As filed with the Securities and Exchange Commission on December 19, 1997
Registration No. 333-20011
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------------
POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM SB-2
Registration Statement
Under the Securities Act of 1933
------------------------------------
EAGLE WIRELESS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
TEXAS 3669 76-0494995
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification Number)
organization) Code Number)
</TABLE>
H. DEAN CUBLEY
910 GEMINI EAGLE WIRELESS INTERNATIONAL, INC.
HOUSTON, TEXAS 77058 910 GEMINI
(281)280-0488 HOUSTON, TEXAS 77058
(Address, and telephone number (281) 280-0488
of principal executive offices) (Name, address and telephone number
of agent for service)
COPIES TO:
THOMAS C. PRITCHARD
BREWER & PRITCHARD, P.C.
1111 BAGBY, 24TH FLOOR
HOUSTON, TEXAS 77002
PHONE (713) 209-2911
FACSIMILE (713) 209-2921
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
-----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
Cross-Reference Sheet
showing location in the Prospectus of
Information Required by Items of Form SB-2
<TABLE>
<CAPTION>
FORM SB-2 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
- --------------------------------- ----------------------
<S> <C> <C>
1. Front of Registration Statement and
Outside Front Cover of Prospectus............... Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus............................. Inside Front Cover Page; Outside Back Cover Page
3. Summary Information and Risk Factors............ Prospectus Summary; Risk Factors; The Company
4. Use of Proceeds................................. Use of Proceeds
5. Determination of Offering Price................. Outside Front Cover Page; Risk Factors; Plan
of Distribution and Selling Stockholders
6. Dilution........................................ Dilution
7. Selling Security-Holders........................ Plan of Distribution and Selling Stockholders
8. Plan of Distribution............................ Outside Front Cover Page; Risk Factors; Plan
of Distribution and Selling Stockholders
9. Legal Proceedings............................... Business
10. Directors, Executive Officers, Promoters
and Control Persons............................. The Company; Management -- Executive
Officers and Directors
11. Security Ownership of Certain Beneficial
Owners and Management........................... Principal Stockholders
12. Description of Securities....................... Description of Capital Stock
13. Interest of Named Experts and Counsel........... Experts
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... *
15. Organization Within Last Five Years............. The Company
16. Description of Business......................... Business
17. Management's Discussion and Analysis
or Plan of Operation............................ Management's Discussion and Analysis of
Financial Condition and Results of Operations
18. Description of Property......................... Business
19. Certain Relationships and Related
Transactions.................................... Management -- Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters............................. Risk Factors; Description of Capital Stock;
Shares Eligible for Future Sale; Dividend
Policy
21. Executive Compensation.......................... Management -- Executive Compensation
22. Financial Statements............................ Financial Statements
23. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure...................................... Experts
</TABLE>
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(*) None or Not Applicable
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<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
RESALE OF 16,850,002 SHARES OF COMMON STOCK
RESALE OF 5,033,334 CLASS B WARRANTS
This Prospectus relates to the resale of 16,850,002 shares of Common
Stock of Eagle Wireless International, Inc. (the "Company"), which may be sold
by the holders thereof ("Selling Stockholders") from time to time as market
conditions permit in the market, or otherwise, at prices and terms then
prevailing or at prices related to the then current market price, or in
negotiated transactions. The shares of Common Stock to be resold include
5,308,334 shares currently issued and outstanding and up to 11,541,668 shares to
be issued upon (i) the exercise of class A warrants outstanding to purchase an
aggregate of 5,033,334 shares of Common Stock at $4.00 per share, which expire
in August 2000 ("Class A Warrants"), (ii) the exercise of class B warrants
outstanding to purchase an aggregate of 5,033,334 shares of Common Stock at
$6.00 per share, which expire in August 2000 ("Class B Warrants"), (iii) the
exercise of Class C Warrants outstanding to purchase an aggregate of 1,050,000
shares of Common Stock at $2.00 per share, which expire in August 2000, and (iv)
the exercise of warrants to purchase 425,000 shares of Common Stock at $5.00 per
share which expire in July 1999 ("$5.00 Warrants") (such Class A Warrants, Class
B Warrants, Class C Warrants and $5.00 Warrants collectively the "Subject
Warrants"). This Prospectus also relates to the resale of the Class B Warrants
to purchase 5,033,334 shares of Common Stock. Shares offered by the Selling
Stockholders may be sold by one or more of the following methods without
limitation: (i) ordinary brokerage transactions in which a broker solicits
purchases; and (ii) face to face transactions between the Selling Stockholders
and purchasers without a broker-dealer. A current prospectus must be in effect
at the time of the sale of the shares of Common Stock to which this Prospectus
relates. Each Selling Stockholder or dealer effecting a transaction in the
registered securities, whether or not participating in a distribution, is
required to deliver a current prospectus upon such sale. See "Description of
Capital Stock" and "Plan of Distribution and Selling Stockholders." The Company
will retain all proceeds from the exercise of the Subject Warrants, regardless
of the number exercised. The gross proceeds (a maximum amount of approximately
$54,558,340) will be used for working capital and general corporate purposes.
The Company will not receive any proceeds from the resale of Common Stock by the
Selling Stockholders.
As the resale of the shares of Common Stock is being registered under the
Securities Act of 1933, as amended ("Act"), holders who subsequently resell such
shares to the public may be deemed to be underwriters with respect to such
shares of Common Stock for purposes of the Act with the result that they may be
subject to certain statutory liabilities if the registration statement is
defective by virtue of containing a material misstatement or omitting to
disclose a statement of material fact. The Company has not agreed to indemnify
any of the Selling Stockholders regarding such liability. See "Plan of
Distribution and Selling Stockholders."
--------------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE, INVOLVE A HIGH DEGREE
OF RISK AND SUBSTANTIAL IMMEDIATE DILUTION AND SHOULD NOT BE
PURCHASED BY ANYONE WHO CANNOT AFFORD THE LOSS OF HIS ENTIRE
INVESTMENT. NO MARKET EXISTS FOR THE COMMON STOCK OR CLASS B
WARRANTS AND THERE IS NO ASSURANCE THAT A MARKET WILL
DEVELOP OR IF ONE DEVELOPS, THAT IT WILL NOT BE ILLIQUID,
LIMITED, SPORADIC OR HIGHLY VOLATILE. SEE
"RISK FACTORS" BEGINNING ON PAGE 5.
----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------
The date of this Prospectus is December 19, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
----
Available Information....................................................... 2
Prospectus Summary...........................................................3
Risk Factors.................................................................5
Use of Proceeds..............................................................7
Dilution ....................................................................7
Dividend Policy..............................................................8
Capitalization...............................................................8
Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................9
Business.....................................................................9
Management..................................................................16
Principal Stockholders......................................................18
Description of Capital Stock................................................19
Shares Available for Future Sale............................................21
Plan of Distribution and Selling Stockholders...............................21
Legal Matters...............................................................41
Experts.....................................................................41
Index to Financial Statements..............................................F-1
No person is authorized to give any information or to make any
representation other than those contained in this Prospectus, and if given or
made, such information or representation must not be relied upon as having been
authorized by the Company or any Underwriter. The Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any securities offered
hereby, or an offer to sell or a solicitations of an offer to buy any securities
offered hereby to or from any person in any jurisdiction in which such offer or
solicitation would be unlawful. Neither the delivery or this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the business or affairs of the Company since the
date hereof or that the information in the Prospectus is correct as of any time
subsequent to the date as of which such information is furnished.
AVAILABLE INFORMATION
The SEC maintains a Web site on the Internet that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the Commission. The address of the site is
http:\\www.sec.gov. Visitors to the site may access such information by
searching the EDGAR data base on the site.
The Company is subject to the information and reporting requirements of
the Securities Exchange Act of 1934, as amended ("Exchange Act"). As a result,
the Company files periodic reports, proxy materials and other information with
the Securities and Exchange Commission (the "SEC"). The Company provides its
shareholders with annual reports containing audited financial statements. The
Company has filed a registration statement of Form SB-2 ("Registration
Statement") under the Securities Act of 1933, as amended ("Act"), with respect
to the securities being registered. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, to which reference is hereby made. Copies of the Registration
Statement and its exhibits are on file at the offices of the Commission and may
be obtained upon payment of the fees prescribed by the Commission or may be
examined, without charge, at the public reference facilities of the Commission.
The Company will provide without charge to each person who receives a copy of
the Prospectus, upon written or oral request of such person, a copy of any of
the information that is incorporated by reference in this Prospectus (not
including exhibits to the information that is incorporated by reference unless
the exhibits are themselves specifically incorporated by reference). Such
request should be directed to the Company, attention Scott A. Cubley, at 910
Gemini, Houston, Texas 77058.
-2-
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL DATA (INCLUDING FINANCIAL STATEMENTS AND NOTES
THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
Eagle Wireless International, Inc. (the "Company" or "Eagle") is a
worldwide supplier of telecommunications equipment and related software used by
service providers in the paging and other wireless personal communications
markets. The Company designs, manufactures, markets and services its products
under the Eagle name. These products include transmitters, receivers,
controllers, software and other equipment used in personal communications
systems (including paging, voice messaging, cellular and message management and
mobile data systems) and radio and telephone systems. The Company's products are
primarily purchased by its customers on an order by order basis, and not
pursuant to any long-term contracts. Company customers include Motorola
Communications and Electronics, Inc. ("Motorola"), Ericsson, Inc., Mobil-Media,
Inc., Pac-Tel, Paging Network, Inc., Norwegian Telecom, Inc., and Link-Two
Communications, Inc. ("Link II"). The Company has a broad line of products
covering the paging spectrum as well as specific personal communication systems
("PCS") and specialized mobile radio ("SMR") products, and products that have
been tested and approved by the Federal Communications Commission ("FCC").
The Company was incorporated in May 1993, but did not conduct any
substantive business operations until April 1996. In September 1996, the Company
amended its articles of incorporation and in August 1997 changed its name to its
current name. Unless otherwise indicated, all information in this Prospectus has
been adjusted to reflect the amended articles of incorporation. The Company's
principal place of business is located at 910 Gemini, Houston, Texas 77058 and
its telephone number is (281) 280-0488.
THE RESALE OFFERING
Common Stock Outstanding........ 11,605,334 shares(1)(2)
Common Stock to be Resold....... 5,308,334 shares
Common Stock to be issued
upon Exercise of the Subject
Warrants ....................... 11,541,668 shares(3)
Class B Warrants to be Resold... 5,033,334
Risk Factors.................... Prospective purchasers are urged to carefully
review the factors set forth in "Risk
Factors."
No Market for Company Securities To date there exists no market for the
Common stock or the Class B Warrants and
there can be no assurance that a market will
develop, or if one develops, that it will
not be limited, sporadic or highly volatile.
- ------------
(1) Does not include 13,966,668 shares of Common Stock underlying outstanding
warrants including: (a) class A warrants to purchase an aggregate of
5,033,334 shares of Common Stock at $4.00 per share, which expire in August
2000("Class A Warrants"), (b) class B warrants to purchase an aggregate of
5,033,334 shares of Common Stock at $6.00 per share, which expire in August
2000 ("Class B Warrants"), (c) warrants to purchase 1,050,000 shares of
Common Stock at $.05 per shares which expire in July 1999 ($.05 Warrants"),
(d) warrants to purchase 1,375,000 shares of Common Stock at $.50 per share
which expire in July 1999 ("$.50 Warrants"), (e) class C warrants to
purchase 1,050,000 shares of Common Stock at $2.00 per share which expire in
August 2000("Class C Warrants"), and (f) warrants to purchase 425,000 shares
of Common Stock at $5.00 per share which expire in September 1999 ("$5.00
Warrants") (such Class A Warrants, Class B Warrants, Class C Warrants, $.05
Warrants, $.50 Warrants and $5.00 Warrants collectively, "Warrants"). See
"Description of Capital Stock."
(2) Does not include 14,875 shares underlying options issued pursuant to the
Company's stock option plan.
(3) Consists of shares of Common Stock underlying the Class A Warrants, Class B
Warrants, Class C Warrants and $5.00 Warrants. See "Plan of Distribution and
Selling Stockholders."
-3-
<PAGE>
SUMMARY FINANCIAL INFORMATION
The Company did not conduct any significant business operations until it
acquired cash, and certain inventory and assets, both of which occurred in March
1996, resulting in business operations commencing in April 1996 and its fiscal
year ends August 31.
FOR THE PERIOD ENDED
AUGUST 31, AUGUST 31,
1997 1996
STATEMENT OF EARNINGS AUDITED AUDITED
- --------------------- ------- -------
Net sales $3,971,369 $1,018,441
Cost of goods sold 1,768,916 644,271
Operating expenses 1,385,127 343,888
Earning before income tax 1,068,216 37,887
Net Earnings 728,494 32,204
BALANCE SHEET DATA
Working capital $6,090,971 $1,657,320
Total assets 7,379,898 3,446,992
Long-term debt, net 18,952 22,387
Shareholders' equity 6,592,388 2,077,006
-4-
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMPANY SECURITIES INVOLVES CERTAIN RISKS.
PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW THE FOLLOWING FACTORS TOGETHER
WITH THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS PRIOR TO MAKING AN
INVESTMENT DECISION.
LIMITED OPERATING HISTORY OF THE COMPANY
The Company has a limited operating history and, accordingly, is subject
to all the substantial risks inherent in the commencement of a new business
enterprise. Additionally, the Company has a very limited business history that
investors can analyze to aid them in making an informed judgement as to the
merits of an investment in the Company. Any investment in the Company should be
considered a high risk investment because the investor will be placing funds at
risk in a start-up company with unforeseen costs, expenses, competition and
other problems to which start-up ventures are often subject. The Company's
prospects must be considered in light of the risks, expenses and difficulties
encountered in establishing a new business in a highly competitive industry
characterized by rapid technological development. The Company had net sales of
$2,191,780 and net earnings of $32,204 for the period ended August 31, 1996, net
sales of $3,971,369 and net earnings of $728,494 for the fiscal year ended
August 31, 1997, may incur losses in the future, and there can be no assurance
when or if the Company will sustain long-term profitability. The Company's
financial statements for the period ended August 31, 1996 reflect the
commencement of manufacturing and sales since April 1996. See "Management's
Discussion and Analysis of Financial Condition."
CAPITAL REQUIREMENTS; LIMITED SOURCES OF LIQUIDITY
The Company requires substantial capital to pursue its operating strategy.
Since inception, the Company has primarily funded its capital requirements
through the private issuance for cash of shares of Common Stock and certain
Class A Warrants, Class B Warrants and Class C Warrants grossing approximately
$6,537,415. For the fiscal year ended August 31, 1997, the Company obtained
$3,140,120 of cash provided by financing activities and used $2,191,780 of cash
in operations. At August 31, 1996, the Company had working capital of
$1,657,320, and for the fiscal year ended August 31, 1997, working capital of
$6,090,971. As the Company has limited internal sources of liquidity, it will
continue to rely on external sources of liquidity, and for the foreseeable
future, the Company's principal source of working capital will be from proceeds
of the private offerings discussed above. The Company has not established any
lines of credit or financing with financial institutions or other unrelated
third parties. The Company may need to raise additional capital to satisfy its
business plan. The Company believes that its current working capital, and
revenues from operations, will satisfy the Company's capital requirements
through 1998; however, such time may be shorter or longer depending on revenues
generated, and expenses incurred. There is no assurance that the Company will
generate sufficient cash in future periods to satisfy its capital requirements.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
IMMEDIATE DILUTION; DISPROPORTIONATE RISK OF LOSS
Assuming an average exercise price of the Subject Warrants of $4.73 per
share, purchasers will incur immediate and substantial dilution of $2.09 per
share in the pro forma net tangible book value per share of their investment. In
addition, assuming the exercise of all of the Subject Warrants, such purchasers
will be contributing approximately 90% of the total capital consideration to the
Company, but will receive only approximately 50% of the shares outstanding.
Accordingly, in the aggregate, purchasers exercising the Subject Warrants will
bear a greater risk of loss than the current stockholders. See "Dilution."
DEPENDENCE ON A CERTAIN CUSTOMER
The Company's largest customer accounted for approximately 61% of the
Company's revenue during the fiscal year ended August 31, 1997. Link II owed the
Company $ 2,170,782 at August 31, 1997, approximately 75% of the accounts
receivable at August 31, 1997. Certain principal stockholders (or affiliates
thereof) of the Company, including James Futer, executive vice president,
director and chief operating officer, and A.L. Clifford, a director of the
Company, are also principal stockholders of Link II. Mr. Clifford is also the
chairman, president and chief executive officer of Link II and Dr. Cubley is a
director of Link II. In addition, the Company and Link II executed an agreement,
whereby the Company would receive up to an 8% equity interest in Link II in lieu
of accruing finance charges on the outstanding balance owed by Link II to the
Company. Under the agreement, equity in Link II is earned at a rate of 0.2% per
month per $100,000 payable and outstanding for more than 30 days. As of August
31, 1997, the Company had earned the full 8% equity interest to be evidenced by
the issuance of 240,000 shares of Link II common stock to the Company. Many of
the Company's customers contract with the Company on a purchase order basis,
which may result in fluctuations of revenue during various periods. The sudden
loss of a significant customer could have material adverse effect on the
Company's business. See "Business - Customers" and "Management-Certain
Transactions."
-5-
<PAGE>
TECHNOLOGY CHANGE
The design, development and manufacturing of PCS and SMR products is
highly competitive and characterized by rapid technology changes. The Company
will compete with other existing products and may compete against other
development technology. Development by others of new or improved products or
technologies may make the Company's products obsolete or less competitive. While
management believes that the Company's products are based on established
state-of-the-art technology, there can be no assurance that they will not be
obsolete in the near future or that the Company will be able to develop a
commercial market for its products in response to future technology advances and
developments. See "Business - Research and Development."
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent upon, among other things, the
services of H. Dean Cubley, president and chief executive officer and James
Futer, executive vice-president and chief operating officer. The loss of the
services of Dr. Cubley or Mr. Futer, for any reason, could have a material
adverse effect on the prospects of the Company. The Company has not entered into
employment agreements with Dr. Cubley and Mr. Futer but does maintain $5 million
of key-man life insurance on Dr. Cubley. The Company has enlisted experienced
personnel in several key positions; however, there can be no assurance that the
Company will be able to continue to attract and retain qualified employees to
implement its business plan. See "Management."
LACK OF PATENT PROTECTION
The Company's success depends upon its proprietary technologies. The
Company relies on certain non-disclosure agreements with employees, and common
law remedies with respect to certain of its proprietary technology. The Company
has not completed filing for or obtained patents on its key technology, and
there can be no assurance that the patents will be issued if applied for in the
future. There can be no assurance that others will not misappropriate the
Company's proprietary technologies or develop competitive technologies or
products that could adversely affect the Company. In addition, although the
Company is not aware of any infringement claims against it or any circumstances
which could lead to such claims, there can be no assurance that such a claim
could not be made which could adversely affect the Company. See "Business -
Proprietary Information."
FEDERAL REGULATION
The paging and PCS industry is heavily regulated. Although compliance with
such laws and regulations historically has not had a material adverse effect on
the Company's competitive position, operations or financial condition or
required material capital expenditures, there is no assurance that the
implementation of new or amended laws or regulations in the future would not
have such an effect or require such expenditures. See "Business Regulation."
COMPETITION
The wireless personal communications industry includes equipment
manufacturers that serve many of the same customers served by the Company.
Substantially all of the Company's competitors have significantly greater
resources, including financial, technical and marketing, than the Company, and
there can be no assurance that the Company will be able to compete successfully
in the future. See "Business - Competition."
LACK OF CASH DIVIDENDS
It is not anticipated that any cash dividends will be paid to stockholders
in the foreseeable future. See "Dividend Policy."
NO ASSURANCE OF A PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE, SHARES
ELIGIBLE FOR FUTURE SALE
There is a limited, sporadic and highly volatile public trading market for
the Company's Common Stock and there is no assurance that any public market will
continue in the future. In the event that any market continues for the Company
securities, the market price of the Common Stock may experience fluctuations
that are unrelated to the operating performance of, or announcement concerning,
the Company. Securities of issuers having relatively limited capitalization or
securities recently issued in a public offering, such as the Company, are
particularly susceptible to change based on short-term trading strategies of
certain investors. See "Plan of Distribution and Selling Stockholders."
As of the date of this Prospectus, a total of 11,605,334 shares of Common
Stock were outstanding. The resale of the 5,308,334 shares of Common Stock
offered hereby, along with the resale of the 11,541,668 shares of Common Stock
issuable upon the exercise of the Subject Warrants, will be eligible for
immediate resale in the public market. In
-6-
<PAGE>
addition, 2,425,000 shares of Common Stock will be issuable upon exercise of the
remaining outstanding warrants, although such shares will be subject to the
resale provisions of Rule 144 promulgated under the Act. The remaining 6,297,000
shares of Common Stock outstanding will be subject to resale pursuant to the
provisions of Rule 144 and 5,657,125 shares are subject to a 12 month
contractual lock up agreement whereby such shares can only be sold by the
holder, if concurrently with such resale, the holder exercises a warrant to
purchase one share of the Company's Common Stock, at an exercise price of at
least $4.00 per share, for each two shares of Common Stock sold. Sales of Common
Stock in the public market may have an adverse effect on prevailing market
prices for the Common Stock. See "Shares Eligible for Future Sale."
PENNY STOCK REGULATION
The SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in "penny stocks." Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange system). The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document prepared by the SEC that provides information about penny stocks and
the nature and level of risks in the penny stock market. The broker-dealer also
must provide the customer with bid and offer quotations for the penny stock, the
compensation of the broker-dealer, and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules require that prior to
a transaction in a penny stock not otherwise exempt from such rules, the
broker-dealer must make a special written determination that a penny stock is a
suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in any secondary market for a stock
that becomes subject to the penny stock rules, and accordingly, investors in
Company securities may find it difficult to sell their securities, if at all.
AUTHORIZED STOCK
The Board of Directors of the Company has the authority to issue up to
5,000,000 shares of "blank check" preferred stock with such designations, rights
and preferences as may be determined by the Board of Directors. Accordingly, the
Board of Directors of the Company is empowered, without further shareholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of the Company's Common Stock. Certain companies have used
the issuance of preferred stock as an anti-takeover device and the Board of
Directors could, without further shareholder approval, issue preferred stock
with certain rights that could discourage an attempt to obtain control of the
Company in a transaction not approved by the Board of Directors. The Board of
Directors of the Company also has authority to issue up to 100,000,000 shares of
Common Stock. See "Description of Capital Stock."
LACK OF DISINTERESTED, INDEPENDENT DIRECTORS
All of the directors of the Company have a direct financial interest in
the Company. While management believes that its current directors will be able
to exercise their fiduciary duties as directors, the Company intends to add an
independent, disinterested director to serve on the Board of Directors in the
near future. See "Management."
USE OF PROCEEDS
Assuming exercise of all the Subject Warrants, the Company will receive
aggregate gross proceeds of approximately $54,558,340, prior to deducting
estimated offering expenses of approximately $125,000. The Company will use
these proceeds for working capital and will have broad discretion in the
application of such proceeds. As there are no commitments from the holders of
the Subject Warrants to exercise such securities, there can be no assurance that
any of the Subject Warrants will be exercised. The Company will receive no
proceeds from the resale of shares of Common Stock by the Selling Stockholders.
DILUTION
Set forth below is a description of dilution to purchasers of the Company
Common Stock, assuming the exercise of all of the Subject Warrants.
As of August 31, 1997, the pro-forma net tangible book value of the
Company's Common Stock was $6,550,716 or approximately $.57 per share. "Net
Tangible book value per share" represents the amount of total tangible assets
less total liabilities of the Company. Without taking into account any changes
in net tangible book value after August 31, 1997, except for the issuance of
95,000 shares of Common Stock, the pro-forma book value of the Common Stock
after the exercise of all Subject Warrants will be $2.64 per share.
Consequently, the purchasers of the shares of Company
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Common Stock issued upon exercise of all of the Subject Warrants will sustain an
immediate substantial dilution (i.e., the difference between the average
exercise price of $4.73 and the pro forma net tangible book value per share)
after such exercise of $2.09 per share. The following table illustrates such
dilution:
Pro forma Net Tangible Book Value of Outstanding
Common Stock................................................. $ .57
Average Exercise Price of the Common Stock
Underlying the Subject Warrants.............................. $4.73
Increase Attributable to Exercise of Subject Warrants.......... $2.07
Pro forma Net Tangible Book Value After Exercise of
Subject Warrants............................................. $2.64
Per Share Dilution to New Investors............................ $2.09
The following table sets forth, as of the date of this Prospectus, the
total number of shares of Common Stock purchased from the Company, the total
consideration recorded and the average price per share for (i) existing holders
of Common Stock for shares acquired since inception and (ii) the investors
exercise all of the Subject Warrants.
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
---------------- ------------------- -----------------
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
Existing
shareholders(1)(2)... 11,605,334 50% $ 6,047,587(1) 10% $ .51
New shareholders....... 11,541,668 50% 54,558,340(1) 90% $4.73
---------- ----- ------------ ---
Total.................. 23,147,002 100% $ 60,605,927 100%
- -----------------
(1) Prior to deducting any expenses associated with the issuances. (2)
Excludes 14,875 shares underlying currently outstanding options.
DIVIDEND POLICY
It is the present policy of the Company not to pay cash dividends and to
retain future earnings to support the Company's growth. Any payment of cash
dividends in the future will be dependent upon the amount of funds legally
available therefor, the Company's earnings, financial condition, capital
requirements and other factors that the Board of Directors may deem relevant.
The Company does not anticipate paying any cash dividends in the foreseeable
future.
CAPITALIZATION
The following table sets forth the audited capitalization of the Company
as of August 31, 1997. This table should be read in conjunction with the
Company's financial statements and notes thereto that are included elsewhere in
this Prospectus.
ACTUAL
----------
Long-term debt, net $ 18,952
Stockholder's Equity:
Preferred Stock, par value $.001 per share;
5,000,000 shares authorized, 0 shares
outstanding............................... -
Common Stock, par value $.001 per share;
100,000,000 shares authorized, 11,510,334
shares issued and outstanding(1) (2)...... 11,510
Additional Paid-In Capital................... 5,820,180
Retained Earnings............................ 760,698
----------
Total Stockholders' Equity................... $6,592,388
- -------------------
(1) Does not reflect 13,966,668 shares underlying the Warrants.
(2) Does not reflect (i) 95,000 shares of Common Stock and (ii) options to
purchase 14,875 shares, the issuance of which occurred after August 31,
1997.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements of the Company and accompanying Notes to the Financial Statements.
GENERAL
The Company was incorporated in May 1993, but did not conduct any
significant business operations until it acquired cash, certain inventory and
assets, both of which occurred at the end of March 1996 resulting in business
operations commencing in April 1996. There exists limited historic operations
with respect to the operation of the Company. The Company's fiscal year is
August 31. The financial information contained in this Prospectus is for the
fiscal year ended August 31, 1996 and for the nine month period ended August 31,
1997.
FIVE MONTHS COMPRISING FISCAL YEAR ENDED AUGUST 31, 1996
For the period ended August 31, 1996, the Company had net sales of
$1,018,441, cost of goods sold was $644,271, resulting in a gross profit of
$374,170. For this period, total operating expenses for such period were
$343,888, resulting in net earnings of $342,204. For the period ended August 31,
1996, the Company had total current assets of $3,004,919, working capital of
$1,657,320, long-term debt, net liabilities of $22,387, and total shareholders'
equity of $2,077,006.
FISCAL YEAR ENDED AUGUST 31, 1997
For the fiscal year ended August 31, 1997, the Company had net sales of
$3,971,369, total cost of goods sold was $1,768,916, resulting in a gross profit
of $2,202,453. For this period, total operating expenses were $1,385,127,
resulting in net earnings of $728,494. For the fiscal year ended August 31,
1997, the Company had total current assets of $6,859,529, working capital of
$6,090,971, long-term debt, net liabilities of $18,952 and shareholders' equity
of $6,592,388.
LIQUIDITY AND CAPITAL RESOURCES
As of August 31, 1997, the Company's primary source of equity was
$2,894,561 of cash, $2,895,281 of accounts receivable, and $1,012,218 of
inventories. Since inception, the Company has primarily funded its capital
requirements through the private issuance for cash of shares of Common Stock and
certain Class A Warrants, Class B Warrants and Class C Warrants grossing
approximately $ 6,537,415 (the "Private Offerings"). Net cash used in operating
activities for the period ended August 31, 1996, was $146,220 compared with
$2,191,780 used in operating activities for the fiscal year ended August 31,
1997. This decrease was primarily due to an increase in accounts receivable. Net
cash provided by financing activities was $2,354,782 for the period ended August
31, 1996 compared with $3,140,120 for the fiscal year ended August 31, 1997. The
Company expects any negative cash flow from its operations to continue which
will be funded primarily from working capital.
The Company believes that its working capital is sufficient to fund
operations through the end of the current calendar year. The Company has not
established a line of credit or other similar financing arrangements with any
lenders. There can be no assurance that the Company will be able to obtain any
funding from any external sources on suitable terms, if at all. Management
believes, however, that its current working capital will be sufficient to meet
the Company's capital requirements for the current calendar year. However, a
decrease in expected revenues resulting from adverse economic conditions or
otherwise, unforeseen costs, insufficient market penetration and any new product
introductions could shorten the period during which the current working capital
may be expected to satisfy the Company's capital requirements. As of the date of
this Prospectus, the Company had no material capital commitments.
BUSINESS
The Company is a worldwide supplier of telecommunications equipment and
related software used by service providers in the paging and other wireless
personal communications markets. The Company designs, manufactures, markets and
services its products under the Eagle name. These products include transmitters,
receivers, controllers, software and other equipment used in personal
communications systems (including paging, voice messaging, cellular and message
management and mobile data systems) and radio and telephone systems. The Company
has a broad line of products covering the paging spectrum as well as specific
personal communication systems ("PCS") and specialized mobile radio ("SMR")
products, and products that have been tested and approved by the FCC. Eagle
provides service and support for its products.
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CURRENT PRODUCTS
The principal products and enhancements currently being manufactured and
sold by the Company relate to its wireless messaging products and include the
following:
LICENSE STARTER
This is a new product which was developed to provide new paging license
holders a method to install a system that will keep them in compliance with FCC
regulations. The product is expandable, giving the license holder the ability to
fund the expansion from revenues. Installation of this product requires 110VAC
power and a standard telephone line. Revenues from sales of this product for the
periods ended August 31, 1996 and August 31, 1997 were approximately $814,752 or
80% of total revenues and $1,100,000 or 28% of total revenues, respectively.
STEALTH SERIES SLIMLINE BASE STATIONS
This product is attractive and convenient where space has a high dollar
cost. The product has the same specifications as a full size base station
(described below) but takes up much less floor space and can be stacked for even
higher density.
FULL SIZE BASE STATION
This product line can be configured for substantially all domestic and
international paging frequencies.
R.F. POWER AMPLIFIERS
The high, medium and low power base station and link transmitter power
amplifiers are designed to operate with any FCC type accepted exciter or may be
combined with Eagle optional plug-in base station in the same volume as the
power amplifier. All Eagle power amplifiers above 100 watts are equipped with
Eagle "Heat Trap"(TM) design to provide the user with long life and high
reliability performance.
EXTEND-A-PAGE
Extend-a-Page is designed to provide fill-in coverage in those locations
where normal paging service from a wide area paging system is not adequate.
Extend-a-Page receives the paging data on either a radio frequency ("RF")
control link or wireline link and converts this information into low power
simulcast compatible paging transmissions on any of the common paging
frequencies. The Extend-a-Page transmits the paging information at a one to two
watt level directly into hard to reach locations such as hospitals, underground
structures, large industrial plants, and many locations near the outer coverage
contour of paging systems.
LINK PRODUCTS
Major competitors have elected to license the Eagle Telecom 20x Control
software and have it resident on their terminals. However, the customer can
elect to purchase the same Link software directly from Eagle as part of an Eagle
system at a lesser cost. Management believes that its software allows the user
to mix and match the products of different vendors on a common system.
MICROBEEP
Management believes this to be the only small terminal resident in an IBM
PC taking power from the PC and giving the user POCSAG numeric and alphanumeric
flexibility at 512 and 1200 baud rate.
ARBITRATOR
Management believes this to be the only product that can reliably
adjudicate and allow up to eight terminals to share the same transmitter,
particularly in private carrier paging ("PCP") applications.
The following wireless messaging products are in the final beta testing
phase by the Company and have recently become available for commercial
production and sale.
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KAR-STOPPER 950
The KS-950 offers safer personal protection during possible car-jacking
situations. When a thief demands and then takes possession, the driver is left
behind, safe but without his or her vehicle. The driver may go to any phone in
the U.S. or Canada and dial a special number, where a person will answer and
proceed to assist them. In some instances the vehicle owner can, also using a
touch tone phone, page the vehicle directly. A signal is then transmitted to the
vehicle via satellite to a paging system which sends out a signal to immediately
trigger a built in anti car-jacking device. Lights flash and a siren or horn
sound is initiated causing immediate attention to the vehicle and concern to the
thief. A shrill sounding 180db interior siren (optional) is also triggered. If
the thief attempts to turn off the ignition or open any door or open the hood,
the engine dies along with all functions of the ignition key switch. If the
thief attempts to stop the system by removing the battery cables, the KS-950
memory system goes into effect, and when the cables are re-connected, the system
resumes where it left off. The system can also be used to unlock vehicle doors
when the driver is accidentally locked out or to lock the vehicle doors. Among
the Kar-Stopper 950 features are: can be initiated from any phone i.e. (land,
cellular, pay phone, etc.); works all over the world; audible and visual alerts;
ignition disable circuit; four separate activation codes available; memory
back-up; and short circuit protection.
ENERGY WIZARD 2000
The Energy Wizard 2000 is a new product being developed for use by Public
Utility Companies to control switching in their sub-stations remotely using the
low-cost paging infrastructure. At the present time, the utilities use existing
voice channels on their radio communications system to control these
Sub-Stations. Unfortunately, when switching is necessary and voice channels are
being used, it reduces the capabilities and traffic capacity of the
communications systems at a time when maximum communications capabilities are
required to monitor emergencies on the system. The unit will be intelligent,
being capable of detecting over voltages in excess of 125VAC and turning the
system OFF activating various safety modes to avoid overloading sub-station or
blacking out of consumers served by the controlled sub-station. Counters will
register the activations and aborts of the controlled system. This system can be
modified to control any process, water, gas, oil, electrical power or any other
process that can be controlled by an ON/OFF relay.
PRODUCT CATEGORIES
WIRELESS MESSAGING PRODUCTS
For the fiscal year ended August 31, 1996 and 1997, infrastructure
equipment, which includes License Starter, Base Stations, power amplifiers,
L20X, arbitrator, Extend-a-Page, and Micro Beep, accounted for substantially all
of the Company's net sales.
Paging is a method of wireless telecommunication which uses an assigned
radio frequency to contact a paging subscriber anywhere within a service area. A
paging system is generally operated by a service provider which incurs the cost
of building and operating the system. Each service provider in the United States
licenses spectrum from the FCC and elsewhere from the authorized government body
to operate a paging frequency within either a local, regional, or national
geographical area. Each paging subscriber is assigned a distinct telephone
number which a caller dials to activate the subscriber's pager (a pocket-sized
radio receiver carried by the subscriber). Telephone calls by the subscriber are
received by a paging switch. A network of transmitters, that broadcast a signal
over a specific geographical area, then receives the information from the paging
switch through the controller and a radio signal is sent by the transmitters via
antennae to the subscriber's pager. The transmitters manufactured by Eagle are
specifically designed to simulcast, which is the transmission of the same signal
over two or more transmitters on the same channel at the same time in an overlap
area, resulting in superior voice and data quality and coverage area. The radio
signal causes the pager to emit a beep or to vibrate, and to provide the
subscriber with information from the caller in the form of a voice, tone,
numeric or alphanumeric message.
A pager has an advantage over a landline telephone in that the pager's
reception is not restricted to a single location, and has an advantage over a
cellular portable telephone in that a pager is smaller, has a much longer
battery life, has excellent coverage, and is less expensive to use.
Historically, the principal disadvantage of traditional paging service in
comparison to landline telephones or cellular portable telephones has been that
paging provided only one-way communication capabilities.
However, this limitation may have been overcome in the United States as a
result of the auction in 1994 by the FCC of nationwide and regional licenses for
designated narrowband personal communication services ("NPCS"), radio
frequencies or spectrum to service providers. Many of the nationwide license
holders and many of the regional license holders are current Eagle customers,
directly or indirectly. Additional licenses may be auctioned in 1996. The cost
of
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the licenses to the NPCS auction winners in 1994 was approximately $1 billion.
The FCC anticipates that these NPCS licenses will be used to provide such new
services as pager location, two-way acknowledgment paging, advanced voice paging
and data services.
The NPCS radio frequencies or spectrum are located at three separate
points within the total radio spectrum, at 902-928 MHZ, 930-931 MHZ and 940-941
MHZ. Initially, the radio frequencies located at 930-931 MHZ and 940- 941 MHZ
have been designated for outbound message transmission (to the pager) and the
902-928 MHZ have been designated response channels (from the pager). This
application is similar to traditional paging except that these license holders
have been granted wider frequency band width permitting the user to transmit
substantially more information. In addition, Eagle manufactures other paging
infrastructure products that cater to the VHF and UHF paging frequencies in the
United States and other areas of the world as well as supporting most
international paging brands.
The NPCS nationwide licenses cover all fifty states, the District of
Columbia, American Samoa, Guam, the Northern Marianas Islands, Puerto Rico and
the United States Virgin Islands. These licenses are divided into 50 KHz paired
and unpaired channel categories. Paired channels permit both outbound and
inbound signals while unpaired channels are limited to only outbound signals.
Currently, there are 11 nationwide licenses and 6 additional licenses which were
auctioned on a regional basis that cover the nation. Remaining to be auctioned
are 7 licenses available on a major trading area ("MTA") basis and 2 licenses on
a basic trading area ("BTA") basis.
The FCC has imposed infrastructure construction or buildout requirements
on all NPCS license holders. Each NPCS license holder must establish a minimum
service availability for at least 37.5% of the population in its geographic
region within five years after receiving the license. After ten years, each NPCS
license holder must make the service available to at least 75% of the area's
population. If a NPCS license holder fails to achieve these build-out
requirements, it risks cancellation by the FCC of its NPCS license and a
forfeiture of any auction monies paid.
Eagle manufactures products that will enable paging license holders to
legally put their systems into operation, at a low cost, a strategy adopted by
the Company to create a "captive" customer in terms of future build out.
Eagle offers its customers an end-to-end solution for NPCS applications.
The Company has developed and introduced, at the September 1996 PCS show in San
Francisco, new technology based products with enhanced architecture and
technology from its existing paging systems to accommodate the advanced services
available through paging and PCS. This system approach includes full product
lines of radio frequency network controllers, transmitters, receivers, and a
special satellite receiver system (to receive the response message from the
end-user). The Company is currently shipping its NPCS products to various beta
test sites, based on product development schedules and the build-out
requirements of the NPCS license holders.
The design of a paging system is customer specific and depends on (i) the
number of paging subscribers the service provider desires to accommodate, (ii)
the operating radio frequency, (iii) the geography of the service area, (iv) the
expected system growth, and (v) specific features desired by the customer.
Paging equipment hardware and software developed by the Company may be used with
all types of paging service, including voice, tone numeric (telephone number
display) or alphanumeric messaging (words and numbers display).
SWITCHES
The Company is involved at an early stage in the development of industry
wide technology standards and is familiar with developments in paging protocol
standards throughout the world. The Company works closely with its customers in
the design of large, complex paging networks. Eagle believes that its customers'
purchasing decisions are based, in large part, on the quality and technological
capabilities of such networks. The Company has strategic agreements to purchase
switches from major switch manufacturers. The Company believes that the advanced
hardware and software features of its switches ensure high reliability and high
volume call processing.
RADIO FREQUENCY EQUIPMENT, TRANSMITTERS AND RECEIVERS
Transmitters are available in frequency ranges of 70 MHZ to 960 MHZ and in
power levels of 2 watts to 500 watts. Radio link receivers are available in
frequency ranges of 70 MHZ to 960 MHZ. Satellite link receivers are available
for integration directly with the transmitters at both Ku- and C- band
frequencies.
The Company's range of receivers detects the responses back from the
two-way NPCS subscriber devices. The receivers take advantage of DSP
demodulation techniques that maximize receiver performance.
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Depending upon frequency, antenna height, topography and power, Eagle
transmitter systems are designed to cover broadcast cells with a diameter from 3
to 100 miles. Typical simulcast systems have broadcast cells which vary from 3
to 15 miles in diameter. Eagle transmitters are designed specifically for the
high performance and reliability required for high speed simulcast networks.
CONTROLLERS
The Company currently offers products for transmitter control known as
Eagle's L20TX transmitter control system, which is a medium-feature transmitter
control system used in domestic and international markets, and the Company's new
advanced Kar-Stopper 950 and Energy Wizard 2000 products were introduced at the
September 1996 show in San Francisco.
MANUFACTURE OF NEW PRODUCTS
The Company has identified several new products that would complement
existing products and broaden its product base. The Company's strategy is to
develop upgrades on existing products to enable it to obtain increased market
share or extend the life of those products by several years.
SERVICE AND SUPPORT
Eagle provides service to customers on a regular basis including
installation, project management of turnkey systems, training, service or
extended warranty contracts with the Company. The Company believes that it is
essential to provide reliable service to customers in order to solidify customer
relationships and to be the vendor of choice when new services or system
expansions are sought by a customer. This relationship is further developed as
customers come to depend upon the Company for installation, system optimization,
warranty and post-warranty services.
The Company has a warranty and maintenance program for both its hardware
and software products and maintains a customer service network in its operating
locations. Eagle's standard warranty provides its customers with repair or
replacement of any defective Eagle manufactured equipment. The warranty is valid
on all products for the period of one year from the later of the date of
shipment or the installation by an Eagle qualified technician.
CUSTOMERS
Eagle sells to a broad range of customers worldwide. In the United States,
customers include the regional Bell operating companies, medical paging
operators, and public and private radio common carriers. Internationally,
customers include public telephone and telegraph companies, as well as private
telecommunication service providers. Company customers include: Motorola,
Ericsson, Inc., Mobil-Media, Inc., Pac-Tel, Paging Network, Inc., Norwegian
Telecom, Inc., and Link II.
The Company's largest customer, Link II, accounted for approximately 61%
of the Company's sales for the fiscal year ended August 31, 1997. Link II is a
common carrier of exclusively wholesale one-way paging network services. Its
customers purchase paging network services as an aggregator and resell Link II's
network services to individual subscribers and other communications providers.
Link II has secured the rights to use or options to purchase five PCP
frequencies, three of which provide coverage in ten of the top ten markets, and
several RCC frequencies providing regional coverage in two of the top ten
markets. Link II will provide high-quality network services by utilizing
regional network operational centers ("NOC") that will enable it to utilize a
star network topology to control paging networks in multiple local markets
within a wide geographical region. Link II intends to build its first NOC in
metro New York City followed by Chicago, Los Angeles, Dallas and Atlanta. Link
II then intends to expand operations nationwide by constructing five additional
NOCs in top markets to allow for nationwide, local and national paging services.
MARKETING AND SALES
The Company markets its products and services in the United States through
representative organizations and internationally through agents. As the
Company's business is highly technical, a majority of sales are complete systems
with technical support. A large percentage of the Company's marketing comes from
direct sales by the employees. The Company also utilizes distributors and agents
to sell its products in certain countries and geographic regions to market
outside of the Company's core markets.
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The Company currently has non-exclusive arrangements with 6 of such
distributors and agents to service Canada and the midwest, eastern seaboard, and
northeast regions of the United States. A non-exclusive arrangement is also in
effect with one distributor on a worldwide basis and the Company has one
exclusive arrangement with a distributor to service Australia. Terms of these
arrangements provide for payments to the distributors on either a fixed
percentage commission or discount from list price basis.
As part of the Company's integrated marketing and sales efforts, Eagle
encourages a philosophy of open communication between the Company and its
customers.
INTERNATIONAL BUSINESS RISKS
In 1996 and 1997, the Company generated net sales in markets outside of
the United States, which amounted to 1.9% and 6.5% of total Company net sales
for the periods ended August 31, 1996 and August 31, 1997, respectively.
International sales are subject to the customary risks associated with
international transactions, including political risks, local laws and taxes, the
potential imposition of trade or currency exchange restrictions, tariff
increases, transportation delays, difficulties or delays in collecting accounts
receivable, and, to a lesser extent, exchange rate fluctuations. To protect its
interests, the Company only services international business using letters of
credit drawn on American or limited foreign corresponding banks.
RESEARCH AND DEVELOPMENT
The Company believes that a strong commitment to research and development
is essential to the continued growth of its business. One of the key components
of the Company's development strategy is the promotion of a close relationship
between its development staff, internally with Eagle's manufacturing and
marketing personnel, and externally with Eagle's customers. This strategy has
allowed Eagle to develop and bring to market customer-driven products.
The Company has extensive expertise in the technologies required to
develop wireless communications systems and products including high power, high
frequency RF design digital signal processing, real-time software, high-speed
digital logic, radio frequency and data network design. The Company believes
that by having a research and development staff with expertise in these key
areas, it is well positioned to develop enhancements for its existing products
as well as the next generation of personal communication products. Investment in
advanced computer-aided design tools for simulation and analysis has allowed
Eagle to reduce the time for bringing new products to market. Research and
development costs incurred by the Company for the periods ended August 31, 1997
and 1996 were $415,265 and $48,829, respectively.
MANUFACTURING
Eagle currently manufactures its products at Company facilities in
Houston, Texas. The Company's manufacturing expertise resides in assembling
sub-assemblies and final systems that are configured to its customers'
specifications. The components and assemblies used in the Company's products
include electronic components such as resistors, capacitors, transistors, and
semiconductors such as field programmable gate arrays, digital signal processors
and microprocessors, and mechanical materials such as cabinets in which the
systems are built. Substantially all of the components and parts used in the
Company's products are available from multiple sources. In those instances where
components are purchased from a single source, the supplier is reviewed
frequently for stability and performance. Additionally, as necessary, the
Company purchases sufficient quantities of certain components which have
long-lead requirements in the world market. The Company ensures that all
products are tested, tuned and verified prior to shipment to the customer.
The Company is in the process of implementing a computerized system which
will be used to control and monitor all areas of the Company from sales to
shipping.
COMPETITION
The Company supplies transmitters, receivers, controllers and software
used in paging, voice messaging and message management systems. While the
services from the foregoing products represent a significant portion of the
wireless personal communications industry today, the industry is expanding to
include new services and new markets. The wireless personal communications
industry includes equipment manufacturers that serve many of the same PCS
markets served by the Company. Certain of the Company's competitors, and all
competitors that have publicly tradeable securities, have significantly greater
resources than the Company, and their can be no assurance that Eagle will be
able to compete successfully in the future. In addition, manufacturers of
wireless telecommunications equipment, including
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those in the cellular telephone industry, certain of which are larger and have
significantly greater resources than the Company, could elect to enter into the
Company's markets and compete with Eagle's products. There can be no assurance
that the Company will be able to increase its market share in the future.
PROPRIETARY INFORMATION
The Company attempts to protect its proprietary technology through a
combination of trade secrets, non-disclosure agreements, technical measures, and
common law remedies with respect to certain proprietary technology. Such
protection may not preclude competitors from developing products with features
similar to the Company's products. The laws of some foreign countries in which
the Company sells or may sell its products do not protect the Company's
proprietary rights in the products to the same extent as do the laws of the
United States. Although the Company believes that its products and technology do
not infringe on the proprietary rights of others, there can be no assurance that
third parties will not assert infringement claims against the Company in the
future. If such litigation resulted in the Company's inability to use
technology, the Company might be required to expend substantial resources to
develop alternative technology. There can be no assurance that the Company could
successfully develop alternative technology on commercially reasonable terms.
REGULATION
Many of the Company's products operate on radio frequencies. Radio
frequency transmissions and emissions, and certain equipment used in connection
therewith, are regulated in the United States and internationally. Regulatory
approvals generally must be obtained by the Company in connection with the
manufacture and sale of its products, and by customers to operate the Company's
products. There can be no assurance that appropriate regulatory approvals will
continue to be obtained, or that approvals required with respect to products
being developed for the personal communications services market will be
obtained. The enactment by federal, state, local or international governments of
new laws or regulations or a change in the interpretation of existing
regulations could affect the market for the Company's products. Although recent
deregulation of international telecommunications industries along with recent
radio frequency spectrum allocations made by the FCC have increased the demand
for the Company's products by providing users of those products with
opportunities to establish new paging and other wireless personal communications
services, there can be no assurance that the trend toward deregulations and
current regulatory developments favorable to the promotion of new and expanded
personal communications services will continue or that future regulatory changes
will have a positive impact on the Company. On February 9, 1996, the FCC
released a notice of proposed rule making covering a licensing rule and
procedure change on the 929 MHZ and 931 MHZ as well as certain other paging
frequencies which included a freeze on its acceptance of new applications for
paging system licenses. The Company believes that this freeze will increase
sales of certain of its product lines as customers respond to the "install of
lose" nature of the proposed licensing rule. The long-term effect is expected to
cause the current system operators to purchase and install new equipment using
their current licenses in an effort to increase the efficiency of operations
rather than expanding into new territories.
EMPLOYEES
At December 1, 1997, the Company employed approximately 37 persons and
retained 2 independent contractors. The Company believes its employee relations
to be good. The Company enters into independent contractual relationships with
various individuals, from time to time, as needed.
DESCRIPTION OF PROPERTY
The Company's headquarters are located in Houston, Texas and include
approximately 15,000 square feet of leased office and warehouse space. The lease
is at market rates and expires in 1998. The Company insures its facilities in an
amount it believes is adequate and customary in the industry. The Company
believes that its existing facilities are adequate to meet its current
requirements but anticipates the need for additional space within the next year.
The Company believes that suitable additional space in close proximity to its
existing headquarters will be available as needed to accommodate such growth of
its operations through the foreseeable future.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers are:
NAME AGE POSITION
---- --- --------
H. Dean Cubley 56 Chairman of the Board of Directors,
President and
Chief Executive Officer
Christopher W. "James" Futer 58 Director, Executive Vice President
and Chief Operating Officer
A. L. Clifford 53 Director
Richard Royall 51 Chief Financial Officer
H. DEAN CUBLEY has served as chairman of the board, president and chief
executive officer of the Company since March 1996. Prior to that, Dr. Cubley
served as vice-president of Eagle Telecom, Inc. from 1993 to March 1996. Dr.
Cubley is also a member of the Oversight Committee for the University of Houston
Epitaxy Center which managed the Wake Shield Flight aboard the Shuttle in
September 1995. Dr. Cubley has over 35 years of extensive experience in the
field of telecommunications. From 1965 to 1984, Dr. Cubley worked for the NASA
Manned Spacecraft Center in the Electromagnetic Systems Branch of the
Engineering and Development Directorate. For a five year portion of that period,
Dr. Cubley was the Antenna Subsystems Manager for all spacecraft antennas for
the Shuttle Program. Dr. Cubley's duties included overall responsibility for the
design, development, costs schedules and testing of the antennas and hardware
for all Shuttle flights. Throughout his career, Dr. Cubley has authored or
co-authored over fifty publications. In addition, he has a total of eight
patents and patents-pending registered in his name. Dr. Cubley received a
bachelor of science degree in electrical engineering from the University of
Texas in 1964 and a masters degree in electrical engineering from the University
of Texas in 1965. In 1970, Dr. Cubley received his PhD in electrical engineering
from the University of Houston. Since 1977, Dr. Cubley has been actively engaged
in the commercial telecommunications industry and has been instrumental in many
of its technological advancements.
JAMES FUTER has served as a director, chief operating officer and vice
president of the Company since March 1996. Prior to that, Mr. Futer served as
sales manager of Eagle Aerospace, Inc. Telecom Division from November 1994 until
February 1996. From May 1993 to November 1994, Mr. Futer was employed as a vice
president of operations with Starcom, Inc. Prior thereto, he was employed with
Paging Products International. Mr. Futer was a manager of Universal Cellular,
Inc., a California corporation ("UCI"), from October 1990 until February 1991.
Mr. Futer resigned from UCI in February 1991 due to his disagreement with UCI
management over its business policy and practices. In June 1993, UCI filed for
protection under the federal bankruptcy laws. Mr. Futer's spectrum of experience
has included work in the fields of hi-tech flight simulation and display
technologies (especially those of light emitting diodes and liquid crystal
displays), and in consumer electronics, i.e. electronic watches, pocket
calculators, and electronic games. Most recently, he has been involved in pager
design, manufacture and marketing, as well as the wider field of paging
equipment. His international background includes work with Hatfield Instrument
(in England, where he was born), Canadian Aviation Electronics, located in
Montreal, Canada, General Instruments (in Canada and the United States),
Litronix (in California) and Siemens (living in California and England and
commuting to the head office in Munich, as well as Berlin, Paris and Milan). In
1975, he was instrumental in implementing a major "turn-key" technology transfer
from Canada to the (then) Soviet Union for the manufacture of hand-held
electronic calculators, an operation which the Soviets then improved from the
consumer level and adapted to suit their particular requirements. Since 1975,
Mr. Futer has had extensive in-depth experience of interfacing with Pacific Rim
countries. In 1992 and 1993, he spent time in the People's Republic of China
co-ordinating a successful technology transfer for one of the first pager
manufacturing facilities.
A. L. CLIFFORD has served as a director since December 1996. Mr. Clifford
has served as president of Clifford & Associates for over five years, a company
involved in the distribution of electrical and electronic products throughout
the Midwest since 1920. Mr. Clifford is a graduate of the University of Miami,
where he studied business and attended law school.
RICHARD R. ROYALL has been a certified public accountant since 1971. From
1971 to 1976, Mr. Royall was employed with Haskins & Sells, Laventhol & Horwath
(a partner from 1976 to 1986), and Bracken, Krutilek & Royall (1986). In 1986,
Mr. Royall practiced accounting as a sole proprietor. Since 1987, Mr. Royall has
been a partner
-16-
<PAGE>
in Royall & Fleschler, certified public accountants. In addition to the
foregoing, Mr. Royall serves as financial officer and director of companies
operating in the oil and gas industry, software industry and chemical
industries, none of which are affiliated with the Company.
The directors of the Company hold office until the next annual meeting of
stockholders of the Company and until their successors in office are elected and
qualified. None of the directors receive any compensation or reimbursement of
out-of-pocket expenses to attend Board meetings. The Company has not established
and does not maintain any compensation, audit, executive or nominating
committees. All officers serve at the discretion of the Board of Directors.
There are no family relationships between or among any of the directors and
executive officers of the Company.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company to the chief executive officer. No other executive officer
received in excess of $100,000 in compensation during the fiscal year ended
August 31, 1997.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
YEAR SALARY BONUS OTHER OPTIONS/ ALL OTHER
ANNUAL WARRANTS COMPENSATION(1)
COMPENSATION
<S> <C> <C> <C> <C> <C> <C>
1997 $ 70,000 $ - - - -
Dean H. Cubley 1996 30,000 - - - -
Chief Executive Officer 1995 - - - - -
</TABLE>
- -----------------------
(1) The aggregate amount of other compensation is less than 10% of such
executive officer's annual compensation.
The Company has not entered into employment agreements with any of its
executive officers.
STOCK OPTIONS
In July 1996, the Board of Directors and majority stockholders adopted a
stock option plan under which 400,000 shares of Common Stock have been reserved
for issuance. As of the date of this Prospectus, options to purchase 14,875
shares have been granted pursuant to such plan to non-executive employees. The
Company does not have a defined benefit plan or any retirement or long-term
incentive plans.
CERTAIN TRANSACTIONS
The Company was incorporated in May 1993, but did not conduct any
substantive business operations until it acquired cash, certain inventory and
test equipment from Hou-Tex Trust, Bailey Trust, Futer Family Trust and John
Nagel totaling approximately $500,000 and concurrently acquired certain assets
from an affiliate of Dr. Cubley totaling approximately $260,000, both of which
occurred in April 1996. Additionally, the Company assumed liabilities owed to
certain principal stockholders and founders as follows: (i) $145,000 to an
affiliate of Dr. Cubley; (ii) $33,000 to certain founding shareholders; and
(iii) $82,000 to certain unrelated third parties. Promoters of the Company are
Hou- Tex Trust, B and F Trust, Futer Family Trust, Dr. Cubley, Mr. Futer, Mr.
Clifford, Mr. Porter Barton and Vonn Ltd. Dr. Cubley disclaims beneficial
ownership, as well as the voting and disposition power of the Company securities
owned by Hou-Tex Trust and B and F Trust. Mr. Futer disclaims beneficial
ownership, as well as voting and disposition power, of the Company securities
owned by the Futer Family Trust.
In connection with the organization of the Company, 3,150,000 shares of
Common Stock were issued to the Hou-Tex Trust, 990,000 shares of Common Stock
were issued to the Futer Family Trust, 180,000 shares of Common Stock were
issued to the Bailey Trust, and 180,000 shares of Common Stock were issued to
John Nagel, such issuances were for nominal services rendered, contribution of
certain net assets and cash valued at approximately $345,000. In
-17-
<PAGE>
July 1996, the Company issued for fund-raising services rendered: $.05 Warrants
to purchase 350,000, 110,000, 20,000 and 20,000 shares, respectively, to the
Hou-Tex Trust, the Futer Family Trust, the Bailey Trust and Mr. Nagel,
respectively; and $.50 Warrants to purchase 350,000, 110,000, 20,000 and 20,000
shares, respectively, to the Hou-Tex Trust, the Futer Family Trust, the Bailey
Trust and Mr. Nagel, respectively. Neither of these $.05 Warrants or $.50
Warrants are exercisable until and unless the shares of Common Stock trade at a
minimum of $5.50 per share for 20 consecutive trading days. The Company issued,
for fund-raising services rendered, to the Hou-Tex Trust, the Futer Family
Trust, the Bailey Trust and Mr. Nagel: Class A Warrants to purchase 350,000
shares, 110,000 shares, 20,000 shares, and 20,000 shares, respectively; and
Class B Warrants to purchase 350,000 shares, 110,000 shares, 20,000 shares, and
20,000 shares, respectively. The Company issued, for fund-raising services,
warrants to purchase an aggregate of 700,000 shares of Common Stock at $.01 per
share to the following entities and individuals: warrants to purchase 490,000
shares to the B and F Trust, warrants to purchase 154,000 shares to the Futer
Family Trust, warrants to purchase 28,000 shares to the Bailey Trust and
warrants to purchase 28,000 shares to John Nagel. All of such warrants became
exercisable in December 1996 and were exercised in full in February 1997.
From September 1996 through December 1997, the Company issued to Messrs.
Clifford and Barton and Realt, LLC. the following securities: 366,000, 975,000
and 567,000 shares of Common Stock, respectively; $.05 Warrants to purchase
166,667 shares, 166,667 shares and 166,666 shares of Common Stock, respectively;
and $.50 Warrants to purchase 166,667 shares, 71,667 shares and 166,666 shares
of Common Stock, respectively; Class A Warrants to purchase 166,667 shares,
146,667 shares, 166,666 shares, respectively; and Class B Warrants to purchase
166,667 shares, 146,667 shares, and 166,666 shares, respectively. Certain
Company securities issued to Messrs Clifford and Barton and Realt, LLC have been
transferred to third parties. All of the above issuances of Common Stock were
for approximately $120,000 of expenses incurred on behalf of the Company by
these parties in connection with fund-raising activities. The issuance of the
Warrants were for fund-raising services rendered.
Certain principal stockholders (or affiliates thereof) of the Company,
including Messrs. Futer and Clifford are also principal stockholders of Link II.
Mr. Clifford is also the chairman, president and chief executive officer of Link
II and Dr. Cubley is a director of Link II. In addition, the Company and Link II
have executed an agreement, whereby the Company would receive up to an 8% equity
interest in Link II in lieu of accruing finance charges on the outstanding
balance owed by Link II to the Company. Under the agreement, equity in Link II
is earned at a rate of 0.2% per month per $100,000 payable and outstanding for
more than 30 days. As of August 31, 1997, the Company had earned the full 8%
equity interest to be evidenced by the issuance of 240,000 shares of Link II
common stock to the Company. As of August 31, 1997, Link II owed the Company
$2,170,782, comprising approximately 75% of the accounts receivable at such
date.
In September 1996, Richard Royall was issued $.05 Warrants to purchase
12,500 shares of Common Stock, and $5.00 Warrants to purchase 12,500 shares of
Common Stock. The $.05 Warrants are not exercisable until and unless the shares
of Common Stock trade at a minimum of $5.50 per share for 20 consecutive trading
days.
LIMITATION OF DIRECTORS' LIABILITY
The Company's Articles of Incorporation eliminates, subject to certain
exceptions, the personal liability of directors of the Company or its
stockholders for monetary damages for breaches of fiduciary duty by such
directors. The Articles of Incorporation do not provide for the elimination of
or any limitation on the personal liability of a director for (i) any breach of
the director's duty of loyalty to the Company or its stockholders, (ii) acts or
omissions not in good faith that constitutes a breach of duty of the director or
which involve intentional misconduct or a knowing violation of law, (iii) any
transaction from which such director derives an improper personal benefit,
whether or not the benefit resulted from an action taken within the scope of the
director's office, or (iv) an act or omission for which the liability of a
director is expressly provided by an applicable statute. This provision of the
Articles of Incorporation will limit the remedies available to the stockholder
who is dissatisfied with a decision of the Board of Directors protected by this
provision; such stockholder's only remedy may be to bring a suit to prevent the
action of the Board. This remedy may not be effective in many situations,
because stockholders are often unaware of a transaction or an event prior to
Board action in respect of such transaction or event. In these cases, the
stockholders and the Company could be injured by a Board's decision and have no
effective remedy.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this Prospectus, the
number and percentage of outstanding shares of Company Common Stock owned by (i)
each person known to the Company to beneficially own more than 5% of its
outstanding Common Stock, (ii) each director, (iii) each named executive
officer, and (iv) all officers and directors as a group.
-18-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON
NAME AND ADDRESS OF STOCK
BENEFICIAL OWNERS (1) BENEFICIALLY OUTSTANDING(2) PERCENTAGE OF OWNERSHIP
- ------------------ ------------------------- -----------------------
<S> <C> <C>
Hou-Tex Trust 3,770,000 (3) 31.0%
H. Dean Cubley (4) - -
Futer Family Trust 1,364,000 (5) 11.5%
Christopher W. "James" Futer (6) - -
Vonn Ltd. 900,332 (7) 7.5%
Econology/The Founder 750,000 (8) 6.1%
A. L. Clifford 579,334 (9) 5.0%
Arabella 660,000 (10) 5.5%
All officers and directors (4 persons) 591,834 (11) 5.1%
</TABLE>
- ---------------------
(1) Each address is the Company, except for (i) Vonn Ltd., at P.O. Box 1407,
Suite 9, Wood Center St. Johns, Antigua, West Indies, (ii) A. L. Clifford
at 1801 W. 18th Street, Indianapolis, IN 46202, (iii) Arabella at
Waldmannstrasse 6, Postfatch 269, Zurich, Switzerland CH-8024 , (iv)
Hou-Tex Trust at 1331 Lamar, Suite 1375, Houston, Texas 77010, (v)
Econology/The Founder at 951 Napoli, Pacific Palasades, CA 90272, and (vi)
Futer Family Trust at 16534 Space Center Boulevard, Houston, Texas 77058.
(2) Does not give effect to the $.05 Warrants and $.50 Warrants as these
warrants are not exercisable until and unless the shares of Common Stock
trade at a minimum of $5.50 per share for 20 consecutive trading days. It
is assumed, for purposes of this table, that this will not occur within 60
days of the date of this Prospectus. See "Management -- Certain
Transactions" and "Description of Capital Stock -- Warrants."
(3) Includes (i) 310,000 shares underlying Class A Warrants and (ii) 310,000
shares underlying Class B Warrants. See "Management-- Certain
Transactions."
(4) Dr. Cubley disclaims beneficial ownership, as well as voting and
disposition power of the shares of Common Stock and Warrants owned by the
Hou-Tex Trust.
(5) Includes (i) 110,000 shares underlying Class A Warrants and (ii) 110,000
shares underlying Class B Warrants. See "Management-- Certain
Transactions."
(6) Mr. Futer disclaims beneficial ownership, as well as voting and
disposition power of the shares of Common Stock and Warrants owned by
Futer Family Trust.
(7) Includes 166,666 shares underlying Class A Warrants and 166,666 shares
underlying Class B Warrants. See "Management-- Certain Transactions."
(8) Includes 750,000 shares underlying Class C Warrants.
(9) The record holder of these securities is the Clifford Family Trust of
which Mr. Clifford has voting and disposition power.
(10) Includes 220,000 shares underlying Class A Warrants and 220,000 shares
underlying Class B Warrants.
(11) Includes warrants to purchase 345,834 shares of Common Stock that are
currently exercisable.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue up to 100,000,000 shares of Common Stock.
There are 11,605,334 shares of Common Stock issued and outstanding, up to
13,966,668 shares are reserved for issuance upon exercise of the Warrants, and
400,000 shares are reserved for issuance under the Company's stock option plan.
The holders of shares of Common Stock are entitled to one vote per share on
each matter submitted to a vote of stockholders. In the event of liquidation,
holders of Common Stock are entitled to share ratably in the distribution of
assets remaining after payment of liabilities and liquidation preferences on the
Preferred Stock, if any. Holders of Common Stock have no cumulative voting
rights, and, accordingly, the holders of a majority of the outstanding shares
have the ability to elect all of the directors. Holders of Common Stock have no
preemptive or other rights to subscribe for shares. Subject to the prior rights
of any series of Preferred Stock which may from time to time be outstanding, if
any, holders of Common Stock are entitled to such dividends as may be declared
by the Board of Directors out of funds legally available therefor. The
outstanding Common Stock is, and the Common Stock to be outstanding upon
completion of this offering will be, validly issued, fully paid and
nonassessable.
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of Preferred
Stock, $.001 par value per share. The Preferred Stock may be issued in one or
more series, the terms of which may be determined at the time of issuance by the
Board of Directors, without further action by stockholders, and may include
voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion, redemption rights and
-19-
<PAGE>
sinking fund provisions.
No shares of Preferred Stock will be outstanding as of the closing of this
offering, and the Company has no present plans for the issuance thereof. The
issuance of any such Preferred Stock could have the effect of delaying or
preventing a change in control of the Company. The issuance of such Preferred
Stock could also adversely affect the rights of the holders of Common Stock and,
therefore, reduce the value of the Common Stock.
WARRANTS
The Company has issued the following warrants to purchase an aggregate of
13,966,668 shares of Common Stock.
CLASS A WARRANTS
The Company has issued Class A Warrants to purchase 5,033,334 shares of
Common Stock at $4.00 per share. The Class A Warrants are currently exercisable
and expire on August 31, 2000. If the closing bid price of the Common Stock
shall have equaled or exceeded $5.50 per share for a period of 20 consecutive
trading days at any time, the Company may redeem the Class A Warrants by paying
holders $.05 per Class A Warrant provided that such notice is mailed not later
than 20 days after the end of such period and prescribes a redemption date at
least 30 days but not more than 60 days thereafter. Class A Warrant holders will
be entitled to exercise Class A Warrants at any time up to the business day next
preceding the redemption date. The Class A Warrants provide for the payment, by
the Company, of a 3% solicitation fee.
CLASS B WARRANTS
The Company has issued Class B Warrants to purchase 5,033,334 shares of
Common Stock at $6.00 per share. The Class B Warrants are currently exercisable
and expire on August 31, 2000. If the closing bid price of the Common Stock
shall have equaled or exceeded $7.50 per share for a period of 20 consecutive
trading days at any time, the Company may redeem the Class B Warrants by paying
holders $.05 per Class B Warrant provided that such notice is mailed not later
than 20 days after the end of such period and prescribes a redemption date at
least 30 days but not more than 60 days thereafter. Class B Warrant holders will
be entitled to exercise Class B Warrants at any time up to the business day next
preceding the redemption date. The Class B Warrants provide for the payment, by
the Company, of a 3% solicitation fee.
CLASS C WARRANTS
The Company has issued Class C Warrants to purchase 1,050,000 shares of
Common Stock at $2.00 per share. The Class C Warrants are currently exercisable
and expire on August 31, 2000. If the closing bid price of the Common Stock
shall have equaled or exceeded $5.50 per share for a period of 20 consecutive
trading days at any time, the Company may redeem the Class C Warrants by paying
holders $.05 per Class C Warrant provided that such notice is mailed not later
than 20 days after the end of such period and prescribes a redemption date at
least 30 days but not more than 60 days thereafter. Class C Warrant holders will
be entitled to exercise Class C Warrants at any time up to the business day next
preceding the redemption date. The Class C Warrants provide for the payment, by
the Company, of a 3% solicitation fee.
$.05 WARRANTS
The Company has issued $.05 Warrants to purchase 1,050,000 shares of
Common Stock at $.05 per share, which expire in July 1999. The $.05 Warrants are
not exercisable until and unless the shares of Common Stock trade at a minimum
of $5.50 per share for 20 consecutive trading days.
$.50 WARRANTS
The Company has issued $.50 Warrants to purchase 1,375,000 shares of
Common Stock at $.50 per share, which expire in July 1999. The $.50 Warrants are
not exercisable until and unless the shares of Common Stock trade at a minimum
of $5.50 per share for 20 consecutive days.
$5.00 WARRANTS
The Company has issued $5.00 Warrants to purchase 425,000 shares of Common
Stock at $5.00 per share. The $5.00 Warrants are currently exercisable and
expire in July 1999.
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<PAGE>
TRANSFER AGENT
Registrar & Transfer Company serves as the transfer agent for the shares
of Common Stock.
SHARES AVAILABLE FOR FUTURE SALE
Upon the date of this Prospectus there are 11,605,334 shares of Common
Stock issued and outstanding and up to 13,966,668 additional shares will be
issuable upon exercise of the Warrants. The 5,308,334 shares of Common Stock to
be resold pursuant to this offering currently outstanding are, and upon exercise
of the Subject Warrants, the 11,541,668 shares of Common Stock issuable
thereunder will be, eligible for immediate resale in the public market. The
remaining 6,297,000 shares of Common Stock outstanding and 2,425,000 shares
issuable upon exercise of $.05 Warrants and the $.50 Warrants will be subject to
the resale provisions of Rule 144 and 5,657,125 shares currently outstanding are
subject to a 12-month contractual lock-up whereby such shares can only be sold
by the holder, if concurrently with such resale, the holder exercises a warrant
to purchase one share of the Company's Common Stock, at an exercise price of at
least $4.00 per share, for each two shares of Common Stock sold. Sales of shares
of Common Stock in the public markets may have an adverse effect on prevailing
market prices for the Common Stock.
Rule 144 governs resale of "restricted securities" for the account of any
person (other than an issuer), and restricted and unrestricted securities for
the account of an "affiliate" of the issuer. Restricted securities generally
include any securities acquired directly or indirectly from an issuer or its
affiliates which were not issued or sold in connection with a public offering
registered under the Act. An affiliate of the issuer is any person who directly
or indirectly controls, is controlled by, or is under common control with, the
issuer. Affiliates of the Company may include its directors, executive officers,
and persons directly or indirectly owning 10% or more of the outstanding Common
Stock. Under Rule 144 unregistered resales of restricted Common Stock cannot be
made until it has been held for one year from the later of its acquisition from
the Company or an affiliate of the Company. Thereafter, shares of Common Stock
may be resold without registration subject to Rule 144's volume limitation,
aggregation, broker transaction, notice filing requirements, and requirements
concerning publicly available information about the Company ("Applicable
Requirements"). Resales by the Company's affiliates of restricted and
unrestricted Common Stock are subject to the Applicable Requirements. The volume
limitations provide that a person (or persons who must aggregate their sales)
cannot, within any three-month period, sell more than the greater of one percent
of the then outstanding shares, or the
average weekly reported trading volume during the four calendar weeks preceding
each such sale. A non-affiliate may resell restricted Common Stock which has
been held for two years free of the Applicable Requirements.
PLAN OF DISTRIBUTION AND SELLING STOCKHOLDERS
This Prospectus relates to the resale of 16,850,002 shares of Common Stock
by the Selling Stockholders of which 5,308,334 shares are currently issued and
outstanding and up to 11,541,668 shares to be issued upon (i) exercise of Class
A Warrants outstanding to purchase up to 5,033,334 shares, (ii) exercise of
Class B Warrants outstanding to purchase up to 5,033,334 shares, and (iii)
exercise of Class C Warrants to purchase up to 1,050,000 on shares and (iv)
exercise of $5.00 Warrants outstanding to purchase up to 425,000 shares of
Common Stock. This Prospectus also relates to the resale of 5,033,334 Class B
Warrants.
The table below sets forth information with respect to the resale of
shares of Common Stock by the Selling Stockholders, including the resale of
shares of Common Stock issued upon exercise of the subject Warrants. The Company
will not receive any proceeds from the resale of Common Stock by the Selling
Stockholders for shares currently outstanding (not from the resale of Class B
Warrants); however, the Company will receive the exercise price. This table does
not set forth the resale of the Class B Warrants. However, the numbered Class B
Warrants owned by each Selling Shareholder, the resale of which is being
registered hereby, is identical to the number of shares of Common stock
underlying the class B Warrants. The resale of such shares is also being
registered hereby.
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<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
5,000 A 5,000 A
5,000 B 5,000 B
Allen, Norman A. & Pamela Holberg 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Ameritrade Clearing, Inc., 10,000 S 10,000 S 0.00% 0.00%
Custodian for Donald M. Robinson IRA 10,000 A 10,000 A
10,000 B 10,000 B
Arabella 220,000 S 220,000 S 0.00% 0.00%
220,000 A 220,000 A
220,000 B 220,000 B
Asbeck, Marcia and Peter 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Auchstetter, Gerald A. 15,000 S 15,000 S 0.00% 0.00%
15,000 A 15,000 A
15,000 B 15,000 B
Azbell, Frederic K. & Barbara A. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
B and F Trust 450,000 S 450,000 S 0.00% 0.00%
Bach, Robert L. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Bailey Trust 208,000 S 208,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Barnard, John E. 1,000 S 1,000 S 0.00% 0.00%
1,000 A 1,000 A
1,000 B 1,000 B
Barrett, Gloria J. & James L. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Barrett, James G. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Barrett-Nelson, Hollye J. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
20,000 B 20,000 B
Barton Family Trust 126,667 A 126,667 A 0.00% 0.00%
126,667 B 126,667 B
Basche, Scott 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Benson, Mark J. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Bergerson, Rodney L. 1,000 S 1,000 S 0.00% 0.00%
1,000 A 1,000 A
1,000 B 1,000 B
Bestgen, Ted 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Big Cat Capital 85,000 C 85,000 C 0.00% 0.00%
Bippus, William J. 12,500($5.00) 12,500($5.00) 0.00% 0.00%
Bloom, James August 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Brentwood Financial, Ltd. 160,000 S 160,000 S 0.00% 0.00%
160,000 A 160,000 A
160,000 B 160,000 B
Brown, Jodie 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Brutger, Wayne A. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Buchanan, Jeffery L. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Burger, Cynthia S. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Carmichael, Thomas S. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
Carpenter, Raymond 1,000 S 1,000 S 0.00% 0.00%
1,000 A 1,000 A
1,000 B 1,000 B
CASZ LLC 50,000 S 50,000 S 0.00% 0.00%
50,000($5.00) 50,000($5.00)
Chisholm, Roger L. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
CLFS Equities 25,000 S 25,000 S 0.00% 0.00%
25,000($5.00) 25,000($5.00)
Clifford, John C. 40,000 S 40,000 S 0.00% 0.00%
40,000 A 40,000 A
40,000 B 40,000 B
Clifford Family Trust 166,667 A 166,667 A 0.00% 0.00%
166,667 B 166,667 B
Coatta, John B. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Coatta, Jean E. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Coatta, Jay D. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Cohen, Morris 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Cole, David L. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Collis, M.D., Noel D. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Corliss, Robert J. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Craven, Richard F. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
20,000 B 20,000 B
Crook, James W. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Dahlberg, David 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
David L. Cole Pension Plan & Trust 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Deanmore Holdings 120,000 S 120,000 S 0.00% 0.00%
120,000 A 120,000 A
120,000 B 120,000 B
Derrer, Roland Jack & Kay Jean 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Dillon, Jr., Robert J. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Dompnier, Rene 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Dulas, Daniel 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Dulverton Holdings 120,000 S 120,000 S 0.00% 0.00%
120,000 A 120,000 A
120,000 B 120,000 B
Econology / The Founder 750,000 C 750,000 C 0.00% 0.00%
Elituv, Chavan 40,000 S 40,000 S 0.00% 0.00%
40,000 A 40,000 A
40,000 B 40,000 B
Erickson, Eric 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Ericson, James E. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
Erkkila, Russell E. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Estrich, Mark and Terry 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Estrich, Florence 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Eye Guys, Inc. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
First Trust National Association 20,000 S 20,000 S 0.00% 0.00%
Trustee
FBO Thomas S. Shoopman IRA 20,000 A 20,000 A
20,000 B 20,000 B
First Trust National Association 40,000 S 40,000 S 0.00% 0.00%
Trustee
FBO Wallace F. Miller IRA 40,000 A 40,000 A
40,000 B 40,000 B
First Trust National Association 10,000 S 10,000 S 0.00% 0.00%
Trustee
FBO Steven Graybow IRA 10,000 A 10,000 A
10,000 B 10,000 B
First Trust National Association 3,667 S 3,667 S 0.00% 0.00%
Trustee
FBO Irving J. Geislinger IRA 3,667 A 3,667 A
3,667 B 3,667 B
First Trust National Association 9,000 S 9,000 S 0.00% 0.00%
Trustee
FBO Eric J. Overig IRA Rollover 9,000 A 9,000 A
9,000 B 9,000 B
First Trust National Association 10,000 S 10,000 S 0.00% 0.00%
Trustee
FBO Bryan Johnson IRA 10,000 A 10,000 A
10,000 B 10,000 B
First Trust National Association 20,000 S 20,000 S 0.00% 0.00%
Trustee
FBO Charles J. Steinke IRA 20,000 A 20,000 A
20,000 B 20,000 B
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
First Trust National Association 5,000 S 5,000 S 0.00% 0.00%
Trustee
FBO Carmen M. Tesch IRA 5,000 A 5,000 A
5,000 B 5,000 B
First Trust National Association 10,000 S 10,000 S 0.00% 0.00%
Trustee
FBO Mark V. Redman IRA 10,000 A 10,000 A
10,000 B 10,000 B
Fleschler, Sammy 12,500($5.00) 12,500($5.00) 0.00% 0.00%
Flink, John Leonard 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Forschen, Blaine M. 3,000 S 3,000 S 0.00% 0.00%
3,000 A 3,000 A
3,000 B 3,000 B
Fowler, Lawarence C. & Dianne K. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Francis, Donald F. & Barbara J. 12,500 S 12,500 S 0.00% 0.00%
12,500($5.00) 12,500($5.00)
Franckowiak, Norbert & Mary 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Franckowiak, Norbert & Janet 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Franckowiak, James L. and Deborah K. 10,000 S 10,000 S 0.00% 0.00%
Sparks
10,000 A 10,000 A
10,000 B 10,000 B
Fransen, Gene A. and Lois J. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Futer Family Trust 110,000 A 110,000 A 0.00% 0.00%
110,000 B 110,000 B
Gabos, John 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Garrison, Valarie A. & Lynn R. 10,000 S 10,000 S 0.00% 0.00%
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
10,000 A 10,000 A
10,000 B 10,000 B
Gayken, Lydell 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Geislinger, Betty 1,333 S 1,333 S 0.00% 0.00%
1,333 A 1,333 A
1,333 B 1,333 B
Geislinger, Irv 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Geislinger, Jeffrey J. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Geraci, Joseph A. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Gill, Robert A. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Glutzer, Norman M. and Barbara 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Goetz, Jr., Roger H. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Goetzke, Lester 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Goldberg, Bennett 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Graybow, Rita 30,000 S 30,000 S 0.00% 0.00%
30,000 A 30,000 A
30,000 B 30,000 B
Graybow, Bruce 40,000 S 40,000 S 0.00% 0.00%
40,000 A 40,000 A
40,000 B 40,000 B
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
Graybow, Steven 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Griner, Jr., Frank W. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Gross, Charles V. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Gustafson, William T. and Barbara J. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Hafiz, Richard J. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Hanneman, William E. 15,000 S 15,000 S 0.00% 0.00%
15,000 A 15,000 A
15,000 B 15,000 B
Hart, Gary 25,000 S 25,000 S 0.00% 0.00%
25,000($5.00) 25,000($5.00)
Helton, Michael 1,000 S 1,000 S 0.00% 0.00%
1,000 A 1,000 A
1,000 B 1,000 B
Hennen, Eugene 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Hennen, Jr., Joseph P. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Hennen, Sr., Joe 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Hewitt, Robert C. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Hillen, John 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
Hoffmann, D.C. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Holberg, Larry W. 50,000 S 50,000 S 0.00% 0.00%
50,000 A 50,000 A
50,000 B 50,000 B
Holberg, Darlyne L. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Hooe, Jr., Nelson D. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Hopkins, Evan 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Horsell, William & Cheryl 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Hou-Tex Trust 310,000 A 310,000 A 0.00% 0.00%
310,000 B 310,000 B
Huot, Irene R. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Jensen, Julian S. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Jones, Robert A. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Joseph Geraci IRA 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Kaatz, Gary 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Kammerer, Celine 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
Kaufman, Lewis H. 40,000 S 40,000 S 0.00% 0.00%
40,000 A 40,000 A
40,000 B 40,000 B
Kaufmann, Walter A. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Keczmer, Pamela 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Keczmer, Daniel Pattrick, Sr. and Alice 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Keczmer, Daniel L. & Lisa A. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Kelly, David J. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Kinney, Larry J. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Kinney, Patrick J. 20,000 A 20,000 A 0.00% 0.00%
20,000 B 20,000 B
Klein, Roger A. & Darlene C. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Klein, Robert N. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Klein, Gerald A. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Klein, Sr., Roger H. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Kolb, Robert T. 25,000 S 25,000 S 0.00% 0.00%
25,000($5.00) 25,000($5.00)
Kosar, Jr., Bernie 60,000 S 60,000 S 0.00% 0.00%
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
60,000 A 60,000 A
60,000 B 60,000 B
Kosar, Sr., Bernard and Geraldine 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Langer, Michael 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Laritson, John 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Larson, Wayne H. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Lauerman, James E. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Lauret, Thurman 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Lawton, Fred W. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Lease, Micheal W. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Leckrone, Janine 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Lehrke, Ronald K. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Lilja, David S. 40,000 S 40,000 S 0.00% 0.00%
40,000 A 40,000 A
40,000 B 40,000 B
Longhi, Bert 20,000 A 20,000 A 0.00% 0.00%
20,000 B 20,000 B
Maddern, James R. and Kristine K. 3,334 S 3,334 S 0.00% 0.00%
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
3,334 A 3,334 A
3,334 B 3,334 B
Magnusson, Jan H. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Mahon, William F. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Mangini, Oscar R. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Mark and Margaret Damon Trust 60,000 S 60,000 S 0.00% 0.00%
60,000 A 60,000 A
60,000 B 60,000 B
Mary H.Ciszewski Self Trusted
Revocable Trust 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Matelski, George 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Matelski, Wanda E. & Carl D. Parker 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
McKeehan, Robert J. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Mechi, Nabil 5,000 C 5,000 C 0.00% 0.00%
Mercantile Bank N.A. Trustee 10,000 S 10,000 S 0.00% 0.00%
FBO Gerald D. Stolz Profit Sharing 10,000 A 10,000 A
Plan
10,000 B 10,000 B
Meyer, Daniel 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Miller, Wallace F. & DeLois J. 60,000 S 60,000 S 0.00% 0.00%
60,000 A 60,000 A
60,000 B 60,000 B
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
Miller, Thomas D. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Mitchell, Gerald M. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Mitroo, J.B. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Monty, Edward G. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Morey, Gregory M. 40,000 S 40,000 S 0.00% 0.00%
40,000 A 40,000 A
40,000 B 40,000 B
Moriarty, Barbara J. and Maurice F. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Mount, Richard L. 25,000 S 25,000 S 0.00% 0.00%
25,000($5.00) 25,000($5.00)
Nagel, Gregory A. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Nagel, John 208,000 S 208,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Nakagawa, Cressey H. 25,000 S 25,000 S 0.00% 0.00%
25,000($5.00) 25,000($5.00)
Nicksa, James H. 25,000 S 25,000 S 0.00% 0.00%
25,000($5.00) 25,000($5.00)
Nicolodi, Fulvia Casella 60,000 S 60,000 S 0.00% 0.00%
60,000 A 60,000 A
60,000 B 60,000 B
Nyquist, R. Dwight and Marie Ann B. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Park, M.D., Myung C. 100,000 S 100,000 S 0.00% 0.00%
100,000 A 100,000 A
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
100,000 B 100,000 B
Parsons, Wayne J. 2,000 S 2,000 S 0.00% 0.00%
2,000 A 2,000 A
2,000 B 2,000 B
Patzner, Rick M. 70,000 S 70,000 S 0.00% 0.00%
70,000 A 70,000 A
70,000 B 70,000 B
Pearlwave Ltd. 200,000 C 200,000 C 0.00% 0.00%
Pearson, Eldean 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Pechota, Gary L. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Peddireddi, Srinivasa R. 30,000 S 30,000 S 0.00% 0.00%
30,000 A 30,000 A
30,000 B 30,000 B
Pellerito, Ronald 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Penn, Sean 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Perman, Mark 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Port, Joshua 2,500 S 2,500 S 0.00% 0.00%
2,500 A 2,500 A
2,500 B 2,500 B
Port, Adam 2,500 S 2,500 S 0.00% 0.00%
2,500 A 2,500 A
2,500 B 2,500 B
Port, Moses 2,500 S 2,500 S 0.00% 0.00%
2,500 A 2,500 A
2,500 B 2,500 B
Port, Joseph 2,500 S 2,500 S 0.00% 0.00%
2,500 A 2,500 A
2,500 B 2,500 B
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
Port, Stephen & Phyllis 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Powell, John R. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Pritchard, Thomas 12,500($5.00) 12,500($5.00) 0.00% 0.00%
Prudential Securities, Inc. 10,000 S 10,000 S 0.00% 0.00%
Custodian for James Ericson Sr. 10,000 A 10,000 A
10,000 B 10,000 B
Quam, Scott A. and Kristine S. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Redman, Mark V. And Kathryn 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Rieman, Raymond 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Robarge, Ralph and Patricia 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Robert H. Tucker Trust 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Robert J. Corliss IRA 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Robinson, Derek K. Vehling and Karen 10,000 S 10,000 S 0.00% 0.00%
A.
10,000 A 10,000 A
10,000 B 10,000 B
Rohkohl, Arlene A. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Rover Enterprises, Ltd. 160,000 S 160,000 S 0.00% 0.00%
160,000 A 160,000 A
160,000 B 160,000 B
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
Royall, Richard 12,500($5.00) 12,500($5.00) 0.00% 0.00%
Sanderman, Robert J. 45,000 S 45,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
25,000($5.00) 25,000($5.00)
Schaffer, Don M. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Schank, Daniel J. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Scott T. Zbikowski IRA 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Segal, Randy 40,000 S 40,000 S 0.00% 0.00%
40,000 A 40,000 A
40,000 B 40,000 B
Severini, Kerrjie Aida 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Severini, Jr., Fred 15,000 S 15,000 S 0.00% 0.00%
15,000 A 15,000 A
15,000 B 15,000 B
Severini, Jr., Vincent J. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Sexton, David 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Shaffer, Byron G. 100,000 S 100,000 S 0.00% 0.00%
100,000 A 100,000 A
100,000 B 100,000 B
Sharon, Roee 10,000 C 10,000 C 0.00% 0.00%
Silletto, Jan and Donna 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Simmons, Ed 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
5,000 B 5,000 B
Siwecki, Henry T. & Marie 60,000 S 60,000 S 0.00% 0.00%
60,000 A 60,000 A
60,000 B 60,000 B
Siwecki, Henry A. & Christine F. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Siwecki, Henry T. 25,000 S 25,000 S 0.00% 0.00%
25,000($5.00) 25,000($5.00)
Smalley, Cathy M. 2,500 S 2,500 S 0.00% 0.00%
2,500($5.00) 2,500($5.00)
Snyder, Dale 2,000 S 2,000 S 0.00% 0.00%
2,000 A 2,000 A
2,000 B 2,000 B
Solo One LLC 6,000($5.00) 6,000($5.00) 0.00% 0.00%
Spriggs, Kevin F. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Stark, Randall P. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Stein, Charles M. 15,000 S 15,000 S 0.00% 0.00%
15,000 A 15,000 A
15,000 B 15,000 B
Stelton, Craig 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Stoffel, August M. and Michelle L. 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Stoffel, August M. and Ann M. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Sud, James P. 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Sulak, Cecilia 12,500 S 12,500 S 0.00% 0.00%
12,500($5.00) 12,500($5.00)
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
Sylla, Craig J. 1,000 S 1,000 S 0.00% 0.00%
1,000 A 1,000 A
1,000 B 1,000 B
Tancheff, John 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Tautges, Thomas and Mary Jo 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Tell, Dr. Brian 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Tesch, Michael A. & Carmen M. 19,000 S 19,000 S 0.00% 0.00%
19,000 A 19,000 A
19,000 B 19,000 B
Traut, Mark Joseph 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Tulgestke, Gordon 6,250 S 6,250 S 0.00% 0.00%
6,250($5.00) 6,250($5.00)
Tuschner, John M. Tuschner and Julie
K.Havlicek 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Tuschner, Jeni 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Tutewohl, Leo & Sharon 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Van Alen, Judith F. 70,000 S 70,000 S 0.00% 0.00%
70,000 A 70,000 A
70,000 B 70,000 B
VanOverbeke, James C. & Michaline 10,000 S 10,000 S 0.00% 0.00%
A.
10,000 A 10,000 A
10,000 B 10,000 B
Vatland, Harlan J. 10,000 S 10,000 S 0.00% 0.00%
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
SHARES OFFERED
BENEFICIALLY (ASSUMING ALL SHARES
OWNED SHARES BENEFICIALLY
BEFORE IMMEDIATELY OWNED
STOCKHOLDER RESALE SOLD) AFTER RESALE PERCENTAGE
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C>
10,000 A 10,000 A
10,000 B 10,000 B
Vern J. Langer IRA 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Villavicencio, Gilbert 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Vonn Ltd 25,000 S 25,000 S 0.00% 0.00%
166,666 A 166,666 A
166,666 B 166,666 B
25,000($5.00) 25,000($5.00)
Wayne, E. Robie 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Westman, Bruce 20,000 S 20,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Zaremba, John M. 3,125 S 3,125 S 0.00% 0.00%
3,125($5.00) 3,125($5.00)
Zaremba, James R. 3,125 S 3,125 S 0.00% 0.00%
3,125($5.00) 3,125($5.00)
Zaremba, Frank J. 3,125 S 3,125 S 0.00% 0.00%
3,125($5.00) 3,125($5.00)
Zaremba, David 3,125 S 3,125 S 0.00% 0.00%
3,125($5.00) 3,125($5.00)
Zaremba Group LLC 67,750 S 67,750 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
47,750($5.00) 47,750($5.00)
Zbikowski, Scott T. 50,000 S 50,000 S 0.00% 0.00%
50,000 A 50,000 A
50,000 B 50,000 B
Zurek, Mark J. 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
</TABLE>
40
<PAGE>
The 16,850,002 shares offered by the Selling Stockholders, as well as
the 5,033,334 Class B Warrants, may be sold from time to time by the Selling
Stockholders or by their pledgees, donees, transferees or other successors in
interest. Such sales may be made on Nasdaq, on the over-the-counter market or
otherwise at prices and at terms then prevailing or at prices related to the
current market price, or in negotiated transactions. The Common Stock and Class
B Warrants may be sold by one or more of the following: (a) block trade in which
the broker or dealer so engaged will attempt to sell the shares as agent but may
position and re-sell a portion of the block as principal to facilitate the
transaction; (b) purchase by a broker or dealer for his account pursuant to this
Prospectus; and (c) ordinary brokerage transactions and transactions in which
the broker solicits purchases. The Selling Stockholder or dealer effecting a
transaction in the registered securities, whether or not participating in a
distribution, is required to deliver a Prospectus. In effecting sales, brokers
or dealers engaged by the Selling Stockholder may arrange for other brokers or
dealers to participate. Brokers or dealers will receive commissions or discounts
from Selling Stockholders in amounts to be negotiated immediately prior to the
sale. Such brokers or dealers and any other participating brokers or dealers may
be deemed to be "underwriters" within the meaning of the Act in connection with
such sales. One broker dealer has received 100,000 shares of the Company's
Common Stock as compensation in connection with the Company's private offering
of these securities, which may be considered by the National Association of
Securities Dealers to be compensation received in connection with this offering.
In addition, any securities covered by this Prospectus which qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
Prospectus. The Company will not receive any of the proceeds from the sale of
these securities, although it has paid the expenses of preparing this Prospectus
and the related Registration Statement. The Company will use its best efforts to
file, during any period in which offers or sale are being made, one or more
post-effective amendments to the Registration Statement of which this Prospectus
is a part to describe any material information with respect to the plan of
distribution not previously disclosed in this Prospectus or any material change
to such information in this Prospectus.
LEGAL MATTERS
Certain legal matters with respect to the issuance of shares of Common
Stock offered hereby will be passed upon for the Company by Brewer & Pritchard,
P.C., Houston, Texas. Principals of Brewer & Pritchard, P.C. own $.05 Warrants
to purchase 12,500 shares of Common Stock and $5.00 Warrants to purchase 12,500
shares of Common Stock.
EXPERTS
The financial statements of Eagle Wireless International, Inc. at August
31, 1997, and for each of the years in the three-year period ended August 31,
1997, appearing in this SB-2 Registration Statement have been audited by McManus
& Company, independent auditors, as set forth in their report thereon appearing
elsewhere herein and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
41
<PAGE>
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors and Stockholders
of Eagle Wireless International, Inc.
We have audited the accompanying balance sheets of Eagle Wireless International,
Inc. as of August 31, 1997 and 1996, and the related statements of earnings,
shareholders' equity, and cash flows for the years ended August 31, 1997, 1996,
and 1995. These financial statements are the responsibility of Eagle Wireless
International, Inc. management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, based on our audit, the financial statements referred to above
present fairly, in all material respects, the financial position of Eagle
Wireless International, Inc. as of August 31, 1997 and 1996, and the results of
their operations, shareholders' equity, and their cash flows for the years ended
August 31, 1997, 1996, and 1995 in conformity with generally accepted accounting
principles.
McMANUS & CO., P.C.
McManus & Co., P.C.
Certified Public Accountants
Morris Plains, New Jersey
November 12, 1997
F-1
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
BALANCE SHEETS
ASSETS
August 31,
--------------------------
1997 1996
----------- -----------
Current Assets:
Cash and Cash Equivalents (Note 1) ............ $ 2,894,561 $ 2,104,052
Accounts Receivable ............................ 2,895,281 358,933
Inventories (Note 1) ........................... 1,012,218 525,311
Prepaid Expenses ............................... 57,469 16,623
----------- -----------
Total Current Assets ........................ 6,859,529 3,004,919
Property and Equipment (Note 1):
Operating Equipment ............................ 590,461 425,735
Less: Accumulated Depreciation ................. (111,764) (33,104)
----------- -----------
Total Property and Equipment ................ 478,697 392,631
Other Assets:
Security Deposits .............................. 10,681 8,950
Deferred Financing Fees ....................... -- 37,500
Investment In Affiliate ........................ 28,663 --
Organization Expense (net of
accumulated amortization) ................... 2,328 2,992
----------- -----------
Total Other Assets .......................... 41,672 49,442
----------- -----------
Total Assets ................................... $ 7,379,898 $ 3,446,992
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Expenses .......... $ 317,169 $ 553,323
Shareholders' Advances (Note 10) ............... 129,372 290,000
Subscriptions Payable .......................... -- 97,500
Notes Payable (Note 2) ......................... -- 386,082
Capital Lease Obligations (Note 3) ............. 32,049 20,694
Federal Income Taxes Payable (Note 4) .......... 260,912 --
Franchise Taxes Payable ........................ 20,000 --
Deferred Taxes (Note 4) ........................ 9,056 --
----------- -----------
Total Current Liabilities ................... 768,558 1,347,599
Long - Term Liabilities:
Capital Lease Obligations
(net of current maturities) (Note 3) ........ 2,791 16,704
Deferred Taxes (Note 4) ........................ 16,161 5,683
----------- -----------
Total Long - Term Liabilities ............... 18,952 22,387
Commitments and Contingent Liabilities (Note 10)
Shareholders' Equity:
Preferred Stock - $.001 par value
Authorized 5,000,000 shares
Issued -0- shares ........................... -- --
Common Stock - $.001 par value
Authorized 100,000,000 shares
Issued and Outstanding at 1997 and 1996
11,510,334 and 6,946,145, respectively ...... 11,510 6,946
Paid in Capital ................................ 5,820,180 2,037,856
Retained Earnings .............................. 760,698 32,204
----------- -----------
Total Shareholders' Equity .................. 6,592,388 2,077,006
----------- -----------
Total Liabilities and Shareholders' Equity ..... $ 7,379,898 $ 3,446,992
=========== ===========
F - 2
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
STATEMENTS OF EARNINGS
For the Years Ended August 31,
-----------------------------------
1997 1996 1995
----------- ----------- -----
Net Sales ................................ $ 3,971,369 $ 1,018,441 $--
Cost of Goods Sold
Materials and Supplies ................. 920,375 228,765 --
Direct Labor and Related Costs ........ 480,688 290,743 --
Depreciation and Amortization .......... 21,400 19,986 --
Other Manufacturing Costs .............. 346,453 104,776 --
----------- ----------- -----
Total Cost of Goods Sold ............ 1,768,916 644,271 --
----------- ----------- -----
Gross Profit ............................. 2,202,453 374,170 --
----------- ----------- -----
Operating Expenses
Selling, General and Administrative
Salaries and Related Costs .......... 720,448 181,338 --
Advertising and Promotion ........... 176,131 65,461 --
Depreciation and Amortization ....... 58,135 13,451 --
Other Support Costs ................. 430,413 83,638 --
----------- ----------- -----
Total Operating Expenses ............ 1,385,127 343,888 --
----------- ----------- -----
Earnings From Operations Before Other
Revenues / (Expenses), Income Taxes, and
Loss From Minority Interest in Affiliate . 817,326 30,282 --
Other Revenues / (Expenses)
Interest Income ........................ 328,760 10,501 --
Interest Expense ....................... (6,533) (2,896)
----------- ----------- -----
Total Other Revenues ................ 322,227 7,605 --
----------- ----------- -----
Earnings Before Income Taxes & Loss From
Minority Interest in Affiliate ......... 1,139,553 37,887 --
Loss From Minority Interest in Affiliate (71,337) -- --
----------- ----------- -----
Earnings Before Income Taxes ............. 1,068,216 37,887 --
Provision For Income Taxes ............. 339,722 5,683 --
----------- ----------- -----
Net Earnings ............................. 728,494 32,204 --
Retained Earnings - Beginning of Year .... 32,204 -- --
----------- ----------- -----
Retained Earnings - End of Year .......... $ 760,698 $ 32,204 $--
=========== =========== =====
Net Earnings Per Common Share:
Primary (Note 1) ......................... $ 0.043 $ 0.003 $--
Fully Diluted (Note 1) ................... $ 0.030 $ 0.002 $--
F - 3
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Total
September 1, 1994 Common Preferred Paid In Retained Shareholders'
To August 31, 1997 Stock Stock Capital Earnings Equity
--------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
As Of September 1, 1994 ....................... $ 1,000 $ -- $ -- $ -- $ 1,000
--------- -------- ----------- -------- -----------
Total Shareholders' Equity
As Of August 31, 1995 ......................... 1,000 -- -- -- 1,000
Net Earnings 1996 ............................. -- -- -- 32,204 32,204
Common Stock Relinquished ..................... (1,000) -- -- -- (1,000)
New Stock Issued to Shareholders
Hou - Tex Trust (July 1996) ............. 3,150 -- 238,627 -- 241,777
Futer Family Trust (July 1996) .......... 990 -- 74,996 -- 75,986
John Nagel (July 1996) .................. 180 -- 13,636 -- 13,816
Bailey Trust (July 1996) ................ 180 -- 13,636 -- 13,816
Private Placement ............................. 2,446 -- 1,926,254 -- 1,928,700
Issuance of Warrants for
Fundraising Activities .................. -- -- 88,343 -- 88,343
Syndication Costs ............................. -- -- (317,636) -- (317,636)
--------- -------- ----------- -------- -----------
Total Shareholders' Equity
As Of August 31, 1996 ......................... 6,946 -- 2,037,856 32,204 2,077,006
Net Earnings 1997 ............................. 728,494 728,494
Private Placement ............................. 1,587 -- 4,117,759 -- 4,119,346
Conversion of Notes Payable and
Advances to Common Stock ................ 2,277 -- 487,092 -- 489,369
Exercise of $.01 Warrants:
B & F Trust ............................. 490 -- 4,410 -- 4,900
Futer Family Trust ...................... 154 -- 1,386 -- 1,540
John Nagel .............................. 28 -- 252 -- 280
Bailey Trust ............................ 28 -- 252 -- 280
Issuance of Warrants for
Fundraising Activities .................. -- -- 192,000 -- 192,000
Syndication Costs ............................. -- -- (1,020,827) -- (1,020,827)
--------- -------- ----------- -------- -----------
Total Shareholders' Equity
As Of August 31, 1997 ......................... $ 11,510 $ -- $ 5,820,180 $760,698 $ 6,592,388
========= ======== =========== ======== ===========
</TABLE>
F - 4
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended August 31,
----------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings .............................................................. $ 728,494 $ 32,204 $--
Adjustments To Reconcile Net Earnings To Net Cash
Used By Operating Activities:
Depreciation and Amortization .......................................... 79,535 33,437 --
(Increase) / Decrease in Accounts Receivable ........................... (2,536,348) (270,144) --
(Increase) / Decrease in Inventories ................................... (486,907) (228,978) --
(Increase) / Decrease in Prepaid Expenses .............................. (40,846) (16,623) --
Increase / (Decrease) in Accounts Payable .............................. 9,868 168,013 --
Increase / (Decrease) in Accrued Payroll Taxes ......................... 16,635 -- --
Increase / (Decrease) in Accrued Expenses .............................. (53,374) (760) --
Increase / (Decrease) in Deferred Taxes ................................ 19,534 5,683 --
Increase / (Decrease) in Customer Deposits ............................. (209,283) 130,948 --
Increase / (Decrease) in Federal Income Taxes Payable .................. 260,912 -- --
Increase / (Decrease) in Franchise Taxes Payable ....................... 20,000 -- --
----------- ----------- ----
Total Adjustments ...................................................... (2,920,274) (178,424) --
----------- ----------- ----
Net Cash Used By Operating Activities ..................................... (2,191,780) (146,220) --
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment ..................................... (164,937) (55,735) --
(Increase) / Decrease in Other Assets ................................. 35,769 (48,775) --
Increase in Investment in Subsidiary ................................... (28,663) -- --
----------- ----------- ----
Net Cash Used By Investing Activities ..................................... (157,831) (104,510) --
CASH FLOWS FROM FINANCING ACTIVITIES
Increase / (Decrease) in Notes Payable ................................. (375,000) 375,000 --
Increase / (Decrease) in Notes Payable ................................. (11,082) 11,082 --
Increase / (Decrease) in Capital Leases ................................ (2,558) 37,398 --
Increase / (Decrease) in Shareholders' Advances ........................ (160,628) -- --
Increase / (Decrease) in Subscriptions Payable ......................... (97,500) 97,500 --
Proceeds From Sale of Common Stock, Net ................................ 3,786,888 1,833,802 --
----------- ----------- ----
Net Cash Provided By Financing Activities ................................. 3,140,120 2,354,782 --
Net Increase in Cash ...................................................... 790,509 2,104,052 --
CASH AT THE BEGINNING OF THE YEAR ........................................... 2,104,052 -- --
----------- ----------- ----
CASH AT THE END OF THE YEAR ................................................. $ 2,894,561 $ 2,104,052 $--
=========== =========== ==========
</TABLE>
F - 5
See accompanying accountant's report and notes to the financial statements.
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
Eagle Wireless International, Inc., (the Company), incorporated as a Texas
corporation on May 24, 1993 and commenced business in April of 1996. The
Company is a worldwide supplier of telecommunications equipment and related
software used by service providers in the paging and other wireless personal
communications markets. The Company designs, manufactures, markets and
services its products under the Eagle name. These products include
transmitters, receivers, controllers, software and other equipment used in
personal communications systems (including paging, voice messaging, cellular
and message management and mobile data systems) and radio and telephone
systems.
Prior to April, 1996, the Company was inactive. During April, 1996, the
Company commenced operations by the issuance of stock for cash, certain
inventories, test equipment, other assets, and the assumption of certain
liabilities to its principal shareholder. Concurrent with this transaction,
the Company entered into an asset purchase agreement with a company to
acquire certain other production equipment, inventories and furniture and
equipment.
A) Cash and Cash Equivalents
The Company has $2,873,806 and $1,650,000 invested in interest bearing
accounts at August 31, 1997 and 1996, respectively.
B) Property and Equipment
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is calculated by using the straight-line method for financial
reporting and accelerated methods for income tax purposes. The recovery
classifications for these assets are listed as follows:
Years
-----
Machinery and equipment 7
Furniture and Fixtures 7
Expenditures for maintenance and repairs are charged against income as
incurred and major improvements are capitalized.
F - 6
<PAGE>
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
C) Inventories
Inventories are valued at the lower of cost or market. The cost is
determined by using the FIFO method. Inventories consist of the following
items:
August 31,
--------------------
1997 1996
---------- --------
Raw Materials $ 602,174 $351,374
Work in Process 400,069 173,937
Finished Goods 9,975 - 0 -
---------- --------
$1,012,218 $525,311
========== ========
D) Organizational Costs
Organizational costs are amortized using the straight - line method over a
period of sixty (60) months. Accumulated amortization is $997 and $333 for
the periods ended August 31, 1997 and 1996, respectively.
E) Research and Development Costs
The Company's research and development costs include obligations to perform
contractual services for outside parties. These costs are expensed as
contract revenues are earned. Research and development costs of $333,200 and
$48,829 were expensed for the periods ended August 31, 1997 and 1996,
respectively. Contract revenues earned for the periods ended August 31, 1997
and 1996 were approximately $ 425,000 and $150,000, respectively.
F) Income Taxes
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes", which requires a
change from the deferral method to assets and liability method of accounting
for income taxes. Timing differences exist between book income and tax
income which relate primarily to depreciation methods.
F - 7
<PAGE>
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
G) Net Earnings Per Common Share
Net earnings per common share is shown as both primary and fully diluted.
Primary earnings per common share are computed by dividing net income less
any preferred stock dividends (if applicable) by the weighted average number
of shares of common stock outstanding plus any dilutive common stock
equivalents. Fully diluted earnings per common share are computed by
dividing net income less any preferred stock dividends (if applicable) by
the weighted average number of shares of common sto ck outstanding plus any
dilutive and anti-dilutive common stock equivalents. The components used for
the computations are shown as follows:
August 31, 1997 August 31, 1996
--------------- ---------------
Weighted Average Number of Common
Shares Outstanding Including:
Primary Common Stock Equivalents 16,876,808 12,819,479
Fully Dilutive Common Stock Equivalents 24,335,142 19,992,813
H) Warrants for Funding Activities
To date, the Company has issued the following warrants: 5,033,334 Class A;
5,033,334 Class B; 1,050,000 Class C; 1,050,000 $.05; 1,375,000 $.50; and
425,000 $5.00. Certain of these warrants were issued to individuals and
trusts for their assistance in the fundraising activities. The Company has
assigned a value of $280,343 as compensation for these fund raising
activities.
I) Deferred Financing Fees
The deferred financing fees originated as a financing charge on a
non-interest bearing notes payable in the amount of $375,000. During
November 1996, the financing fees were expensed.
J) Advertising and Promotion
All advertising related costs are expensed as incurred. The Company does not
incur any cost for direct-response advertising. For the periods ended August
31, 1997 and 1996, the Company had expensed $176,131 and $65,461,
respectively.
F - 8
<PAGE>
NOTE 2 - NOTES PAYABLE:
August 31,
------------------------
1997 1996
------ ------
Notes to individuals due October 31,
1996, bearing no interest,
convertible into the Company's
common stock at the noteholder's
option .................................... $ - 0 - $375,000
Unsecured note to the insurance
company bearing interest at 8.75%,
due $2,265 monthly until January
1997 ...................................... - 0 - 11,082
------- --------
Total ................................ - 0 - 386,082
Less Current Portion of
Long - Term Debt .................. - 0 - 386,082
------- --------
Total Long - Term Debt ............... $ - 0 - $ - 0 -
======= ========
NOTE 3 - CAPITAL LEASE OBLIGATIONS:
August 31,
--------------------
1997 1996
------- -------
Equipment lease with Compix bearing
interest at 15%, payable in monthly
installments of $624; due July 1998 ............. $ 5,856 $12,049
Equipment lease with IFR bearing
interest at 15%, payable in monthly
installments of $1,427; due June 1998 ........... 12,133 25,349
Equipment lease with Associates
Capital bearing interest at 7%,
payable in monthly installments
of $1,177; due Sept. 1998 ....................... 14,271 - 0 -
F - 9
<PAGE>
NOTE 3 - CAPITAL LEASE OBLIGATIONS:(CONTINUED)
August 31,
-------------------
1997 1996
------- -------
Equipment lease with IKON Office
Solutions bearing interest at 18%
payable in monthly installments of
$105; due March, 2000 ................... $ 2,580 $ - 0 -
------- -------
Total Obligations ................... 34,840 37,398
Less Current Portion of
Lease Obligations ................. 32,049 20,694
------- -------
Total Long - Term Capital
Lease Obligations ................. $ 2,791 $16,704
======= =======
The capitalized lease obligations are collateralized by the related
equipment acquired with a net book value of approximately $ 35,000 and $
41,892 at August 31, 1997 and 1996, respectively. The future minimum lease
payments under the capital leases and the net present value of the future
lease payments at August 31, 1997 and 1996 are as follows:
Aug. 31, 1997 Aug. 31, 1996
------------- -------------
Total minimum lease payments ................. $39,690 $42,447
Less: Amount representing interest .......... 4,850 5,049
------- -------
Present value of net minimum
lease payments ............................. $34,840 $37,398
======= =======
Future obligations under the lease terms are:
Period Ending
August 31, Amount
------------- -----------
1998 $ 36,518
1999 2,437
2000 735
----------
Total $ 39,690
==========
F - 10
<PAGE>
NOTE 4 - INCOME TAXES:
As discussed in note 1, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes". Implementation of SFAS 109 did not have a material cumulative effect
on prior periods nor did it result in a change to the current year's
provision.
A) The effective tax rate for the Company is reconcilable to statutory tax
rates as follows:
August 31,
---------------
1997 1996
---- ----
% %
U.S. Federal Statutory Tax Rate .................... 34 15
U.S. Valuation Difference .......................... (7) --
--- --
Effective U.S. Tax Rate ............................ 27 15
Foreign Tax Valuation .............................. 5 --
--- --
Effective Tax Rate ................................. 32 15
=== ==
B) Deferred income taxes are provided for differences between financial
statement and income tax reporting. Principal difference is the manner in
which depreciation is computed for financial and income tax reporting
purposes.
NOTE 5 - PREFERRED STOCK, STOCK OPTIONS AND WARRANTS:
In July, 1996, the Board of Directors and majority shareholders authorized
5,000,000 shares of Preferred Stock with a par value of $.001. As of August
31, 1997, no Preferred Stock has been issued.
In July, 1996, the Board of Directors and majority shareholders adopted a
stock option plan under which 400,000 shares of Common Stock have been
reserved for issuance. As of August 31, 1997, no options have been granted
pursuant to such plan.
F - 11
<PAGE>
NOTE 5 - PREFERRED STOCK, STOCK OPTIONS, AND WARRANTS: (CONTINUED)
In May of 1996, the Company received an aggregate of $375,000 in bridge
financing in the form of interest-free convertible notes from unaffiliated
individuals. Holders of $369,000 of these notes converted into 369,000
shares of Company common stock, and the balance of $6,000 was retired in
November of 1996. In conjunction with the issuance of such indebtedness, the
Company has issued such investors $.50 Warrants to purchase 375,000 shares
of common stock, and $5.00 Warrants to purchase up to 375,000 shares of
common stock.
Due to the lack of a public market, shareholders and warrant-holders are
inherently restricted from exercising their warrants. A minimal value has
therefore been assigned as compensation for these warrants and recorded as
syndication costs.
The Company has issued the following warrants which have since been
exercised:
700,000 stock purchase warrants which expire July, 2000. The warrants
are to purchase fully paid and non-assessable shares of the common
stock, par value $.001 per share at a purchase price of $.01 per share.
These warrants were exercised as of August 31, 1997.
The Company has issued and outstanding the following warrants which have not
yet been exercised at August 31, 1997:
1,050,000 stock purchase warrants which expire July, 1999. These
warrants are subject to restrictions regarding the timing of exercise,
the ability of the Company to become a public company and future
marketability of the common stock. The warrants are to purchase fully
paid and non-assessable shares of the common stock, par value $.001 per
share at a purchase price of $.05 per share. These warrants, however,
are not exercisable until and unless the shares of Common Stock trade at
a minimum of $5.50 per share for twenty consecutive trading days, yet
still expire July, 1999 if not exercised.
1,375,000 stock purchase warrants which expire July, 1999. These
warrants are subject to restrictions regarding the timing of exercise,
the ability of the Company to become a public company and future
marketability of the common stock. The warrants are to purchase fully
paid and non-assessable shares of the common stock, par value $.001 per
share at a purchase price of $.50 per share. These warrants, however,
are not exercisable until and unless the shares of Common Stock trade at
a minimum of $5.50 per share for twenty consecutive trading days, yet
still expire July, 1999 if not exercised.
F - 12
<PAGE>
NOTE 5 - PREFERRED STOCK, STOCK OPTIONS, AND WARRANTS: (CONTINUED)
425,000 stock purchases warrants which expire July, 1999. The warrants
are to purchase fully paid and non-assessable shares of the common
stock, par value $.001 per share at a purchase price of $5.00 per share.
These warrants are subject to restrictions regarding the timing of
exercise. The underlying shares of common stock were registered for
resale on September 4, 1997 under the Securities Act of 1933.
5,033,334 Class A stock purchase warrants which expire August 31, 2000.
These warrants are subject to restrictions regarding the timing of
exercise, the ability of the Company to become a public company and
future marketability of the common stock. The warrants are to purchase
fully paid and non-assessable shares of the common stock, par value
$.001 per share at a purchase price of $4.00 per share. If, however, the
closing bid price of the Common Stock shall have equaled or exceeded
$5.50 per share for a period of twenty consecutive trading days at any
time, the Company may redeem the Class A Warrants by paying holders $.05
per Class A Warrant. The underlying shares of common stock were
registered for resale on September 4, 1997 under the Securities Act of
1933.
5,033,334 Class B stock purchase warrants which expire August 31, 2000.
These warrants are subject to restrictions regarding the timing of
exercise, the ability of the Company to become a public company, and
future marketability of the common stock. The warrants are to purchase
fully paid and non-assessable shares of the common stock, par value
$.001 per share, at a purchase price if $6.00 per share. If, however,
the closing bid price of the Common Stock shall have equaled or exceeded
$7.50 per share for a period of twenty consecutive trading days at any
time, the Company may redeem the Class B Warrants by paying holders $.05
per Class B Warrant. The underlying shares of common stock and Class B
Warrants were registered for resale on September 4, 1997 under the
Securities Act of 1933.
1,050,000 Class C stock purchase warrants which expire August 31, 2000.
These warrants are subject to restrictions regarding the timing of
exercise, the ability of the Company to become a public company, and
future marketability of the common stock. The warrants are to purchase
fully paid and non-assessable shares of the common stock, par value
$.001 per share, at a purchase price if $2.00 per share. If, however,
the closing bid price of the Common Stock shall have equaled or exceeded
$7.50 per share for a period of twenty consecutive trading days at any
time, the Company may redeem the Class C Warrants by paying holders $.05
per Class C Warrant. The underlying shares of common stock were
registered for resale on September 4, 1997 under the Securities Act of
1933.
F - 13
<PAGE>
NOTE 5 - PREFERRED STOCK, STOCK OPTIONS, AND WARRANTS: (CONTINUED)
The warrants outstanding are segregated into two categories (exercisable and
non-exercisable). They are summarized as follows:
Class of Exercisable
Warrants Aug. 31, 1997 Aug. 31, 1996 Non-Exercisable Exercise Price
-------- -------------- ------------- --------------- --------------
$ .01 Exercised 700,000 -- $ .01
.05 -- -- 1,050,000 .05
.50 -- -- 1,375,000 .50
5.00 425,000 425,000 -- 5.00
A 5,033,334 4,748,334 -- 4.00
B 5,033,334 4,748,334 -- 6.00
C 1,050,000 -- -- 2.00
---------- ---------- ---------
Total 11,541,668 10,621,668 2,425,000
========== ========== =========
NOTE 6 - RELATED PARTY TRANSACTIONS:
In April 1996, the Company entered into a number of non-cash transactions.
Inventories and property in the amounts of $200,000 and $300,000,
respectively, were contributed to the Company by the Hou-Tex Trust, Bailey
Trust, Futer Family Trust, and John Nagle and recorded at each individuals'
respective historical cost. The Company also received inventory, accounts
receivable, and furniture and fixtures in the amounts of $96,333, $88,789,
$70,000, respectively, in exchange for the assumption of liabilities
totaling $255,122.
Additionally, the Company issued a note payable to an affiliate in the
amount of $155,000 and concurrently issued 4,500,000 shares of common stock
for $345,395 .
For the period ended August 31, 1997, 1,908,000 shares had been issued to
the Vonn, Ltd. and Messrs. Clifford and Barton for cash advances of
$120,000.
F - 14
<PAGE>
NOTE 7 - SEGMENT INFORMATION:
The Company had gross revenues of $3,971,369 for the year ended August 31,
1997. The following parties individually represent a greater than ten
percent of these revenues.
August 31, 1997
Customer Amount Percentage
-------- ----------- ----------
Link - Two Communications, Inc. $ 2,385,747 60.07 %
=========== =======
At August 31, 1996, no parties comprised a greater than ten percent of
revenues.
NOTE 8 - INVESTMENT IN LINK - TWO COMMUNICATIONS, INC.:
The Company and Link - Two Communications, Inc. (Link II) have executed an
agreement, whereby the Company would receive up to an eight percent equity
interest in Link II in lieu of accruing finance charges on the outstanding
balance owed by Link II to the Company. Under the agreement, equity in Link
II was earned at a rate of 0.2% per month per $100,000 payable and
outstanding for more than thirty days. At August 31, 1997 and 1996, the
Company had earned a 6.8% and 0%, respectively, minor ity equity interest in
Link II. This is evidenced by the issuance of 240,000 shares of Link II
common stock to the Company. As of August 31, 1997, the Company has recorded
it share of losses in this unconsolidated affiliate. The loss as a minority
shareholder totaled $71,337.
Certain principal stockholders (or affiliates thereof) of the Company,
including James Futer, executive vice president, director, and chief
operating officer, and A.L. Clifford, a director of the Company, are also
principal stockholders of Link II. Mr. Clifford is also the chairman,
president, and chief executive officer of Link II and Dr. Cubley is a
director of Link II.
F - 15
<PAGE>
NOTE 9 - RISK FACTORS:
At August 31, 1997, substantially all of the Company's business activity has
remained within the United States and has been extended to the wireless
infrastructure industry. Approximately eighty-three percent of the Company's
revenues and receivables have been created solely in the state of Texas, six
and one-half percent have been created in the international market, and the
approximate ten and one-half percent remainder has been created relatively
evenly over the rest of the nation.
Through the normal course of business, the Company generally does not
require its customers to post any collateral. However, because Link II
constitutes 60.72% of the Company's gross revenues and 75% of the its
accounts receivable, the two companies have reached an agreement whereby the
Company has received a minority interest in Link II based upon accounts
receivable. (See Note 8)
Although the Company has concentrated its efforts in the wireless
infrastructure industry at August 31, 1997, it is management's belief that
the Company faces little credit or economic risk due to the continuous
growth the market is experiencing.
NOTE 10 - SHAREHOLDERS' ADVANCES:
Certain officers and an employee advanced the Company $290,000. At August
31, 1997 and 1996, the Company owes $129,372 and $290,000, respectively. The
shareholder advances are non-interest bearing and payable upon demand.
NOTE 11 - FOREIGN OPERATIONS:
Although the Company is based in the United States, its product is sold on
the international market. Presently, international sales total 6.5 % and
1.9% at August 31, 1997 and 1996, respectively.
F - 16
<PAGE>
NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES:
The Company now leases its primary office space for $8,963 per month under a
non-cancelable lease expiring on March 31, 1999. For the periods ending
August 31, 1997 and 1996, rental expenses of $94,036 and $34,612,
respectively, were incurred.
Future obligations under the non-cancelable lease terms are:
Period Ending
August 31, Amount
------------- ---------
1998 $ 98,593
1999 62,741
---------
Total $ 161,334
=========
NOTE 13 - SUBSEQUENT EVENTS:
Subsequent to August 31, 1997, the Company acquired all of the assets, net
of liabilities, of W & H Development, Inc. for 40,000 shares of common
stock. W & H is involved in the business of wireless communications for oil
and gas concerns. As of November 12, 1997, no shares of stock have been
issued.
Additionally, the Company has entered into an agreement with Houston
Research Consulting, Inc. to issue 55,000 shares of common stock in as full
payment in lieu of an $82,500 debt. As of November 12, 1997, no shares of
stock have been issued.
Additionally, the Company has subsequently issued 14,875 stock options to
certain key employees pursuant to the Company's 1996 stock option plan. As
of November 12, 1997, none of the options have been exercised.
F - 17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
A. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
B. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
C. To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (A) and (B), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
D. Any indemnification under subsections (A) and (B) (unless ordered
by a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (A) and (B). Such
determination shall be made (i) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (iii) by the stockholders.
E. Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized by the Articles of Incorporation. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
F. The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
G. The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the Articles of Incorporation.
II-1
<PAGE>
H. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred
in connection with the distribution of the securities being registered. The
expenses shall be paid by the Registrant.
SEC Registration Fee..................................... $ --
NASD Registration Fee.................................... --
Printing and Engraving Expenses.......................... 5,000
Legal Fees and Expenses.................................. 10,000
Accounting Fees and Expenses............................. 5,000
Blue Sky Fees and Expenses............................... --
Transfer Agent Fees...................................... --
Miscellaneous............................................ 5,000
TOTAL............................................... $ 25,000
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In May 1996, the Company issued $375,000 of convertible indebtedness
of which $369,000 was converted into 369,000 shares of Common Stock and, in
connection with the original issuance of such indebtedness, the Company issued
such investors 375,000 $.50 Warrants and 375,000 $5.00 Warrants. The Company
believes that the above-captioned transactions are exempt from registration
pursuant to Section 4(2) of the Act as a transaction by an issuer not involving
any public offering.
In July 1996, the Company issued an aggregate of 4,500,000 shares of
Common Stock to certain founders (or affiliates thereof) of the Company for
nominal consideration. The Company believes that the transactions herein are
exempt from registration pursuant to Section 4(2) of the Act as a transaction by
an issuer not involving any public offering.
In July 1996, the Company issued to certain founders $.05 Warrants to
purchase an aggregate of 500,000 shares of Common Stock at an exercise price of
$.05 per share. The Company believes that the above captioned transaction is
exempt from registration pursuant to Section 4(2) of the Act as a transaction by
an issuer not involving any public offering.
In July 1996, the Company issued to certain founders $.50 Warrants to
purchase an aggregate of 500,000 shares of Common Stock at an exercise price of
$.50 per share. The Company believes that the above captioned transaction is
exempt from registration pursuant to Section 4(2) of the Act as a transaction by
an issuer not involving any public offering.
In July 1996, the Company issued to certain founders warrants to
purchase an aggregate of 700,000 shares of Common Stock at an exercise price of
$.01 per share. In February 1997, such warrants were exercised in full. The
Company believes that the above captioned transactions are exempt from
registration pursuant to Section 4(2) of the Act as a transaction by an issuer
not involving any public offering.
In July 1996, the Company issued three individuals and one entity
three year warrants to purchase an aggregate of 50,000 shares of Common Stock at
an exercise price of $.05 per share for services rendered. The Company believes
that the above captioned transaction is exempt from registration pursuant to
Section 4(2) of the Act as a transaction by an issuer not involving any public
offering.
In July 1996, the Company issued three individuals and one entity
three year warrants to purchase an aggregate of 50,000 shares of Common Stock at
an exercise price of $5.00 per share for services rendered. The Company believes
that the above captioned transaction is exempt from registration pursuant to
Section 4(2) of the Act as a transaction by an issuer not involving any public
offering.
In August 1996, the Company issued 1,285,000 shares of Common Stock,
1,285,000 Class A Warrants to purchase 1,285,000 shares of Common Stock at an
exercise price of $4.00 per share, and 1,285,000 Class B Warrants to purchase
1,285,000 shares of Common Stock at an exercise price of $6.00 per share to a
limited number of investors pursuant to a private offering. The Company believes
that the above captioned transaction is exempt from registration pursuant to
Section 4(2) of the Act as a transaction by an issuer not involving any public
offering.
II-2
<PAGE>
In November 1996, the Company issued 1,908,000 shares of Common Stock
to two individuals and an entity for services rendered in connection with the
above captioned private offering. The Company believes that the above captioned
transaction is exempt from registration pursuant to Section 4(2) of the Act as a
transaction by an issuer not involving any public offering.
In November 1996, the Company issued two individuals and one entity
three year warrants to purchase an aggregate of 500,000 shares of Common Stock
at an exercise price of $.05 per share for services rendered. The Company
believes that the above captioned transaction is exempt from registration
pursuant to Section 4(2) of the Act as a transaction by an issuer not involving
any public offering.
In November 1996, the Company issued two individuals and one entity
three year warrants to purchase an aggregate of 500,000 shares of Common Stock
at an exercise price of $.50 per share for services rendered. The Company
believes that the above captioned transaction is exempt from registration
pursuant to Section 4(2) of the Act as a transaction by an issuer not involving
any public offering.
In November 1996, the Company issued 870,000 shares of Common Stock,
870,000 Class A Warrants to purchase 870,000 shares of Common Stock at an
exercise price of $4.00 per share and 870,000 Class B Warrants to purchase
870,000 shares of Common Stock at an exercise price of $6.00 per share to a
limited number of investors pursuant to a private offering. The Company believes
that the above-captioned transactions are exempt from registration pursuant to
Section 4(2) of the Act as a transaction by an issuer not involving any public
offering.
In December 1996, the Company issued 1,110,000 shares of Common Stock,
1,110,000 Class A Warrants to purchase 1,110,000 shares of Common Stock at an
exercise price of $4.00 per share and 1,110,000 Class B Warrants to purchase
1,110,000 shares of Common Stock at an exercise price of $6.00 per share to a
limited number of investors pursuant to a private offering. The Company believes
that the above-captioned transactions are exempt from registration pursuant to
Section 4(2) of the Act as a transaction by an issuer not involving any public
offering.
In December 1996, the Company issued 1,000,000 Class A Warrants to
purchase 1,000,000 shares of Common Stock at a purchase price of $4.00 per share
and 1,000,000 Class B Warrants to purchase 1,000,000 shares of Common Stock at a
purchase price of $6.00 per share to certain insiders for services rendered. The
Company believes that the above-captioned transactions are exempt from
registration pursuant to Section 4(2) of the Act as a transaction by an issuer
not involving any public offering.
From January 1997, through April 15, 1997 the Company issued 768,334
shares of Common Stock, 728,334 Class A Warrants to purchase 768,344 shares of
Common Stock at an exercise price of $4.00 per share, 768,334 Class B Warrants
to purchase 768,334 shares of Common Stock at an exercise price of $6.00 per
share and 1,050,000 Class C Warrants to purchase 1,050,000 shares of Common
Stock at an exercise price of $2.00 per share to a limited number of investors
pursuant to a private offering. The Company believes that the above-captioned
transactions are exempt from registration pursuant to Section 4(2) of the Act as
a transaction by an issuer not involving any public offering.
In December 1997, the Company issued 95,000 shares in connection with
acquisitions for consideration of $1.50 per share. The Company believes that the
above-captioned transactions are exempt from registration pursuant to Section
4(2) of the Act as a transaction by an issuer not involving any public offering.
In December 1997, the Company issued options to purchase 14,875 shares
pursuant to the stock option plan. The Company believes that the above-captioned
transactions are exempt from registration pursuant to Section 4(2) of the Action
as a transaction by an issuer not involving any public offering.
ITEM 27. EXHIBITS
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
3.1(1) Articles of Incorporation of the Company, as amended
3.1(a)(1) Amendment to the Articles of Incorporation
3.2(1) By-laws
4.1(1) Form of Common Stock Certificate
4.2(1) Class A Warrant Agreement and Form of Warrant
4.3(1) Class B Warrant Agreement and Form of Warrant
4.4(1) Form of $.05 Warrant
4.5(1) Form of $.50 Warrant
4.6(1) Form of $5.00 Warrant
4.7(1) Class C Warrant Agreement and Form of Warrant
5.1(2) Legal Opinion of Brewer & Pritchard, P.C.
10.1(1) Asset Purchase Agreement
10.2(1) Stock Option Plan
II-3
<PAGE>
10.3(1) Form of Purchase Order
23.1(2) Consent of McManus & Co., Inc.
23.2(3) Consent of Brewer & Pritchard, P.C.
- ---------------
(1) Filed as an Exhibit (with the same corresponding Exhibit No. listed herein)
to the Company's Registration Statement on Form SB-2 (File No. 333- 20011)
and incorporated herein by reference.
(2) Filed herewith.
(3) Included in Exhibit 5.1
ITEM 28. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
i. To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
ii. To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
and
iii. To include any additional or changed material
information with respect to the plan of
distribution.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and
the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(4) i. That, for the purpose of determining liability under
the Securities Act of 1933, the information omitted
from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Securities Act of 1933 shall be
deemed to be part of this registration statement as
of the time it was declared effective.
ii. That, for the purpose of determining liability under
the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall
be deemed to be a new registration statement
relating to the securities offered therein, and the
offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on the 19th day of December,
1997.
Eagle Wireless International, Inc.
By /s/ H. DEAN CUBLEY
H. Dean Cubley, President,
Chief Executive Officer and
Director
----------------------------
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ H. DEAN CUBLEY President, Chief Executive Officer December 19, 1997
H. Dean Cubley
/s/ RICHARD ROYALL Chief Financial Officer (Principal December 19, 1997
Richard Royall Financial and Accounting Officer)
/s/ CHRISTOPHER W. FUTER Director December 19, 1997
Christopher W. Futer
/s/ A.L. CLIFFORD Director December 19, 1997
A.L. Clifford
II-5
EXHIBIT 5.1
December 19, 1997
Dr. H. Dean Cubley
Eagle Telecom International, Inc.
910 Gemini
Houston, Texas 77058
Dear Dr. Cubley:
As counsel for Eagle Telecom International, Inc., a Texas corporation
("Company"), you have requested our firm to render this opinion in connection
with the Post-Effective Registration Statement of the Company on Form SB-2 filed
under the Securities Act of 1933, as amended ("Act"), with the Securities and
Exchange Commission relating to the resale of 16,850,002 shares of common stock
("Common Stock"), and (ii) 5,033,334 shares of Common Stock underlying currently
exercisable warrants ("Warrants").
We are familiar with the registration statement and the registration
contemplated thereby. In giving this opinion, we have reviewed the registration
statement and such other documents and certificates of public officials and of
officers of the Company with respect to the accuracy of the factual matters
contained therein as we have felt necessary or appropriate in order to render
the opinions expressed herein. In making our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents presented to us
as originals, the conformity to original documents of all documents presented to
us as copies thereof, and the authenticity of the original documents from which
any such copies were made, which assumptions we have not independently verified.
Based upon all the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas.
2. The shares of Common Stock are validly issued, fully paid and
non-assessable.
3. The shares of Common Stock underlying the Warrants to be issued
upon exercise of such Warrants are validly authorized and, upon
exercise of the Warrants in accordance with their terms, will be
validly issued, fully paid and nonassessable.
<PAGE>
Dr. H. Dean Cubley
December 19, 1997
Page 2
We consent to the use in the registration statement of the reference to
Brewer & Pritchard, P.C. under the heading "Legal Matters."
This opinion is conditioned upon the registration statement being
declared effective and upon compliance by the Company with all applicable
provisions of the Act and such state securities rules, regulations and laws as
may be applicable.
Very truly yours,
BREWER & PRITCHARD, P.C.
December 18, 1997
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this SB-2 Registration Statement of our report
dated November 12, 1997 on our review of the financial statements of Eagle
Wireless International, Inc. We also consent to the reference to our firm under
the captions "Selected Financial Data" and "Experts".
McManus & Co., P.C.
Certified Public Accountants
Morris Plains, New Jersey
