**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM 10-Q**

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe quarterly period ended March 31, 2007**

**OR**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe transition period from                               to                             **

**CommissionFile No. 0-28582**

**CHANNELL COMMERCIAL CORPORATION**

(Exact name of Registrantas specified in its charter)

**DELAWARE**

(State or otherjurisdiction of incorporation or organization)

**95-2453261**

(I.R.S. EmployerIdentification No.)

**26040 Ynez Road,Temecula, California**

(Address of principalexecutive offices)

**92591**

(Zip Code)

**(951) 719-2600**

(Registrant’s telephonenumber, including area code)

Indicate by check mark whether the registrant: (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

Yes  x  No  o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer” and “largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

| Large Accelerated Filer  o |   | Accelerated  Filer  o |   | Non- accelerated  Filer  x |
|--------------------------------------|--------|---------------------------------|--------|--------------------------------------|

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o  No  x

9,543,584 shares of common stock of the registrantwere outstanding at May 10, 2007.

 

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**PART 1 - FINANCIALINFORMATION**

**Item 1.**                          FinancialStatements.

**CHANNELL COMMERCIAL CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSAND COMPREHENSIVE INCOME (LOSS)(UNAUDITED)*(amounts in thousands, except per sharedata)***
| ** **                                     | ** ** | **Three months ended  March 31,** | ** ** |
|------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                     | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
|                                           |       |                                             |       |   |   |
| Net sales                                      |       | $                                                | 32,853     |   | $ | 25,152 |   |
| Cost of goods sold                             |       | 22,879                                           |       | 17,563 |   |
| Gross profit                                   |       | 9,974                                            |       | 7,589 |   |
|                                           |       |                                             |       |   |   |
| Operating expenses                             |       |                                             |       |   |   |
| Selling                                        |       | 5,246                                            |       | 5,339 |   |
| General and  administrative                    |       | 4,223                                            |       | 3,267 |   |
| Research and  development                      |       | 429                                              |       | 536 |   |
|                                           |       | 9,898                                            |       | 9,142 |   |
|                                           |       |                                             |       |   |   |
| Income (loss)  from operations                 |       | 76                                               |       | (1,553 | ) |
| Interest income                                |       | 13                                               |       | 18 |   |
| Interest expense                               |       | (185                                             | )          | (120 | ) |
| Loss before  income tax benefit                |       | (96                                              | )          | (1,655 | ) |
|                                           |       |                                             |       |   |   |
| Income tax benefit                             |       | (146                                             | )          | (18 | ) |
| Net income  (loss) before minority interest    |       | 50                                               |       | (1,637 | ) |
| Minority  interest in loss of subsidiaries     |       | (65                                              | )          | (81 | ) |
| Net income  (loss)                             |       | $                                                | 115        |   | $ | (1,556 | ) |
|                                           |       |                                             |       |   |   |
| Net income  (loss) per share                   |       |                                             |       |   |   |
| Basic and  diluted                             |       | $                                                | 0.01       |   | $ | (0.16 | ) |
|                                           |       |                                             |       |   |   |
| Net income (loss)                              |       | $                                                | 115        |   | $ | (1,556 | ) |
| Other comprehensive  income (loss), net of tax |       |                                             |       |   |   |
| Foreign currency  translation adjustment       |       | 397                                              |       | (342 | ) |
|                                           |       |                                             |       |   |   |
| Comprehensive income (loss)                    |       | $                                                | 512        |   | $ | (1,898 | ) |

 

The accompanying notes are an integral part of thesefinancial statements.

2

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**CHANNELL COMMERCIAL CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED)(amounts in thousands, except per share data)**
| ** **                                                                                                                                                                                                                    | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                                    | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| ASSETS                                                                                                                                                                                                                        |       |               |       |                  |       |
| Current assets                                                                                                                                                                                                                |       |               |       |                  |       |
| Cash and cash  equivalents                                                                                                                                                                                                    |       | $                  | 1,225      |                  | $          | 2,235 |   |
| Accounts  receivable, net of allowance for doubtful accounts of $139 at March 31, 2007  and $220 at December 31, 2006                                                                                                         |       | 16,684             |       | 11,673                |       |
| Inventories, net                                                                                                                                                                                                              |       | 15,698             |       | 13,018                |       |
| Prepaid expenses  and other current assets                                                                                                                                                                                    |       | 965                |       | 931                   |       |
| Income taxes  receivable                                                                                                                                                                                                      |       | 783                |       | 881                   |       |
| Deferred income  taxes, net                                                                                                                                                                                                   |       | 736                |       | 719                   |       |
| Total current  assets                                                                                                                                                                                                         |       | 36,091             |       | 29,457                |       |
|                                                                                                                                                                                                                          |       |               |       |                  |       |
| Property and equipment,  net                                                                                                                                                                                                  |       | 18,564             |       | 18,799                |       |
| Deferred income taxes,  net                                                                                                                                                                                                   |       | 1,041              |       | 1,017                 |       |
| Goodwill                                                                                                                                                                                                                      |       | 10,075             |       | 9,848                 |       |
| Intangible assets, net                                                                                                                                                                                                        |       | 2,101              |       | 2,097                 |       |
| Other assets                                                                                                                                                                                                                  |       | 790                |       | 660                   |       |
|                                                                                                                                                                                                                          |       | $                  | 68,662     |                  | $          | 61,878 |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                                                                                                                    |       |               |       |                  |       |
| Current liabilities                                                                                                                                                                                                           |       |               |       |                  |       |
| Accounts payable                                                                                                                                                                                                              |       | $                  | 16,212     |                  | $          | 10,902 |   |
| Short-term debt  (including current maturities of long-term debt)                                                                                                                                                             |       | 13,522             |       | 13,723                |       |
| Current  maturities of capital lease obligations                                                                                                                                                                              |       | 179                |       | 138                   |       |
| Accrued expenses                                                                                                                                                                                                              |       | 5,365              |       | 4,371                 |       |
| Total current  liabilities                                                                                                                                                                                                    |       | 35,278             |       | 29,134                |       |
|                                                                                                                                                                                                                          |       |               |       |                  |       |
| Capital lease  obligations, less current maturities                                                                                                                                                                           |       | 491                |       | 384                   |       |
| Other long-term  liabilities                                                                                                                                                                                                  |       | 1,338              |       | 1,332                 |       |
| Commitments and  contingencies (Note 7)                                                                                                                                                                                       |       | —             |       | —                |       |
| Minority interest                                                                                                                                                                                                             |       | 833                |       | 878                   |       |
|                                                                                                                                                                                                                          |       |               |       |                  |       |
| Stockholders’ equity                                                                                                                                                                                                     |       |               |       |                  |       |
| Preferred stock,  par value $.01 per share, authorized—1,000 shares, none issued and  outstanding                                                                                                                        |       | —             |       | -                     |       |
| Common stock,  par value $.01 per share, authorized—19,000 shares; issued — 9,787 at March 31,  2007 and December 31, 2006; outstanding - 9,543 shares at March 31,  2007 and December 31, 2006 |       | 98                 |       | 98                    |       |
| Additional  paid-in capital                                                                                                                                                                                                   |       | 31,153             |       | 31,093                |       |
| Treasury stock —  244 shares in 2007 and 2006                                                                                                                                                                            |       | (1,871             | )          | (1,871                | )          |
| Accumulated  deficit                                                                                                                                                                                                          |       | (45                | )          | (160                  | )          |
| Accumulated  other comprehensive income -                                                                                                                                                                                     |       |               |       |                  |       |
| Foreign currency  translation                                                                                                                                                                                                 |       | 1,387              |       | 990                   |       |
| Total  stockholders’ equity                                                                                                                                                                                              |       | 30,722             |       | 30,150                |       |
|                                                                                                                                                                                                                          |       | $                  | 68,662     |                  | $          | 61,878 |   |

 

The accompanying notes are an integral part of thesefinancial statements.

3

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**CHANNELL COMMERCIAL CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)*(amounts in thousands)***
| ** **                                                                                                        | ** ** | **Three months ended  March 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                                        | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
|                                                                                                              |       |                                             |       |   |   |
| Cash flows from  operating activities:                                                                            |       |                                             |       |   |   |
| Net income  (loss)                                                                                                |       | $                                                | 115        |   | $ | (1,556 | ) |
| Adjustments to  reconcile net income (loss) to net cash used in operating activities:                             |       |                                             |       |   |   |
| Depreciation and  amortization                                                                                    |       | 1,187                                            |       | 1,149 |   |
| Stock-based  compensation                                                                                         |       | 60                                               |       | 81 |   |
| Loss on disposal  of fixed assets                                                                                 |       | 23                                               |       | — |   |
| Amortization of  deferred gain on sale leaseback                                                                  |       | (15                                              | )          | (15 | ) |
| Provision for  doubtful accounts                                                                                  |       | (7                                               | )          | (174 | ) |
| Provision for  inventory obsolescence                                                                             |       | 33                                               |       | — |   |
| Minority  interest in income loss of subsidiaries                                                                 |       | (65                                              | )          | (81 | ) |
| Changes in  operating assets and liabilities:                                                                     |       |                                             |       |   |   |
| Accounts  receivable                                                                                              |       | (4,824                                           | )          | (3,420 | ) |
| Inventories                                                                                                       |       | (2,583                                           | )          | 125 |   |
| Prepaid expenses  and other current assets                                                                        |       | (25                                              | )          | (208 | ) |
| Income taxes  receivable                                                                                          |       | 105                                              |       | (258 | ) |
| Other assets                                                                                                      |       | (128                                             | )          | 50 |   |
| Accounts payable                                                                                                  |       | 4,795                                            |       | 3,043 |   |
| Accrued expenses  and other liabilities                                                                           |       | 946                                              |       | (439 | ) |
| Net cash used in  operating activities                                                                            |       | (383                                             | )          | (1,703 | ) |
|                                                                                                              |       |                                             |       |   |   |
| Cash flows from  investing activities:                                                                            |       |                                             |       |   |   |
| Purchase of  property and equipment                                                                               |       | (339                                             | )          | (300 | ) |
| Proceeds from  the sales of property and equipment                                                                |       | 66                                               |       | — |   |
| Net cash used in  investing actitivities                                                                          |       | (273                                             | )          | (300 | ) |
|                                                                                                              |       |                                             |       |   |   |
| Cash flows from  financing activities:                                                                            |       |                                             |       |   |   |
| Repayment of  debt                                                                                                |       | (792                                             | )          | (532 | ) |
| Borrowings from  credit facilities                                                                                |       | 402                                              |       | 1,807 |   |
| Repayment of  obligations under capital lease                                                                     |       | (61                                              | )          | (13 | ) |
| Net cash (used  in) provided by financing activities                                                              |       | (451                                             | )          | 1,262 |   |
|                                                                                                              |       |                                             |       |   |   |
| Effect of exchange  rates on cash                                                                                 |       | 97                                               |       | (50 | ) |
| Decrease in cash  and cash equivalents                                                                            |       | (1,010                                           | )          | (791 | ) |
| Cash and cash  equivalents, beginning of period                                                                   |       | 2,235                                            |       | 3,148 |   |
| Cash and cash  equivalents, end of period                                                                         |       | $                                                | 1,225      |   | $ | 2,357 |   |
| Cash paid during the  period for:                                                                                 |       |                                             |       |   |   |
| Interest                                                                                                          |       | $                                                | 289        |   | $ | 172 |   |
| Income taxes                                                                                                      |       | $                                                | 11         |   | $ | 21 |   |
| Non-cash investing  activities:                                                                                   |       |                                             |       |   |   |
| Purchases of property  and equipment which are included in obligations under capital leases and  accounts payable |       | $                                                | 295        |   | $ | 37 |   |

 

The accompanying notes are an integral part of thesefinancial statements.

4

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**CHANNELL COMMERCIAL CORPORATIONCONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITYThree months ended March 31, 2007(UNAUDITED)*(amounts in thousands)***
| ** **                    | ** ** | ** **            | ** ** | ** **  | ** ** | ** **              | ** ** | ** **      | ** ** | ** **        | ** ** | ** **             | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
|-------------------------------|------------|-----------------------|------------|-------------|------------|-------------------------|------------|-----------------|------------|-------------------|------------|------------------------|------------|-----------------|------------|------------|------------|
| ** **                    | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional**          | ** ** | ** **      | ** ** | ** **        | ** ** | ** **             | ** ** | **other**       | ** ** | **Total**  | ** ** |
| ** **                    | ** ** | **Common stock** | ** ** | **paid-in** | ** ** | **Treasury stock** | ** ** | **Accumulated** | ** ** | **comprehensive** | ** ** | **stockholders’** | ** ** |
| ** **                    | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **capital**             | ** ** | **Shares**      | ** ** | **Amount**        | ** ** | **defecit**            | ** ** | **income**      | ** ** | **equity** | ** ** |
|                          |       |                  |       |        |       |                    |       |            |       |              |       |                   |       |            |       |       |       |
| Balance, January 1, 2007      |       | 9,787                 |       | $           | 98         |                    | $          | 31,093          |       | 244               |       | $                      | (1,871     | )               | $          | (160       | )          | $ | 990 |   | $ | 30,150 |   |
|                          |       |                  |       |        |       |                    |       |            |       |              |       |                   |       |            |       |       |       |
| Stock-based compensation      |       | —                |       | —      |       | 60                      |       | —          |       | —            |       | —                 |       | —          |       | 60         |       |
|                          |       |                  |       |        |       |                    |       |            |       |              |       |                   |       |            |       |       |       |
| Foreign currency  translation |       | —                |       | —      |       | —                  |       | —          |       | —            |       | —                 |       | 397             |       | 397        |       |
|                          |       |                  |       |        |       |                    |       |            |       |              |       |                   |       |            |       |       |       |
| Net income for the  period    |       | —                |       | —      |       | —                  |       | —          |       | —            |       | 115                    |       | —          |       | 115        |       |
|                          |       |                  |       |        |       |                    |       |            |       |              |       |                   |       |            |       |       |       |
| Balance, March 31, 2007       |       | 9,787                 |       | $           | 98         |                    | $          | 31,153          |       | 244               |       | $                      | (1,871     | )               | $          | (45        | )          | $ | 1,387 |   | $ | 30,722 |   |

 

The accompanying notes are an integral part of thesefinancial statements.

5

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**CHANNELL COMMERCIAL CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2007 and 2006*(amounts in thousands, except per share data)***

**1.****              *Unauditedfinancial statements.**** *In the opinion of management, theaccompanying unaudited condensed consolidated financial statements contain alladjustments (consisting only of normal, recurring adjustments) that arenecessary to present fairly the consolidated financial position of ChannellCommercial Corporation (the “Company”) as of March 31, 2007 and theresults of its operations and cash flows for the three months ended March 31,2007 and 2006. The results of operations and cash flows for the three monthsended March 31, 2007 and cash flows for the three months ended March 31,2007 are not necessarily indicative of the results to be expected for any otherinterim period or the full year. These condensed consolidated financialstatements should be read in combination with the Company’s auditedconsolidated financial statements and notes thereto for the year ended December 31,2006, included in the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2006.

***Recent Accounting Pronouncements.***  In September 2006, the Financial AccountingStandards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”)No. 157, *Fair Value Measurements*, whichdefines fair value, establishes a framework for measuring fair value ingenerally excepted accounting principles and expands disclosures about fairvalue measurements. This Statement will be effective for financial statementsissued for fiscal years beginning after November 15, 2007, and interim periodswithin those fiscal years. The Company is currently evaluating the requirementsof this new standard and has not concluded its analysis on the impact to theCompany’s consolidated financial position or results of operations.

In February 2007, theFASB issued SFAS No. 159,*The FairValue Option for Financial Assets and Financial Liabilities — including anamendment of SFAS No. 115,* which allows measurement at fairvalue of eligible financial assets and liabilities that are not otherwisemeasured at fair value. If the fair value option for an eligible item iselected, unrealized gains and losses for that item shall be reported in currentearnings at each subsequent reporting date. SFAS No. 159 also establishespresentation and disclosure requirements designed to draw comparison betweenthe different measurement attributes the company elects for similar types ofassets and liabilities. This statement is effective for fiscal years beginningafter November 15, 2007. The Company is in the process of evaluating theapplication of the fair value option and its effect on the Company’s results ofoperations or financial condition.

***Reclassifications.**** *In the first quarterof 2007, the Company reclassified the long-term portion of accrued workerscompensation from accrued expenses to other long-term liabilities, includingthe December 31, 2006 amount of $818 for comparative purposes. The Companyhad previously classified such accrued expenses under current liabilities. TheCompany’s current liabilities, and any ratio calculated therefrom, as usedthroughout this Quarterly Report for the period ended March 31, 2007reflect the reclassification described above.

**2.****              *Stock-BasedCompensation.**** *Effective January 1, 2006 theCompany adopted SFAS No. 123R, *Share-Based Payment*,which requires that compensation expense be recognized over the requisiteservice period based on the fair value of the award at the date of grant. At March 31,2007, the Company had total unvested stock-based compensation expense of $263. Theunvested stock options will vest at various intervals over the next 2.5 years. Totalstock-based compensation expense, recognized in general and administrativeexpenses, was $60 and $81 during the first quarter of 2007 and 2006,respectively. There were no options granted during the three months ended March 31,2007.

**3.****              *Inventories.**** *Inventories statedat the lower of cost (first-in, first-out method) or market are summarized asfollows:

|                                   | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|-----------------------------------|------------|--------------------------|------------|-----------------------------|------------|
|                              |       |                     |       |                        |       |
| Raw Materials                     |       | $                        | 7,799      |                        | $          | 6,043 |   |
| Work-in-Process                   |       | 3,945                    |       | 3,318                       |       |
| Finished Goods                    |       | 5,223                    |       | 4,891                       |       |
|                              |       | 16,967                   |       | 14,252                      |       |
| Less inventory  valuation reserve |       | (1,269                   | )          | (1,234                      | )          |
|                              |       | $                        | 15,698     |                        | $          | 13,018 |   |

 

6

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**4.****              *Income(loss) per share.***  Basicincome (loss) per share excludes dilution and is computed by dividing netincome (loss) available to common stockholders by the weighted average numberof common shares outstanding for the three months ended March 31, 2007 and2006*.*Diluted income (loss) per sharereflects the potential dilution that could occur if dilutive options to acquirecommon stock were exercised, the proceeds of which are then presumed to havebeen used to repurchase outstanding stock using the treasury stock method. Forthe three months ended March 31, 2007, the calculation of dilutive sharesfrom the exercise of stock options resulted in a number of dilutive shares thatrounded to less than 1. For the three months ended March 31, 2006, thereis no calculation of dilution since the Company incurred a loss for the period,thereby resulting in the options becoming antidilutive. The following is areconciliation of the number of shares (denominator) used in the basic anddiluted income (loss) per share computations for three months ended March 31,2007 and 2006:

|                                   | ** ** | **Three months ended March 31,** | ** ** |
|-----------------------------------|------------|------------------------------------------------------|------------|
| ** **                        | ** ** | **2007**                                             | ** ** | **2006** | ** ** |
| ** **                        | ** ** | ** **                                           | ** ** | **Per Share** | ** ** | ** ** | ** ** | **Per Share** | ** ** |
| ** **                        | ** ** | **Shares**                                           | ** ** | **Amount** | ** ** | **Shares** | ** ** | **Amount** | ** ** |
| Basic income  (loss) per share    |       | 9,543                                                |       | $ | 0.01 |   | 9,543 |   | $ | (0.16 | ) |
| Effect of  dilutive stock options |       | —                                               |       | — |   | — |   | — |   |
| Diluted income (loss)  per share  |       | 9,543                                                |       | $ | 0.01 |   | 9,543 |   | $ | (0.16 | ) |

 

The following optionswere not included in the computation of diluted income (loss) per share due totheir antidilutive effect.

|                                             | ** ** | **Three months ended March 31,** | ** ** |
|---------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                  | ** ** | **2007**                                             | ** ** | **2006** | ** ** |
|                                        |       |                                                 |       |   |   |
| Options to  purchase shares of common stock |       | 1,748                                                |       | 1,837 |   |
| Exercise prices                             |       | $3.60 - $13.75                                       |       | $3.25 - $13.75 |   |
| Expiration dates                            |       | July 2010 - October 2016                        |       | July 2006 - February  2016 |   |

 

**5.****              *Segments.***  The operating segments of the Company havebeen aggregated into two geographical reporting segments: Americas andInternational. Americas includes the United States, Central and South Americaand Canada. International includes Europe, Africa, the Middle East, Australiaand Asia. The chief operating decision maker is William H. Channell, Jr.,President and Chief Executive Officer of the Company. The Company’s four productlines are sold in both segments. The following tables summarize segmentinformation:

|                                        | ** ** | **Three months ended  March 31,** | ** ** |
|----------------------------------------|------------|--------------------------------------------------|------------|
| ** **                             | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Revenues from  external customers (1): |       |                                             |       |   |   |
| Americas                               |       | $                                                | 18,664     |   | $ | 13,485 |   |
| International                          |       | 14,189                                           |       | 11,667 |   |
|                                   |       | $                                                | 32,853     |   | $ | 25,152 |   |
| Income (loss)  from operations:        |       |                                             |       |   |   |
| Americas                               |       | $                                                | 466        |   | $ | (1,196 | ) |
| International                          |       | (390                                             | )          | (357 | ) |
|                                   |       | $                                                | 76         |   | $ | (1,553 | ) |
| Interest  expense, net:                |       |                                             |       |   |   |
| Americas                               |       | $                                                | 139        |   | $ | 86 |   |
| International                          |       | 33                                               |       | 16 |   |
|                                   |       | $                                                | 172        |   | $ | 102 |   |

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(1)          Note:  Revenues from Australia exceeded 10% of totalrevenues for the three months ended March 31, 2007 and 2006. Revenues fromAustralia totaled $12,801 and $10,561 for the three month periods in 2007 and2006, respectively.

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The Company has revenuesfrom external customers from the following product lines:

|                        | ** ** | **Three months ended  March 31,** | ** ** |
|------------------------|------------|--------------------------------------------------|------------|
| ** **             | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
|                   |       |                                             |       |   |   |
| Product lines:         |       |                                             |       |   |   |
| Enclosures             |       | $                                                | 13,513     |   | $ | 11,676 |   |
| Water related products |       | 15,542                                           |       | 11,296 |   |
| Connectivity           |       | 2,500                                            |       | 1,997 |   |
| Other                  |       | 1,298                                            |       | 183 |   |
|                   |       | $                                                | 32,853     |   | $ | 25,152 |   |

 

**6.****              *IncomeTaxes.***  The effective taxrate is (152.1%) for the three months ended March 31, 2007, compared tothe statutory rate of 34%. The effective rate is based on the expected rate forthe year. The income tax benefit recorded for the three months ended March 31,2007 is a result of the losses from the foreign operations of the Company. TheCompany has not recorded income tax expense on the income of the Company’sdomestic operations because of the Company’s federal net operating losscarryforward position and the full valuation allowance on the Company’sdeferred tax assets.

Under SFAS No. 109, *Accounting for Income Taxes,* the Company is required torecord a valuation allowance to reduce its net deferred tax asset to the amountthat management believes is more likely than not to be realized. Accountingguidance allows the Company to look to future earnings to support therealizability of net deferred assets. However, since the Company has hadcumulative losses in recent years in its domestic operations, the Company isunable to support the realizability of domestic deferred tax assets based onforecasted future earnings. As a result, management has concluded that a fullvaluation allowance against net domestic deferred tax assets is necessary.

The Company adopted theprovisions of FASB Interpretation No. 48, *Accountingfor Uncertainty in Income Taxes,*(“FIN 48”) an interpretation ofSFAS No. 109*,* on January 1, 2007. FIN 48prescribes a recognition threshold that a tax position is required to meetbefore being recognized in the financial statements and provides guidance onderecognition, measurement, classification, interest and penalties, accountingin interim periods, disclosure and transitions issues. The adoption of FIN 48resulted in no impact to the Company’s consolidated financial statements. As ofthe date of the adoption, the Company had no unrecognized tax benefits. Basedon the information currently available, no significant changes in unrecognizedtax benefits are expected in the next twelve months. As of the date ofadoption, the Company files income tax returns in the U.S. federal jurisdictionand various state and foreign jurisdictions. The 2003 through 2006 tax yearsremain subject to examination by federal tax authorities while most state andforeign jurisdictions remain subject to examination from 2002 through 2006.

The Company recognizesinterest and penalties related to uncertain tax positions in income taxexpense. As of the date of the adoption and March 31, 2007, the Companyhad no provisions for interest or penalties related to uncertain tax positions.

**7.****              *Commitmentsand Contingencies*.**  *Employment Agreements**—***In December, 2003 the Company entered into anemployment agreement with William H. Channell Jr., its president and chiefexecutive officer. The employment agreement is for an initial five-year termand is automatically renewed for additional five-year terms unless it isterminated by the Company or by Mr. Channell, Jr. in accordance with theagreement. Mr. Channell, Jr.’s salary (1) maybe increased from time to time at the discretion of the Board of Directors and(2) will be increased annually, beginning July 1, 2004, to reflect themost recently published annualized percentage increase in the consumer priceindex for the Los Angeles, California area. The agreement also provides thathis base salary will not be decreased below $718 (which was the base salary onthe original effective date of the agreement). In addition to basesalary, Mr. Channell, Jr. is entitled to participate in cash and other bonusprograms, including the 2003 Incentive Stock Plan, 401(k) plan and the 2004Incentive Bonus Plan. Pursuant to the agreement, the Company is also requiredto maintain certain insurance policies for Mr. Channell Jr.’s benefit and he isalso entitled to certain other benefits, including an automobile allowance,health insurance, and vacation and sick leave, in accordance with customarypractices for senior executive officers. In the event that (1) the Companyterminates Mr. Channell, Jr.’s employment without “cause,” as defined in theagreement, or (2) Mr. Channell, Jr. terminates his employment with theCompany for “good reason,” which is also specifically defined in the agreement,then Mr. Channell, Jr. would be entitled to a lump sum payment equal to threetimes his then current base salary, all health and life insurance benefits forthree years, and accelerated vesting of any stock options or restricted stockgranted to him. In addition, if the Company terminates Mr. Channell, Jr.’semployment for any reason other than cause, it is required to maintain Mr.Channell, Jr.’s disability policy, at its expense, until the date on which Mr.Channell, Jr. is 65 years old. The agreement also provides for certain benefitsto Mr. Channell, Jr. upon his death or disability.

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The Company was party toan employment agreement with William H. Channell, Sr., the Company’s formerchairman of the board of directors. The agreement was terminated on April 8,2007, the date on which Mr. Channell, Sr. passed away. In accordance with theagreement, the Company will continue to provide Mrs. Channell with medicalinsurance (to the same extent such insurance is provided to the Company’ssenior executive officers) during her lifetime.

***Taxes.***  The Federal income taxes of the Company forthe years ended December 31, 2003 and 2004 are currently under examinationby the Internal Revenue Service (“IRS”). As of March 31, 2007, the Companyand the IRS have resolved all outstanding issues except for the ordinaryworthless stock deduction. The amount of the benefit under dispute isapproximately $3,000. The net benefit recognized for this position isapproximately $300 with the remaining benefit being offset by the valuationallowance that has been established against the deferred tax asset. The Companydoes not anticipate a material adverse impact on its financial statements forthis item.

***Termination of Transportation and Logistics Servicesby Primary Freight Provider for Bushman Tanks Business.**** *As of October 12,2006, the primary freight provider for the Company’s Bushman Tanks waterstorage tank manufacturing and distribution business unilaterally withdrew itstransportation and logistics services. Accordingly, the agreement with thefreight provider has been terminated, and Bushman Tanks has reserved its rightsin relation to any damages it suffers as a result of the termination of suchservices. The freight provider claims that Bushman Tanks has breached theagreement. Although the Company does not believe Bushman Tanks has breached theterms of the agreement, the Company has accrued for amounts in dispute. If thedispute with the freight provider cannot be resolved, either Bushman Tanks orthe freight provider may pursue legal action. In addition, as Bushman Tankstransitions its transportation and logistics services, the timing of scheduleddeliveries may continue to be temporarily pushed out to subsequent periods. Thedisruption in transportation and logistics services due to the termination ofsuch services by the former freight provider, the success of the implementationof replacement transportation and logistics services, the legal cost associatedwith potential litigation related to the termination of such services, and anysettlements as a result of legal disputes related thereto, could negativelyaffect the Company’s working capital and results of operations.

***Legal Proceedings.***  The Company is from time to time involved inordinary routine litigation incidental to the conduct of its business. The Companyregularly reviews all pending litigation matters in which it is involved andestablishes reserves deemed appropriate for such litigation matters. Managementbelieves that no presently pending litigation matters are likely to have amaterial adverse effect on the Company’s financial statements or results ofoperations, taken as a whole.

**8.****              *Concentrations.***  Sales to Verizon of $3,657 in the firstquarter of 2007 represented 11.1% of the Company’s sales in the period. Salesto Verizon of $2,344 in the first quarter of 2006 represented 9.3% of theCompany’s sales in the period.

**9*.******              Guarantees.***  In 1997, the Company guaranteed debt of theChannell Family Trust of approximately $754 incurred in connection withconstruction of the facilities leased to the Company, and such guaranteed debtis collateralized by said facilities. The loan amount subject to the guaranteeis expected to decline before expiring in 2017. The Company has not recorded aliability for this guarantee. At March 31, 2007, the outstanding loanbalance subject to the guarantee totaled approximately $512. The ChannellFamily Trust does not qualify as a “variable interest entity” subject toconsolidation under FIN 46(R), *Consolidation of VariableInterest Entities,* since (a) there are sufficient assets held by theTrust that the lender could attach in the event of default on the loan, (b) thetotal equity investment at risk in the Trust is sufficient to permit financingwithout additional financial support from the Company and (c) William Channell,Jr., the administrator of the Channell Family Trust, has the direct ability tomake decisions about the Trust’s activities.

**10.****       *Goodwill andOther Intangible Assets.***  Thebalance of goodwill and intangible assets on the Company’s balance sheetfluctuates from period to period due to the application of foreign currencytranslation to United States dollars in calculating the balance of goodwill andother intangible assets of the Company’s foreign subsidiaries. SFAS No. 142,*Goodwill and Other Intangible Assets,*requires that goodwill and certain intangibles no longer be amortized, butinstead be reviewed at least annually for impairment.

The Company tests thevalue of goodwill for impairment annually at December 31 (prior to December 31,2006 goodwill was tested for impairment at June 30 for the Bushman Tanksreporting unit) or whenever events or changes

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in circumstance indicatethat a condition of impairment may exist. The goodwill for the Bushman Tanksreporting unit was reassessed for impairment on December 31, 2006. Thetest involves significant judgment in estimating projections of fair valuegenerated through future performance of the operating segment. In calculatingthe fair value, the Company relies on factors such as operating results,business plans, economic projections, and anticipated cash flows used in thediscounted cash flow analysis supporting the fair value determination. Inherentuncertainties exist in determining and applying such factors.

The changes in thecarrying amount of goodwill, the non-compete agreement and the nonamortizable trademarkintangible, are summarized below for the three months ended March 31,2007:

|                                         | ** ** | ** **   | ** ** | **Non-Compete** | ** ** | **Trademark**  | ** ** |
|-----------------------------------------|------------|--------------|------------|-----------------|------------|----------------|------------|
| ** **                              | ** ** | **Goodwill** | ** ** | **Agreement**   | ** ** | **Intangible** | ** ** |
|                                    |       |         |       |            |       |           |       |
| Balance at  December 31, 2006      |       | $            | 9,848      |            | $          | 1,387          |       | $ | 710 |   |
| Amortization of  non-compete agreement  |       | —       |       | (46             | )          | —         |       |
| Effect of foreign  currency translation |       | 227          |       | 33              |       | 17             |       |
| Balance at March 31, 2007          |       | $            | 10,075     |            | $          | 1,374          |       | $ | 727 |   |

 

As of March 31,2007, the Company has recorded goodwill of $683 in its Canadian reporting unit,which is part of the Americas segment and $9,392 of goodwill in its BushmanTanks reporting unit, which is part of the International segment.

The estimatedamortization expense based on current intangible balances and the March 31,2007 foreign currency exchange rates, is $188 per year for the next five fiscalyears, and $434 thereafter.

**11.****       *Loan and Security Agreements.***  The Company entered into a Loan and SecurityAgreement with an asset-based lender in the United States in September of 2002.This Agreement contains a term loan and a revolving credit facility. Themaximum amount available under the revolving credit facility is based on alevel of certain qualifying assets. The revolver under this Agreement has a$2,000 sub-limit for letters of credit. On February 12, 2007, the Loan andSecurity Agreement was amended, among other things: (i) to extend the termof the loans through June 30, 2007; (ii) to temporarily reduce therequired aggregate availability under the revolving credit facility from $1,500to $500 through and including April 30, 2007; (iii) to temporarilyreduce the reserve against borrowing availability to $300 until April 30,2007; (iv) to aggregate the domestic borrowing base, the United Kingdomborrowing base and the Canadian borrowing base for purposes of determining theborrowing availability for domestic loans under the revolving credit facility;and (v) increase the maximum amount of the United Kingdom borrowing basefrom $400 to $600. In April 2007 the agreement was further amendedto, among other things, eliminate the temporary reduction in the requiredaggregate availability and the reserve against borrowing availability. Theloans under the Loan and Security Agreement are secured by all of the assets ofthe Company. The Agreement contains various financial and operating covenantsthat impose limitations on the Company’s ability, among other things, to incuradditional indebtedness, merge or consolidate, sell assets except in theordinary course of business, make certain investments, enter into leases andpay dividends. The Agreement requires the Company to maintain a lockbox on therevolving credit facility. The Agreement also contains a subjectiveacceleration clause if there exists an event of default under the Agreement,which allows the asset-based lender to terminate the facility and require thatany outstanding obligation to be repaid. The balance outstanding at March 31,2007 under the revolving line of credit was $5,070 and under the term loan was$471. As of March 31, 2007, outstanding letters of credit totaled $1,186. Theremaining term loan balance was paid off in April 2007. The revolving lineof credit and the term loan have been classified as a current liability.

Channell Bushman Pty Ltdand controlled entities, collectively known as Channell Bushman Group, subsidiariesof the Company, entered into a five-year Loan and Security Agreement with acommercial bank in Australia in August 2004. Channell Bushman Group has fromtime to time entered into new Loan and Security Agreements with the bank, whichhave amended and superseded the prior Loan and Security Agreements. As of March 31,2007, the facilities under the then-current Loan and Security Agreementincluded the following: a term loan that expires in July 2009; a revolvingcredit facility with maximum borrowings of AUD $3,200 that expires in April 2007;a facility to fund “earn out” payments to the sellers of Bushman Tanks thatexpires in July 2008; a capital expenditure facility that expires in July 2008;and a master asset finance agreement facility that expires in April 2007. Thebank has informally extended the maturity date of the facilities expiring in April 2007to May 31, 2007. Channell Bushman Group expects to receive a furtherextension of those facilities through July 31, 2007 and is currently innegotiation with the bank with respect to the terms governing the extension ofthose facilities. Channell Bushman Group is also simultaneously seekingfinancing from other sources to refinance its current credit facilities.

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The Agreement containsvarious financial and operating covenants that impose limitations on ChannellBushman Group’s ability, among other things, to merge or consolidate, sellassets except in the ordinary course of business, and pay dividends. Inaddition, Channell Bushman Group is required to comply with certain financialcovenants relating to sales, gross profit and operating profit, and the bank,at its discretion, may terminate the Agreement if such covenants are not met. TheAgreement contractually obligates Channell Bushman Group to repay the revolvingcredit facility as Channell Bushman Group receives payments from its customers.The Agreement also provides that the bank will seek additional support fromChannell Commercial Corporation if there is further deterioration and containsa subjective acceleration clause should Channell Bushman Group come into adefault, which allows the bank to terminate the facility and require anyoutstanding obligations to be repaid. The balance outstanding under the Loanand Security Agreement at March 31, 2007 was $7,949. As of March 31,2007, Channell Bushman Group was not in compliance with the various financialcovenants. As Channell Bushman Group has not received a formal waiver for itsbreach of the aforementioned bank covenants, the Company has reclassified$3,640 of debt as short-term in the accompanying March 31, 2007 balancesheet.

The Company is engaged inongoing discussions with its primary lenders with respect to the facilitiesdescribed above that mature in 2007. Based on these discussions, the Companyexpects that it will be able to (i) amend its existing agreements or enterinto new agreements with those lenders, providing for an extension of thematurity of those loan facilities beyond current maturities or providing for newloan facilities to extend beyond current maturities or (ii) obtainadequate funding from other sources.

**Item 2.**                          Management’sDiscussion and Analysis of Financial Condition and Results of Operations.

**Introduction andOverview**

Channell Commercial Corporation (the “Company”) is adesigner and manufacturer of telecommunications equipment supplied tocommunications network operators worldwide and water storage tanks distributedin consumer markets throughout Australia. Major product lines include acomplete line of thermoplastic and metal fabricated enclosures, advanced coppertermination and connectorization products, fiber-optic cable management systemsand polyethylene water storage tanks.

During the last five years, demand for communicationsinfrastructure equipment has fluctuated dramatically. At various times in thepast there have been significant slowdowns in capital spending by both cableand telecom network operators due to several factors including, but not limitedto, service provider consolidation, delays in outside plant upgrade/rebuildprojects, and enhancing free cash flow to strengthen their balance sheets andpay down debt. These changes had a significant negative impact on overalldemand for infrastructure products, and at various times have directly reduceddemand for the Company’s products and increased price competition within itsindustry, which has led to reductions in the Company’s revenues and contributedto its recent operating losses.

Within the water storage portion of the Company’s business,demand continues to grow in Australia due to the country’s generally aridclimate and widespread water conservation efforts. Demand for the Company’swater storage products is also driven by regulatory factors at the local,state, and federal government levels. Recently, portions of Australia haveexperienced significant rainfall which, if continued, could negatively affectthe sales of the Company’s product.

Within both the communications infrastructure marketand water storage market, the historically high price of petroleum commoditieshas had a negative impact on the Company’s gross margins. The productsmanufactured in both of the markets in which the Company operates are primarilycomposed of polyethylene resins, which are primarily derived from commoditiessuch as oil and natural gas. The Company is limited in its ability to pass onincremental price increases to its customers. Continued commodity priceincreases would have a negative impact on the Company’s performance.

The Company continues to invest in the development ofnew communications infrastructure products and water storage tanks and believesthat in both markets it has leading product portfolios in terms of performanceand features.

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The Company measures its success by monitoring netsales and gross margins with a near-term goal of maintaining positive cashflows, while striving to achieve long-term operating profits. The Companybelieves that there continues to be long-term growth opportunities within boththe communications infrastructure equipment and water tank markets.

**Results ofOperations**

**Comparison of theThree Months Ended March 31, 2007 with the Three Months Ended March 31,2006**

***Net Sales.***  Net sales in the first quarter of 2007 were$32.9 million, an increase of $7.7 million or 30.6% compared to thefirst quarter of 2006. The increase is due to higher demand for the Company’sproducts in both of the Company’s operating segments.

Americas net sales were $18.7 million in thefirst quarter of 2007, an increase of $5.2 million or 38.5% over the sameperiod in 2006. The increase was due primarily to a higher volume of sales tothe Company’s core telecom and cable customers. Sales to large telecom andcable service providers fluctuate period to period based on the status of suchcustomers’ infrastructure projects and therefore are difficult to predict.

International net sales were $14.2 million in thefirst quarter of 2007, an increase of $2.5 million or 21.4% over the sameperiod in 2006. The higher sales volume was a result of increased demand forthe Company’s products due to favorable market conditions in Australia.

Sales to Verizon of $3.7 million in the firstquarter of 2007 represented 11.1% of Company sales in the period. Sales toVerizon of $2.3 million in the first quarter of 2006 represented 9.3% ofthe Company sales in the period. Sales to Verizon have historically fluctuatedfrom period to period. Accordingly, the Company cannot accurately predict whatsales to Verizon will be for the remainder of 2007.

***Gross Profit.***  Gross profit in the first quarter of 2007 was$10.0 million, an increase of $2.4 million or 31.6% compared to thefirst quarter of 2006. The increase was primarily due to higher gross profitdollars in the Americas segment. Gross profit dollars in the Americas segmentincreased $2.0 million from $3.8 million in the first quarter of 2006to $5.8 million in the first quarter of 2007. Gross profit of $4.2 millionin the first quarter of 2007 in the International segment was $0.4 millionhigher than in the 2006 period.

As a percentage of net sales, gross profit increasedfrom 30.2% in the first quarter of 2006 to 30.4% in the first quarter of 2007. Theincrease is primarily due to an increase in the gross profit percentage in theAmericas segment from 27.7% in the first quarter of 2006 to 30.9% in the firstquarter of 2007. This increase is primarily due to an increase in fixed costabsorption on the higher sales volume. Offsetting the increase in the grossprofit percentage in the Americas segment was a decrease in the gross profitpercentage in the International segment from 33.0% in the first quarter of 2006to 29.6% in the first quarter of 2007. This decrease was primarily due tohigher raw material costs related to increased commodity prices; due tocompetition, the Company was not able to pass on all of the increase tocustomers.

***Selling.***  Selling expenses were $5.2 million inthe first quarter of 2007, a decrease of $0.1 million or 1.9% from thefirst quarter of 2006.

As a percentage of net sales, selling expensesdecreased from 21.2% in the 2006 period to 16.0% in the 2007 period. Thedecrease is primarily due to an increased absorption of the fixed costs on thehigher sales volume along with increased efficiencies associated with themanagement and operation of the Company’s international shipping activities.

***General and Administrative.***  General and administrative expenses were $4.2 millionin the first quarter of 2007, an increase of $0.9 million or 27.3% fromthe first quarter of 2006. The increase is due primarily to higher compensationexpense due to increased head count and to higher incentive compensationexpense of $0.3 million. Also contributing to the increase wasapproximately $0.2 million in higher depreciation expense related toupgraded information systems.

As a percentage of net sales, general andadministrative expense decreased from 13.0% in the 2006 period to 12.9% in the2007 period.

***Research and Development.***  Research and development expenses were $0.4 millionin the first quarter of 2007, a decrease of $0.1 million or 20.0% from thefirst quarter of 2006. Spending on new product development programs wasslightly less than the previous year.

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As a percentage of net sales, research and developmentexpenses decreased from 2.1% in the first quarter of 2006 to 1.3% in the firstquarter of 2007 as a result of increased sales volume and a slight decrease inresearch and development costs.

***Income (Loss) from Operations.***  As a result of the items discussed above,income from operations was $0.1 million in the first quarter of 2007compared to a loss from operations of ($1.6) million in the first quarterof 2006. Operating margin as a percent of sales was 0.2% in the 2007 periodcompared to (6.2%) in the 2006 period.

***Interest Expense, Net.***  Interest expense, net of interest income, was$0.2 million in the first quarter of 2007 and $0.1 million in thefirst quarter of 2006.

***Income Taxes.***  There was an income tax benefit of $0.1 millionin the first quarter of 2007 compared to an income tax benefit of eighteenthousand dollars in the first quarter of 2006. The effective tax rate was(152.1%) in the first quarter of 2007 and (1.1%) for the same period in 2006. Sincethe Company has a full valuation allowance on the realization of the domesticnet deferred tax asset, no tax expense or benefit is currently being recordedon the results of operations in the U.S. The tax benefit recorded in both yearswas a result of the loss in the Company’s foreign operations.

**Liquidity and Capital Resources**

Net cash used in operating activities was ($0.4) millionfor the three months ended March 31, 2007, compared to ($1.7) millionin the same period in 2006. The cash used in operating activities in 2007 isprimarily due to an increase in accounts receivable and inventories of $7.4 million,resulting from the increase in operating activities in both segments of theCompany. The use of cash in operating activities described above was offset byan increase in accounts payable and accrued expenses of $5.7 million andby approximately $1.2 million in non-cash deductions, most of which isdepreciation and amortization.

Net cash used in investing activities was ($0.3) millionfor the quarters ended March 31, 2007 and 2006. The relatively small amountof cash used in the acquisition of the property and equipment resulted from theCompany’s efforts to reduce non-critical cash expenditures in both years.

Net cash used in financing activities was ($0.5) millionfor the three months ended March 31, 2007 compared to net cash provided byfinancing activities of $1.3 million in the same period of 2006. Thedecrease is due to the Company’s higher repayment of debt relative to theborrowings in the current year as compared to the borrowings under the Company’scredit facilities in the 2006 period.

Cash and cash equivalents on March 31, 2007 were$1.2 million, compared to $2.2 million at December 31, 2006.

Net accounts receivable increased to $16.7 millionat March 31, 2007 from $11.7 million at December 31, 2006 due tothe significantly higher volume of sales resulting from the increased demand inthe first quarter of 2007. In terms of days sales outstanding, accountsreceivable increased from 43 days at December 31, 2006 to 46 days at March 31,2007. The increase in days sales outstanding is due to a higher percentage ofsales occurring at the end of the first quarter in 2007 as compared to the endof 2006.

Inventories increased to $15.7 million at March 31,2007 from $13.0 million at December 31, 2006 due to the increase ininventories related to the higher volume of manufacturing activity to supportthe higher sales in the first quarter of 2007. Days inventory decreased from 63days at December 31, 2006 to 62 days at March 31, 2007.

Accounts payable increased from $10.9 million at December 31,2006 to $16.2 million at March 31, 2007 due to the significantlyhigher volume of activity in the first quarter of 2007. Days payables were 53days at December 31, 2006 and 64 days at March 31, 2007 due to theincrease in accounts payable at the end of the first quarter.

The Company is actively managing expenditures forcapital assets and working capital requirements to reduce cash needs for 2007and beyond. The Company focused expenditures for capital assets on purchases forprojects that will provide positive long-term cash flow. In addition, theCompany is pursuing market opportunities and designing products that willconsume idle or slow moving inventory to further reduce the need for currentand long-term cash flow. The Company believes that cash flow from operationscoupled with available borrowings under the credit facilities described in Note 11will be sufficient to fund the Company’s capital expenditure and workingcapital requirements for the next twelve months.

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The Company’s U.S. Loan and Security Agreement expireson June 30, 2007. The Company believes that it will be able to extend theagreement for the next twelve months.

As of March 31, 2007 the Company’s Australianoperations were not in compliance with various financial covenants under itsAustralian Loan and Security Agreement. A waiver of noncompliance has not beengranted by the lender. Accordingly, related borrowings are classified ascurrent liabilities as of March 31, 2007. Channell Bushman Group is currentlyin the process of renegotiating the Agreement with the Bank and expects to beable to enter into a new Agreement with the bank. Channell Bushman Group hasnot been precluded from drawing on its credit facilities during the negotiationperiod; however, in the event that Channell Bushman Group is not able tosuccessfully renegotiate an Agreement with the bank, then the bank may takefurther action against Channell Bushman Group as described in Note 11. Simultaneously,Channell Bushman Group is seeking financing from other sources to refinance itscurrent credit facilities.

The Company is engaged in ongoing discussions with itsprimary lenders with respect to the facilities described above that mature in2007. Based on these discussions, the Company expects that it will be able to(i) amend its existing agreements with those lenders, or enter into newagreements with those lenders, providing for an extension of the maturity ofthose loan facilities beyond current maturities or providing for new loan facilitiesto extend beyond current maturities or (ii) obtain adequate funding fromother sources.

**Off-Balance SheetArrangements**

The Company’s off-balance sheet arrangements consistof operating leases, employment contracts and purchase obligations. In addition,the Company guaranteed the debt of the Channell Family Trust of approximately$754,000 in 1997. The guaranteed debt was incurred in connection withconstruction of the facilities leased to the Company and is collateralized bysaid facilities. The loan amount subject to the unsecured guarantee is expectedto decline before expiring in 2017. The Company does not anticipate that itwill incur losses as a result of this guarantee and has not recorded aliability. If the Channell Family Trust were to default on the outstanding loanbalance, the Company might be required to repay the remaining principalbalance. The maximum potential amount the Company would be required to pay isequal to the outstanding principal and interest balance of the loan to theChannell Family Trust. At March 31, 2007, the outstanding loan balancesubject to the guarantee totaled $512.

**CriticalAccounting Policies**

The Company’s discussion and analysis of its financialcondition and results of operations are based upon its consolidated financialstatements, which have been prepared in accordance with accounting principlesgenerally accepted in the United States of America. The preparation of thesefinancial statements requires the Company to make estimates and judgments thataffect the reported amounts of assets, liabilities, revenues and expenses, andrelated disclosure of contingent assets and liabilities.

The Company believes that the estimates, assumptionsand judgments involved in the accounting policies described in the “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”section of its most recent Annual Report on Form 10-K have the greatestpotential impact on its financial statements, so it considers these to be itscritical accounting policies. Because of the uncertainty inherent in thesematters, actual results could differ from the estimates the Company uses inapplying the critical accounting policies. Certain of these critical accountingpolicies affect working capital account balances, including the policies forrevenue recognition, the reserve for uncollectible accounts receivable,inventory reserves, and income taxes. These policies require that the Companymake estimates in the preparation of its financial statements as of a givendate.

Within the context of these critical accountingpolicies, the Company is not currently aware of any reasonably likely events orcircumstances that would result in materially different amounts being reported.

**Forward-LookingStatements**

Certain statements contained herein are “forward-looking”statements within the meaning of the Private Securities Litigation Reform Actof 1995 (the “Act”), which provides certain “safe harbor” provisions forforward-looking statements. All forward-looking statements made herein are madepursuant to the Act. Forward-looking statements include statements which arepredictive in nature; which depend upon or refer to future events orconditions; or which include words such as “expects”, “anticipates”, “intends”,“plans”, “believes”, “estimates”, or variations or negatives

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thereof or by similar or comparable words or phrases. Inaddition, any statement concerning future financial performance, ongoingbusiness strategies or prospects, and possible future Company actions that maybe provided by management are also forward-looking statements as defined by theAct. Forward-looking statements are based on current expectations andprojections about future events and are subject to risks, uncertainties, andassumptions about the Company; and economic and market factors in the countriesin which the Company does business, among other things. These statements arenot guarantees of future performance, and the Company has no specificintentions to update these statements. Actual events and results may differmaterially from those expressed or forecasted in forward-looking statements dueto a number of factors including, among others: (1) the communicationsindustry is in a state of rapid technological change, which can render theCompany’s products obsolete or unmarketable; (2) any failure by theCompany to anticipate or respond to technological developments or changes inindustry standards or customer requirements, or any significant delays inproduct development or introduction, could have a material adverse effect onthe Company’s business, operating results and financial condition; (3) arelatively small number of telecommunications customers account for a largepercentage of the Company’s available market; (4) the Company expects thatsales to the telecommunications industry will continue to represent asubstantial portion of its total sales, and the demand for products within thisindustry depends primarily on capital spending by service providers; (5) theCompany’s cost of sales may be materially affected by increases in the marketprices of the raw materials used in the Company’s manufacturing processes; (6) theCompany’s water related sales could be materially affected by weatherconditions and government regulation; (7) the Company is subject to therisks of conducting business internationally; and (8) the industries inwhich the Company operates are highly competitive. Additional risks anduncertainties are outlined in the Company’s filings with the Securities andExchange Commission, including its most recent Annual Report on Form 10-K.

**Item 3.**                          Quantitativeand Qualitative Disclosures About Market Risk.

The risk inherent in the Company’s market sensitiveinstruments is the potential loss arising from adverse changes in interestrates and foreign currency exchange rates. All financial instruments held bythe Company described below are held for purposes other than trading.

**Interest RateSensitivity**

The Company and its subsidiaries have entered into twofinancing agreements. In September 2002, the Company entered into a three-yearLoan and Security Agreement with an asset based lender in the United Statesthat has been extended through June 30, 2007. The agreement contains aterm loan and a revolving line of credit. In August 2004, the Company’sAustralian subsidiaries entered into a Loan and Security Agreement with acommercial bank in Australia, which contains a term loan that expires in July 2009,a revolving line of credit that expires in May 2007, an “earn out”facility that expires in July 2008, a capital expenditure facility thatexpires in July 2008 and a master asset finance agreement facility thatexpires in May 2007. The loan and security agreements allow for theoutstanding balance to bear interest at a variable rate based on the lender’sbase rate. The credit facilities expose the Company to changes in short-terminterest rates since the interest rates on the credit facility are variable.

Based upon the amount of variable rate debtoutstanding at the end of the quarter, and holding the variable rate debtbalance constant, each one percentage point increase in interest ratesoccurring on the second day of a quarterly period would result in an increasein interest expense of approximately $0.03 million per quarter. This analysisdoes not consider the effects of economic activity on the Company’s sales andprofitability in such an environment.

**Exchange RateSensitivity**

The Company has assets and liabilities outside theUnited States that are subject to fluctuations in foreign currency exchangerates. Assets and liabilities outside the United States are primarily locatedin the United Kingdom, Australia, and Canada. The Company’s investment inforeign subsidiaries with a functional currency other than the U.S. dollar isgenerally considered long-term. Accordingly, the Company does not hedge theseinvestments. The Company also purchases a limited portion of its raw materialsfrom foreign countries. These purchases are generally denominated in U.S.dollars and are accordingly not subject to exchange rate fluctuations. TheCompany has minimal foreign currency transaction gains or losses. The Companyhas not engaged in forward purchases of foreign currency and other similarcontracts to reduce its economic exposure to changes in exchange rates becausethe associated risk is not considered significant.

15

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**Item 4.**                          Controlsand Procedures.

**Evaluation ofDisclosure Controls and Procedures**

The Company maintains disclosure controls andprocedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securitiesand Exchange Act of 1934 (the “Exchange Act”) that are designed to ensure thatinformation required to be disclosed in the Company’s Exchange Act reports isrecorded, processed, summarized, and reported within the time periods specifiedin the rules and forms of the Securities and Exchange Commission regulations,and that such information is accumulated and communicated to the Company’smanagement, including its Chief Executive Officer and Chief Financial Officer,as appropriate, to allow timely decisions regarding required disclosure. As of March 31,2007, the management of the Company carried out an assessment of the Company’sdisclosure controls and procedures and concluded that they were not effective,as described below, as of the end of the period covered by this report.

One of the Company’s subsidiaries, Bushman Tanks, waspreviously a closely-held, family run business with mostly manual controls inplace. During the process of assessing the status of the internal control infrastructure,the Company previously identified significant deficiencies in internal controlsthat rose to the level of “material weaknesses” in financial closing, revenueand purchasing cycles.

As a result of the weaknesses identified in management’sevaluation, the Company committed to:

·                  Implementthe Company’s Oracle information system in the Bushman Tanks subsidiary toimprove the processes in the revenue and purchasing cycles. The Company hasdeveloped a plan to complete the implementation in 2007.

·                  Design/implementand document control procedures adequate to support the Company’s day-to-dayaccounting and the financial closing and reporting process.

Therefore, remediation of the material weaknesses infinancial closing, revenue and purchasing cycles is not yet complete.

**Changes inInternal Control Over Financial Reporting**

There has been no change in the Company’s internalcontrol over financial reporting that occurred in the quarterly period coveredby this report that has materially affected, or is reasonably likely tomaterially affect the Company’s internal control over financial reporting.

**PART II - OTHERINFORMATION**

**Item 1.**                          LegalProceedings.

The Company is from time to time involved in ordinaryroutine litigation incidental to the conduct of its business. The Companyregularly reviews all pending litigation matters in which it is involved andestablishes reserves deemed appropriate for such litigation matters. Managementbelieves that no presently pending litigation matters are likely to have a materialadverse effect on the Company’s financial statements or results of operations,taken as a whole.

**Item 1A.**                 Risk Factors.

Not applicable.

**Item 2.**                          UnregisteredSales of Equity Securities and Use of Proceeds.

Not applicable.

**Item 3.**                          DefaultsUpon Senior Securities.

Not applicable.

**Item 4.**                          Submissionof Matters to a Vote of Security Holders.

Not applicable.

**Item 5.**                          OtherInformation.

Not applicable.

16

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**Item6.**                          Exhibits.
| Exhibit    | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                      |
|------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                 |
| 3.1        |       | Restated Certificate of Incorporation of the Company  (Exhibit 3.1)(1)                                                                                                                                                                                                                                                                                                                     |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 3.2        |       | Bylaws of the Company (Exhibit 3.2)(1)                                                                                                                                                                                                                                                                                                                                                     |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 4          |       | Form of Common Stock Certificate (Exhibit 4)(1)                                                                                                                                                                                                                                                                                                                                            |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.1       |       | Tax Agreement between the Company and the Existing  Stockholders (Exhibit 10.1)(1)                                                                                                                                                                                                                                                                                                         |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.2*      |       | Channell Commercial Corporation 1996 Incentive Stock  Plan (including forms of Stock Option Agreements and Restricted Stock  Agreement) (Exhibit 10.2)(1)                                                                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.3*      |       | Channell Commercial Corporation 2003 Incentive Stock  Plan (including forms of Stock Option Agreement and Restricted Stock  Agreement)(7)                                                                                                                                                                                                                                                       |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.4*      |       | Channell Commercial Corporation 2004 Incentive Bonus  Plan(9)                                                                                                                                                                                                                                                                                                                                   |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.5       |       | Loan and Security Agreement dated as of September 25,  2002 by and among the Company, Channell Commercial Canada Inc., Fleet Capital  Corporation, Fleet Capital Canada Corporation and, under the circumstances  set forth therein, Fleet National Bank, London U.K. Branch, trading as Fleet  Boston Financial, and the U.K. Borrowers (as defined therein, if any) (Exhibit 99)(6) |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.6       |       | Loan and Security Agreement dated October 24,  2003 by and between Channell Pty Ltd and National Australia Bank Ltd (Exhibit 10.3.1)(11)                                                                                                                                                                                                                                              |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.7       |       | Loan and Security Agreement dated August 2,  2004 by and between Channell Bushman Pty Ltd and National Australia Bank Ltd  (Exhibit 10.3.2)(11)                                                                                                                                                                                                                                       |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.8       |       | Loan and Security Agreement dated August 2,  2004 by and between Channell Pty Ltd and National Australia Bank Ltd (Exhibit 10.3.3)(11)                                                                                                                                                                                                                                                |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.9       |       | Investment and Shareholders Agreement dated August 2,  2004 by and among Channell Bushman Pty Ltd and Australia and New Zealand  Banking Group Ltd.(Exhibit 10.3.4)(11)                                                                                                                                                                                                               |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.10*     |       | Employment Agreement dated July 8, 1996 between the  Company and William H. Channell, Sr. (Exhibit 10.8)(1)                                                                                                                                                                                                                                                                           |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.11*     |       | Channell Commercial Corporation 1996  Performance-Based Annual Incentive Compensation Plan (Exhibit 10.10)(1)                                                                                                                                                                                                                                                                              |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.12      |       | Lease dated December 22, 1989 between the Company  and the Channell Family Trust (as successor in interest to William H.  Channell, Sr.), as amended (Exhibit 10.11)(1)                                                                                                                                                                                                               |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.13      |       | Lease dated May 29, 1996 between the Company and the  Channell Family Trust (Exhibit 10.12)(1)                                                                                                                                                                                                                                                                                             |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.14      |       | Lease dated October 26, 2000 between the  Company and Belston Developments Inc. (Exhibit 10.15)(4)                                                                                                                                                                                                                                                                                    |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.15      |       | Third Amendment to Lease dated December 22, 1989  between the Company and the Channell Family Trust (as successor in interest  to William H. Channell, Sr.), effective as of June 1, 2005 (Exhibit 99.1)(12)                                                                                                                                                                     |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.16      |       | Form of Indemnity Agreement (Exhibit 10.17)(1)                                                                                                                                                                                                                                                                                                                                             |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.17      |       | Form of Agreement Regarding Intellectual Property (Exhibit 10.18)(1)                                                                                                                                                                                                                                                                                                                       |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.18      |       | 401(k) Plan of the Company (Exhibit 10.19)(3)                                                                                                                                                                                                                                                                                                                                              |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.19      |       | A.C. Egerton (Holdings) PLC Share Purchase Agreement  (Exhibit 2)(2)                                                                                                                                                                                                                                                                                                                       |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.20      |       | Lease dated June 27, 2002 between the Company  and Ynez Street, Ltd. (Exhibit 10.29)(5)                                                                                                                                                                                                                                                                                               |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.21*     |       | Amendment to Employment Agreement dated December 9,  2003 between the Company and William H. Channell, Sr. (Exhibit 10.19)(8)                                                                                                                                                                                                                                                         |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.22*     |       | Employment Agreement dated December 9, 2003 between  the Company and William H. Channell, Jr. (Exhibit 10.20)(8)                                                                                                                                                                                                                                                                      |

 

17

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| 10.23  |   | Share and Asset Purchase Agreement dated as of July  14, 2004 by and among Australia’s Bushman Tanks Pty Ltd, Douglas Robin Young,  Richard James Young, Lokan Nominees Pty Ltd and Lenbridge Grange Pty Ltd,  Belsiasun Pty Ltd and Elcarva Pty Ltd, the holders of all the outstanding  shares of Bushmans Group Pty Ltd, Hold-On Industries Australia Pty Ltd,  Australian Bushman Tanks Pty Ltd, and Polyrib Tanks Pty Ltd, on the one hand,  and Channell Commercial Corporation and Channell Bushman Pty Limited, on the  other hand (Exhibit 99.2)(10) |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.24* |   | Employment Letter dated June 27, 2005 between  the Company and Jerry Collazo (Exhibit 99.2)(13)                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.25* |   | Long-Term Incentive Plan for William H.  Channell, Jr. (Exhibit 10.1)(14)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.26  |   | Waiver and Third Amendment to Loan and Security  Agreement dated as of November 18, 2005 by and among the Company,  Channell Commercial Canada Inc., Channell Limited, Channell Commercial Europe  Limited, Bank of America, N.A., BABC Global Finance Inc., Bank of America,  N.A., and the lenders party to the Loan and Security Agreement dated as of September 25,  2002 (as amended) (Exhibit 10.25)(15)                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.27  |   | Assignment and Assumption Agreement dated November 18,  2005 by and between Banc of America Leasing and Capital, LLC and Bank of  America, N.A. (relating to U.S. Loan and Security Agreement) (Exhibit 10.26)(15)                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.28  |   | Waiver and Fourth Amendment to Loan and Security  Agreement dated as of February 28, 2006 by and among Channell Commercial  Corporation, Bank of America, N.A., BABC Global Finance Inc., Bank of  America, N.A. and the lenders party to the Loan and Security Agreement dated  as of September 25, 2002 (as amended) (Exhibit 10.1)(18)                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.29  |   | Loan and Security Agreement dated as of December 1,  2005, by and among Channell Bushman Pty Ltd, Bushmans Group Pty Ltd, Channell  Pty Ltd, certain other subsidiaries of the Company and National Australia  Bank Ltd (Exhibit 10.30)(19)                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.30  |   | Loan and Security Agreement dated April 26,  2006 and effective May 10, 2006, by and among Channell Bushman Pty Ltd,  Bushmans Group Pty Ltd, certain other subsidiaries of the Company, and  National Australia Bank Ltd (Exhibit 10.31)(19)                                                                                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.31  |   | Lease dated July 13, 2006 between Channell Pty Ltd  and Ing Management Ltd (Exhibit 10.32)(20)                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.32* |   | Employment Letter dated August 31, 2006 between  the Company and Patrick E. McCready (Exhibit 10.1)(21)                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.33  |   | Loan and Security Agreement dated August 11,  2006 and effective August 25, 2006, by and among Channell Bushman Pty  Ltd, Bushmans Group Pty Ltd, certain other subsidiaries of the Company, and  National Australia Bank Ltd (Exhibit 10.1)(21)                                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.34  |   | Loan and Security Agreement dated November 8,  2006 and effective November 15, 2006, by and among Channell Bushman Pty  Ltd, Bushmans Group Pty Ltd, certain other subsidiaries of the Company, and  National Australia Bank Ltd (Exhibit 10.1)(23)                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.35  |   | Loan and Security Agreement dated February 2,  2007 and effective February 7, 2007 by and among Channell Bushman Pty  Ltd, Bushmans Group Pty Ltd, certain other subsidiaries of the Company, and  National Australia Bank Ltd (Exhibit 10.1) (24)                                                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.36  |   | Waiver and Fifth Amendment to Loan and Security  Agreement dated as of February 12, 2007 by and among Channell Commercial  Corporation and the other borrowers thereunder, Bank of America, N.A., BABC  Global Finance Inc., Bank of America, N.A. and the lenders party to the Loan  and Security Agreement dated as of September 25, 2002 (as amended) (Exhibit 10.1)(25)                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.37  |   | Sixth Amendment to Loan and Security Agreement dated  as of April 2, 2007 by and among Channell Commercial Corporation and the  other borrowers thereunder, Bank of America, N.A., BABC Global Finance Inc.,  Bank of America, N.A. and the lenders party to the Loan and Security  Agreement dated as of September 25, 2002 (as amended) (26)                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 14     |   | Channell Commercial Corporation Code of Business  Conduct and Ethics (Exhibit 14)(8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 21     |   | Subsidiaries of the Company (Exhibit 21)(16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 31.1   |   | Certification of Chief Executive Officer pursuant to  Rule 13a-14(a)/Rule 15d-14(a) under the Securities and Exchange Act of 1934(26)                                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

18

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| 31.2   |   | Certification of Chief Financial Officer pursuant to  Rule 13a-14(a)/Rule 15d-14(a) under the Securities and Exchange Act of  1934(26)                                                          |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                            |
| 32.1   |   | Certification pursuant to 18 U.S.C. Section 1350 as  adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 by William H.  Channell, Jr., CEO and Patrick E. McCready, CFO(26) |

----

*                    Managementcontract or compensatory plan or arrangement.

(1)             Incorporatedby reference to the indicated exhibits filed in connection with the Company’sRegistration Statement on Form S-1 (File No. 333-03621).

(2)             Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 8-K on May 18, 1998.

(3)             Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 10-K on March 31, 1999.

(4)             Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 10-K on April 2, 2001.

(5)             Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 10-Q on August 12, 2002.

(6)             Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 8-K on October 1, 2002.

(7)             Incorporatedby reference to Appendix B filed in connection with the Company’s DefinitiveProxy Statement on March 26, 2003.

(8)             Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 10-K on March 5, 2004.

(9)             Incorporatedby reference to Appendix B filed in connection with the Company’s DefinitiveProxy Statement on April 16, 2004.

(10)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 8-K on August 6, 2004.

(11)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 10-Q on November 15, 2004.

(12)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 8-K on June 15, 2005.

(13)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 8-K on June 28, 2005.

(14)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 8-K on September 9, 2005.

(15)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 10-Q on November 21, 2005.

(16)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 10-K/A on November 21, 2005.

(17)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 8-K on March 6, 2006.

(18)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 8-K on March 29, 2006.

(19           Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 10-Q on May 15, 2006.

(20)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 10-Q on August 17, 2006.

(21)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 8-K on September 8, 2006.

(22)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 8-K on September 21, 2006.

(23)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 8-K on November 17, 2006.

(24)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 8-K on February 8, 2007.

(25)       Incorporatedby reference to the indicated exhibits filed in connection with the Company’sForm 8-K on February 15, 2007.

(26)       Filedherewith.

19

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

Dated:  May 15, 2007

 
|        |   | CHANNELL COMMERCIAL CORPORATION                                              |
|--------|--------|------------------------------------------------------------------------------|
|   |   | (Registrant)                                                                 |
|   |   |                                                                         |
|   |   |                                                                         |
|   |   |                                                                         |
|   |   |                                                                         |
|   | By     | / s/ Patrick E. McCready                                                     |   |
|   |   | Patrick E. McCready                                                          |
|   |   | Chief Financial Officer                                                      |
|   |   | (Duly authorized officer and principal financial  officer of the Registrant) |

 

 

20

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