<PAGE>

                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549

                                      ---------

                                      FORM 10-Q


(Mark One)

/X/      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
         EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1997    
                               ------------------

                                          OR

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

For the transition period from                      to 
                               --------------------    ---------------------

                      Commission file number  333-20295
                                              ---------

                           CS Wireless Systems, Inc.
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           (Exact Name of Registrant as Specified in Its Charter)

                Delaware                               23-2751747            
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      (State or Other Jurisdiction of      (I.R.S. Employer Identification No.)
       Incorporation or Organization)           

200 Chisholm Place, Suite 202, Plano, Texas               75075     
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 (Address of Principal Executive Offices)               (Zip Code)

Registrant's Telephone Number, Including Area Code     (972) 633-4000   
                                                       --------------

                                        N/A                                
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   Former Name, Former Address and Former Fiscal Year, if Changed Since Last
                                      Report.

         Indicate by check whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  /X/    No  / /

         Indicate the number of shares outstanding of each of the issuer's 
classes of common stock, as of the latest practicable date:

                                                     Shares Outstanding
                          Class                    as of November 14, 1997
                          -----                    -----------------------

               Common Stock, $.001 par value             10,700,506       

<PAGE>

                          PART  I  -  FINANCIAL INFORMATION

ITEM 1.

                      CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                     (Unaudited)
                           (In thousands, except share data)

                                                    SEPTEMBER 30,   DECEMBER 31,
                                                         1997           1996
                                                    -------------   ------------
               ASSETS

Current assets:
    Cash and cash equivalents. . . . . . . . . . . . . $ 83,453        $113,072
    Investment in restricted cash (Note 2) . . . . . .    5,030              --
    Subscriber receivables, net. . . . . . . . . . . .      817           1,079
    Notes receivable . . . . . . . . . . . . . . . . .       --           1,510
    Prepaid expenses and other . . . . . . . . . . . .      755             689
                                                       --------        --------
    Total current assets . . . . . . . . . . . . . . .   90,055         116,350

Plant and equipment, net . . . . . . . . . . . . . . .   42,837          42,955
License and leased license investment, net . . . . . .  169,222         172,953
Goodwill, net. . . . . . . . . . . . . . . . . . . . .   49,175          52,011
Assets held for sale (Note 2). . . . . . . . . . . . .    4,609          19,366
Investment in and loans to equity affiliates (Note 2).    8,932              --
Debt issuance costs and other assets, net. . . . . . .   10,924          10,602
                                                       --------        --------
    Total assets . . . . . . . . . . . . . . . . . . . $375,754        $414,237
                                                       --------        --------
                                                       --------        --------

    LIABILITIES AND STOCKHOLDERS' EQUITY                             
Current liabilities:                                                 
    Accounts payable and accrued expenses. . . . . . . $  5,079        $  5,440
    Accounts payable to affiliates . . . . . . . . . .       29           1,215
    Current portion of long-term debt. . . . . . . . .      236           3,194
    Current portion of BTA auction payable . . . . . .    1,324             646
    Other current liabilities. . . . . . . . . . . . .    2,026           1,043
                                                       --------        --------
    Total current liabilities. . . . . . . . . . . . .    8,694          11,538

Long-term debt, less current portion . . . . . . . . .  275,876         268,180
BTA auction payable, less current portion. . . . . . .    3,882           4,256
Deferred income taxes. . . . . . . . . . . . . . . . .    1,357           5,429
                                                       --------        --------
    Total liabilities. . . . . . . . . . . . . . . . .  289,809         289,403
                                                       --------        --------
Stockholders' equity:
   Preferred stock, $.01 par value; authorized 
     5,000,000 shares, no shares issued and 
     outstanding . . . . . . . . . . . . . . . . . . .      --              -- 
   Common stock, $.001 par value; authorized 
     40,000,000 shares,issued and outstanding 
     10,700,506 shares in 1997 and 10,445,408 shares 
     in 1996 . . . . . . . . . . . . . . . . . . . . .       11              10
   Additional paid-in capital. . . . . . . . . . . . .  154,557         154,558
   Treasury stock, at cost; 2,103 shares in 1997 . . .      (40)            -- 
   Accumulated deficit . . . . . . . . . . . . . . . .  (68,583)        (29,734)
                                                       --------        --------
    Total stockholders' equity . . . . . . . . . . . .   85,945         124,834
                                                       --------        --------
    Total liabilities and stockholders' equity . . . . $375,754        $414,237
                                                       --------        --------
                                                       --------        --------

See accompanying notes to unaudited condensed consolidated financial statements

                                       2
<PAGE>
                                       
               CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)
                        (In thousands, except share data)
<TABLE>

                                               THREE MONTHS ENDED     NINE MONTHS ENDED
                                                  SEPTEMBER 30,         SEPTEMBER 30,
                                               ------------------     -----------------
                                                  1997     1996         1997      1996
                                               ---------  -------     ---------  ------
<S>                                            <C>       <C>         <C>        <C>    
Revenue  . . . . . . . . . . . . . . . . . .   $  6,746  $  6,274    $ 20,246   $ 15,994
Operating expenses:
   Systems operations. . . . . . . . . . . .      3,822     3,731      11,174      9,400
   Selling, general and administrative . . .      4,528     3,984      12,299      9,726
   Depreciation and amortization . . . . . .      6,976     6,074      20,266     13,853
                                               --------- ---------   ---------  ---------
      Total operating expenses . . . . . . .     15,326    13,784      43,739     32,979
                                               --------- ---------   ---------  ---------
Operating loss . . . . . . . . . . . . . . .     (8,580)   (7,515)    (23,493)   (16,985)
                                               --------- ---------   ---------  ---------
Other income (expense):
   Interest income . . . . . . . . . . . . .      1,379     1,929       4,261      4,907
   Interest expense. . . . . . . . . . . . .     (7,863)   (7,245)    (23,952)   (17,490)
   Equity in losses of affiliates. . . . . .       (385)       --        (385)        --
   Other (Note 2). . . . . . . . . . . . . .         (7)       --         648         --
                                               --------- ---------   ---------  ---------
      Total other expense, net . . . . . . .     (6,876)   (5,316)    (19,428)   (12,583)
                                               --------- ---------   ---------  ---------
Loss before income taxes . . . . . . . . . .    (15,456)  (12,831)    (42,921)   (29,568)
Income tax benefit . . . . . . . . . . . . .      1,358     4,345       4,072     10,234
                                               --------- ---------   ---------  ---------
Net loss . . . . . . . . . . . . . . . . . .   $(14,098) $ (8,486)   $(38,849)  $(19,334)
                                               --------- ---------   ---------  ---------
                                               --------- ---------   ---------  ---------

Net loss per common share. . . . . . . . . .   $  (1.32) $  (0.84)   $  (3.66)  $  (2.21)
                                               --------- ---------   ---------  ---------
                                               --------- ---------   ---------  ---------
</TABLE>
                                       
              See accompanying notes to unaudited condensed 
                      consolidated financial statements

                                       3
<PAGE>
                  CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
                                       
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                 (In thousands)
<TABLE>
                                                                NINE MONTHS ENDED
                                                           ----------------------------
                                                           SEPTEMBER 30,  SEPTEMBER 30,
                                                               1997          1996
                                                           -------------  -------------
<S>                                                        <C>            <C>
Cash flows from operating activities:
    Net loss . . . . . . . . . . . . . . . . . . . . . . .   $(38,849)     $(19,334)
    Adjustments to reconcile net loss to net cash                        
     provided by (used in) operating activities:                         
       Depreciation and amortization . . . . . . . . . . .      20,266       13,853
       Deferred income taxes . . . . . . . . . . . . . . .     (4,072)      (10,234)
       Accretion on discount notes and amortization of 
        debt issuance costs. . . . . . . . . . . . . . . .     22,444        16,390
       Non-cash interest expense on other long-term debt .      1,402         1,036
       Gain on sale. . . . . . . . . . . . . . . . . . . .       (648)           --
       Equity in losses of affiliates. . . . . . . . . . .        385            --
       Changes in assets and liabilities, net of effects                    
        of contributions:                                                   
          Subscriber receivables. . . . . . . . . . . . .         273           (58)
          Prepaid expenses and other. . . . . . . . . . .        (144)         (122)
          Accounts payable, accrued expenses and other                      
           liabilities. . . . . . . . . . . . . . . . . .      (1,630)          386
                                                             ---------     ---------
          Net cash provided by (used in) operating 
           activities . . . . . . . . . . . . . . . . . .        (573)        1,917
                                                             ---------     ---------
Cash flows from investing activities:                                
    Purchases of plant and equipment . . . . . . . . . . .    (12,796)       (9,817)
    Additions to license and leased license investment . .     (2,727)      (11,230)
    Investment in assets held for sale . . . . . . . . . .       (943)           --
    Proceeds from sale of assets . . . . . . . . . . . . .     16,350            --
    Investment in restricted cash. . . . . . . . . . . . .     (5,030)           --
    Investment in equity affiliates. . . . . . . . . . . .     (5,899)           --
    Other. . . . . . . . . . . . . . . . . . . . . . . . .       (540)         (515)
                                                             ---------     ---------
          Net cash used in investing activities. . . . . .    (11,585)      (21,562)
                                                             ---------     ---------
Cash flows from financing activities:                                   
    Payments on notes payable. . . . . . . . . . . . . . .    (17,377)      (30,739)
    Payment on capital leases and other. . . . . . . . . .        (84)           --
    Proceeds from unit offering. . . . . . . . . . . . . .         --       229,484
    Debt issuance costs. . . . . . . . . . . . . . . . . .         --       (10,792)
    Cash distributed pursuant to contributions . . . . . .         --       (31,648)
                                                             ---------     ---------
          Net cash provided by (used in) financing 
           activities. . . . . . . . . . . . . . . . . . .    (17,461)      156,305
                                                             ---------     ---------
Net increase (decrease) in cash and cash equivalents . . .   $(29,619)     $136,660
Cash and cash equivalents at beginning of period . . . . .    113,072           184
                                                             ---------     ---------
Cash and cash equivalents at end of period . . . . . . . .   $ 83,453      $136,844
                                                             ---------     ---------
                                                             ---------     ---------
</TABLE>
               See accompanying notes to unaudited condensed 
                     consolidated financial statements

                                       4
<PAGE>

                      CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  September 30, 1997
                                     (Unaudited)

(1) GENERAL
    (a)  DESCRIPTION OF BUSINESS
         CS Wireless Systems, Inc. and its subsidiaries (the "Company" or "CS 
Wireless") develop, own and operate a network of wireless cable television 
systems providing subscription television services.  The Company has a 
portfolio of wireless cable channel rights (or wireless spectrum) in various 
markets in the United States.  As of September 30, 1997, the Company had 
systems in operation in ten markets. Systems in other markets are currently 
under construction and development by the Company.  The Company also intends 
to use a portion of its wireless spectrum for high-speed Internet access.

    (b)  BASIS OF PRESENTATION
         The unaudited condensed consolidated financial statements include 
the accounts of the Company and its subsidiaries.  All significant 
intercompany accounts and transactions have been eliminated in consolidation.

         The accompanying unaudited condensed consolidated financial 
information for the period from January 1, 1996 through February 23, 1996 
reflects the combined financial position and results of operations for the 
Company's wireless cable system serving the Cleveland, Ohio metropolitan 
area, which includes the accounts of the Company and certain assets of an 
affiliated company, Atlantic Microsystems, Inc.  For the period subsequent to 
February 23, 1996, the Company's consolidated financial statements include 
the results of operations of the entities and assets contributed to the 
Company on February 23, 1996 by CAI Wireless Systems, Inc. ("CAI") and 
Heartland Wireless Communications, Inc. ("Heartland") (the "February 23, 1996 
Contributions").

    (c)  INTERIM FINANCIAL INFORMATION
         In the opinion of management, the accompanying unaudited condensed 
consolidated financial statements of the Company contain all adjustments, 
consisting only of those of a normal recurring nature, necessary to present 
fairly the Company's financial position as of September 30, 1997, and the 
results of operations for the three and nine months ended September 30, 1997 
and 1996 and cash flows for the nine months ended September 30, 1997 and 
1996. These results are not necessarily indicative of the results to be 
expected for the full fiscal year.

    (d)  COMMON SHARES OUTSTANDING AND NET LOSS PER COMMON SHARE
         Net loss per common share is based on the net loss applicable to the 
weighted average number of common shares outstanding of approximately 
10,700,506 and 10,110,000 for the three month periods ended September 30, 
1997 and 1996, respectively and 10,618,451 and 8,758,882 in the nine months 
periods ended September 30, 1997 and 1996.  For purposes of the accompanying 
condensed consolidated financial information, the Company has retroactively 
adjusted all references to the number of outstanding shares prior to February 
23, 1996 to reflect the number of shares issued to CAI on February 23, 1996 
related to the wireless cable television system in Cleveland, Ohio.  Shares 
issuable upon exercise of stock options are anti-dilutive and have been 
excluded from the calculation.  Fully-diluted loss per common share is not 
presented as it would not materially differ from primary loss per common 
share.

(2) COMPLETED TRANSACTIONS 
    On May 22, 1997 the Company sold to BellSouth Corporation, pursuant to 
the July 25, 1996 purchase agreement, (i) certain leases and licenses for 
wireless cable channel rights in Adairsville, Power Crossroads and Rutledge, 
Georgia (Atlanta Suburbs markets) and leases for four tower sites; (ii) the 
BTA license relating to Atlanta, Georgia and (iii) certain other assets and 
reimbursable expenses for approximately $16.4 million, resulting in a gain of 
approximately $0.7 million.
    
    On August 4, 1997 the Company acquired a 25% ownership interest in 
TelQuest Satellite Services LLC ("TelQuest"), for consideration of an initial 
contribution of $2.5 million in cash (payable in quarterly installments 
beginning August 1997) and, through a lease, up to $2.5 million in equipment. 
At September 30, 1997 the Company's recorded investment in TelQuest was $4.2 
million.  TelQuest was formed to provide digital video programming signals 
through its headend in the sky satellite service.  The Company has entered 
into a ten-year 

                                       5

<PAGE>
                      CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                September 30, 1997
                                   (Unaudited)

Affiliation Agreement with TelQuest through which the Company will receive 
TelQuest's headend in the sky service as well as other services offered by 
TelQuest.  TelQuest Satellite Services LLC's other members are TelQuest 
Communications, Inc. and CAI.  Both CAI and TelQuest Communications, Inc. are 
affiliated entities.

    On September 3, 1997, pursuant to an agreement dated as of November 6, 
1996,  the Company consummated an exchange with Peoples Choice TV Corp. of 
wireless cable channel rights and related assets in Salt Lake City, Utah for 
wireless cable channel rights and related assets in Kansas City, Missouri. 

    On September 29, 1997, the Company acquired 39% of the voting common 
stock of Television Interactiva del Norte, S.A. de C.V. ("Telinor") from 
Heartland for cash proceeds of $915,000 and assumption of a cash call 
obligation in the amount of $145,000.  The Company also purchased from 
Heartland two unsecured promissory notes payable by Telinor for $2.56 
million, including accrued interest.  The two notes were immediately 
restructured into one unsecured note accruing interest at 12% and maturing on 
September 21, 2002.  Additionally, the Company consummated another 
transaction with the principal stockholders of Telinor whereby the Company 
purchased 49% of the voting stock of Television Inalambrica, S.A. de C.V. 
("Television") for cash in the amount of $1.0 million and committed to 
(i) loan Television up to the sum of $5.4 million in cash or (ii) finance an 
equivalent amount in sales of the Company's equipment to Television.  The 
funds committed have been deposited into escrow pending disbursement or 
reduction of the required escrow amount through equipment sales to 
Television.  As of September 30, 1997 approximately $5.0 million is held in 
escrow pursuant to this agreement.  As of September 30, 1997, the Company's 
recorded Investment in Telinor and Television was $2.2 million. Telinor and 
Television were formed to develop wireless cable television systems providing 
subscription television services in Mexico.

(3)  PENDING TRANSACTIONS
    The Company has entered into a letter of intent with Heartland, pursuant 
to which Heartland will acquire the Company's wireless cable operating system 
in Radcliffe, Iowa and wireless cable channel rights in Scottsbluff, Nebraska 
and Kalispell, Montana for an aggregate of approximately $3.9 million.  
Heartland is operating or maintaining each of these markets, as applicable, 
under a Management Agreement.  Accordingly, the carrying amount of such 
assets of $3.9 million has been classified as assets held for sale in the 
accompanying condensed consolidated balance sheet.

(4)  RECENT ACCOUNTING PRONOUNCEMENTS
    Statement of Financial Accounting Standards No. 128 ("SFAS 128"), 
"Earnings per Share," which superseded APB Opinion No. 15, "Earnings per 
Share," was issued in February 1997.  SFAS 128 requires dual presentation of 
basic and diluted earning per share ("EPS") for complex capital structures on 
the face of the statements of operations.  Basic EPS is computed by dividing 
income (loss) by the weighted-average number of common shares outstanding for 
the period. Diluted EPS reflects the potential dilution from the exercise or 
conversion of securities into common stock, such as stock options.  SFAS 128 
is required to be adopted for year-end 1997; earlier application is not 
permitted.  Due to the Company's net losses, the loss per share amounts 
included in the accompanying statements of operations would not differ from 
the basic or the dilutive loss per share amounts calculated under SFAS 128.

 (5) CONTINGENCIES
    The Company is a party to legal proceedings incidental to its business.  
A discussion of certain of these legal proceedings is contained in Part II, 
Item 1 "Legal Proceedings" of this Form 10-Q.  The Company believes that the 
ultimate resolution of the legal proceedings will not have a material adverse 
effect on the Company's consolidated financial position, operating results or 
liquidity.

                                       6

<PAGE>

ITEM 2.

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                              AND RESULTS OF OPERATIONS

OVERVIEW 

    CS Wireless Systems, Inc. and its subsidiaries (the "Company" or "CS 
Wireless") develop, own and operate a network of wireless cable television 
systems providing subscription television services.  The Company has a 
portfolio of wireless cable channel rights (or wireless spectrum) in various 
markets in the United States.  As of September 30, 1997, the Company had 
systems in operation in ten markets. Systems in other markets are currently 
under construction and development by the Company.  The Company also intends 
to use a portion of its wireless spectrum for high-speed Internet access.

RESULTS OF OPERATIONS
    
GENERAL.  Period to period comparisons of financial results are not 
necessarily meaningful due to certain contributions to, and acquisition by, 
the Company and its predecessor, ACS Ohio, Inc. ("ASC Ohio").  ACS Ohio owned 
and operated the wireless cable television system serving the Cleveland, Ohio 
metropolitan area. ACS Ohio, its parent and various affiliates were acquired 
by CAI Wireless Systems, Inc. ("CAI") in September, 1995.  CAI and Heartland 
Wireless Communications, Inc., ("HWC") contributed to the Company on February 
23, 1996, certain wireless cable television assets comprising various 
domestic markets (the "February 23, 1996 Contributions").  Financial 
information for the period January 1, 1996 through February 23, 1996 reflects 
the combined financial position and results of operations for the Company's 
wireless cable system serving the Cleveland, Ohio metropolitan area, which 
includes the accounts of the Company and certain assets of an affiliated 
company, Atlantic Microsystems, Inc.  For the period subsequent to February 
23, 1996, the Company's consolidated financial statements include the results 
of operations of the entities and assets contributed to the Company as part 
of the February 23, 1996 Contributions.  Additionally, on October 11, 1996 
the Company acquired all of the issued and outstanding common stock of USA 
Wireless Cable, Inc. whereby the Company acquired certain assets in certain 
Midwest markets ("USA Wireless Acquisition").

REVENUE.  The Company's revenue primarily consists of monthly fees paid by 
subscribers for basic programming, premium programming and equipment rental. 
The Company's revenue was $6.7 million for the third quarter of 1997 compared 
to $6.3 million for the third quarter of 1996, an increase of 7.5%.  Revenue 
for the nine months ended September 30, 1997 was $20.2 million, compared to 
$16.0 million for the comparable prior year period, an increase of 26.6%.  
The increase in revenue for the periods presented is primarily due to average 
subscribers increasing to approximately 65,425 for the third quarter of 1997 
compared to approximately 59,390 for the prior year period, an increase of 
10.2% and approximately 65,520 for the nine months ended September 30, 1997 
compared to approximately 51,150 for the prior year period, a 28.1% increase. 
The increase in subscriber levels is attributed to the February 23, 1996 
Contributions and the USA Wireless Acquisition.  The Company had ten systems 
in operation at September 30, 1997 compared to nine systems in operation at 
September 30, 1996, including eight markets relating to the February 23, 1996 
Contributions.  The increase in revenue attributed to subscriber growth was 
partially offset by a decrease in average recurring revenue per subscriber to 
approximately $33.63 and $33.56 for the quarter and nine months ended 
September 30, 1997 from approximately $34.68 and $34.27 for the comparable 
prior year periods.

SYSTEMS OPERATIONS.  Systems operations primarily include programming costs, 
channel lease payments, transmitter site and tower rentals, and other costs 
of providing service.  Programming costs (with the exception of minimum 
payments) and channel lease payments (with the exception of certain fixed 
payments) are variable expenses which generally increase as the number of 
subscribers increase.  Systems operations expenses were $3.8 million and 
$11.2 million for the quarter and nine months ended September 30, 1997 
compared to $3.7 million and $9.4 million for the prior year periods. The 
increase in systems operations expense for the third quarter of 1997 compared 
to the third quarter of 1996 is principally due to the increase in 
subscribers brought about by the USA Wireless Acquisition.  The increase in 
systems operations expense for the nine months ended September 30, 1997 
compared to the prior year period is primarily due to the increase in the 
subscriber base brought about by the February 23, 1996 Contributions and the 
USA Wireless Acquisition. 

                                       7

<PAGE>

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                        AND RESULTS OF OPERATIONS-(Continued)

SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and administrative 
expenses ("SG&A") were $4.5 million and $12.3 million for the quarter and 
nine months ended September 30, 1997, compared to $4.0 million and $9.7 
million for the comparable prior year periods.  The increase in SG&A for the 
third quarter of 1997 compared to the prior year period is attributed to the 
increase in the subscriber base brought about by the USA Wireless 
Acquisition.  The increase in SG&A for the nine months ended September 30, 
1997 compared to the prior year period is principally due to an increase in 
the subscriber base brought about by the February 23, 1996 Contributions and 
the USA Wireless Acquisition, and to a lesser extent, certain costs 
associated with the activities preparing for the launch of digital video and 
high speed Internet access services in Dallas, Texas.

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense 
includes depreciation of systems and equipment, amortization of licenses and 
leased license investment and goodwill.  Depreciation and amortization 
expenses were $7.0 million and $20.3 million for the quarter and nine months 
ended September 30, 1997, compared to $6.1 million and $13.9 million for the 
prior year periods.  The increase in depreciation and amortization expense 
during the periods presented is attributed to capital expenditures and to the 
additional plant and equipment, subscriber equipment, and leased license 
investment contributed to the Company in connection with the February 23, 
1996 Contributions and the USA Wireless Acquisition.

OPERATING LOSS.  The Company generated operating losses of $8.6 million and 
$23.5 million for the quarter and nine months ended September 30, 1997 
compared to $7.5 million and $17.0 million for the comparable prior year 
periods. Consolidated earnings before interest, taxes, depreciation and 
amortization ("EBITDA") were a negative $1.6 million and a negative $3.2 
million for the quarter and nine months ended September 30, 1997, compared to 
a negative $1.4 million and $3.1 million for the prior year periods.  The 
increase in the Company's operating loss and decrease in EBITDA during the 
periods presented is primarily due to incremental net operating costs 
associated with the February 23, 1996 Contributions and the USA Wireless 
Acquisition.

INTEREST INCOME.  Interest income was $1.4 million and $4.3 million for the 
quarter and nine months ended September 30, 1997, compared to $1.9 million 
and $4.9 million for the comparable prior year periods.  The Company 
consummated a private placement of $400.0 million of 11 3/8% Senior Discount 
Notes (the "Senior Discount Notes") on February 23, 1996, resulting in net 
proceeds of $162.9 million (net of debt issuance costs, payment on notes and 
distributions pursuant to the February 23, 1996 Contributions).  The decrease 
in interest income is primarily due a decrease in the average invested 
balance, partially offset by cash equivalents being invested for a shorter 
period in 1996 compared to 1997.

INTEREST EXPENSE.  The Company incurred interest expense of $7.9 million and 
$24.0 million for the quarter and nine months ended September 30, 1997, 
compared to $7.2 million and $17.5 million for the comparable prior year 
periods. Interest expense during the quarter and nine months ended September 
30, 1997 included (i) non-cash interest and accretion of deferred debt 
issuance costs of $7.6 million and $22.4 million, respectively, related to 
the Senior Discount Notes and (ii) non-cash interest of $.2 million and $1.5 
million, respectively, relating to the Heartland Long-Term Note ("Long Note") 
issued by the Company in connection with the February 23, 1996 Contributions 
and the BTA auction payable.  Interest expense during the quarter ended and 
nine months ended September 30, 1996 included non-cash interest and accretion 
of deferred debt issuance costs of $6.8 million and $17.5 million, 
respectively, related to the Senior Discount Notes and $.04 million and $.08 
million, respectively, primarily relating to the Heartland Long Note.

    INCOME TAX BENEFIT.  The Company recognized income tax benefits related 
to the Company's losses before income taxes of $1.4 million and $4.1 million 
for the quarter and nine months ended September 30, 1997, compared to $4.3 
million and $10.2 million for the comparable prior year periods.  The Company 
recognized income tax benefits to the extent of future expected reversals of 
existing taxable temporary differences.

NET LOSS.  The Company has recorded net losses since inception.  The Company 
incurred net losses of $14.1 million, or $1.32  per share, during the third 
quarter of 1997 compared to  $8.5 million, or $0.84 per share, during the 
prior year period and  $38.8 million, or $3.66 per share, during the nine 
months  ended  September 30, 1997, compared to $19.3 million, or $2.21 per 
share during the prior year period.  Although the Company's total revenue 
increased 7.5%  and 26.6% during the third quarter of 1997 and the nine 
months ended 

                                       8
<PAGE>

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                        AND RESULTS OF OPERATIONS-(Continued)

September 30, 1997 respectively, the Company's net losses have increased due 
to increased SG&A, system operations, depreciation and amortization and 
interest expense.

LIQUIDITY AND CAPITAL RESOURCES

    Companies within the wireless cable industry require significant capital. 
Funds are required for the lease or acquisition of channel rights, the 
acquisition of wireless cable systems, the construction of system head-end 
and transmission equipment, subscriber equipment, the conversion of analog 
systems to digital technology, start-up costs related to the commencement of 
operations and subscriber acquisitions and installation costs.  The Company 
intends to finance its capital requirements through a combination of cash on 
hand, the issuance of debt and equity securities, financing of equipment 
purchases, the disposition of wireless cable systems that are inconsistent 
with the Company's business strategy, the incurrence of loans and the 
assumption of debt and other liabilities in connection with acquisitions.  
There can be no assurance that the Company will be able to secure its capital 
requirements on terms and conditions satisfactory to the Company.  Each of 
the operating systems that was contributed to the Company in connection with 
the February 23, 1996 Contributions has incurred operating losses since 
inception. The combined cash flow from operating activities of the Company's 
operating systems has to date been insufficient to cover the combined 
operating expenses of such systems.  Accordingly, in the event the Company is 
unable to secure capital requirements on satisfactory terms and conditions, 
the ability of the Company to develop and expand operations and satisfy its 
indebtedness would be materially adversely affected.

    The Company expects to launch its first digital video market in the 
fourth quarter of 1997 in Dallas, depending on the availability of digital 
equipment and the successful construction of the necessary infrastructure.  
In addition, the Company is evaluating its other markets to determine where 
and when to convert existing analog markets to digital or offer hybrid 
digital services in conjunction with existing or planned analog services.  
However, in the interim, the Company intends to minimize capital expenditures 
in its analog markets.

    The Company plans to launch its first high speed Internet access service 
in the fourth quarter of 1997 in Dallas, depending on the availability of 
equipment and the successful construction of the necessary infrastructure.  
The Company is also evaluating its other markets to determine where and when 
to offer high speed Internet access services.

    For 1997, the Company estimates capital expenditures and investment in 
and loans to equity affiliates of approximately  $25.0 million and $12.0 
million, respectively.  Through September 30, 1997, such expenditures and 
investments have totaled $16.4 million and $10.9 million, respectively.  
Approximately $10.0 and $1.0 million of estimated capital expenditures 
relates to the launch of the digital video business and high speed Internet 
access service in Dallas; however, these amount may vary significantly 
depending on actual subscriber growth rates and the potential use of 
equipment leases for the acquisition of certain capital equipment.  In 
addition, the Company estimates total capital expenditures of approximately 
$6.0 million in its analog markets.  The remainder of the capital budget 
relates to strategic investments in items such as channel capacity.

    The key components of a new digital headend system are (1) the 
compression center (2) the transmitter site  and (3) repeater sites and 
microwave or other links, as necessary.  The Company estimates that the 
launch of a new digital wireless cable system in a typical market will 
require capital expenditures for the compression center of approximately $1.3 
million and  approximately $1.3 million for the transmitter site, based on 
utilizing a headend in the sky service such as offered by TelQuest Satellite 
Services, LLC ("Telquest") (see Note 2 to Condensed Consolidated Financial 
Statements).  The capital expenditures associated with facilities vary 
significantly by  market as do capital expenditures associated with microwave 
and other links.  The capital associated with a typical repeater site is 
estimated at approximately $800,000.  In total, with a headend in the sky 
solution, a new digital system is estimated to cost approximately $3.3 
million.  The capital expenditures associated with acquiring and installing 
each digital subscriber are estimated at approximately $750, based on a one 
terminal configuration.  Also, the capital expenditures required to modify an 
existing analog  head-end to offer a hybrid digital service  are  estimated 
at  $100,000, including  the utilization of a headend in the sky service such 
as that offered by TelQuest (see Note 2 to Condensed Consolidated Financial 
Statements).  

    The Company's Dallas/Fort Worth system is ultimately expected to require 
two repeater sites and the construction of an additional transmitter site in 
Fort Worth, with the final configuration being roughly equivalent to 

                                       9

<PAGE>

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                        AND RESULTS OF OPERATIONS-(Continued)

two stand alone systems.  In total, the capital expenditures estimated for 
the buildout of the Dallas/Fort Worth market are $7.5 million, inclusive of 
the compression center, transmitter site costs, repeater sites, microwave 
links, building and towers and warehouse and lab equipment.  Approximately 
$6.0 million of the total headend cost is budgeted for 1997.

    The anticipated investments in equity affiliates for the remainder of 
1997 include $1.0 million with respect to TelQuest and $145,000 with respect 
to Television del Norte, S.A. de C.V. and Television Inolombrica, S.A. de 
C.V. ("Television") (see Note 2 to Condensed Consolidated Financial 
Information).  Funds committed to Television pursuant to a commitment to loan 
up to $5.4 million may be released from time to time as the Company finances 
purchases by Television of equipment redeployed from the Company's domestic 
markets in conjunction with system conversions from analog to digital.

    Net cash used in operating activities during the nine months ended 
September 30, 1997 was $.6 million versus cash provided by operating 
activities of $1.9 million during the comparable prior year period.  The 
decrease in cash provided by operating activities was primarily due to timing 
of payments to vendors, increased SG&A and system operating expense, and to 
a lesser extent, certain costs associated with the activities preparing for 
the launch of digital video and high speed Internet access services in 
Dallas, Texas.

    Net cash used in investing activities was $11.6 million during the nine 
months ended September 30, 1997 compared to cash used in investing activities 
of $21.6 million during the comparable prior year period.  Cash used in 
investing activities primarily relates to the acquisition and installation of 
subscriber receive-site equipment, the acquisition of certain wireless cable 
channel rights, the investments in assets held for sale and the investment in 
equity affiliates.  The decrease in cash used in investing activities in the 
nine months ended September 30, 1997 is primarily due to the proceeds from 
the assets held for sale partially off-set by the investment in equity 
affiliates and restricted cash with no comparable amounts in the 
corresponding prior year period.

    Net cash used in financing activities was $17.5 million during the nine 
months ended September 30, 1997 compared to cash provided by financing 
activities of $156.3 million during the comparable prior year period.  Cash 
used in financing activities during the nine months ended September 30, 1997 
is primarily attributed to the repayment of $2.1 million of indebtedness 
related to the USA Wireless Acquisition and the repayment of $15.3 million of 
the Heartland Long-Term Note.  Net cash provided by financing activities 
during the nine months ended September 30, 1996 primarily represents the net 
proceeds from the Company's sale of the Senior Discount Notes reduced by cash 
distributed pursuant to the February 23, 1996 Contributions and the repayment 
of a $25.0 million note to Heartland.

FUTURE OPERATING RESULTS; FORWARD LOOKING STATEMENTS

    The Company's future revenues and profitability are difficult to predict 
due to a variety of risks and uncertainties, including (i) business 
conditions and growth in the Company's existing markets, (ii) the costs and 
level of consumer acceptance associated with the launch of systems in new 
markets, (iii) the availability and performance of digital compression 
equipment, (iv) the Company's existing indebtedness and the need for 
additional financing to fund subscriber growth and system development, (v) 
government regulation, including FCC regulations, and receipt of regulatory 
approvals for alternative uses of spectrum, (vi) the Company's dependence on 
channel leases, (vii) the successful integration of potential future 
acquisitions and (viii) numerous competitive factors, including alternative 
methods of distributing and receiving video transmissions.

    Because of the foregoing uncertainties affecting the Company's future 
operating results, past performance should not be considered to be a reliable 
indicator of future performance, and investors should not use historical 
trends to anticipate results or trends in future periods.  In addition, the 
Company's participation in a highly dynamic industry often results in 
significant volatility in the price of the Company's Senior Discount Notes.

    In addition to the matters noted above, certain other statements made in 
this report are forward-looking.  Such statements are based on an assessment 
of a variety of factors, contingencies and uncertainties deemed relevant by 
management, including technological changes, competitive products and 
services, management issues as well as those matters discussed specifically 
elsewhere herein.  As a result, the actual results realized by the Company 
could differ materially from those described in any forward-looking 
statements made herein.  Readers of this report are 

                                       10

<PAGE>

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                        AND RESULTS OF OPERATIONS-(Continued)

cautioned not to place undue reliance on the forward-looking statements made 
in this report.  A comprehensive listing of risk factors and a more detailed 
description of the Company's business are available in the Company's Annual 
Report on Form 10-K for the year ended December 31, 1996.

                                       11
<PAGE>
                             PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

    During the fourth quarter of 1996, the Company became aware of a dispute 
involving San Antonio Wireless, Inc. ("SAW") over the Company's lease rights 
to eight Instructional Television Fixed Services ("ITFS") channels for San 
Antonio. SAW is the putative lessee of channel capacity leases with two ITFS 
licensees and has asserted that predecessors of the Company were required to 
obtain SAW's consent to transfer sublease rights to the channel capacity to 
the Company. Therefore, SAW has asserted that the transfers of the lease 
rights to the Company were not valid.  SAW has also alleged that the Company 
failed to make monthly lease payments on a timely basis, and that those 
failures constituted a material breach of the lease agreements.  SAW has 
purported in writing to evict the Company from the channel leases.  The 
Company's position has been that either SAW's consent was not required for 
the transfers, or that SAW was required to give its consent pursuant to the 
channel leases.  The Company has also asserted that, to the extent it might 
have failed to make timely payments, such a failure or failures did not 
constitute a basis for SAW to terminate the Company's lease rights.  If SAW 
evicts the Company from the eight ITFS channels, the Company's inability to 
transmit on such channels in the present analog system could have a material 
adverse effect on the Company's ability to offer subscribers in the San 
Antonio Market an attractive programming package unless the Company can 
quickly convert its system in the market from analog to digital.  The Company 
has begun the conversion process.  In addition, SAW may pursue monetary 
damages related to the Company's unwillingness to vacate the channels.  SAW 
has filed a motion for summary judgment with respect to certain of its 
claims; the Company will contest the motion, which has been scheduled for 
hearing on November 19, 1997.

    Although there can be no assurance of the final resolution of this 
matter, the Company believes that, based upon its current knowledge of the 
facts of the case, it has meritorious defenses to the claims made and intends 
to defend the suit vigorously, and the Company does not believe that the 
outcome of this lawsuit will have a material adverse effect on the Company's 
financial position, results of operations or cash flows.

    The Company is a party to legal proceedings incidental to its business 
which, in the opinion of management, are not expected to have a material 
adverse effect on the Company's consolidated financial position, operating 
results or liquidity.

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

    Pursuant to a certificate of Written Consent of a Majority of the 
Stockholders in Lieu of an Annual Meeting ("Written Consent") dated July 22, 
1997, CAI and Heartland elected the members of the Board of Directors of the 
Company.  Jared E. Abbruzzese, Alan Sonnenberg, David Webb, James P. Ashman, 
Robert D. Happ, D. Michael Sitton, and William W. Sprague were re-elected to 
the Board to hold seven of the nine positions required under the Company's 
By-laws. Carroll D. McHenry and L. Allen Wheeler were also elected to serve 
on the Board of Directors to fill the required positions.

    Additionally, the majority of the Stockholders authorized pursuant to the 
Written Consent the (i) appointment of KPMG Peat Marwick as the Company's 
independent auditors for the fiscal year ending December 31, 1997, and (ii) 
the amendment of the 1996 CS Wireless Systems, Inc. Incentive Stock Option 
Plan (the "Plan") to (a) increase the number of shares of the Company's 
common stock eligible for granting under the Plan to 1.5 million shares, (b) 
permit the Plan Committee to grant stock awards, other than Incentive Stock 
Options, to independent contractors and service providers to the Company and 
its affiliates and (c) provide maximum flexibility to the Committee 
administering the Plan to determine vesting, exercise and expiration terms of 
the stock awards granted under the Plan on a case-by-case basis.

    All of the shares of the Company's common stock owned by Heartland and 
CAI were voted for each of matters voted upon pursuant to the Written 
Consent. Heartland and CAI collectively own approximately 9,257,201 shares of 
the Company's common stock.  

                                       12

<PAGE>

ITEM 5.  OTHER INFORMATION

    On September 4, 1997, the Company's Board of Directors approved the 
execution of Indemnity Agreements for the benefit of each of its officers and 
directors.  The Company believes such agreements provide each officer and 
director with specific contractual assurances regarding the protection 
provided such officer or director in the Company's By-laws.

    As reported on Form 8-K filed with the Securities and Exchange Commission 
on October 27, 1997, Mr. Sprague resigned from the Board of Directors citing 
other commitments.  Pursuant to the Stockholders' Agreement among CAI, 
Heartland and the Company dated as of February 23, 1996, CAI has the right to 
designate the successor to Mr. Sprague.  

                                       13

<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8 K

    (a)  Exhibits

         *10.1  Form of Indemnity Agreement
         *27    Financial Data Schedule

    (b)  Reports on Form 8 K

         (1) Report on Form 8-K filed August 29, 1997 with respect to Item 5.
         (2) Report on Form 8-K filed September 12, 1997 with respect to Item 5.
         (3) Report on Form 8-K filed October 27, 1997 with respect to Item 5.
         (4) Report on Form 8-K filed November 7, 1997 with respect to Item 5.

-----------------
*Filed herewith.

                                       14

<PAGE>

                                    SIGNATURE


    Pursuant to the requirements of the Securities Exchange Act of 1934, the 
registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.

Dated:  November 14, 1997              CS WIRELESS SYSTEMS, INC.


                                       By:  /s/ John M. Lund
                                       ------------------------------------
                                       John M. Lund
                                       Vice President -- Finance and Controller
                                       (Principal Financial Officer)

                                       15
<PAGE>

                               INDEX TO EXHIBITS

    Exhibits            Description
    --------            -----------

     *10.1      Form of Indemnity Agreement
     *27        Financial Data Schedule


-----------------
*Filed herewith.