United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 2001.
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ___ to ___.
Commission File Number 0-23212
Telular Corporation
(Exact name of Registrant as specified in its charter)
Delaware 36-3885440
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
647 North Lakeview Parkway
Vernon Hills, Illinois
60061
(Address of principal executive offices)
(Zip Code)
(847) 247-9400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No_____
------
The number of shares outstanding of the Registrant's common stock, par value
$.01, as of December 31, 2001, the latest practicable date, was 12,852,928
shares.
1
TELULAR CORPORATION
Index
Page No.
--------
Part I - Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets
December 31, 2001 (unaudited) and September 30, 2001 3
Consolidated Statements of Operations (unaudited)
Three Months Ended December 31, 2001 and
December 31, 2000 4
Consolidated Statement of Stockholders' Equity (unaudited)
Period from September 30, 2001 to
December 31, 2001 5
Consolidated Statements of Cash Flows (unaudited)
Three Months Ended December 31, 2001 and
December 31, 2000 6
Notes to the Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
Part II - Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Recent Sales of Unregistered Securities 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 20
Exhibit Index 21
2
TELULAR CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
December 31, September 30,
2001 2001
------------ -------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 29,591 $ 36,385
Short term investment 19 15
Receivables:
Trade, net of allowance for doubtful accounts of
$206 and $210 at December 31, 2001
and September 30, 2001, respectively 3,323 5,151
Inventories, net 9,179 10,008
Prepaid expenses and other current assets 718 363
--------- ---------
Total current assets 42,830 51,922
Restricted cash 3,789 3,000
Property and equipment, net 3,714 3,743
Other assets:
Excess of cost over fair value of net assets acquired, less accumulated
amortization of $2,342 at December
31, 2001 and September 30, 2001 2,554 2,554
Other intangible assets, less accumulated amortization of
$250 and $125 at December 31, 2001 and September 30, 2001,
respectively 750 875
Deposits and other 559 75
--------- ---------
Total other assets 3,863 3,504
--------- ---------
Total assets $ 54,196 $ 62,169
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable trade $ 2,530 $ 8,470
Accrued liabilities 1,523 1,700
--------- ---------
Total current liabilities 4,053 10,170
Long term revolving line of credit 3,789 3,000
--------- ---------
Total liabilities 7,842 13,170
--------- ---------
Stockholders' equity:
Common stock; $.01 par value; 75,000,000 shares
authorized; 12,852,928 and 12,810,998 outstanding
at December 31, 2001 and September 30, 2001, respectively 129 129
Additional paid-in capital 149,252 149,071
Deficit (102,734) (99,904)
Accumulated other comprehensive loss (293) (297)
--------- ---------
Total stockholders' equity 46,354 48,999
--------- ---------
Total liabilities and stockholders' equity $ 54,196 $ 62,169
========= =========
See accompanying notes
3
TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(Unaudited)
Three Months Ended December 31,
2001 2000
------------- ------------
Net product sales $ 7,195 $ 14,996
Royalty and royalty settlement revenue - 211
------------- ------------
Total revenue 7,195 15,207
Cost of sales 5,565 10,593
------------- ------------
1,630 4,614
Engineering and development expenses 1,565 1,577
Selling and marketing expenses 1,843 1,835
General and administrative expenses 1,032 1,094
Amortization 125 130
------------- ------------
Loss from operations (2,935) (22)
Other income, net 105 173
------------- ------------
Net income (loss) $ (2,830) $ 151
============= ============
Net income (loss) per common share:
Basic $ (0.22) $ 0.01
Diluted $ (0.22) $ 0.01
Weighted average number of common shares outstanding:
Basic 12,821,015 12,678,988
Diluted 12,821,015 12,672,694
4
TELULAR CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
Unrealized
Additional gain (loss) Total
Common Paid-In on Stockholders'
Stock Capital Deficit investments Equity
------------- ------------- ------------ -------------- --------------
Balance at September 30, 2001 $ 129 $ 149,071 $ (99,904) $ (297) $ 48,999
Comprehensive loss:
Net loss for period from October 1,
2001 to December 31, 2001 - - (2,830) - (2,830)
Unrealized gain on investments - - - 4 4
-----------
Comprehensive loss (2,826)
-----------
Deferred compensation related
to stock options - 35 - - 35
Stock options exercised - 103 - - 103
Stock issued in connection with
services and compensation - 43 - - 43
------------------------------------------------------- -----------
Balance at December 31, 2001 $ 129 $ 149,252 $(102,734) $ (293) ($ 46,354)
======================================================= ===========
See accompanying notes
5
TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended December 31,
2001 2000
--------- --------
Operating Activities:
Net income (loss) $ (2,830) $ 151
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities
Depreciation 323 347
Amortization 125 130
Inventory obsolescence expense - 25
Compensation expense related to
stock options 35 35
Common stock issued for services
and compensation 43 6
Loss on sale of short term investment - 65
Changes in assets and liabilities:
Trade receivables 1,828 (936)
Related party receivables - 466
Inventories 829 (4,015)
Prepaid expenses, deposits and other (89) (131)
Trade accounts payable (5,940) 4,252
Related party accounts payable - 525
Accrued liabilities (177) 1,361
-------- --------
Net cash provided by (used in) operating activities (5,853) 2,281
Investing Activities:
Proceeds from sale of short term investment - 17
Increase in restricted cash (789) -
Acquisition of property and equipment (294) (273)
Advance to shareholder (750) -
-------- --------
Net cash used in investing activities (1,833) (256)
-------- --------
Financing Activities:
Proceeds from revolving line of credit, net 789 -
Proceeds from the issuance of common stock 103 61
-------- --------
Net cash provided by financing activities 892 61
-------- --------
Net increase (decrease) in cash and cash equivalents (6,794) 2,086
Cash and cash equivalents, beginning of period 36,385 20,527
-------- --------
Cash and cash equivalents, end of period $ 29,591 $ 22,613
======== ========
See accompanying notes
6
TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Unaudited, dollars in thousands, except share data)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included.
Operating results for the three months ended December 31, 2001, are not
necessarily indicative of the results that may be expected for the full
fiscal year ending September 30, 2002. For further information, refer
to the consolidated financial statements and the footnotes included in
the Annual Report on Form 10-K for the fiscal year ended September 30,
2001.
2. Inventories
The components of inventories consist of the following (000's):
December 31, September 30,
2001 2001
-------------- -------------
(unaudited)
Raw materials $ 4,963 $ 5,486
Finished goods 4,404 5,468
-------- --------
9,367 10,954
Less: Reserve for obsolescence 188 946
-------- --------
$ 9,179 $ 10,008
======== ========
The December 31, 2001, amounts reflect a $1,771 reduction in inventory
and a $700 reduction in related reserve for obsolescence resulting from
the liquidation of last generation Code Division Multiple Access (CDMA)
FWT products. (See Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations)
3. Goodwill and Intangible Assets
Effective October 1, 2001, the Company early adopted Statement of
Financial Accounting Standards (SFAS) 142, which resulted in the
discontinuance of the amortization of goodwill. Under the Statement,
goodwill will be carried at its book value as of September 30, 2001.
Further, in accordance with SFAS 142, any future impairment will be
recognized as either a change in accounting principle (with respect to
the transitional impairment test conducted within six months of
adoption) or as an expense in the period of impairment.
The Company's intangible assets at December 31, 2001 and September 30,
2001 were $750 and $875, respectively. The Company's goodwill was
$2,554 at December 31, 2001 and September 30, 2001. The Company will
test the value of its goodwill for any impairment at least annually.
Amortization expense for intangible assets other than goodwill was $125
and $0 for the first quarter of fiscal year 2002 and 2001,
respectively. In addition, amortization expense for goodwill was $130
for the first quarter of fiscal year 2001.
7
TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Unaudited, dollars in thousands, except share data)
As required by SFAS 142 the results for the prior year's quarter have
not been restated. A reconciliation of net income as if SFAS 142 had
been adopted is presented below for the three months ended December 31,
2000.
Three Months Ended
December 31, 2000
-----------------
Net income as reported $ 151
Add back goodwill amortization 130
------
Adjusted net income 281
======
Basic earnings per share as reported $ 0.01
Goodwill amortization 0.01
------
Adjusted basic earnings per share 0.02
======
Diluted earnings per share as reported $ 0.01
Goodwill amortization 0.01
------
Adjusted diluted earnings per share 0.02
======
4. Advance to Shareholder
In 1992, the Telular Group L.P., predecessor of the Company, entered
into a contribution agreement with DNIC Brokerage Company (DNIC)
pursuant to which DNIC contributed a variety of assets including
certain patents and license agreements, to the Company. Under the
contribution agreement, DNIC retained the right to receive the first
$250 per year in annual royalty payments pursuant to the contributed
license agreements. On October 10, 2001, the Company entered into an
agreement with DNIC, pursuant to which the Company agreed to advance an
amount not to exceed $750 of future royalties to DNIC to be used solely
for the purpose of purchasing the Company's common stock in open market
transactions.
Beginning on October 1, 2001, all royalties received by the Company for
the benefit of DNIC will first be applied to amounts advanced to DNIC
by the Company, and any remaining royalties will be paid to DNIC. The
advances bear interest at the prime rate as published in the Wall
Street Journal. During the first quarter of fiscal year 2002, the
Company advanced a total of $750 to DNIC under the terms of this
arrangement. The current portion is $250, which has been recorded in
other current assets. The long-term portion is $500, which has been
recorded in other assets. DNIC is a shareholder of the Company, who as
of November 9, 2001 holds 1,050,759 shares of the Company's Common
Stock.
5. Revolving Line of Credit
On January 7, 2000, the Company entered into a Loan and Security
Agreement with Wells Fargo Business Credit Inc. (Wells) to provide a
revolving credit facility with a loan limit of $5,000 (the Loan). In
accordance with the agreement, 100% of the outstanding amount of the
Loan is collaterized with restricted cash. At December 31, 2001, the
Company had approximately $3,789 of available borrowings under the
Loan, of which $3,789 was outstanding. Under the Loan, the Company is
restricted from making dividend payments. The Loan matures on January
7, 2003, and carries interest at the bank's prime rate. To reduce
applicable financing fees, the Company issued 50,000 shares of Common
Stock Warrants to Wells. The Warrants have a strike price of $16.29 per
share and expire on January 6, 2005. The value of the Warrants was
accounted for as deferred financing costs, and was recorded at the fair
value of the financing fees of $195. The deferred financing costs are
included in other assets and are being amortized over the life of the
Loan.
8
TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Unaudited, dollars in thousands, except share data)
6. Redeemable Preferred Stock and Preferred Stock
On December 31, 2001 and September 30, 2001, the Company had 21,000
shares of $0.01 par value Redeemable Preferred Stock authorized and
none outstanding.
The Company also had 9,979,000 shares of $0.01 par value Preferred
Stock authorized and none outstanding on December 31, 2001 and
September 30, 2001.
7. Segment Disclosures
The Company, which is organized on the basis of products and services,
has two reportable business segments, Fixed Wireless Terminals and
Security Products. The Company designs, develops, manufactures and
markets both fixed wireless terminals and security products. Fixed
wireless terminals bridge wireline telecommunications customer premises
equipment with cellular-type transceivers for use in wireless
communication networks. Security products provide wireless backup
systems for commercial and residential alarm systems.
Export sales of fixed wireless terminals represent 57% and 87% of total
fixed wireless net product sales for the first quarter of fiscal year
2002 and 2001, respectively.
Export sales of security products were insignificant for the first
quarter of fiscal year 2002 and 2001.
Summarized below are the Company's segment revenue and operating profit
(loss) by reportable segment:
Three Months Ended
December 31,
2001 2000
---- ----
Revenue
Fixed Wireless Terminals $ 4,233 $ 12,435
Security Products 2,962 2,772
---------------------
$ 7,195 $ 15,207
Operating Profit (Loss)
Fixed Wireless Terminals $(2,557) $ 644
Security Products (273) (493)
-----------------------
$(2,830) $ 151
For the three months ended December 31, 2001, two customers located in
Nigeria and the USA, accounted for 26% and 21%, respectively, of the
fixed wireless terminal net product sales and two customers, located in
the USA accounted for 23% and 11%, respectively, of the security
products net product sales. For the three months ended December 31,
2000, one customer located in Mexico, accounted for 70% of the fixed
wireless terminal net product sales and two customers, located in the
USA accounted for 18% and 14% respectively, of the security products
net product sales.
9
TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Unaudited, dollars in thousands, except share data)
8. Earnings Per Share
Basic and diluted net income (loss) per common share are computed based
upon the weighted-average number of shares of common stock outstanding.
Common shares issuable upon the exercise of options, warrants and
redeemable preferred stock are not included in the per share
calculations if the effect of their inclusion would be anti-dilutive.
The following is a reconciliation of the weighted average number of
common shares outstanding for the basic and diluted earnings per share
computation:
Three Months Ended December 31,
2001 2000
---- ----
Weighted average number of common shares outstanding
Basic 12,821,015 12,678,988
Effect of dilutive employee stock options 0 83,706
---------- ----------
Diluted 12,821,015 12,762,694
10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The Company designs, develops, manufactures and markets products based on its
proprietary interface technologies, which provide the capability to bridge
standard telecommunications equipment, including standard telephones, fax
machines, data modems and alarm panels with standard wireless communication
networks in the cellular and PCS frequency bands (collectively cellular).
Applications of the Company's technology include cellular fixed wireless
telecommunications as a primary access service where wireline systems are
unavailable, unreliable or uneconomical, as well as cellular backup systems for
wireline telephone systems and cellular wireless security and alarm monitoring
signaling. The Company's principal product lines are: PHONECELL(R), a line of
cellular Fixed Wireless Terminals and cellular Fixed Wireless Desktop Phones
(collectively FWTs), and TELGUARD(R), a line of cellular wireless security and
alarm monitoring signaling products.
Currently, the Company is devoting a substantial portion of its resources to
international market development, extension of its core product line to new
cellular wireless standards, expansion, protection and licensing of its
intellectual property rights and development of underlying radio technology.
The Company's operating expense levels are based in large part on expectations
of future revenues. If anticipated sales in any quarter do not occur as
expected, expenditure and inventory levels could be disproportionately high, and
the Company's operating results for that quarter, and potentially for future
quarters, could be adversely affected. Certain factors that could significantly
impact expected results are described in Cautionary Statements Pursuant to the
Securities Litigation Reform Act that is set forth in Exhibit 99 to the
Company's Form 10-K for the fiscal year ended September 30, 2001.
Results of Operations
First quarter fiscal year 2002 compared to first quarter fiscal year 2001
Net Product Sales. Net product sales of $7.2 million for the three months ended
December 31, 2001 decreased 52% compared to the same period last year. Sales of
PHONECELL(R) decreased 65%, or $8.0 million, during the first quarter of fiscal
year 2002 compared to the same period of fiscal year 2001. This decrease was
primarily the result of an absence of shipments to Telcel (See Outlook below),
the largest wireless carrier in Mexico. Sales of TELGUARD(R) products during the
first quarter of fiscal year 2002 of $3.0 million increased 7% compared to the
same period last year.
Cost of sales. Cost of sales decreased 47%, or $5.0 million, for the first
quarter of fiscal year 2002 compared to the first quarter of fiscal year 2001.
Cost of sales for the first quarter 2002 of $5.6 million, or 77% of total
revenue, compares to $10.6 million, or 70% of total revenue, for the first
quarter of fiscal year 2001. The decrease in cost of sales during the first
quarter of fiscal year 2002 is primarily the result of the decrease in sales
volume. The increase in cost of sales as a percentage of total revenue is
primarily due to the Company's complete liquidation of its last generation Code
Division Multiple Access (CDMA) FWT inventory. The Company sold such inventory
at $0.3 million below its cost, net of previously established reserves.
General and Administrative Expenses (G&A). G&A for the first quarter of fiscal
year 2002 decreased 6% to $1.0 million from $1.1 million for the same period of
fiscal year 2001. The decrease is primarily the result of a reduction in
incentive pay for the three months ended December 31, 2001, as compared to the
same period last year.
Other Income. Other income for the first quarter of fiscal year 2002 decreased
$0.1 million, compared to the same period during fiscal year 2001. The decrease
is primarily due to lower interest income, as a result of significant
11
interest rate reductions during the first three months of fiscal year 2002
compared to the same period of fiscal year 2001.
Net income (loss). The Company recorded net loss of ($2.8) million for the first
quarter of fiscal year 2002 compared to a net income of $0.2 million for the
first quarter of fiscal year 2001. The decrease is primarily the result of the
lower sales volume.
Net income (loss) per Common Share. Net loss per share of ($0.22) for the first
quarter of fiscal year 2002 compares to net income per share of $0.01 for the
first quarter of fiscal year 2001.
Liquidity and Capital Resources
On December 31, 2001, the Company had $29.6 million in cash and cash equivalents
with a working capital surplus of $38.8 million.
The Company used $5.9 million of cash in operations during the first quarter of
fiscal year 2002 compared to cash generated of $2.3 million during the same
period of fiscal year 2001. The decrease in cash from operations during the
first quarter of fiscal year 2002 is primarily due to a $5.9 million reduction
in accounts payable. This decrease in accounts payable consisted primarily of
payments to our largest vendor for materials utilized in the manufacturing of
desktop phones shipped in the fourth quarter of the prior fiscal year in
fulfillment of the Company's supply agreement with Telcel.
Cash used in investing activities of $1.8 million during the first quarter of
fiscal year 2002 compares to $0.3 million during the same period of fiscal year
2001. The first quarter of fiscal year 2002 amount consists primarily of $0.8
million of increases in restricted cash related to the revolving line of credit
(offset by the same amount of cash from financing activity) and $0.7 million in
cash advanced against future royalties to a shareholder of the Company (See Note
4 to the Consolidated Financial Statements). The investing activities for both
periods also include capital spending for product testing equipment of $0.3
million.
Cash provided by financing activities of $0.9 million during the first quarter
of fiscal year 2002 compares to $0.1 million during the same period of fiscal
year 2001. The amount for the first quarter of fiscal year 2002 consists
primarily of $0.8 million in proceeds of loans under the terms of the Company's
revolving line of credit (offset by the same amount of restricted cash from
investing activity). The financing activities for both periods also include $0.1
million of proceeds from the issuance of common stock in connection with the
exercise of employee stock options.
Based upon its current operating plan, the Company believes its existing capital
resources will enable it to maintain its current and planned operations. Cash
requirements may vary and are difficult to predict given the nature of the
developing markets targeted by the Company. The amount of royalty income from
the Company's licensees is unpredictable, but could have a significant impact on
the Company's cash flows.
The Company requires its foreign customers to prepay, to obtain letters of
credit or to qualify for export credit insurance underwritten by third party
credit insurance companies prior to the Company making international shipments.
Also, to mitigate the effects of currency fluctuations on the Company's results
of operations, the Company conducts all of its international transactions in
U.S. dollars.
Outlook
The statements contained in this outlook are based on current expectations.
These statements are forward looking, and actual results may differ materially.
Based upon observed trends, the Company believes that the market for cellular
FWTs will experience substantial growth over the next five years. The Company
has identified significant growth opportunities in Africa, Brazil, China, India,
Mexico and the USA. Each of these markets will develop at a different pace, and
the sales cycle for
12
these regions are likely to be several months or quarters. Further, economic
conditions play an important role in the timing of market development for the
Company's products. In connection with the present global economic slowdown and
the recession in the USA, the Company's prospects for continued growth have been
accordingly reduced in the near term. However, as economic conditions improve,
the Company is well positioned with a wide range of products to capitalize on
these market opportunities.
In recent months there has been considerable price pressure in the cellular FWT
market, particularly for CDMA products. Most CDMA products are manufactured in
Korea, where several manufacturers are competing for the same business. There
appears to be a glut of CDMA products, which has resulted in very low prices.
Consequently, the Company sold all of its last generation CDMA product at a loss
during the three months ended December 31, 2001.
The Company's next generation CDMA FWTs will incorporate the 1xRTT standard for
high-speed data. The Company expects an improvement in market conditions for
CDMA when 1xRTT networks and products become generally available.
The Company will improve its position in the Global System for Mobile
Communication (GSM) FWT markets with the launch of its PHONECELL(R) SX5 GSM
products with General Packet Radio Service (GPRS) in 2002. GPRS in GSM networks
allow for the use of high-speed data applications.
Shipments under the Company's agreement with Telcel to supply $67.5 million
Desktop Phones dated September 13, 2000, were completed during the fourth
quarter of fiscal year 2001. The absence of desktop phone shipments to Telcel
during the first quarter of fiscal year 2002 resulting from this completion
caused net product sales to be significantly below those of the four previous
quarters. On January 2, 2002, the Company announced an extension of the above
agreement and will ship additional volumes of desktop phones to Telcel during
February, March and April of 2002.
The Company is also actively pursuing a new annual supply agreement with Telcel,
the outcome and timing of which will have a significant impact on the Company's
future revenues and profitability.
Forward Looking Information
Statements contained in this filing, other than historical statements, consist
of forward-looking information. The Company's actual results may vary
considerably from those discussed in this filing as a result of various risks
and uncertainties. For example, there are a number of uncertainties as to the
degree and duration of the revenue momentum, which could impact the Company's
ability to be profitable as lower sales may likely result in lower margins. In
addition, product development expenditures, which are expected to benefit future
periods, are likely to have a negative impact on near term earnings. Other risks
and uncertainties, which are discussed in Exhibit 99 to the Company's 10-K for
the period ended September 30, 2001, include the risk that technological change
will render the Company's technology obsolete, ability to protect intellectual
property rights in its products, unfavorable economic conditions could lead to
lower product sales, the risk of litigation, the Company's ability to develop
new product, the Company's dependence on contractors, the Company's ability to
maintain quality control, the risk of doing business in developing markets, the
Company's dependence on research and development, the uncertainty of additional
funding, dilution of ownership to stockholders resulting from financing
activities, volatility of Common Stock price, the effects of control by existing
shareholders, intense industry competition including competition from its
licensees and new market entrants with cellular phone docking station products
and the uncertainty in the development of wireless service generally.
13
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
On March 2, 1998, the Company received 300,000 shares of ORA Electronics, Inc.
common stock ("ORA stock") in connection with the settlement of patent
litigation. ORA stock is traded on Nasdaq's Over The Counter (OTC) system. The
Company's holdings in ORA stock are valued at the quoted price on OTC for ORA
stock on the date of each balance sheet presented.
Pursuant to the settlement with ORA, as amended, the Company is entitled to
receive 12,200,000 additional shares of ORA stock (Additional Shares) from ORA
on February 1, 2002. As of February 14, 2002, the Company had not received the
Additional Shares. The Company has demanded that ORA immediately comply with the
settlement agreement and issue the Additional Shares. The Company will invoke
all legal remedies available to force ORA to comply with the settlement
agreement.
Since the market value of the Additional Shares exceeds the market value of the
Company's holdings in ORA stock, the Company has accounted for a decline in
market value of its ORA stock holdings as temporary. Accordingly, the Company
has recorded the market value decline as an unrealized loss, which is an equity
transaction.
The Company frequently invests available cash and cash equivalents in short term
instruments such as certificates of deposit, commercial paper and money market
accounts. Although the rate of interest paid on such investments may fluctuate
over time, each of the Company's investments is made at a fixed interest rate
over the duration of the investment. All of these investments have maturities of
less than 90 days. The Company believes its exposure to market risk fluctuates
for these investments is not material as of December 31, 2001.
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts receivable.
For international sales, the Company generally receives either payment prior to
shipment or irrevocable letters of credit that are confirmed by U.S. banks to
reduce its credit risk. Further, the Company purchases credit insurance for all
significant open accounts outside of the United States. The Company performs
ongoing credit evaluations and charges amounts to operations when they are
determined to be uncollectible.
14
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On October 5, 2000, the Company filed suit against Vox2, Inc., of Northborough,
Massachusetts, which manufactures a cellular interface product named the Vox
Link. The Company has alleged infringement of its U.S. Patents: 4,659, 096;
5,715,296; and 5,946,616, and seeks injunction, damages, attorney fees and
costs. On January 8, 2002, a Magistrate recommended that Vox2, Inc.'s product
not be enjoined. The Company will object to this recommendation and is
continuing with the discovery process in its case against Vox2.
On September 8, 2001, the Company filed a patent infringement lawsuit in Korea
for an injunction against LG Electronics on its cellular interface products for
CDMA Fixed Wireless Terminals; Models LST-220(F) and 2200(F). On December 4,
2001 the Korean Court denied The Company an injunction on the sale or
manufacture of these products because LG Electronics stated it had ceased
manufacturing the products as of December 26, 2000. The Company is currently
preparing to file a separate cause of action for damages arising out of the
sales of the LST-220(F) and 2200(F) by LG Electronics.
While no assurance can be given regarding the outcome of legal proceedings that
arise in the ordinary course of business, the Company believes that the final
outcome of these matters will not have a material effect on the Company's
consolidated financial position or results of operations. However, because of
the nature and inherent uncertainties of litigation, should the outcome of any
legal actions be unfavorable, the Company may be required to pay damages and
other expenses, which could have a material adverse effect on the Company's
financial position and results of operations.
Item 2. Changes in Securities and Recent Sales of Unregistered Securities
Changes in Securities
On January 7, 2000, the Company entered into a Loan and Security Agreement with
Wells Fargo Business Credit Inc. to provide a revolving credit facility with a
loan limit of $5 million (the Loan). (See Note 5 to the Consolidated Financial
Statements) Under the terms of the Loan, the Company is prohibited from paying
cash dividends during the term of the Loan.
Recent Sales of Unregistered Securities
During the three months ended December 31, 2001, the Company issued 9,060 shares
of Common Stock valued at $43,340.75 to the law of firm of Hamman and Benn for
legal services. These issuances were exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended, as they did not involve
a public offering of securities.
15
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (listed by number according to Exhibit table of Item 601 in
Regulation S-K)
Number Description Reference
------ ----------- ---------
3.1 Certificate of Incorporation Filed as Exhibit 3.1 to
Registration Statement
No. 33-72096 (the Registration
Statement)
3.2 Amendment No. 1 to Certificate Filed as
of Incorporation Exhibit 3.2 to
the Registration
Statement
3.3 Amendment No. 2 to Certificate Filed as
of Incorporation Exhibit 3.3 to
the Registration
Statement
3.4 Amendment No. 3 to Certificate Filed as
of Incorporation Exhibit 3.4 to
Form 10-Q filed
February 16, 1999
3.5 Amendment No. 4 to Certificate Filed as
of Incorporation Exhibit 3.5 to
Form 10-Q filed
February 16, 1999
3.6 By-Laws Filed as
Exhibit 3.4 to
the Registration
Statement
4.1 Certificate of Designations, Preferences, Filed as Exhibit 99.2
and Rights of Series A Convertible Preferred Form 8-K filed
Stock April 25, 1997
4.2 Loan agreement with Wells Fargo Business Filed as Exhibit 4.5 to
Form 10-Q filed
February 14, 2000
4.3 Stock Purchase Warrant with Wells Filed as Exhibit 4.6 to
Fargo Business Form 10-Q filed
February 14, 2000
10.1 Employment Agreement with Filed as Exhibit
Kenneth E. Millard 10.1 to Form 10-Q
filed August 14, 1996
10.2 Stock Option Agreement with Filed as Exhibit
Kenneth E. Millard 10.2 to Form 10-Q
filed August 14, 1996
10.3 Stock Purchase Agreement By Filed as Exhibit
and Among Telular Corporation 10.3 to Form 10-Q
and TelePath Corporation (which filed August 14, 1996
had changed its name to Wireless
Domain, Incorporated)
10.4 Appointment of Larry J. Ford Filed as Exhibit 10.2
to Form 10-Q filed
May 1, 1995
10.5 Option Agreement with Motorola Filed as Exhibit 10.6
dated November 10, 1995 to Form 10-K filed
December 26, 1996 (1)
10.6 Amendment No. 1 dated September 24, 1996 Filed as Exhibit 10.7
to Option Agreement with Motorola to Form 10-Q filed
August 13, 1999 (1)
16
10.7 Amendment No. 2 dated April 30, 1999 Filed as Exhibit 10.8
to Option Agreement with Motorola to Form 10-Q filed
August 13, 1999 (1)
10.8 Stock Purchase Agreement Filed as Exhibit 10.11
between Motorola, Inc. and to the Registration
Telular Corporation dated Statement
September 20, 1993
10.9 Patent Cross License Agreement Filed as Exhibit 10.12
between Motorola, Inc. and the to the Registration
Company, dated March 23, 1990 Statement (1)
and Amendments No. 1, 2 and
3 thereto
10.10 Amendment No. 4 to Patent Cross License Filed as Exhibit 10.11
Agreement between Motorola, Inc. and the to Form 10-Q filed
Company, dated May 3, 1999 August 13, 1999 (1)
10.11 Amended and Restated Shareholders Filed as Exhibit 10.15
Agreement dated November 2, 1993 to the Registration
Statement (1)
10.12 Amendment No. 1 to Amended and Filed as Exhibit 10.24
Restated Shareholders the Registration
Agreement, dated January 24, Statement
1994
10.13 Amendment No. 2 to Amended and Filed as Exhibit 10.5
Restated Shareholders Agreement, to the Form 10-Q filed
dated June 29, 1995 July 28, 1995
10.14 Amended and Restated Registration Filed as Exhibit 10.16
Rights Agreement dated November to the Registration
2, 1993 Statement
10.15 Amendment No. 1 to Amended and Filed as Exhibit 10.25
Restated Registration Rights to the Registration
Agreement, dated January 24, 1994 Statement
10.16 Securities Purchase Agreement dated Filed as Exhibit 99.1 to
April 16, 1997, by and between Telular Form 8-K filed
Corporation and purchasers of the April 25, 1997
Series A Convertible Preferred Stock
10.17 Registration Rights Agreement dated Filed as Exhibit 99.3 to
April 16, 1997, by and between Telular Form 8-K filed
Corporation and purchasers of the April 25, 1997
Series A Convertible Preferred Stock
10.18 Securities Purchase Agreement dated Filed as Exhibit 99.3 to
June 6, 1997, by and between Telular Registration Statement on
Corporation and purchasers of the Series Form S-3, Registration
A Convertible Preferred Stock No. 333-27915, as amended
by Amendment No. 1 filed
June 13, 1997, and further
Amended by Amendment
No. 2 filed July 8, 1997
(Form S-3)
10.19 Registration Rights Agreement dated Filed as Exhibit 99.4 to
June 6, 1997, by and between Telular Form S-3
Corporation and purchasers of the Series
A Convertible Preferred Stock
10.20 Agreement and Plan of Merger by and Filed as Exhibit 10.21
among Wireless Domain Incorporated to Form 10-K filed
(formerly TelePath), Telular-WD (a December 19, 1998
wholly-owned subsidiary of Telular) and
certain stockholder of Wireless Domain
Incorporated
17
10.21 Common Stock Investment Agreement Filed as Exhibit 4.8 to
dated March 3, 2000 Registration Statement on
Form S-3, Registration
No. 333-33810 filed
March 31, 2000, as amended
By Amendment No. 1 filed
April 28, 2000
10.22 Registration Rights Agreement Filed as Exhibit 4.9 to
dated March 3, 2000 Registration Statement on
Form S-3, Registration
No. 333-33810 filed
March 31, 2000, as amended
By Amendment No. 1 filed
April 28, 2000
10.23 Employment Agreement with Daniel D. Filed as Exhibit 10.22
Giacopelli to Form 10-Q filed
February 13, 1998
10.24 OEM Equipment Purchase Agreement Filed as Exhibit 10.27
for WAFU dated April 30, 1999 to form 10-Q filed
August 13, 1999 (1)
10.25 Settlement and Release of Claims Filed as Exhibit 10.25
Agreement with Motorola (1) to Form 10-Q filed
February 14, 2001 (1)
10.26 Agreement for the Purchase of Telular Filed as Exhibit 10.1
Fixed Telephony Digital Cellular to Form 8-K filed
Telephones Dated as of September 13, September 13, 2000 (1)
2000, among Telular Corporation,
Radiomovil DIPSA, S.A. de C.V., and
BrightStar de Mexico S.A. de C.V. (1)
10.27 Nonqualified Stock Option Agreement, Filed as Exhibit 4.9 to
dated as of October 31, 2000, by and Registration Statement on
between the Company and Larry J. Ford Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.28 Nonqualified Stock Option Agreement, Filed as Exhibit 4.10 to
dated as of October 26, 1999, by and Registration Statement on
between the Company and Larry J. Ford Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.29 Nonqualified Stock Option Agreement, Filed as Exhibit 4.11 to
dated as of October 27, 1998, by and Registration Statement on
between the Company and Larry J. Ford Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.30 Nonqualified Stock Option Agreement, Filed as Exhibit 4.12 to
dated as of February 28, 1997, by and Registration Statement on
between the Company and Larry J. Ford Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.31 Nonqualified Stock Option Agreement, Filed as Exhibit 4.13 to
dated as of April 17, 1996, by and Registration Statement on
between the Company and Larry J. Ford Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.32 Nonqualified Stock Option Agreement, Filed as Exhibit 4.14 to
dated as of April 7, 1995, by and Registration Statement on
between the Company and Larry J. Ford Form S-8, Registration
No. 333-61970 filed
May 31, 2001
18
10.33 Nonqualified Stock Option Agreement, Filed as Exhibit 4.15 to
dated as of October 31, 2000, by and Registration Statement on
between the Company and John E. Berndt Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.34 Nonqualified Stock Option Agreement, Filed as Exhibit 4.16 to
dated as of October 26, 1999, by and Registration Statement on
between the Company and John E. Berndt Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.35 Nonqualified Stock Option Agreement, Filed as Exhibit 4.17 to
dated as of October 27, 1998, by and Registration Statement on
between the Company and John E. Berndt Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.36 Nonqualified Stock Option Agreement, Filed as Exhibit 4.18 to
dated as of February 28, 1997, by and Registration Statement on
between the Company and John E. Berndt Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.37 Nonqualified Stock Option Agreement, Filed as Exhibit 4.19 to
dated as of December 3, 1996, by and Registration Statement on
between the Company and John E. Berndt Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.38 Nonqualified Stock Option Agreement, Filed as Exibit 10.38 to
dated as of July 25, 2001, by and Form 10-K filed
between the Company and Mitchell H. Saranow December 21, 2001
10.39 Nonqualified Stock Option Agreement, Filed as Exibit 10.39 to
dated as of August 30, 2001, by and Form 10-K filed
between the Company and Richard D. Haning December 21, 2001
10.40 Advance Agreement dated as of Filed as Exhibit 10.40 to
October 9, 2001, by and between the Form 10-K filed
Company and DNIC Brokerage Company December 21, 2001
10.41 Nonqualified Stock Option Agreement, Filed as Exhibit 10.41 to
dated as of October 30, 2001, by and Form 10-K filed
between the Company and John E. Berndt December 21, 2001
10.42 Nonqualified Stock Option Agreement, Filed as Exhibit 10.42 to
dated as of October 30, 2001, by and Form 10-K filed
between the Company and Larry J. Ford December 21, 2001
10.43 Nonqualified Stock Option Agreement, Filed as Exhibit 10.43 to
dated as of October 30, 2001, by and Form 10-K filed
between the Company and Richard D. Haning December 21, 2001
10.44 Nonqualified Stock Option Agreement, Filed as Exhibit 10.44 to
dated as of October 30, 2001, by and Form 10-K filed
between the Company and Mitchell H. Saranow December 21, 2001
11 Statement regarding computation Filed herewith
of per share earnings
(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 ([*]).
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three months
ended December 31, 2001.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report on Form 10-Q to be signed on its behalf
by the undersigned, thereunto duly authorized.
Telular Corporation
Date February 14, 2002 By: /s/ Kenneth E. Millard
----------------- ----------------------
Kenneth E. Millard
President & Chief Executive Officer
Date February 14, 2002 /s/ Jeffrey L. Herrmann
----------------- -----------------------
Jeffrey L. Herrmann
Executive Vice President, Chief Operating Officer
& Chief Financial Officer
Date February 14, 2002 /s/ Robert L. Zirk
----------------- ------------------
Robert L. Zirk
Controller & Chief Accounting Officer
20
Exhibit Index
Number Description Reference
------ ----------- ---------
3.1 Certificate of Incorporation Filed as Exhibit 3.1 to
Registration Statement
No. 33-72096 (the Registration
Statement)
3.2 Amendment No. 1 to Certificate Filed as
of Incorporation Exhibit 3.2 to
the Registration
Statement
3.3 Amendment No. 2 to Certificate Filed as
of Incorporation Exhibit 3.3 to
the Registration
Statement
3.4 Amendment No. 3 to Certificate Filed as
of Incorporation Exhibit 3.4 to
Form 10-Q filed
February 16, 1999
3.5 Amendment No. 4 to Certificate Filed as
of Incorporation Exhibit 3.5 to
Form 10-Q filed
February 16, 1999
3.6 By-Laws Filed as
Exhibit 3.4 to
the Registration
Statement
4.1 Certificate of Designations, Preferences, Filed as Exhibit 99.2
and Rights of Series A Convertible Preferred Form 8-K filed
Stock April 25, 1997
4.2 Loan agreement with Wells Fargo Business Filed as Exhibit 4.5 to
Form 10-Q filed
February 14, 2000
4.3 Stock Purchase Warrant with Wells Filed as Exhibit 4.6 to
Fargo Business Form 10-Q filed
February 14, 2000
10.1 Employment Agreement with Filed as Exhibit
Kenneth E. Millard 10.1 to Form 10-Q
filed August 14, 1996
10.2 Stock Option Agreement with Filed as Exhibit
Kenneth E. Millard 10.2 to Form 10-Q
filed August 14, 1996
10.3 Stock Purchase Agreement By Filed as Exhibit
and Among Telular Corporation 10.3 to Form 10-Q
and TelePath Corporation (which filed August 14, 1996
had changed its name to Wireless
Domain, Incorporated)
10.4 Appointment of Larry J. Ford Filed as Exhibit 10.2
to Form 10-Q filed
May 1, 1995
10.5 Option Agreement with Motorola Filed as Exhibit 10.6
dated November 10, 1995 to Form 10-K filed
December 26, 1996 (1)
10.6 Amendment No. 1 dated September 24, 1996 Filed as Exhibit 10.7
to Option Agreement with Motorola to Form 10-Q filed
August 13, 1999 (1)
21
10.7 Amendment No.2 dated April 30, 1999 Filed as Exhibit 10.8
to Option Agreement with Motorola to Form 10-Q filed
August 13, 1999 (1)
10.8 Stock Purchase Agreement Filed as Exhibit 10.11
between Motorola, Inc. and to the Registration
Telular Corporation dated Statement
September 20, 1993
10.9 Patent Cross License Agreement Filed as Exhibit 10.12
between Motorola, Inc. and the to the Registration
Company, dated March 23, 1990 Statement (1)
and Amendments No. 1, 2 and
3 thereto
10.10 Amendment No. 4 to Patent Cross License Filed as Exhibit 10.11
Agreement between Motorola, Inc. and the to Form 10-Q filed
Company, dated May 3, 1999 August 13, 1999 (1)
10.11 Amended and Restated Shareholders Filed as Exhibit 10.15
Agreement dated November 2, 1993 to the Registration
Statement (1)
10.12 Amendment No. 1 to Amended and Filed as Exhibit 10.24
Restated Shareholders the Registration
Agreement, dated January 24, Statement
1994
10.13 Amendment No. 2 to Amended and Filed as Exhibit 10.5
Restated Shareholders Agreement, to the Form 10-Q filed
dated June 29, 1995 July 28, 1995
10.14 Amended and Restated Registration Filed as Exhibit 10.16
Rights Agreement dated November to the Registration
2, 1993 Statement
10.15 Amendment No. 1 to Amended and Filed as Exhibit 10.25
Restated Registration Rights to the Registration
Agreement, dated January 24, 1994 Statement
10.16 Securities Purchase Agreement dated Filed as Exhibit 99.1 to
April 16, 1997, by and between Telular Form 8-K filed
Corporation and purchasers of the Series April 25, 1997
A Convertible Preferred Stock
10.17 Registration Rights Agreement dated Filed as Exhibit 99.3 to
April 16, 1997, by and between Telular Form 8-K filed
Corporation and purchasers of the Series April 25, 1997
A Convertible Preferred Stock
10.18 Securities Purchase Agreement dated Filed as Exhibit 99.3 to
June 6, 1997, by and between Telular Registration Statement on
Corporation and purchasers of the Series Form S-3, Registration
A Convertible Preferred Stock No. 333-27915, as amended
by Amendment No. 1 filed
June 13, 1997, and further
Amended by Amendment
No. 2 filed July 8, 1997
(Form S-3)
10.19 Registration Rights Agreement dated Filed as Exhibit 99.4 to
June 6, 1997, by and between Telular Form S-3
Corporation and purchasers of the Series
A Convertible Preferred Stock
10.20 Agreement and Plan of Merger by and Filed as Exhibit 10.21
among Wireless Domain Incorporated to Form 10-K filed
(formerly TelePath), Telular-WD (a December 19, 1998
wholly-owned subsidiary of Telular) and
certain stockholder of Wireless Domain
Incorporated
22
10.21 Common Stock Investment Agreement Filed as Exhibit 4.8 to
dated March 3, 2000 Registration Statement on
Form S-3, Registration
No. 333-33810 filed
March 31, 2000, as amended
By Amendment No. 1 filed
April 28, 2000
10.22 Registration Rights Agreement Filed as Exhibit 4.9 to
dated March 3, 2000 Registration Statement on
Form S-3, Registration
No. 333-33810 filed
March 31, 2000, as amended
By Amendment No. 1 filed
April 28, 2000
10.23 Employment Agreement with Daniel D. Filed as Exhibit 10.22
Giacopelli to Form 10-Q filed
February 13, 1998
10.24 OEM Equipment Purchase Agreement Filed as Exhibit 10.27
for WAFU dated April 30, 1999 to form 10-Q filed
August 13, 1999 (1)
10.25 Settlement and Release of Claims Filed as Exhibit 10.25
Agreement with Motorola (1) to Form 10-Q filed
February 14, 2001 (1)
10.26 Agreement for the Purchase of Telular Filed as Exhibit 10.1
Fixed Telephony Digital Cellular to Form 8-K filed
Telephones Dated as of September 13, September 13, 2000 (1)
2000, among Telular Corporation,
Radiomovil DIPSA, S.A. de C.V., and
BrightStar de Mexico S.A. de C.V. (1)
10.27 Nonqualified Stock Option Agreement, Filed as Exhibit 4.9 to
dated as of October 31, 2000, by and Registration Statement on
between the Company and Larry J. Ford Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.28 Nonqualified Stock Option Agreement, Filed as Exhibit 4.10 to
dated as of October 26, 1999, by and Registration Statement on
between the Company and Larry J. Ford Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.29 Nonqualified Stock Option Agreement, Filed as Exhibit 4.11 to
dated as of October 27, 1998, by and Registration Statement on
between the Company and Larry J. Ford Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.30 Nonqualified Stock Option Agreement, Filed as Exhibit 4.12 to
dated as of February 28, 1997, by and Registration Statement on
between the Company and Larry J. Ford Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.31 Nonqualified Stock Option Agreement, Filed as Exhibit 4.13 to
dated as of April 17, 1996, by and Registration Statement on
between the Company and Larry J. Ford Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.32 Nonqualified Stock Option Agreement, Filed as Exhibit 4.14 to
dated as of April 7, 1995, by and Registration Statement on
between the Company and Larry J. Ford Form S-8, Registration
No. 333-61970 filed
May 31, 2001
23
10.33 Nonqualified Stock Option Agreement, Filed as Exhibit 4.15 to
dated as of October 31, 2000, by and Registration Statement on
between the Company and John E. Berndt Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.34 Nonqualified Stock Option Agreement, Filed as Exhibit 4.16 to
dated as of October 26, 1999, by and Registration Statement on
between the Company and John E. Berndt Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.35 Nonqualified Stock Option Agreement, Filed as Exhibit 4.17 to
dated as of October 27, 1998, by and Registration Statement on
between the Company and John E. Berndt Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.36 Nonqualified Stock Option Agreement, Filed as Exhibit 4.18 to
dated as of February 28, 1997, by and Registration Statement on
between the Company and John E. Berndt Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.37 Nonqualified Stock Option Agreement, Filed as Exhibit 4.19 to
dated as of December 3, 1996, by and Registration Statement on
between the Company and John E. Berndt Form S-8, Registration
No. 333-61970 filed
May 31, 2001
10.38 Nonqualified Stock Option Agreement, Filed as Exibit 10.38 to
dated as of July 25, 2001, by and Form 10-K filed
between the Company and Mitchell H. Saranow December 21, 2001
10.39 Nonqualified Stock Option Agreement, Filed as Exibit 10.39 to
dated as of August 30, 2001, by and Form 10-K filed
between the Company and Richard D. Haning December 21, 2001
10.40 Advance Agreement dated as of Filed as Exhibit 10.40 to
October 9, 2001, by and between the Form 10-K filed
Company and DNIC Brokerage Company December 21, 2001
10.41 Nonqualified Stock Option Agreement, Filed as Exhibit 10.41 to
dated as of October 30, 2001, by and Form 10-K filed
between the Company and John E. Berndt December 21, 2001
10.42 Nonqualified Stock Option Agreement, Filed as Exhibit 10.42 to
dated as of October 30, 2001, by and Form 10-K filed
between the Company and Larry J. Ford December 21, 2001
10.43 Nonqualified Stock Option Agreement, Filed as Exhibit 10.43 to
dated as of October 30, 2001, by and Form 10-K filed
between the Company and Richard D. Haning December 21, 2001
10.44 Nonqualified Stock Option Agreement, Filed as Exhibit 10.44 to
dated as of October 30, 2001, by and Form 10-K filed
between the Company and Mitchell H. Saranow December 21, 2001
11 Statement regarding computation Filed herewith
of per share earnings
(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
([*]).
24