SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended September 30, 2008
 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 Number 0-23212
 Telular Corporation
 (Exact name of registrant as specified in its charter)
 Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    36-3885440
(I.R.S. employer
identification no.)
 311 South Wacker Drive, Suite 4300, Chicago, Illinois 60606-6622
(Address of principal executive offices and zip code)
 (312) 379-8397
(Registrants telephone number, including area code)
 Securities registered pursuant to 12(b) of the Act:
 Title of Each Class
    
    Name of each exchange on which registeredCommon Stock, $.01 Par Value
    
    The NASDAQ Stock Market LLC
 Securities registered pursuant to Section 12(g) of the Act:
 o þ
 o þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE




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##### 



PART I
 ITEM 1. BUSINESS
 OVERVIEW
   COMPANY STRATEGY
      2




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GEOGRAPHICAL MARKETS
    TECHNOLOGY
  RESEARCH AND DEVELOPMENT AND PRODUCT LINES
     3




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M2M SOLUTIONS 
 TELGUARD
 TERMINALS
 SALES, MARKETING SERVICE AND SUPPORT
 Domestic Sales
  International Sales
  Service and Support
  MAJOR CUSTOMERS
  MANUFACTURING
   4




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##### 



EXECUTIVE OFFICERS
  Name
    
    Age
    
    PositionJoseph A. Beatty
    
    
    45
    
    
    President, Chief Executive Officer and DirectorJonathan M. Charak
    
    
    39
    
    
    Senior Vice President, Chief Financial Officer and SecretaryGeorge S. Brody
    
    
    54
    
    
    Senior Vice President, Telguard and TerminalsRobert L. Deering
    
    
    50
    
    
    Controller, Treasurer and Chief Accounting Officer
 Joseph A. Beatty
 Jonathan M. Charak
 George S. Brody
 Robert L. Deering
 EMPLOYEES
  COMPETITION
  Better focus/commitment
 More experience
  5




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##### 



Broader product line
 Service and support
      PATENTS AND OTHER INTELLECTUAL PROPERTY
 PATENTS
   TRADEMARKS AND OTHER PROPRIETARY INFORMATION
   6




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##### 



AVAILABLE INFORMATION
 Internet Address
 www.telular.com
 Filings with the Securities and Exchange Commission
  ITEM 1A. RISK FACTORS
  ITEM 1B. UNRESOLVED STAFF COMMENTS
  ITEM 2. PROPERTIES
  Lease Dates
    
    Square
    
    
    RenewalFunctions
    
    Location
    
    Commencement
    
    Termination
    
    Footage
    
    
    OptionsCorporate Headquarters
    
    Sales, marketing, operations administration,
finance and general administrations
    
    Chicago, Illinois
    
    February 2007
    
    February 2014
    
    
    11,700
    
    
    NoTerminal and Security
Products Operations and
Engineering
    
    Sales, marketing, operations and general
administration for terminal products and
product research and development
    
    Atlanta, Georgia
    
    November 2007
    
   December 2012
    
    
    15,154
    
    
    NoInternational
Sales Office
    
    Sales
    
    Weston, Florida
    
    October 1999
    
    December 2009
    
    
    1,700
    
    
    Yes
 ITEM 3. LEGAL PROCEEDINGS
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   7




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##### 



PART II
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 MARKET PRICE OF AND DIVIDENDS ON COMMON STOCK
  QUARTER ENDED DURING FISCAL YEAR 2008December 31
    
    
    March 31
    
    
    June 30
    
    
    September 30High
    
    $
    8.59
    
    
    $
    6.84
    
    
    $
    3.88
    
    
    $
    3.89Low
    
    $
    5.47
    
    
    $
    2.50
    
    
    $
    2.78
    
    
    $
    1.99
 QUARTER ENDED DURING FISCAL YEAR 2007December 31
    
    
    March 31
    
    
    June 30
    
    
    September 30High
    
    $
    4.22
    
    
    $
    4.37
    
    
    $
    5.10
    
    
    $
    7.50Low
    
    $
    2.00
    
    
    $
    3.23
    
    
    $
    3.07
    
    
    $
    4.55
  TREASURY SHARES
  Issuer Purchase of Equity SecuritiesTotal Number
    
    
    Averageof Shares
    
    
    Price PaidPeriod
    
    Purchased
    
    
    Per ShareAugust 2008 (August 7 - August 25)
    
    
    383,207
    
    
    $
    2.94
  8




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##### 



TELULAR CORPORATION COMMON STOCK PERFORMANCE GRAPH
 The following Performance Graph and related information shall not be deemed soliciting material
or to be filed with the Securities and Exchange Commission, nor shall such information be
incorporated by reference into any future filing under the Securities Act of 1933 or Securities
Exchange Act of 1934, each as amended, except to the extent that the Company specifically
incorporates it by reference into such filing.
   COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
 
 *
    
    $100 invested on 9/30/03 in stock & index-including reinvestment of
dividends. Fiscal year ending September 30.  9




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##### 



ITEM 6. SELECTED FINANCIAL DATA
  Year ended September 30,(In thousands, except share data)2008 (a)
    
    
    2007 (a)
    
    
    2006
    
    
    2005
    
    
    2004Results of Operations:Total revenue
    
    $
    66,154
    
    
    $
    74,507
    
    
    $
    45,706
    
    
    $
    33,489
    
    
    $
    49,578Income (loss) from continuing operations
    
    
    6,101
    
    
    
    5,625
    
    
    
    (644
    )
    
    
    (4,507
    )
    
    
    2,105Income (loss) from discontinued operations
    
    
    (7,480
    )
    
    
    (7,571
    )
    
    
    (11,174
    )
    
    
    (6,375
    )
    
    
    (2,808
    )Net loss
    
    $
    (1,379
    )
    
    $
    (1,946
    )
    
    $
    (11,818
    )
    
    $
    (10,882
    )
    
    $
    (703
    )Per Share Data:Basic and dilutive:Income (loss) from continuing operations
    
    $
    0.32
    
    
    $
    0.31
    
    
    $
    (0.04
    )
    
    $
    (0.34
    )
    
    $
    0.16Income (loss) from discontinued operations
    
    $
    (0.39
    )
    
    $
    (0.42
    )
    
    $
    (0.66
    )
    
    $
    (0.47
    )
    
    $
    (0.21
    )Net loss
    
    $
    (0.07
    )
    
    $
    (0.11
    )
    
    $
    (0.70
    )
    
    $
    (0.81
    )
    
    $
    (0.05
    )As of September 30 - balance sheet data:Total assets
    
    $
    47,969
    
    
    $
    55,608
    
    
    $
    57,937
    
    
    $
    53,499
    
    
    $
    54,366Current loans payable
    
    
    
    
    
    
    
    
    
    
    3,313
    
    
    
    
    
    
    
    Stockholders equity
    
    
    40,167
    
    
    
    38,366
    
    
    
    38,812
    
    
    
    43,792
    
    
    
    44,801
 (a)
    
    In July 2007, the Company formulated a plan to sell the net assets of its FCP segment and exit
the fixed cellular phone market. During the third quarter of fiscal 2008, the Company determined it
would be unable to secure a buyer for the FCP segment and made a strategic decision to abandon the
FCP segment effective June 30, 2008. As a result, the FCP segment has been segregated and
classified as discontinued operations and amounts for all periods presented have been restated to
reflect this classification. ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
 INTRODUCTION
   10




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##### 



11




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##### 



RESULTS OF OPERATIONS  (In Thousands, Except Share Data)
 Fiscal Year 2008 Compared to Fiscal Year 2007
 Revenues and Costs of Sales
 Change2008
    
    
    2007
    
    
    Amount
    
    
    PercentageNet product salesTelguard
    
    $
    28,391
    
    
    $
    40,694
    
    
    $
    (12,303
    )
    
    
    -30
    %Terminal
    
    
    17,542
    
    
    
    16,442
    
    
    
    1,100
    
    
    
    7
    %Total product revenues
    
    
    45,933
    
    
    
    57,136
    
    
    
    (11,203
    )
    
    
    -20
    %Service revenues
    
    
    20,221
    
    
    
    17,371
    
    
    
    2,850
    
    
    
    16
    %Total revenues
    
    
    66,154
    
    
    
    74,507
    
    
    
    (8,353
    )
    
    
    -11
    %Cost of salesProducts
    
    
    31,805
    
    
    
    40,539
    
    
    
    (8,734
    )
    
    
    -22
    %Services
    
    
    9,817
    
    
    
    9,169
    
    
    
    648
    
    
    
    7
    %41,622
    
    
    
    49,708
    
    
    
    (8,086
    )
    
    
    -16
    %Gross margin
    
    $
    24,532
    
    
    $
    24,799
    
    
    $
    (267
    )
 Revenues
   Cost of Sales
     12




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##### 



Operating Expenses
 Change
    
    
    % of Revenues2008
    
    
    2007
    
    
    Amount
    
    
    Percentage
    
    
    2008
    
    
    2007Engineering and development
    
    $
    5,171
    
    
    $
    6,930
    
    
    $
    (1,759
    )
    
    
    -25
    %
    
    
    8
    %
    
    
    9
    %Selling and marketing
    
    
    6,287
    
    
    
    6,157
    
    
    
    130
    
    
    
    2
    %
    
    
    9
    %
    
    
    8
    %General and
administrative
    
    
    7,283
    
    
    
    6,114
    
    
    
    1,169
    
    
    
    19
    %
    
    
    11
    %
    
    
    8
    %$
    18,741
    
    
    $
    19,201
    
    
    $
    (460
    )
    
    
    
    
    
    
    28
    %
    
    
    25
    %
 Engineering and Development
  Selling and Marketing
  General and Administrative (G&A)
  Other Income
  Income Taxes
  Discontinued Operations
   13




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##### 



2008
    
    
    2007
    
    
    Change
    
    
    PercentageRevenues
    
    $
    7,544
    
    
    $
    20,931
    
    
    $
    (13,387
    )
    
    
    -64
    %Cost of sales
    
    
    11,252
    
    
    
    20,357
    
    
    
    (9,105
    )
    
    
    -45
    %Gross margin
    
    
    (3,708
    )
    
    
    574
    
    
    
    (4,282
    )Engineering and development
    
    
    
    
    
    
    723
    
    
    
    (723
    )
    
    
    -100
    %Selling and marketing
    
    
    767
    
    
    
    3,313
    
    
    
    (2,546
    )
    
    
    -77
    %Amortization
    
    
    
    
    
    
    3,149
    
    
    
    (3,149
    )
    
    
    -100
    %Impairment loss
    
    
    1,711
    
    
    
    563
    
    
    
    1,148
    
    
    
    204
    %Loss on asset disposals
    
    
    1,083
    
    
    
    
    
    
    
    1,083
    
    
    
    > 100
    %Other
    
    
    211
    
    
    
    397
    
    
    
    (186
    )
    
    
    -47
    %$
    (7,480
    )
    
    $
    (7,571
    )
    
    $
    91
 Net Loss
  Fiscal Year 2007 Compared to Fiscal Year 2006
 Revenues and Costs of Sales
 Change2007
    
    
    2006
    
    
    Amount
    
    
    PercentageNet product salesTelguard
    
    $
    40,694
    
    
    $
    21,630
    
    
    $
    19,064
    
    
    
    88
    %Terminal
    
    
    16,442
    
    
    
    12,932
    
    
    
    3,510
    
    
    
    27
    %Total product revenues
    
    
    57,136
    
    
    
    34,562
    
    
    
    22,574
    
    
    
    65
    %Service revenues
    
    
    17,371
    
    
    
    11,144
    
    
    
    6,227
    
    
    
    56
    %Total revenues
    
    
    74,507
    
    
    
    45,706
    
    
    
    28,801
    
    
    
    63
    %Cost of salesProducts
    
    
    40,539
    
    
    
    26,175
    
    
    
    14,364
    
    
    
    55
    %Services
    
    
    9,169
    
    
    
    5,937
    
    
    
    3,232
    
    
    
    54
    %49,708
    
    
    
    32,112
    
    
    
    17,596
    
    
    
    55
    %Gross margin
    
    $
    24,799
    
    
    $
    13,594
    
    
    $
    11,205
 Revenues
   Cost of Sales
   14




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##### 



Operating Expenses
 Change
    
    
    % of Revenues2007
    
    
    2006
    
    
    Amount
    
    
    Percentage
    
    
    2007
    
    
    2006Engineering and development
    
    $
    6,930
    
    
    $
    3,935
    
    
    $
    2,995
    
    
    
    76
    %
    
    
    9
    %
    
    
    9
    %Selling and marketing
    
    
    6,157
    
    
    
    4,575
    
    
    
    1,582
    
    
    
    35
    %
    
    
    8
    %
    
    
    10
    %General and administrative
    
    
    6,114
    
    
    
    6,101
    
    
    
    13
    
    
    
    < 1
    %
    
    
    8
    %
    
    
    13
    %$
    19,201
    
    
    $
    14,611
    
    
    $
    4,590
    
    
    
    
    
    
    
    25
    %
    
    
    32
    %
 Engineering and Development
  Selling and Marketing
  General and Administrative (G&A)
  Other Income
  Income Taxes
  Discontinued Operations
   15




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##### 



2007
    
    
    2006
    
    
    Change
    
    
    PercentageRevenues
    
    $
    20,931
    
    
    $
    47,394
    
    
    $
    (26,463
    )
    
    
    -56
    %Cost of sales
    
    
    20,357
    
    
    
    43,312
    
    
    
    (22,955
    )
    
    
    -53
    %Gross margin
    
    
    574
    
    
    
    4,082
    
    
    
    (3,508
    )Engineering and development
    
    
    723
    
    
    
    3,622
    
    
    
    (2,899
    )
    
    
    -80
    %Selling and marketing
    
    
    3,313
    
    
    
    5,983
    
    
    
    (2,670
    )
    
    
    -45
    %Amortization
    
    
    3,149
    
    
    
    1,606
    
    
    
    1,543
    
    
    
    96
    %Impairment loss
    
    
    563
    
    
    
    4,045
    
    
    
    (3,482
    )
    
    
    -86
    %Other
    
    
    397
    
    
    
    
    
    
    
    397
    
    
    
    > 100
    %$
    (7,571
    )
    
    $
    (11,174
    )
    
    $
    3,603
 Net Loss
  LIQUIDITY AND CAPITAL RESOURCES
   16




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##### 



Fiscal 2008
  $
    6,101
    
    
    Income from continuing operations; cash provided.2,388
    
    
    Non-cash expenses: $1,705 from stock based compensation; $674 depreciation expenses; $9 loss on
disposal of fixed assets.12,819
    
    
    The decrease in trade accounts receivable is due primarily to the collection during the period of
outstanding balances
at September 30, 2007 and timely customer payments on sales made during fiscal 2008.(6,507
    )
    
    The increase in inventory reflects the buildup of Telguard and terminal inventory as the Company
anticipated stronger
sales in the fourth quarter of fiscal 2008 . Inventory levels decreased substantially in the fourth
quarter of fiscal 2007 as a
result large sale of Telguard units to customers who were anticipating the conversion of cellular
networks to digital
from analog.(6,913
    )
    
    Trade accounts payable primarily consists of amounts due to Telulars contract manufacturers. To
assure timely
production of inventory to meet customers needs, these accounts are kept current. That process, in
addition to the
payments made to our contract manufacturers in the first quarter of fiscal 2008 for the production
to support the
increased sales in the fourth quarter of fiscal 2007, led to the reduction in trade accounts payable.(804
    )
    
    Net cash used in other working capital items primarily due to a $850 increase in notes receivable
related to a temporary
cash advance to related party. The note receivable has been repaid in October 2008.$
    7,084
    
    
    Total cash provided by continuing operations
 Fiscal 2007
  $
    5,625
    
    
    Income from continuing operations; cash provided.1,716
    
    
    Non-cash expenses: $924 from stock based compensation; $732 depreciation expenses; $60 loss on disposal
of fixed assets.(8,403
    )
    
    The increase in trade accounts receivable is due primarily to the increased sales volume; a 64% increase in fourth quarter
fiscal 2007 sales over the same period of fiscal 2006.(1,023
    )
    
    The increase in inventory reflects the buildup of Telguard and terminal inventory in response to increased customer
demand in the fourth quarter of fiscal 2007.2,497
    
    
    Trade accounts payable primarily consists of amounts due to Telulars contract manufacturers. The increase
is due to increased production as a result of significant sales increase in the fourth quarter of fiscal 2007.1,154
    
    
    Net cash provided by other working capital items primarily due to a $973 increase in accrued liabilities resulting from
liabilities that fluctuate directly with sales volumes such as internal and external commissions.$
    1,566
    
    
    Total cash provided by continuing operations
   17




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##### 



Payments Due by PeriodLess thanContractual Cash Obligations
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    After 5 yearsOperating leases
    
    $
    3,785
    
    
    $
    716
    
    
    $
    2,225
    
    
    $
    783
    
    
    $
    61Purchase Commitments
    
    
    5,190
    
    
    
    5,190
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    8,975
    
    
    $
    5,906
    
    
    $
    2,225
    
    
    $
    783
    
    
    $
    61
  CRITICAL ACCOUNTING POLICIES
   Allowance for Doubtful Accounts
  Reserve for Obsolescence
  Goodwill
   18




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##### 



Income Taxes
  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
  OUTLOOK
    FORWARD-LOOKING INFORMATION
     19




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
     20




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##### 



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  Reports of Independent Registered Public Accounting Firm
    
    
    22Consolidated Balance Sheets as of September 30, 2008 and 2007
    
    
    24Consolidated Statements of Operations for the years ended
September 30, 2008, 2007 and 2006
    
    
    25Consolidated Statements of Stockholders Equity for the years ended
September 30, 2008, 2007 and 2006
    
    
    26Consolidated Statements of Cash Flows for the years ended
September 30, 2008, 2007 and 2006
    
    
    27Notes to Consolidated Financial Statements
    
    
    28
  21




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##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     Internal Control 
Integrated Framework
 
 
  22




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##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
 
  23




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##### 



TELULAR CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
 September 30,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    21,168
    
    
    $
    10,254Restricted cash
    
    
    
    
    
    
    340Trade accounts receivable, net
    
    
    6,904
    
    
    
    19,723Inventories, net
    
    
    10,007
    
    
    
    3,500Prepaid expenses and other current assets
    
    
    1,023
    
    
    
    108Assets of discontinued operations
    
    
    4,709
    
    
    
    17,959Total current assets
    
    
    43,811
    
    
    
    51,884Property and equipment, net
    
    
    2,016
    
    
    
    1,391Other assets:Goodwill
    
    
    2,043
    
    
    
    2,043Other
    
    
    99
    
    
    
    290Total other assets
    
    
    2,142
    
    
    
    2,333Total assets
    
    $
    47,969
    
    
    $
    55,608LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    2,701
    
    
    $
    9,614Accrued liabilities
    
    
    4,286
    
    
    
    4,366Liabilities of discontinued operations
    
    
    815
    
    
    
    3,262Total current liabilities
    
    
    7,802
    
    
    
    17,242Stockholders equity:Common stock; $.01 par value; 75,000,000 shares
authorized; 19,343,819 and 18,524,039 shares issued
at September 30, 2008 and 2007, respectively
    
    
    194
    
    
    
    185Additional paid-in capital
    
    
    175,456
    
    
    
    171,158Deficit
    
    
    (134,356
    )
    
    
    (132,977
    )Treasury stock, at cost; 383,207 and 0 shares
at September 30, 2008 and 2007, respectively
    
    
    (1,127
    )
    
    
    Total stockholders equity
    
    
    40,167
    
    
    
    38,366Total liabilities and stockholders equity
    
    $
    47,969
    
    
    $
    55,608
 See accompanying notes
  24




---



##### 



TELULAR CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
 Year ended September 30,2008
    
    
    2007
    
    
    2006RevenueNet product sales
    
    $
    45,933
    
    
    $
    57,136
    
    
    $
    34,562Service revenue
    
    
    20,221
    
    
    
    17,371
    
    
    
    11,144Total revenue
    
    
    66,154
    
    
    
    74,507
    
    
    
    45,706Cost of salesNet product cost of sales
    
    
    31,805
    
    
    
    40,539
    
    
    
    26,175Service cost of sales
    
    
    9,817
    
    
    
    9,169
    
    
    
    5,937Total cost of sales
    
    
    41,622
    
    
    
    49,708
    
    
    
    32,112Gross margin
    
    
    24,532
    
    
    
    24,799
    
    
    
    13,594Operating ExpensesEngineering and development expenses
    
    
    5,171
    
    
    
    6,930
    
    
    
    3,935Selling and marketing expenses
    
    
    6,287
    
    
    
    6,157
    
    
    
    4,575General and administrative expenses
    
    
    7,283
    
    
    
    6,114
    
    
    
    6,101Total operating expenses
    
    
    18,741
    
    
    
    19,201
    
    
    
    14,611Income (loss) from operations
    
    
    5,791
    
    
    
    5,598
    
    
    
    (1,017
    )Other income, net
    
    
    310
    
    
    
    27
    
    
    
    373Income (loss) from continuing operations before income taxes
    
    
    6,101
    
    
    
    5,625
    
    
    
    (644
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    Income (loss) from continuing operations
    
    
    6,101
    
    
    
    5,625
    
    
    
    (644
    )Loss from discontinued operations, net of income taxes
    
    
    (7,480
    )
    
    
    (7,571
    )
    
    
    (11,174
    )Net loss
    
    $
    (1,379
    )
    
    $
    (1,946
    )
    
    $
    (11,818
    )Net income (loss) per common share:BasicContinuing operations
    
    $
    0.32
    
    
    $
    0.31
    
    
    $
    (0.04
    )Discontinued operations
    
    $
    (0.39
    )
    
    $
    (0.42
    )
    
    $
    (0.66
    )Net loss
    
    $
    (0.07
    )
    
    $
    (0.11
    )
    
    $
    (0.70
    )DilutedContinuing operations
    
    $
    0.32
    
    
    $
    0.31
    
    
    $
    (0.04
    )Discontinued operations
    
    $
    (0.39
    )
    
    $
    (0.42
    )
    
    $
    (0.66
    )Net loss
    
    $
    (0.07
    )
    
    $
    (0.11
    )
    
    $
    (0.70
    )Weighted-average number of common shares outstanding:Basic
    
    
    19,145,132
    
    
    
    18,211,553
    
    
    
    16,903,487Diluted
    
    
    19,145,132
    
    
    
    18,211,553
    
    
    
    16,903,487
 See accompanying notes
  25




---



##### 



TELULAR CORPORATION
 
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(In Thousands)
 Common Stockand Additional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalPaid-In Capital
    
    
    
    
    
    
    Treasury Stock
    
    
    StockholdersAmount
    
    
    Shares
    
    
    Deficit
    
    
    Amount
    
    
    Shares
    
    
    EquityBalance at September 30, 2005
    
    $
    162,195
    
    
    
    16,111
    
    
    $
    (118,403
    )
    
    $
    
    
    
    
    
    
    
    $
    43,792Comprehensive income:Net loss for the year ended September 30, 2006
    
    
    
    
    
    
    
    
    
    
    (11,818
    )
    
    
    
    
    
    
    
    
    
    
    (11,818
    )Stock issued in connection with purchase of
business unit
    
    
    5,505
    
    
    
    1,932
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,505Cost associated with the sale of
common stock in a private placement
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )Warrants issued to secure working capital loan
    
    
    356
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    356Stock based compensation expense
    
    
    937
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    937Stock options exercised
    
    
    51
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51Stock issued in connection with services received
    
    
    10
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10Balance at September 30, 2006
    
    
    169,033
    
    
    
    18,066
    
    
    
    (130,221
    )
    
    
    
    
    
    
    
    
    
    
    38,812Cumulative effect of adjustments resulting from
the adoption of SAB No. 108
    
    
    
    
    
    
    
    
    
    
    (810
    )
    
    
    
    
    
    
    
    
    
    
    (810
    )Adjusted balance at October 1, 2006
    
    
    169,033
    
    
    
    18,066
    
    
    
    (131,031
    )
    
    
    
    
    
    
    
    
    
    
    38,002Comprehensive income:Net loss for the year ended September 30, 2007
    
    
    
    
    
    
    
    
    
    
    (1,946
    )
    
    
    
    
    
    
    
    
    
    
    (1,946
    )Stock issued in connection with purchase of
business unit
    
    
    563
    
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    563Stock based compensation expense
    
    
    877
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    877Stock options exercised
    
    
    823
    
    
    
    288
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    823Restricted stock award
    
    
    47
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47Balance at September 30, 2007
    
    
    171,343
    
    
    
    18,524
    
    
    
    (132,977
    )
    
    
    
    
    
    
    
    
    
    
    38,366Comprehensive income:Net loss for the year ended September 30, 2008
    
    
    
    
    
    
    
    
    
    
    (1,379
    )
    
    
    
    
    
    
    
    
    
    
    (1,379
    )Stock based compensation expense
    
    
    1,653
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,653Stock options exercised
    
    
    1,807
    
    
    
    412
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,807Warrants exercised
    
    
    795
    
    
    
    395
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    795Restricted stock award
    
    
    52
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52Treasury stock purchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,127
    )
    
    
    (383
    )
    
    
    (1,127
    )Balance at September 30, 2008
    
    $
    175,650
    
    
    
    19,344
    
    
    $
    (134,356
    )
    
    $
    (1,127
    )
    
    
    (383
    )
    
    $
    40,167
 See accompanying notes
  26




---



##### 



TELULAR CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 Year ended September 30,2008
    
    
    2007
    
    
    2006Operating Activities:Net loss
    
    $
    (1,379
    )
    
    $
    (1,946
    )
    
    $
    (11,818
    )Less loss from discontinued operations
    
    
    (7,480
    )
    
    
    (7,571
    )
    
    
    (11,174
    )Income (loss) from continuing operations
    
    
    6,101
    
    
    
    5,625
    
    
    
    (644
    )Adjustments to reconcile income (loss) from continuing operations to net cash
provided by (used in) operating activitiesDepreciation
    
    
    674
    
    
    
    732
    
    
    
    1,106Loss on disposal of operating assets
    
    
    9
    
    
    
    60
    
    
    
    37Stock based compensation expense  stock options
    
    
    1,653
    
    
    
    877
    
    
    
    937Stock based compensation expense  restricted stock
    
    
    52
    
    
    
    47
    
    
    
    Common stock issued for services
    
    
    
    
    
    
    
    
    
    
    10Changes in assets and liabilities, net of effects of acquisition:Trade accounts receivable
    
    
    12,819
    
    
    
    (8,403
    )
    
    
    (6,830
    )Inventories
    
    
    (6,507
    )
    
    
    (1,023
    )
    
    
    1,661Prepaid expenses and other assets
    
    
    (724
    )
    
    
    181
    
    
    
    182Trade accounts payable
    
    
    (6,913
    )
    
    
    2,497
    
    
    
    3,344Accrued liabilities
    
    
    (80
    )
    
    
    973
    
    
    
    (689
    )Net cash provided by (used in) operating activities of continuing operations
    
    
    7,084
    
    
    
    1,566
    
    
    
    (886
    )Investing Activities:Acquisition of property and equipment
    
    
    (1,090
    )
    
    
    (845
    )
    
    
    (478
    )Decrease
(increase) in restricted cash
    
    
    340
    
    
    
    (340
    )
    
    
    Proceeds from sale of marketable securities
    
    
    
    
    
    
    
    
    
    
    12,075Net cash (used in) provided by investing activities of continuing operations
    
    
    (750
    )
    
    
    (1,185
    )
    
    
    11,597Financing Activities:Proceeds from working capital line of credit
    
    
    
    
    
    
    5,737
    
    
    
    10,065Payments on working capital line of credit
    
    
    
    
    
    
    (9,050
    )
    
    
    (6,752
    )Expenditures related to the issuance of common stock
    
    
    
    
    
    
    
    
    
    
    (21
    )Proceeds from the exercise of stock options
    
    
    1,807
    
    
    
    823
    
    
    
    51Proceeds from the exercise of warrants
    
    
    795
    
    
    
    
    
    
    
    Purchase of treasury stock, at cost
    
    
    (1,127
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities of continuing operations
    
    
    1,475
    
    
    
    (2,490
    )
    
    
    3,343Cash Flows of Discontinued Operations:Net cash provided by (used in) operating activities of discontinued operations
    
    
    2,799
    
    
    
    5,596
    
    
    
    (16,781
    )Net cash provided by (used in) investing activities of discontinued operations
    
    
    306
    
    
    
    (32
    )
    
    
    (497
    )Net cash provided by (used in) discontinued operations
    
    
    3,105
    
    
    
    5,564
    
    
    
    (17,278
    )Net increase (decrease) in cash and cash equivalents
    
    
    10,914
    
    
    
    3,455
    
    
    
    (3,224
    )Cash and cash equivalents, beginning of period
    
    
    10,254
    
    
    
    6,799
    
    
    
    10,023Cash and cash equivalents, end of period
    
    $
    21,168
    
    
    $
    10,254
    
    
    $
    6,799
 See accompanying notes
  27




---



##### 



TELULAR CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Description of Business
  2. Summary of Significant Accounting Policies
 Consolidation
  Revenue Recognition
  Cash Equivalents
  Restricted Cash
   Financial Instruments
   28




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Inventories and Reserve for Obsolescence
  Goodwill
   
    
    Significant underperformance relative to expected historical or projected future
operating results;
    
    Significant changes in the manner of use of the acquired assets or the strategy for the
overall business;
    
    Significant negative industry or economic trends; and,
    
    Significant decline in Telulars stock price for a substantial period.
    Intangible Assets
   29




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Property and Equipment
  Income Taxes
  Loss Per Share of Common Stock
   2008
    
    
    2007
    
    
    2006Stock options
    
    
    1,712,342
    
    
    
    1,590,073
    
    
    
    1,765,009Warrants
    
    
    2,523,425
    
    
    
    3,020,848
    
    
    
    3,020,8484,235,767
    
    
    
    4,610,921
    
    
    
    4,785,857
  Stock-Based Compensation
   30




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2008
    
    2007
    
    2006Volatility
    
    70%
    
    69% - 73%
    
    73% - 75%Expected term
    
    4.0 yrs
    
    4.0 yrs
    
    4.5 yrsRisk free interest rate
    
    3.69% - 4.40%
    
    4.61% - 4.96%
    
    4.32% - 5.01%Dividend yield
    
    0.0%
    
    0.0%
    
    0.0%
  2008
    
    
    2007
    
    
    2006Stock-based compensation:Stock options
    
    $
    1,653
    
    
    $
    877
    
    
    $
    937Restricted stock
    
    
    52
    
    
    
    47
    
    
    
    $
    1,705
    
    
    $
    924
    
    
    $
    937
 Fair Value of Financial Instruments
  Research and Development Costs
  Shipping and Handling Costs
  Warranty
   31




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  September 30,2008
    
    
    2007Balance at the beginning of the period
    
    $
    83
    
    
    $
    90Warranty expense during the period
    
    
    334
    
    
    
    439Warranty payments made during the period
    
    
    (321
    )
    
    
    (446
    )Balance at the end of the period
    
    $
    96
    
    
    $
    83
 Use of Estimates
  Reclassifications
  Recently Issued Accounting Pronouncements
 Business Combinations. Business Combinations
  3. Discontinued Operations
 Accounting for Impairment or Disposal
of Long-Lived Assets
  32




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2008
    
    
    2007
    
    
    2006Revenues
    
    $
    7,544
    
    
    $
    20,931
    
    
    $
    47,394Cost of sales
    
    
    11,252
    
    
    
    20,357
    
    
    
    43,312Total operating expenses
    
    
    3,772
    
    
    
    8,145
    
    
    
    15,256Loss from discontinued operations
    
    $
    (7,480
    )
    
    $
    (7,571
    )
    
    $
    (11,174
    )
  2008
    
    
    2007
    
    
    2006Operating Activities:Loss from discontinued operations
    
    $
    (7,480
    )
    
    $
    (7,571
    )
    
    $
    (11,174
    )Adjustments to reconcile loss to
net cash provided by (used in) operating activities:Depreciation
    
    
    
    
    
    
    718
    
    
    
    690Amortization
    
    
    
    
    
    
    3,149
    
    
    
    1,606Intangible impairment loss
    
    
    1,098
    
    
    
    
    
    
    
    Goodwill impairment loss
    
    
    
    
    
    
    563
    
    
    
    4,045Fixed asset impairment loss
    
    
    613
    
    
    
    
    
    
    
    Loss on disposal of assets
    
    
    1,083
    
    
    
    256
    
    
    
    Changes in assets and liabilities:Assets of discontinued operations
    
    
    9,930
    
    
    
    11,331
    
    
    
    (14,529
    )Liabilities of discontinued
operations
    
    
    (2,445
    )
    
    
    (2,850
    )
    
    
    2,581Net cash provided by (used in) operating activities
    
    
    2,799
    
    
    
    5,596
    
    
    
    (16,781
    )Investing Activities:Sale of property and equipment
    
    
    306
    
    
    
    
    
    
    
    Acquisition of property and equipment
    
    
    
    
    
    
    (32
    )
    
    
    (602
    )Purchase of business
    
    
    
    
    
    
    
    
    
    
    (3,895
    )Decrease in restricted cash
    
    
    
    
    
    
    
    
    
    
    4,000Net cash provided by (used in) investing activities
    
    
    306
    
    
    
    (32
    )
    
    
    (497
    )Cash provided by (used in) discontinued operations
    
    $
    3,105
    
    
    $
    5,564
    
    
    $
    (17,278
    )
  33




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2008
    
    
    2007Trade accounts receivable, net
    
    $
    4,583
    
    
    $
    9,962Inventories, net
    
    
    
    
    
    
    4,359Prepaid expenses
    
    
    
    
    
    
    101Property and equipment, net
    
    
    126
    
    
    
    2,348Intangible assets, net
    
    
    
    
    
    
    1,098Other assets
    
    
    
    
    
    
    91Total assets
    
    $
    4,709
    
    
    $
    17,959Trade accounts payable
    
    $
    149
    
    
    $
    1,696Accrued liabilities
    
    
    666
    
    
    
    1,566Total liabilities
    
    $
    815
    
    
    $
    3,262
  4. Trade Accounts Receivable and Allowance for Doubtful Accounts
  September 30,2008
    
    
    2007Trade receivables
    
    $
    6,943
    
    
    $
    19,763Less: allowance for doubtful accounts
    
    
    (39
    )
    
    
    (40
    )$
    6,904
    
    
    $
    19,723
  34




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 5. Inventories
  September 30,2008
    
    
    2007Raw materials
    
    $
    1,958
    
    
    $
    915Finished goods
    
    
    8,133
    
    
    
    3,13610,091
    
    
    
    4,051Less: reserve for obsolescence
    
    
    (84
    )
    
    
    (551
    )$
    10,007
    
    
    $
    3,500
 6. Property and Equipment
  September 30,2008
    
    
    2007Furniture and fixtures
    
    $
    85
    
    
    $
    488Computer equipment
    
    
    1,967
    
    
    
    2,426Machinery and equipment
    
    
    3,002
    
    
    
    4,497Leasehold improvements
    
    
    363
    
    
    
    324Construction in progress and other
    
    
    126
    
    
    
    115,543
    
    
    
    7,746Less accumulated depreciation
    
    
    (3,527
    )
    
    
    (6,355
    )Property and equipment, net
    
    $
    2,016
    
    
    $
    1,391
 7. Goodwill and Intangible Assets
  Balance at September 30, 2006
    
    $
    2,043Additional goodwill   FCP
    
    
    563Impairment of goodwill  FCP
    
    
    (563
    )Balance at September 30, 2007
    
    
    2,043Additional goodwill
    
    
    Impairment of goodwill
    
    
    Balance at September 30, 2008
    
    $
    2,043
  35




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2008
    
    
    2007Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Net
    
    
    Cost
    
    
    Amortization
    
    
    NetCapitalized technology
    
    $
    3,840
    
    
    $
    (3,840
    )
    
    $
    
    
    
    $
    3,840
    
    
    $
    (3,240
    )
    
    $
    600Customer relationships
    
    
    3,070
    
    
    
    (3,070
    )
    
    
    
    
    
    
    3,070
    
    
    
    (2,671
    )
    
    
    399Other
    
    
    293
    
    
    
    (293
    )
    
    
    
    
    
    
    293
    
    
    
    (194
    )
    
    
    99Total intangible
assets
    
    $
    7,203
    
    
    $
    (7,203
    )
    
    $
    
    
    
    $
    7,203
    
    
    $
    (6,105
    )
    
    $
    1,098
  8. Accrued Liabilities
  September 30,2008
    
    
    2007Payroll and benefits expense
    
    $
    1,770
    
    
    $
    1,621Royalties
    
    
    558
    
    
    
    447Other
    
    
    1,958
    
    
    
    2,298$
    4,286
    
    
    $
    4,366
 9. Line of Credit
     36




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  10. Income Taxes
       37




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  September 30,2008
    
    
    2007Deferred tax assets:Reserve for inventory obsolescence
    
    $
    32
    
    
    $
    552Allowance for doubtful accounts
    
    
    15
    
    
    
    18Fixed assets
    
    
    150
    
    
    
    Intangible assets
    
    
    450
    
    
    
    3,284Research and development tax credits
    
    
    2,834
    
    
    
    2,834Non-cash compensation
    
    
    774
    
    
    
    440Net operating loss carryforwards
    
    
    52,911
    
    
    
    49,540Accrued liabilities
    
    
    216
    
    
    
    376Other
    
    
    108
    
    
    
    109Total deferred tax assets
    
    
    57,490
    
    
    
    57,153Less valuation allowance
    
    
    57,490
    
    
    
    57,153Net deferred tax assets
    
    $
    
    
    
    $
    
     38




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11. Commitments
  Fiscal Year2009
    
    $
    7162010
    
    
    7152011
    
    
    7502012
    
    
    7602013
    
    
    535Thereafter
    
    
    309$
    3,785
 
  12. Redeemable Preferred Stock and Preferred Stock
  13. Capital Stock and Stock Options
     39




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   AvailableReserved
    
    
    to IssueStock Incentive Plan
    
    
    3,450,000
    
    
    
    286,6792008 Employee Stock Incentive Plan
    
    
    500,000
    
    
    
    500,000Non-employee Director Stock Incentive Plan
    
    
    500,000
    
    
    
    77,701
   2008
    
    
    2007
    
    
    2006Weighted-
    
    
    
    
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageOptions
    
    
    Exercise
    
    
    Options
    
    
    Exercise
    
    
    Options
    
    
    Exercise(000s)
    
    
    Price
    
    
    (000s)
    
    
    Price
    
    
    (000s)
    
    
    PriceOutstanding at beginning of the year
    
    
    1,590
    
    
    $
    4.67
    
    
    
    1,765
    
    
    $
    4.52
    
    
    
    1,719
    
    
    $
    7.93Granted
    
    
    916
    
    
    
    5.81
    
    
    
    453
    
    
    
    3.66
    
    
    
    892
    
    
    
    2.72Exercised
    
    
    (411
    )
    
    
    4.39
    
    
    
    (288
    )
    
    
    2.86
    
    
    
    (21
    )
    
    
    2.47Canceled
    
    
    (383
    )
    
    
    6.88
    
    
    
    (340
    )
    
    
    4.07
    
    
    
    (825
    )
    
    
    9.73Outstanding at end of the year
    
    
    1,712
    
    
    $
    4.85
    
    
    
    1,590
    
    
    $
    4.67
    
    
    
    1,765
    
    
    $
    4.52
  40




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Weighted-
    
    
    Outstanding
    
    
    
    
    
    
    ExercisableAverage
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Outstanding as of
    
    
    Remaining
    
    
    Average
    
    
    Exercisable as of
    
    
    AverageRange of
    
    
    September 30, 2008
    
    
    Contractual
    
    
    Exercise
    
    
    September 30, 2008
    
    
    ExerciseExercise Prices
    
    
    (000s)
    
    
    Life (in years)
    
    
    Price
    
    
    (000s)
    
    
    Price$
    1.95  3.50
    
    
    
    593
    
    
    
    5.00
    
    
    $
    2.96
    
    
    
    248
    
    
    $
    2.663.51  6.58
    
    
    
    592
    
    
    
    5.05
    
    
    
    4.50
    
    
    
    445
    
    
    
    4.616.59  7.99
    
    
    
    512
    
    
    
    5.16
    
    
    
    7.28
    
    
    
    83
    
    
    
    6.708.00  16.45
    
    
    
    15
    
    
    
    1.92
    
    
    
    11.13
    
    
    
    15
    
    
    
    11.131,712
    
    
    
    5.04
    
    
    $
    4.85
    
    
    
    791
    
    
    $
    4.34
 14. Major Customers
  15. Export Sales
  Export Sales by RegionCALA
    
    
    EA
    
    
    AME
    
    
    Total
    
    
    Domestic
    
    
    Total SalesFiscal 2008 sales
    
    $
    8,574
    
    
    $
    677
    
    
    $
    117
    
    
    $
    9,368
    
    
    $
    56,786
    
    
    $
    66,154Regions sales as % of

total export sales
    
    
    91.52
    %
    
    
    7.23
    %
    
    
    1.25
    %
    
    
    100.00
    %Regions sales as % of

Total Company sales
    
    
    12.96
    %
    
    
    1.02
    %
    
    
    0.18
    %
    
    
    14.16
    %
    
    
    85.84
    %
    
    
    100.00
    %Fiscal 2007 sales
    
    $
    8,368
    
    
    $
    1,126
    
    
    $
    244
    
    
    $
    9,738
    
    
    $
    64,769
    
    
    $
    74,507Regions sales as % of

total export sales
    
    
    85.92
    %
    
    
    11.57
    %
    
    
    2.51
    %
    
    
    100.00
    %Regions sales as % of

Total Company sales
    
    
    11.23
    %
    
    
    1.51
    %
    
    
    0.33
    %
    
    
    13.07
    %
    
    
    86.93
    %
    
    
    100.00
    %Fiscal 2006 sales
    
    $
    5,201
    
    
    $
    1,728
    
    
    $
    514
    
    
    $
    7,443
    
    
    $
    38,263
    
    
    $
    45,706Regions sales as % of

total export sales
    
    
    69.88
    %
    
    
    23.22
    %
    
    
    6.90
    %
    
    
    100.00
    %Regions sales as % of

Total Company sales
    
    
    11.38
    %
    
    
    3.78
    %
    
    
    1.12
    %
    
    
    16.28
    %
    
    
    83.72
    %
    
    
    100.00
    %
  41




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 16. Contingencies
  17. Employee Benefit Plan
  18. Supplemental Disclosures of Cash Flow Information
 For the Year ended September 30,2008
    
    
    2007
    
    
    2006Supplemental disclosure of cash flow information:Interest paid
    
    $
    2
    
    
    $
    107
    
    
    $
    91Supplemental disclosure of non-cash investing and financing activities:Common stock issued to CSI in connection with acquisition - 1,931,745 shares
    
    $
    
    
    
    $
    
    
    
    $
    5,505Common stock issued to CSI in connection with the earn-out
provisions of the Purchase Agreement - 150,990 shares
    
    $
    
    
    
    $
    563
    
    
    $
    Restricted common stock awarded as director compensation -
13,165 and 18,482 shares, respectively
    
    $
    52
    
    
    $
    47
    
    
    $
    Increase in additional paid-in capital related to warrants issued to
secure working capital line of credit - 320,856 warrants
    
    $
    
    
    
    $
    
    
    
    $
    356
  42




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 19. Quarterly Results of Operations (Unaudited)
  Three months ended,December 31
    
    
    March 31
    
    
    June 30
    
    
    September 30Fiscal year 2008Total revenues
    
    $
    19,726
    
    
    $
    19,613
    
    
    $
    15,312
    
    
    $
    11,503Gross margin
    
    
    7,047
    
    
    
    7,629
    
    
    
    5,241
    
    
    
    4,615Income from continuing operations
    
    
    2,247
    
    
    
    2,485
    
    
    
    644
    
    
    
    725Loss from discontinued operations
    
    
    (565
    )
    
    
    (2,178
    )
    
    
    (4,737
    )
    
    
    Net income (loss)
    
    
    1,682
    
    
    
    307
    
    
    
    (4,093
    )
    
    
    725Basic income (loss) per common share:Continuing operations
    
    $
    0.12
    
    
    $
    0.13
    
    
    $
    0.03
    
    
    $
    0.04Discontinued operations
    
    $
    (0.03
    )
    
    $
    (0.11
    )
    
    $
    (0.24
    )
    
    $
    Net income (loss)
    
    $
    0.09
    
    
    $
    0.02
    
    
    $
    (0.21
    )
    
    $
    0.04Diluted income (loss) per common share:Continuing operations
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.03
    
    
    $
    0.04Discontinued operations
    
    $
    (0.03
    )
    
    $
    (0.11
    )
    
    $
    (0.24
    )
    
    $
    Net income (loss)
    
    $
    0.08
    
    
    $
    0.02
    
    
    $
    (0.21
    )
    
    $
    0.04Fiscal year 2007Total revenues
    
    $
    14,763
    
    
    $
    16,890
    
    
    $
    16,502
    
    
    $
    26,352Gross margin
    
    
    5,005
    
    
    
    5,332
    
    
    
    5,597
    
    
    
    8,865Income from continuing operations
    
    
    248
    
    
    
    288
    
    
    
    1,391
    
    
    
    3,698Loss from discontinued operations
    
    
    (2,327
    )
    
    
    (2,108
    )
    
    
    (976
    )
    
    
    (2,160
    )Net income (loss)
    
    
    (2,079
    )
    
    
    (1,820
    )
    
    
    415
    
    
    
    1,538Basic income (loss) per common share:Continuing operations
    
    $
    0.01
    
    
    $
    0.02
    
    
    $
    0.07
    
    
    $
    0.20Discontinued operations
    
    $
    (0.13
    )
    
    $
    (0.12
    )
    
    $
    (0.05
    )
    
    $
    (0.12
    )Net income (loss)
    
    $
    (0.12
    )
    
    $
    (0.10
    )
    
    $
    0.02
    
    
    $
    0.08Diluted income (loss) per common share:Continuing operations
    
    $
    0.01
    
    
    $
    0.02
    
    
    $
    0.07
    
    
    $
    0.19Discontinued operations
    
    $
    (0.13
    )
    
    $
    (0.12
    )
    
    $
    (0.05
    )
    
    $
    (0.11
    )Net income (loss)
    
    $
    (0.12
    )
    
    $
    (0.10
    )
    
    $
    0.02
    
    
    $
    0.08
  20. Cumulative Effect Adjustment to Retained Earnings
 
  43




---



##### 



TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 21. Subsequent Events
   PART III
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  ITEM 9A. CONTROLS AND PROCEDURES
   Managements Report on Internal Control Over Financial Reporting
    44




---



##### 



ITEM 9B. OTHER INFORMATION
  ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
   www.telular.com/profile/codes.asp
 ITEM 11. EXECUTIVE COMPENSATION
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
   ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
   45




---



##### 



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  PART IV
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 (a)
    
    
    1.
    
    
    The following financial statements are included in Part II, Item 8 of this Form 10-K. 

Reports of Independent Registered Public Accounting Firm 

Consolidated Balance Sheets as of September 30, 2008 and 2007

Consolidated Statements of Operations for the years ended September 30, 2008, 2007 and 2006

Consolidated Statements of Stockholders Equity for the years ended September 30, 2008, 2007 and 2006


Consolidated Statements of Cash Flows for the years ended September 30, 2008, 2007 and 2006

Notes to Consolidated Financial Statements2.
    
    
    The following financial statement schedule, Schedule II  Valuation and
Qualifying Accounts for the years ended September 30, 2008, 2007 and 2006 is filed as
part of this report. All other financial statement schedules have been omitted because
they are not applicable or are not required or the information required to be set forth
therein is included in the financial statements or notes thereto contained in Part II,
Item 8 of this annual report.Schedule II  Valuation and Qualifying Accounts
 ChargedBalance at
    
    
    to Costs
    
    
    Charged
    
    
    
    
    
    
    Balance atBeginning
    
    
    and
    
    
    to Other
    
    
    
    
    
    
    End ofDescription
    
    of Period
    
    
    Expenses
    
    
    Accounts
    
    
    Deductions
    
    
    PeriodPeriod Ended September 30, 2008Accumulated amortization of intangible
assets
    
    $
    6,105
    
    
    $
    1,098
    (1)
    
    $
    
    
    
    $
    (7,203
    )(2)
    
    $
    Valuation allowance of deferred tax asset
    
    
    57,153
    
    
    
    337
    (3)
    
    
    
    
    
    
    
    
    
    
    57,490Reserve for inventory obsolescence
    
    
    551
    
    
    
    19
    
    
    
    
    
    
    
    (486
    )(4)
    
    
    84Allowance for doubtful accounts
    
    
    40
    
    
    
    61
    
    
    
    
    
    
    
    (62
    )(5)
    
    
    39Period Ended September 30, 2007Accumulated amortization of intangible
assets
    
    $
    2,956
    
    
    $
    3,149
    (1)
    
    $
    
    
    
    $
    
    
    
    $
    6,105Valuation allowance of deferred tax asset
    
    
    55,822
    
    
    
    1,331
    (3)
    
    
    
    
    
    
    
    
    
    
    57,153Reserve for inventory obsolescence
    
    
    922
    
    
    
    328
    
    
    
    
    
    
    
    (699
    )(4)
    
    
    551Allowance for doubtful accounts
    
    
    185
    
    
    
    (54)
    (6)
    
    
    
    
    
    
    (91
    )(5)
    
    
    40Period Ended September 30, 2006Accumulated amortization of intangible
assets
    
    $
    1,350
    
    
    $
    1,606
    (1)
    
    $
    
    
    
    $
    
    
    
    $
    2,956Valuation allowance of deferred tax asset
    
    
    51,268
    
    
    
    4,554
    (3)
    
    
    
    
    
    
    
    
    
    
    55,822Reserve for inventory obsolescence
    
    
    2,285
    
    
    
    245
    
    
    
    
    
    
    
    (1,608
    )(4)
    
    
    922Allowance for doubtful accounts
    
    
    95
    
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    185
 (1)
    
    Amortization of intangibles includes impairment charges. All charges are
included in loss from discontinued operations.(2)
    
    Intangible assets related to the discontinued operations were written-off when
that business unit was abandoned during the third quarter of fiscal 2008.  46




---



##### 



(3)
    
    Amount represents the change in the valuation amount for deferred taxes due
principally to the origination and utilization of net operating loss carryforwards. The
valuation amount reflects the net tax effects of temporary differences between the carry
amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes.(4)
    
    Inventory disposed.(5)
    
    Accounts receivable written-off.(6)
    
    Reversal of previously charged expense for the allowance for doubtful accounts. 3.
    
    Exhibits
 Number
    
    Description
    
    Reference3.1
    
    Certificate of Incorporation
    
    Filed as Exhibit 3.1 to Registration Statement
No. 33-72096 (the Registration Statement)3.2
    
    Amendment No. 1 to Certificate
of Incorporation
    
    Filed as
Exhibit 3.2 to the Registration Statement3.3
    
    Amendment No. 2 to Certificate
of Incorporation
    
    Filed as
Exhibit 3.3 to the Registration
Statement3.4
    
    Amendment No. 3 to Certificate of Incorporation
    
    Filed as
 Exhibit 3.4 to Form 10-Q filed
February 16, 19993.5
    
    Amendment No.4 to Certificate
of Incorporation
    
    Filed as
Exhibit 3.5 to Form 10-Q filed
February 16, 19993.6
    
    By-Laws
    
    Filed as Exhibit 3.4 to the Registration
Statement4.1
    
    Certificate of Designations, Preferences,
and Rights of Series A Convertible Preferred
Stock
    
    Filed as Exhibit 99.2
Form 8-K filed
April 25, 199710.1
    
    Nonqualified Stock Option Agreement,
dated as of October 31, 2000, by and
between the Company and Larry J. Ford
    
    Filed as Exhibit 4.9 to
Registration Statement on
Form S-8, Registration
No. 333-61970 filed
May 31, 200110.2
    
    Nonqualified Stock Option Agreement,
dated as of October 26, 1999, by and
between the Company and Larry J. Ford
    
    Filed as Exhibit 4.10 to
Registration Statement on
Form S-8, Registration
No. 333-61970 filed May 31, 200110.3
    
    Nonqualified Stock Option Agreement,
dated as of October 31, 2000, by and
between the Company and John E. Berndt
    
    Filed as Exhibit 4.15 to
Registration Statement on
Form S-8, Registration
No. 333-61970 filed
May 31, 200110.4
    
    Nonqualified Stock Option Agreement,
dated as of October 26, 1999, by and
between the Company and John E. Berndt
    
    Filed as Exhibit 4.16 to
Registration Statement on
Form S-8, Registration
No. 333-61970 filed
May 31, 2001
  47




---



##### 



Number
    
    Description
    
    Reference10.5
    
    Nonqualified Stock Option Agreement,
dated as of October 30, 2001, by and
between the Company and John E. Berndt
    
    Filed as Exhibit 10.41 to
Form 10-K filed
December 21, 200110.6
    
    Nonqualified Stock Option Agreement,
dated as of October 30, 2001, by and
between the Company and Larry J. Ford
    
    Filed as Exhibit 10.42 to
Form 10-K filed
December 21, 200110.7
    
    Telular Corporation Non-employee
Directors Stock Incentive Plan
    
    Filed as Exhibit 10.22
to Form 10-Q filed
February 14, 200310.8
    
    Amendment to Warrants dated
November 11, 2007
    
    Filed as Exhibit
10.1 to Form 8-K Filed on November 15, 200710.9
    
    Second Amended and Restated
Employment Agreement with
Michael J. Boyle dated
December 7, 2007
    
    Filed as Exhibit
10.1 to Form 8-K filed December 6, 200710.10
    
    Employment Agreement with
Joseph A. Beatty dated
December 14, 2007
    
    Filed as Exhibit
10.1 to Form 8-K filed December 19,
200710.11
    
    Retention and Severance
Agreement with Jonathan M.
Charak dated March 17, 2008
    
    Filed as Exhibit
10.1 to Form 8-K
filed on March 19, 200810.12
    
    Retention and Severance
Agreement with George S.
Brody dated July 29, 2008
    
    Filed as Exhibit
10.1 to Form 8-K
Filed on August 4, 200821
    
    Subsidiaries of Registrant
    
    Filed herewith23
    
    Consent of Ernst & Young LLP
    
    Filed herewith31.1
    
    Certification Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
    
    Filed herewith31.2
    
    Certification Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
    
    Filed herewith32.1
    
    Certification Pursuant to 18
U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    Furnished herewith99
    
    Cautionary Statements
    
    Furnished herewith
 (1)
    
    Certain portions of this exhibit have been omitted and filed separately with the
United
States Securities and Exchange Commission pursuant to a request for confidential
treatment.
The omitted portions have been replaced by an * enclosed by brackets ([*]).  48




---



##### 



SIGNATURES
  Telular CorporationDate: December 15, 2008
    By:
    /s/ JOSEPH A. BEATTYJoseph A. BeattyPresident & Chief Executive Officer  Signature
    
    Title
    
    Date/s/ JOSEPH A. BEATTY
    
    President, Chief Executive Officer
and Director
    
    December 15, 2008Joseph A. Beatty/s/ JONATHAN M. CHARAK
    
    Senior Vice President,
    
    December 15, 2008Jonathan M. Charak
    
    Chief
Financial Officer
and Secretary/s/ ROBERT L. DEERING

Robert L. Deering
    
    Chief Accounting Officer
    
    December 15, 2008/s/ JOHN E. BERNDT

John E. Berndt
    
    Chairman of the Board
    
    December 15, 2008/s/ LAWRENCE S. BARKER

Lawrence S. Barker
    
    Director
    
    December 15, 2008/s/ BETSY J. BERNARD

Betsy J. Bernard
    
    Director
    
    December 15, 2008/s/ BRIAN J. CLUCAS

Brian J. Clucas
    
    Director
    
    December 15, 2008/s/ LARRY J. FORD

Larry J. Ford
    
    Director
    
    December 15, 2008/s/ M. BRIAN MCCARTHY
    
    Director
    
    December 15, 2008M. Brian McCarthy
  49




---



##### 



Exhibit Index
 Number
    
    Description
    
    Reference21
    
    Subsidiaries of Registrant
    
    Filed herewith23
    
    Consent of Ernst & Young LLP
    
    Filed herewith31.1
    
    Certification Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
    
    Filed herewith31.2
    
    Certification Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
    
    Filed herewith32.1
    
    Certification Pursuant to 18
U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
    
    Furnished herewith99
    
    Cautionary Statements
    
    Furnished herewith
  50