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, 1999.
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, 1999, the latest practicable date, was
8,808,209 shares.
<PAGE>
TELULAR CORPORATION
Index
Part I - Financial Information Page No.
Item 1. Financial Statements:
Consolidated Balance Sheets
March 31, 1999 (unaudited) and September 30, 1998 3
Consolidated Statements of Operations (unaudited)
Three Months Ended March 31, 1999 and
March 31, 1998 4
Consolidated Statements of Operations (unaudited)
Six Months Ended March 31, 1999 and
March 31, 1998 5
Consolidated Statement of Stockholders' Equity (unaudited)
Period from September 30, 1998 to
March 31, 1999 6
Consolidated Statements of Cash Flows (unaudited)
Six Months Ended March 31, 1999 and
March 31, 1998 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 20
Exhibit Index 21
<PAGE>
<TABLE>
TELULAR CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
March 31, September 30,
1999 1998
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,115 $ 19,854
Receivables:
Trade, net of allowance for doubtful accounts
of $147 and $112 at March 31, 1999
and September 30, 1998, respectively 6,018 4,468
Related parties 435 1,268
------------ ------------
6,453 5,736
Inventories, net 11,423 11,594
Prepaid expenses and other current asset 900 853
------------ ------------
Total current assets 32,891 38,037
Property and equipment, net 5,679 5,496
Other assets:
Excess of cost over fair value of net assets
acquired, less accumulated amortization of
$1,045 and $785 at March 31, 1999 and
September 30, 1998, respectively 3,851 4,111
Intangible assets, less accumulated amortization
of $1,026 and $845 at March 31, 1999 and
September 30, 1998 69 250
Deposits and other 349 918
------------ ------------
$ 42,839 $ 48,812
============ ============
<PAGE>
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade $ 6,173 $ 5,138
Related parties 291 1,185
Accrued liabilities 2,195 3,521
------------ ------------
Total current liabilities 8,659 9,844
Commitments and contingencies 0 0
Redeemable Preferred Stock:
Series A convertible preferred stock, $.01
par value; $16,634 and $17,709 liquidation
preference at March 31, 1999 and
September 30, 1998, respectively; 21,000 shares
authorized at March 31, 1999 and September
30, 1998; 14,906 shares and 16,506 shares issued
and outstanding at March 31, 1999 and
September 30, 1998, respectively. 17,212 18,286
Stockholders' Equity:
Preferred stock $.01 par value; 9,979,000 shares
March 31, 1999 and September 30, 1998;
none outstanding 0 0
Common stock; $.01 par value; 75,000,000 shares
authorized; 8,808,209 and 8,534,298 outstanding
at March 31, 1999 and September 30, 1998,
respectively 88 346
Additional paid-in capital 119,264 117,326
Deficit (100,524) (95,458)
Unrealized loss on investments (253) 75
Treasury stock, 140,000 shares at cost (1,607) (1,607)
------------ ------------
Total stockholders' equity 16,968 20,682
------------ ------------
Total liabilities, redeemable preferred stock
and stockholders' equity $ 42,839 $ 48,812
============ ===========
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(Unaudited)
Three Months Ended March 31,
1999 1998
---------- ----------
<S> <C> <C>
Net product sales to unrelated parties $ 7,031 $ 9,780
Net product sales to related parties 248 0
---------- ----------
Total net product sales 7,279 9,780
Royalty and royalty settlement revenue 1,083 1,274
---------- ----------
Total revenue 8,362 11,054
Cost of sales 5,848 7,698
---------- ----------
2,514 3,356
Engineering and development expenses 1,651 2,274
Selling and marketing expenses 1,821 1,721
General and administrative expenses 920 1,232
Provision for doubtful accounts 25 25
Amortization 194 252
---------- ----------
Loss from operations (2,097) (2,148)
Other income/(expense) 99 332
---------- ----------
Net loss $ (1,998) $ (1,816)
========== ==========
Less: Cumulative dividend on redeemable
on preferred stock (186) (230)
---------- ----------
Net loss applicable to common shares $ (2,184) $ (2,046)
========== ==========
Basic and diluted net loss per common stock $ (0.25) $ (0.25)
========== ==========
Weighted average number of common share 8,793,923 8,214,001
========== ==========
</TABLE>
<PAGE>
<TABLE>
TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(Unaudited)
Six Months Ended March 31,
1999 1998
---------- ----------
<S> <C> <C>
Net product sales to unrelated parties $ 15,243 $ 22,364
Net product sales to related parties 248 0
---------- ----------
Total net product sales 15,491 22,364
Royalty and royalty settlement revenue 1,083 1,377
---------- ----------
Total revenue 16,574 23,741
Cost of sales 12,268 17,611
---------- ----------
4,306 6,130
Engineering and development expenses 3,019 4,325
Selling and marketing expenses 3,848 3,385
General and administrative expenses 1,877 2,287
Provision for doubtful accounts 50 50
Amortization 441 508
---------- ----------
Loss from operations (4,929) (4,425)
Other income/(expense) 244 565
---------- ----------
Net loss $ (4,685) $ (3,860)
========== ==========
Less: Cumulative dividend on redeemable
on preferred stock (381) (469)
---------- ----------
Net loss applicable to common shares $ (5,066) $ (4,329)
========== ==========
Basic and diluted net loss per common stock $ (0.58) $ (0.53)
========== ==========
Weighted average number of common share 8,730,904 8,190,505
========== ==========
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
Telular Corporation
Consolidated Statements of Stockholders' Equity
(In Thousands)
Unrealized
Additional gain (loss) Total
Preferred Common Paid-in on Treasury Stockholder's
Stock Stock Capital Deficit Investments Stock Equity
--------- ------ --------- --------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1998 $ 0 $346 $117,326 $ (95,458) $ 75 $ (1,607) $ 20,682
Comprehensive income:
Net loss for period from
October 1, 1998 to March
31, 1999 0 0 0 (4,685) 0 0 (4,685)
Other comprehensive income
Unrealized loss on investments 0 0 0 0 (328) 0 (328)
---------
Comprehensive income (5,013)
---------
One-for-four stock exchange 0 (269) 269 0 0 0 0
Deferred compensation related
to stock options 0 0 90 0 0 0 90
Stock issued in connection
with services 0 1 134 0 0 0 135
Conversion of preferred stock
to common stock 0 10 1,445 0 0 0 1,455
Cumulative dividend on
redeemable preferred stock 0 0 0 (381) 0 0 (381)
--------- ------ --------- --------- ---------- -------- ----------
Balance at March 31, 1999 0 88 119,264 (100,524) (253) (1,607) 16,968
========= ====== ========= ========= ========== ======== ==========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended March 31,
1999 1998
---------- ----------
<S> <C> <C>
Operating Activities:
Net loss $ (4,685) $ (3,860)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation 776 917
Amortization 441 508
Inventory obsolescence expense 150 229
Compensation expense related to
stock options and grants 135 0
Common stock issued for services
and compensation 90 116
Equity in net income of affiliate 0 (84)
Changes in assets and liabilities:
Trade receivables, net (1,550) 1,654
Related parties receivables, net 833 925
Inventories 21 (3,089)
Prepaid expenses, deposits and other 194 (1,987)
Trade accounts payable 1,035 (378)
Related parties accounts payable (894) (927)
Accrued liabilities (1,326) 228
---------- ----------
Net cash used in operating activities (4,780) (5,748)
Investing Activities:
Acquisition of property and equipment (959) (1,306)
---------- ----------
Net cash used in investing activities (959) (1,306)
---------- ----------
Financing Activities:
Proceeds from the issuance of common stock 0 151
---------- ----------
Net cash provided by financing activities 0 151
---------- ----------
Net decrease in cash and cash equivalents (5,739) (6,903)
Cash and cash equivalents, beginning of period 19,854 28,451
---------- ----------
Cash and cash equivalents, end of period $ 14,115 $ 21,548
========== ==========
See accompanying notes
</TABLE>
<PAGE>
TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
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 effect 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,
1999, are not necessarily indicative of the results that may be
expected for the full fiscal year ending September 30, 1999. 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, 1998.
2. Inventories
The components of inventories consist of the following (000's):
March 31, September 30,
1999 1998
---------- -------------
(unaudited)
Raw materials $ 4,473 $ 6,709
Finished goods 7,703 5,488
---------- -------------
12,176 12,197
Less: Reserve for obsolescence 753 603
---------- -------------
$ 11,423 $ 11,594
========== =============
3. Investment in Wireless Domain Corporation (formerly TelePath
Corporation)
On June 28, 1996, the Company entered into an agreement with and
acquired a 33% interest in Wireless Domain Incorporated (WD) in
exchange for $1 million in cash and common stock of the Company
(Common Stock) valued at approximately $2.2 million. During the
year ended September 30, 1997, the Company increased its equity
ownership 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 valued at approximately $0.7 million.
Effective October 1, 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 October 1,
1997, the Company had accounted for its investment in WD using
the equity method.
<PAGE>
TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
4. Redeemable Preferred Stock
In 1997, the Company issued 20,000 shares 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 October 16, 1999 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 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; (iii) 50% change in ownership; or (iv) certain triggering
events including suspension of the SEC registration statement for
the Common Stock to be issued upon conversion of the Preferred
Stock, failure to be listed on Nasdaq or another national
securities exchange, and notice by the Company of its intention
not to comply with proper requests for conversion. 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 using a defined conversion
formula based upon the Nasdaq closing bid prices for 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.
The Preferred Stock reflects a beneficial conversion feature that
allows holders to convert the security to Common Stock at a
discount. The amount of the discount is determined using Nasdaq
closing bid prices for the 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 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, 1999, 5,094 shares of preferred stock have been
converted into 629,983 shares of Common Stock.
<PAGE>
5. Comprehensive Income
On October 1, 1998, the Company adopted Statement of Financial
Accounting Standard No. 130, Reporting Comprehensive Income
(SFAS No. 130). Comprehensive income is defined by SFAS No. 130
as net income plus other comprehensive income, which, under
existing accounting standards includes foreign currency items,
minimum pension liability and unrealized gains and losses on
certain investments in debt and equity securities. Comprehensive
income is reported by the Company in the consolidated statement
of changes in stockholders' equity.
6. Segment Disclosures
In June 1997, the FASB issued Statement of Financial Accounting
Standard No. 131, Disclosures about Segments of an Enterprise
and Related Information (SFAS No. 131), which is effective for
years beginning after December 15, 1997. SFAS No. 131
establishes standards for the way public business enterprises
report information about operating segments in annual financial
statements and requires that those enterprises report selected
information about operating segments in interim financial
reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major
customers. The Company will adopt the new requirements
retroactively during the three month period ended September 30,
1999. Management has not completed its review of SFAS No. 131,
but anticipates that the adoption of this statement will not have
a significant effect on the Company's financial disclosures.
<PAGE>
TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
7. Contingencies
The Company is involved in litigation with Global Emerging
Markets North America, Inc. (GEM) over a commission GEM claims
it is owed in connection with the Preferred Stock issued by the
Company in 1997 (see footnote 4 above). Payments that the
Company may be required to make in connections with this
litigation are deemed issuance cost and would be recorded as a
reduction to Redeemable Preferred Stock and not effect the
Consolidated Statements of Operations. On April 5, 1999, The
Circuit Court of Cook County (Illinois) awarded GEM $549,305, but
the Company has appealed that judgement. As a result, the
Company has not recorded the above judgement in its financial
statements.
The Company is involved in other legal proceedings in the
ordinary course of business. While all litigation contains an
element of uncertainty, based upon discussion with the Company's
counsel, except for the GEM case described above, 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.
8. Reverse Stock Split
The number of shares of common stock outstanding, the weighed
average number of common shares outstanding and basic and diluted
net loss per share amounts have all been restated to reflect the
one-for-four (1:4) reverse stock split of the Company's common
stock on January 27, 1999.
9. Reclassification
Certain amounts in the March 31, 1998 financial statements have
been reclassified to conform to the
March 31, 1999 presentation.
<PAGE>
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. 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 are:
PHONECELL, a line of fixed wireless terminals (FWTs), and TELGUARD,
a line of WAS products.
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 the
Company's Cautionary Statements Pursuant to the Securities
Litigation Reform Act which is attached as Exhibit 99 to the Form 10-
K for the period ended September 30, 1998.
Results of Operations
Second quarter fiscal year 1999 compared to second quarter fiscal year
1998
Net Product Sales. Net product sales of $7.3 million for the three
months ended March 31, 1999 decreased 26% from $9.8 million for the
three months ended March 31, 1998. Sales of FWTs decreased 34% from
$8.8 million during the second quarter fiscal year 1998 to $5.8
million during the same quarter fiscal year 1999. The decrease
resulted primarily from lower shipments to Africa and The Philippines
during the current year, but also due to economic turmoil in Asia in
general and in specific areas of South America. The Company shipped
$3.0 million of FWTs to Guinea, West Africa and Philippines during the
second quarter of fiscal year 1998. There have been no sales to these
destinations in fiscal year 1999. The sale of WAS products increased
approximately 14% from $2.3 million during the three months ended
March 31, 1998 to $2.6 million during the three months ended March 31,
1999.
<PAGE>
Royalty and Royalty Settlement Revenue. Royalty and royalty
settlement revenue decreased from $1.3 million during the second
quarter of fiscal 1998 to $1.1 million during the same quarter of
fiscal 1999. The fiscal 1998 amount included $1.2 million for the
royalty settlement with ORA Electronics, Inc. The fiscal 1999 amount
includes $0.9 million of royalty settlement revenue from Motorola.
The amount from Motorola is a wrap-up payment related to the Option
Agreement with Motorola. The above payment, along with previous NRE
payments and favorable changes in terms for the Company on the Hungary
project comprises the balance of liquidated damages owed the Company
by Motorola in connection with the Option Agreement and the Hungary
project contract. Further, in connection with the above settlement,
the Company has agreed to reduce certain present and future royalties
from Motorola.
Engineering and Development Expenses. Engineering and development
expenses of $1.7 million during the second quarter of fiscal year 1999
decreased approximately 27% or $0.6 million over the same quarter of
fiscal 1998. In fiscal year 1998 and prior the Company had increasing
engineering and development expenses as a result of efforts to bring
several new lower cost products and a wider range of products to
market. Many new products were completed and introduced to market
during that year, and therefore the Company has reduced engineering
and development expenses, primarily through reductions in material
costs and contracted engineering services.
General and Administrative Expenses (G&A). G&A for the second quarter
of fiscal 1999 decreased 25% compared to the same quarter of fiscal
1998. The decrease is primarily attributable to the reduction or
elimination of expenditures, primarily through personnel reductions,
as well as leveraging resources.
Other Income. Other income during the second quarter of fiscal 1999
decreased by $0.2 million compared to the same quarter of fiscal 1998.
The decrease is primarily due to lower interest income due to lower
cash balances during the second quarter of fiscal 1999 compared to the
same quarter of fiscal 1998.
Net Income (loss). The Company recorded a net loss of ($2.0) million
or ($0.23) per share for the second quarter in fiscal 1999 compared to
a loss of ($1.8) million or ($0.22) per share in the same quarter of
fiscal 1998.
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 year 1999, net loss applicable to common shares of
($2.2) million or ($0.25) per share compares to a loss of ($2.0)
million or ($0.25) per share in the same quarter of fiscal 1998.
First half fiscal year 1999 compared to first half fiscal year 1998
<PAGE>
Net Product Sales. Net product sales of $15.5 million for the six
months ended March 31, 1999 decreased 31% from $22.4 million for the
six months ended March 31, 1998. Sales of FWTs decreased 40% from
$18.9 million during the first half of fiscal year 1998 to $11.3
million during the same period of fiscal year 1999. The decrease
resulted primarily from lower shipments to Africa and The Philippines
during the current year, but also due to economic turmoil in Asia in
general and in specific areas of South America. The Company shipped
$7.6 million of FWTs to Guinea, West Africa and Philippines during the
first half of fiscal year 1998. There have been no sales to these
destinations in fiscal year 1999. The sale of WAS products increased
approximately 10% from $4.8 million during the six months ended March
31, 1998 to $5.3 million during the six months ended March 31, 1999.
Royalty and Royalty Settlement Revenue. Royalty and royalty
settlement revenue decreased from $1.4 million during the first half
of fiscal 1998 to $1.1 million during the same period of fiscal 1999.
The fiscal 1998 amount included $1.2 million for the royalty
settlement with ORA Electronics, Inc. The fiscal 1999 amount includes
$0.9 million of royalty settlement revenue from Motorola. The amount
from Motorola is a wrap-up payment related to the Option Agreement
with Motorola. The above payment, along with previous NRE payments
and favorable changes in terms for the Company on the Hungary project
comprises the balance of liquidated damages owed the Company by
Motorola in connection with the Option Agreement and the Hungary
project contract. Further, in connection with the above settlement,
the Company has agreed to reduce certain present and future royalties
from Motorola.
Engineering and Development Expenses. Engineering and development
expenses of $3.0 million during the first six months of fiscal 1999
decreased approximately 30% or $1.3 million over the first six months
of fiscal 1998. In fiscal year 1998 and prior the Company had
increasing engineering and development expenses as a result of efforts
to bring several new lower cost products and a wider range of products
to market. Many new products were completed and introduced to market
during that year, and therefore the Company has reduced engineering
and development expenses, primarily through reductions in material
costs and contracted engineering services.
Selling and Marketing Expenses. Selling and marketing expenses for
the first half of fiscal 1999 increased 14% or $0.5 million compared
to the period of fiscal 1998. 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. The Company has
added new direct sales personnel in Budapest, Hungary; Hong Kong,
Republic of China and Istanbul, Turkey during the first half of fiscal
year 1999.
General and Administrative Expenses (G&A). G&A for the first half of
fiscal 1999 decreased 18% compared to the first half of fiscal 1998.
The decrease is primarily attributable to the reduction or elimination
of expenditures, primarily through personnel reductions, as well as
leveraging resources.
Other Income. Other income during the first half of fiscal 1999
decreased by $0.3 million compared to the same period of fiscal 1998.
The decrease is primarily due to lower interest income due to lower
cash balances during the first half of fiscal 1999 compared to the
same half of fiscal 1998.
Net Income (loss). The Company recorded a net loss of ($4.7) million
or ($0.54) per share for the first half in fiscal 1999 compared to a
net loss of ($3.9) million or ($0.47) per share first half of fiscal
1998.
Net income (loss) applicable to common shares. After giving effect to
the cumulative preferred stock dividend of $0.4 million for the first
half of fiscal 1999, net loss applicable to common shares of ($5.1)
million or ($0.58) per share compares to a net loss of ($4.3) million
or ($0.53) per share in the first half of fiscal 1998.
<PAGE>
Liquidity and Capital Resources
At March 31, 1999, the Company had $14.1 million in cash and cash
equivalents with a working capital surplus of $24.2 million.
The Company generated $1.7 million of cash during the three months
ended March 31, 1999, but used $5.7 million during the first half of
fiscal year 1999 compared to $6.9 million of cash used during the same
period last year. Cash used for capital spending was $1.0 million
during the six months ended March 31, 1999, compared to $1.3 million
during the same period last fiscal year.
In 1997, the Company issued 20,000 shares 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 into shares of the Company's common stock (Common Stock) on
October 16, 1999 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 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; (iii) 50%
change in ownership; or (iv) certain triggering events including
suspension of the SEC registration statement for the Common Stock to
be issued upon conversion of the Preferred Stock, failure to be listed
on Nasdaq or another national securities exchange, and notice by the
Company of its intention not to comply with proper requests for
conversion. 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 using a defined conversion
formula based upon the Nasdaq closing bid prices for the 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, 1999, 5,094 shares of preferred stock have been converted
into 629,983 shares of Common Stock.
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 Loan matures on April 23, 2000. As of
March 31, 1999, the Company's borrowing capacity under the Loan
provisions was $8.4 million, although there have been no borrowings
and none are contemplated in the near term.
The Company has and will continue to use much of the capital raised in
fiscal year 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 the 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.
<PAGE>
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.
Impact of the 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.
In 1998, management conducted a formal assessment of its significant
information technology systems, including computers used in its
production and manufacturing functions. Based upon this assessment,
management developed an action plan to modify its internal software
and hardware (imbedded chips) so that its computer systems will
function properly with respect to dates in the Year 2000 and
thereafter. The cost of such modifications, including testing and
implementation, was not significant and was funded with available
cash. Although the Company has completed all known changes to its
internal computer systems and has obtained certification of year 2000
compliance from its key external software providers, there can be no
absolute assurance that all of the Company's internal systems will
operate properly in the Year 2000 and beyond. The Company is prepared
to operate the business without the benefit of internal computer
systems should its systems fail to operate after December 31, 1999.
The Company does not conduct any of its purchase transactions through
computer systems that interface directly with suppliers. The Company
has also initiated a formal assessment of its significant suppliers to
determine the extent to which the Company would be vulnerable if those
third parties fail to remedy Year 2000 issues. To date, the Company
has received written responses from most of its suppliers. The
Company has evaluated these responses and is now monitoring the
progress of suppliers that are not fully ready for the Year 2000.
Where the Company determines that critical suppliers will not be ready
for the Year 2000, the Company will take appropriate actions.
With respect to its customers, the Company currently has no material
systems that interface directly with customers. Further, the Company
has not entered into any significant supply contracts that extend
beyond September 30, 1999. The Company's large customers beyond
December 31, 1999 will likely be new customers due to the project
nature of its business. However, as a global company that operates in
many different countries, some of which may not be addressing the Year
2000 problem as aggressively as the United States, there can be no
assurances that future customers will be Year 2000 compliant.
Moreover, because markets for the Company's products are dependent on
third parties, such as wireless local loop network providers,
management cannot fully assess the impact that the Year 2000 problem
will have on future sales.
<PAGE>
The Company has reviewed each of its product lines and has determined
that its products will operate properly in the Year 2000 and beyond.
However, for some industries, the Company's products are integrated
with other company's products and sold as a combined product by
another company. There can be no assurances that such combined
products, current and future, will operate properly in the Year 2000
and beyond.
The cost of the Company's efforts to prepare for the Year 2000 was
approximately $100,000, of which approximately 50% was incurred during
the current fiscal year. Management will continue to monitor this
issue, particularly the possible impact of third-party Year 2000
compliance on the Company's operations.
Management believes that it is Year 2000 ready and does not anticipate
any additional preparation cost. Nevertheless, because it is not
possible to anticipate all future outcomes, especially when third
parties are involved, there could be circumstances in which the
Company is adversely effected by Year 2000 problems. The loss of
revenue from such occurrences has not been estimated.
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
FWTs will experience substantial growth over the next five years.
Nearer term prospects should enable the Company to grow, but at more
modest rates. The economic turmoil in Asia, a key market for the
Company's products, will negatively impact growth prospects in the
near term. However, the Company has identified significant near term
opportunities primarily in Eastern Europe, Africa, Columbia,
Venezuela, Mexico, Dominican Republic and Malaysia. Each of these
markets will develop at a different pace, and the sales cycle for
these regions are several months or quarters, but market indications
remain positive. The Company is well positioned with a wide range of
products and an expanded sales force to capitalize on these market
opportunities.
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 Company's 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 Form
10-K for the period ended September 30, 1998, 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.
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In 1998, the Company received 300,000 shares of ORA Electronics, Inc.
common stock (ORA stock) in connection with the settlement of
litigation. ORA stock is traded on Nasdaq's Over The Counter (OTC)
system. Although ORA stock is subject to price fluctuations
associated with all securities that are traded on the OTC system, the
Company has the right to receive additional shares of ORA stock to
ensure the fair market value of the settlement consideration received
in stock is equivalent to $1.5 million on February 1, 2000.
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
available 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,
1999.
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of trade
accounts receivable. Credit risks with respect to trade receivables
are limited due to the diversity of customers comprising the Company's
customer base. The Company generally receives irrevocable letters of
credit that are confirmed by U.S. banks to reduce its credit risk.
Further, the Company purchases credit insurance for all significant
open accounts outside of the United States. The Company performs
ongoing credit evaluations and charges uncollectible amounts to
operations when they are determined to be uncollectible.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is involved in litigation with Global Emerging Markets
North America, Inc. (GEM) over a commission GEM claims it is owed in
connection with the Preferred Stock issued by the Company in 1997.
Payments that the Company may be required to make in connections with
this litigation are deemed issuance cost and would be recorded as a
reduction to Redeemable Preferred Stock and not effect the
Consolidated Statements of Operations. On April 5, 1999, The Circuit
Court of Cook County (Illinois) awarded GEM $549,305, but the Company
has appealed that judgement. As a result, the Company has not
recorded the above judgement in its financial statements.
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 cash dividends during the term
of the loan.
<PAGE>
Recent Sales of Unregistered Securities
During the three months ended March 31, 1999, the Company issued 6,355
shares of Common Stock valued at $13,905 to the law of firm of Hamman
and Benn for legal services. The Company also issued 12,427 shares of
Common Stock valued at $27,190 to the law firm of Bellows & Bellows
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 26,
1999. The number of shares issued and outstanding and entitled to
vote was 34,710,636. There were present at said meeting, in person or
by proxy, shareholders holding 33,652,634 shares of common stock, that
is 97% 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:
For Withheld
John E. Berndt 33,115,198 537,436
William L. DeNicolo 33,088,198 564,436
Larry J. Ford 33,119,198 533,436
Daniel D. Giacopelli 33,102,898 549,736
Richard D. Haning 33,119,198 533,436
Kenneth E. Millard 33,110,898 541,736
Robert C. Montgomery 33,113,698 538,936
Mark R. Warner 33,107,198 545,436
All nominees for Director were elected.
The second matter voted upon was to approve each of three amendments
to the Certificate of Incorporation of the Company which would effect
a reverse stock split at 1:2, 1:3, or 1:4. Votes on this matter were:
32,493,578 For, 1,067,580 Against, 91,476 Abstentions and there were
no Broker Non-Votes.
The third matter voted upon was to approve the Company's Third Amended
and Restated Stock Incentive Plan, increasing the number of options
authorized thereunder from 3,000,000 to 7,000,000. Votes on this
matter were: 18,288,477 For, 2,020,710 Against, 118,001 Abstentions
and 13,225,276 Broker Non-Votes.
The fourth matter voted upon was to amend the Ratification of Ernst &
Young LLP as Independent Auditors for the year ending September 30,
1999. Votes on this matter were: 33,379,131 For, 115,665 Against,
157,665 Abstentions, and there were no Broker Non-Votes.
<PAGE>
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 Exhibit 3.2
of Incorporation to the Registration Statement
3.3 Amendment No. 2 to Certificate Filed as Exhibit 3.3 to the
of Incorporation Registration Statement
3.4 Amendment No. 3 to Certificate Filed as Exhibit 3.4 to Form
of Incorporation 10-Q filed February 16, 1999
3.5 Amendment No. 4 to Certificate Filed as Exhibit 3.5 to Form
of Incorporation 10-Q filed February 16, 1999
3.6 By-Laws Filed as Exhibit 3.4 to the
Registration Statement
4.1 Loan Agreement with LaSalle Filed as Exhibit 4.1
National Bank and Amendment to Form 10-K filed December
thereto 27, 1995
4.2 Debenture Agreements dated Filed as Exhibit 4.2
December 11, 1995 to Form 10-K filed
December 27, 1995
<PAGE>
4.3 Certificate of Designations, Filed as Exhibit 99.2
Preferences, and Rights of Form 8-K filed
Series A Convertible Preferred April 25, 1997
Stock
4.4 Loan and Security Agreement with Filed as Exhibit 4.2 to
Sanwa Business Credit Corporation Form 10-Q filed August 14, 1997
10.1 Consulting Agreement with Filed as Exhibit 10.1
William L. De Nicolo to the 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
and Among Telular Corporation 10.3 to Form 10-Q
and TelePath Corporation (which filed August 14, 1996
had 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
<PAGE>
10.6 Option Agreement with Motorola Filed as Exhibit 10.6
dated November 10, 1995 to Form 10-K filed
December 26, 1996(1)
10.7 Stock Purchase Agreement Filed as Exhibit 10.11
between Motorola, Inc. and to the Registration Statement
Telular Corporation dated
September 20, 1993
10.8 Patent Cross License Agreement Filed as Exhibit 10.12
between Motorola, Inc. and the to the Registration
Company, dated March 23, 1990 Statement(1)
and Amendments No. 1, 2 and
3 thereto
10.9 Exclusive Distribution and Filed as Exhibit 10.14
Trademark License Agreement the Registration
between Telular Canada Inc. Statement(1)
and the Company, dated April 1,
1989, and Amendments thereto
10.10 Amended and Restated Shareholders Filed as Exhibit 10.15
Agreement dated November 2, 1993 to the Registration
Statement(1)
<PAGE>
10.11 Amendment No. 1 to Amended and Filed as Exhibit 10.24
Restated Shareholders the Registration
Agreement, dated January 24, 1994 Statement
10.12 Amendment No. 2 to Amended and Filed as Exhibit 10.5
Restated Shareholders Agreement, to the Form 10-Q filed
dated June 29, 1995 July 28, 1995
10.13 Amended and Restated Registration Filed as Exhibit 10.16
Rights Agreement dated November to the Registration
2, 1993 Statement
10.14 Amendment No. 1 to Amended and Filed as Exhibit 10.25
Restated Registration Rights to the Registration
Agreement, dated January 24, Statement
1994
10.15 Amended and Restated Employee Filed as Exhibit 10.17
Stock Option Plan to Form 10-K filed
December 26, 1996
10.16 Stock Option Grant to Filed as Exhibit 10.7
Independent Directors to Form 10-Q filed
July 28, 1995
10.17 Securities Purchase Agreement Filed as Exhibit 99.1 to
dated April 16, 1997, by and Form 8-K filed
between Telular Corporation and April 25, 1997
purchasers of the Series A
Convertible Preferred Stock
<PAGE>
10.18 Registration Rights Agreement Filed as Exhibit 99.3 to
dated April 16, 1997, by and Form 8-K filed
between Telular Corporation and April 25, 1997
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
between Telular Corporation and Form S-3, Registration
purchasers of the Series A No. 333-27915, as amended
Convertible Preferred Stock by 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
dated June 6, 1997, by and Form S-3
between Telular Corporation and
purchasers of the Series A
Convertible Preferred Stock
10.21 Agreement and Plan of Merger by Filed as Exhibit 10.21
and among Wireless Domain to Form 10-K filed
Incorporated (formerly TelePath), December 19, 1998
Telular-WD (a wholly-owned
subsidiary of Telular) and
certain stockholder of Wireless
Domain Incorporated
10.22 Employment Agreement with Daniel Filed as Exhibit 10.22
D. Giacopelli to Form 10-Q filed
February 13, 1998
<PAGE>
10.23 Employment Agreement with Robert Filed as Exhibit 10.23
C. Montgomery to Form 10-Q filed
February 13, 1998
11 Statement regarding computation Filed herewith
of per share earnings
27 Financial data schedule Filed herewith
(1) Confidential treatment granted with respect to redacted
portions of documents.
(b) Reports on Form 8-K
The Company did not file any report on Form 8-K during the three
months ended March 31, 1999.
<PAGE>
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 14, 1999 By: /s/ Kenneth E. Millard
----------------- -------------------------
Kenneth E. Millard
President & Chief Executive Officer
Date May 14, 1999 /s/ Jeffrey L. Herrmann
----------------- -------------------------
Jeffrey L. Herrmann
Senior Vice President & Chief
Financial Officer
<PAGE>
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 Exhibit 3.2
of Incorporation to the Registration Statement
3.3 Amendment No. 2 to Certificate Filed as Exhibit 3.3 to the
of Incorporation Registration Statement
3.4 Amendment No. 3 to Certificate Filed as Exhibit 3.4 to Form
of Incorporation 10-Q filed February 16, 1999
3.5 Amendment No. 4 to Certificate Filed as Exhibit 3.5 to Form
of Incorporation 10-Q filed February 16, 1999
3.6 By-Laws Filed as Exhibit 3.4 to the
Registration Statement
4.1 Loan Agreement with LaSalle Filed as Exhibit 4.1
National Bank and Amendment to Form 10-K filed December
thereto 27, 1995
4.2 Debenture Agreements dated Filed as Exhibit 4.2
December 11, 1995 to Form 10-K filed
December 27, 1995
4.3 Certificate of Designations, Filed as Exhibit 99.2
Preferences, and Rights of Form 8-K filed
Series A Convertible Preferred April 25, 1997
Stock
<PAGE>
4.4 Loan and Security Agreement with Filed as Exhibit 4.2 to
Sanwa Business Credit Corporation Form 10-Q filed August 14, 1997
10.1 Consulting Agreement with Filed as Exhibit 10.1
William L. De Nicolo to the 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
and Among Telular Corporation 10.3 to Form 10-Q
and TelePath Corporation (which filed August 14, 1996
had 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 Motorola Filed as Exhibit 10.6
dated November 10, 1995 to Form 10-K filed
December 26, 1996(1)
10.7 Stock Purchase Agreement Filed as Exhibit 10.11
between Motorola, Inc. and to the Registration Statement
Telular Corporation dated
September 20, 1993
<PAGE>
10.8 Patent Cross License Agreement Filed as Exhibit 10.12
between Motorola, Inc. and the to the Registration
Company, dated March 23, 1990 Statement(1)
and Amendments No. 1, 2 and
3 thereto
10.9 Exclusive Distribution and Filed as Exhibit 10.14
Trademark License Agreement the Registration
between Telular Canada Inc. Statement(1)
and the Company, dated April 1,
1989, and Amendments thereto
10.10 Amended and Restated Shareholders Filed as Exhibit 10.15
Agreement dated November 2, 1993 to the Registration
Statement(1)
10.11 Amendment No. 1 to Amended and Filed as Exhibit 10.24
Restated Shareholders the Registration
Agreement, dated January 24, 1994 Statement
10.12 Amendment No. 2 to Amended and Filed as Exhibit 10.5
Restated Shareholders Agreement, to the Form 10-Q filed
dated June 29, 1995 July 28, 1995
10.13 Amended and Restated Registration Filed as Exhibit 10.16
Rights Agreement dated November to the Registration
2, 1993 Statement
10.14 Amendment No. 1 to Amended and Filed as Exhibit 10.25
Restated Registration Rights to the Registration
Agreement, dated January 24, Statement
1994
<PAGE>
10.15 Amended and Restated Employee Filed as Exhibit 10.17
Stock Option Plan to Form 10-K filed
December 26, 1996
10.16 Stock Option Grant to Filed as Exhibit 10.7
Independent Directors to Form 10-Q filed
July 28, 1995
10.17 Securities Purchase Agreement Filed as Exhibit 99.1 to
dated April 16, 1997, by and Form 8-K filed
between Telular Corporation and April 25, 1997
purchasers of the Series A
Convertible Preferred Stock
10.18 Registration Rights Agreement Filed as Exhibit 99.3 to
dated April 16, 1997, by and Form 8-K filed
between Telular Corporation and April 25, 1997
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
between Telular Corporation and Form S-3, Registration
purchasers of the Series A No. 333-27915, as amended
Convertible Preferred Stock by Amendment No. 1 filed
June 13, 1997, and further
Amended by Amendment
No. 2 filed July 8, 1997
(Form S-3)
<PAGE>
10.20 Registration Rights Agreement Filed as Exhibit 99.4 to
dated June 6, 1997, by and Form S-3
between Telular Corporation and
purchasers of the Series A
Convertible Preferred Stock
10.21 Agreement and Plan of Merger by Filed as Exhibit 10.21
and among Wireless Domain to Form 10-K filed
Incorporated (formerly TelePath), December 19, 1998
Telular-WD (a wholly-owned
subsidiary of Telular) and
certain stockholder of Wireless
Domain Incorporated
10.22 Employment Agreement with Daniel Filed as Exhibit 10.22
D. Giacopelli to Form 10-Q filed
February 13, 1998
10.23 Employment Agreement with Robert Filed as Exhibit 10.23
C. Montgomery to Form 10-Q filed
February 13, 1998
11 Statement regarding computation Filed herewith
of per share earnings
27 Financial data schedule Filed herewith
(1) Confidential treatment granted with respect to redacted
portions of documents.
Exhibit (11) - Statement Re: Computation of Earnings Per Share and
Pro Forma Earnings Per Share (1999)
<TABLE>
<CAPTION> Three Months Ended
March 31,
1999 1998
-------------- -------------
<S> <C> <C>
Average number of shares outstanding 8,793,923 8,214,001
============== =============
Net loss $ (1,998,000) $ (1,816,000)
Less: cumulative dividend on
redeemable preferred stock $ (186,000) $ (230,000)
-------------- -------------
Loss applicable to common shares $ (2,184,000) $ (2,046,000)
============== =============
Net loss per share $ (0.25) $ (0.25)
============== =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 14115
<SECURITIES> 0
<RECEIVABLES> 6600
<ALLOWANCES> 147
<INVENTORY> 11423
<CURRENT-ASSETS> 32891
<PP&E> 10906
<DEPRECIATION> 5227
<TOTAL-ASSETS> 42839
<CURRENT-LIABILITIES> 8659
<BONDS> 0
17212
0
<COMMON> 88
<OTHER-SE> 16880
<TOTAL-LIABILITY-AND-EQUITY> 42839
<SALES> 7279
<TOTAL-REVENUES> 8362
<CGS> 5848
<TOTAL-COSTS> 5848
<OTHER-EXPENSES> 4487
<LOSS-PROVISION> 25
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1998)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1998)
<DISCONTINUED> 0
<EXTRAORDINARY> (186)
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<NET-INCOME> (2184)
<EPS-PRIMARY> (0.25)
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