate Filed as of Incorporation Exhibit 3.5 to Form 10-Q filed February 16, 1999 3.6 By-Laws Filed as Exhibit 3.4 to the Registration Statement 4.1 Certificate of Designations, Preferences, Filed as Exhibit 99.2 and Rights of Series A Convertible Preferred Form 8-K filed Stock April 25, 1997 10.1 Employment Agreement with Filed as Exhibit 10.1 Kenneth E. Millard dated to Form 10-Q filed January 1, 2003 February 14, 2003 10.2 Stock Option Agreement with Filed as Exhibit 10.2 Kenneth E. Millard dated to Form 10-Q filed January 28, 2003 February 14, 2003 10.3 Appointment of Larry J. Ford Filed as Exhibit 10.2 to Form 10-Q filed May 1, 1995 10.4 Settlement and Release of Claims Filed as Exhibit 10.25 Agreement with Motorola (1) to Form 10-Q filed February 14, 2001 (1) 10.5 Agreement for the Purchase of Telular Filed as Exhibit 10.1 Fixed Telephony Digital Cellular to Form 8-K filed Telephones Dated as of September 13, September 13, 2000 (1) 2000, among Telular Corporation, Radiomovil DIPSA, S.A. de C.V., and BrightStar de Mexico S.A. de C.V. (1) 10.6 Nonqualified Stock Option Agreement, Filed as Exhibit 4.9 to dated as of October 31, 2000, by and Registration Statement on between the Company and Larry J. Ford Form S-8, Registration No. 333-61970 filed May 31, 2001 10.7 Nonqualified Stock Option Agreement, Filed as Exhibit 4.10 to dated as of October 26, 1999, by and Registration Statement on between the Company and Larry J. Ford Form S-8, Registration No. 333-61970 filed May 31, 2001
24
10.8 Nonqualified Stock Option Agreement, Filed as Exhibit 4.11 to dated as of October 27, 1998, by and Registration Statement on between the Company and Larry J. Ford Form S-8, Registration No. 333-61970 filed May 31, 2001 10.9 Nonqualified Stock Option Agreement, Filed as Exhibit 4.12 to dated as of February 28, 1997, by and Registration Statement on between the Company and Larry J. Ford Form S-8, Registration No. 333-61970 filed May 31, 2001 10.10 Nonqualified Stock Option Agreement, Filed as Exhibit 4.15 to dated as of October 31, 2000, by and Registration Statement on between the Company and John E. Berndt Form S-8, Registration No. 333-61970 filed May 31, 2001 10.11 Nonqualified Stock Option Agreement, Filed as Exhibit 4.16 to dated as of October 26, 1999, by and Registration Statement on between the Company and John E. Berndt Form S-8, Registration No. 333-61970 filed May 31, 2001 10.12 Nonqualified Stock Option Agreement, Filed as Exhibit 4.17 to dated as of October 27, 1998, by and Registration Statement on between the Company and John E. Berndt Form S-8, Registration No. 333-61970 filed May 31, 2001 10.13 Nonqualified Stock Option Agreement, Filed as Exhibit 4.18 to dated as of February 28, 1997, by and Registration Statement on between the Company and John E. Berndt Form S-8, Registration No. 333-61970 filed May 31, 2001 10.14 Nonqualified Stock Option Agreement, Filed as Exhibit 10.38 to dated as of July 25, 2001, by and Form 10-K filed between the Company and Mitchell H. Saranow December 21, 2001 10.15 Nonqualified Stock Option Agreement, Filed as Exhibit 10.39 to dated as of August 30, 2001, by and Form 10-K filed between the Company and Richard D. Haning December 21, 2001 10.16 Advance Agreement dated as of Filed as Exhibit 10.40 to October 9, 2001, by and between the Form 10-K filed Company and DNIC Brokerage Company December 21, 2001 10.17 Nonqualified Stock Option Agreement, Filed as Exhibit 10.41 to dated as of October 30, 2001, by and Form 10-K filed between the Company and John E. Berndt December 21, 2001 10.18 Nonqualified Stock Option Agreement, Filed as Exhibit 10.42 to dated as of October 30, 2001, by and Form 10-K filed between the Company and Larry J. Ford December 21, 2001 10.19 Nonqualified Stock Option Agreement, Filed as Exhibit 10.43 to dated as of October 30, 2001, by and Form 10-K filed between the Company and Richard D. Haning December 21, 2001 10.20 Nonqualified Stock Option Agreement, Filed as Exhibit 10.44 to dated as of October 30, 2001, by and Form 10-K filed between the Company and Mitchell H. Saranow December 21, 2001 10.21 Amendment 1 dated June 20, 2002, to the Filed as Exhibit 10.45 to September 13, 2000 Agreement for the Form 10-Q filed Purchase of Telular Fixed Telephony August 14, 2002 Digital Cellular Telephones among Telular Corporation, et.al. (1)
25
10.22 Telular Corporation Non-employee Filed as Exhibit 10.22 Directors' Stock Incentive Plan to Form 10-Q filed February 14, 2003 10.23 Telular Corporation Common Stock Filed herewith Purchase Agreement dated April 14, 2003, by and among Telular Corporation and QUALCOMM Incorporated 99.1 Certification Pursuant to 18 Filed herewith U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(1) Certain portions of this exhibit have been omitted and filed separately with the United States Securities and Exchange Commission pursuant to a request for confidential treatment. The omitted portions have been replaced by an * enclosed by brackets ([*]). 26