**UNITEDSTATES**

###### **SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

| **x**                            |       | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE   SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                               |
|----------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                       | ** ** | ** **                                                                                                                                                                                                                                                   |
| ** **                       | ** ** | **For the quarterly period ended June 30, 2007**                                                                                                                                                                                                             |
| ** **                       | ** ** | ** **                                                                                                                                                                                                                                                   |
| ** **                       | ** ** | **OR**                                                                                                                                                                                                                                                       |
| ** **                       |
| **o**                            |       | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                               |
| ** **                       | ** ** | ** **                                                                                                                                                                                                                                                   |
| ** **                       |       | **For the transition period from                  to                  ** |
| ** **                       |       | ** **                                                                                                                                                                                                                                                   |
| **Commission  File No. 0-28582** |
| ** **                       |

**CHANNELLCOMMERCIAL CORPORATION**

(Exact name of Registrant as specified in its charter)

**DELAWARE**

(State or other jurisdiction of incorporation ororganization)

**95-2453261**

(I.R.S. Employer Identification No.)

**26040Ynez Road, Temecula, California**

(Address of principal executive offices)

**92591**

(Zip Code)

**(951)719-2600**

(Registrant’s telephone number, including area code)

Indicateby check mark whether the registrant: (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

|  | Yes****x     No  o |   |   |
|--|---------------------------------------------|--------|--------|

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” inRule 12b-2 of the Exchange Act. (Check one): 

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

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

|  | Yes****o     No  x |   |   |
|--|---------------------------------------------|--------|--------|

 

9,544,134 sharesof common stock of the registrant were outstanding at August 9, 2007.

 

----

**PART 1 - FINANCIAL INFORMATION**

**Item 1.****        Financial Statements.**

CHANNELL COMMERCIALCORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATEDSTATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME(LOSS)

(UNAUDITED)

*(amountsin thousands, except per share data)*
| ** **                                     | ** ** | **Six months ended June 30,** | ** ** | **Three months ended June 30,** | ** ** |
|------------------------------------------------|------------|---------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                     | ** ** | **2007**                                          | ** ** | **2006**                                            | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| Net sales                                      |       | $                                                 | 69,575     |                                                | $          | 55,100 |   | $ | 36,722 |   | $ | 29,948 |   |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| Cost of goods sold                             |       | 47,674                                            |       | 37,175                                              |       | 24,795 |   | 19,612 |   |
| Gross  profit                                  |       | 21,901                                            |       | 17,925                                              |       | 11,927 |   | 10,336 |   |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| Operating expenses                             |       |                                              |       |                                                |       |   |   |   |   |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| Selling                                        |       | 11,470                                            |       | 11,074                                              |       | 6,224 |   | 5,735 |   |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| General  and administrative                    |       | 8,074                                             |       | 6,289                                               |       | 3,851 |   | 3,022 |   |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| Research  and development                      |       | 915                                               |       | 1,087                                               |       | 486 |   | 551 |   |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| Impairment  of goodwill                        |       | —                                            |       | 4,829                                               |       | — |   | 4,829 |   |
|                                           |       | 20,459                                            |       | 23,279                                              |       | 10,561 |   | 14,137 |   |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| Income  (loss) from operations                 |       | 1,442                                             |       | (5,354                                              | )          | 1,366 |   | (3,801 | ) |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| Interest  income                               |       | 21                                                |       | 33                                                  |       | 8 |   | 15 |   |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| Interest  expense                              |       | (483                                              | )          | (319                                                | )          | (298 | ) | (199 | ) |
| Income  (loss) before income tax expense       |       | 980                                               |       | (5,640                                              | )          | 1,076 |   | (3,985 | ) |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| Income tax expense  (benefit)                  |       | 20                                                |       | (278                                                | )          | 166 |   | (260 | ) |
| Net  income (loss) before minority interest    |       | 960                                               |       | (5,362                                              | )          | 910 |   | (3,725 | ) |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| Minority  interest in loss of subsidiaries     |       | (86                                               | )          | (1,420                                              | )          | (21 | ) | (1,339 | ) |
| Net  income (loss)                             |       | $                                                 | 1,046      |                                                | $          | (3,942 | ) | $ | 931 |   | $ | (2,386 | ) |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| Net  income (loss) basic and diluted           |       | $                                                 | 0.11       |                                                | $          | (0.41 | ) | $ | 0.10 |   | $ | (0.25 | ) |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| Net income (loss)                              |       | $                                                 | 1,046      |                                                | $          | (3,942 | ) | $ | 931 |   | $ | (2,386 | ) |
| Other comprehensive  income (loss), net of tax |       |                                              |       |                                                |       |   |   |   |   |
| Foreign  currency translation adjustment       |       | 819                                               |       | (142                                                | )          | 422 |   | 200 |   |
|                                           |       |                                              |       |                                                |       |   |   |   |   |
| Comprehensive income  (loss)                   |       | $                                                 | 1,865      |                                                | $          | (4,084 | ) | $ | 1,353 |   | $ | (2,186 | ) |

 

The accompanying notes are an integral part of thesefinancial statements.

2

----

CHANNELL COMMERCIALCORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATEDBALANCE SHEETS

(UNAUDITED)

*(amountsin thousands, except per share data)*
| ** **                                                                                                                                                                                             | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                             | ** ** | **2007**          | ** ** | **2006**              | ** ** |
| ASSETS                                                                                                                                                                                                 |       |              |       |                  |       |
| Current assets                                                                                                                                                                                         |       |              |       |                  |       |
| Cash and cash equivalents                                                                                                                                                                              |       | $                 | 601        |                  | $          | 2,235 |   |
| Accounts receivable, net of allowance for doubful  accounts of $178 at June 30, 2007 and $220 at December 31, 2006                                                                                     |       | 17,570            |       | 11,673                |       |
| Inventories, net                                                                                                                                                                                       |       | 18,157            |       | 13,018                |       |
| Prepaid expenses and other current assets                                                                                                                                                              |       | 816               |       | 931                   |       |
| Income taxes receivable                                                                                                                                                                                |       | 307               |       | 881                   |       |
| Deferred income taxes, net                                                                                                                                                                             |       | 774               |       | 719                   |       |
| Total current assets                                                                                                                                                                                   |       | 38,225            |       | 29,457                |       |
|                                                                                                                                                                                                   |       |              |       |                  |       |
| Property and equipment, net                                                                                                                                                                            |       | 19,143            |       | 18,799                |       |
| Deferred income taxes, net                                                                                                                                                                             |       | 1,094             |       | 1,017                 |       |
| Goodwill                                                                                                                                                                                               |       | 10,613            |       | 9,848                 |       |
| Intangible assets, net                                                                                                                                                                                 |       | 2,159             |       | 2,097                 |       |
| Other assets                                                                                                                                                                                           |       | 730               |       | 660                   |       |
|                                                                                                                                                                                                   |       | $                 | 71,964     |                  | $          | 61,878 |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                                                                                             |       |              |       |                  |       |
| Current liabilities                                                                                                                                                                                    |       |              |       |                  |       |
| Accounts payable                                                                                                                                                                                       |       | $                 | 14,827     |                  | $          | 10,902 |   |
| Short-term debt (including current maturities of  long-term debt)                                                                                                                                      |       | 16,249            |       | 13,723                |       |
| Current maturities of capital lease obligations                                                                                                                                                        |       | 295               |       | 138                   |       |
| Accrued expenses                                                                                                                                                                                       |       | 5,652             |       | 4,371                 |       |
| Total current  liabilities                                                                                                                                                                             |       | 37,023            |       | 29,134                |       |
|                                                                                                                                                                                                   |       |              |       |                  |       |
| Capital lease obligations, less current maturities                                                                                                                                                     |       | 683               |       | 384                   |       |
| Other long-term liabilities                                                                                                                                                                            |       | 1,267             |       | 1,332                 |       |
| Commitments and contingencies (Note 7)                                                                                                                                                                 |       | —            |       | —                |       |
| Minority interest                                                                                                                                                                                      |       | 855               |       | 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 June 30, 2007 and December 31,  2006; outstanding - 9,543 shares at June 30, 2007 and December 31, 2006 |       | 98                |       | 98                    |       |
| Additional paid-in capital                                                                                                                                                                             |       | 31,214            |       | 31,093                |       |
| Treasury stock – 244 shares in 2007 and 2006                                                                                                                                                      |       | (1,871            | )          | (1,871                | )          |
| Retained earnings (accumulated deficit)                                                                                                                                                                |       | 886               |       | (160                  | )          |
| Accumulated other comprehensive income - Foreign  currency translation                                                                                                                                 |       | 1,809             |       | 990                   |       |
| Total stockholders’  equity                                                                                                                                                                       |       | 32,136            |       | 30,150                |       |
|                                                                                                                                                                                                   |       | $                 | 71,964     |                  | $          | 61,878 |   |

 

The accompanying notes are an integral part of thesefinancial statements.

3

----

CHANNELLCOMMERCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS

(UNAUDITED)

*(amountsin thousands)*
| ** **                                                                            | ** ** | **Six months ended June 30,** | ** ** |
|---------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                            | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
|                                                                                  |       |                                              |       |   |   |
| Cash flows from operating activities:                                                 |       |                                              |       |   |   |
| Net income (loss)                                                                     |       | $                                                 | 1,046      |   | $ | (3,942 | ) |
| Adjustments to reconcile net income (loss) to net  cash used in operating activities: |       |                                              |       |   |   |
| Depreciation and amortization                                                         |       | 2,552                                             |       | 2,354 |   |
| Stock-based compensation                                                              |       | 121                                               |       | 186 |   |
| Loss (gain) on disposal of fixed assets                                               |       | 31                                                |       | (2 | ) |
| Amortization of deferred gain on sale leaseback                                       |       | (30                                               | )          | (30 | ) |
| Impairment of goodwill                                                                |       | —                                            |       | 4,829 |   |
| Provision for doubtful accounts                                                       |       | 29                                                |       | 1 |   |
| Provision for inventory obsolescence                                                  |       | 179                                               |       | — |   |
| Minority interest in loss of subsidiaries                                             |       | (86                                               | )          | (1,420 | ) |
| Changes in operating assets and liabilities:                                          |       |                                              |       |   |   |
| Accounts receivable                                                                   |       | (5,303                                            | )          | (4,488 | ) |
| Inventories                                                                           |       | (4,816                                            | )          | (1,020 | ) |
| Prepaid expenses and other current assets                                             |       | 135                                               |       | 8 |   |
| Income taxes receivable                                                               |       | 592                                               |       | (900 | ) |
| Other assets                                                                          |       | (65                                               | )          | 20 |   |
| Accounts payable                                                                      |       | 3,086                                             |       | 3,475 |   |
| Accrued expenses and other liabilities                                                |       | 1,025                                             |       | (209 | ) |
| Net cash used in operating activities                                                 |       | (1,504                                            | )          | (1,138 | ) |
|                                                                                  |       |                                              |       |   |   |
| Cash flows from investing activities:                                                 |       |                                              |       |   |   |
| Purchase of property and equipment                                                    |       | (1,760                                            | )          | (866 | ) |
| Proceeds from the sales of property and equipment                                     |       | 83                                                |       | 42 |   |
| Net cash used in investing actitivities                                               |       | (1,677                                            | )          | (824 | ) |
|                                                                                  |       |                                              |       |   |   |
| Cash flows from financing activities:                                                 |       |                                              |       |   |   |
| Repayment of debt                                                                     |       | (1,664                                            | )          | (1,066 | ) |
| Borrowings from credit facilities                                                     |       | 3,640                                             |       | 3,519 |   |
| Repayment of obligations under capital lease                                          |       | (34                                               | )          | (69 | ) |
| Net cash provided by financing actitivities                                           |       | 1,942                                             |       | 2,384 |   |
| Effect of exchange rates on cash                                                      |       | (395                                              | )          | (343 | ) |
| Increase (decrease) in cash and cash equivalents                                      |       | (1,634                                            | )          | 79 |   |
| Cash and cash equivalents, beginning of period                                        |       | 2,235                                             |       | 3,148 |   |
| Cash and cash equivalents, end of period                                              |       | $                                                 | 601        |   | $ | 3,227 |   |
| Cash paid during the period for:                                                      |       |                                              |       |   |   |
| Interest                                                                              |       | $                                                 | 521        |   | $ | 364 |   |
| Income taxes                                                                          |       | $                                                 | 13         |   | $ | 235 |   |
| Non-cash investing activities:                                                        |       |                                              |       |   |   |
| Purchases of property and equipment which are  included in:                           |       |                                              |       |   |   |
| Obligations under capital leases                                                      |       | $                                                 | 434        |   | $ | — |   |
| Accounts payable                                                                      |       | $                                                 | 199        |   | $ | 46 |   |

 

The accompanying notes are an integral part of thesefinancial statements.

4

----

CHANNELLCOMMERCIAL CORPORATION AND SUSBSIDIARIES

CONDENSED CONSOLIDATEDSTATEMENT OF STOCKHOLDERS’ EQUITY

Six months ended June 30,2007

(UNAUDITED)

*(amountsin thousands)*
| ** **                    | ** ** | **Common stock** | ** ** | **Additional  paid-in  capital** | ** ** | **Treasury stock** | ** ** | **Retained  earnings  (accumulated  deficit)** | ** ** | **Accumulated  other  comprehensive  income** | ** ** | **Total  stockholders’  equity** | ** ** |
|-------------------------------|------------|-----------------------|------------|----------------------------------|------------|-------------------------|------------|------------------------------------------------|------------|-----------------------------------------------|------------|---------------------------------------|------------|
| ** **                    | ** ** | **Shares**            | ** ** | **Amount**                       | ** ** | ** **              | **Shares** | ** **                                     | **Amount** | ** **                                    | ** ** | ** **                            | ** ** |
|                          |       |                  |       |                             |       |                    |       |                                           |       |                                          |       |                                  |       |   |   |   |   |
| Balance, January  1, 2007     |       | 9,787                 |       | $                                | 98         |                    | $          | 31,093                                         |       | 244                                           |       | $                                     | (1,871     | ) | $ | (160 | ) | $ | 990 |   | $ | 30,150 |   |
|                          |       |                  |       |                             |       |                    |       |                                           |       |                                          |       |                                  |       |   |   |   |   |
| Stock-based  compensation     |       | —                |       | —                           |       | 121                     |       | —                                         |       | —                                        |       | —                                |       | — |   | 121 |   |
|                          |       |                  |       |                             |       |                    |       |                                           |       |                                          |       |                                  |       |   |   |   |   |
| Foreign currency  translation |       | —                |       | —                           |       | —                  |       | —                                         |       | —                                        |       | —                                |       | 819 |   | 819 |   |
|                          |       |                  |       |                             |       |                    |       |                                           |       |                                          |       |                                  |       |   |   |   |   |
| Net income for  the period    |       | —                |       | —                           |       | —                  |       | —                                         |       | —                                        |       | 1,046                                 |       | — |   | 1,046 |   |
|                          |       |                  |       |                             |       |                    |       |                                           |       |                                          |       |                                  |       |   |   |   |   |
| Balance, June 30, 2007        |       | 9,787                 |       | $                                | 98         |                    | $          | 31,214                                         |       | 244                                           |       | $                                     | (1,871     | ) | $ | 886 |   | $ | 1,809 |   | $ | 32,136 |   |

 

The accompanying notes are an integral part of thesefinancial statements.

5

----

CHANNELLCOMMERCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2007 and2006

*(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 June 30, 2007 and the results ofits operations for the three months and six months ended June 30, 2007 and 2006and cash flows for the six months ended June 30, 2007 and 2006.  The results of operations for the threemonths and six months ended June 30, 2007 and cash flows for the six monthsended June 30, 2007 are not necessarily indicative of the results to beexpected for any other interim 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 December31, 2006, included in the Company’s Annual Report on Form 10-K for the yearended December 31, 2006.

***Recent Accounting Pronouncements*. **In September 2006, the FinancialAccounting Standards Board (“FASB”) issued Statement of Financial AccountingStandards (“SFAS”) No. 157, *Fair Value Measurements*,which defines fair value, establishes a framework for measuring fair value ingenerally accepted accounting principles and expands disclosures about fairvalue measurements.  This Statement willbe effective for financial statements issued for fiscal years beginning afterNovember 15, 2007, and interim periods within those fiscal years.  The Company is currently evaluating therequirements of this new standard and has not concluded its analysis on theimpact to the Company’s consolidated financial position or results ofoperations.

In February 2007, the FASB issued SFAS No. 159,*The Fair Value Option for Financial Assets andFinancial Liabilities — including an amendment of SFAS No. 115,*which allows measurement at fair value of eligible financial assets andliabilities that are not otherwise measured at fair value. If the fair valueoption for an eligible item is elected, unrealized gains and losses for thatitem shall be reported in current earnings at each subsequent reporting date.SFAS No. 159 also establishes presentation and disclosure requirements designedto draw comparison between the different measurement attributes the companyelects for similar types of assets and liabilities. This statement is effectivefor fiscal years beginning after November 15, 2007. The Company is in theprocess of evaluating the application of the fair value option and its effecton the Company’s results of operations or financial condition.

***Reclassifications. ***In 2007, the Companyreclassified the long-term portion of accrued workers compensation from accruedexpenses to other long-term liabilities, including the December 31, 2006 amountof $818 for comparative purposes.  TheCompany had previously classified such accrued expenses under currentliabilities.  The Company’s currentliabilities, and any ratio calculated therefrom, as used throughout thisQuarterly Report for the period ended June 30, 2007 reflect thereclassification described above.

**2.****              *Stock-BasedCompensation. ***EffectiveJanuary 1, 2006 the Company adopted SFAS No. 123R, *Share-BasedPayment*, which requires that compensation expense be recognized overthe requisite service period based on the fair value of the award at the dateof grant.  At June 30, 2007, the Companyhad total unvested stock-based compensation expense of $238.  The unvested stock options will vest atvarious intervals over the next 3 years. Total stock-based compensation expense, recognized in general andadministrative expenses, was $121 and $186 during the first six months of 2007and 2006, respectively.  During the sixmonths ended June 30, 2007, the Company granted options under its 2003 IncentiveStock Plan for the purchase of 14 shares of common stock at a weighted averageexercise price of $4.07 per share and a weighted average fair value of $3.12per share.

**3.*****              Inventories.**** *Inventories stated atthe lower of cost (first-in, first-out method) or market are summarized asfollows:
|                                  | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|----------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
|                             |       |                        |       |                            |       |
| Raw Materials                    |       | $                           | 8,993      |                            | $          | 6,043 |   |
| Work-in-Process                  |       | 4,909                       |       | 3,318                           |       |
| Finished Goods                   |       | 5,618                       |       | 4,891                           |       |
|                             |       | 19,520                      |       | 14,252                          |       |
| Less inventory valuation reserve |       | (1,363                      | )          | (1,234                          | )          |
|                             |       | $                           | 18,157     |                            | $          | 13,018 |   |

 

6

----

**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 and six months ended June 30,2007 and 2006*. *Dilutedincome (loss) per share reflects the potential dilution that could occur ifdilutive options to acquire common stock were exercised, the proceeds of whichare then presumed to have been used to repurchase outstanding stock using thetreasury stock method.  For the threemonths and six months ended June 30, 2006, there is no calculation of dilutionsince the Company incurred a loss for the period, thereby resulting in the optionsbecoming antidilutive.  The following isa reconciliation of the number of shares (denominator) used in the basic anddiluted income (loss) per share computations for three months and six monthsended June 30, 2007 and 2006:
|                                  | ** ** | **Six months ended June 30,** | ** ** |
|----------------------------------|------------|---------------------------------------------------|------------|
| ** **                       | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| ** **                       | ** ** | **Shares**                                        | ** ** | **Per Share  Amount** | ** ** | **Shares** | ** ** | **Per Share  Amount** | ** ** |
| Basic income (loss) per share    |       | 9,543                                             |       | $ | 0.11 |   | 9,543 |   | $ | (0.41 | ) |
| Effect of dilutive stock options |       | 1                                                 |       | — |   | — |   | — |   |
| Diluted income (loss) per share  |       | 9,544                                             |       | $ | 0.11 |   | 9,543 |   | $ | (0.41 | ) |

 
|                                  | ** ** | **Three months ended June 30,** | ** ** |
|----------------------------------|------------|-----------------------------------------------------|------------|
| ** **                       | ** ** | **2007**                                            | ** ** | **2006** | ** ** |
| ** **                       | ** ** | **Shares**                                          | ** ** | **Per Share  Amount** | ** ** | **Shares** | ** ** | **Per Share  Amount** | ** ** |
| Basic income (loss) per share    |       | 9,543                                               |       | $ | 0.10 |   | 9,543 |   | $ | (0.25 | ) |
| Effect of dilutive stock options |       | 20                                                  |       | — |   | — |   | — |   |
| Diluted income (loss) per share  |       | 9,563                                               |       | $ | 0.10 |   | 9,543 |   | $ | (0.25 | ) |

 

The following options were not included in thecomputation of diluted income (loss) per share due to their antidilutiveeffect.
|                                            | ** ** | **Six months ended June 30,** | ** ** |
|--------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                 | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| * *                                   | * *   | * *                                          | * *   | * * | * * |
| Options to purchase shares of common stock |       | 1,750                                             |       | 1,816 |   |
| Exercise prices                            |       | $4.15 – $13.75                               |       | $3.25 – $13.75 |   |
| Expiration dates                           |       | July 2010 – May 2017                         |       | July 2006 – May 2016 |   |

 
|                                            | ** ** | **Three months ended June 30,** | ** ** |
|--------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                 | ** ** | **2007**                                            | ** ** | **2006** | ** ** |
| * *                                   | * *   | * *                                            | * *   | * * | * * |
| Options to purchase shares of common stock |       | 1,373                                               |       | 1,816 |   |
| Exercise prices                            |       | $4.65 – $13.75                                 |       | $3.25 – $13.75 |   |
| Expiration dates                           |       | July 2010 – May 2017                           |       | July 2006 – May 2016 |   |

 

**5.*****              Segments.***  The operating segments of the Company havebeen aggregated into two geographical reporting segments:  Americas and International.  Americas includes the United States, Centraland South America and Canada. International includes Europe, Africa, the Middle East, Australia andAsia.  The chief operating decision makeris William H. Channell, Jr., President and Chief Executive Officer of theCompany.  The Company’s four productlines are sold in both segments.  Thefollowing tables summarize segment information:

7

----

 
|                                      | ** ** | **Six months ended June 30,** | ** ** |
|--------------------------------------|------------|---------------------------------------------------|------------|
| ** **                           | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| Revenues from external customers(1): |       |                                              |       |   |   |
| Americas                             |       | $                                                 | 39,059     |   | $ | 31,176 |   |
| International                        |       | 30,516                                            |       | 23,924 |   |
|                                 |       | $                                                 | 69,575     |   | $ | 55,100 |   |
| Income (loss) from operations:       |       |                                              |       |   |   |
| Americas                             |       | $                                                 | 1,871      |   | $ | 380 |   |
| International                        |       | (429                                              | )          | (5,734 | ) |
|                                 |       | $                                                 | 1,442      |   | $ | (5,354 | ) |
| Interest expense, net:               |       |                                              |       |   |   |
| Americas                             |       | $                                                 | 288        |   | $ | 177 |   |
| International                        |       | 174                                               |       | 109 |   |
|                                 |       | $                                                 | 462        |   | $ | 286 |   |

 

----

(1) Note:        Revenuesfrom Australia exceeded 10% of total revenues for the six months ended June 30,2007 and 2006.  Revenues from Australiatotaled $27,844 and $21,375 for the six month periods in 2007 and 2006,respectively.
|                                      | ** ** | **Three months ended June 30,** | ** ** |
|--------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                           | ** ** | **2007**                                            | ** ** | **2006** | ** ** |
| Revenues from external customers(1): |       |                                                |       |   |   |
| Americas                             |       | $                                                   | 20,395     |   | $ | 17,691 |   |
| International                        |       | 16,327                                              |       | 12,257 |   |
|                                 |       | $                                                   | 36,722     |   | $ | 29,948 |   |
| Income (loss) from operations:       |       |                                                |       |   |   |
| Americas                             |       | $                                                   | 1,404      |   | $ | 1,576 |   |
| International                        |       | (38                                                 | )          | (5,377 | ) |
|                                 |       | $                                                   | 1,366      |   | $ | (3,801 | ) |
| Interest expense, net:               |       |                                                |       |   |   |
| Americas                             |       | $                                                   | 148        |   | $ | 92 |   |
| International                        |       | 142                                                 |       | 92 |   |
|                                 |       | $                                                   | 290        |   | $ | 184 |   |

 

----

(1) Note:        Revenuesfrom Australia exceeded 10% of total revenues for the three months ended June30, 2007 and 2006.  Revenues fromAustralia totaled $15,043 and $10,814 for the three month periods in 2007 and2006, respectively.

The Company hasrevenues from external customers from the following product lines:
|                        | ** ** | **Six months ended June 30,** | ** ** |
|------------------------|------------|---------------------------------------------------|------------|
| ** **             | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
|                   |       |                                              |       |   |   |
| Product lines:         |       |                                              |       |   |   |
| Enclosures             |       | $                                                 | 30,039     |   | $ | 26,699 |   |
| Water related products |       | 31,693                                            |       | 23,961 |   |
| Connectivity           |       | 5,263                                             |       | 3,968 |   |
| Other                  |       | 2,580                                             |       | 472 |   |
|                   |       | $                                                 | 69,575     |   | $ | 55,100 |   |

 

8

----

 
|                        | ** ** | **Three months ended June 30,** | ** ** |
|------------------------|------------|-----------------------------------------------------|------------|
| ** **             | ** ** | **2007**                                            | ** ** | **2006** | ** ** |
|                   |       |                                                |       |   |   |
| Product lines:         |       |                                                |       |   |   |
| Enclosures             |       | $                                                   | 16,526     |   | $ | 15,023 |   |
| Water related products |       | 16,151                                              |       | 12,665 |   |
| Connectivity           |       | 2,763                                               |       | 1,971 |   |
| Other                  |       | 1,282                                               |       | 289 |   |
|                   |       | $                                                   | 36,722     |   | $ | 29,948 |   |

 
|                      | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|----------------------|------------|-----------------------------|------------|---------------------------------|------------|
|                 |       |                        |       |                            |       |
| Identifiable assets: |       |                        |       |                            |       |
| Americas             |       | $                           | 32,536     |                            | $          | 28,682 |   |
| International        |       | 39,428                      |       | 33,196                          |       |
|                 |       | $                           | 71,964     |                            | $          | 61,878 |   |

 

**6.****              *IncomeTaxes.***  The effective taxrate is 2.0% for the six months ended June 30, 2007, compared to the statutoryrate of 34%.  The effective rate is basedon the expected rate for the year. The income tax expense recorded for the sixmonths ended June 30, 2007 is a result of the income from the foreign operationsof the Company.  The Company has notrecorded income taxes on the income (loss) of the Company’s domestic operationsbecause of the Company’s federal net operating loss carryforward position andthe full valuation allowance on the Company’s deferred tax assets.

Under SFAS No. 109, *Accountingfor Income Taxes,* the Company is required to record a valuationallowance to reduce its net deferred tax asset to the amount that managementbelieves is more likely than not to be realized.  Accounting guidance allows the Company tolook to future earnings to support the realizability of net deferredassets.  However, since the Company hashad cumulative losses in recent years in its domestic operations, the Companyis unable to support the realizability of domestic deferred tax assets based onforecasted future earnings.  As a result,management has concluded that a full valuation allowance against net domesticdeferred tax assets is necessary.

The Company adopted the provisions of FASBInterpretation No. 48, *Accounting for Uncertaintyin Income Taxes,*(“FIN 48”) an interpretation of SFAS No. 109*,* on January 1, 2007. FIN 48 prescribes a recognition threshold that a tax position isrequired to meet before being recognized in the financial statements andprovides guidance on derecognition, measurement, classification, interest andpenalties, accounting in interim periods, disclosure and transitionsissues.  The adoption of FIN 48 resultedin no impact to the Company’s consolidated financial statements.  As of the date of the adoption, the Companyhad no unrecognized tax benefits. Based on the information currently available,no significant changes in unrecognized tax benefits are expected in the nexttwelve months. As of the date of adoption, the Company files income tax returnsin the U.S. federal jurisdiction and various state and foreignjurisdictions.  The 2003 through 2006 taxyears remain subject to examination by federal tax authorities while most stateand foreign jurisdictions remain subject to examination from 2002 through 2006.

The Company recognizes interest and penalties relatedto uncertain tax positions in income tax expense.  As of the date of the adoption and June 30,2007, the Company had no provisions for interest or penalties related touncertain tax positions.

**7.*****              Commitments andContingencies*.**  *Employment Agreements**—***In December, 2003 the Company entered into anemployment agreement with William H. Channell Jr., its president and chiefexecutive officer.  The employmentagreement is for an initial five-year term and is automatically renewed foradditional five-year terms unless it is terminated by the Company or by Mr.Channell, Jr. in accordance with the agreement. Mr. Channell, Jr.’s salary (1) may be increased from time to time at thediscretion of the Board of Directors and (2) will be increased annually,beginning July 1, 2004, to reflect the most recently published annualizedpercentage increase in the consumer price index for the Los Angeles, Californiaarea.  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 base salary, Mr. Channell, Jr. is entitled toparticipate in cash and other bonus

9

----

programs, including the 2003 Incentive Stock Plan,401(k) plan and the 2004 Incentive Bonus Plan. Pursuant to the agreement, the Company is also required to maintaincertain insurance policies for Mr. Channell Jr.’s benefit and he is alsoentitled to certain other benefits, including an automobile allowance, healthinsurance, and vacation and sick leave, in accordance with customary practicesfor senior executive officers.  In theevent that (1) the Company terminates Mr. Channell, Jr.’s employment without “cause,”as defined in the agreement, or (2) Mr. Channell, Jr. terminates his employmentwith the Company for “good reason,” which is also specifically defined in theagreement, then Mr. Channell, Jr. would be entitled to a lump sum payment equalto three times his then current base salary, all health and life insurancebenefits for three years, and accelerated vesting of any stock options orrestricted stock granted to him.  Inaddition, if the Company terminates Mr. Channell, Jr.’s employment for anyreason other than cause, it is required to maintain Mr. Channell, Jr.’sdisability policy, at its expense, until the date on which Mr. Channell, Jr. is65 years old.  The agreement alsoprovides for certain benefits to Mr. Channell, Jr. upon his death ordisability.

TheCompany was party to an employment agreement with William H. Channell, Sr., theCompany’s former chairman 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 the agreement, the Companywill continue to provide Mrs. Jacqueline M. Channell with medical insurance (tothe same extent such insurance is provided to the Company’s senior executiveofficers) during her lifetime.

***Taxes*. **TheFederal income taxes of the Company for the years ended December 31, 2003 and2004 are currently under examination by the Internal Revenue Service (“IRS”).  As of June 30, 2007, the Company and the IRShave resolved all outstanding issues except for the ordinary worthless stockdeduction.  The amount of the benefitunder dispute is approximately $3,000.  The net benefit recognized for this positionis approximately $300 with the remaining benefit being offset by the valuationallowance that has been established against the deferred tax asset.  TheCompany does not anticipate a material adverse impact on its financialstatements for this item.

***Terminationof Transportation and Logistics Services by Primary Freight Provider forBushman Tanks Business. ***Asof October 12, 2006, the primary freight provider for the Company’s BushmanTanks water storage tank manufacturing and distribution business unilaterallywithdrew its transportation and logistics services.  Accordingly, the agreement with the freightprovider has been terminated, and Bushman Tanks has reserved its rights inrelation to any damages it suffers as a result of the termination of suchservices.  The freight provider claimsthat Bushman Tanks has breached the agreement. Although the Company does not believe Bushman Tanks has breached theterms of the agreement, the Company has accrued for amounts in dispute.  If the dispute with the freight providercannot be resolved, either Bushman Tanks or the freight provider may pursuelegal action. In addition, as Bushman Tanks transitions its transportation andlogistics services, the timing of scheduled deliveries may continue to betemporarily pushed out to subsequent periods. The disruption in transportation and logistics services due to thetermination of such services by the former freight provider, the success of theimplementation of replacement transportation and logistics services, the legalcost associated with potential litigation related to the termination of suchservices, and any settlements as a result of legal disputes related thereto,could negatively affect the Company’s working capital and results ofoperations.

***LegalProceedings.**** *The Company is from time to timeinvolved in ordinary routine litigation incidental to the conduct of itsbusiness.  The Company regularly reviewsall pending litigation matters in which it is involved and establishes reservesdeemed appropriate for such litigation matters. Management believes that no presently pending litigation matters arelikely to have a material adverse effect on the Company’s financial statementsor results of operations, taken as a whole.

**8.**              ***Concentrations.***  Sales to Verizon of $5,947 in the first halfof 2007 represented 8.5% of the Company’s sales in the period.  Sales to Verizon of $5,558 in the first halfof 2006 represented 10.1% of the Company’s sales in the period.

Sales to Verizon of $2,290 in the second quarter of2007 represented 6.2% of the Company’s sales in the period.  Sales to Verizon of $3,214 in the secondquarter of 2006 represented 10.7% of the Company’s sales in the period.

**9*.******              Guarantees.***  In 1997, the Company guaranteed debt of theChannell Family Trust, one of its principal stockholders, of approximately $754incurred in connection with construction of the facilities leased to theCompany, and such guaranteed debt is collateralized by said facilities.  The loan amount subject to the guarantee isexpected to decline before expiring in 2017. The Company has not recorded a liability for this guarantee.  At June 30, 2007, the outstanding loanbalance subject to the guarantee totaled approximately $503.  The Channell Family Trust does not qualify asa “variable interest entity” subject to consolidation under FIN 46(R), *Consolidation of Variable Interest Entities,* since (a) thereare sufficient assets held by the Trust that the lender could attach in theevent of default on the loan, (b) the total equity investment at risk in theTrust is sufficient to permit financing without additional financial supportfrom the Company and (c) William Channell, Jr., the administrator of theChannell Family Trust, has the direct ability to make decisions about the Trust’sactivities.

10

----

**10.**       ***Goodwilland Other Intangible Assets.*** The balance of goodwill and intangible assets on the Company’s balancesheet fluctuates from period to period due to the application of foreigncurrency translation to United States dollars in calculating the balance ofgoodwill and other intangible assets of the Company’s foreignsubsidiaries.  SFAS No. 142, *Goodwill and Other Intangible Assets,* requires that goodwilland certain intangibles no longer be amortized, but instead be reviewed atleast annually for impairment.

The Company tests the value of goodwill for impairmentannually at December 31 (prior to December 31, 2006 goodwill was tested forimpairment at June 30 for the Bushman Tanks reporting unit) or whenever eventsor changes in circumstance indicate that a condition of impairment mayexist.  The goodwill for the BushmanTanks reporting unit was reassessed for impairment on December 31, 2006.  The test involves significant judgment inestimating projections of fair value generated through future performance ofthe 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.  Inherent uncertainties exist in determiningand applying such factors.

The changes in the carrying amount of goodwill, thenon-compete agreement and the nonamortizable trademark intangible, aresummarized below for the six months ended June 30, 2007:
|                                        | ** ** | **Goodwill** | ** ** | **Non-Compete  Agreement** | ** ** | **Trademark  Intangible** | ** ** |
|----------------------------------------|------------|--------------|------------|----------------------------|------------|---------------------------|------------|
|                                   |       |         |       |                       |       |                      |       |
| Balance at December 31, 2006           |       | $            | 9,848      |                       | $          | 1,387                     |       | $ | 710 |   |
|                                   |       |         |       |                       |       |                      |       |
| Amortization of non-compete agreement  |       | —       |       | (93                        | )          | —                    |       |
| Effect of foreign currency translation |       | 765          |       | 101                        |       | 54                        |       |
| Balance at June 30, 2007               |       | $            | 10,613     |                       | $          | 1,395                     |       | $ | 764 |   |

 

As of June 30, 2007, the Company has recorded goodwillof $745 in its Canadian reporting unit, which is part of the Americas segment,and $9,868 of goodwill in its Bushman Tanks reporting unit, which is part ofthe International segment.

The estimated amortization expense based on currentintangible balances and the June 30, 2007 foreign currency exchange rates is$197 per year for the next five fiscal years, and $410 thereafter.

**11.*  Loan andSecurity Agreements.***  As of June30, 2007, the Company was party to a Loan and Security Agreement with anasset-based lender in the United States entered into originally in September of2002, which contained a revolving credit facility.  The maximum amount available under therevolving credit facility was based on a level of certain qualifying assets,with a maximum borrowing capacity of $10,000. The revolver had a $2,000sub-limit for letters of credit.  On June26, 2007, the Loan and Security Agreement was amended, among other things: (i)to extend the term of the revolving credit facility through July 30, 2007; (ii)to reduce the required aggregate availability under the revolving creditfacility from $1,500 to $1,000; and (iii) to permit an increase in andextension of the maturity of certain intercompany loans.  The balance outstanding at June 30, 2007under the revolving line of credit was $8,029. As of June 30, 2007, outstandingletters of credit totaled $786.

On July 30, 2007the Company entered into an Amended and Restated Loan and Security Agreement(the “Amended and Restated Agreement”) with the same asset-based lender.  The Company and Channell Commercial Canada (“ChannellCanada”) are borrowers under the Amended and Restated Agreement.  The Amended and Restated Agreement providesfor: (i) a term loan of $2,500; (ii) capital expenditure loans in an aggregateamount of up to $5,000; and (iii) a revolving credit facility with borrowingsof up to a maximum of $12,500, depending on the level of certain qualifyingassets. The Amended and Restated Agreement terminates on June 30, 2010 (unlessearlier terminated pursuant to the terms thereof).  Other than the borrowing limits, the terms ofthe Amended and Restated Agreement are substantially the same as the prior Loanand Security Agreement.

The loans under the Amended and RestatedAgreement are guaranteed by Channell Limited, Channell Commercial EuropeLimited and A.C. Egerton (Holdings) Limited, which are direct and indirectsubsidiaries of the Company (the “Subsidiary Guarantors”), and are secured bysubstantially all of the assets of the Company and the Subsidiary Guarantors.In addition, borrowings made by Channell Canada are secured by substantially

11

----

all of the assets of Channell Canada.  The Amended and Restated Agreement containsvarious financial and operating covenants that impose limitations on theCompany’s ability, among other things, to incur additional indebtedness, mergeor consolidate, sell assets except in the ordinary course of business, makecertain investments, enter into leases and pay dividends.  The Amended and Restated Agreement requiresthe Company to maintain a lockbox on the revolving credit facility.  The Amended and Restated Agreement alsogenerally provides that if there exists an event of default thereunder, thelenders or administrative agents would have the option of accelerating theoutstanding obligations and terminating all commitments thereunder.

ChannellBushman Pty Ltd and controlled entities, collectively known as Channell BushmanGroup, subsidiaries of the Company, entered into a five-year Loan and SecurityAgreement with a commercial bank in Australia in August 2004. Channell BushmanGroup has from time to time entered into new Loan and Security Agreements withthe bank, which have amended and superseded the prior Loan and SecurityAgreements.  As of June 30, 2007, the facilities under the then-currentLoan and Security Agreement included the following: a term loan that expires inJuly 2009; a revolving credit facility with maximum borrowings of AUD $3,200that expires in July 2007; a facility to fund “earn out” payments to thesellers of Bushman Tanks that expires in July 2008; a capital expenditurefacility that expires in July 2008; and a master asset finance agreementfacility that expires in July 2007.  The companyentered into an amendment to the Loan and Security Agreement, effective as ofJuly 25, 2007, which, among other things, extended the maturity date of thefacilities that expired in July 2007 through August 30, 2007.  Channell Bushman Group is seekingfinancing from other sources to refinance its current credit facilities. TheCompany expects that it will be able to obtain adequate funding from othersources.

The Agreement contains various financial and operatingcovenants that impose limitations on Channell Bushman Group’s ability, amongother things, to merge or consolidate, sell assets except in the ordinarycourse of business, and pay dividends.  In addition, Channell BushmanGroup is required to comply with certain financial covenants relating to sales,gross profit and operating profit, and the bank, at its discretion, mayterminate the Agreement if such covenants are not met.  The Agreementcontractually obligates Channell Bushman Group to repay the revolving creditfacility 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 theLoan and Security Agreement at June 30, 2007 was $8,214.  As of June 30, 2007, Channell Bushman Groupwas not in compliance with the various financial covenants.  As ChannellBushman Group has not received a formal waiver for its breach of theaforementioned bank covenants, the Company has reclassified $4,447 of debtpreviously classified as long-term to short-term in the accompanying June 30,2007 balance sheet.

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

### **Introduction and Overview**

ChannellCommercial Corporation (the “Company”) is a designer and manufacturer oftelecommunications equipment supplied to communications network operatorsworldwide and water storage tanks distributed in consumer markets throughoutAustralia.  Major product lines include a complete line of thermoplasticand metal fabricated enclosures, advanced copper termination andconnectorization products, fiber-optic cable management systems and polyethylenewater storage tanks.

During the lastfive years, demand for communications infrastructure equipment has fluctuateddramatically.  At various times in the past there have been significantslowdowns in capital spending by both cable and telecom network operators dueto several factors including, but not limited to, service providerconsolidation, delays in outside plant upgrade/rebuild projects, and enhancingfree cash flow to strengthen their balance sheets and pay down debt. These changes had a significant negative impact on overall demand forinfrastructure products, and at various times have directly reduced demand forthe Company’s products and increased price competition within its industry,which has led to reductions in the Company’s revenues and contributed to itsrecent operating losses.

Within the waterstorage portion of the Company’s business, demand continues to grow inAustralia due to the country’s generally arid climate and widespread waterconservation efforts.  Demand for the Company’s water storage products isalso driven by regulatory factors at the local, state, and federal governmentlevels.  Recently, portions of Australia have experienced significantrainfall which, if continued, could negatively affect the sales of the Company’sproducts.

12

----

Within both thecommunications infrastructure market and water storage market, the historicallyhigh price of petroleum commodities has had a negative impact on the Company’sgross margins.  The products manufactured in both of the markets in whichthe Company operates are primarily composed of polyethylene resins, which areprimarily derived from commodities such as oil and natural gas.  TheCompany is limited in its ability to pass on incremental price increases to itscustomers.  Continued commodity price increases would have a negativeimpact on the Company’s performance.

The Companycontinues to invest in the development of new communications infrastructureproducts and water storage tanks and believes that in both markets it hasleading product portfolios in terms of performance and features.

The Companymeasures its success by monitoring net sales and gross margins with a near-termgoal of maintaining positive cash flows, while striving to achieve long-termoperating profits.  The Company believes that there continues to belong-term growth opportunities within both the communications infrastructureequipment and water tank markets.

**Resultsof Operations**

**Comparisonof the Six Months Ended June 30, 2007 with the Six Months Ended June 30, 2006**

***Net Sales*.** Net sales in the first half of 2007 were $69.6 million, an increase of$14.5 million or 26.3% compared to the first half of 2006.  The increase is due to higher demand for theCompany’s products in both of the Company’s reporting segments.

Americas net saleswere $39.1 million in the first half of 2007, an increase of $7.9 million or25.3% over the same period in 2006.  Theincrease was due primarily to a higher volume of sales to the Company’s coretelecom and cable customers.  Sales tolarge telecom and cable service providers fluctuate from period to period basedon the status of such customers’ infrastructure projects, and therefore aredifficult to predict.

International netsales were $30.5 million in the first half of 2007, an increase of $6.6 millionor 27.6% over the same period in 2006. The higher sales volume was a result of increased demand for the Company’sproducts due to favorable conditions in the urban markets of Australia.

Sales to Verizonof $5.9 million in the first half of 2007 represented 8.5% of Company sales inthe period.  Sales to Verizon of $5.6million in the first half of 2006 represented 10.1% of the Company sales in theperiod.  Sales to Verizon havehistorically fluctuated from period to period. Accordingly, the Company cannot accurately predict what sales to Verizonwill be for the remainder of 2007.

***GrossProfit*.**  Grossprofit in the first half of 2007 was $21.9 million, an increase of $4.0 millionor 22.3% compared to the first half of 2006. The increase was due to higher gross profit dollars in both segments ofthe Company.  Gross profit dollars in theAmericas segment increased $2.7 million from $10.2 million in the first half of2006 to $12.9 million in the first half of 2007.  Gross profit of $9.0 million in the firsthalf of 2007 in the International segment was $1.3 million higher than in the2006 period.

As a percentage ofnet sales, gross profit decreased from 32.5% in the first half of 2006 to 31.5%in the first half of 2007.  The decreaseis primarily due to a decline in the gross profit percentage in theInternational segment from 32.2% in the first half of 2006 to 29.7% in thefirst half of 2007.  This decrease wasprimarily due to higher raw material costs related to increased commodityprices; due to competition, the Company was not able to pass on all of theincrease to customers. The gross profit percentage in the Americas segmentincreased slightly from 32.8% in the first half of 2006 to 32.9% in the firsthalf of 2007.

***Selling*.**  Selling expenses were $11.5 million in thefirst half of 2007, an increase of $0.4 million or 3.5% from the first half of2006.

As a percentage ofnet sales, selling expenses decreased from 20.1% in the first half of 2006 to16.5% in the first half of 2007.  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.

***Generaland Administrative*.** General and administrative expenses were $8.1 million in the first halfof 2007, an increase of $1.8 million or 28.6% from the first half of 2006.  The increase is due primarily to highercompensation expense due to increased head count and to higher incentive compensationexpense of $0.5 million.  Alsocontributing to the increase was approximately $0.4 million in higher expensesrelated to upgraded information systems.

As a percentage ofnet sales, general and administrative expense increased from 11.4% in the 2006period to 11.6% in the 2007 period.

13

----

***Researchand Development*.** Research and development expenses were $0.9million in the first half of 2007, a decrease of $0.2 million or 18.2% from thefirst half of 2006.  Spending on newproduct development programs was slightly less than the previous year.

As a percentage ofnet sales, research and development expenses decreased from 2.0% in the firsthalf of 2006 to 1.3% in the first half of 2007 as a result of increased salesvolume and the decrease in research and development costs.

***Impairmentof Goodwill.***  Therewas no goodwill impairment expense in the first half of 2007 compared togoodwill impairment expense of $4,829 in the first half of 2006.  The impairment was related to the Company’sBushman Tanks operations in Australia. The primary cause for this impairment of goodwill was the decrease ingross margins and operating income in the Bushman Tanks business, which havebeen negatively impacted by increasing prices in raw materials.  The primary raw materials used in themanufacture of Bushman Tanks products are petroleum-based resins.  The price of these resins has beencontinually increasing as the price of oil increases.

As a percentage ofsales, goodwill impairment was 8.8% in the first half of 2006.

***Income(Loss) from Operations*.** As a result of the items discussed above, income from operations was$1.4 million in the first half of 2007 compared to a loss from operations of($5.4) million in the first half of 2006. Operating margin as a percent of sales was 2.1% in the 2007 periodcompared to (9.7%) in the 2006 period.

***InterestExpense, Net*.** Interest expense, net of interest income, was $462 million in the firsthalf of 2007 and $286 million in the first half of 2006.  The increase in interest expense is due tothe increased level of borrowing compared to the prior year.

***IncomeTaxes*.**  There wasan income tax expense of twenty thousand dollars in the first half of 2007compared to an income tax benefit of $0.3 million in the first half of2006.  The effective tax rate was 2.0% inthe first half of 2007 and 4.9% for the same period in 2006.  Since the Company has a full valuationallowance on the realization of the domestic net deferred tax asset, no taxexpense or benefit is currently being recorded on the results of operations inthe U.S.  The tax expense recorded in thecurrent year was a result of the income in the Company’s foreign operations.The tax benefit recorded in 2006 was the result of the loss in the foreignoperations.  The low effective tax ratein 2006 is related to the $4,829 charge for the impairment of goodwill, whichis a non-deductible item for determining income taxes.

**Comparisonof the Three Months Ended June 30, 2007 with the Three Months Ended June 30,2006**

***Net Sales*.** Net sales in the second quarter of 2007 were $36.7 million, an increaseof $6.8 million or 22.7% compared to the second quarter of 2006.  The increase is due to higher demand for theCompany’s products in both of the Company’s reporting segments.

Americas net saleswere $20.4 million in the second quarter of 2007, an increase of $2.7 millionor 15.3% over the same period in 2006. The increase was due primarily to a higher volume of sales to theCompany’s core telecom and cable customers. Sales to large telecom and cable service providers fluctuate from periodto period based on the status of such customers’ infrastructure projects andtherefore are difficult to predict.

International netsales were $16.3 million in the second quarter of 2007, an increase of $4.0million or 32.5% over the same period in 2006. The higher sales volume was a result of increased demand for the Company’sproducts in the urban markets of Australia.

Sales to Verizonof $2.3 million in the second quarter of 2007 represented 6.2% of Company salesin the period.  Sales to Verizon of $3.2million in the second quarter of 2006 represented 10.7% of the Company sales inthe period.  Sales to Verizon havehistorically fluctuated from period to period. Accordingly, the Company cannot accurately predict what sales to Verizonwill be for the remainder of 2007.

***GrossProfit*.**  Grossprofit in the second quarter of 2007 was $11.9 million, an increase of $1.6million or 15.5% compared to the second quarter of 2006.  The increase was due to higher gross profit dollarsin both segments of the Company.  Grossprofit dollars in the Americas segment increased $0.6 million from $6.5 millionin the second quarter of 2006 to $7.1 million in the second quarter of 2007.  Gross profit of $4.8 million in the secondquarter of 2007 in the International segment was $1.0 million higher than inthe 2006 period.

As a percentage ofnet sales, gross profit decreased from 34.5% in the second quarter of 2006 to32.5% in the second quarter of 2007 due to lower gross profit percentages inboth segments of the Company.  The grossprofit percentage in the Americas segment decreased from 36.7% in the secondquarter of 2006 to 34.7% in the second quarter of 2007.  The gross profit percentage in theInternational segment decreased from 31.4% in the second quarter of 2006 to29.7% in the second quarter of 2007. This decrease in both segments was primarily due to higher raw materialcosts related to increased commodity prices. The Company was able to increaseprices in the International segments, that were effective during the latterhalf of the second quarter, but due to competition, the Company was not able topass on all of the commodity price increase to customers.

14

----

***Selling*.**  Selling expenses were $6.2 million in thesecond quarter of 2007, an increase of $0.5 million or 8.8% from the secondquarter of 2006.

As a percentage ofnet sales, selling expenses decreased from 19.1% in the 2006 period to 16.9% inthe 2007 period.  The decrease isprimarily due to an increased absorption of the fixed costs on the higher salesvolume along with increased efficiencies associated with the management andoperation of the Company’s international shipping activities.

***Generaland Administrative*.** General and administrative expenses were $3.8 million in the secondquarter of 2007, an increase of $0.8 million or 26.7% from the second quarterof 2006.  The increase is due primarilyto higher compensation expense due to increased head count and to higherincentive compensation expense of $0.2 million. Also contributing to the increase was approximately $0.2 million inhigher expenses related to upgraded information systems.

As a percentage ofnet sales, general and administrative expense increased from 10.1% in the 2006period to 10.5% in the 2007 period.

***Researchand Development*.** Research and development expenses were $0.5million in the second quarter of 2007, a decrease of $0.1 million or 16.7% fromthe second quarter of 2006.  Spending onnew product development programs was slightly less than the previous year.

As a percentage ofnet sales, research and development expenses decreased from 1.8% in the secondquarter of 2006 to 1.3% in the second quarter of 2007 as a result of increasedsales volume and a slight decrease in research and development costs.

***Impairmentof Goodwill.***  Therewas no goodwill impairment expense in the second quarter of 2007 compared togoodwill impairment expense of $4,829 in the second quarter of 2006.  The impairment was related to the Company’sBushman Tanks operations in Australia.  The primary cause for this impairment ofgoodwill was the decrease in gross margins and operating income in the BushmanTanks business, which have been negatively impacted by increasing prices in rawmaterials.  The primary raw materialsused in the manufacture of Bushman Tanks products are petroleum-basedresins.  The price of these resins hasbeen continually increasing as the price of oil increases.

As a percentage ofsales, goodwill impairment was 16.1% in the second quarter of 2006.

***Income(Loss) from Operations*.** As a result of the items discussed above, income from operations was$1.4 million in the second quarter of 2007 compared to a loss from operationsof ($3.8) million in the second quarter of 2006.  Operating margin as a percent of sales was 3.7%in the 2007 period compared to (12.7%) in the 2006 period.

***InterestExpense, Net*.** Interest expense, net of interest income, was $290 million in the secondquarter of 2007 and $184 million in the second quarter of 2006. The increase ininterest expense is due to the increased level of borrowing compared to theprior year period.

***IncomeTaxes*.**  There wasan income tax expense of $0.2 million in the second quarter of 2007 compared toan income tax benefit of $0.3 million in the second quarter of 2006.  The effective tax rate was 15.4% in thesecond quarter of 2007 and 6.5% for the same period in 2006.  Since the Company has a full valuationallowance on the realization of the domestic net deferred tax asset, no tax expenseor benefit is currently being recorded on the results of operations in theU.S.  The tax expense recorded in thecurrent year was a result of the income in the Company’s foreign operations.The tax benefit recorded in 2006 was the result of the loss in the foreignoperations.  The relatively low effectivetax rate in 2006 is related to the $4,829 charge for the impairment ofgoodwill, which is a non-deductible item for determining income taxes.

**Liquidityand Capital Resources**

Net cash used inoperating activities was ($1.5) million for the six months ended June 30, 2007,compared to ($1.1) million in the same period in 2006.  The cash used in operating activities in 2007is primarily due to an increase in accounts receivable and inventories of $10.1million, resulting from the increase in operating activities in both segmentsof the Company.  The use of cash inoperating activities described above was offset by an increase in accountspayable and accrued expenses of $4.1 million and a decrease in income taxesreceivable and other assets of $0.7 million. The cash used in the operating assets and liabilities described aboveoffset the net income of $1.0 million and the $2.9 million in non-cashdeductions, most of which were depreciation and amortization.

15

----

Net cash used ininvesting activities was ($1.7) million for the six months ended June 30, 2007and ($0.8) million for the six months ended June 30, 2006.  The increase is due to a higher level ofacquisition of capital assets related to product development projects.

Net cash provided byfinancing activities was $1.9 million for the six months ended June 30, 2007compared to net cash provided by financing activities of $2.4 million in thesame period of 2006.  The additional borrowingsin both periods was required to fund the higher production activitiesexperienced in both years.

Cash and cash equivalentsat June 30, 2007 were $0.6 million, compared to $2.2 million at December 31,2006.

Net accounts receivableincreased to $17.6 million at June 30, 2007 from $11.7 million at December 31,2006 due to the significantly higher volume of sales resulting from theincreased demand in the first six months of 2007.  In terms of days sales outstanding, accountsreceivable was 43 days at December 31, 2006 and at June 30, 2007.

Inventories increased to$18.2 million at June 30, 2007 from $13.0 million at December 31, 2006 due tothe increase in inventories related to the higher volume of manufacturingactivity to support the higher sales in the second quarter of 2007.  Days inventory on hand increased from 63 daysat December 31, 2006 to 66 days at June 30, 2007.

Accounts payableincreased from $10.9 million at December 31, 2006 to $14.8 million at June 30,2007 due to the significantly higher volume of activity in the second quarterof 2007.  Days payables were 53 days atDecember 31, 2006 and 54 days at June 30, 2007 due to the increase in accountspayable at the end of the second quarter.

The Company is activelymanaging expenditures for capital assets and working capital requirements toreduce cash needs for 2007 and beyond. The Company focused expenditures for capital assets on purchases forprojects that will provide positive long-term cash flow.  In addition, the Company is pursuing marketopportunities and designing products that will consume idle or slow movinginventory to further reduce the need for current and long-term cash flow.  The Company believes that cash flow fromoperations coupled with available borrowings under the credit facilitiesdescribed in Note 11 will be sufficient to fund the Company’s capitalexpenditure and working capital requirements for the next twelve months.

As of June 30, 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 been granted by the lender.  Channell Bushman Group is seeking financingfrom other sources to refinance its current credit facilities.  The Company expects that it will be able toobtain adequate funding from other sources.

**Off-Balance Sheet Arrangements**

The Company’s off-balancesheet arrangements consist of operating leases, employment contracts andpurchase obligations.  In addition, theCompany guaranteed the debt of the Channell Family Trust of approximately$754,000 in 1997.  The guaranteed debtwas incurred in connection with construction of the facilities leased to theCompany and is collateralized by said facilities.  The loan amount subject to the unsecuredguarantee is expected to decline before expiring in 2017.  The Company does not anticipate that it willincur losses as a result of this guarantee and has not recorded aliability.  If the Channell Family Trustwere to default on the outstanding loan balance, the Company might be requiredto repay the remaining principal balance. 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 June 30, 2007,the outstanding loan balance subject to the guarantee totaled $503.

**Critical Accounting Policies**

The Company’s discussionand analysis of its financial condition and results of operations are basedupon its consolidated financial statements, which have been prepared in accordancewith accounting principles generally accepted in the United States ofAmerica.  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 thatthe estimates, assumptions and judgments involved in the accounting policiesdescribed in the “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” section of its most recent Annual Report on Form10-K have the greatest potential impact on its financial statements, so itconsiders these to be its critical 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 accounting policies affect working capitalaccount balances, including the policies for revenue recognition, the reservefor uncollectible accounts receivable, inventory reserves, and incometaxes.  These policies require that theCompany make estimates in the preparation of its financial statements as of agiven date.

Within the context ofthese critical accounting policies, the Company is not currently aware of anyreasonably likely events or circumstances that would result in materiallydifferent amounts being reported.

16

----

**Forward-Looking Statements**

Certain statementscontained herein are “forward-looking” statements within the meaning of thePrivate Securities Litigation Reform Act of 1995 (the “Act”), which providescertain “safe harbor” provisions for forward-looking statements.  All forward-looking statements made hereinare made pursuant to the Act. Forward-looking statements include statements which are predictive innature; which depend upon or refer to future events or conditions; or whichinclude words such as “expects”, “anticipates”, “intends”, “plans”, “believes”,“estimates”, or variations or negatives thereof or by similar or comparablewords or phrases.  In addition, anystatement concerning future financial performance, ongoing business strategiesor prospects, and possible future Company actions that may be provided bymanagement are also forward-looking statements as defined by the Act.  Forward-looking statements are based oncurrent expectations and projections about future events and are subject torisks, uncertainties, and assumptions about the Company; and economic andmarket factors in the countries in which the Company does business, among otherthings.  These statements are notguarantees of future performance, and the Company has no specific intentions toupdate these statements.  Actual eventsand results may differ materially from those expressed or forecasted inforward-looking statements due to a number of factors including, among others:(1) the communications industry is in a state of rapid technological change,which can render the Company’s products obsolete or unmarketable; (2) anyfailure by the Company to anticipate or respond to technological developmentsor changes in industry standards or customer requirements, or any significantdelays in product development or introduction, could have a material adverseeffect on the Company’s business, operating results and financial condition;(3) a relatively small number of telecommunications customers account for alarge percentage of the Company’s available market; (4) the Company expectsthat sales 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)the Company’s water related sales could be materially affected by weatherconditions and government regulation; (7) the Company is subject to the risksof conducting business internationally; and (8) the industries in which theCompany operates are highly competitive. Additional risks and uncertainties are outlined in the Company’s filingswith the Securities and Exchange Commission, including its most recent AnnualReport on Form 10-K.

**Item 3.****            Quantitative andQualitative Disclosures About Market Risk.**

The risk inherent in theCompany’s market sensitive instruments is the potential loss arising fromadverse changes in interest rates and foreign currency exchange rates.  All financial instruments held by the Companydescribed below are held for purposes other than trading.

**Interest Rate Sensitivity**

The Company and itssubsidiaries have entered into two financing agreements.  In July 2007, the Company entered into athree-year Loan and Security Agreement with an asset based lender in the UnitedStates that expires in June 30, 2010. The agreement contains a term loan, capital expenditure facility and arevolving line of credit.  In August2004, the Company’s Australian subsidiaries entered into a Loan and SecurityAgreement with a commercial bank in Australia, which contains a term loan thatexpires in July 2009, a revolving line of credit that expires in August 2007,an “earn out” facility that expires in July 2008, a capital expenditurefacility that expires in July 2008 and a master asset finance agreementfacility that expires in August 2007. The loan and security agreements allow for the outstanding balance tobear interest at a variable rate based on the lender’s base rate.  The credit facilities expose the Company tochanges in short-term interest rates since the interest rates on the creditfacility are variable.

Based upon the amount ofvariable rate debt outstanding at the end of the quarter, and holding thevariable rate debt balance constant, each one percentage point increase ininterest rates occurring on the second day of a quarterly period would resultin an increase in interest expense of approximately $0.04 million perquarter.  This analysis does not considerthe effects of economic activity on the Company’s sales and profitability insuch an environment.

**Exchange Rate Sensitivity**

The Company has assetsand liabilities outside the United States that are subject to fluctuations inforeign currency exchange rates.  Assets andliabilities outside the United States are primarily located in the UnitedKingdom, Australia, and Canada.  TheCompany’s investment in foreign subsidiaries with a functional currency otherthan the U.S. dollar is generally considered long-term.  Accordingly, the Company does not hedge theseinvestments.  The Company also purchasesa limited portion of its raw materials from foreign countries.  These purchases are generally denominated inU.S. dollars and are accordingly not subject to exchange rate fluctuations.  The Company has minimal foreign currencytransaction 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.

17

----

**Item 4.****            Controls andProcedures.**

**Evaluationof Disclosure Controls and Procedures**

The Company maintainsdisclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) of the Securities and Exchange Act of 1934 (the “Exchange Act”) thatare designed to ensure that information required to be disclosed in the Company’sExchange Act reports is recorded, processed, summarized, and reported withinthe time periods specified in the rules and forms of the Securities andExchange Commission regulations, and that such information is accumulated andcommunicated to the Company’s management, including its Chief Executive Officerand Chief Financial Officer, as appropriate, to allow timely decisionsregarding required disclosure.  As of June 30, 2007, the management of theCompany carried out an assessment of the Company’s disclosure controls andprocedures and concluded that, they were not effective, as described below, asof the end of the period covered by this report.

One of the Company’ssubsidiaries, Bushman Tanks, was previously a closely-held, family run businesswith mostly manual controls in place.  During the process of assessing thestatus of the internal control infrastructure, the Company previouslyidentified significant deficiencies in internal controls that rose to the levelof “material weaknesses” in financial closing, revenue and purchasing cycles.

As a result of theweaknesses identified in management’s evaluation, the Company has 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 ofthe material weaknesses in financial closing, revenue and purchasing cycles isnot yet complete.

**Changesin Internal Control Over Financial Reporting**

There has been no changein the Company’s internal control over financial reporting that occurred in thequarterly period covered by this report that has materially affected, or isreasonably likely to materially affect the Company’s internal control overfinancial reporting.

18

----

**PART II - OTHER INFORMATION**

**Item 1.****            Legal Proceedings.**

The Company is from timeto time involved in ordinary routine litigation incidental to the conduct ofits business.  The Company regularlyreviews all pending litigation matters in which it is involved and establishesreserves deemed appropriate for such litigation matters.  Management believes that no presently pendinglitigation matters are likely to have a material adverse effect on the Company’sfinancial statements or results of operations, taken as a whole.

**Item 1A.****         Risk Factors.**

Not applicable.

**Item 2.****            Unregistered Sales ofEquity Securities and Use of Proceeds**.

Not applicable.

**Item 3.****            Defaults Upon SeniorSecurities.**

Not applicable.

**Item 4.****            Submission of Mattersto a Vote of Security Holders.**

On May 22, 2007, the Company held its Annual Meeting of Stockholders inTemecula, California.  Guy Marge andStephen Gill were re-elected to the Company’s board of directors.  The term of office for the followingdirectors continued after the Annual Meeting: William H. Channell, Jr., DanaBrenner, and Jacqueline M. Channell.

At the Annual Meeting, the stockholders of the Company approved theproposal to elect the following two directors to serve on the Company’s boardof directors, each to hold office for a term of three years:

|              | ** ** | **Number of Votes for** | ** ** | **Number of Votes Withheld** | ** ** |
|--------------|------------|----------------------------------------|------------|---------------------------------------------|------------|
| Guy Marge    |       | 8,671,789                              |       | 111,600                                     |       |
| Stephen Gill |       | 8,678,089                              |       | 105,300                                     |       |

 

**Item 5.****            Other Information.**

Not applicable.

**Item 6.****            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)                                                                                                                                                                                                                                        |

 

19

----

 
| 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 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)                                                                                                                                                                                                                                                                                                                      |

 

20

----

 
| 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)                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                         |
| 10.38  |   | Amendment to Loan and Security Agreement dated July 24, 2007, and  effective July 25, 2007, by and among Channell Bushman Pty Ltd, Bushmans  Group Pty Ltd, certain other subsidiaries of Channell Commercial, and  National Australia Bank Ltd (26)                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                         |
| 10.39  |   | Amended and Restated Loan and Security Agreement dated July 30, 2007, by  and among Bank of America, N.A., Bank of America Canada Branch, Channell  Commercial Corporation and Channell Commercial Canada Inc. (27)                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                         |
| 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(28)                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                         |
| 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(28)                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                         |
| 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(28)                                                                                                                                                                                   |

 

----

|        |   | * Management contract or compensatory plan or  arrangement.                                                                                                |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                       |
| (1)    |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Registration Statement on Form S-1  (File No. 333-03621). |
|   |   |                                                                                                                                                       |
| (2)    |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 8-K on May 18, 1998.                                 |
|   |   |                                                                                                                                                       |
| (3)    |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 10-K on March 31, 1999.                              |
|   |   |                                                                                                                                                       |
| (4)    |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 10-K on April 2, 2001.                               |
|   |   |                                                                                                                                                       |
| (5)    |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 10-Q on August 12, 2002.                             |
|   |   |                                                                                                                                                       |
| (6)    |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 8-K on October 1, 2002.                              |
|   |   |                                                                                                                                                       |
| (7)    |   | Incorporated by reference to Appendix B filed in  connection with the Company’s Definitive Proxy Statement on March 26, 2003.                         |
|   |   |                                                                                                                                                       |
| (8)    |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 10-K on March 5, 2004.                               |

 

21

----

 
| (9)    |   | Incorporated by reference to Appendix B filed in  connection with the Company’s Definitive Proxy Statement on April 16, 2004. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                               |
| (10)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 8-K on August 6, 2004.       |
|   |   |                                                                                                                               |
| (11)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 10-Q on November 15, 2004.   |
|   |   |                                                                                                                               |
| (12)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 8-K on June 15, 2005.        |
|   |   |                                                                                                                               |
| (13)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 8-K on June 28, 2005.        |
|   |   |                                                                                                                               |
| (14)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 8-K on September 9, 2005.    |
|   |   |                                                                                                                               |
| (15)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 10-Q on November 21, 2005.   |
|   |   |                                                                                                                               |
| (16)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 10-K/A on November 21, 2005. |
|   |   |                                                                                                                               |
| (17)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 8-K on March 6, 2006.        |
|   |   |                                                                                                                               |
| (18)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 8-K on March 29, 2006.       |
|   |   |                                                                                                                               |
| (19    |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 10-Q on May 15, 2006.        |
|   |   |                                                                                                                               |
| (20)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 10-Q on August 17, 2006.     |
|   |   |                                                                                                                               |
| (21)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 8-K on September 8, 2006.    |
|   |   |                                                                                                                               |
| (22)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 8-K on September 21, 2006.   |
|   |   |                                                                                                                               |
| (23)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 8-K on November 17, 2006.    |
|   |   |                                                                                                                               |
| (24)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 8-K on February 8, 2007.     |
|   |   |                                                                                                                               |
| (25)   |   | Incorporated by reference to the indicated exhibits  filed in connection with the Company’s Form 8-K on February 15, 2007.    |
|   |   |                                                                                                                               |
| (26)   |   | Incorporated by reference to the indicated exhibits filed in connection  with the Company’s Form 8-K on July 31, 2007.        |
|   |   |                                                                                                                               |
| (27)   |   | Incorporated by reference to the indicated exhibits filed in connection  with the Company’s Form 8-K on August 3, 2007.       |
|   |   |                                                                                                                               |
| (28)   |   | Filed herewith.                                                                                                                    |

 

22

----

SIGNATURES

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
| Dated: August 14, 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) |
|                        |        |                                                                              |        |        |  |

 

23

----