As filed with the Securities and Exchange Commission on January 18, 2000
Registration No. 333-20011
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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POST-EFFECTIVE AMENDMENT NO. 4
TO
FORM SB-2
Registration Statement
Under the Securities Act of 1933
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EAGLE WIRELESS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
TEXAS 3669 76-0494995
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification Number)
organization) Code Number)
H. DEAN CUBLEY
101 COURAGEOUS DRIVE EAGLE WIRELESS INTERNATIONAL, INC.
LEAGUE CITY, TEXAS 77573 101 COURAGEOUS DRIVE
(281) 538-6000 LEAGUE CITY, TEXAS 77573
(Address, and telephone number (281) 538-6000
of principal executive offices) (Name, address and telephone number
of agent for service)
COPIES TO:
MARGARET C. FITZGERALD
BREWER & PRITCHARD, P.C.
1111 BAGBY, 24TH FLOOR
HOUSTON, TEXAS 77002
PHONE (713) 209-2911
FACSIMILE (713) 209-2921
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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]
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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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EAGLE WIRELESS INTERNATIONAL, INC.
RESALE OF 13,847,318 SHARES OF COMMON STOCK
RESALE OF 5,033,334 CLASS B WARRANTS
This prospectus relates to the resale of 13,847,318 shares of our common
stock, which are being sold by the selling stockholders. The shares of common
stock to be resold include 2,730,650 shares currently issued and outstanding and
up to 11,116,668 shares to be issued upon:
o 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,
o 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, and
o 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.
This prospectus also relates to the resale of the class B warrants to
purchase 5,033,334 shares of our common stock.
We will not receive any proceeds from the resale of common stock by the
selling stockholders. We will retain all proceeds from the exercise of the
subject warrants, regardless of the number exercised. The gross proceeds, a
maximum amount of approximately $52,433,340, will be used for working capital
and general corporate purposes.
Our common stock is listed on the OTC Bulletin Board under the symbol "EGLW."
The class B warrants are listed under the symbol "EGLWZ." On January 12, 2000,
the last reported sale price for the common stock was $8.00. On January 12,
2000, the last reported sale price for the class B warrants was $1.50.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES
ONLY IF YOU CAN AFFORD A COMPLETE LOSS. WE URGE YOU TO READ THE "RISK FACTORS"
SECTION BEGINNING ON PAGE 3 ALONG WITH THE REST OF THIS PROSPECTUS BEFORE YOU
MAKE YOUR INVESTMENT DECISION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is January __, 2000
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TABLE OF CONTENTS
PAGE
Prospectus Summary.......................................................1
Risk Factors.............................................................3
Use of Proceeds..........................................................7
Price Range of Common Stock..............................................8
Dividend Policy..........................................................8
Capitalization...........................................................9
Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................10
Business................................................................13
Management..............................................................21
Executive Compensation..................................................23
Principal Stockholders..................................................24
Description of Capital Stock............................................26
Plan of Distribution and Selling Stockholders...........................30
Legal Matters...........................................................47
Experts.................................................................47
Where to Find More Information..........................................47
Financial Statements...................................................F-1
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PROSPECTUS SUMMARY
This summary highlights selected information from this document and may
not contain all of the information that is important to you. To understand the
specific terms of the common stock and class B warrants we are offering, you
should carefully read the entire prospectus, including the risk factors
beginning on page 3 and the financial statements.
EAGLE WIRELESS INTERNATIONAL, INC.
We are a worldwide supplier of telecommunications equipment and related
software used by service providers in the paging and other wireless personal
communications markets. In addition, radio remote control products have been
added to our product line. Recently, we introduced a multi-media home
entertainment product to the telecommunications industry. We design,
manufacture, market, and service our products under the Eagle name. These
products include transmitters, receivers, controllers, radio and telephone
systems, and software and other equipment used in personal communications
systems, which includes paging, voice messaging, cellular and message
management, and mobile data systems. We incorporated BroadbandMagic.com, Inc., a
wholly owned subsidiary, which will focus on the development, marketing and sale
of our new multi-media set-top-box products. All references to we, our, or us
refer to Eagle Wireless International, Inc., a Texas corporation, and our
subsidiary.
Our principal place of business is located at 101 Courageous Drive, League
City, Texas 77573 and our telephone number is (281) 538-6000.
THE OFFERING
Common stock outstanding............... 14,241,854 shares.
Common stock to be offered by our
selling stockholders................... 2,730,650 shares
Common stock underlying our class
A, B, & C warrants to be issued upon
exercise by our selling stockholders... 11,116,668 shares.
Class B warrants to be offered
by our selling stockholders............ 5,033,334.
Market for our common stock............ Our common stock and class B warrants
are listed on the OTC Bulletin Board
under the symbols EGLW and EGLWZ,
respectively. The market for the common
stock and class B warrants is limited,
sporadic and highly volatile. We can
provide no assurance that there will be
a market in the future for our common
stock.
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SUMMARY FINANCIAL INFORMATION
The following table depicts the summarized financial operations of Eagle
Wireless. The information is only a summary and does not provide all of the
information contained in the actual financial statements.
FOR THE YEAR ENDED FOR THE THREE MONTHS ENDED
AUGUST 31, NOVEMBER 30,
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1998 1999 1998 1999
STATEMENT OF EARNINGS AUDITED AUDITED UNAUDITED UNAUDITED
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Net sales .................. $4,827,434 $2,217,275 $931,000 $656,000
Cost of goods sold.......... 1,964,954 1,336,502 420,000 251,000
Operating expenses.......... 2,107,058 1,318,981 535,000 534,000
Earning (Loss) before income
tax....................... 755,422 (438,208) (24,000) (129,000)
Net Earnings................ 770,968 168,271 96,000 68,000
NOVEMBER 30,1999
BALANCE SHEET DATA UNAUDITED
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Working capital................................................ $ 1,824,000
Total assets................................................... 11,397,000
Long-term debt, net............................................ 8,000
Shareholders' equity........................................... 8,999,000
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RISK FACTORS
Any investment in shares of our common stock involves a high degree of
risk. You should carefully consider the following information about these risks,
together with the other information contained in this prospectus, before you
decide to buy our common stock. If any of the following risks actually occur,
our business would likely suffer. In these circumstances, the market price of
our common stock could decline, and you may lose all or part of the money you
paid to buy our common stock.
WE HAVE A LIMITED OPERATING HISTORY FOR YOU TO EVALUATE EAGLE WIRELESS AND YOU
WILL HAVE TO MAKE YOUR INVESTMENT DECISION ON THIS LIMITED OPERATING HISTORY.
We have a limited operating history and are subject to all the substantial
risks inherent in the commencement of a new business enterprise. Additionally,
we have a limited business history for you to analyze and aid you in making an
informed judgement as to the merits of an investment in Eagle Wireless. Any
investment in Eagle Wireless should be considered a high risk investment because
you will be placing funds at risk in a company with unforeseen costs, expenses,
competition and other problems to which relatively new ventures are often
subject. Our prospects must be considered in light of the risks, expenses and
difficulties encountered in establishing a business in a highly competitive
industry characterized by rapid technological development.
ALTHOUGH WE HAVE HAD A HISTORY OF EARNINGS, WE HAD A DECREASE IN EARNINGS AND
REVENUES IN FISCAL 1999 AND FOR THE FIRST QUARTER OF FISCAL 2000. WE MAY INCUR
LOSSES IN THE FUTURE AND THERE CAN BE NO ASSURANCE WHEN OR IF WE WILL SUSTAIN
LONG-TERM PROFITABILITY.
We had net sales of $4,827,434 and net earnings of $770,968 for the fiscal year
ended August 31, 1998; net sales of $2,217,275 and net earnings of $168,271 for
the fiscal year ended August 31, 1999; and net sales of $656,000 and net
earnings of $68,000 for the three-month period ended November 30, 1999. The
decreases in our earnings and revenues are primarily attributed to completion of
contracts for our paging and personal communication systems and increases in
research and development expenses for our convergent set-top device. It is
likely this trend will continue through the short term. Accordingly, we may
incur losses in the future and there can be no assurance when or if we will
sustain long-term profitability.
WE REQUIRE SUBSTANTIAL CAPITAL TO PURSUE OUR OPERATING STRATEGY AND IMPLEMENT
OUR BUSINESS PLAN. IF WE ARE UNABLE TO OBTAIN ADDITIONAL CAPITAL, WE MAY NOT BE
ABLE TO FULLY EXECUTE OUR BUSINESS STRATEGY.
We require substantial capital to pursue our operating strategy and
implement our business plan. Our current level of operations is consuming cash
at a rate of approximately $200,000 per month and is expected to continue at
this rate through the end of the current fiscal year. We currently have
approximately $1.1 million available for use from our credit facility. For the
next six months our primary financing activities will be from our credit
facility, and the exercise of various classes of warrants which we believe will
provide the necessary working capital for operations. These funds will be
applied to currently due payables and on-going operations. Currently, we are
completing negotiations regarding a term loan to provide additional working
capital to fund the development of our expanded product line. For our long term
financing needs, we have an additional $3 million available for use from our
credit facility, subject to certain terms and conditions. We may need additional
debt or equity capital in order to continue to fund our business operations and
finance our growth. There can be no assurance that we will be able to obtain
additional funding from external sources on suitable terms, if at all. A
decrease in expected revenues resulting from adverse economic conditions or
otherwise, unforeseen costs, insufficient market penetration, inability to
collect our receivable from Link-Two Communications and production and marketing
costs of new product introductions could shorten the period during which the
current working capital may be expected to satisfy our capital requirements.
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OUR CONVERGENT SET-TOP-BOXES ARE IN THE INITIAL STAGES OF DEVELOPMENT, AND WE
MAY NOT BE ABLE TO EFFECTIVELY MASS PRODUCE OR MASS MARKET THESE NEW PRODUCTS.
We have developed several prototypes of our convergent set-top-box product line,
and are currently in negotiations to obtain the necessary financing to produce
and market these devices. We may not be able to obtain such financing, and even
if we do, we may not be able to effectively mass produce or mass market these
new products. Additionally, we currently do not have any contracts with
customers for the purchase of these products.
WE ARE IN AN INDUSTRY SUBJECT TO RAPID TECHNOLOGICAL CHANGE AND AN INABILITY ON
OUR PART TO ADAPT OR ADJUST OUR TECHNOLOGY TO SUCH DEVELOPMENTS MAY HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
The design, development and manufacturing of personal communication
systems, specialized mobile radio products, and multi-media entertainment
products is highly competitive and characterized by rapid technology changes. We
compete with other existing products and may compete against other development
technology. Development by others of new or improved products or technologies
may make our products obsolete or less competitive. While management believes
that our 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 we
will be able to develop a commercial market for our products in response to
future technology advances and developments.
WE ARE DEPENDENT ON MEMBERS OF OUR KEY PERSONNEL AND LOSS OF THESE PERSONNEL MAY
HAVE AN ADVERSE EFFECT ON OUR BUSINESS.
Our success 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 our
prospects. We have not entered into employment agreements with Dr. Cubley and
Mr. Futer, but we do maintain $2.5 million key-man life insurance on Dr. Cubley.
We have enlisted experienced personnel in several key positions; however, we
cannot provide you any assurance that we will be able to continue to attract and
retain qualified employees to implement our business plan.
OUR SUCCESS DEPENDS UPON OUR ABILITY TO PROTECT OUR PROPRIETARY TECHNOLOGIES.
We rely on non-disclosure agreements with employees, and common law
remedies with respect to our proprietary technology. We have not completed
filing for or obtained patents on our key technology, and there can be no
assurance that the patents will be issued if applied for in the future. We
cannot provide you any assurance that others will not misappropriate our
proprietary technologies or develop competitive technologies or products that
could have an adverse effect on our business. In addition, although we are not
currently aware of any infringement claims against us or any circumstances which
could lead to such claims, we cannot provide you any assurance that such a claim
could not be made which could adversely affect our business.
Our efforts to protect our intellectual property may cause us to become
involved in costly and lengthy litigation which could seriously harm our
business. In recent years, there has been significant litigation in the United
States involving patents and other intellectual property rights. Although we
have not become involved in intellectual property litigation, we may become
involved in litigation in the future to protect our intellectual property or
defend allegations of infringement asserted by others. Legal proceedings could
subject us to significant liability for damages and subject us to significant
liability for damages or invalidate our proprietary rights. Any litigation,
regardless of its outcome, would likely be time consuming and expensive to
resolve and would divert management's time and attention. Any potential
intellectual property litigation also could force us to take specific actions,
including:
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o cease selling our products that use the challenged intellectual
property;
o obtain from the owner of the infringed intellectual property a right
a license to sell or use the relevant technology, which license may
not be available on reasonable terms, or at all; or
o redesign those products that use infringing intellectual property.
THE INDUSTRIES IN WHICH WE COMPETE, THE PAGING AND PERSONAL COMMUNICATIONS
SERVICES INDUSTRY, ARE HEAVILY REGULATED AND COMPLIANCE WITH FEDERAL LAWS MAY BE
OVERLY BURDENSOME AND COSTLY.
The paging and personal communications services industry is heavily
regulated. Although compliance with such laws and regulations historically has
not had a material adverse effect on our 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.
WE FACE SUBSTANTIAL COMPETITION FROM COMPETITORS WITH SIGNIFICANTLY GREATER
RESOURCES.
The wireless personal communications industry includes equipment
manufacturers that serve many of the same customers served by Eagle Wireless.
Substantially all of our competitors have significantly greater resources,
including financial, technical and marketing, than us and we cannot provide you
any assurance that we will be able to compete successfully in the future.
We face competition from many entities with significantly greater
financial resources, well-established brand names and larger customer bases. The
numerous companies that may seek to enter our industry may expose us to severe
price competition for our products and services. We expect competition to
intensify in the future. We expect significant competition from traditional and
new telecommunications companies including, local, long distance, cable modem,
Internet, digital subscriber line, microwave, mobile and satellite data
providers.
CONTINUED GROWTH OF OUR BUSINESS DEPENDS ON OUR ABILITY TO MANAGE EXPANSION AND
DEVELOPMENT EFFECTIVELY.
Our ability to manage expansion effectively will require us to continue to
implement and improve our operating, financial and accounting systems and to
hire train and manage new employees. The continued expansion and development of
our business will also depend on our ability to continue to grow as a supplier
of telecommunications equipment and related software used by service providers
in the paging and other wireless personal communications market. In addition, we
must perform these tasks in a timely manner, at a reasonable cost and on
satisfactory terms and conditions. Failure to effectively manage our planned
expansion could have a material adverse effect on our business, growth,
financial condition, results of operations and the market price of our common
stock. Our expansion may involve acquiring other companies and assets. These
acquisitions could divert our resources and management attention and require
integration with our existing operations. We cannot assure you that any
acquisition will be successful. We further cannot assure you that we will be
successful or timely in developing and marketing service enhancements or new
services that respond to technological change, changes in customer requirements
and emerging industry standards. Even if we are successful, we cannot assure you
that our lack of significant experience with respect to a new service or market
will not hinder our ability to successfully capitalize on any such opportunity.
A SYSTEM FAILURE COULD DELAY OR INTERRUPT OUR ABILITY TO PROVIDE PRODUCTS OR
SERVICES TO OUR CUSTOMERS AND MATERIALLY, ADVERSELY AFFECT OUR BUSINESS.
Our operations are dependant upon our ability to support our highly
complex network infrastructure. Many of our customers are particularly dependent
on an uninterrupted supply of services. Any damage or failure that causes
interruptions in our operations could result in loss of these customers and
condition. Because of the
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nature of the services we supply and the complexity of our network, it is not
feasible to maintain backup systems, and the occurrence of a natural disaster,
operational disruption or other unanticipated problem could cause interruptions
in the services we provide. Additionally, the failure of a major supplier to
provide the components and parts necessary for our products and services, or of
a major customer to continue buying our goods and services, as a result of a
natural disaster, operational disruption or any other reason, could cause
interruptions in the service we provide and adversely affect our business
prospects, financial condition and results of operations.
FAILURE TO EXPAND OUR DISTRIBUTION CHANNELS AND MANAGE OUR DISTRIBUTION
RELATIONSHIPS MAY ADVERSELY EFFECT OUR OPERATIONS.
The future growth of our business will depend in part on our ability to
expand our existing relationships with distributors and resellers, develop
additional channels for the distribution and sale of our products and manage
these relationships. As part of our growth strategy, we intend to expand our
relationships with distributors and resellers. The inability to successfully
execute this strategy could impede our future growth.
THE LOSS OF OUR CONTRACT SUPPLIERS, OR FAILURE TO FORECAST DEMAND ACCURATELY FOR
OUR PRODUCTS OR TO MANAGE OUR RELATIONSHIP WITH OUR CONTRACT SUPPLIERS
SUCCESSFULLY, WOULD NEGATIVELY IMPACT OUR ABILITY TO MANUFACTURE AND SELL OUR
PRODUCTS.
To date we rely on third party suppliers for component and assemblies used
in our products. If our relationship with our suppliers was harmed for any
reason or our demand for products was greater than their ability to supply us
with products, we may be forced to enter into contracts with other suppliers. It
may be difficult to contract with other suppliers in such a short period of time
or at comparable pricing. We can provide no assurance that we would be able to
enter such contract, of if we were able to enter such contract, that the terms
of that contract would be favorable to us.
WE CAN PROVIDE NO ASSURANCE THAT THERE WILL BE A PUBLIC MARKET FOR OUR
SECURITIES, NOR THAT ANY TRADING WILL NOT BE LIMITED, SPORADIC, OR HIGHLY
VOLATILE.
There is a limited, sporadic and highly volatile public trading market for
our securities and there is no assurance that any public market will continue in
the future. In the event that any market continues for our securities, the
market price of our common stock may experience fluctuations that are unrelated
to the operating performance of, or announcement concerning Eagle Wireless. We
recently experienced an increase in the market price of our common stock. We can
provide you no assurance that the current price will be maintained. Securities
of issuers having relatively limited capitalization or securities recently
issued in a public offering, such as us, are particularly susceptible to change
based on short-term trading strategies of some investors.
THE SHARES BEING OFFERED ARE ELIGIBLE FOR IMMEDIATE RESALE IN THE PUBLIC MARKET
WHICH MAY HAVE A MATERIAL ADVERSE EFFECT ON THE PRICE OF OUR COMMON STOCK.
As of the date of this prospectus, a total of 14,241,854 shares of common
stock were outstanding. The resale of the 2,730,650 shares of common stock
offered by this prospectus, along with the resale of the 11,116,668 shares of
common stock issuable upon the exercise of the subject warrants, will be
eligible for immediate resale in the public market. Sales of this common stock
in the public market may have an adverse effect on prevailing market prices for
our common stock.
OUR DIRECTORS ARE AUTHORIZED TO ISSUE BLANK CHECK PREFERRED STOCK THAT COULD
DELAY OR PREVENT AN ACQUISITION AND COULD ADVERSELY AFFECT THE PRICE OF OUR
COMMON STOCK.
Our board of directors has the authority to issue up to 5,000,000 shares
of "blank check" preferred stock with such designations, rights and preferences
as they so determine. Accordingly, the board of directors is
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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 our common stock. Some
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 rights that could discourage an attempt to obtain control
of Eagle Wireless in a transaction not approved by the board of directors.
PENNY STOCK REGULATIONS MAY DECREASE YOUR ABILITY TO SELL OUR COMMON STOCK.
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. The penny stock rules require a
broker-dealer, before 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. These disclosure requirements and others 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. Our securities
may be subject to the penny stock rules, and accordingly, investors purchasing
securities under this prospectus may find it difficult to sell their securities
in the future, if at all.
USE OF PROCEEDS
Assuming exercise of all the subject warrants, we will receive aggregate
gross proceeds of approximately $52,433,340, before deducting estimated offering
expenses of approximately $125,000. We 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. We will receive no proceeds from the resale of shares of common
stock by the selling stockholders.
PRICE RANGE OF COMMON STOCK
Our common stock has traded under the symbol "EGLW" on the OTC Electronic
Bulletin Board since October 27, 1997. The market for our common stock is
limited, sporadic and highly volatile. As of January 14, 2000, there were
approximately 231 holders of record of our common stock. On January 14, 2000,
the closing price of our common stock was $6.13 per share.
The following table provides the range of high and low bid information of
our common stock for the last two fiscal years as reflected by the OTC
Electronic Bulletin Board. Such quotations reflect inter-dealer prices, without
retail mark up, mark down or commission, and may not represent actual
transactions.
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FISCAL 2000 HIGH LOW
- ----------- ---- ---
1st Quarter $2.00 $1.00
FISCAL 1999 HIGH LOW
- ----------- ---- ---
1st Quarter $2.00 $1.09
2nd Quarter $3.06 $1.53
3rd Quarter $2.81 $1.66
4th Quarter $2.75 $1.03
FISCAL 1998 HIGH LOW
- ----------- ---- ---
1st Quarter (commencing 10/27/97) $4.75 $2.75
2nd Quarter $3.56 $0.88
3rd Quarter $1.69 $1.12
4th Quarter $2.16 $0.88
DIVIDEND POLICY
It is our present policy not to pay cash dividends and to retain future
earnings to support our growth. Any payment of cash dividends in the future will
be dependent upon the amount of funds legally available therefor, our earnings,
financial condition, capital requirements and other factors that the board of
directors believe relevant. We do not anticipate paying any cash dividends in
the foreseeable future.
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CAPITALIZATION
The following table sets forth the capitalization as of November 30, 1999
and August 31, 1999. This table should be read in conjunction with our financial
statements and notes that are included elsewhere in this prospectus.
NOVEMBER 30, AUGUST 30,
1999 1999
---------- ----------
UNAUDITED AUDITED
Long-term debt, net ................................ $ 8,000 $ 11,622
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, 13,541,750
shares issued and outstanding ............... 13,542 13,480
Additional Paid-In Capital ......................... 7,217,000 7,180,900
Retained Earnings .................................. 1,768,000 1,699,937
---------- ----------
Total Stockholders' Equity ......................... $8,899,000 $8,894,317
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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 our financial
statements and accompanying notes to the financial statements.
During the year ended August 31, 1999, the majority of our revenues
originated from shipments for a two- way messaging system that we are installing
for Link-Two Communications in the Houston and Dallas metroplexes and from
contract research and development services. Other sales during this period were
to our broader customer base and were comprised principally of paging
infrastructure products. This sales mix is consistent with the pattern of sales
we realized during the year ended August 31, 1998. The expansion of our
manufacturers' representative organization during the year did not significantly
contribute to an increase in the sales of our paging infrastructure products. A
major restructuring within the paging equipment industry by both Motorola and
Glenayre Electronics and the implementation of cost reduction campaigns by
paging carriers have created uncertainty in the paging equipment industry that
has caused many customers to delay paging infrastructure equipment purchases.
During the three months ended November 30, 1999, our primary operations
were concentrated in the on- going development, marketing and beta testing of
our multi-media set-top devices. These new products are currently being tested
by multinational distribution companies, Internet service providers, national
retail distribution companies and multiple international hotel companies. We
expect to complete most beta testing during the second quarter ending February
29, 2000. During this current quarter, our marketing resources were directed to
identifying product demand for the set-top devices and development new wireless
application customers. Concurrent with this marketing effort, we are currently
negotiating with domestic and international manufacturing concerns to support
production activity for the multi-media set-top devices.
RESULTS OF OPERATIONS
YEAR ENDED AUGUST 31, 1999 COMPARED TO THE YEAR ENDED AUGUST 31, 1998
NET SALES. For the year ended August 31, 1999, net sales on products sold
decreased to $2,217,275 from $4,827,434 during the year ended August 31, 1998.
The decrease of $2,610,159, or 54%, was attributable to the shifting focus to
the research, development and sale of the set-top devices, and away from our
traditional products.
COST OF GOODS SOLD. For the year ended August 31, 1999, cost of goods sold on
our product sales decreased to $1,336,502 from $1,964,954 during the year ended
August 31, 1998. The decrease of $628,452, or 32%, was primarily attributable to
fewer products sold and costs associated with production. The decrease in cost
of sales reduced our gross profit percentage for products sold and increased
costs associated with production.
OPERATING EXPENSES. For the year ended August 31, 1999, operating expenses
decreased to $1,318,981 from $2,107,058 during the year ended August 31, 1998, a
decrease of $788,077 or 37%. The primary portions of the decrease are discussed
below:
o A $677,854 decrease in salaries, or 92%.
o A $117,356 decrease in advertising and promotion, or 61%.
o A $130,789 decrease in other support costs, or 16%.
However, our research and development costs increased approximately $202,000 due
to existing officers and
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employees being utilized in the development of the wireless set-top devices.
NET EARNINGS. For the year ended August 31, 1999, our net earnings decreased to
$168,271 from $770,968 during the year ended August 31, 1998.
CHANGES IN CASH FLOW. Our operating activities used net cash of $405,953 in
fiscal 1999 and $1,498,393 in fiscal 1998. The decrease in net cash used by
operating activities in fiscal 1999 was primarily attributable to a change in
our business activities. Our investing activities used net cash of $1,528,262 in
fiscal 1999 and $344,519 in fiscal 1998. Such increase was due primarily to an
increase in our investment in Link-Two Communications in 1999. Our financing
activities provided cash of $1,024,935, in fiscal 1999 and $45,596 in fiscal
1998, and such increase was primarily the result of financing activities
consisted primarily of the sale of common stock, which was partially offset by
the repayment of shareholder advances.
THREE MONTH PERIOD ENDED NOVEMBER 30, 1999 COMPARED TO THE THREE MONTH PERIOD
ENDED NOVEMBER 30, 1998
NET SALES. For the three months ended November 30, 1999, net sales on products
sold decreased to $656,000 from $931,000 during the three months ended November
30, 1998. The decrease of $275,000, or 30%, was attributable to a decrease in
sales to infrastructure customers and discontinuance of a research and
development contract with a computer manufacturer.
COST OF GOODS SOLD. For the three months ended November 30, 1999, cost of goods
sold on our product sales decreased to $251,000 from $420,000 during the three
months ended November 30, 1998. The decrease of $169,000, or 40%, was primarily
attributable to a decrease in sales.
OPERATING EXPENSES. For the three months ended November 30, 1999, operating
expenses decreased to $534,000 from $535,000 during the three months ended
November 30, 1998. For the current quarter, the research and development
expenses increased $99,000 over the 1998 amount of $154,000. This increase is
attributable to additional personnel employed to support the development
necessary to manufacture the multi-media set-top devices and other wireless
applications.
NET EARNINGS. For the three months ended November 30, 1999, our net earnings
decreased to $69,000 from $96,000 during the three months ended November 30,
1998. The decrease of $25,000, or 28%, was attributable to a lower volume of
sales.
CHANGES IN CASH FLOW. Cash flows used by operating activities for the three
months ended November 30, 1999 and 1998 totaled $635,000 and $513,000,
respectively. Cash flows provided (used) by investing activities for the three
months ended November 30, 1999 and 1998 totaled $33,000 and $(26,000),
respectively; due primarily to no investment in Link II Communications during
the quarter ended November 30, 1999. Cash flows provided (used) by financing
activities for the three months ended November 30, 1999 and 1998 totaled
$1,519,000 and $(19,000), respectively; such change due primarily to the
convertible debt financing in October 1999.
LIQUIDITY AND CAPITAL RESOURCES
In October 1999, we entered into a convertible debenture arrangement with
Global Capital Advisors, LTD to fund up to $4,500,000 over a two-year period
subject to certain terms and conditions. Additionally, we are committed to issue
up to 280,000 warrants with exercise prices ranging from $1.54 to $1.75 per
share, expiring in October 2002. We have met the first of such criteria and we
have sold $1,500,000 of the debentures and issued warrants to purchase 149,875
shares of common stock to Global Capital. We may borrow additional funds if we
meet the following conditions:
o the effectiveness of the registration statement covering resales of
the shares underlying the
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debentures and warrants;
o the accuracy and completeness of Eagle Wireless's representations
and warranties as stated in the purchase agreement;
o the absence of suspensions of trading in or delisting, or pending
delisting, of our common stock; o the receipt of legal opinions from
our counsel;
o the receipt of an accountant's "comfort letter" or "agreed upon
procedures" letter;
o the completion of due diligence investigations by Global Capital and
the absence of disputes with respect thereto; and
o the absence of material adverse changes in our financial condition
or prospects or share listing status or price.
The three-year convertible debenture bears interest at seven percent and can be
redeemed in our common stock or cash. We will either redeem the debentures for
cash within four years or the debentures may be converted into common stock if
we meets specified conditions. If the full amount of the financing is not
required we have the option to cancel any remaining unused portion by paying a
1% termination fee. These convertible debentures are secured by a note
receivable from Link Two Communications, Inc. of $6,000,000. In January we
issued 53,601 shares of common stock which repaid $100,000 of principal and
accrued interest.
As of November 30, 1999, we had working capital of $1,824,000. We have
drawn down $1,500,000 of the convertible debenture facility and the balance is
available subject to certain terms and conditions. Our current level of
operations is consuming cash at a rate of approximately $200,000 per month. We
believe that our current cash position, and the exercise of certain classes of
warrants will provide sufficient working capital through June 2000. Thereafter,
we will need additional working capital, either by drawing down on our credit
facility or through debt or equity financing.
We are currently in negotiations regarding a term loan to provide
additional working capital to fund the development, production and marketing of
our expanded product line. Although these negotiations are underway, we have not
established a line of credit or other similar financing arrangements with any
lenders as of January 14, 2000. There can be no assurance that we will be able
to obtain any funding from any external sources on suitable terms, if at all. A
decrease in expected revenues resulting from adverse economic conditions or
otherwise, unforeseen costs, insufficient market penetration, inability to
collect our notes receivable from Link-Two and production and marketing costs of
new product introductions could shorten the period during which the current
working capital may be expected to satisfy our capital requirements.
As of January 14, 2000, we had no material capital commitments other than
our credit facility.
IMPACT OF YEAR 2000
Even though the date is now past January 1, 2000, and we have not
experienced any immediate adverse impact from the transition to the year 2000,
we cannot provide any assurance that our suppliers and customers have not been
affected in a manner that is not yet apparent. In addition, some computer
programs which were date sensitive to the year 2000 may not have been programmed
to process the year 2000 as a leap year, and any negative consequential effects
remain unknown. As a result, we will continue to monitor our year 2000
compliance and the year 2000 compliance of our suppliers and customers.
The year 2000 posed issues for business and consumer computing,
particularly the functionality of software for two-digit storage of dates and
special meanings for dates such as 9/9/99. The problem exists for many kinds of
software, including software for mainframes, PCs, and embedded systems.
In assessing the effect of the Year 2000 problem, we determined that there
existed two general areas that needed to be evaluated:
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o Internal infrastructure; and
o Supplier/third-party relationships.
A discussion of the various activities related to assessment and actions
resulting from those evaluations is below.
INTERNAL INFRASTRUCTURE. - During the fiscal year 1999, we undertook and
completed a project to replace our accounting and manufacturing information
systems that we found to not be Year 2000 compliant. We presently believe that,
with modifications to existing software and conversions to new software, the
Year 2000 issue will not pose significant operational problems for our business,
our products or installed systems. As of January 14, 2000, we have not suffered
any problems or interruptions due to the Year 2000 problem.
SUPPLIERS/THIRD-PARTY RELATIONSHIPS. - We rely on outside vendors for water,
electrical, and telecommunications services as well as climate control, and
other infrastructure services. We did independently evaluate the year 2000
compliance of the systems utilized to supply these services. We have not
received any assurance of compliance from the providers of these services. Any
failure of these third-parties to resolve year 2000 problems with their systems
could have a material adverse effect on our business.
CONTINGENCY PLANS. - Based on the above actions, we have not developed a formal
contingency plan to be implemented as part of our efforts to identify and
correct year 2000 problems affecting our internal systems. However, if we
believe it is necessary, we may take the following actions:
o Short to medium-term use of backup equipment and software;
o Increased work hours for our personnel; and
o Other similar approaches.
If we are required to implement any of these contingency plans, such plans
could have a material adverse effect on our business. Based on the actions taken
to date, and the lack of any problems to date, we are reasonably certain that we
have identified and resolved all year 2000 problems that could hurt our
business.
BUSINESS
GENERAL
We are a worldwide supplier of telecommunications equipment and related
software used by service providers in the paging and other wireless personal
communications markets. In addition, radio remote control products have been
added to our product line. Recently, we introduced a multi-media home
entertainment product to the telecommunications industry. We design,
manufacture, market, and service our products under the Eagle name. These
products include transmitters, receivers, controllers, radio and telephone
systems, and software and other equipment used in personal communications
systems, which includes paging, voice messaging, cellular and message
management, and mobile data systems. The manufacture, sale and operation of most
of our products are regulated by the United States Federal Communication
Commission, or FCC. We also provide consulting and product installation and
repair services. We are located at 101 Courageous Drive, League City, Texas,
77573 and our telephone number is 281-538-6000.
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PRODUCT CATEGORIES
WIRELESS MESSAGING PRODUCTS
For the fiscal years ended August 31, 1998, and 1999, infrastructure
equipment, which includes License Starter, transmitters, base stations, power
amplifiers, link products, multi-terminal arbitrator, Extend-a-Page, Hot Switch
Panel, and consulting services accounted for substantially all of our 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 who 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 capability.
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, or 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. The cost of 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 bandwidth 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 Marinas 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.
The FCC has imposed infrastructure construction or buildout requirements on all
NPCS license holders. Each NPCS license holder must establish 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
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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.
We manufacture products that will enable paging license holders to legally
put their systems into operation, at a low cost, a strategy we have adopted to
create a "captive" customer in terms of future build out.
We offer our customers an end-to-end solution for NPCS applications. We
have developed new technology based products with enhanced architecture and
technology from our 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). We are currently shipping our 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 :
o the number of paging subscribers the service provider desires to
accommodate,
o the operating radio frequency,
o the geography of the service area,
o the expected system growth, and
o specific features desired by the customer.
Paging equipment hardware and software that we develop may be used with
all types of paging service, including voice, tone numeric (telephone number
display) or alphanumeric messaging (words and numbers display).
SWITCHES
We are involved at an early stage in the development of industry wide
technology standards and are familiar with developments in paging protocol
standards throughout the world. We work closely with our customers in the design
of large, complex paging networks. We believe that our customers' purchasing
decisions are based, in large part, on the quality and technological
capabilities of such networks. We believe that the advanced hardware and
software features of our 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.
Our 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. Depending upon frequency, antenna height,
topography and power, our 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. Our transmitters are
designed specifically for the high performance and reliability required for
high-speed simulcast networks.
MULTIMEDIA DEVICES
We recently developed WebFlyer, an Internet Set-Top-Box designed to access
the Internet and e-mail through a television set for individual or commercial
use. The WebFlyer is the latest product to be introduced into the multimedia
home entertainment arena. It uses a standard TV set as a monitor, allowing the
user to connect to their chosen ISP on the Internet. The multi-media
entertainment device can at a minimum:
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o Receive, write and send e-mail,
o Write a letter, work on a spreadsheet,
o Play games, use learning tools,
o Watch movies from CDs, DVDs, or even downloaded from the Internet,
and
o Record on the hard drive direct from the TV, providing better
quality picture than through a VCR.
CONTROLLERS
We currently offer products for transmitter control known as the L20TX
transmitter control system, which is a medium-feature transmitter control system
used in domestic and international markets.
CURRENT PRODUCTS AND SERVICES
Our principal products and enhancements we currently manufacture and sell
relate to our wireless messaging products and include the following:
LICENSE STARTER
This product provides 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 110-Volt AC power and a standard
telephone line.
BASE STATIONS AND TRANSMITTERS
Transmitters and full-featured transmitters called Base Stations are used
by paging carriers to broadcast radio-frequency messages to subscribers carrying
mobile receivers commonly known as pagers. Eagle offers a slimline Stealth and a
larger Quantum transmitter that is available in the 72MHz, VHF, UHF and 900MHz
broadcast frequency ranges. Each unit can be equipped to provide an output power
ranging from 15 Watts up to 500 Watts on almost any domestic or international
paging frequency.
RADIO FREQUENCY AMPLIFIERS
Radio-frequency power amplifiers are a sub-component of both paging and
SMR transmitters and base stations. 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 an Eagle optional plug-in base station
in the same space 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 a compact lower-power transmitter and receiver set
designed to provide fill-in coverage in fringe locations where normal paging
service from a wide-area paging system is not adequate. The 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.
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LINK PRODUCTS
Radio frequency and wireline communication links are needed to connect
multiple transmitters within a paging network. Eagle provides both Link
equipment (the Link 20TX, 20RX, 20GX and 20PX) and the Link 20 software to
facilitate this interconnection. Major competitors have licensed the Eagle Link
20 software and have incorporated it as an industry standard into their
radio-paging terminals. Customers may also purchase the same software directly
from Eagle as part of an Eagle system at a lesser cost. Management believes that
our software allows the user to mix and match the products of different vendors
on a common radio-paging system.
MICROBEEP
The MicroBeep paging terminal is a small paging terminal that can be
plugged into the expansion slot of an IBM compatible computer. This
fully-contained paging terminal includes a low-power transmitter and subscriber
software. This system is used for local paging applications within factories,
offices, restaurants and campuses.
MULTI-TERMINAL ARBITRATOR
The Multi-Terminal Arbitrator is a programmable communications switch that
facilitates the sharing of a single radio-frequency transmitter by a maximum of
eight different paging terminals. A target market for this product is in private
carrier paging ("PCP") where multiple companies share the same radio frequency
and are required to coordinate the sharing activities.
TWO-WAY MESSAGING DEVICES
We are a licensed distributor of spread-spectrum wireless messaging
receivers that, when used in conjunction with our one-way paging transmitters,
provides a two-way messaging system for both consumer and industrial
applications. In addition to the receivers, we currently sell and distribute a
wireless water meter, a wireless power meter, a wireless gas meter, a wireless
home security alarm, a wireless vehicle tracking system and a multi-purpose
wireless module that can be combined with a wide variety of switch-type
applications.
CONSULTING SERVICES
We routinely provide consulting services on a contract basis to support
the sale of our main product lines. Examples of these consulting services
include the design and installation of radio paging systems. We also perform
research and development on a contract basis.
NEW BROADBAND MULTIMEDIA AND INTERNET PRODUCTS
We have developed a complete new line of broadband multimedia Set-Top-Box
products during 1999 and are test marketing these products under the name of
BroadbandMagic.com. We are currently negotiating to obtain the necessary
financing to produce and market these devices. These new products are
multimedia-based products that provide a user with the ability to interface
their Internet connection, their broadcast video source, their cable or DSL
source, or their satellite video source directly to their television receiver.
Eagle is marketing the new multimedia and Internet products as Convergence
Set-Top-Boxes or CSTB products. One version of the CSTB includes a DVD player
and full high performance computer functionality as well as all of the other
CSTB capabilities. The marketing plan of Eagle through BroadbandMagic.com is to
initially focus on the large Internet service providers or ISP's who typically
bundle Set-Top-Boxes with their service as their own marketing strategy. In
addition, the CSTB will be marketed to large retail distributors, through our
representative network, to large OEM clients, as well as through a new
BroadbandMagic.com e-commerce web site and other e-commerce sites.
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SERVICE AND SUPPORT
We provide service to customers on a regular basis including installation,
project management of turnkey systems, training, service or extended warranty
contracts. We believe 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 us for
installation, system optimization, warranty and post-warranty services.
We have a warranty and maintenance program for both our hardware and
software products. Our standard warranty provides customers with repair or
replacement of any defective equipment we manufacture. 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 Wireless qualified technician.
CUSTOMERS
We sell 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. Our customers include Motorola, Pac-Tel,
Scientific Atlanta, Bell Atlantic, Metrocall, ProNet, Pacific Bell, SkyTel,
Link-Two Communications and the U.S. Department of Defense.
Our largest customer, Link-Two, accounted for approximately 43% of our
sales for the fiscal year ended August 31, 1999. Link-Two is a common carrier of
exclusively wholesale one-way paging and two-way messaging network services. Its
customers purchase paging network services as an aggregator and resell
Link-Two's network services to individual subscribers and other communications
providers. Link-Two has been classified as an incumbent carrier by the FCC and
has secured the rights to use or options to purchase spectrum in all of the
major metropolitan U.S. cities on five PCP frequencies. Link-Two has also
secured several exclusive RCC frequencies providing regional coverage in two of
the top ten markets. Link-Two is currently operational in Houston and Dallas,
Texas.
MARKETING AND SALES
We market our products and services in the United States through
representative organizations and internationally through agents. As our business
is highly technical, a majority of sales are complete systems with technical
support. A large percentage of our marketing comes from direct sales by the
employees. We also utilize distributors and agents to sell our products in
countries and geographic regions to market outside of our core markets.
We currently have non-exclusive arrangements with eight distributors and
agents to service selected regions within the United States. A non-exclusive
arrangement is also in effect with one distributor on a worldwide basis and we
have 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. We have an agreement
with Motorola which provides that several products we offer are to be listed in
Motorola's product catalog under the Eagle name. In addition, we have been
granted the status of a value added reseller by Lucent Technologies for all of
Lucent's wireless networking and Internet product lines. We have recently
developed a manufacturers representative for the new multimedia and Internet
product lines. Currently this program consists of fourteen manufacturers
representatives on a world wide basis.
We maintain an Internet website at http://www.eglw.com where information
can be found on our products and services. The website provides customers with a
mechanism to request additional information on products and allows the customer
to quickly identify and obtain contact information for their regional sales
representative.
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INTERNATIONAL BUSINESS RISK
We generated net sales in markets outside of the United States, which
amounted to 2% and 1% at November 30, 1999 and 1998, respectively. 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. Pre-payments and letters of credit
drawn on American or limited foreign corresponding banks are required from
international customers to reduce the risk of non-payment.
RESEARCH AND DEVELOPMENT
We believe that a strong commitment to research and development is
essential to the continued growth of our business. One of the key components our
development strategy is the promotion of a close relationship between our
development staff, internally with our manufacturing and marketing personnel,
and externally with our customers. This strategy has allowed us to develop and
bring to market customer-driven products.
We have focused a large portion of our new development resources during
1999 on the development of the new broadband multimedia and Internet product
line. In addition we have formed a number of strategic relationships with other
large suppliers and manufacturers that will allow the latest in technology and
techniques to be utilized in the CSTB product line. We will continue to incur
research and development expenses with respect to the CTSB product line during
the current fiscal year.
We also 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. We believe that by
having a research and development staff with expertise in these key areas, we
are well positioned to develop enhancements for our 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 us to reduce
the time for bringing new products to market. Our research and development
expenditures for the fiscal years ended August 31, 1998, and August 31, 1999
were $333,200, and $438,693, respectively.
MANUFACTURING
We currently manufacture our wireless products at our facilities in
Houston, Texas. Subcontractors at various locations throughout the world
manufacture subassemblies for Eagle Wireless. Our manufacturing expertise
resides in assembling sub-assemblies and final systems that are configured to
our customers' specifications. The components and assemblies used in our
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 our 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, we
purchases sufficient quantities of components, which have long- lead
requirements in the world market. We ensure that all products are tested, tuned
and verified before shipment to the customer. We have determined that the most
cost effective manufacturing method for our high volume multimedia and Internet
product line will be to utilize offshore contract production facilities
supplemented with high volume U.S. based contract facilities. The high volume
requirements of the CSTB product line are well beyond the capabilities of our
current facilities and would be cost prohibitive to construct. However, in the
selection of a high volume international manufacturer, we have selected SCI, a
U.S. owned company with manufacturing facilities in over twenty countries around
the world. The initial manufacturing location for the CSTB is the SCI facility
in Singapore.
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COMPETITION
We supply transmitters, receivers, controllers and software used in
paging, voice messaging and message management systems. While the services from
our 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 that we serve.
Some of our competitors, and all competitors that have publicly tradable
securities, have significantly greater resources than we do, and there can be no
assurance that we will be able to compete successfully in the future. In
addition, manufacturers of wireless telecommunications equipment, including
those in the cellular telephone industry, some of which are larger and have
significantly greater resources than we do, could elect to enter into our
markets and compete with our products. There can be no assurance that we will be
able to increase our market share in the future.
We compete with many established companies in the Set-Top-Box business
including Microsoft, Scientific Atlanta, General Instruments, and many smaller
companies. Most of these companies have greater resources available than we do.
The markets that are currently developing for multimedia and other Internet
related products are extremely large and growing daily. We have conducted
extensive study of these markets and are of the belief based on this research
that we can effectively compete in these markets with our new CSTB product line.
However, there can be no assurance that these conclusions are correct and that
the multimedia and Internet markets will continue to expand at their current
rates and that we can gain significant market share in the future.
PROPRIETARY INFORMATION
We attempt to protect our proprietary technology through a combination of
trade secrets, non-disclosure agreements, technical measures, and common law
remedies with respect to some proprietary technology. Such protection may not
preclude competitors from developing products with features similar to our
products. The laws of some foreign countries in which we sell or may sell our
products do not protect our proprietary rights in the products to the same
extent as do the laws of the United States. Although we believe that our
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 us in the future. If such litigation resulted in our inability to use
technology, we may be required to expend substantial resources to develop
alternative technology. There can be no assurance that we could successfully
develop alternative technology on commercially reasonable terms. More recently
we have registered and trademarked the name of BroadbandMagic.com for our new
wholly owned subsidiary. We believe this to be a very valuable addition to the
intellectual property rights of the Eagle Wireless.
REGULATION
Many of our products operate on radio frequencies. Radio frequency
transmissions and emissions, and equipment used in connection therewith, are
regulated in the United States and internationally. Generally, we must obtain
regulatory approvals in connection with the manufacture and sale of our
products, and our customers must obtain regulatory approvals to operate our
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 our products. Although recent
deregulation of international telecommunications industries along with recent
radio frequency spectrum allocations made by the FCC have increased the demand
for our 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 deregulation 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 our business.
-20-
<PAGE>
EMPLOYEES
At January 14, 2000, we employed approximately 31 persons and retained 6
independent contractors. We believe our employee relations to be good. We enter
into independent contractual relationships with various individuals, from time
to time, as needed.
FACILITIES
Our headquarters are located in League City, Texas and include
approximately 23,000 square feet of leased office and production space. The
lease is at market rates and expires in 2001. We have insured our facilities in
an amount we believe is adequate and customary in the industry. We believe that
our existing facilities are adequate to meet our current requirements but we
anticipate the need for acquiring additional space within the next two years. We
believe that suitable additional space in close proximity to our existing
headquarters will be available as needed to accommodate such growth of our
operations through the foreseeable future.
LEGAL PROCEEDINGS
In September 1999, Eagle Wireless was named as defendant in a lawsuit
involving our former landlord regarding an alleged breach of the lease and a
claim for approximately $25,000. We are currently in discovery and we intend to
vigorously defend this lawsuit. We have filed a countersuit against our former
landlord claiming breach of the lease in an attempt to recover deposits, and
collect damages in connection with the dispute regarding our former rental
space.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers are:
NAME AGE POSITION
---- --- --------
H. Dean Cubley 58 Chairman of the board of directors,
president and chief executive officer
Christopher W. "James" Futer 60 Director, executive vice president and
chief operating officer
A. L. Clifford 55 Director
Senator Gary Hart 65 Director
Richard Royall 53 Chief financial officer
DR. H. DEAN CUBLEY has served as chairman of the board, president and
chief executive officer of Eagle Wireless since March 1996. Before 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
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<PAGE>
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 Ph.D. in electrical engineering from the
University of Houston.
CHRISTOPHER W. "JAMES" FUTER has served as a director, chief operating
officer and vice president of Eagle Wireless since March 1996. Before 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. Before May 1993,
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
coordinating 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.
SENATOR GARY HART has served as a director since January of 1998 and
served in the United States Senate from 1975 to 1987. During his twelve years in
the Senate he served on the Senate Armed Services Committee where he specialized
in nuclear arms control and naval issues. Senator Hart also served on the Senate
Select Committee to Investigate the Intelligence Operations of the United States
Government and was an original member of the new Senate Intelligence Oversight
Committee from 1975 to 1978. Senator Hart was also a congressional advisor to
the Salt II talks with the Soviet Union in Geneva. He is the author of numerous
books, including RUSSIA SHAKES THE WORLD (1991). Since leaving the Senate he has
served as a strategic advisor to major U.S. corporations, focusing on the former
Soviet Union and Eastern Europe. Senator Hart is a graduate of Yale Law School,
the Yale Divinity School and Southern Nazarene University.
RICHARD R. ROYALL has served as chief financial officer since March 1996.
Mr. 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 in Royall & Fleschler, certified public accountants. In addition, Mr.
Royall serves as financial officer and director of companies operating in the
finance and chemical industries, none of which are affiliated with Eagle
Wireless.
Our directors hold office until the next annual meeting of the
stockholders and until their successors are duly elected and qualified.
Directors are reimbursed for out-of-pocket expenses to attend meetings. We have
not established and do not maintain any compensation, audit, executive or
nominating committees. There are no family relationships among any of the
directors and executive officers of Eagle Wireless.
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<PAGE>
EXECUTIVE COMPENSATION
The following table provides information regarding compensation paid to
our chief executive officer. No other executive officer received in excess of
$100,000 in compensation during the fiscal year ended August 31, 1999.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- ---------------------------
YEAR SALARY BONUS OTHER OPTIONS OTHER
---- --------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
H. Dean Cubley
Chief Executive Officer 1999 $ 100,000 $ - $ - $ - $ -
1998 $ 91,923 $ - $ - $ - $ -
1997 $ 65,407 $ - $ - $ - $ -
</TABLE>
We have not entered into employment agreements with any of our 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 112,125
shares have been granted under the plan.
1999 STOCK OPTION GRANTS
NAME OPTIONS GRANTED PERCENT OF EXERCISE EXPIRATION DATE
(SHARES) TOTAL OPTIONS PRICE
GRANTED (PER SHARE)
- ----------------- --------------- ------------ ----------- --------------
H. Dean Cubley - - - -
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
SHARES VALUE NUMBER OF SECURITIES VALUE OF
NAME ACQUIRED REALIZED UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
ON EXERCISE OPTIONS OPTIONS(*)
- -------------- ---------- --------- ------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
H. Dean Cubley - - - - - -
</TABLE>
- ---------------------
RETIREMENT PLANS
In October 1997, we initiated a 401(k) plan for our employees which is
funded through the contributions of its participants. The plan maintains that we
will match up to 3% of each participant's contribution. For the
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<PAGE>
years ended August 31, 1999 and 1998, employee contributions were approximately
$103,000 and $56,500, respectively, whereas our matching contribution was
$33,500 and $17,000, respectively for those same periods.
CERTAIN TRANSACTIONS
Some of our principal stockholders (or affiliates thereof), including
Messrs. Futer and Clifford are also principal stockholders of Link-Two, which is
one of our principal customers. Mr. Clifford is also the chairman, and chief
executive officer of Link-Two and Dr. Cubley is a director of Link-Two. We have
entered an agreement with Link-Two which provides that we may receive up to an
eight percent equity interest in Link-Two in lieu of accruing finance charges on
the outstanding balance owed to us by Link-Two. Under the agreement, equity in
Link-Two was earned at a rate of 0.2% per month per $100,000 payable and
outstanding for more than thirty days. In addition, because of the size of this
receivable, Link-Two has provided us with a UCC on all of its assets including
all its wireless license holdings. At August 31, 1999 and 1998, we had earned a
5.0% and 5.0%, respectively, minority equity interest in Link-Two. This is
evidenced by the issuance of 240,000 shares of Link- Two common stock to Eagle
Wireless.
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. In July 1999, Mr. Royall exchanged these warrants for 12,500
shares of common stock. In July 1999, Mr. Futer exchanged 110,000 $.05 warrants,
110,000 $0.50 warrants, and $147,000 for 220,000 shares of common stock. In
December 1997, Senator Gary Hart was issued class C $2.00 warrants to purchase
50,000 shares of common stock as compensation for serving on our board of
directors. The class C warrants expire August 31, 2000 and are callable by Eagle
Wireless at a price of $.05 per class C warrant when 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.
LIMITATION OF DIRECTORS' LIABILITY
Our articles of incorporation eliminates, subject to exceptions, the
personal liability of directors or our 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 Eagle
Wireless or our 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 before board action in respect of
such transaction or event. In these cases, the stockholders and Eagle Wireless
could be injured by a board's decision and have no effective remedy.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of January 14, 2000, the number and
percentage of outstanding shares of our common stock owned by (i) each person
known to beneficially own more than 5% of our outstanding common stock, (ii)
each director, (iii) each named executive officer, and (iv) all officers and
directors as a group.
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<PAGE>
SHARES OF COMMON STOCK
NAME AND ADDRESS BENEFICIALLY OWNED % OF VOTING POWER
---------------------- -----------------
Hou-Tex Trust
1331 Lamar, Suite 1375
Houston, TX 77010 2,569,300 17%
H. Dean Cubley
101 Courageous Drive
League City, TX 77573 - -
Futer Family Trust
1331 Lamar, Suite 1375
Houston, TX 77010 1,296,500 10%
Gary Hart
950 17th Street
Denver, CO 80202 150,000 1%
Christopher W. Futer
101 Courageous Drive
League City, TX 77573 5,000 less than 1%
A.L. Clifford
101 Courageous Drive
League City, TX 77573 632,667 4%
All officers and directors
as a group(5 persons) 800,167 5.5%
It is assumed for the purposes of this table that no trading will occur
within 60 days of the date of this document.
The shares held by Hou-Tex Trust include the warrants to purchase 310,000
shares of company common stock at $4.00 per share which expire on August 31,
2000, and are redeemable by Eagle Wireless at $.05 per share if at any time 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 (the class A warrants), and
warrants to purchase 310,000 shares of company common stock at $6.00 per share
which expire on August 31, 2000, and are redeemable by Eagle Wireless at $.05
per share if at any time 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
(the class B warrants). 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.
The shares held by the Futer Family Trust include 110,000 shares of common
stock underlying class A warrants, and 110,000 shares of common stock underlying
class B warrants.
Mr. Futer disclaims beneficial ownership, as well as voting and
disposition power of the shares of common stock and warrants owned by the Futer
Family Trust. Mr. Futer's ownership consists of options to purchase 5,000 shares
of common stock at $1.25 per share which will expire on August 3, 2003, issued
under our employee stock option program.
Mr. Clifford has voting and disposition power of the 105,000 held in his
name, 141,000 shares which are held in the name of The Clifford Family Trust,
and 61,667 held by his wife. Mr. Clifford owns 110,000 shares of common stock
underlying class A warrants and 110,000 shares of common stock underlying class
B warrants.
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<PAGE>
The shares held by Mr. Hart include 50,000 shares of common stock
underlying class C warrants.
The total number of shares held by officers and directors include options
and warrants to purchase 275,000 shares of common stock that are currently
exercisable.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
We are authorized to issue up to 100,000,000 shares of common stock. There
are 14,241,854 shares of common stock issued and outstanding, up to 12,616,543
shares are reserved for issuance upon exercise of the warrants, and 400,000
shares are reserved for issuance under our employee stock option plan of which
options to purchase 112,125 shares of common stock are currently outstanding.
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
non-assessable.
PREFERRED STOCK
We are 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
(a)_voting rights including the right to vote as a series on particular matters,
(b) preferences as to dividends and liquidation, (c) conversion, (d) redemption
rights and (e) sinking fund provisions.
No shares of preferred stock will be outstanding as of the closing of this
offering, and we have 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 Eagle Wireless. 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
We have issued the following warrants to purchase an aggregate of
12,616,543 shares of common stock.
CLASS A WARRANTS
We have 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, we 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
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<PAGE>
business day next preceding the redemption date. The class A warrants provide
for the payment, by Eagle Wireless, of a 3% solicitation fee.
CLASS B WARRANTS
We have 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, we 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 Eagle
Wireless, of a 3% solicitation fee.
CLASS C WARRANTS
We have issued class C warrants to purchase 1,050,000 shares of common
stock at $2.00 per share. The class C warrants are held by insiders of Eagle
Wireless and 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, we 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 Eagle Wireless, of a 3%
solicitation fee.
THE MEGA HOLDING CORP. WARRANTS
CLASS A
Warrants to purchase 150,000 shares of the common stock at a purchase
price of $1.50 per share. These warrants are not exercisable until and unless
the shares of common stock trade at a minimum of $4.00 per share for sixty-one
consecutive trading days. The underlying shares of common stock were registered
for resale under the Securities Act of 1933 on March 19, 1999. These warrants
will expire on March 19, 2000.
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<PAGE>
CLASS B
Warrants to purchase 150,000 shares of the common stock at a purchase
price of $2.00 per share. These warrants are not exercisable until and unless
the shares of common stock trade at a minimum of $5.50 per share for sixty-one
consecutive trading days. The underlying shares of common stock were registered
for resale under the Securities Act of 1933 on March 19, 1999. These warrants
will expire on March 19, 2000.
CLASS C
Warrants to purchase 200,000 shares of common stock at a purchase price
of $3.00 per share. These warrants are not exercisable until and unless the
shares of common stock trade at a minimum of $7.50 per share for sixty-one
consecutive trading days. The underlying shares of common stock were registered
for resale under the Securities Act of 1933 on March 19, 1999. These warrants
will expire on March 19, 2001.
CLASS D
Warrants to purchase 200,000 shares of common stock at a purchase price
of $5.00 per share. These warrants are not exercisable until and unless the
shares of common stock trade at a minimum of $10.00 per share for thirty-one
consecutive trading days. These warrants will expire three years from the date
of effective registration of the underlying shares of common stock. As of the
date hereof, the underlying shares of common stock have not been registered for
resale under the Securities Act of 1933 and thus have no set expiration date.
CLASS E
Warrants to purchase 200,000 shares of common stock at a purchase price
of $7.00 per share. These warrants are not exercisable until and unless the
shares of common stock trade at a minimum of $12.00 per share for thirty-one
consecutive trading days. These warrants will expire three years from the date
of effective registration of the underlying shares of common stock. As of the
date hereof, the underlying shares of common stock have not been registered for
resale under the Securities Act of 1933 and thus have no set expiration date.
CLASS F
Warrants to purchase 200,000 shares of common stock at a purchase price
of $9.00 per share. These warrants are not exercisable until and unless the
shares of common stock trade at a minimum of $14.00 per share for thirty-one
consecutive trading days. These warrants will expire five years from the date of
effective registration of the underlying shares of common stock. As of the date
hereof, the underlying shares of common stock have not been registered for
resale under the Securities Act of 1933 and thus have no set expiration date.
CLASS G
Warrants to purchase 200,000 shares of common stock at a purchase price
of $11.00 per share. These warrants are not exercisable until and unless the
shares of common stock trade at a minimum of $16.00 per share for thirty-one
consecutive trading days. These warrants will expire five years from the date of
effective registration of the underlying shares of common stock. As of the date
hereof, the underlying shares of common stock have not been registered for
resale under the Securities Act of 1933 and thus have no set expiration date.
THE GCA STRATEGIC INVESTMENT FUND, LTD. WARRANTS
In connection with the credit facility, we agreed to issue to GCA and its
investors warrants to purchase up to 280,000 shares of common stock. In October
1999, we issued 149,875 warrants in connection with a $1,500,000 draw on the
credit facility. Of these warrants, 100,000 were issued to purchase shares of
common stock at $1.77 per share and 49,875 were issued to purchase shares of
common stock at $2.01 per share, all of
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<PAGE>
which expire on October 7, 2002. Additional warrants may be issued if we
takedown additional funds from the credit facility with an exercise price set at
115% of the average closing bid price of our common stock on the OTC bulletin
board as reported on Bloomberg, LP, for the five (5) completed trading days
immediately preceding the date of issuance of the warrants. These warrants will
expire three years from the date of issue.
TRANSFER AGENT
Registrar & Transfer Company serves as the transfer agent for the shares
of common stock.
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<PAGE>
PLAN OF DISTRIBUTION AND SELLING STOCKHOLDERS
This prospectus relates to the resale of 13,847,318 shares of common
stock by the selling stockholders of which 2,730,650 shares are currently issued
and outstanding and up to 11,116,668 shares to be issued upon (1) exercise of
class A warrants outstanding to purchase up to 5,033,334 shares, (2) exercise of
class B warrants outstanding to purchase up to 5,033,334 shares, and (3)
exercise of class C warrants to purchase up to 1,050,000 on shares. 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. We 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, we will receive the exercise price. This table does not include 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 by this
prospectus, is identical to the number of shares of common stock underlying the
class B warrants. The resale of such shares is also being registered by this
prospectus.
RESALE OF COMMON STOCK BY SELLING STOCKHOLDERS
SHARES CURRENTLY OUTSTANDING ("S"),
SHARES TO BE ISSUED UPON EXERCISE OF CLASS A WARRANTS ("A"),
CLASS B WARRANTS ("B"),
AND CLASS C WARRANTS ("C"),
<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>
Adhikary, Tapan Kumar 5,000 S 5,000 S 0.00% 0.00%
5,000 A 5,000 A
5,000 B 5,000 B
Allen, Norman A. & Pamela Holberg 5,000 S 5,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Ameritrade Clearing, Inc., as 10,000 A 10,000 A
Custodian for Donald M. Robinson IRA 10,000 B 10,000 B
Arabella 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 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%
</TABLE>
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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>
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 A 10,000 A
10,000 B 10,000 B
Bailey Trust 40,000 S 40,000 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. 500 S 500 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. 16,100 S 16,100 S 0.00% 0.00%
20,000 A 20,000 A
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 A 10,000 A
10,000 B 10,000 B
Benson, Mark J. 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 10,000 S 10,000 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
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 A 160,000 A
</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>
160,000 B 160,000 B
Brown, Jodie 20,000 A 20,000 A
20,000 B 20,000 B
Brutger, Wayne A. 10,000 A 10,000 A
10,000 B 10,000 B
Buchanan, Jeffery L. 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 A 10,000 A
10,000 B 10,000 B
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%
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
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 A 20,000 A
20,000 B 20,000 B
Cole, David L. 20,000 A 20,000 A
20,000 B 20,000 B
</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>
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
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 A 20,000 A
20,000 B 20,000 B
Deanmore Holdings 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 A 120,000 A
120,000 B 120,000 B
Econology / The Founder 750,000 C 750,000 C
Elituv, Chavan 40,000 S 40,000 S 0.00% 0.00%
40,000 A 40,000 A
40,000 B 40,000 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>
Erickson, Eric 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
Erkkila, Russell E. 10,000 A 10,000 A
10,000 B 10,000 B
Estrich, Mark and Terry 5,000 A 5,000 A
5,000 B 5,000 B
Estrich, Florence 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 A 9,000 A
Trustee
FBO Eric J. Overig IRA Rollover 9,000 B 9,000 B
First Trust National Association 10,000 A 10,000 A
Trustee
FBO Bryan Johnson IRA 10,000 B 10,000 B
First Trust National Association 20,000 S 20,000 S 0.00% 0.00%
Trustee
</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>
FBO Charles J. Steinke IRA 20,000 A 20,000 A
20,000 B 20,000 B
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
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, Lawrence C. & Dianne K. 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%
Franckowiak, Norberto & Mary 10,000 S 10,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Franckowiak, Norberto & 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
Francine, 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, Valerie A. & Lynn R. 10,000 S 10,000 S 0.00% 0.00%
</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>
10,000 A 10,000 A
10,000 B 10,000 B
Gaykin, 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 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 A 10,000 A
10,000 B 10,000 B
Goetzke, Lester 10,000 A 10,000 A
10,000 B 10,000 B
Goldberg, Bennett 10,000 A 10,000 A
10,000 B 10,000 B
Graybow, Rita 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
Graybow, Steven 20,000 A 20,000 A
20,000 B 20,000 B
Griner, Jr., Frank W. 5,000 A 5,000 A
5,000 B 5,000 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>
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 A 10,000 A
10,000 B 10,000 B
Hafiz, Richard J. 10,000 A 10,000 A
10,000 B 10,000 B
Hanneman, William E. 10,000 S 10,000 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%
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 A 20,000 A
20,000 B 20,000 B
Hewitt, Robert C. 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
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. 28,000 S 28,000 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 A 10,000 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>
10,000 B 10,000 B
Hopkins, Evan 1,600 S 1,600 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 A 10,000 A
10,000 B 10,000 B
Jones, Robert A. 5,000 A 5,000 A
5,000 B 5,000 B
Joseph Geraci IRA 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 A 20,000 A
20,000 B 20,000 B
Kaufman, Lewis H. 25,000 S 25,000 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 A 10,000 A
10,000 B 10,000 B
Keczmer, Daniel Patrick, Sr. and Alice 6,650 S 6,650 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Keczmer, Daniel L. & Lisa A. 20,000 A 20,000 A
20,000 B 20,000 B
Kelly, David J. 3,000 S 3,000 S 0.00% 0.00%
</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>
5,000 A 5,000 A
5,000 B 5,000 B
Kinney, Larry J. 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. 13,000 S 13,000 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%
Kosar, Jr., Bernie 50,000 S 50,000 S 0.00% 0.00%
60,000 A 60,000 A
60,000 B 60,000 B
Kosar, Sr., Bernard and Geraldine 15,000 S 15,000 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Langer, Michael 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 A 20,000 A
20,000 B 20,000 B
Lauerman, James E. 4,000 S 4,000 S 0.00% 0.00%
10,000 A 10,000 A
10,000 B 10,000 B
Lauret, Thurman 10,000 S 10,000 S 0.00% 0.00%
20,000 A 20,000 A
</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>
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, Michael 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 A 5,000 A
5,000 B 5,000 B
Lehrke, Ronald K. 5,000 S 5,000 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 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. 14,300 S 14,300 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Mangini, Oscar R. 20,000 A 20,000 A
20,000 B 20,000 B
Mark and Margaret Damon Trust 60,000 A 60,000 A
60,000 B 60,000 B
Mary H. Ciszewski Self-Trusted 20,000 A 20,000 A
Revocable Trust
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
</TABLE>
-40-
<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 B 10,000 B
McKeehan, Robert J. 10,000 A 10,000 A
10,000 B 10,000 B
Mechi, Nabil 5,000 C 5,000 C
Mercantile Bank N.A. Trustee 10,000 A 10,000 A
FBO Gerald D. Stolz Profit Sharing 10,000 B 10,000 B
Plan
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. 50,000 S 50,000 S 0.00% 0.00%
60,000 A 60,000 A
60,000 B 60,000 B
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 A 20,000 A
20,000 B 20,000 B
Morey, Gregory M. 40,000 A 40,000 A
40,000 B 40,000 B
Moriarty, Barbara J. and Maurice F. 8,000 S 8,000 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%
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%
</TABLE>
-41-
<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>
Nicksa, James H. 25,000 S 25,000 S 0.00% 0.00%
Nicolodi, Fulvia Casella 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 A 100,000 A
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. 60,000 S 60,000 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
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 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 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 A 10,000 A
10,000 B 10,000 B
Port, Joshua 2,500 A 2,500 A
2,500 B 2,500 B
Port, Adam 2,500 A 2,500 A
2,500 B 2,500 B
Port, Moses 2,500 A 2,500 A
2,500 B 2,500 B
Port, Joseph 2,500 A 2,500 A
</TABLE>
-42-
<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>
2,500 B 2,500 B
Port, Stephen & Phyllis 10,000 A 10,000 A
10,000 B 10,000 B
Powell, John R. 5,000 A 5,000 A
5,000 B 5,000 B
Prudential Securities, Inc. 10,000 A 10,000 A
Custodian for James Ericson Sr. 10,000 B 10,000 B
Quam, Scott A. and Kristine S. 5,000 A 5,000 A
5,000 B 5,000 B
Redman, Mark V. And Kathryn 10,000 A 10,000 A
10,000 B 10,000 B
Rieman, Raymond 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 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 A 10,000 A
10,000 B 10,000 B
Rover Enterprises, Ltd. 160,000 A 160,000 A
160,000 B 160,000 B
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
Schaffer, Don M. 12,500 S 12,500 S 0.00% 0.00%
20,000 A 20,000 A
20,000 B 20,000 B
Schank, Daniel J. 5,000 A 5,000 A
5,000 B 5,000 B
</TABLE>
-43-
<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>
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 A 40,000 A
40,000 B 40,000 B
Severini, Kerrjie Aida 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 A 10,000 A
10,000 B 10,000 B
Sexton, David 5,000 A 5,000 A
5,000 B 5,000 B
Shaffer, Byron G. 100,000 A 100,000 A
100,000 B 100,000 B
Sharon, Roee 10,000 C 10,000 C
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 A 5,000 A
5,000 B 5,000 B
Siwecki, Henry T. & Marie 60,000 A 60,000 A
60,000 B 60,000 B
Siwecki, Henry A. & Christine F. 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%
Smalley, Cathy M. 2,500 S 2,500 S 0.00% 0.00%
Snyder, Dale 2,000 S 2,000 S 0.00% 0.00%
2,000 A 2,000 A
2,000 B 2,000 B
Spriggs, Kevin F. 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%
</TABLE>
-44-
<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>
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 A 10,000 A
10,000 B 10,000 B
Stoffel, August M. and Ann M. 20,000 A 20,000 A
20,000 B 20,000 B
Sud, James P. 20,000 A 20,000 A
20,000 B 20,000 B
Sulak, Cecilia 12,500 S 12,500 S 0.00% 0.00%
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 15,000 S 15,000 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 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%
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
</TABLE>
-45-
<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>
Tutewohl, Leo & Sharon 5,000 A 5,000 A
5,000 B 5,000 B
Van Alen, Judith F. 70,000 A 70,000 A
70,000 B 70,000 B
VanOverbeke, James C. & Michaline 10,000 A 10,000 A
A.
10,000 B 10,000 B
Vatland, Harlan J. 10,000 S 10,000 S 0.00% 0.00%
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
Wayne, E. Robie 10,000 A 10,000 A
10,000 B 10,000 B
Westman, Bruce 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%
Zaremba, James R. 3,125 S 3,125 S 0.00% 0.00%
Zaremba, Frank J. 3,125 S 3,125 S 0.00% 0.00%
Zaremba, David 3,125 S 3,125 S 0.00% 0.00%
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
Zbikowski, Scott T. 20,000 S 20,000 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>
-46-
<PAGE>
The 13,847,318 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:
o 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;
o purchase by a broker or dealer for his account under this
prospectus; and
o 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 before the sale. Such
brokers or dealers and any other participating brokers or dealers may be
"underwriters" within the meaning of the Act in connection with such sales. One
broker dealer has received 100,000 shares of our common stock as compensation in
connection with our 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 under Rule 144 may be sold under Rule
144 rather than by this Prospectus. We will not receive any of the proceeds from
the sale of these securities, although we have paid the expenses of preparing
this prospectus and the related Registration Statement. We will use our 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
Legal matters concerning the issuance of shares of common stock offered
by this prospectus will be passed upon for Eagle Wireless by Brewer & Pritchard,
P.C., Houston, Texas. Principals of Brewer & Pritchard, P.C. own 12,500 shares
of Eagle Wireless common stock.
EXPERTS
The financial statements of Eagle Wireless International, Inc. at
August 31, 1999, and for each of the years in the three-year period ended August
31, 1999, appearing in this SB-2 Registration Statement have been audited by
McManus & Company, independent auditors, as provided in their report thereon
appearing elsewhere in this prospectus and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form SB-2 Eagle
Wireless filed with the SEC under the Securities Act. You should rely only on
the information or representations provided in this prospectus. We have
authorized no one to provide you with different information. We are not making
an offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus is accurate as of any
date other than the date on the front of the document.
-47-
<PAGE>
We are subject to the information and reporting requirements of the
Exchange Act. As a result, we file periodic reports, proxy materials and other
information with the SEC. We provide our shareholders with annual reports
containing audited financial statements. You may request a copy of these
filings, at no cost, by writing or telephoning as follows:
Eagle Wireless International, Inc.
Attention: Investor Relations
101 Courageous Drive
League City, TX 77573
Telephone (281) 538-6000
You may read and copy our registration statement and all of its exhibits
at the SEC public reference room located at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information on the operation of the SEC public
reference room in Washington, D.C. by calling the SEC at 1-800-SEC-0330. The
registration statement is also available from the SEC's web site at
http://www.sec.gov. The SEC's web site contains reports, proxy and information
statements, and other information about issuers that file electronically.
-48-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
EAGLE WIRELESS INTERNATIONAL, INC.
THREE MONTHS ENDED NOVEMBER 30, 1999
Unaudited Balance Sheet....................................................F-1
Unaudited Statement of Earnings............................................F-2
Statements of Changes in Shareholders Equity...............................F-3
Statements of Cash Flows...................................................F-4
Notes to the Financial Statements..........................................F-5
FISCAL YEAR ENDED AUGUST 31, 1999 AND AUGUST 31, 1998
Independent Auditor's Report..............................................F-17
Balance Sheets............................................................F-18
Statements of Earnings....................................................F-19
Statement of Changes in Stockholders' Equity..............................F-20
Statements of Cash Flows..................................................F-21
Notes to Financial Statements.............................................F-22
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARY
BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
NOVEMBER AUGUST 31,
30, 1999 1999
----------- -----------
(UNAUDITED) (AUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents (Note 1) ..................... $ 1,105 $ 188
Accounts Receivable (Note 2) ........................... 340 286
Inventories (Note 1) ................................... 2,335 2,356
Prepaid Expenses ....................................... 434 242
----------- -----------
Total Current Assets ................................ 4,214 3,072
PROPERTY AND EQUIPMENT (NOTE 1):
Operating Equipment .................................... 926 922
Less: Accumulated Depreciation ......................... (366) (333)
----------- -----------
Total Property and Equipment ........................ 560 589
OTHER ASSETS:
Security Deposits ...................................... 17 17
Investment In Affiliate (Note 9) ....................... 6,605 6,642
----------- -----------
Total Other Assets .................................. 6,622 6,659
TOTAL ASSETS ........................................... $ 11,397 $ 10,320
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable ....................................... $ 139 $ 208
Accrued Expenses ....................................... 121 106
Notes Payable (Note 3) ................................. 1,505 17
Capital Lease Obligations (Note 4) ..................... 15 15
Deferred Revenues ...................................... 53 533
Federal Income Taxes Payable (Notes 1 & 5) ............. 486 468
Franchise Taxes Payable ................................ 17 13
Sales Taxes Payable .................................... 48 48
Deferred Taxes (Note 5) ................................ 6 6
----------- -----------
Total Current Liabilities ........................... 2,390 1,414
LONG - TERM LIABILITIES:
Capital Lease Obligations (net of current
maturities) (Note 4) ................................. -- 4
Deferred Taxes (Note 5) ................................ 8 8
----------- -----------
Total Long - Term Liabilities ....................... 8 12
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 12)
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 November 30, and August 31, 1999
13,541,750 shares and 13,479,833, respectfully ....... 14 13
Paid in Capital ........................................ 7,217 7,181
Retained Earnings ...................................... 1,768 1,700
----------- -----------
Total Shareholders' Equity .......................... 8,999 8,894
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............. $ 11,397 $ 10,320
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
F-1
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARY
STATEMENTS OF EARNINGS
(IN THOUSANDS)
THREE MONTHS ENDED
-----------------------------
NOVEMBER NOVEMBER
30, 1999 30, 1998
(UNAUDITED) (UNAUDITED)
------------ ------------
NET SALES .................................. $ 656 $ 931
COST OF GOODS SOLD
Materials and Supplies .................. 107 184
Direct Labor and Related Costs .......... 118 163
Depreciation and Amortization ........... 17 18
Other Manufacturing Costs ............... 7 55
------------ ------------
Total Cost of Goods Sold ............. 251 420
------------ ------------
GROSS PROFIT ............................... 405 511
OPERATING EXPENSES
Selling, General and Administrative
Salaries and Related Costs ........... 132 131
Advertising and Promotion ............ 3 68
Depreciation and Amortization ........ 16 9
Research & Development ............... 253 154
Other Support Costs .................. 131 173
------------ ------------
Total Operating Expenses .......... 534 535
------------ ------------
EARNINGS (LOSSES) FROM OPERATIONS BEFORE OTHER
REVENUES / (EXPENSES) AND INCOME TAXES ..... (129) (24)
OTHER REVENUES / (EXPENSES)
Interest Income (net) ................... 245 176
Other Income ............................ 6 --
------------ ------------
Total Other Revenues ................. 251 176
------------ ------------
EARNINGS BEFORE INCOME TAXES & LOSS FROM ... 123 152
MINORITY INTEREST IN AFFILIATE
Gain / (Loss) From Minority Interest in
Affiliate ............................. (37) --
------------ ------------
EARNINGS BEFORE INCOME TAXES .............. 85 152
Provision For Income Taxes .............. 17 56
------------ ------------
NET EARNINGS ............................... $ 68 $ 96
============ ============
Net Earnings Per Common Share:
Primary .............................. $ .01 $ .01
Diluted .............................. $ .01 $ .01
Weighted Average Common Shares Outstanding:
Primary .............................. 13,541,750 11,670,155
Diluted .............................. 13,610,750 11,750,530
See accompanying notes to the financial statements.
F-2
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARY
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
AUGUST 31, 1998 COMMON PREFERRED PAID IN RETAINED SHAREHOLDERS'
TO NOVEMBER 30, 1999 STOCK STOCK CAPITAL EARNINGS EQUITY
- ------------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total As of August 31, 1998 ........ 12 -- 5,973 1,532 7,516
Net Earnings 1999 .................. 168 168
New Stock Issued to Shareholders
For Services Rendered ........... -- 163 -- 163
For Exercise of Warrants ........ 2 1,045 -- 1,047
---------- ---------- ---------- ---------- ----------
Total As Of August 31, 1999 ........ 14 -- 7,181 1,700 8,894
Net Earnings For The Three Months
Ended November 30, 1999 ......... 68 68
New Stock Issued to Shareholders
J. Nagel (Sept. 1999) .......... -- 22 22
P. Barton (Sept. 1999) .......... -- 14 14
---------- ---------- ---------- ---------- ----------
Total As Of November 30, 1999 ...... 14 -- 7,217 1,768 8,999
</TABLE>
See accompanying notes to the financial statements.
F-3
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
NOVEMBER NOVEMBER
30, 1999 30, 1998
---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash Flows From Operating Activities
Net Earnings .................................................. $ 68 $ 96
Adjustments To Reconcile Net Earnings To Net Cash
Used By Operating Activities:
Depreciation and Amortization .............................. 33 27
(Increase) / Decrease in Accounts Receivable ............... (54) (692)
(Increase) / Decrease in Inventories ....................... 21 (32)
(Increase) / Decrease in Prepaid Expenses .................. (192) 55
Increase / (Decrease) in Accounts Payable and Accrued Exp .. (54) (33)
Increase / (Decrease) in Deferred Taxes .................... -- --
Increase / (Decrease) in Deferred Revenues ................. (480) (3)
Increase / (Decrease) in Sales Tax Payable ................. -- 6
Increase / (Decrease) in Fed Inc Taxes Payable ............. 18 56
Increase / (Decrease) in Franchise Taxes Payable ........... 4 7
---------- ----------
Total Adjustments .......................................... (704) (609)
---------- ----------
Net Cash Used By Operating Activities ......................... (635) (513)
Cash Flows From InvestingActivities
Purchase of Property and Equipment ............................ (4) (24)
(Increase) / Decrease in Other Assets ......................... 37 (2)
---------- ----------
Net Cash Used By Investing Activities ............................ 34 (26)
Cash Flows From Financing Activities
Increase / (Decrease) in Notes Payable and Capital Leases ..... 1,483 5
Increase / (Decrease) in Shareholders' Advances ............... -- (24)
Increase / (Decrease) in Syndication Costs .................... -- --
Proceeds From Sale of Common Stock, Net ....................... 36 --
---------- ----------
Net Cash Provided / (Used) By Financing Activities ............... 1,519 (19)
Net Decrease in Cash ............................................. 917 (558)
Cash at the Beginning of the Year ................................ 188 1,097
---------- ----------
Cash at the End of the Year ...................................... $ 1,105 $ 539
========== ==========
</TABLE>
See accompanying notes to the financial statements.
F-4
<PAGE>
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
Eagle Wireless International, Inc., and Subsidiary (the Company), was
incorporated as a Texas corporation on May 24, 1993 and commenced business
in April of 1996. The Company and its subsidiary, BroadbandMagic.com, are
suppliers of multi-media set top devices, 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 and
BroadbandMagic.com names. These products include multi-media set top
devices, 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.
A) Cash and Cash Equivalents
The Company has $1,056,768 and $29,059 invested in interest bearing
accounts at November 30, 1999 and August 31, 1999, 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.
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:
NOVEMBER 30, 1999 AUGUST 31, 1999
------------- -------------
Raw Materials $ 1,164,463 $ 1,215,003
Work in Process 1,170,337 1,119,672
Finished Goods -0- 21,186
------------- -------------
$ 2,334,800 $ 2,355,861
============= =============
D) 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
$130,726 and $153,529 were expensed for the periods ended November 30,
1999 and 1998, respectively. Contract revenues earned for the periods
ended November 30, 1999 and 1998 were approximately $-0- and $225,000
respectively.
E) 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-5
<PAGE>
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)
---------------------------------------------------------
F) Net Earnings Per Common Share
Net earnings per common share is shown as both basic and diluted. Basic
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. 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 stock
outstanding plus any dilutive common stock equivalents. The components
used for the computations are shown as follows:
NOVEMBER 30, 1999 NOVEMBER 30, 1998
----------------- -----------------
Weighted Average Number of Common
Shares Outstanding Including:
Primary Common Stock Equivalents 13,541,750 11,670,155
Fully Dilutive Common Stock Equivalents 13,610,750 11,750,530
G) Impairment of Long Lived and Identifiable Intangible Assets
The Company evaluates the carrying value of long-lived assets and
identifiable intangible assets for potential impairment on an ongoing
basis. An impairment loss would be deemed necessary when the estimated
non-discounted future cash flows are less than the carrying net amount of
the asset. If an asset were deemed to be impaired, the asset's recorded
value would be reduced to fair market value. In determining the amount of
the charge to be recorded, the following methods would be utilized to
determine fair market value:
1) Quoted market prices in active markets.
2) Estimate based on prices of similar assets
3) Estimate based on valuation techniques
As of November 30, 1999 and August 31, 1999, no impairment existed.
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;
425,000 $5.00;150,000 $1.50; 150,000 $2.00; 200,000 $3.00; 200,000 $5.00;
200,000 $7.00; 200,000 $9.00; 200,000 $11.00; and 50,000 $2.00. 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) 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
November 30, 1999 and 1998, the Company had expensed $3,000 and $68,000,
respectively.
J) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent asset and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-6
<PAGE>
NOTE 1 -BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)
K) Comprehensive Income
There were no items of other comprehensive income in 1999 and 1998, and,
thus, net income is equal to comprehensive income for each of those years.
L) Reclassification
The Company has reclassified certain costs and expenses for the three
months ended November 30, 1999 to facilitate comparison to the three
months ended November 30, 1998.
NOTE 2 - ACCOUNTS RECEIVABLE:
Accounts receivable consist of the following:
NOVEMBER 30, 1999 AUGUST 31, 1999
----------------- ---------------
Accounts Receivable $ 340,082 $ 286,269
Allowance for Doubtful Accounts - 0 - - 0 -
----------------- ---------------
Net Accounts Receivable $ 340,082 $ 286,269
================= ===============
NOTE 3 - NOTES PAYABLE:
NOVEMBER 30, AUGUST 31,
1999 1999
---------- ----------
Unsecured note to Imperial Premium
Finance bearing interest at 14.9%,
due $1,795 monthly until February 2000 .......... $ -- $ 5,386
Unsecured note to Central Insurance
bearing no interest, due $1,031
monthly until March 2000 ........................ 2,326 5,220
Unsecured note to Paula Insurance
bearing no interest, due $373 monthly
until March 2000 ................................ -- 1,124
Unsecured note to West Coast Life
Insurance bearing no interest, due
$2,457 quarterly until May 2000 ................. 2,457 4,913
Secured convertible note to
Global Capital Advisors, LTD bearing
interest at 7%, due October 2002
interest and principal payable in cash
or common stock based on market value
of common shares. Security is a $6,000,000
note receivable from Link II Communications ...... $1,500,000 $ --
Total ...................................... $1,504,783 16,643
Less Current Portion of
Long - Term Debt ........................ 4,783 16,643
---------- ----------
Total Long - Term Debt ..................... $1,500,000 $ -0-
========== ==========
F-7
<PAGE>
NOTE 4 - CAPITAL LEASE OBLIGATIONS:
NOVEMBER 30, AUGUST 31,
1999 1999
---------- ----------
Equipment lease with Konica bearing
interest at 8.9%, payable in monthly
installments of $445; due Aug. 2001 .............. $ 8,609 $ 9,720
Equipment lease with IKON Office
Solutions bearing interest at 18%
payable in monthly installments of
$105; due March 2000 ............................. 408 695
Software lease with Manifest Group
bearing interest at 14%, payable in
monthly installments of $751; due
August 2000 ...................................... $ 6,453 $ 8,487
---------- ----------
Total Obligations ........................ 15,470 18,902
Less Current Portion of
Lease Obligations ..................... 14,994 15,047
---------- ----------
Total Long - Term Capital
Lease Obligations ......................... $ 476 $ 3,855
========== ==========
The capitalized lease obligations are collateralized by the related
equipment acquired with a net book value of approximately $27,135 and $
29,600 at November 30, 1999 and August 31, 1999, respectively. The future
minimum lease payments under the capital leases and the net present value
of the future lease payments at November 30, 1999 and August 31, 1999 are
as follows:
NOVEMBER 30, 1999 AUGUST 31, 1999
----------------- ---------------
Total minimum lease payments $ 16,128 $ 20,405
Less: Amount representing interest 1,134 1,503
----------------- ---------------
Present value of net minimum
lease payments $ 14,994 $ 18,902
================= ===============
Future obligations under the lease terms are:
Period Ending
NOVEMBER 30, AMOUNT
----------- -------
2000 $10,614
2001 4,380
-------
Total $14,994
=======
NOTE 5 - 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,
1999 1998
---- ----
% %
U.S. Federal Statutory Tax Rate 34 34
U.S. Valuation Difference 1 (1)
---- ----
Effective U.S. Tax Rate 35 33
Foreign Tax Valuation -0- -0-
---- ----
Effective Tax Rate 35 33
==== ====
F-8
<PAGE>
NOTE 5 - INCOME TAXES: (continued)
B) Items giving rise to deferred tax assets / liabilities are as follows:
AUGUST 31,
-------------------
1999 1998
------- -------
Deferred Tax Assets:
Tax Loss Carry-forward $ - 0 - $ - 0 -
------- -------
Deferred Tax Liability:
Depreciation 13,852 11,070
------- -------
Valuation Allowance - 0 - - 0 -
------- -------
Net Deferred Tax Asset / Liability $13,852 $11,070
======= =======
NOTE 6 - 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 $0.001. As of
November 30, 1999, no Preferred Stock has been issued.
In July 1996, the Board of Directors and majority shareholders adopted an
employee stock option plan under which 400,000 shares of Common Stock have
been reserved for issuance. The options granted for under this plan are to
purchase fully paid and non-assessable shares of the Common Stock, par
value $.001 per share at a price equal to the underlying common stock's
market price at the date of issuance. These options may be redeemed six
months after issuance, expire five years from the date of issuance and
contain a cash-less exercise feature. The underlying shares of common
stock were registered for resale under the Securities Act of 1933 on
February 19, 1999. As of November 31, 1999, 151,375 options have been
granted pursuant to such plan with 29,000 being exercised.
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.
The Company has issued the following warrants that have since been
exercised or expired:
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.
1,050,000 stock purchase 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 $.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. During April 1999, the Company's Board of
Directors removed the requirement that the Company's common stock
trade at a price of no less than $5.50 per share for twenty
consecutive trading days provided that the holders of the warrants
exercise the warrants prior to the expiration date and remit to the
Company a fee of $.70 per underlying share upon exercise of the
warrants. Prior to expiration, 1,037,500 warrants had been exercised
whereas 12,500 warrants expired.
F-9
<PAGE>
NOTE 6 - PREFERRED STOCK, STOCK OPTIONS AND WARRANTS: (continued)
1,375,000 stock purchase 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 $.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. During April 1999, the Company's Board of
Directors removed the requirement that the Company's common stock
trade at a price of no less than $5.50 per share for twenty
consecutive trading days provided that the holders of the warrants
exercise the warrants prior to the expiration date and remit to the
Company a fee of $.25 per underlying share upon exercise of the
warrants. Prior to expiration, 1,325,000 warrants had been exercised
whereas 50,000 warrants expired.
425,000 stock purchases warrants that 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. Prior to expiration, no warrants had been exercised whereas
425,000 warrants expired.
The Company has issued and outstanding the following warrants which have
not yet been exercised at November 30, 1999:
150,000 stock purchase warrants. 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 $1.50 per share. These warrants,
however, are not exercisable until and unless the shares of Common
Stock trade at a minimum of $4.00 per share for sixty-one
consecutive trading days. The underlying shares of common stock were
registered for resale under the Securities Act of 1933 on March 19,
1999. These warrants will expire on March 19, 2000.
150,000 stock purchase warrants. 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 $2.00 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 sixty-one
consecutive trading days. The underlying shares of common stock were
registered for resale under the Securities Act of 1933 on March 19,
1999. These warrants will expire on March 19, 2000.
50,000 stock purchase warrants which expire August 31 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
$2.00 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 warrants by paying holders $.05 per warrant. As of August 31,
1999, the underlying shares of common stock have not yet been
registered for resale under the Securities Act of 1933.
200,000 stock purchase warrants. 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 $3.00 per share. These warrants,
however, are not exercisable until and unless the shares of Common
Stock trade at a minimum of $7.50 per share for sixty-one
consecutive trading days. The underlying shares of common stock were
registered for resale under the Securities Act of 1933 on March 19,
1999. These warrants will expire on March 19, 2000.
F-10
<PAGE>
NOTE 6 - PREFERRED STOCK, STOCK OPTIONS AND WARRANTS: (continued)
200,000 stock purchase warrants. 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,
however, are not exercisable until and unless the shares of Common
Stock trade at a minimum of $10.00 per share for thirty-one
consecutive trading days. These warrants will expire three years
from the date of effective registration of the underlying shares of
common stock. As of August 31, 1999, the underlying shares of common
stock have not yet been registered for resale under the Securities
Act of 1933 and thus have no set expiration date.
200,000 stock purchase warrants. 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 $7.00 per share. These warrants,
however, are not exercisable until and unless the shares of Common
Stock trade at a minimum of $12.00 per share for thirty-one
consecutive trading days. These warrants will expire three years
from the date of effective registration of the underlying shares of
common stock. As of August 31, 1999, the underlying shares of common
stock have not yet been registered for resale under the Securities
Act of 1933 and thus have no set expiration date.
200,000 stock purchase warrants. 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 $9.00 per share. These warrants,
however, are not exercisable until and unless the shares of Common
Stock trade at a minimum of $14.00 per share for thirty-one
consecutive trading days. These warrants will expire five years from
the date of effective registration of the underlying shares of
common stock. As of August 31, 1999, the underlying shares of common
stock have not yet been registered for resale under the Securities
Act of 1933 and thus have no set expiration date.
200,000 stock purchase warrants. 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 $11.00 per share. These warrants,
however, are not exercisable until and unless the shares of Common
Stock trade at a minimum of $16.00 per share for thirty-one
consecutive trading days. These warrants will expire five years from
the date of effective registration of the underlying shares of
common stock. As of August 31, 1999, the underlying shares of common
stock have not yet been registered for resale under the Securities
Act of 1933 and thus have no set expiration date.
5,033,334 Class A stock purchase warrants which expire August 31,
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 $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. 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 $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. These warrants trade under the symbol "EGLWZ".
F-11
<PAGE>
NOTE 6 - PREFERRED STOCK, STOCK OPTIONS AND WARRANTS: (continued)
1,050,000 Class C stock purchase warrants which expire August 31
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 $2.00 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 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.
100,000 stock purchase warrants which expire October 7, 2002. 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
$1.77 per share. As of November 30, 1999, the underlying shares of
common stock have not yet been registered for resale under the
Securities Act of 1933; however, these shares are subject to a
registration agreement which has not been effected.
43,641 stock purchase warrants which expire October 7, 2002. 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
$2.01 per share. As of November 30, 1999, the underlying shares of
common stock have not yet been registered for resale under the
Securities Act of 1933; however, these shares are subject to a
registration agreement, which has not been effected.
6,234 stock purchase warrants which expire October 7, 2002. 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
$2.01 per share. As of November 30, 1999, the underlying shares of
common stock have not yet been registered for resale under the
Securities Act of 1933; however, these shares are subject to a
registration agreement which has not been effected.
The warrants outstanding are segregated into four categories (exercisable,
non-exercisable, non-registered, and expired). They are summarized as
follows:
<TABLE>
<CAPTION>
WARRANTS ISSUED WARRANTS EXERCISABLE WARRANTS WARRANTS EXPIRED
CLASS OF NOVEMBER 30, NOVEMBER 30, NON NON NOVEMBER 30,
WARRANTS 1999 1998 1999 1998 EXERCISED REGISTERED 1999 1998
- ------- ------------- ------------- ------------- ------------ ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.01 Exercised Exercised -- -- -- -- -- --
0.05 Exercised 1,050,000 -- -- -- -- 12.500 --
0.50 Exercised 1,375,000 -- -- -- -- 50,000 --
5.00 Expired * 425,000 -- 425,000 -- -- 425,000 --
4.00 5,033,334 * 5,033,334 5,033,334 5,033,334 -- -- -- --
6.00 5,033,334 * 5,033,334 5,033,334 5,033,334 -- -- -- --
2.00 1,050,000 * 1,050,000 1,050,000 1,050,000 -- -- -- --
1.77 100,000 -- 100,000 -- -- -- -- --
2.01 49,875 -- 49,875 -- -- -- -- --
1.50 150,000 150,000 150,000 -- -- -- -- --
2.00 150,000 150,000 150,000 -- -- -- -- --
3.00 200,000 200,000 200,000 -- -- -- -- --
5.00 200,000 200,000 -- -- -- 200,000 -- --
7.00 200,000 200,000 -- -- -- 200,000 -- --
9.00 200,000 200,000 -- -- -- 200,000 -- --
11.00 200,000 200,000 -- -- -- 200,000 -- --
2.00 50,000 * 50,000 50,000 50.000 -- -- -- --
ESOP 47,375 * 319,625 14,625 332.000 3,500 -- 10,250 --
ESOP 104,000 80,375 69,000 68,000 50,000 -- -- --
</TABLE>
F-12
<PAGE>
NOTE 6 - PREFERRED STOCK, STOCK OPTIONS AND WARRANTS: (continued)
An asterisk (*) denotes warrants which would have an anti-dilutive effect
if currently used to calculate earnings per share for the year ended
August 31, 1999.
NOTE 7 - SEGMENT INFORMATION:
The Company had gross revenues of $656,369 and $930,897 for the three
months ended November 30, 1999 and 1998, respectively. The following
parties individually represent a greater than ten percent of these
revenues.
<TABLE>
<CAPTION>
NOVEMBER 30,1999 NOVEMBER 30, 1998
CUSTOMER AMOUNT PERCENTAGE AMOUNT PERCENTAGE
------------ --------------- ------------------ ------------- ------------------
<S> <C> <C> <C> <C>
Link - Two $ 39,215 6 % 249,616 27 %
RFTL $ -- -- % 550,937 59 %
</TABLE>
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 November 30, 1999 and 1998, the
Company had earned a 5.0% and 5.0%, respectively, minority 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, 1999 and 1998, the Company
has recorded it share of losses in this unconsolidated affiliate. The loss
as a minority shareholder totaled $91,678 and $28,663, respectively. The
Company has reclassified its balances due from Link II as additional
advances to affiliates.
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. Subsequent to August 31, 1999, Link II has entered
into negotiations to acquire existing paging operations in Dallas, San
Antonio and Houston. Additionally the company is currently negotiating
with a utility company to install wireless meter reading equipment which
will utilize the Link II radio frequency licenses and equipment.
On October 1, 1999, Link II refinanced its existing accounts payable to
Eagle Wireless International through the issuance of a $733,571 ten
percent (10%) note secured by all lease station licenses and a $6,000,000
ten percent (10%) note secured by all assets (excluding licenses). These
notes are due September 1, 2000. During October 1999, the Company pledged
as collateral on a $4,500,000 convertible note, the $6,000,000 note
receivable and its underlying collateral.
NOTE 9 - RISK FACTORS:
For the months ended November 30, 1999 and 1999, substantially all of the
Company's business activities have remained within the United States and
have been extended to the wireless infrastructure industry. Approximately
ninety-one percent of the Company's revenues and receivables have been
created solely in the state of Texas, two percent have been created in the
international market, and the approximate seven percent remainder has been
created relatively evenly over the rest of the nation during the three
months ended November 30, 1999 whereas Approximately eighty-seven percent
of the Company's revenues and receivables have been created solely in the
state of Texas, one percent have been created in the international market,
and the approximate twelve percent remainder has been created relatively
evenly over the rest of the nation during the three months ended November
30, 1998
F-13
<PAGE>
NOTE 9 - RISK FACTORS: (continued)
Through the normal course of business, the Company generally does not
require its customers to post any collateral. However, because Link II
constitutes 43% and 60% of the Company's gross revenues and 64% and 60% of
its gross assets for the years ended August 31, 1999 and 1998,
respectively, the two companies have reached an agreement whereby the
Company has received a minority interest in Link II based upon accounts
receivable and has fully collateralized the debt. (See Note 9)
Although the Company has concentrated its efforts in the wireless
infrastructure industry and convergent set top market during the years
ended August 31, 1999 and for the three months ended November 30, 1999, 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 - FOREIGN OPERATIONS:
Although the Company is based in the United States, its product is sold on
the international market. Presently, international sales total
approximately 2% and 1% at November 30, 1999 and 1998, respectfully.
NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES:
The Company leases its primary office space for $10,000 per month with
Space Industries, Inc. ("Space"). This non-cancelable lease commenced on
July 1, 1999 and expires on March 29, 2001. In addition to the monthly
rental, the Company will issue 100,000 shares of its common stock to
Space. Space will have the right to sell no more than 10,000 shares per
month until all shares have been sold. Additionally, Space will have the
right to put to the Company all unsold shares held by Space in exchange
for a payment calculated using the following formula:
$173,000 - (gross proceeds from stock sales above $1.70 per share)
minus ($1.73 x quantity of shares sold below $1.70 per share)
It is understood and agreed, and it is the intention of both parties, that
this put right will provide Space with a guarantee that, so long as (a)
Space does not sell or otherwise dispose of the common stock for less than
$1.70 per share, and (b) Space exercises its put right between August 15,
2000 and August 31, 2000, Space will receive a minimum economic benefit of
at least $170,000 from the common stock issued by the Company to Space.
For the periods ending November 30, 1999 and 1998, rental expenses of
$64,548 and $23,793 respectively, were incurred.
Future obligations under the non-cancelable lease terms are:
Period Ending
NOVEMBER 30, AMOUNT
----------- ----------
2000 $ 187,140
2001 $ 126,665
==========
During the year ended August 31, 1998, the Company entered into an
agreement with a public relations consultant whereby the consultant will
develop, implement, and maintain an ongoing program to increase the
investment community's awareness of the Company's activities and to
stimulate the investment community's interest in the Company. As
compensation for these services, the consultant will be paid $5,000 per
month. Additionally, the consultant will receive options to purchase
100,000 shares of the Company's common stock for $1.00 per share. The
delivery of the options to purchase the 100,000 shares of common stock is
contingent upon the attainment of certain objective criteria as outlined
in the July 16, 1998 agreement between the Company and the public
relations consulting firm. At August 31, 1999, these options have been
issued and exercised.
F-14
<PAGE>
NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES: (continued)
The Company has been named as defendant in a lawsuit involving the
Company's previous landlord with regard to breach of the lease. The
Company has counter-claimed, also alleging breach of the lease. The
Company intends to vigorously defend this matter as well as prosecute its
counter-claim.
The Company has provided a finance company a limited manufacturer's
guarantee for an amount not to exceed $910,845 for equipment and services
sold to a customer of the Company. In the event of default by the
customer, after a minimum period of ninety days from the date default is
declared and after having exhausted all available remedies against the
customer, the finance company may seek payment directly from the Company.
Under this guarantee, the Company may elect to assume the lease from the
finance company under the original terms and conditions or may elect to
pay all amounts due in arrears under the original agreement and pay-off
the lease through a one-time payment of the unamortized balance.
NOTE 12 - EARNINGS PER SHARE:
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
FOR THE 3 MONTHS ENDED NOVEMBER, 1999
--------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------- ---------- ----------
<S> <C> <C> <C>
Net Income .................................. $ 86,021
Basic EPS:
Income available to common stockholder .... $ 86,021 13,541,750 $ 0.01
Effect of Dilutive Securities:
Warrants .................................. - 0 - 69,000
---------- ----------
Diluted EPS:
Income available to common stockholders
and assumed conversions ................. $ 86,021 13,610,750 $ 0.01
========== ========== ==========
<CAPTION>
FOR THE YEAR ENDED AUGUST , 1999
--------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------- ---------- ----------
Net Income .................................. $ 168,272
Basic EPS:
Income available to common stockholder .... $ 168,272 11,980,911 $ 0.01
Effect of Dilutive Securities:
Warrants .................................. - 0 - 69,000
---------- ----------
Diluted EPS:
Income available to common stockholders
and assumed conversions ................. $ 168,272 12,049,911 $ 0.01
========== ========== ==========
</TABLE>
For the November 30, 1999 and August 31, 1999, anti-dilutive securities
existed. (see Note 6)
F-15
<PAGE>
NOTE 13- EMPLOYEE STOCK OPTION PLAN:
In July 1996, the Board of Directors and majority stockholders adopted a
stock option plan under which 400,000 shares of the Company's common stock
have been reserved for issuance. Under this plan, as of November 30, 1999
and 1998, 151,375 and 85,375 warrants have been issued to various
employees. Of these outstanding warrants, 29,000 were exercised for the
year ended August 31, 1999 and none for the year ended August 31, 1998.
Additionally, 10,250 warrants have expired as of August 31, 1999.
NOTE 14 - RETIREMENT PLANS:
During October 1997, the Company initiated a 401(k) plan for its employees
which is funded through the contributions of its participants. This plan
maintains that the Company will match up to 3% of each participant's
contribution. For the months ended November 30, 1999 and 1998, employee
contributions were approximately $120,045 and $74,654, respectively. The
Company matched approximately $39,385.23 and $22,765 respectively for
those same periods.
NOTE 15 - MAJOR CUSTOMER:
As of November 30, 1999, the Company had a receivable due from Link - Two
Communications (Link II) in the amount of $6,641,892. This account
receivable has been converted to a note receivable (see Note 9). As of
August 31, 1999, Link II is continuing to sell equity securities, assets,
and products that are being used to retire this note receivable. This
receivable is secured by substantially all assets of Link II including
radio frequency licenses that have been valued by outside appraisal firms
to in excess of twenty million dollars. In August 1999, Link II commenced
operations of its nationwide two-way messaging system. Based upon the
aforementioned, management believes the risks involved with this
receivable are minimal.
NOTE 16 - SUBSEQUENT EVENTS:
During January 2000, the Company signed a letter of intent with Atlantic
Pacific Communications, Inc. to acquire Atlantic Pacific Communications
(AtlanticPacific) for 519,000 restrictive shares of common stock.
Additionally, the principal shareholders of Atlantic Pacific can earn an
additional 3,000,000 restricted common shares over a over a four-year
period of time upon attainment of stipulated sales levels between
$10,000,000 and $60,000,000.
F-16
<PAGE>
[MCMANUS & CO. LETTERHEAD]
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, 1999 and 1998 and the related statements of earnings,
shareholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of Eagle Wireless International, Inc.'s
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 audit provides a reasonable basis for our opinion.
In our opinion, based on our audits, the financial statements referred to above
present fairly, in all material respects, the financial position of Eagle
Wireless International, Inc. as of August 31, 1999 and 1998 and the results of
their earnings, shareholders' equity, and their cash flows for the years then
ended are in conformity with generally accepted accounting principles.
MCMANUS & CO., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
MORRIS PLAINS, NEW JERSEY
December 13, 1999
F-17
<PAGE>
- --------------------------------------------------------------------------------
EAGLE WIRELESS INTERNATIONAL, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
AUGUST 31,
----------------------------
1999 1998
------------ ------------
CURRENT ASSETS:
<S> <C> <C>
Cash and Cash Equivalents (Note 1) .............. $ 187,965 $ 1,097,245
Accounts Receivable (Note 2) .................... 286,269 245,889
Inventories (Note 1) ............................ 2,355,861 1,273,281
Prepaid Expenses ................................ 242,551 69,490
------------ ------------
Total Current Assets ......................... 3,072,646 2,685,905
PROPERTY AND EQUIPMENT (NOTE 1):
Operating Equipment ............................. 922,204 933,050
Less: Accumulated Depreciation .................. (333,474) (223,645)
------------ ------------
Total Property and Equipment ................. 588,730 709,405
OTHER ASSETS:
Security Deposits ............................... 17,014 8,944
Investment In Affiliate (Note 9) ................ 6,641,892 5,146,189
------------ ------------
Total Other Assets ........................... 6,658,906 5,155,133
============ ============
TOTAL ASSETS .................................... $ 10,320,282 $ 8,550,443
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable ................................ $ 207,949 $ 336,782
Accrued Expenses ................................ 106,355 117,915
Shareholders' Advances (Note 11) ................ 0 24,519
Notes Payable (Note 3) .......................... 16,643 12,731
Capital Lease Obligations (Note 4) .............. 14,962 11,125
Deferred Revenues ............................... 532,772 56,504
Federal Income Taxes Payable (Notes 1 & 5) ...... 468,064 375,171
Franchise Taxes Payable ......................... 13,108 41,854
Sales Taxes Payable ............................. 48,348 37,983
Deferred Taxes (Note 5) ......................... 6,142 4,888
------------ ------------
Total Current Liabilities .................... 1,414,343 1,019,472
LONG - TERM LIABILITIES:
Capital Lease Obligations
(net of current maturities) (Note 4) ......... 3,939 8,621
Deferred Taxes (Note 5) ......................... 7,683 6,182
------------ ------------
Total Long - Term Liabilities ................ 11,622 14,803
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 13)
SHAREHOLDERS' EQUITY:
Preferred Stock - $.001 par value
Authorized 5,000,000 shares
Issued -0- shares ............................ 0 0
Common Stock - $.001 par value
Authorized 100,000,000 shares
Issued and Outstanding at 1999 and 1998
13,479,833 and 11,670,154, respectively .. 13,480 11,670
Paid in Capital ................................. 7,180,900 5,972,832
Retained Earnings ............................... 1,699,937 1,531,666
------------ ------------
Total Shareholders' Equity ................... 8,894,317 7,516,168
============ ============
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...... $ 10,320,282 $ 8,550,443
============ ============
</TABLE>
F-18
<PAGE>
- --------------------------------------------------------------------------------
EAGLE WIRELESS INTERNATIONAL, INC.
STATEMENTS OF EARNINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED AUGUST 31,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES .................................. $ 2,217,275 $ 4,827,434 $ 3,971,369
COST OF GOODS SOLD
Materials and Supplies .................. 542,515 1,181,776 920,375
Direct Labor and Related Costs .......... 219,285 355,644 260,776
Depreciation and Amortization ........... 80,069 17,542 21,400
Other Manufacturing Costs ............... 494,633 409,992 346,453
----------- ----------- -----------
Total Cost of Goods Sold ............. 1,336,502 1,964,954 1,549,004
----------- ----------- -----------
GROSS PROFIT ............................... 880,773 2,862,480 2,422,365
----------- ----------- -----------
OPERATING EXPENSES
Selling, General and Administrative
Salaries and Related Costs ........... 58,880 736,734 607,160
Advertising and Promotion ............ 75,816 193,172 176,131
Depreciation and Amortization ........ 65,095 128,997 58,135
Research & Development ............... 438,693 236,869 333,200
Other Support Costs .................. 680,497 811,286 430,413
----------- ----------- -----------
Total Operating Expenses ............. 1,318,981 2,107,058 1,605,039
----------- ----------- -----------
EARNINGS/(LOSS) FROM OPERATIONS BEFORE OTHER
REVENUES/(EXPENSES), INCOME TAXES, AND
LOSS FROM MINORITY INTEREST IN AFFILIATE ... (438,208) 755,422 817,326
OTHER REVENUES/(EXPENSES)
Interest Income ......................... 799,098 427,144 328,760
Interest Expense ........................ (10,081) (5,451) (6,533)
----------- ----------- -----------
Total Other Revenues ................. 789,017 421,693 322,227
----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES & LOSS FROM
MINORITY INTEREST IN AFFILIATE ............. 350,809 1,177,115 1,139,553
Gain/(Loss) From Minority Interest
in Affiliate ......................... (91,678) (28,663) (71,337)
----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES ............... 259,131 1,148,452 1,068,216
Provision For Income Taxes .............. 90,860 377,484 339,722
----------- ----------- -----------
NET EARNINGS ............................... 168,271 770,968 728,494
RETAINED EARNINGS - BEGINNING OF YEAR ...... 1,531,666 760,698 32,204
----------- ----------- -----------
RETAINED EARNINGS - END OF YEAR ............ $ 1,699,937 $ 1,531,666 $ 760,698
=========== =========== ===========
Net Earnings Per Common Share:
Primary (Note 1) ..................... $ 0.01 $ 0.07 $ 0.07
Fully Diluted (Note 1) ............... $ 0.01 $ 0.05 $ 0.04
</TABLE>
F-19
<PAGE>
- --------------------------------------------------------------------------------
EAGLE WIRELESS INTERNATIONAL, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
SEPTEMBER 1, 1996 COMMON STOCK PREFERRED PAID IN RETAINED SHAREHOLDERS'
TO AUGUST 31, 1999 SHARES VALUE STOCK CAPITAL EARNINGS EQUITY
-------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shareholders' Equity
As Of September 1, 1996 ........ 6,946,145 $ 6,946 $ 0 $ 2,037,856 $ 32,204 $ 2,077,006
----------- ----------- ----------- ----------- ----------- -----------
Net Earnings 1997 .............. 728,494 728,494
Private Placement .............. 1,587,189 1,587 0 4,117,759 0 4,119,346
Conversion of Notes Payable and
Advances to Common Stock . 2,277,000 2,277 0 487,092 0 489,369
Exercise of $.01 Warrants:
B & F Trust .............. 490,000 490 0 4,410 0 4,900
Futer Family Trust ....... 154,000 154 0 1,386 0 1,540
John Nagel ............... 28,000 28 0 252 0 280
Bailey Trust ............. 28,000 28 0 252 0 280
Issuance of Warrants for
Fundraising Activities ... 0 0 0 192,000 0 192,000
Syndication Costs .............. 0 0 0 (1,020,827) 0 (1,020,827)
----------- ----------- ----------- ----------- ----------- -----------
Total Shareholders' Equity
As Of August 31, 1997 .......... 11,510,334 11,510 0 5,820,180 760,698 6,592,388
Net Earnings 1998 .............. 770,968 770,968
New Stock Issued to Shareholders
J. Hamilton (Nov. 1997) ..... 39,820 40 0 59,960 0 60,000
D. Walker (Nov. 1997) ....... 55,000 55 0 82,445 0 82,500
D. Walker (Aug. 1998) ....... 65,000 65 0 95,564 0 95,629
Syndication Costs .............. 0 0 0 (85,317) 0 (85,317)
----------- ----------- ----------- ----------- ----------- -----------
Total Shareholders' Equity
As Of August 31, 1998 .......... 11,670,154 11,670 0 5,972,832 1,531,666 7,516,168
----------- ----------- ----------- ----------- ----------- -----------
Net Earnings 1999 .............. 168,271 168,271
New Stock Issued to Shareholders
Issuance of Common Stock
For Services Rendered .. 34,470 34 0 163,457 0 163,491
For Exercise of Warrants 1,775,209 1,776 0 1,044,611 0 1,046,387
----------- ----------- ----------- ----------- ----------- -----------
Total Shareholders' Equity
As Of August 31, 1999 .......... 13,479,833 $ 13,480 $ 0 $ 7,180,900 $ 1,699,937 $ 8,894,317
=========== =========== =========== =========== =========== ===========
</TABLE>
F-20
<PAGE>
- --------------------------------------------------------------------------------
EAGLE WIRELESS INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED AUGUST 31,
-------------------------------------------
1999 1998 1997
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings $ 168,271 $ 770,968 $ 728,494
<S> <C> <C> <C>
Adjustments To Reconcile Net Earnings To Net Cash
Used By Operating Activities:
Depreciation and Amortization ..................... 145,164 146,539 79,535
Stock Issued for Services Rendered ................ 163,491 0 0
(Increase)/Decrease in Accounts Receivable ........ (40,380) (2,496,797) (2,536,348)
(Increase)/Decrease in Inventories ................ (1,082,580) (261,063) (486,907)
(Increase)/Decrease in Prepaid Expenses ........... (173,061) (12,021) (40,846)
Increase/(Decrease) in Accounts Payable ........... (128,833) 19,613 9,868
Increase/(Decrease) in Accrued Payroll Taxes ...... 0 0 16,635
Increase/(Decrease) in Accrued Expenses ........... (11,560) 117,915 (53,374)
Increase/(Decrease) in Deferred Taxes ............. 2,755 (14,147) 19,534
Increase/(Decrease) in Customer Deposits .......... 0 0 (209,283)
Increase/(Decrease) in Deferred Revenues .......... 476,268 56,504 0
Increase/(Decrease) in Sales Tax Payable .......... 10,365 37,983 0
Increase/(Decrease) in Federal Income Taxes Payable 92,893 114,259 260,912
Increase/(Decrease) in Franchise Taxes Payable .... (28,746) 21,854 20,000
----------- ----------- -----------
Total Adjustments ................................ (574,224) (2,269,361) (2,920,274)
----------- ----------- -----------
Net Cash Used By Operating Activities ................ (405,953) (1,498,393) (2,191,780)
CASH FLOWS FROM INVESTING ACTIVITIES
(Purchase)/Disposal of Property and Equipment ..... (24,489) (377,247) (164,937)
(Increase)/Decrease in Other Assets ............... (8,070) 4,065 35,769
(Increase)/Decrease in Investment in Affiliate .... (1,495,703) 28,663 (28,663)
----------- ----------- -----------
Net Cash Used By Investing Activities ........... (1,528,262) (344,519) (157,831)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase/(Decrease) in Notes Payable (Long-Term) .. 0 0 (375,000)
Increase/(Decrease) in Notes Payable (Short-Term) . 3,912 12,731 (11,082)
Increase/(Decrease) in Capital Leases ............. (845) (15,094) (2,558)
Increase/(Decrease) in Shareholders' Advances ..... (24,519) (104,853) (160,628)
Increase/(Decrease) in Subscriptions Payable ...... 0 0 (97,500)
Proceeds From Sale of Common Stock, Net ........... 1,046,387 152,812 3,786,888
----------- ----------- -----------
Net Cash Provided By Financing Activities ............ 1,024,935 45,596 3,140,120
Net Increase/(Decrease) in Cash ...................... (909,280) (1,797,316) 790,509
CASH AT THE BEGINNING OF THE YEAR ....................... 1,097,245 2,894,561 2,104,052
----------- ----------- -----------
CASH AT THE END OF THE YEAR ............................. $ 187,965 $ 1,097,245 $ 2,894,561
=========== =========== ===========
Supplemental Disclosures of Cash Flow Information:
Net cash paid during the year for:
Interest ....................................... $ 10,081 $ 5,451 $ 6,533
Income Taxes ................................... 75,051 338,688 306,254
</TABLE>
F-21
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
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 $29,059 and $1,088,555 invested in interest bearing
accounts at August 31, 1999 and 1998, 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-22
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
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,
------------------------------
1999 1998
------------ ------------
Raw Materials $ 1,215,003 $ 719,157
Work in Process 1,119,672 554,124
Finished Goods 21,186 - 0 -
------------ ------------
$ 2,355,861 $ 1,273,281
============ ============
D) Organizational Costs
For the year ended August 31, 1998, the Company has adopted the provisions
of the AICPA's Statement of Position (SOP) No. 98-5 "Reporting on the
Costs of Start-Up Activities", which requires that all costs related to a
companies start-up activities should now be expensed during the period
incurred rather than capitalized and amortized over a period of time.
Prior to the year ended August 31, 1998, organizational costs had been
amortized using the straight - line method over a period of sixty (60)
months. As a result of "SOP" 98-5, unamortized organization costs of
$2,328 have been expensed through amortization expense for the year ended
August 31, 1998.
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
$438,693 and $236,869 were expensed for the periods ended August 31, 1999
and 1998, respectively. Contract revenues earned for the periods ended
August 31, 1999 and 1998 were approximately $755,771 and $656,512,
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-23
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
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 basic and diluted. Basic
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. 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 stock
outstanding plus any dilutive common stock equivalents. The components
used for the computations are shown as follows:
AUGUST 31, 1999 AUGUST 31, 1998
--------------- ---------------
Weighted Average Number of Common
Shares Outstanding Including:
Primary Common Stock Equivalents 11,980,911 11,594,902
Fully Dilutive Common Stock Equivalents 12,049,911 14,019,902
H) Impairment of Long Lived and Identifiable Intangible Assets
The Company evaluates the carrying value of long-lived assets and
identifiable intangible assets for potential impairment on an ongoing
basis. An impairment loss would be deemed necessary when the estimated
non-discounted future cash flows are less than the carrying net amount of
the asset. If an asset were deemed to be impaired, the asset's recorded
value would be reduced to fair market value. In determining the amount of
the charge to be recorded, the following methods would be utilized to
determine fair market value:
1) Quoted market prices in active markets.
2) Estimate based on prices of similar assets
3) Estimate based on valuation techniques
As of August 31, 1999 and 1998, no impairment existed.
I) 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;
425,000 $5.00;150,000 $1.50; 150,000 $2.00; 200,000 $3.00; 200,000 $5.00;
200,000 $7.00; 200,000 $9.00; 200,000 $11.00; and 50,000 $2.00. 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.
F-24
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 1 -BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)
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, 1999 and 1998, the Company had expensed $75,816 and $193,172,
respectively.
K) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent asset and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
L) Comprehensive Income
There were no items of other comprehensive income in 1999 and 1998, and,
thus, net income is equal to comprehensive income for each of those years.
M) Reclassification
The Company has reclassified certain costs and expenses for the year ended
August 31, 1998 to facilitate comparison to the year ended August 31,
1999.
NOTE 2 - ACCOUNTS RECEIVABLE:
Accounts receivable consist of the following:
AUGUST 31,
---------------------------
1999 1998
---------- -----------
Accounts Receivable $ 286,269 $ 245,889
Allowance for Doubtful Accounts - 0 - - 0 -
---------- -----------
Net Accounts Receivable $ 286,269 $ 245,889
=========== ===========
F-25
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 3 - NOTES PAYABLE:
AUGUST 31,
--------------------
1999 1998
------- -------
Unsecured note to Imperial Premium
Finance bearing interest at 14.9%,
due $1,795 monthly until February 2000 ... $ 5,386 $ - 0 -
Unsecured note to Central Insurance
bearing no interest, due $1,031
monthly until March 2000 ................. 5,220 - 0 -
Unsecured note to Paula Insurance
bearing no interest, due $373 monthly
until March 2000 ......................... 1,124 - 0 -
Unsecured note to West Coast Life
Insurance bearing no interest, due
$2,457 quarterly until May 2000 .......... 4,913 - 0 -
Unsecured note to Canawill Insurance
bearing interest at 9.6%, due $2,122
monthly until January 1999 ............... $ - 0 - $12,731
------- -------
Total .............................. 16,643 12,731
Less Current Portion of
Long - Term Debt ................ 16,643 12,731
------- -------
Total Long - Term Debt ............. $ - 0 - $ - 0 -
======= =======
NOTE 4 - CAPITAL LEASE OBLIGATIONS:
AUGUST 31,
--------------------
1999 1998
------- -------
Equipment lease with Konica bearing
interest at 8.9%, payable in monthly
installments of $445; due Aug. 2001....... 9,720 - 0 -
Equipment lease with Associates
Capital bearing interest at 7%,
payable in monthly installments
of $1,177; due Sept. 1998................. - 0 - 2,272
F-26
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 4 - CAPITAL LEASE OBLIGATIONS: (continued)
AUGUST 31,
--------------------
1999 1998
------- -------
Equipment lease with IKON
Office Solutions bearing
interest at 18% payable
in monthly installments of
$105; due March 2000. 695 1,746
Software lease with Manifest
Group bearing interest at 14%,
payable in monthly installments
of $751; due August 2000. $ 8,487 $15,728
------- -------
Total Obligations 18,902 19,746
Less Current Portion of
Lease Obligations 15,047 11,125
------- -------
Total Long - Term Capital
Lease Obligations $ 3,855 $ 8,621
======= =======
The capitalized lease obligations are collateralized by the related
equipment acquired with a net book value of approximately $ 29,600 and $
45,000 at August 31, 1999 and 1998, respectively. The future minimum lease
payments under the capital leases and the net present value of the future
lease payments at August 31, 1999 and 1998 are as follows:
AUG. 31, 1999 AUG. 31, 1998
------------- -------------
Total minimum lease payments ........... $20,405 $22,319
Less: Amount representing interest ..... 1,503 2,573
------- -------
Present value of net minimum
lease payments ..................... $18,902 $19,746
======= =======
Future obligations under the lease terms are:
PERIOD ENDING
AUGUST 31, AMOUNT
------------- ----------
2000 $ 14,522
2001 4,380
----------
Total $ 18,902
==========
F-27
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 5 - 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,
----------------
1999 1998
---- ----
% %
U.S. Federal Statutory Tax Rate ... 34 34
U.S. Valuation Difference ......... 1 (1)
---- ----
Effective U.S. Tax Rate ........... 35 33
Foreign Tax Valuation ............. -0- -0-
---- ----
Effective Tax Rate ................ 35 33
==== ====
B) Items giving rise to deferred tax assets / liabilities are as follows:
AUGUST 31,
----------------------
1999 1998
--------- ---------
Deferred Tax Assets:
Tax Loss Carry-forward .............. $ - 0 - $ - 0 -
--------- ---------
Deferred Tax Liability:
Depreciation ........................ 13,852 11,070
--------- ---------
Valuation Allowance ...................... - 0 - - 0 -
--------- ---------
Net Deferred Tax Asset / Liability .. $ 13,852 $ 11,070
========= =========
NOTE 6 - 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 $0.001. As of
August 31, 1999, no Preferred Stock has been issued.
F-28
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 6 - PREFERRED STOCK, STOCK OPTIONS, AND WARRANTS: (continued)
In July 1996, the Board of Directors and majority shareholders adopted an
employee stock option plan under which 400,000 shares of Common Stock have
been reserved for issuance. The options granted for under this plan are to
purchase fully paid and non-assessable shares of the Common Stock, par
value $.001 per share at a price equal to the underlying common stock's
market price at the date of issuance. These options may be redeemed six
months after issuance, expire five years from the date of issuance and
contain a cash-less exercise feature. The underlying shares of common
stock were registered for resale under the Securities Act of 1933 on
February 19, 1999. As of August 31, 1999, 146,375 options have been
granted pursuant to such plan with 29,000 being exercised.
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.
The Company has issued the following warrants that have since been
exercised or expired:
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.
1,050,000 stock purchase 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 $.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. During April 1999, the Company's Board of
Directors removed the requirement that the Company's common stock
trade at a price of no less than $5.50 per share for twenty
consecutive trading days provided that the holders of the warrants
exercise the warrants prior to the expiration date and remit to the
Company a fee of $.70 per underlying share upon exercise of the
warrants. Prior to expiration, 1,037,500 warrants had been exercised
whereas 12,500 warrants expired.
1,375,000 stock purchase 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 $.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. During April 1999, the Company's Board of
Directors removed the requirement that the Company's common stock
trade at a price of no less than $5.50 per share for twenty
consecutive trading days provided that the holders of the warrants
exercise the warrants prior to the expiration date and remit to the
Company a fee of $.25 per underlying share upon exercise of the
warrants. Prior to expiration, 1,325,000 warrants had been exercised
whereas 50,000 warrants expired.
F-29
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 6 - PREFERRED STOCK, STOCK OPTIONS, AND WARRANTS: (continued)
425,000 stock purchases warrants that 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. Prior to expiration, no warrants had been exercised whereas
425,000 warrants expired.
The Company has issued and outstanding the following warrants which have
not yet been exercised at August 31, 1999:
150,000 stock purchase warrants. 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 $1.50 per share. These warrants,
however, are not exercisable until and unless the shares of Common
Stock trade at a minimum of $4.00 per share for sixty-one
consecutive trading days. The underlying shares of common stock were
registered for resale under the Securities Act of 1933 on March 19,
1999. These warrants will expire on March 19, 2000.
150,000 stock purchase warrants. 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 $2.00 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 sixty-one
consecutive trading days. The underlying shares of common stock were
registered for resale under the Securities Act of 1933 on March 19,
1999. These warrants will expire on March 19, 2000.
50,000 stock purchase warrants which expire August 31 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
$2.00 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 warrants by paying holders $.05 per warrant. As of August 31,
1999, the underlying shares of common stock have not yet been
registered for resale under the Securities Act of 1933.
200,000 stock purchase warrants. 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 $3.00 per share. These warrants,
however, are not exercisable until and unless the shares of Common
Stock trade at a minimum of $7.50 per share for sixty-one
consecutive trading days. The underlying shares of common stock were
registered for resale under the Securities Act of 1933 on March 19,
1999. These warrants will expire on March 19, 2000.
200,000 stock purchase warrants. 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,
however, are not exercisable until and unless the shares of Common
Stock trade at a minimum of $10.00 per share for thirty-one
consecutive trading days. These warrants will expire three years
from the date of effective registration of the underlying shares of
common stock. As of August 31, 1999, the underlying shares of common
stock have not yet been registered for resale under the Securities
Act of 1933 and thus have no set expiration date.
F-30
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 6 - PREFERRED STOCK, STOCK OPTIONS, AND WARRANTS: (continued)
200,000 stock purchase warrants. 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 $7.00 per share. These warrants,
however, are not exercisable until and unless the shares of Common
Stock trade at a minimum of $12.00 per share for thirty-one
consecutive trading days. These warrants will expire three years
from the date of effective registration of the underlying shares of
common stock. As of August 31, 1999, the underlying shares of common
stock have not yet been registered for resale under the Securities
Act of 1933 and thus have no set expiration date.
200,000 stock purchase warrants. 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 $9.00 per share. These warrants,
however, are not exercisable until and unless the shares of Common
Stock trade at a minimum of $14.00 per share for thirty-one
consecutive trading days. These warrants will expire five years from
the date of effective registration of the underlying shares of
common stock. As of August 31, 1999, the underlying shares of common
stock have not yet been registered for resale under the Securities
Act of 1933 and thus have no set expiration date.
200,000 stock purchase warrants. 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 $11.00 per share. These warrants,
however, are not exercisable until and unless the shares of Common
Stock trade at a minimum of $16.00 per share for thirty-one
consecutive trading days. These warrants will expire five years from
the date of effective registration of the underlying shares of
common stock. As of August 31, 1999, the underlying shares of common
stock have not yet been registered for resale under the Securities
Act of 1933 and thus have no set expiration date.
5,033,334 Class A stock purchase warrants which expire August 31,
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 $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. 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 $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. These warrants trade under the symbol "EGLWZ".
1,050,000 Class C stock purchase warrants which expire August 31
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 $2.00 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 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-31
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 6 - PREFERRED STOCK, STOCK OPTIONS, AND WARRANTS: (continued)
The warrants outstanding are segregated into four categories (exercisable,
non-exercisable, non-registered, and expired). They are summarized as
follows:
<TABLE>
<CAPTION>
WARRANTS ISSUED WARRANTS EXERCISABLE WARRANTS EXPIRED
CLASS AUGUST 31, AUGUST 31, WARRANTS AUGUST 31,
OF ---------------------- --------------------- --------------------------------- --------------------
WARRANTS 1999 1998 1999 1998 NON-EXERCISABLE NON-REGISTERED 1999 1998
- ---------- --------- --------- --------- --------- --------------- --------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.01 Exercised Exercised -- -- -- -- -- --
0.05 Exercised 1,050,000 -- -- -- -- 12,500 --
0.50 Exercised 1,375,000 -- -- -- -- 50,000 --
5.00 Expired 425,000* -- 425,000 -- -- 425,000 --
4.00 5,033,334* 5,033,334* 5,033,334 5,033,334 -- -- -- --
6.00 5,033,334* 5,033,334* 5,033,334 5,033,334 -- -- -- --
2.00 1,050,000* 1,050,000* 1,050,000 1,050,000 -- -- -- --
1.50 150,000* 150,000 150,000 -- -- -- -- --
2.00 150,000* 150,000 150,000 -- -- -- -- --
3.00 200,000* 200,000 200,000 -- -- -- -- --
5.00 200,000 200,000 -- -- -- 200,000 -- --
7.00 200,000 200,000 -- -- -- 200,000 -- --
9.00 200,000 200,000 -- -- -- 200,000 -- --
11.00 200,000 200,000 -- -- -- 200,000 -- --
2.00 50,000* 50,000* 50,000 50,000 -- -- -- --
ESOP 27,375* 14,875* 13,625 12,125 3,500 -- 10,250 --
ESOP 119,000 68,000 69,000 6,000 50,000 -- -- --
</TABLE>
An asterisk (*) denotes warrants which would have an anti-dilutive effect
if currently used to calculate earnings per share for the year ended
August 31, 1999.
NOTE 7 - RELATED PARTY TRANSACTIONS:
For the year ended August 31, 1999, the Company has repaid certain
advances to shareholders. (See Note 11)
NOTE 8 - SEGMENT INFORMATION:
The Company had gross revenues of $2,359,184 and $4,827,434 for the years
ended August 31, 1999 and 1998, respectively. The following parties
individually represent a greater than ten percent of these revenues.
AUGUST 31, 1999 AUGUST 31, 1998
--------------------- ---------------------
CUSTOMER AMOUNT PERCENTAGE AMOUNT PERCENTAGE
-------- ---------- ---------- ---------- ----------
Link-Two Communications, Inc. $ 991,692 42.83% $2,892,769 59.92%
RFTL ........................ $ 755,771 32.64% 656,512 11.71%
========== ===== ========== =====
F-32
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 9 - 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, 1999 and 1998, the
Company had earned a 5.0% and 5.0%, respectively, minority 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, 1999 and 1998, the Company
has recorded it share of losses in this unconsolidated affiliate. The loss
as a minority shareholder totaled $91,678 and $28,663, respectively. The
Company has reclassified its balances due from Link II as additional
advances to affiliates.
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. Subsequent to August 31, 1999, Link II has entered
into negotiations to acquire existing paging operations in Dallas, San
Antonio and Houston. Additionally the company is currently negotiating
with a utility company to install wireless meter reading equipment which
will utilize the Link II radio frequency licenses and equipment.
On October 1, 1999, Link II refinanced its existing accounts payable to
Eagle Wireless International through the issuance of a $733,571 ten
percent (10%) note secured by all lease station licenses and a $6,000,000
ten percent (10%) note secured by all assets (excluding licenses). These
notes are due September 1, 2000. During October 1999, the Company pledged
as collateral on a $4,500,000 convertible note, the $6,000,000 note
receivable and its underlying collateral.
NOTE 10 - RISK FACTORS:
For the years ended August 31, 1999 and 1998, substantially all of the
Company's business activities have remained within the United States and
have been extended to the wireless infrastructure industry. Approximately
eighty-four percent of the Company's revenues and receivables have been
created solely in the state of Texas, one-half percent have been created
in the international market, and the approximate fifteen and one-half
percent remainder has been created relatively evenly over the rest of the
nation during the year ended August 31, 1999 whereas approximately
seventy-four percent of the Company's revenues and receivables have been
created solely in the state of Texas, one and one-half percent have been
created in the international market, and the approximate twenty-four and
one-half percent remainder has been created relatively evenly over the
rest of the nation for the year ended August 31, 1998.
F-33
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 10 - RISK FACTORS: (continued)
Through the normal course of business, the Company generally does not
require its customers to post any collateral. However, because Link II
constitutes 43% and 60% of the Company's gross revenues and 64% and 60% of
its gross assets for the years ended August 31, 1999 and 1998,
respectively, the two companies have reached an agreement whereby the
Company has received a minority interest in Link II based upon accounts
receivable and has fully collateralized the debt. (See Note 9)
Although the Company has concentrated its efforts in the wireless
infrastructure industry during the years ended August 31, 1999 and 1998,
it is management's belief that the Company faces little credit or economic
risk due to the continuous growth the market is experiencing.
NOTE 11 - SHAREHOLDERS' ADVANCES:
Certain officers and an employee advanced the Company $290,000. At August
31, 1999 and 1998, the Company owes $ -0- and $24,519, respectively. The
shareholder advances are non-interest bearing and payable upon demand.
NOTE 12 - FOREIGN OPERATIONS:
Although the Company is based in the United States, its product is sold on
the international market. Presently, international sales total
approximately 0.5 % and 1.4% at August 31, 1999 and 1998, respectively.
NOTE 13 - COMMITMENTS AND CONTINGENT LIABILITIES:
The Company leases its primary office space for $10,000 per month with
Space Industries, Inc. ("Space"). This non-cancelable lease commenced on
July 1, 1999 and expires on March 29, 2001. In addition to the monthly
rental, the Company will issue 100,000 shares of its common stock to
Space. Space will have the right to sell no more than 10,000 shares per
month until all shares have been sold. Additionally, Space will have the
right to put to the Company all unsold shares held by Space in exchange
for a payment calculated using the following formula:
$173,000 - (gross proceeds from stock sales above $1.70 per share)
minus ($1.73 x quantity of shares sold below $1.70 per share)
F-34
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 13 - COMMITMENTS AND CONTINGENT LIABILITIES (continued):
It is understood and agreed, and it is the intention of both parties, that
this put right will provide Space with a guarantee that, so long as (a)
Space does not sell or otherwise dispose of the common stock for less than
$1.70 per share, and (b) Space exercises its put right between August 15,
2000 and August 31, 2000, Space will receive a minimum economic benefit of
at least $170,000 from the common stock issued by the Company to Space.
For the periods ending August 31, 1999 and 1998, rental expenses of
$120,906 and $93,510, respectively, were incurred.
Future obligations under the non-cancelable lease terms are:
PERIOD ENDING
AUGUST 31, AMOUNT
------------- ----------
2000 $ 217,140
2001 $ 126,665
==========
During the year ended August 31, 1998, the Company entered into an
agreement with a public relations consultant whereby the consultant will
develop, implement, and maintain an ongoing program to increase the
investment community's awareness of the Company's activities and to
stimulate the investment community's interest in the Company. As
compensation for these services, the consultant will be paid $5,000 per
month. Additionally, the consultant will receive options to purchase
100,000 shares of the Company's common stock for $1.00 per share. The
delivery of the options to purchase the 100,000 shares of common stock is
contingent upon the attainment of certain objective criteria as outlined
in the July 16, 1998 agreement between the Company and the public
relations consulting firm. At August 31, 1999, these options have been
issued and exercised.
The Company has been named as defendant in a lawsuit involving the
Company's previous landlord with regard to breach of the lease. The
Company has counter-claimed, also alleging breach of the lease. The
Company intends to vigorously defend this matter as well as prosecute its
counter-claim.
The Company has provided a finance company a limited manufacturer's
guarantee for an amount not to exceed $910,845 for equipment and services
sold to a customer of the Company. In the event of default by the
customer, after a minimum period of ninety days from the date default is
declared and after having exhausted all available remedies against the
customer, the finance company may seek payment directly from the Company.
Under this guarantee, the Company may elect to assume the lease from the
finance company under the original terms and conditions or may elect to
pay all amounts due in arrears under the original agreement and pay-off
the lease through a one-time payment of the unamortized balance.
F-35
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 13 - COMMITMENTS AND CONTINGENT LIABILITIES (continued):
During September 1998, the Company has filed a petition with the District
Court in Harris County, Texas against a California corporation that sells
manufacturing and accounting software, alleging deceptive trade practices,
fraud, misrepresentation, negligence, and breach of implied warranty. At
August 31, 1999, the Company had received full compensation and the case
has been terminated.
NOTE 14 - EARNINGS PER SHARE:
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST, 1999
------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------- ---------- ----------
<S> <C> <C> <C>
AMOUNT
Net Income .............................. $ 168,272
Basic EPS:
Income available to common stockholders 168,272 11,980,911 $ 0.01
Effect of Dilutive Securities:
Warrants .............................. - 0 - 69,000
---------- ----------
Diluted EPS:
Income available to common stockholders
and assumed conversions ............. $ 168,272 12,049,911 $ 0.01
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31, 1998
-----------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------- ---------- ---------
<S> <C> <C> <C>
Net Income ............................... $ 770,968 -- --
Basic EPS:
Income available to common stockholders 770,968 11,594,902 $0.07
Effect of Dilutive Securities: .......... - 0 - 2,425,000 --
---------- ----------
Diluted EPS:
Income available to common stockholders
and assumed conversions ............. $ 770,968 14,019,902 $0.06
========== ========== =====
</TABLE>
For the years ended August 31, 1999 and 1998, anti-dilutive securities
existed. (see Note 6)
For the period September 1, 1999 to December 13, 1999, there were no
transactions that would have materially changed the number of common
shares or potential common shares outstanding.
F-36
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 15 - EMPLOYEE STOCK OPTION PLAN:
In July 1996, the Board of Directors and majority stockholders adopted a
stock option plan under which 400,000 shares of the Company's common stock
have been reserved for issuance. Under this plan, as of August 31, 1999
and 1998, 146,375 and 82,875 warrants have been issued to various
employees. Of these outstanding warrants, 29,000 were exercised for the
year ended August 31, 1999 and none for the year ended August 31, 1998.
Additionally, 10,250 warrants have expired as of August 31, 1999.
NOTE 16 - RETIREMENT PLANS:
During October 1997, the Company initiated a 401(k) plan for its employees
which is funded through the contributions of its participants. This plan
maintains that the Company will match up to 3% of each participant's
contribution. For the years ended August 31, 1999 and 1998, employee
contributions were approximately $103,000 and $56,500, respectively. The
Company matched approximately $33,500 and $17,000, respectively for those
same periods.
NOTE 17 - MAJOR CUSTOMER:
As of August 31, 1998, the Company had a receivable due from Link - Two
Communications (Link II) in the amount of $5,142,950. This account
receivable has been converted to a note receivable (see Note 9). As of
August 31, 1999, Link II is continuing to sell equity securities, assets,
and products that are being used to retire this note receivable. This
receivable is secured by substantially all assets of Link II including
radio frequency licenses that have been valued by outside appraisal firms
to in excess of twenty million dollars. In August 1999, Link II commenced
operations of its nationwide two-way messaging system. Based upon the
aforementioned, management believes the risks involved with this
receivable are minimal.
NOTE 18 - SUBSEQUENT EVENTS:
The Company entered into a convertible debenture arrangement with Global
Capital Advisors, LTD to fund up to $4,500,000 over a two-year period. On
October 7, 1999 the Company borrowed $1,500,000 under this agreement. The
three-year convertible debenture bears interest at seven percent (7%) and
can be redeemed in the Company's common stock or cash. Additionally, the
Company is committed to issue up to 280,000 warrants with a strike price
of $1.54 per warrant. These convertible debentures are secured by a note
receivable from Link Two Communications, Inc. of $6,000,000.
F-37
<PAGE>
EAGLE WIRELESS INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 18 - SUBSEQUENT EVENTS: (continued)
Subsequent to August 31, 1999, the Company has signed a letter of intent
with Atlantic Pacific Communications, Inc. to start negotiations with
regard to entering into a merger, acquisition, or joint venture.
Subsequent to August 31, 1999, the Company has signed a letter of intent
with a Florida Company to start negotiations with regard to entering into
a merger, acquisition, or joint venture.
Subsequent to August 31, 1999, the Company has formed BroadbandMagic.com,
Inc., a wholly owned subsidiary. This subsidiary has been created
primarily to market and sell the Company's products.
F-38
<PAGE>
13,847,318 Shares
5,033,334 Class B Warrants
Eagle Wireless International, Inc.
Common Stock
Class B Warrants
-------------------------
PROSPECTUS
-------------------------
-------------------------
January __, 2000
-------------------------
You should only rely on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling security holders are offering to sell,
and seeking offers to buy, shares of common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of common stock.
<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
II-1
<PAGE>
and agents may be so paid upon such terms and conditions, if any, as the Board
of Directors deems appropriate.
II-2
<PAGE>
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.
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............. $ n/a
NASD Registration Fee............ n/a
Printing and Engraving Expenses.. 5,000
Legal Fees and Expenses.......... 10,000
Accounting Fees and Expenses..... 5,000
Blue Sky Fees and Expenses....... n/a
Transfer Agent Fees.............. n/a
Miscellaneous.................... 5,000
TOTAL................... $25,000
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
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 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 1997, the company issued 82,445 shares of common stock to an
entity 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 1997 the company issued 59,960 shares of common stock to an
individual in connection with the acquisition of his company's assets. 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-3
<PAGE>
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
transaction is exempt from registration pursuant to Section 4(2) of the Action
as a transaction by an issuer not involving any public offering.
In December 1997, the company issued class C warrants to purchase 50,000
shares of common stock to an individual 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 February 1998, the company issued options to purchase 6,000 shares
pursuant to the stock option plan. 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 April 1998, the company issued options to purchase 6,500 shares
pursuant to the stock option plan. 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 1998, the company issued options to purchase 37,000 shares
pursuant to the stock option plan. 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 1998, the company issued 95,564 shares of common stock to an
entity 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 February 1999, the company issued 34,470 shares to a consultant for
services rendered in the amount of $67,927.69. 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 1999, the company issued 1,775,209 shares of common stock to
seven individuals, four trusts and two entities upon the exercise of certain
warrants. 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 September 1999, the company issued 61,667 shares of common stock to two
individuals for $36,317. The company believes that these issuances were exempt
from registration pursuant to Section 4(2) of the Act as transactions by an
issuer not involving any public offering.
In October 1999, the company issued a convertible note in the amount of
$1,500,000. The company believes that this issuance was exempt from registration
pursuant to Section 4(2) of the Act as a transaction by an issuer not involving
any public offering.
II-4
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
----------- -----------------------------------------------------------
<S> <C>
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
10.3(1) Form of Purchase Order
10.4(1) Mega Holding Corporation Agreement
10.5(3) Stock Purchase Agreement by and between Eagle Wireless and
GCA Strategic Investment Fund Limited
23.1(2) Consent of McManus & Co., Inc.
23.2(3) Consent of Brewer & Pritchard, P.C.
</TABLE>
- ---------------
(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) Filed as Exhibit 10.1 to the company's Registration Statement on Form S-3
(File No. 333-20011) and incorporated by reference.
(4) 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
II-5
<PAGE>
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-6
<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 League City, State of Texas, on the 18 day of January, 2000.
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----------------------------------- ----------------------
<S> <C> <C>
/s/ H. DEAN CUBLEY President, chief executive officer January 18, 2000
- -------------------------- and director
H. Dean Cubley
/s/ RICHARD ROYALL Chief financial officer (principal January 18, 2000
- -------------------------- financial and accounting officer)
Richard Royall
/s/ CHRISTOPHER W. FUTER Director January 18, 2000
- --------------------------
Christopher W. Futer
/s/ A.L. CLIFFORD Director January 18, 2000
- --------------------------
A.L. Clifford
</TABLE>
II-7
EXHIBIT 5.1
January 18, 2000
Dr. H. Dean Cubley
Eagle Wireless International, Inc.
910 Gemini
Houston, Texas 77058
Dear Dr. Cubley:
As counsel for Eagle Wireless International, Inc., a Texas corporation
("Company"), you have requested our firm to render this opinion in connection
with Post Effective Amendment No. 4 to the registration statement of the Company
on Form SB-2 (File Number 333-20011) filed under the Securities Act of 1933, as
amended ("Act"), with the Securities and Exchange Commission relating to the
resale of (i) 13,847,318 shares of common stock ("Common Stock") (of which
2,730,650 shares are currently outstanding and 11,116,668 shares are issuable
upon exercise of outstanding warrants), and (ii) 5,033,334 class B 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 and Warrants are validly issued, fully paid
and non-assessable.
<PAGE>
Dr. H. Dean Cubley
January 18, 2000
Page 2
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.
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.
//BREWER & PRITCHARD//
TCP/chc
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use
of our report dated December 13, 1999 on the financial statements of Eagle
Wireless International, Inc. as of August 31, 1999 and 1998 included in the
Prospectus which is a part of the SB-2 Registration Statement dated January 18,
2000 covering the registration of 2,730,650 shares of common stock, and
11,116,668 shares of common stock underlying currently exercisable warrants, and
to the reference to us under the heading "Experts" in such Prospectus
Houston, Texas
January 18, 2000//s// McMANUS & CO. P.C.
MCMANUS & CO. P.C.,
CERTIFIED PUBLIC ACCOUNTANTS
