<PAGE> 1
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998.
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)
<TABLE>
<S> <C>
Delaware 36-3885440
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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, 1998, the latest practicable date, was 32,862,067
shares.
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TELULAR CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NO.
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<S> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets
March 31, 1998 and September 30, 1997 3
Consolidated Statements of Operations
Three Months Ended March 31, 1998 and
March 31, 1997 4
Consolidated Statements of Operations
Six Months Ended March 31, 1998 and
March 31, 1997 5
Consolidated Statement of Stockholders' Equity
Period from September 30, 1997 to March 31, 1998 6
Consolidated Statements of Cash Flows
Six Months Ended March 31, 1998 and
March 31, 1997 7
Notes to the Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Recent Sales of Unregistered Securities 16
Item 4. Submission of Matters to a Vote of Security Holders. 16
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 21
Exhibit Index 22
</TABLE>
2
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TELULAR CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1998 1997
---------- ----------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 21,548 $ 28,451
Receivables:
Trade, net of allowance for doubtful accounts of
$310 and $426 at March 31, 1998
and September 30, 1997, respectively 7,781 6,527
Related parties 837 4,670
---------- ----------
8,618 11,197
Inventories, net 12,520 9,431
Prepaid expenses and other current assets 1,521 500
---------- ----------
Total current assets 44,207 49,579
Property and equipment, net 4,636 3,611
Other assets:
Intangible assets, net 492 461
Goodwill 4,509 -
Investment in Affiliate - 3,851
Deposits and other 530 51
---------- ----------
5,531 4,363
---------- ----------
Total assets $ 54,374 $ 57,553
========== ==========
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade $ 5,476 $ 3,764
Related parties 623 3,640
Accrued liabilities 3,179 3,142
---------- ----------
Total current liabilities 9,278 10,546
Commitments and contingencies - -
Redeemable Preferred Stock:
Series A convertible preferred stock, $.01 par value;
$19,655 and $20,386 liquidation preference at March 31, 1998
and September 30, 1997, respectively; 21,000 shares
authorized at March 31, 1998 and September 30, 1997;
18,800 shares and 20,000 shares issued and outstanding
at March 31, 1998 and September 30, 1997, respectively. 20,176 21,308
Stockholders' equity:
Preferred stock, $.01 par value; 9,979,000 shares
authorized at March 31, 1998 and September 30, 1997;
none outstanding - -
Common stock; $.01 par value; 40,000,000 shares
authorized; 32,862,067 and 31,684,073 outstanding
at March 31, 1998 and September 30, 1997, respectively 334 322
Additional paid-in capital 114,681 111,143
Deficit (88,488) (84,159)
Treasury stock, 560,000 shares at cost (1,607) (1,607)
---------- ----------
Total stockholders' equity 24,920 25,699
---------- ----------
Total liabilities, redeemable preferred stock and stockholders' equity $ 54,374 $ 57,553
========== ==========
</TABLE>
See accompanying notes
3
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TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1998 1997
----------- -----------
<S> <C> <C>
Net product sales to third parties $9,780 $5,419
Net product sales to related parties - 5,998
----------- -----------
Total net product sales 9,780 11,417
Royalty and royalty settlement revenue 1,274 -
----------- -----------
Total revenue 11,054 11,417
Cost of sales 7,698 8,580
----------- -----------
Gross profit 3,356 2,837
Engineering and development expenses 2,274 1,387
Selling and marketing expenses 1,721 948
General and administrative expenses 1,232 1,326
Provision for doubtful accounts 25 47
Amortization 252 20
----------- -----------
Loss from operations (2,148) (891)
Other income 332 159
----------- -----------
Net income (loss) $ (1,816) $ (732)
Less: Cumulative dividend on redeemable preferred stock (230) -
Net income (loss) applicable to common shares $ (2,046) $ (732)
=========== ===========
Basic and diluted net income (loss) per common share $ (0.06) $ (0.02)
=========== ===========
Weighted average number of common shares outstanding 32,856,003 31,452,294
=========== ===========
</TABLE>
See accompanying notes
4
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TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
1998 1997
----------- -----------
<S> <C> <C>
Net product sales to third parties $ 22,364 $ 12,164
Net product sales to related parties - 17,633
----------- -----------
Total net product sales 22,364 29,797
Royalty and royalty settlement revenue 1,377 218
----------- -----------
Total revenue 23,741 30,015
Cost of sales 17,611 22,377
----------- -----------
Gross profit 6,130 7,638
Engineering and development expenses 4,325 2,727
Selling and marketing expenses 3,385 2,028
General and administrative expenses 2,287 2,863
Provision for doubtful accounts 50 231
Amortization 508 40
----------- -----------
Loss from operations (4,425) (251)
Other income 565 260
----------- -----------
Net income (loss) $ (3,860) $ 9
Less: Cumulative dividend on redeemable preferred stock (469) -
Net income (loss) applicable to common shares $ (4,329) $ 9
=========== ===========
Basic and diluted net income (loss) per common share $ (0.13) $ 0.00
=========== ===========
Weighted average number of common shares outstanding 32,762,020 31,447,644
=========== ===========
</TABLE>
See accompanying notes
5
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TELULAR CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PREFERRED COMMON PAID-IN TREASURY STOCKHOLDERS'
STOCK STOCK CAPITAL DEFICIT STOCK EQUITY
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1997 $ - $ 322 $ 111,143 $ (84,159) $ (1,607) $ 25,699
Proceeds from the issuance of
common stock - 2 149 - - 151
Stock issued in connection with
services - - 116 - - 116
Conversion of preferred stock
to common stock - 4 1,410 - - 1,414
Stock issued in connection with the
equity investment in Wireless Domain - 5 1,714 - - 1,719
Stock issued in connection with
services relating to redeemable
preferred stock - 1 149 - - 150
Cumulative dividend on redeemable
preferred stock - - - (469) - (469)
Net loss for period from October 1,
1997 to March 31, 1998 - - - (3,860) - (3,860)
---------- --------- --------- --------- --------- ---------
Balance at March 31, 1998 $ - $ 334 $ 114,681 $ (88,488) $ (1,607) $ 24,920
========== ========= ========= ========= ========= =========
</TABLE>
See accompanying notes
6
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TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (3,860) $ 9
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities
Depreciation 917 405
Amortization 508 133
Stock issued for compensation and services 116 94
Equity in net income of affiliate (84) 43
Changes in assets and liabilities:
Receivables, net 2,579 3,439
Inventories, net (3,089) 1,275
Prepaid expenses, deposits and other (1,758) (731)
Accounts payable (1,305) (4,446)
Accrued liabilities 228 (260)
-------- --------
Net cash provided by (used in) operating activities (5,748) (39)
INVESTING ACTIVITIES:
Investment in affiliate - (250)
Acquisition of property and equipment (1,306) (1,000)
-------- --------
Net cash used in investing activities (1,306) (1,250)
FINANCING ACTIVITIES:
Proceeds from the issuance of common stock 151 279
-------- --------
Net cash provided by financing activities 151 279
-------- --------
Net increase (decrease) in cash and cash equivalents (6,903) (1,010)
Cash and cash equivalents, beginning of period 28,451 12,838
-------- --------
Cash and cash equivalents, end of period $ 21,548 $ 11,828
======== ========
</TABLE>
See accompanying notes
7
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TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
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. In
the opinion of management, all adjustments considered necessary for a
fair presentation have been included. Operating results for the six
months ended March 31, 1998, are not necessarily indicative of the
results that may be expected for the full fiscal year ending September
30, 1998. For further information, refer to the consolidated
financial statements for the fiscal year ended September 30, 1997.
2. INVENTORIES
The components of inventories consist of the following (000's):
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1998 1997
-------- -------------
(unaudited)
<S> <C> <C>
Raw materials $ 6,141 $ 6,344
Work in process 1,669 455
Finished goods 5,302 3,155
--------- --------
13,112 9,954
Less: Reserve for obsolescence 592 523
--------- --------
$ 12,520 $ 9,431
========= ========
</TABLE>
3. INVESTMENT IN WIRELESS DOMAIN CORPORATION (FORMERLY TELEPATH
CORPORATION)
On June 28, 1996, the Company entered into an agreement and acquired a
33% interest in Wireless Domain Incorporated (WD) in exchange for $1
million in cash and common stock of the Company valued at
approximately $2.2 million. During the year ended September 30, 1997,
the Company increased its equity portion in WD to 50% by purchasing an
additional 17% of WD in exchange for $0.5 million in cash and 150,000
shares of common stock of the Company valued at approximately $0.7
million.
On November 10, 1997, the Company acquired the remaining 50% of WD.
Under the terms of the merger, the Company issued 500,000 shares of
common stock to the shareholders of WD and relinquished control of the
500,000 shares of common stock held by WD. This acquisition was
accounted for using the purchase method of accounting. The excess of
consideration paid over the fair value of net assets purchased of $4.7
million was recorded as goodwill, which is being amortized over ten
years. Prior to the November 10, 1997 transaction, the Company had
accounted for its investment in WD using the equity method.
The following unaudited pro forma results of operations assumes the
acquisition of Wireless Domain occurred as of October 1, 1996, after
giving effect to certain adjustments including amortization of
goodwill and equity income recorded for the periods in which the
Company owned less than 100% of WD.
8
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TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998
<TABLE>
<CAPTION>
Six months ended March 31,
1998 1997
-------- --------
(000's)
<S> <C> <C>
Total revenue $23,741 $30,015
Net income (loss) (3,900) (1,635)
Basic and diluted net income (loss)
per common share (0.13) (0.05)
</TABLE>
Revenues would not change as a result of the acquisition as WD's
revenues related entirely to amounts billed to the Company. The pro
forma financial information does not purport to be indicative of the
results of operations that would have occurred had the transaction
taken place at the beginning of the periods indicated or of future
results of operations.
4. CONVERTIBLE DEBENTURES
On December 11, 1995, the Company issued $18 million in convertible
debentures (the "Debentures") at 4% per annum, which matured on
December 11, 1997. The Debentures were issued under the provisions of
Regulation S as promulgated under the United States Securities Act of
1933, as amended. Holders of the Debentures were entitled, at their
option any time after issuance until December 10, 1997, to convert
principal and interest accrued thereon, in whole or in part, into
shares of common stock using defined conversion formulas based on
NASDAQ closing bids for the Company's common stock. The Company was
entitled, at its option any time commencing one year after issuance
(and under certain circumstances prior to that date) through maturity,
to require the holders to convert the principal and accrued interest
into shares of common stock of the Company using defined conversion
formulas based on NASDAQ closing bids for the Company's common stock.
As of November 30, 1996, the entire issuance of convertible debentures
and all interest accrued thereon had been converted into approximately
7,033,000 shares of common stock.
5. REDEEMABLE PREFERRED STOCK
During fiscal 1997, the Company issued 20,000 shares (10,000 shares on
April 16, 1997 and 10,000 shares on June 6, 1997) of Series A
Convertible Preferred Stock (the "Preferred Stock") for $18.8 million
which is net of issuance cost of $1.2 million. The Preferred Stock
automatically converts to Common Stock on April 16, 1999 or October
16, 1999, depending on the conversion price, and includes the
equivalent of a 5% annual stock dividend. Holders of the Preferred
Stock are entitled, at their option, subject to trading volume and
other restrictions, to convert Preferred Stock into shares of Common
Stock using defined conversion formulas based on the NASDAQ closing
bid prices for the Company's Common Stock. In addition, the holders
have the option to redeem the Preferred Stock upon the occurrence of :
(i) a consolidation or merger with another company; (ii) sale or
transfer of substantially all assets; or (iii) 50% change in
ownership. The redemption price upon holder redemption is the greater
of $1,250 per share and the cash equivalent of the defined conversion
formula on the date of redemption. The Company is entitled to require
the holders to convert the Preferred Stock and accrued dividends into
shares of common stock of the Company using a defined conversion
formula based upon the NASDAQ closing bid prices for the Company's
common stock. In addition, the Company has the right to redeem the
Preferred Stock after April 15, 1999 for $1,200 per share plus 120% of
the accrued dividends. Holders of the Preferred Stock are not
entitled to vote on matters submitted for vote to the stockholders of
the Company.
9
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TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998
The Preferred Stock reflects a beneficial conversion feature that
allows holders to convert the security to common stock of the Company
at a discount. The amount of the discount is determined using NASDAQ
closing bid prices for the Company's common stock. During fiscal year
1997, the Company recorded $2.2 million of amortization of preferred
stock beneficial conversion discount. The offset entry to
amortization of preferred stock beneficial conversion discount
increased redeemable preferred stock by $2.2 million. This amount
will accrete to the Company's common stock and additional paid in
capital accounts as shares of redeemable preferred stock are converted
into shares of common stock of the Company. As of March 31, 1998,
1,200 shares of Preferred Stock had been converted into 409,498 shares
of the Company's common stock.
6. EARNINGS PER SHARE
On October 1, 1997, the Company adopted Financial Accounting Standards
Board SFAS No. 128, "Earnings Per Share." SFAS No. 128 replaced the
previously reported primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted
earnings per share. When necessary, previously reported earnings per
share amounts have been restated to conform to SFAS No. 128.
7. CONTINGENCIES
The Company is involved in legal proceedings that arise in the
ordinary course of business. While any litigation contains an element
of uncertainty, based upon discussion with the Company's counsel,
management believes that the outcome of such proceedings will not have
a material adverse effect on the Company's consolidated financial
position and results of operations.
On March 2, 1998, the Company reached settlement in its patent
infringement case against ORA Electronics, Inc. (formerly Alliance
Research Corporation) and received the following from ORA Electronics,
Inc.: $500,000 in cash, a $1,000,000 promissory note, 300,000 shares
of ORA Electronics, Inc. common stock ("ORA stock") with a fair market
value of $450,000, and the right to receive additional shares of ORA
stock to ensure the fair market value received in stock is equivalent
to $1,500,000 on February 1, 2000. The Company recorded royalty and
royalty settlement revenue of $1,176,201 during the three months ended
March 31, 1998 which is the amount equivalent to the fair market value
of cash and assets received on March 2, 1998, net of legal fees. The
Company deferred recognition of an additional $700,000 of royalty and
royalty settlement revenue (net of additional legal fees) during the
three months ended March 31, 1998 which is the amount equivalent to
the value of additional shares of ORA stock or the appreciation of ORA
stock currently held which would be necessary to increase the value of
ORA stock to an aggregate of $1,500,000 on February 1, 2000.
8. RECLASSIFICATION
Certain amounts in the March 31, 1997 financial statements have been
reclassified to conform to the March 31, 1998 presentation.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is in the fixed wireless telecommunications industry. The Company
designs, develops, manufactures and markets products based on its proprietary
interface technologies, which provide the capability to bridge wireline
telecommunications customer premises equipment ("CPE") with cellular-type
transceivers for use in wireless communication networks, whether cellular,
personal communications services ("PCS"), or satellite-based. Applications of
the Company's technology include fixed wireless telecommunications as a primary
service where wireline systems are unavailable, unreliable or uneconomical, as
well as wireless backup systems for wireline telephone systems and wireless
alarm signaling ("WAS"). The Company's principal product lines - PHONECELL(R),
a line of fixed wireless terminals ("FWTs"); and TELGUARD(R), a line of WAS
products - allow CPE designed for traditional wireline networks to send and
receive voice, data and facsimile signals over wireless networks.
Although the Company has licensed its patented technology to a limited number
of other companies and has received royalty revenues in return, these revenues
have not prior to fiscal year 1998, represented a significant portion of the
Company's gross revenues, and so have been reported as net sales on the
Company's consolidated statements of operations. On March 2, 1998, the Company
received $1.2 million in royalties pursuant to a settlement entered into with
ORA Electronics, Inc., a company that had been using the Company's patented
technology without a license.
The Company is investing in new product development for both analog and digital
fixed wireless terminals. As with any emerging market, it is difficult to
predict the timing of the market demand. 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" which
is attached as exhibit 99 to the Form 10-K filed for the period ended September
30, 1997.
RESULTS OF OPERATIONS
SECOND QUARTER FISCAL 1998 COMPARED TO SECOND QUARTER FISCAL 1997
Net Product Sales. Net product sales of $9.8 million for the three months
ended March 31, 1998 decreased from $11.4 million for the three months ended
March 31, 1997. Net product sales, excluding net product sales to a large
Motorola wireless local loop (WLL) project in Hungary during second quarter of
fiscal 1997, increased 80% from $5.4 million for the three months ended March
31, 1997 to $9.8 million for the three months ended March 31, 1998. FWT net
product sales, excluding net product sales to Hungary during second quarter of
fiscal 1997, increased 168% from $2.8 million for the three months ended March
31, 1997 to $7.6 million for the three months ended March 31, 1998. This
increase primarily resulted from shipments to WLL projects in Guinea, West
Africa and the Philippines.
Royalty and Royalty Settlement Revenue. Royalty and royalty settlement revenue
increased to $1.3 million during the second quarter of fiscal 1998, compared to
the second quarter of fiscal 1997, due primarily to the royalty settlement of
$1.2 million with ORA Electronics, Inc. (see financial statement footnote 7
above). No royalty or royalty settlement revenue was recorded in the second
quarter of fiscal 1997.
Gross Profit. Second quarter fiscal 1998 gross profit increased by $0.5
million compared to the same period of fiscal 1997. The increase is due to the
increase in royalty and royalty settlement revenue, which is partially offset
by lower overall total revenue during the second quarter fiscal 1998.
11
<PAGE> 12
Engineering and Development Expenses. Engineering and development expenses of
$2.3 million during the second quarter of fiscal 1998, increased approximately
64% or $0.9 million over the second quarter of fiscal 1997. The increase
relates to the Company's increased focus on developing additional analog and
digital FWTs, including its acquisition of Wireless Domain Incorporated, which
increased the Company's engineering staff by 30 engineers.
Selling and Marketing Expenses. Selling and marketing expenses for the second
quarter of fiscal 1998 increased 82% or $0.8 million compared to the same
quarter of fiscal 1997. The increase was primarily a result of the Company's
effort to market its new products and increase its sales force to support
worldwide sales coverage.
General and Administrative Expenses (G&A). G&A for the second quarter of
fiscal 1998 decreased 7% compared to the same quarter of fiscal 1997. The
decrease is primarily attributable to the reduction or elimination of
expenditures, primarily through personnel reductions, as well as leveraging
resources.
Provision for doubtful accounts. The provision for doubtful accounts expense
decreased from the same quarter of fiscal 1997 due to improvement in the
Company's collections experience.
Amorization. Amortization expense increased from the same quarter of fiscal
1997 due to the amortization of goodwill recorded in connection with the
acquisition of Wireless Domain Incorporated on November 10, 1997.
Other Income. Other income during the fiscal quarter of fiscal 1998 increased
by $0.2 million compared to the same quarter of fiscal 1997. The increase is
primarily due to higher interest income due to higher cash balances during the
first quarter of fiscal 1998 compared to the same quarter of fiscal 1997.
Net Income (loss). The Company recorded a net loss of ($1.8) million or
($0.06) per share for the first quarter in fiscal 1998 compared to a loss of
($0.7) million or ($0.02) per share in the same quarter of fiscal 1997.
Net income (loss) applicable to common shares. After giving effect to the
cumulative preferred stock dividend of $0.2 million for the second quarter of
fiscal 1998, net loss applicable to common shares of ($2.0) million or ($0.06)
per share compares to a loss of ($0.7) million or ($0.02) per share in the same
quarter of fiscal 1997.
FIRST HALF FISCAL 1998 COMPARED TO FIRST HALF FISCAL 1997
Net Product Sales. Net product sales of $22.4 million for the six months ended
March 31, 1998 decreased from $29.8 million for the six months ended March 31,
1997. Net product sales, excluding net product sales to a large Motorola
wireless local loop (WLL) project in Hungary during the first half of fiscal
1997, increased 84% from $12.2 million for the six months ended March 31, 1997
to $22.4 million for the six months ended March 31, 1998. FWT net product
sales, excluding net product sales to Hungary during the first half of fiscal
1997, increased 129% from $7.7 million for the six months ended March 31, 1997
to $17.8 million for the six months ended March 31, 1998. This increase
primarily resulted from shipments to WLL projects in Guinea, West Africa and
the Philippines.
Royalty and Royalty Settlement Revenue. Royalty and royalty settlement revenue
increased from $0.2 million to $1.4 million during the first half of fiscal
1998, compared to the first half of fiscal 1997, due primarily to the royalty
settlement of $1.2 million with ORA Electronics, Inc. (see financial statement
footnote 7 above).
Gross Profit. First half of fiscal 1998 gross profit decreased by $1.5 million
compared to the same period of fiscal 1997. The decrease was primarily due to
lower sales during the six months ended March 31, 1998, which were partially
offset by the increase in royalty and royalty settlement revenue during the
first half of fiscal 1998.
Engineering and Development Expenses. Engineering and development expenses of
$4.3 million during the first six months of fiscal 1998, increased
approximately 59% or $1.6 million over the first six months of fiscal 1997.
12
<PAGE> 13
The increase relates to the Company's increased focus on developing additional
analog and digital FWTs, including its acquisition of Wireless Domain
Incorporated, which increased the Company's engineering staff by 30 engineers.
Selling and Marketing Expenses. Selling and marketing expenses for the first
half of fiscal 1998 increased 67% or $1.4 million compared to the period of
fiscal 1997. The increase was primarily a result of the Company's efforts to
market its new products and increase its sales force to support worldwide sales
coverage.
General and Administrative Expenses (G&A). G&A for the first half of fiscal
1998 decreased 20% compared to the same half of fiscal 1997. The decrease is
primarily attributable to the reduction or elimination of expenditures,
primarily through personnel reductions, as well as leveraging resources.
Provision for doubtful accounts. The provision for doubtful accounts expense
decreased from the same half of fiscal 1997 due to improvement in the
Company's collections experience.
Amorization. Amortization expense increased from the same half of fiscal 1997
due to the amortization of goodwill recorded in connection with the acquisition
of Wireless Domain Incorporated on November 10, 1997.
Other Income. Other income during the first half of fiscal 1998 increased by
$0.3 million compared to the same period of fiscal 1997. The increase is
primarily due to higher interest income due to higher cash balances during the
first half of fiscal 1998 compared to the same half of fiscal 1997.
Net Income (loss). The Company recorded a net loss of ($3.9) million or
($0.12) per share for the first half in fiscal 1998 compared to a profit of $9
thousand or less than one cent per share in the same half of fiscal 1997.
Net income (loss) applicable to common shares. After giving effect to the
cumulative preferred stock dividend of $0.5 million for the first half of
fiscal 1998, net loss applicable to common shares of ($4.3) million or ($0.13)
per share compares to a profit of $9 thousand or less than one cent per share
in the same half of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had $21.5 million in cash and cash equivalents
with a working capital surplus of $34.9 million.
From an operating standpoint, the Company used $5.8 million of cash during the
six months ended March 31, 1998 compared to the cash neutral position for the
same fiscal period last year. The use of cash primarily relates to an increase
in inventory for new products and the net loss for the six months ended March
31, 1998.
Cash used for capital spending was approximately $1.3 million during the six
months ended March 31, 1998 compared to $1.0 million during the same period
last fiscal year. The increase during the first half of fiscal 1998 primarily
relates to upgrades to the Company's information systems and purchases of test
equipment for new products.
Financing activities provided $0.2 million during the first six months of
fiscal 1998, compared to $0.3 million during the same period in fiscal 1997.
The $0.2 million provided during the six months ended March 31, 1998 resulted
from the issuance of common stock in connection with stock option exercises in
accordance with the Company's Amended and Restated Stock Option Plan.
On April 23, 1997, the Company entered into a Loan and Security Agreement with
Sanwa Business Credit Corporation that, among other things, provides a credit
facility with a loan limit of $20.0 million (the "Loan"). Borrowings under the
Loan are subject to borrowing base requirements and other restrictions. Under
the Loan and Security Agreement, the Company is required to comply with certain
affirmative and negative covenants. The
13
<PAGE> 14
Loan matures on April 23, 2000. As of March 31, 1998, the Company's borrowing
capacity under the Loan provisions was $11.2 million although there have been
no borrowings and none are contemplated in the near term.
During fiscal 1997, the Company issued 20,000 shares (10,000 shares on April
16, 1997 and 10,000 shares on June 6, 1997) of Series A Convertible Preferred
Stock (the "Preferred Stock") for $18.8 million, which is net of issuance cost
of $1.2 million. The Preferred Stock automatically converts to Common Stock on
April 16, 1999, or October 16, 1999, depending on the conversion price and
includes the equivalent of a 5% annual stock dividend. Holders of the Preferred
Stock are entitled, at their option, subject to trading volume and other
restrictions, to convert Preferred Stock into shares of Common Stock using
defined conversion formulas based on the NASDAQ closing bid prices for the
Company's Common Stock. In addition, the holders have the option to redeem the
Preferred Stock upon the occurrence of a (i) consolidation or merger with
another company; (ii) sale or transfer of substantially all assets; or (iii)
50% change in ownership. The redemption price upon holder redemption is the
greater of $1,250 per share and the cash equivalent of the defined conversion
formula on the date of redemption. The Company is entitled to require the
holders to convert the Preferred Stock and accrued dividends into shares of
common stock of the Company using a defined conversion formula based upon the
NASDAQ closing bid prices for the Company's common stock. In addition, the
Company has the right to redeem the Preferred Stock after April 15, 1999 for
$1,200 per share plus 120% of the accrued dividends. Holders of the Preferred
Stock are not entitled to vote on matters submitted for vote to the
stockholders of the Company. As of March 31, 1998, 1,200 shares of preferred
stock have been converted into 409,498 shares of the Company's common stock.
The Company will use much of the capital raised in fiscal 1997 to fund new
product development. Beyond its specific research and product development
needs, expected future uses of cash include working capital requirements,
marketing and sales support programs in anticipation of future revenues and
certain capital expenditures. Based upon its current operating plan, the
Company believes its existing capital resources, including the credit facility
and proceeds from the issuance of Preferred Stock, should 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 amount of royalty income from the Company's licensees is
unpredictable, but could have an impact on the Company's actual cash flow.
The Company requires letters of credit or qualification for export credit
insurance underwritten by third party credit insurance companies or the
Export-Import Bank of the United States on a substantial portion of its
international sales orders. Also, to mitigate the effects of currency
fluctuations on the Company's results of operations, the Company endeavors to
conduct all of its international transactions in U.S. dollars. To date, the
Company's sales have not been adversely affected by currency fluctuations;
however, as the Company's international operations grow, foreign exchange or
the inflation of a foreign currency may pose greater risks for the Company, and
the Company may be required to develop and implement additional strategies to
manage these risks.
YEAR 2000 ISSUE
Recently, national attention has focused on the potential problems and
associated costs resulting from computer programs that have been written using
two digits rather than four to define the applicable year. These programs
treat all years as occurring between 1900 and 1999 and do not self-correct to
reflect the upcoming change in the century. If not corrected, computer
applications could fail or create erroneous results by or at the year 2000.
Management believes that only minor modifications will be required to its
internal software so that its computer systems will function properly with
respect to dates in the year 2000 and thereafter. The cost of such
modifications is not expected to have a material adverse effect on the
Company's results of operations and will be funded through operating cash
flows. The Company has determined that it has no exposure to contingencies
related to the year 2000 issue for products it has sold.
The Company has also initiated a formal review of its significant suppliers and
large customers to determine the extent to which the Company would be
vulnerable if those third parties' fail to remedy year 2000 issues. The
Company anticipates completing this review prior to December 31, 1998.
14
<PAGE> 15
The cost of the Company's efforts and the date on which the Company believes it
will complete its year 2000 compliance efforts reflect management's current
estimates based upon available information. Management will continue to
monitor this issue, particularly the possible impact of third-party year 2000
compliance on the Company's operations, and will modify its estimates if
warranted.
OUTLOOK
The statements contained in this outlook are based on current expectations.
These statements are forward looking, and actual results may differ materially.
The Company expects fiscal 1998 sales levels to be about the same as in fiscal
1997. Sales to the Hungary project accounted for over $21.2 million, or
approximately 44%, of total sales for fiscal 1997. Although sales to the
Hungary project are not expected to be significant in fiscal 1998, the Company
anticipates that new WLL business will replace the Hungary project business.
Comparison of the first half of fiscal 1998, with the first half of fiscal 1997
does not fully reflect the performance trend for fiscal 1998. Sales for the
first half of fiscal year 1997 were unusually high as a result of sales to the
Hungary project of $17.6 million, representing 59% of first half of fiscal 1997
total revenue. The absence of sales to the Hungary project in the first half
of fiscal 1998 was mostly offset by increased sales to new projects. During
the six months ended March 31, 1998, the Company announced that it received
approximately $11 million of new WLL business in Guinea, West Africa and the
Philippines. The Company expects demand for FWTs to continue to grow and is
cultivating other revenue opportunities that it believes will contribute to
future revenue growth.
To capitalize on the anticipated growth in the market for FWTs, the Company
accelerated its product development plan for fiscal 1998. On November 10,
1997, the Company added 30 additional engineers to its staff when it acquired
the remaining 50% of Wireless Domain Incorporated. The Company's strategy
continues to be to introduce fixed wireless terminals that will address the
radio standards serving 85 percent of all cellular subscribers by the year
2000. The Company plans to continue to devote substantial resources to product
development.
Based upon observed trends, the Company believes that the market for FWTs is
undergoing substantial growth. The Company is seeking to capitalize on the
anticipated growth by devoting resources across the Company to meet the
anticipated needs of the market.
Statements contained in this filing, other than historical statements, consist
of forward-looking information. The Company's actual results may vary
considerably from those discussed in the "Outlook" section and elsewhere in
this filing as a result of various risks and uncertainties. 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 Annual Report on Form 10-K for the
period ended September 30, 1997, include the risk that technological change
could render the Company's technology obsolete, the risk of litigation, the
Company's ability to develop new products, the Company's dependence on
contractors and Motorola, 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, the potential
for redemption of preferred stock, the effects of control by existing
shareholders, the effect of changes in management, intense industry
competition, and uncertainty in the development of wireless service generally.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 2, 1998, the Company reached settlement in its patent infringement
case against ORA Electronics, Inc. (formerly Alliance Research Corporation) and
received the following from ORA Electronics, Inc.: $500,000 in cash, a
$1,000,000 promissory note, 300,000 shares of ORA Electronics, Inc. common
stock ("ORA stock") with a fair market value of $450,000, and the right to
receive additional shares of ORA stock to ensure the fair market value received
in stock is equivalent to $1,500,000 on February 1, 2000 (see financial
statement footnote 7 above).
ITEM 2. CHANGES IN SECURITIES AND RECENT SALES OF UNREGISTERED SECURITIES
CHANGES IN SECURITIES
Under the terms of the Series A Convertible Preferred Stock issued on April 16,
1997 and June 6, 1997, for so long as such stock is outstanding, dividends may
be paid on the Common Stock only out of retained earnings of the Company
generated after April 1, 1997.
Under the terms of the Loan and Security Agreement with Sanwa Business Credit
Corporation that provides a credit facility up to $20 million, the Company is
prohibited from paying dividends during the term of the loan.
RECENT SALES OF UNREGISTERED SECURITIES
During the fiscal quarter ended March 31, 1998, the Company issued: (i) 15,568
shares of Common Stock valued at $41,847 to the law of firm of Hamman and Benn
for legal services; (ii) 7,448 shares of Common Stock valued at $14,002 to the
law of firm of Bellows & Bellows for legal services; (iii) 5,373 shares of
Common Stock valued at $11,350 to Kenneth E. Millard in connection with the
Company's bonus plan; (iv) 2,686 shares of Common Stock valued at $5,675 to
Robert C. Montgomery in connection with the Company's bonus plan; and (v) 2,686
shares of Common Stock valued at $5,675 to Daniel D. Giacopelli in connection
with the Company's bonus plan. Each issuance was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended, as it 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 27, 1998. The
number of shares issued and outstanding and entitled to vote was 32,613,843.
There were present at said meeting, in person or by proxy, shareholders holding
27,012,819 shares of common stock, that is 82.8% of the stock outstanding, and
entitled to vote, which constituted a quorum.
The first matter voted upon was the election of the Board of Directors. The
directors elected were as follows:
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
John E. Berndt 26,744,785 268,034
William L. DeNicolo 26,738,385 274,434
Larry J. Ford 26,744,785 268,034
Daniel D. Giacopelli 26,743,885 268,934
Richard D. Haning 26,742,385 270,434
Kenneth E. Millard 26,736,135 276,684
Robert C. Montgomery 26,743,285 269,534
Mark R. Warner 26,742,885 269,934
</TABLE>
All nominees for Director were elected.
16
<PAGE> 17
The second matter voted upon was to approve the issuance by the Company of
certian shares of common stock on the conversion of the Company's Series A
Convertible Preferred Stock. Votes on this matter were: 14,607,012 For, 709,924
Against, 126,465 Abstentions and Broker Non-Votes were 11,569,418.
The third matter voted upon was to amend the Ratification of Ernst & Young LLP
as Independent Auditors for the year ending September 30, 1998. Votes on this
matter were: 26,895,694 For, 53,665 Against, 63,460 Abstentions, and Broker
Non-Votes were 0.
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)
<TABLE>
<CAPTION>
NUMBER DESCRIPTION REFERENCE
- ------ ----------- ---------
<S> <C> <C>
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 Exhibit 3.2 to the
of Incorporation Registration Statement
3.3 Amendment No. 2 to Certificate Filed as Exhibit 3.3 to the
of Incorporation Registration Statement
3.4 By-Laws Filed as Exhibit 3.4 to the
Registration Statement
4.1 Loan Agreement with LaSalle Filed as Exhibit 4.1 to Form
National Bank and Amendment 10-K filed December 27, 1995
thereto
4.2 Debenture Agreements dated Filed as Exhibit 4.2 to Form
December 11, 1995 10-K filed December 27, 1995
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C> <C>
4.3 Certificate of Designations, Filed as Exhibit 99.2 to Form
Preferences, and Rights of 8-K filed April 25, 1997
Series A Convertible Preferred
Stock
4.4 Loan and Security Agreement Filed as Exhibit 4.2 to Form
with Sanwa Business Credit 10-Q filed August 14, 1997
Corporation
10.1 Consulting Agreement with Filed as Exhibit 10.1 to the
William L. DeNicolo Registration Statement
10.2 Employment Agreement with Filed as Exhibit 10.1 to Form
Kenneth E. Millard 10-Q filed August 14, 1996
10.3 Stock Option Agreement with Filed as Exhibit 10.2 to Form
Kenneth E. Millard 10-Q filed August 14, 1996
10.4 Stock Purchase Agreement By Filed as Exhibit 10.3 to Form
and Among Telular Corporation 10-Q filed August 14, 1996
and TelePath Corporation
(which has changed its name to
Wireless Domain, Incorporated)
10.5 Appointment of Larry J. Ford Filed as Exhibit 10.2 to Form
10-Q filed May 1, 1995
10.6 Option Agreement with Filed as Exhibit 10.6 to Form
Motorola Dated November 10, 10-K filed December 26,
1995 1996(1)
10.7 Stock Purchase Agreement Filed as Exhibit 10.11 to the
between Motorola, Inc. and Registration Statement
Telular Corporation dated
September 20, 1993
10.8 Patent Cross License Agreement Filed as Exhibit 10.12 to the
between Motorola, Inc. and Registration Statement (1)
Telular Corporation, dated
March 23, 1990 and
Amendments No. 1, 2 and 3
thereto
10.9 Exclusive Distribution and Filed as Exhibit 10.14 the
Trademark License Agreement Registration Statement (1)
between Telular Canada Inc. and
the Company, dated April
1, 1989, and Amendments
thereto
10.10 Amended and Restated Filed as Exhibit 10.15 to the
Shareholders Agreement dated Registration Statement (1)
November 2, 1993
</TABLE>
18
<PAGE> 19
<TABLE>
<S> <C> <C>
10.11 Amendment No. 1 to Amended Filed as Exhibit 10.24 to the
and Restated Shareholders Registration
Agreement, dated January 24,
1994
10.12 Amendment No. 2 to Amended Filed as Exhibit 10.5 to the Form
and Restated Shareholders 10-Q filed July 28, 1995
Agreement, dated June 29, 1995
10.13 Amended and Restated Filed as Exhibit 10.16 to the
Registration Rights Agreement Registration Statement
dated November 2, 1993
10.14 Amendment No. 1 to Amended Filed as Exhibit 10.25 to the
and Restated Registration Rights Registration Statement
Agreement, dated January 24,
1994
10.15 Amended and Restated Filed as Exhibit 10.17 to Form
Employee Stock Option Plan 10-K filed December 26, 1996
10.16 Stock Option Grant to Filed as Exhibit 10.7 to Form
Independent Directors 10-Q filed July 28, 1995
10.17 Securities Purchase Agreement Filed as Exhibit 99.1 to Form
dated April 16, 1997, by and 8-K filed April 25, 1997
between Telular Corporation
and purchasers of the Series A
Convertible Preferred Stock
10.18 Registration Rights Agreement Filed as Exhibit 99.3 to Form
dated April 16, 1997, by and 8-K filed April 25, 1997
between Telular Corporation
and purchasers of the Series A
Convertible Preferred Stock
10.19 Securities Purchase Agreement Filed as Exhibit 99.3 to
dated June 6, 1997, by and Registration Statement on Form
between Telular Corporation S-3, Registration No. 333-
and purchasers of the Series A 27915, as amended by
Convertible Preferred Stock Amendment No. 1 filed June 13,
1997, and further Amended by
Amendment No. 2 filed July 8,
1997 ("Form S-3")
10.20 Registration Rights Agreement Filed as Exhibit 99.4 to Form
dated June 6, 1997, by and S-3
between Telular Corporation
and purchasers of the Series A
Convertible Preferred Stock
</TABLE>
19
<PAGE> 20
<TABLE>
<S> <C> <C>
10.21 Agreement and Plan of Merger Filed as Exhibit 10.21 to Form
by and among Wireless Domain 10-K filed December 19, 1997
Incorporated (formerly
TelePath), Telular-WD (a
wholly-owned subsidiary of
Telular) and certain stockholders
of Wireless Domain
Incorporated
10.22 Employment Agreement with Filed as Exhibit 10.22 to Form
Dan Giacopelli 10-Q filed February 13, 1998.
10.23 Employment Agreement with Filed as Exhibit 10.23 to Form
Robert Montgomery 10-Q filed February 13, 1998.
11 Statement regarding Filed herewith
computation of per share
earnings
27 Financial data schedule Filed herewith
99 Cautionary Statements Pursuant Filed as Exhibit 99 to Form
to the Securities Litigation Act 10-K filed December 19, 1997
of 1995
</TABLE>
(1) Confidential treatment granted with respect to certain portions of
documents.
20
<PAGE> 21
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended March 31, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant 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, 1998 By: /s/ Kenneth E. Millard
------------------------- -----------------------------------
Kenneth E. Millard
President & Chief Executive Officer
Date May 15, 1998 /s/ Jeffrey L. Herrmann
------------------------- -----------------------------------
Jeffrey L. Herrmann
Senior Vice President &
Chief Financial Officer
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION REFERENCE
- ------ ----------- ---------
<S> <C> <C>
3.1 Certificate of Filed as Exhibit 3.1 to
Incorporation Registration Statement No.
33-72096 (the "Registration
Statement")
3.2 Amendment No. 1 to Filed as Exhibit 3.2 to the
Certificate of Registration Statement
Incorporation
3.3 Amendment No. 2 to Filed as Exhibit 3.3 to the
Certificate of Registration Statement
Incorporation
3.4 By-Laws Filed as Exhibit 3.4 to the
Registration Statement
4.1 Loan Agreement with Filed as Exhibit 4.1 to Form
LaSalle National Bank and 10-K filed December 27, 1995
Amendment thereto
4.2 Debenture Agreements Filed as Exhibit 4.2 to Form
dated December 11, 1995 10-K filed December 27, 1995
4.3 Certificate of Filed as Exhibit 99.2 to Form
Designations, 8-K filed April 25, 1997
Preferences, and Rights
of Series A Convertible
Preferred Stock
4.4 Loan and Security Filed as Exhibit 4.2 to Form
Agreement with Sanwa 10-Q filed August 14, 1997
Business Credit
Corporation
10.1 Consulting Agreement with Filed as Exhibit 10.1 to the
William L. DeNicolo Registration Statement
</TABLE>
22
<PAGE> 23
<TABLE>
<S> <C> <C>
10.2 Employment Agreement with Filed as Exhibit 10.1 to Form
Kenneth E. Millard 10-Q filed August 14, 1996
10.3 Stock Option Agreement Filed as Exhibit 10.2 to Form
with Kenneth E. Millard 10-Q filed August 14, 1996
10.4 Stock Purchase Agreement Filed as Exhibit 10.3 to Form
By and Among Telular 10-Q filed August 14, 1996
Corporation and TelePath
Corporation (which has
changed its name to
Wireless Domain,
Incorporated)
10.5 Appointment of Larry J. Filed as Exhibit 10.2 to Form
Ford 10-Q filed May 1, 1995
10.6 Option Agreement with Filed as Exhibit 10.6 to Form
Motorola dated November 10-K filed December 26,
10, 1995 1996(1)
10.7 Stock Purchase Agreement Filed as Exhibit 10.11 to the
between Motorola, Inc. Registration Statement
and Telular Corporation
dated September 20, 1993
10.8 Patent Cross License Filed as Exhibit 10.12 to the
Agreement between Registration Statement (1)
Motorola, Inc. and
Telular Corporation,
dated March 23, 1990 and
Amendments No. 1, 2 and 3
thereto
10.9 Exclusive Distribution Filed as Exhibit 10.14 the
and Trademark License Registration Statement (1)
Agreement between Telular
Canada Inc. and the
Company, dated April 1,
1989, and Amendments
thereto
10.10 Amended and Restated Filed as Exhibit 10.15 to the
Shareholders Agreement Registration Statement (1)
dated November 2, 1993
10.11 Amendment No. 1 to Filed as Exhibit 10.24 to the
Amended and Restated Registration Statement
Shareholders Agreement,
dated January 24, 1994
10.12 Amendment No. 2 to Filed as Exhibit 10.5 to the
Amended and Restated Form 10-Q filed July 28, 1995
Shareholders Agreement,
dated June 29, 1995
</TABLE>
23
<PAGE> 24
<TABLE>
<S> <C> <C>
10.13 Amended and Restated Filed as Exhibit 10.16 to the
Registration Rights Registration Statement
Agreement dated November
2, 1993
10.14 Amendment No. 1 to Filed as Exhibit 10.25 to the
Amended and Restated Registration Statement
Registration Rights
Agreement, dated January
24, 1994
10.15 Amended and Restated Filed as Exhibit 10.17 to Form
Employee Stock Option 10-K filed December 26, 1996
Plan
10.16 Stock Option Grant to Filed as Exhibit 10.7 to Form
Independent Directors 10-Q filed July 28, 1995
10.17 Securities Purchase Filed as Exhibit 99.1 to Form
Agreement dated April 16, 8-K filed April 25, 1997
1997, by and between
Telular Corporation and
purchasers of the Series
A Convertible Preferred
Stock
10.18 Registration Rights Filed as Exhibit 99.3 to Form
Agreement dated April 16, 8-K filed April 25, 1997
1997, by and between
Telular Corporation and
purchasers of the Series
A Convertible Preferred
Stock
10.19 Securities Purchase Filed as Exhibit 99.3 to
Agreement dated June 6, Registration Statement on Form
1997, by and between S-3, Registration No.
Telular Corporation and 333-27915, as amended by
purchasers of the Series Amendment No. 1 filed June 13,
A Convertible Preferred 1997, and further Amended by
Stock Amendment No. 2 filed July 8,
1997 ("Form S-3")
10.20 Registration Rights Filed as Exhibit 99.4 to Form
Agreement dated June 6, S-3
1997, by and between
Telular Corporation and
purchasers of the Series
A Convertible Preferred
Stock
</TABLE>
24
<PAGE> 25
<TABLE>
<S> <C> <C>
10.21 Agreement and Plan of Filed as Exhibit 10.21 to Form
Merger by and among 10-K filed December 19, 1997
Wireless Domain
Incorporated (formerly
TelePath), Telular-WD (a
wholly-owned subsidiary
of Telular) and certain
stockholders of Wireless
Domain Incorporated
10.22 Employment Agreement with Filed as Exhibit 10.22 to Form
Dan Giacopelli 10-Q filed February 13, 1998.
10.23 Employment Agreement with Filed as Exhibit 10.23 to Form
Robert Montgomery 10-Q filed February 13, 1998.
11 Statement regarding Filed herewith
computation of per share
earnings
27 Financial data schedule Filed herewith
99 Cautionary Statements Filed as Exhibit 99 to Form
Pursuant to the 10-K filed December 19, 1997
Securities Litigation Act
of 1995
</TABLE>
(1) Confidential treatment granted with respect to certain portions of
documents.
25
<PAGE> 1
EXHIBIT(11) - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE AND PRO FORMA PER
SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1998 1997
<S> <C> <C>
Average number of shares outstanding......... 32,856,033 31,452,294
============ ===========
Net income (loss) $ (1,816,000) $ (732,000)
============ ===========
Less: Cumulative dividend on redeemable
preferred stock $ (230,000) $ -
------------ -----------
Income (loss) applicable to common shares $ (2,046,000) $ (732,000)
============ ===========
Net income (loss) per share $ (0.06) $ (0.02)
============ ===========
<CAPTION>
SIX MONTHS ENDED MARCH 31,
1998 1997
<S> <C> <C>
Average number of shares outstanding......... 32,762,020 31,447,644
============ ===========
Net income (loss) $ (3,860,000) $ 9,000
============ ===========
Less: Cumulative dividend on redeemable
preferred stock $ (469,000) $ -
------------ -----------
Income (loss) applicable to common shares $ (4,329,000) $ 9,000
============ ===========
Net income (loss) per share $ (0.13) $ 0.00
============ ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> DEC-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 21,548,000
<SECURITIES> 0
<RECEIVABLES> 8,928,000
<ALLOWANCES> (310,000)
<INVENTORY> 12,520,000
<CURRENT-ASSETS> 44,207,000
<PP&E> 8,365,000
<DEPRECIATION> (3,729,000)
<TOTAL-ASSETS> 54,374,000
<CURRENT-LIABILITIES> 9,278,000
<BONDS> 0
20,176,000
0
<COMMON> 334,000
<OTHER-SE> 24,586,000
<TOTAL-LIABILITY-AND-EQUITY> 54,374,000
<SALES> 9,780,000
<TOTAL-REVENUES> 11,054,000
<CGS> 7,698,000
<TOTAL-COSTS> 7,698,000
<OTHER-EXPENSES> 5,147,000
<LOSS-PROVISION> 25,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,816,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,816,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (230,000)
<CHANGES> 0
<NET-INCOME> (2,046,000)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>