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

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

Telular Corporation

Delaware (State or other jurisdiction of incorporation or organization)		36-3885440 (I.R.S. employer identification no.)

Title of Each Class		Name of each exchange on which registered
Common Stock, $.01 Par Value		The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No þ

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 þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange.

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

As of March 31, 2008, the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $51,407,000 (based upon the closing sales price of such stock as reported by The NASDAQ Stock Market LLC on such date). The number of shares outstanding of the registrant’s Common Stock as of December 8, 2008, the latest practicable date, was 18,466,876 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the close of the registrant’s fiscal year ended September 30, 2008 are incorporated by reference in Part III of this Form 10-K.

 

 

PART I
(Dollar In Thousands, Except Per Share Data)

ITEM 1. BUSINESS

OVERVIEW

Telular Corporation (Telular or the Company) designs, develops and distributes products and services that utilize wireless networks to provide data and voice connectivity among people and machines. Telular’s product and service offerings take advantage of the pervasiveness and data transport capabilities of wireless networks in order to facilitate communications among people and machines. Oftentimes, the Company’s products and services replace the wireline network while providing the added flexibility of wireless connectivity.

Telular was established in 1986 when it acquired the intellectual property rights for its cellular interface concept and methodology. Historically, Telular provided Fixed Cellular Terminals (FCTs) and Fixed Cellular Phones (FCPs) to markets in North America and in developing countries around the world. Today, while Telular continues to develop FCTs, it is emphasizing the development of FCTs that work in conjunction with software systems to provide integrated event monitoring and reporting services for machine-to-machine (M2M) applications. M2M applications take advantage of wireless networks to improve process efficiency in areas such as supply chain management, security monitoring, meter reading, vehicle tracking and many other commercial and industrial situations.

COMPANY STRATEGY

Strategically, Telular is focused on M2M market segments in which the Company can provide a differentiated product and service offering using wireless networks to facilitate supply chain efficiencies. Telular invests in solutions that uniquely meet a customer’s need to utilize remote telemetry using technology similar to its market-leading TELGUARD security solution. In addition, Telular continues to sell FCT products that function on a standalone basis and enable end users to transmit voice, data and fax information over commercial wireless networks.

The most recent M2M application currently offered by the Company is tank level monitoring. Through its October 2008 acquisition of SupplyNet Communications, Inc., Telular added approximately 13,000 tanks to its subscription base for monitoring services. The Telular tank monitoring solution, TankLink, combines a specially designed cellular communicator, wireless data services and a web-based application into a single offering which allows end-users to remotely monitor the level of product contained in each tank vessel. This information commonly feeds a vendor managed inventory (VMI) program that improves the efficiency and timeliness of product delivery while optimizing the amount of product held by customers at any given time. Most of the Company’s existing tank monitoring systems are installed in the fuels and lubricants space. Additional market segments served include industrial chemicals, food additives, and waste water treatment.

The Company’s TELGUARD products and service generate a majority of Telular’s revenue. TELGUARD service combines a specialized terminal unit with Telular’s message center to provide real-time transport of alarm signals from residential and commercial locations to an alarm company’s central monitoring station. Alarm monitoring companies purchase the products and cellular service from Telular and resell them to end users in order to provide a wireless backup for the conveyance of alarm signals, which are typically sent over traditional wireline phone networks. Increasingly, the Company’s TELGUARD solution is being used as the primary means for the transmission of alarm signals as end users eliminate traditional phone lines in favor of voice-over-IP (VoIP) over broadband and cellular telephones.

Telular’s standalone FCT business targets both commercial and residential consumers, who use FCTs for voice, fax, and Internet access over the wireless networks. Distribution outside the United States is typically through direct sales to large wireless carriers who certify the FCT equipment for use on their networks and then sell and distribute FCT products directly to end users through their existing distribution channels for wireless handsets. At its most basic level, an FCT allows users to simultaneously plug in a standard telephone, fax machine and a computer data line, which the FCT then makes functional over the wireless phone network. In the United States, FCTs are most often used for remote or mobile applications in which cellular service is available but broadband Internet connectivity is not. For example, FCTs are used by public safety agencies to provide connectivity for mobile command centers. In Latin America, Telular FCTs are used more extensively due to the fact that traditional wireline telephone and broadband networks were not built as extensively as in the United States, but cellular systems have been widely implemented. One key application for FCTs in Latin America is for Least Cost Routing (LCR). LCR is the process of routing calls according to the most favorable tariff rates. An FCT enables a private branch exchange (PBX) to consider cellular rates while computing the lowest possible tariff for an outbound phone call.

Telular operates as a single-segment enterprise for financial reporting purposes. For financial information about geographic areas, see “Note 14. Major Customers” and “Note 15. Export Sales” to the consolidated financial statements of Telular set forth in Item 8 of this Form 10-K.

GEOGRAPHICAL MARKETS

Currently, the vast majority of M2M tank applications served by Telular are located within the United States. These installations span the entire country and the Company expects to expand over time into other countries, particularly in Latin America where it has strong relationships with the leading wireless carriers.

TELGUARD products and service are currently sold only in the United States, although the Company plans to expand service to other North American countries during fiscal 2009.

The Company currently focuses its FCT sales efforts in North and South America, but also has sales in Africa, Asia and the Middle East.

TECHNOLOGY

Integral to our success in the FCT space is our experience in creating intelligent interfaces enabling ordinary telecommunications equipment to operate on wireless phone networks. Bridging the gap between wireline customer premises equipment and cellular networks, the intelligent interface provides Telular’s products with the “look and feel” of the wireline network, providing critical communications and security needs in a variety of environments. The lack of dial tone on the cellular network is a key difference from the wireline network. The generation of a standard dial tone, along with off-hook signal detection and other common wireline signals, are key benefits provided by our products.

RESEARCH AND DEVELOPMENT AND PRODUCT LINES

Telular has built a core competency in developing products which enable devices such as standard telephones, fax machines and computers to utilize both GSM-based and CDMA-based wireless phone networks. In addition, our M2M and TELGUARD solutions operate in conjunction with real-time, transaction processing servers which receive data, transform the data, and immediately forward the result to our customers. The M2M tank level monitoring and TELGUARD security solutions are a combination of hardware product design along with software system design. In both cases, the software system is capable of high-volume, real-time transaction processing of mission critical data (security alarms and tank fill levels). Such integrated hardware and software system solutions will be the focus of our research and development activities going forward and will be further applied to the event monitoring space.

Because our products operate on a coordinated basis with wireless phone networks, Telular works closely with major carriers to certify our products on their networks. In many cases, the carriers themselves are our customers and they sell and distribute our products to end users upon certification. Based on this need to work closely with the major wireless phone carriers, Telular has developed strong working relationships with these carriers as customers and solution partners.

Research and development activities sponsored by the Company for the years ended September 30, 2008, 2007, and 2006, were $4,448, $6,076, and $2,636, respectively, and are included in engineering and development expense. There are no customer sponsored research and development activities included in any of those years.

The following details areas of product delivery and research during fiscal 2008 and anticipated in fiscal 2009.

M2M SOLUTIONS — During 2008, Telular developed an integrated, M2M event monitoring system consisting of two new hardware products as well as a message processing engine, database and customer portal. Pending market development activities in early 2009, the Company expects to further refine this base-level M2M system solution for additional vertical markets. The October 1, 2008, acquisition of SupplyNet Communications, Inc. brought the Company a successful wireless communicator product line for tank level monitoring. Enhancements to this hardware and its supporting message center will be made during 2009.

TELGUARD — Telular’s engineering team continues to update the TELGUARD digital product portfolio by addressing the growing demand and technology changes in the electronics security market. In fiscal 2008, Telular re-engineered its message processing system, including the upgrade of all hardware servers on which the system operates. In addition, the Company introduced TELGUARD DIGITAL TG-11 which integrates more directly with key security panels and should improve the Company’s competitive position with regard to these panels from both a price and functionality perspective. In fiscal 2009, Telular will further enhance its Telguard services by improving the Telguard online portal and introducing other system enhancements.

TERMINALS — In fiscal 2008, we launched a new FCT called SX7T, which include 3G radio technologies (HSDPA and EVDO). These radio technologies take advantage of the cellular network’s evolution to those standards that offer high speed data for improved data networking and faster Internet access. In addition, the new SX6T GSM terminal for 2G networks was introduced in late 2008 and is undergoing certification testing at numerous potential carrier customers. The Company currently expects to focus its 2009 Terminals development activity on further enhancements to its 2G terminal product line.

SALES, MARKETING SERVICE AND SUPPORT

Domestic Sales

In the United States, Telular markets both its TELGUARD and other FCT products through an Atlanta-based sales group. TELGUARD customers are security system distributors and security service dealers that the Company sells to on a direct basis. The Company utilizes a significant number of manufacturer’s representatives to manage approximately 3,500 customer relationships for the Telguard products. Other FCT customers are the large cellular carriers and dealers and Value Added Resellers (VARs) dedicated to niche market applications that the Company sells to on a direct basis. In fiscal 2008, the Company’s domestic revenues were $56,786, or 86% of total revenues.

International Sales

Our international sales team is based in Miami and covers key markets such as Latin America. These markets include significant cellular carrier customers in countries such as Mexico and Venezuela. In addition, Telular has built strong relationships with distributors and VARs in a number of these and other markets. In fiscal 2008, the Company’s international revenues were $9,368, or 14% of total revenues.

Service and Support

Telular believes that providing customers with comprehensive product service and support is critical to maintaining a competitive position in the mobile telecommunications equipment industry. Telular offers warranty and repair service for its products through three primary methods: (1) advance replacement kits shipped with orders, (2) in-house service and technical support, and (3) authorized third-party service centers in various regions of the world.

MAJOR CUSTOMERS

In fiscal 2008, the Company derived 31% of its total revenues from ADT, a major U.S. securities systems provider, and 13% of its total revenue from ADI, a large U.S. distributor of security systems and related products.

MANUFACTURING

Telular’s products are manufactured by contract manufacturers in China and the United States who make our products and test them with proprietary testing equipment that Telular provides. We also write manufacturing procedures and conduct comprehensive quality control and quality assurance surveillance during the manufacturing process. Quality programs are a high priority at Telular and our contract manufacturers are ISO 9001:2000 certified. Telular also contracts with a variety of suppliers to buy several critical components of its products, including certain cellular transceivers.

EXECUTIVE OFFICERS

The executive officers of Telular and their ages as of December 15, 2008 are as follows:

Name		Age				Position
Joseph A. Beatty			45			President, Chief Executive Officer and Director
Jonathan M. Charak			39			Senior Vice President, Chief Financial Officer and Secretary
George S. Brody			54			Senior Vice President, Telguard and Terminals
Robert L. Deering			50			Controller, Treasurer and Chief Accounting Officer

Joseph A. Beatty has served as President, Chief Executive Officer and Director since January 2008 and Chief Financial Officer and Secretary from May 2007 to March 2008. From June 2003 until June 2006, he was President and Chief Executive Officer of Concourse Communications Group, a privately-held developer and operator of distributed antenna systems and airport Wi-Fi networks. From November 1996 until February 2001, Mr. Beatty was a co-founder and the CFO of Focal Communications Corporation, a competitive local exchange carrier that is now part of Level 3 Communications. Earlier in his career, Mr. Beatty was a securities analyst and also held numerous technical management positions for a local exchange carrier. Mr. Beatty has a BS in Electrical Engineering and an MBA in Finance. In addition, he is a Chartered Financial Analyst.

Jonathan M. Charak has served as Senior Vice President, Chief Financial Officer and Secretary since March 2008. From January 2007 through February 2008, he served as the Chief Financial Officer of Vanderbilt Financial, LLC. From June 2003 through October 2006, Mr. Charak was Chief Financial Officer at Concourse Communications Group, LLC. Prior to that, Mr. Charak served as Chief Financial Officer of Language Stars, LLC and as Controller at iFulfillment, Inc., both of which were early stage high growth companies. Mr. Charak began his career with 9 years of experience in the audit practice of Arthur Andersen LLP. Mr. Charak has a B.S. degree in Accounting from Indiana University and has a CPA certificate.

George S. Brody has served as Senior Vice President, Telguard and Terminals since June 2003. Previously, Mr. Brody worked as a consultant in the telecommunications industry from 2002 to 2003. From 2000 to 2002, Mr. Brody was Vice President of Sales and Marketing for Evolution Networks, Inc. From 1995 to 2000, Mr. Brody served as Vice President, Sales and Marketing for Philips Electronics. Prior to that he was Vice President, Worldwide Marketing for Burle Industries (1987-1995). Mr. Brody began his career at RCA in 1978.

Robert L. Deering was appointed Controller, Treasurer and Chief Accounting Officer in October 2005. Mr. Deering had previously been the Corporate Controller for VASCO Data Security International, Inc. from June 2002 to October 2005. Prior to that he was the Controller for various technology and manufacturing companies. Mr. Deering began his career in public accounting at PricewaterhouseCoopers in 1979. He has a BA in Accounting and has a CPA certificate.

EMPLOYEES

The Company has 85 full time employees, of which 43% are in sales, customer service and marketing, 12% in manufacturing support, 27% in engineering and product development and 18% in finance and administration. None of the Company’s employees are represented by organized labor.

COMPETITION

Telular believes its advantages over the competition include:

Better focus/commitment —Telular’s only business is Fixed Cellular Terminals and related event monitoring services. Many of our largest competitors sell a much broader line of equipment, software and services.

More experience — Telular has been in the Fixed Cellular business for 20 years. We have deployed FCTs in more than 130 countries worldwide, reflecting the quality, reliability and innovation of our products.

Broader product line — Telular offers products that operate on the world’s major cellular air-interface standards and is developing additional products for the latest generation, 3G networks.

Service and support — Telular provides customers with comprehensive product service and support. It is our commitment to providing superior quality and service that differentiates us from our competition.

There are several firms that compete with the Company’s TELGUARD products and services. These primary competitors include: Honeywell, Numerex, DSC and Alarm.com. Telular believes it has a significant portion of the market share for digital cellular alarm communicators, having introduced the first such device in March 2006. Demand for digital communicators has increased markedly since mid-2007, although it is difficult to predict whether this increased demand is sustainable over the long term.

Telular’s TELGUARD hardware products will only interface with the Company’s proprietary message center, which interprets and forwards any alarms received to the Company’s security monitoring customers in near real-time. The Company believes its competitive advantages for this service are the fact that its hardware products interface with the vast majority of alarm panels on the market and that installers can quickly activate the hardware and service.

With regard to the other terminal products sold by Telular, there are a large number of competitors that manufacture and sell FCTs. They range from large, global companies such as Ericsson to small, electronics manufacturers in China. Much of the demand for these terminals is outside the United States and demand is concentrated among the large wireless carriers that operate in various countries around the world. Competition is based on reputation, features and pricing. The Company’s products sell well in Latin America and Telular is able to realize an acceptable selling price due to Telular’s reputation for quality products in that region.

The Fixed Cellular industry consists of domestic and international equipment companies, including Ericsson Radio Systems AB, Huawei Technologies Co., Ltd., LG Electronics, ZTE Corporation, Axesstel, Inc., Honeywell International Inc., Tyco International Ltd. and Numerex Corporation.

Telular has granted a license for its patents to Ericsson Radio Systems AB and currently faces competition for FCT sales from Ericsson Radio Systems AB.

PATENTS AND OTHER INTELLECTUAL PROPERTY

PATENTS

With respect to its intelligent interface technology, Telular currently has 25 issued patents that are currently active and 1 pending patent application in the United States, as well as 4 foreign patents (and no pending foreign applications). Telular has successfully defended some of its patents in court. These law suits have not had a material effect on the Company’s financial position.

Although Telular believes its intelligent interface can be adapted to accommodate emerging wireless technologies, there can be no assurance that these new applications will fall within the scope of the existing patent protection.

TRADEMARKS AND OTHER PROPRIETARY INFORMATION

Telular has 7 registered U.S. trademarks, which are: Telular (block), TELULAR plus design, CELJACK, Hexagon Logo, PHONECELL, TELGUARD and WiPATH. Telular has 1 new pending US trademark application (for “Lose the Line Keep the Connection”). In addition, Telular has 4 registered Mexican trademarks covering the names and logos used for some of its products. Telular has a total of 29 foreign trademark registrations and 1 foreign application.

AVAILABLE INFORMATION

Internet Address

Telular’s Internet address is www.telular.com.

Filings with the Securities and Exchange Commission

Telular makes available free of charge through a link on its Internet website its Code of Ethics, Audit Committee Charter, Compensation Committee Charter, Nominating and Governance Committee Charter, annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13 (a) or 15 (d) of the Exchange Act as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission.

ITEM 1A. RISK FACTORS

Telular hereby incorporates by reference the risk factors included in Exhibit 99, Cautionary Statements, filed as an exhibit to this annual report on Form 10-K.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The following is a list of properties that Telular leases:

Lease Dates

Square

Renewal

Functions

Location

Commencement

Termination

Footage

Options

Corporate Headquarters

Sales, marketing, operations administration, finance and general administrations

Chicago, Illinois

February 2007

February 2014

11,700

No

Terminal 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

No

International Sales Office

Sales

Weston, Florida

October 1999

December 2009

1,700

Yes

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in legal proceedings, which arose in the ordinary course of its business. While any litigation contains an element of uncertainty, management believes that the outcome of all pending legal proceedings will not have a material adverse effect on the Company’s consolidated results of operation, cash flows or financial position.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended September 30, 2008.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET PRICE OF AND DIVIDENDS ON COMMON STOCK

The Company’s Common Stock trades publicly on the NASDAQ National Market System under the symbol WRLS. The following table sets forth the quarterly high and low sales prices for each quarter of fiscal year 2008 and 2007, as reported by NASDAQ. Such quotations reflect inter-dealer prices without retail markup, markdown or commissions and may not necessarily represent actual transactions.

		QUARTER ENDED DURING FISCAL YEAR 2008
		December 31				March 31				June 30				September 30
High		$	8.59			$	6.84			$	3.88			$	3.89
Low		$	5.47			$	2.50			$	2.78			$	1.99

		QUARTER ENDED DURING FISCAL YEAR 2007
		December 31				March 31				June 30				September 30
High		$	4.22			$	4.37			$	5.10			$	7.50
Low		$	2.00			$	3.23			$	3.07			$	4.55

On December 8, 2008, there were approximately 239 shareholders of record, approximately 5,409 beneficial shareholders and 18,466,876 shares of Common Stock outstanding. The Company has not paid any dividends since its inception and does not intend to pay any dividends on its Common Stock in the foreseeable future.

TREASURY SHARES

On July 25, 2008, the Company’s Board authorized the purchase of up to $5,000,000 of Telular’s Common Stock at prices to be determined at management’s discretion. During the fourth quarter of fiscal 2008, the Company purchased 383,207 shares of Telular’s Common Stock as follows:

Issuer Purchase of Equity Securities
		Total Number				Average
		of Shares				Price Paid
Period		Purchased				Per Share
August 2008 (August 7 - August 25)			383,207			$	2.94

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.

The Telular Corporation Common Stock Performance Graph compares total shareholder returns of the Company since September 30, 2003, to three indices: the NASDAQ Stock Market (U.S.) Index, the NASDAQ Telecommunications Index and the Research Data Group (RDG) Technology Composite Index. The total return calculations assume the reinvestment of dividends, although dividends have never been declared for the Company’s stock, and are based on the returns of the component companies weighted according to their capitalizations as of the end of each monthly period. The NASDAQ Stock Market (U.S.) Index tracks the aggregate return of all equity securities traded on the NASDAQ National Market System (the NMS). The NASDAQ Telecommunications Index tracks the aggregate return of equity securities of telecommunications companies traded on the NASDAQ National Market System (the NMS). The Research Data Group Technology Index tracks the aggregate return of technology companies, including electronics, medical and other related technology industries.

The Company’s Common Stock is traded on the NMS and is a component of the NASDAQ Stock Market (U.S.) Index. The Company’s stock price on the last trading day of its fiscal year, September 30, 2008, was $2.41.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Telular Corporation, The Nasdaq Composite Index,
The Nasdaq Composite Index And The RDG Technology Composite Index

ITEM 6. SELECTED FINANCIAL DATA

The following table is a summary of certain condensed statement of operations and balance sheet information of the Company. The table lists historical financial data of the Company for the fiscal years ended September 30, 2008, 2007, 2006, 2005 and 2004. The selected financial data were derived from audited financial statements. The summary should be read in conjunction with financial statements and notes thereto appearing in Item 8 of this report.

		Year ended September 30,
		(In thousands, except share data)
		2008 (a)				2007 (a)				2006				2005				2004
Results of Operations:
Total revenue		$	66,154			$	74,507			$	45,706			$	33,489			$	49,578
Income (loss) from continuing operations			6,101				5,625				(644	)			(4,507	)			2,105
Income (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	)		$	0.16
Income (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			$	54,366
Current loans payable			—				—				3,313				—				—
Stockholders’ equity			40,167				38,366				38,812				43,792				44,801

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

INTRODUCTION

Telular Corporation (Telular or the Company) designs, develops, and distributes products and services that utilize wireless networks to provide data and voice connectivity among people and machines. Telular’s product and service offerings take advantage of the pervasiveness and data transport capabilities of wireless phone networks in order to replace functionality historically provided by wireline communications networks. Bridging the gap between traditional, wireline equipment and wireless phone networks, the Company’s products and services replace the wireline network while providing the added flexibility and security of wireless connectivity.

The Company generates most of its revenue by designing, producing and selling products and through the delivery of machine-to-machine (M2M) and event monitoring services, such as its TELGUARD service, which can be included with certain of the Company’s terminal products. In addition, the Company distributes its standalone Fixed Cellular Terminal (FCT) products in Latin America and the United States. Telular recognizes revenue when its products ship from various manufacturing locations to customers and when services are performed. Although the Company has a wide base of customers in the Western Hemisphere, much of its revenue is generated from a small number of major customers and via large contracts, the timing of which is often unpredictable.

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 that are set forth in Exhibit 99.

The market for the Company’s products is primarily in North and South America and consists of a number of vertical applications ranging from wireless residential and commercial alarm systems addressed by TELGUARD to Internet access provided by PHONECELL FCTs. The FCT market is addressed primarily through indirect channels consisting of distributors, representatives and agents along with in-house sales and customer support teams. A direct sales model is utilized for certain large customers.

During June 2008, Telular abandoned its Fixed Cellular Phone (FCP) segment after unsuccessfully marketing this unit for sale. Many of the segment’s assets were parts and finished goods inventory which were sold prior to abandonment of the segment on June 30, 2008. Currently, Telular is collecting certain receivables owed as a result of FCP product sales during 2008.

The Company believes that its future success depends on its ability to continue to meet customers’ needs through product innovation, including the creation of event monitoring services that can be sold with products. Research and development activities sponsored by the Company for the years ended September 30, 2008, 2007 and 2006 were $4,448, $6,076 and $2,636, respectively.

Telular’s engineering team continues to develop M2M hardware products and software systems and to expand the TELGUARD digital product portfolio by addressing the growing demand and technology changes in the electronics security market. In fiscal 2008, the Company has designed and developed the TELGUARD DIGITAL TG-11 model for certain vendor panels in the security industry. In addition, Telular completed development of the SX7T terminal, which will carry voice, data, and fax services over 3G wireless networks. The Company is also devoting resources in marketing and engineering to research, specify and develop products and services for additional event monitoring applications outside of the security industry.

Fabrication of Telular’s products is accomplished through contract manufacturing. Contract manufacturers in China and the United States make and test all hardware products.

The Fixed Cellular industry consists of domestic and international equipment companies, including Ericsson Radio Systems AB, Huawei Technologies Co., Ltd., LG Electronics, ZTE Corporation, Axesstel, Inc., Honeywell International Inc., Tyco International Ltd. and Numerex Corporation.

Telular has granted a license for its patents to Ericsson Radio Systems AB and currently faces competition for FCT sales from Ericsson.

With respect to its interface technology, the Company currently has 25 issued patents and 1 pending patent applications in the United States, as well as 4 issued foreign patents. The Company has successfully defended some of its patents in court.

RESULTS OF OPERATIONS
(In Thousands, Except Share Data)

Fiscal Year 2008 Compared to Fiscal Year 2007

Revenues and Costs of Sales

										Change
		2008				2007				Amount				Percentage
Net product sales
Telguard		$	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 sales
Products			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

Total product revenues decreased 20% in fiscal 2008 due to decreased sales of our Telguard products. Our dealers and distributors increased their inventory during the fourth quarter of fiscal 2007 and the first two quarters of fiscal year 2008 anticipating a stronger demand to convert from analog to digital. As that demand waned and the housing market continued to weaken, our customers reduced their purchases during the last half of fiscal 2008. Terminal product sales increased primarily due to sales increases in the domestic market.

The increase in service revenues is a result of the increase in the activation of monitoring services related to additional Telguard unit sales in the fourth quarter of fiscal 2007 and the first six months of fiscal 2008. Activations, which are dependent on Telguard unit installations, will lag behind the sales of those units.

Cost of Sales

Total cost of sales decreased 16% in fiscal 2008. This was due to both a decrease in the volume of sales and to decreased cost of manufacturing products and delivering services.

Product cost of sales as a percentage of revenues was 69% for fiscal 2008 as compared to 71% for fiscal 2007. This 2% decrease was attributed to decreased manufacturing costs.

Service cost of sales as a percentage of revenue decreased from 53% in fiscal 2007 to 49% in fiscal 2008. This was primarily due to the lower cost of providing digital services as a result of the transition from analog services.

Operating Expenses

										Change								% of Revenues
		2008				2007				Amount				Percentage				2008				2007
Engineering 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

The decrease of 25% in engineering and development costs was primarily due to a reduction in payroll related expenses of $1,578, a reduction of $144 in facility costs as a result of moving the engineering function from New York to Atlanta, and a reduction in prototype and supplies costs of $261, partially offset by an increase of $224 in recruiting cost to replace engineers who did not move to Atlanta. Payroll related costs decreased in fiscal 2008 because of the elimination of one-time expenses in fiscal 2007 related to costs associated with a reduction in workforce of $661 and savings from reduced engineering staff of $917.

Selling and Marketing

Selling and marketing costs increased 2% in fiscal 2008 primarily due to increased payroll related expenses of $780 from increased staff in marketing, sales and product support, a $158 increase in facility costs as a result of moving to a new location in Atlanta and an increase of $172 in targeted co-op marketing expenses related to the Telguard products, partially offset by a decrease in external commissions of $980 related to reduced sales volumes.

General and Administrative (G&A)

G&A costs increased 19% in fiscal 2008 primarily due to increased legal and professional fees of $538, increased payroll related costs of $450 as a result of severance paid to terminated officers and non-cash compensation related to stock option modifications, an $89 increase in bank fees and insurance costs, partially offset by a decrease in facility costs as a result of moving the corporate headquarters to Chicago.

Other Income

Other income for fiscal 2008 increased by $283 compared to fiscal 2007. This increase was primarily due to a $139 increase in interest income as a result of increased cash balances throughout the year, a decrease in interest expense of $105 as a result of reducing the Company’s borrowings to $0 and a $39 decrease in various other miscellaneous expense items during the year.

Income Taxes

The Company recorded no income tax benefit for both fiscal years 2008 and 2007 due to the uncertainty of the realizability of its deferred tax assets.

Discontinued Operations

The loss from discontinued operations of $7,480 for the fiscal 2008 decreased $91 from a loss of $7,571 for fiscal 2007. Sales decreased significantly as the Company exited the FCP market and sold its remaining inventory. During the third quarter of fiscal 2008, the Company determined that it would be unable to find a buyer for the FCP business unit. As a result, the Company made a strategic decision to abandon the FCP business unit effective June 30, 2008. The majority of the assets of the business have been disposed of. The remaining assets consist of trade accounts receivable of $4,583, inventory held for warranty purposes, which has been fully reserved for, and $126 of test equipment which the Company intends to sell at auction. The following table summarizes the activity of the discontinued operations for the fiscal years 2008 and 2007. Also, see Note 3 of the Notes to Consolidated Financial Statements.

		2008				2007				Change				Percentage
Revenues		$	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

The Company recorded a net loss of $1,379 or $0.07 per share for fiscal 2008 compared to a net loss of $1,946 or $0.11 per share for fiscal 2007. The decrease in net loss was primarily due to the result of increased margins due to improved product mix and a reduction of manufacturing cost and containment of operational costs.

Fiscal Year 2007 Compared to Fiscal Year 2006

Revenues and Costs of Sales

										Change
		2007				2006				Amount				Percentage
Net product sales
Telguard		$	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 sales
Products			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

Total product revenues increased 65% in fiscal year 2007 as compared to fiscal year 2006, reflecting increases in sales of both Telguard and terminal products. The increase in sales of Telguard products is due to increased market penetration and an increase in the number of customers switching from analog security devices to digital. The increase in terminal product sales reflects increased sales volume in the Central American/Latin American (CALA) and United States markets.

The increase in service revenue is a result of the increase in the activation of monitoring services related to additional Telguard unit sales.

Cost of Sales

The increase in cost of sales in fiscal year 2007 as compared fiscal year 2006 represents a combination of increased sales volume and a better product mix. As a percentage of revenues, cost of sales declined to 67% in fiscal 2007 from 70% in fiscal 2006, reflecting the increase in sales of the lower cost Telguard digital products.

Operating Expenses

										Change								% of Revenues
		2007				2006				Amount				Percentage				2007				2006
Engineering 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

The increase of 76% in engineering and development costs reflects increased expenditures related to the development of new products in both the Telguard and terminal product lines and to improvements in the technologies incorporated in existing product. Engineering and development expenses were 9% of total revenues in each fiscal year.

Selling and Marketing

Selling and marketing expenses increased 35% primarily due to increased salary expenses of $690 related to technical support and internal marketing personnel, increased commission expenses of $320, both for internal sales representatives and independent agents, as a result of increased product sales, increased co-op marketing expenses of $350, related specifically to products, increased professional fees related to product repairs of $205 and a $17 increase in various expenses. As a percentage of revenues, selling and marketing expenses declined to 8% in fiscal 2007 from 10% in fiscal 2006.

General and Administrative (G&A)

G&A expenses increased slightly in fiscal year 2007 as compared to fiscal year 2006. In 2007, the Company increased expenditures related to professional fees and realized savings from the elimination of manufacturing overhead, which was charged to G&A in fiscal 2006, as a result of cessation of manufacturing operations at the Company’s headquarters during fiscal 2006. Additionally, facility and phone expenses declined, year over year, following the move to the new corporate headquarters in February 2007. G&A expenses also declined as a percentage of revenue from 13% to 8%.

Other Income

Other income for fiscal year 2007 is comprised of interest income of $279 offset by interest expense of $107 and franchise taxes of $145. Other income decreased by $346 over fiscal year 2006 primarily due to a settlement of a 2001 insurance claim in fiscal year 2006.

Income Taxes

The Company recorded no income tax benefit for both fiscal years 2007 and 2006 due to the uncertainty of the realizability of its deferred tax assets.

Discontinued Operations

In fiscal 2007, the Company formulated a plan to sell the net assets of its FCP segment and exit the fixed cellular phone market. The loss from discontinued operations decreased in fiscal 2007 by $3,603, or 32%, primarily due to the reduction of operating expenses from $15,256 in fiscal year 2006 to $8,145 in fiscal year 2007. These reductions were offset by a reduction in sales margin of $3,508, as a result of reduced selling prices. Operating expenses decreased as a result of a decrease in engineering and development expenses of $2,899, a reduction in selling and marketing expenses of $2,670, and a reduction in amortization expense and goodwill impairment charges of $1,939, offset by an increase in other expenses of $397. The following table summarizes the activity of the discontinued operations for the fiscal years 2007 and 2006.

		2007				2006				Change				Percentage
Revenues		$	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

The Company recorded a net loss of $1,946 or $0.11 per share for fiscal 2007 compared to a net loss of $11,818 or $0.70 per share for fiscal 2006. The decrease in net loss is due primarily to the Company re-aligning its focus in fiscal 2007 on its terminals and Telguard products and services, which have a higher margin contribution than the discontinued phone products.

LIQUIDITY AND CAPITAL RESOURCES

Management regularly reviews the Company’s net working capital and available borrowings in addition to its cash and cash equivalent balance to determine if it has enough cash to operate the business. On September 30, 2008, the Company had cash and cash equivalents of $21,168 and net working capital of $36,009, compared to cash and cash equivalents of $10,254 and net working capital of $34,642 a year earlier. The Company can draw upon a Loan and Security Agreement with SVB Silicon Valley Bank (SVB) that provides an aggregate working capital line of credit up to $10,000. Management expects trade accounts receivable and inventory to turn into cash in short periods of time. As such, given the level of cash and cash equivalents, trade accounts receivable, inventory and available borrowings, management believes the Company has adequate resources to fund current and planned operations. The tables below discuss the liquidity components of continuing operations for fiscal years 2008 and 2007.

Fiscal 2008

The Company generated cash of $7,084 from continuing operations during fiscal year 2008 compared to cash generated of $1,566 during the same period of fiscal 2007. The components of the change for fiscal 2008 are as follows:

$	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

The Company generated cash of $1,566 from continuing operations during fiscal year 2007 compared to cash used of $886 during the same period of fiscal 2006. The components of the change for fiscal 2007 are as follows:

$	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

The Company generally requires its foreign customers to prepay, obtain letters of credit or qualify for export credit insurance underwritten by third party credit insurance companies prior to making international shipments. Such prepayments, letters of credit and credit insurance are not obtained for orders from our Venezuelan customers, which may represent a material portion of customer receivables at any given time. Also, to mitigate the effects of currency fluctuations on the Company’s results of operations, the Company conducts all of its international transactions in US dollars.

The following table sets forth our total contractual cash obligations as of September 30, 2008:

						Payments Due by Period
						Less than
Contractual Cash Obligations		Total				1 year				1-3 years				4-5 years				After 5 years
Operating leases		$	3,785			$	716			$	2,225			$	783			$	61
Purchase Commitments			5,190				5,190				—				—				—
Total contractual cash obligations		$	8,975			$	5,906			$	2,225			$	783			$	61

Purchase commitments are for purchases made in the normal course of business to meet operational requirements, consisting primarily of raw materials and finished goods inventory. The Company expects to satisfy these commitments primarily from cash from the revenues generated by the delivery of backlogged orders.

CRITICAL ACCOUNTING POLICIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

On an on-going basis, management evaluates its estimates and judgments, including those related to the net realizable value of inventories and intangible assets. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies, among others, affect the presentation of the Company’s financial condition and results of operations

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make payment for products and services. The Company evaluates the collectability of customer receivables by considering the payment history and the financial stability of its customers. If the Company believes that an account receivable may not be collected, a charge is recorded. The Company maintains trade accounts receivable in both continuing and discontinued operations. At September 30, 2008 and 2007, the allowance for doubtful accounts related to trades accounts receivable from continuing operations was $39 and $40, respectively.

Reserve for Obsolescence

Significant management judgment is required to determine the reserve for obsolete or excess inventory. The Company generally considers inventory quantities greater than a one-year supply based on current year activity as well as any additional specifically identified inventory to be excess. The Company also provides for the total value of inventories that are determined to be obsolete based on criteria such as customer demand and changing technologies. At September 30, 2008 and 2007, the inventory reserves were $84 and $551, respectively. Changes in strategic direction, such as discontinuance or expansion of product lines, changes in technology or changes in market conditions, could result in significant changes in required reserves.

Goodwill

The Company evaluates the fair value and recoverability of goodwill at least annually or whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. In determining fair value and recoverability, the Company makes projections regarding future cash flows. These projections are based on assumptions and estimates of growth rates for the terminals business segment, anticipated future economic conditions, the assignment of discount rates relative to risk associated with companies in similar industries and estimates of terminal values. An impairment loss is assessed and recognized in operating earnings when the fair value of the asset is less than its carrying amount.

Income Taxes

The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. Currently, the Company has significant deferred tax assets principally related to net operating losses. Deferred tax assets are reviewed regularly for recoverability and when necessary, valuation allowances are based on historical tax losses, projected future taxable income, and expected timing of reversals of existing temporary differences. Valuation allowances have been provided for all deferred tax assets, due to uncertainty in the realizability of such deferred tax assets. Future profitable operations and changes in the Company’s expectations could result in significant adjustments to the valuation allowances, which would significantly impact the Company’s net income.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The discussion of recently issued accounting pronouncements is hereby incorporated by reference from Item 8, notes to consolidated financial statements.

OUTLOOK

The statements contained in this outlook are based on current expectations. These statements are forward looking, and actual results may differ materially.

The Company expects to expend most of its market and product development resources on the M2M space, while continuing to capitalize on its favorable market position in the domestic security alarm market by virtue of its well-regarded TELGUARD offering. Due to uncertainties in international markets and pending new product introductions, the Company is unable to forecast results and resource allocations for FCT products.

The amount and frequency of product shipments to the Company’s largest customers depends on many factors, including market conditions and agreements with other suppliers. The outcome of pending and future negotiations for orders with such customers and the timing of shipments may have a significant impact on the Company’s future revenues and profitability.

FORWARD-LOOKING INFORMATION

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company also includes certain estimates, projections and other forward-looking statements in its reports and in other publicly available material. Statements regarding expectations, including performance assumptions and estimates relating to capital requirements, as well as other statements that are not historical facts, are forwarding-looking statements.

These statements reflect management’s judgments based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, customer growth and retention, pricing, operating costs and the economic environment.

The words “estimate”, “project”, “intend”, “expect”, “believe”, “target” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are found throughout Management’s Discussion and Analysis. The reader should not place undue reliance on forward-looking statements, which speak only as of the date of this report. The Company is not obligated to publicly release any revisions to forward-looking statements to reflect events after the date of this report or unforeseen events. Other risks and uncertainties are discussed in Exhibit 99 to this 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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 fluctuations for these investments is not material as of September 30, 2008.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of trade accounts receivable. To reduce its exposure to the credit risks of international customers, the Company generally seeks payment prior to shipment, receives irrevocable letters of credit that are confirmed by U.S. banks, or purchases commercial credit insurance. In some instances, the Company extends credit to foreign customers without the protection of prepayment, letters of credit or credit insurance. The Company performs ongoing credit evaluations and charges amounts to operations when they are determined to be uncollectible.

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.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

1. The following financial statements are included in this document.

Reports of Independent Registered Public Accounting Firm			22
Consolidated Balance Sheets as of September 30, 2008 and 2007			24
Consolidated Statements of Operations for the years ended September 30, 2008, 2007 and 2006			25
Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2008, 2007 and 2006			26
Consolidated Statements of Cash Flows for the years ended September 30, 2008, 2007 and 2006			27
Notes to Consolidated Financial Statements			28

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Telular Corporation

We have audited the accompanying consolidated balance sheets of Telular Corporation as of September 30, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2008. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Telular Corporation at September 30, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 20 to the financial statements, the Company adopted Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in the Current Year Financial Statements effective October 1, 2006.

We also have audited, in accordance with the standards of the Public Accounting Oversight Board (United States), the effectiveness of Telular Corporation’s internal control over financial reporting as of September 30, 2008, based on the criteria established in the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated December 10, 2008 expressed an unqualified opinion thereon.

Chicago, Illinois
December 10, 2008

Ernst & Young LLP

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Telular Corporation

We have audited Telular Corporation’s internal control over financial reporting as of September 30, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Telular Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Telular Corporation maintained, in all material respects, effective internal control over financial reporting as of September 30, 2008, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Telular Corporation as of September 30, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2008 of Telular Corporation and our report dated December 10, 2008, expressed an unqualified opinion thereon.

Chicago, Illinois
December 10, 2008

Ernst & Young LLP

TELULAR CORPORATION

		September 30,
		2008				2007
ASSETS
Current assets:
Cash and cash equivalents		$	21,168			$	10,254
Restricted cash			—				340
Trade accounts receivable, net			6,904				19,723
Inventories, net			10,007				3,500
Prepaid expenses and other current assets			1,023				108
Assets of discontinued operations			4,709				17,959
Total current assets			43,811				51,884
Property and equipment, net			2,016				1,391
Other assets:
Goodwill			2,043				2,043
Other			99				290
Total other assets			2,142				2,333
Total assets		$	47,969			$	55,608
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable		$	2,701			$	9,614
Accrued liabilities			4,286				4,366
Liabilities of discontinued operations			815				3,262
Total current liabilities			7,802				17,242
Stockholders’ 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				185
Additional paid-in capital			175,456				171,158
Deficit			(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				38,366
Total liabilities and stockholders’ equity		$	47,969			$	55,608

See accompanying notes

TELULAR CORPORATION

		Year ended September 30,
		2008				2007				2006
Revenue
Net product sales		$	45,933			$	57,136			$	34,562
Service revenue			20,221				17,371				11,144
Total revenue			66,154				74,507				45,706
Cost of sales
Net product cost of sales			31,805				40,539				26,175
Service cost of sales			9,817				9,169				5,937
Total cost of sales			41,622				49,708				32,112
Gross margin			24,532				24,799				13,594
Operating Expenses
Engineering and development expenses			5,171				6,930				3,935
Selling and marketing expenses			6,287				6,157				4,575
General and administrative expenses			7,283				6,114				6,101
Total operating expenses			18,741				19,201				14,611
Income (loss) from operations			5,791				5,598				(1,017	)
Other income, net			310				27				373
Income (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:
Basic
Continuing operations		$	0.32			$	0.31			$	(0.04	)
Discontinued operations		$	(0.39	)		$	(0.42	)		$	(0.66	)
Net loss		$	(0.07	)		$	(0.11	)		$	(0.70	)
Diluted
Continuing 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				16,903,487
Diluted			19,145,132				18,211,553				16,903,487

See accompanying notes

TELULAR CORPORATION

		Common Stock and Additional																				Total
		Paid-In Capital												Treasury Stock								Stockholders’
		Amount				Shares				Deficit				Amount				Shares				Equity
Balance at September 30, 2005		$	162,195				16,111			$	(118,403	)		$	—				—			$	43,792
Comprehensive 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				—				—				—				5,505
Cost associated with the sale of common stock in a private placement			(21	)			—				—				—				—				(21	)
Warrants issued to secure working capital loan			356				—				—				—				—				356
Stock based compensation expense			937				—				—				—				—				937
Stock options exercised			51				20				—				—				—				51
Stock issued in connection with services received			10				3				—				—				—				10
Balance at September 30, 2006			169,033				18,066				(130,221	)			—				—				38,812
Cumulative 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	)			—				—				38,002
Comprehensive 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				—				—				—				563
Stock based compensation expense			877				—				—				—				—				877
Stock options exercised			823				288				—				—				—				823
Restricted stock award			47				19				—				—				—				47
Balance at September 30, 2007			171,343				18,524				(132,977	)			—				—				38,366
Comprehensive income:
Net loss for the year ended September 30, 2008			—				—				(1,379	)			—				—				(1,379	)
Stock based compensation expense			1,653				—				—				—				—				1,653
Stock options exercised			1,807				412				—				—				—				1,807
Warrants exercised			795				395				—				—				—				795
Restricted stock award			52				13				—				—				—				52
Treasury 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

TELULAR CORPORATION

		Year ended September 30,
		2008				2007				2006
Operating 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 activities
Depreciation			674				732				1,106
Loss on disposal of operating assets			9				60				37
Stock based compensation expense — stock options			1,653				877				937
Stock based compensation expense — restricted stock			52				47				—
Common stock issued for services			—				—				10
Changes in assets and liabilities, net of effects of acquisition:
Trade accounts receivable			12,819				(8,403	)			(6,830	)
Inventories			(6,507	)			(1,023	)			1,661
Prepaid expenses and other assets			(724	)			181				182
Trade accounts payable			(6,913	)			2,497				3,344
Accrued 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			—				—				12,075
Net cash (used in) provided by investing activities of continuing operations			(750	)			(1,185	)			11,597
Financing Activities:
Proceeds from working capital line of credit			—				5,737				10,065
Payments 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				51
Proceeds 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	)			3,343
Cash 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				10,023
Cash and cash equivalents, end of period		$	21,168			$	10,254			$	6,799

See accompanying notes

TELULAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share Data)

1. Description of Business

Telular Corporation (Telular or the Company) designs, develops, and distributes products and services that utilize wireless networks to provide data and voice connectivity among people and machines. Telular’s product and service offerings take advantage of the pervasiveness and data transport capabilities of wireless networks in order to facilitate communications among people and machines. Oftentimes, the Company’s products and services replace the wireline network while providing the added flexibility of wireless connectivity.

2. Summary of Significant Accounting Policies

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Telular-Adcor Security Products, Inc. and Telular International, Inc. All intercompany balances and transactions have been eliminated.

Revenue Recognition

Product sales and associated costs are recognized at the time of shipment of products which is when title transfers. Service revenue is recognized when the services are performed. Royalty revenue, which is based on a percentage of sales by the licensee, is recognized by the Company upon notification of sales by the licensee.

Cash Equivalents

Cash equivalents consist of highly liquid investments that have maturities of three months or less at the date of purchase. Cash equivalents are stated at cost, which approximates fair value.

Restricted Cash

Beginning in February 2003, the Venezuelan government imposed restrictions on the acquisition and payment of foreign currencies. On June 27, 2007, the Company entered into a Guaranty Agreement (the “Agreement”) with Digitel, one of its customers located in Venezuela. Under the Agreement, Digitel recognized its debt to the Company of $340 related to unpaid invoices and deposited $340 with the Company. The Agreement stipulated that the funds shall not be applied or used by the Company as total or partial payment of any unpaid invoices unless, within 180 days of the date of the Agreement, payment is not approved and made by the Venezuelan government. Under the Agreement, if such a payment on the unpaid invoice had been made before December 24, 2007, the Company would have been required to return the funds to Digitel.

During the first quarter of fiscal 2008, payment was received for $269 of the open invoices and the same amount of restricted cash was returned to Digitel. During the second quarter of fiscal 2008, the Company offset the remaining $71 of the restricted cash against unpaid invoices.

Financial Instruments

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The credit risks related to cash and cash equivalents are limited to the Company’s investments of cash in money market funds and the possibility that the per unit value of these funds may decline below $1.00. The Company regularly reviews the investments that are included in the money market funds it invests in and, when appropriate, limits its credit risk by diversifying its investments. At September 30, 2008, the Company had approximately 23% of its cash and cash equivalents invested in U.S. Treasury Reserves. Credit risks with respect to trade accounts receivables are limited due to the diversity of customers comprising the Company’s customer base. For international sales, the Company generally receives payment in advance of shipment, irrevocable letters of credit that are confirmed by U.S. banks or purchases international credit insurance to reduce its credit risk. The Company performs ongoing credit evaluations and charges amounts to operations when they are determined to be uncollectible.

TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share Data)

Inventories and Reserve for Obsolescence

Inventories are carried at the lower of cost or market and are charged to cost of sales based on first in, first out (FIFO) costing. The Company records a reserve for obsolete or excess inventory. The Company generally considers inventory quantities greater than a one-year supply based on current year activity as well as any additional specifically identified inventory to be in excess of needs. The Company also provides for the total value of inventories that are determined to be obsolete based on criteria such as customer demand and changing technologies.

Goodwill

The Company accounts for goodwill and intangible assets in accordance with Statement of Financial Accounting Standards 142, “Goodwill and Other Intangible Assets” (SFAS 142). Goodwill represents the excess of cost over fair value of net assets of purchased businesses. The Company does not amortize goodwill. The Company evaluates the impairment of goodwill each year in the third quarter or whenever events or changes in circumstances indicate that the carrying value may not be recoverable based on the fair value of the reporting unit.

The Company reviews for impairment of other intangible assets whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company evaluates recoverability of other intangible assets by comparing the carrying amount of the intangible assets to future net undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets calculated using a discounted future cash flow analysis. If one or more of the following indicators of impairment have occurred, the Company measures the impairment based on a projected discounted cash flow using a discount rate that incorporates the risk inherent in the cash.

	•		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.

On May 8, 2006, the Company recorded additional goodwill of $3,534 as a result of the purchase of the fixed wireless division of CSI Wireless, Inc. (CSI). Based upon its June 2006 goodwill impairment test, the Company recorded a goodwill impairment charge of $4,045 representing all of the goodwill of the fixed cellular phone (FCP) business which, since July 2007, has been accounted for as a discontinued operation (see Note 3).

In the first quarter of fiscal 2007, $563 of additional purchase price related to the purchase of the fixed wireless division of CSI was recorded as goodwill. The additional goodwill was also deemed to be impaired. Accordingly, the Company recorded a goodwill impairment charge of $563. The loss on goodwill impairment in fiscal 2007 and 2006 is included in the loss from discontinued operations in the accompanying consolidated statements of operations

Based upon its June 2008 goodwill impairment test, the Company determined that the goodwill of $2,043 was not impaired.

Intangible Assets

Intangible assets consist of capitalized technology, customer relationships and licensing agreements. These assets are recorded at cost and, prior to July 2007, were being amortized over their estimated lives over a period of 8 months to 5 years, using the straight-line method. All of the intangible assets are part of discontinued operations (see Note 3). Accordingly, the Company ceased amortizing its intangible assets beginning July 1, 2007. All prior amortization expense is included in loss from discontinued operations in the accompanying consolidated statement of operations.

TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share Data)

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are computed using straight-line methods over the assets’ useful lives ranging from 3 to 10 years. Depreciation expense was $674, $732 and $1,106 for 2008, 2007 and 2006, respectively.

Income Taxes

The Company utilizes the liability method of accounting for income taxes whereby it recognizes deferred tax assets and liabilities for future tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets are reduced by a valuation allowance if, based upon management’s estimates, it is more likely than not, that a portion of the deferred tax assets will not be realized in a future period. The estimates utilized in the recognition of deferred tax assets are subject to revision in future periods based on new facts or circumstances.

Loss Per Share of Common Stock

Basic loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock and common stock equivalents, which relate entirely to the assumed exercise of stock options and warrants. Weighted average number of shares of common stock outstanding for computation of basic and diluted earnings per share was 19,145,132, 18,211,553, and 16,903,487 in 2008, 2007 and 2006, respectively.

The following stock options and warrants were excluded as being antidilutive from the shares outstanding used to compute diluted loss per share for the years ended September 30:

		2008				2007				2006
Stock options			1,712,342				1,590,073				1,765,009
Warrants			2,523,425				3,020,848				3,020,848
			4,235,767				4,610,921				4,785,857

The weighted average exercise prices of the stock options for 2008, 2007 and 2006 were $4.85, $4.67 and $4.52, respectively.

Stock-Based Compensation

The Company has an officer and employee stock incentive plan, a non-employee director stock incentive plan and outside of the plans several stock option agreements (See Note 13). The Company calculates the cost of stock options grants based on their grant date fair value and recognizes these costs over the vesting period. The fair value of stock options granted and warrants issued is estimated at the grant date or issuance date using a Black-Scholes stock option valuation model. Key factors in determining the valuation of a grant under the Black-Scholes model are: a volatility factor of the expected market price of the Company’s common stock, a risk-free interest rate, a dividend yield on the Company’s common stock and the expected term of the option.

TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share Data)

For the years ended September 30, 2008, 2007 and 2006, the Company valued stock options granted using the Black-Scholes valuation method using the following assumptions:

		2008		2007		2006
Volatility		70%		69% - 73%		73% - 75%
Expected term		4.0 yrs		4.0 yrs		4.5 yrs
Risk free interest rate		3.69% - 4.40%		4.61% - 4.96%		4.32% - 5.01%
Dividend yield		0.0%		0.0%		0.0%

The Company recognized stock-based compensation expense as follows for the years ended September 30:

		2008				2007				2006
Stock-based compensation:
Stock options		$	1,653			$	877			$	937
Restricted stock			52				47				—
		$	1,705			$	924			$	937

Fair Value of Financial Instruments

At September 30, 2008 and 2007, the Company’s financial instruments included cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities. The carrying values reported in the consolidated balance sheet for these financial instruments approximate their fair values.

Research and Development Costs

Research and development costs for the years ended September 30, 2008, 2007 and 2006, were $4,448, $6,076 and $2,636, respectively, and are included in engineering and development expense.

Shipping and Handling Costs

Shipping and handling costs of $326, $321, and $499 were included in cost of sales for the years ended September 30, 2008, 2007 and 2006, respectively.

Warranty

The Company provides warranty coverage for a period of 15 months on terminal products and 24 months on event monitoring products from the date of shipment. A provision for warranty expense is recorded at the time of shipment and adjusted quarterly based on historical warranty experience.

TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share Data)

The following table is a summary of the Company’s accrued warranty obligation for continuing operations.

		September 30,
		2008				2007
Balance at the beginning of the period		$	83			$	90
Warranty expense during the period			334				439
Warranty payments made during the period			(321	)			(446	)
Balance at the end of the period		$	96			$	83

Use of Estimates

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.

Reclassifications

As described in Note 3, the amounts in the accompanying Consolidated Balance Sheets, the Consolidated Statements of Operations and the Consolidated Statements of Cash Flows have been restated to reflect the discontinuance of the FCP segment. Additionally, certain operating expenses and the increase in restricted cash have been reclassified in the prior years to be consistent with the current year presentation.

Recently Issued Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations. SFAS No. 141 (revised 2007) replaces SFAS No. 141, Business Combinations, and applies to all transactions or other events in which an entity obtains control of one or more businesses and combinations achieved without the transfer of consideration. This statement is effective for fiscal years beginning on or after December 15, 2008. We do not anticipate this pronouncement will have a significant impact on our results of operations or financial position.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with US GAAP for nongovernmental entities. The Company does not expect the adoption of SFAS No. 162 to have a material effect on its results of operations or financial position.

3. Discontinued Operations

During July 2007, the Company formulated a plan to sell the net assets of its FCP segment and exit the cellular phone market. In accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets, (SFAS 144), the Company designated the assets and liabilities of this segment as “held for sale”. The assets and liabilities in this disposal group were measured at the lower of their carrying value or fair value less cost to sell and were separately identified in the Consolidated Balance Sheets at September 30, 2007. During the third quarter of fiscal 2008, the Company determined it would be unable to secure a buyer of the FCP business unit. As a result, the Company made a strategic decision to abandon the FCP business effective June 30, 2008. The majority of the assets of the business have been disposed of. The remaining assets consist of trade accounts receivable of $4,583, inventory held for warranty purposes, which has been fully reserved for, and $126 of test equipment which the Company intends to sell at auction. The remaining assets and liabilities are separately identified in the Consolidated Balances Sheets at September 30, 2008.

TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share Data)

The following table summarizes certain operating data for discontinued operations for the years ended September 30:

		2008				2007				2006
Revenues		$	7,544			$	20,931			$	47,394
Cost of sales			11,252				20,357				43,312
Total operating expenses			3,772				8,145				15,256
Loss from discontinued operations		$	(7,480	)		$	(7,571	)		$	(11,174	)

The following table summarizes the components of discontinued operations reported on the Consolidated Statements of Cash Flows for the years ended September 30:

		2008				2007				2006
Operating 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				690
Amortization			—				3,149				1,606
Intangible impairment loss			1,098				—				—
Goodwill impairment loss			—				563				4,045
Fixed 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	)			2,581
Net 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			—				—				4,000
Net cash provided by (used in) investing activities			306				(32	)			(497	)
Cash provided by (used in) discontinued operations		$	3,105			$	5,564			$	(17,278	)