U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB/A

--------------------------------------------------------------------------------

[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934

FOR THE FISCAL YEAR ENDED AUGUST 31, 1999

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

                        EAGLE WIRELESS INTERNATIONAL, INC.
              (Exact name of registrant as specified in its charter)

                         COMMISSION FILE NUMBER: 0-20011

            TEXAS                                         76-0494995
(State or Other Jurisdiction of                (IRS Employer Identification No.)
 Incorporation or Organization)

                  101 COURAGEOUS DRIVE, LEAGUE CITY, TEXAS 77573
                (Address of Principal Executive Office)(Zip Code)

                                   281-538-6000
               (Registrant's Telephone Number, Including Area Code)


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

Securities registered pursuant to Section 12(g) of the Act: Common Stock

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 past 90 days.

                                 Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

     ISSUER HAD $2,217,275 REVENUES FOR THE 12 MONTHS ENDED AUGUST 31, 1999.

The aggregate market value of the voting stock held by nonaffiliates of the
registrant, based on the average bid and ask price on the OTC Electronic
Bulletin Board on January 21, 2000 was $86,133,131. As of January 21, 2000
registrant had 14,306,468 shares of Common Stock outstanding.
<PAGE>
                                TABLE OF CONTENTS

ITEMS                                                                  PAGE

                                     PART I

ITEM 1.     DESCRIPTION OF BUSINESS......................................1

ITEM 2.     DESCRIPTION OF PROPERTIES....................................8

ITEM 3.     LEGAL PROCEEDINGS............................................9

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........9

                                     PART II


ITEM 5.     MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
            STOCKHOLDER MATTERS.........................................10

ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS.........................11

ITEM 7.     FINANCIAL STATEMENTS........................................12

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE.........................12


                                    PART III

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
            CONTROL PERSONS.............................................13

ITEM 10.    EXECUTIVE COMPENSATION......................................16

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
            OWNERS MANAGEMENT...........................................17

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTION...............17

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K............................17
<PAGE>
                                     PART I

ITEM 1.     DESCRIPTION OF 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 were incorporated in May 1993, but did not conduct any substantive
business operations until April 1996. In August 1997, we amended our articles of
incorporation and changed our name to its current name. Unless otherwise
indicated, all information in this Form 10-KSB/A has been adjusted to reflect
the amended articles of incorporation. We are located at 101 Courageous Drive,
League City, Texas, 77573 and our telephone number is 281-538-6000.

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

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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
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.

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      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:

      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

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<PAGE>
receives the paging data on either a radio frequency, or RF, control link or
wireline link and converts this information into low power simulcast compatible
paging transmissions on any of the common paging frequencies. The Extend-a-Page
transmits the paging information at a one to two Watt level directly into hard
to reach locations such as hospitals, underground structures, large industrial
plants, and many locations near the outer coverage contour of paging systems.

      LINK PRODUCTS

      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, or 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.
We are 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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<PAGE>
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 a customer seeks new services or system expansions. 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.

INTERNATIONAL BUSINESS RISK

      In 1998 and 1999, we generated net sales in markets outside of the United
States, which amounted to 1.3%, and .5% of our total net sales for the fiscal
years ended August 31, 1998, and 1999 respectively. Sales are subject to

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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
purchase 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.

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

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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.

EMPLOYEES

      At January 20, 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.

RECENT DEVELOPMENTS

      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. The three-year convertible debenture
bears

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interest at seven percent and can be redeemed in our common stock or cash. These
convertible debentures are secured by a note receivable from Link Two
Communications, Inc. of $6,000,000.

ITEM 2.     DESCRIPTION OF PROPERTY

      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.

ITEM 3.     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 filed in the County Civil Court at Law No.1 in
Harris County, Texas. 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.

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

      None.

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                                     PART II

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

      Our common stock trades under the symbol EGLW on the OTC Electronic
Bulletin Board. The market for our common stock on the OTC Electronic Bulletin
Board is limited, sporadic and highly volatile. The following table sets forth
the high and low bid prices per share of the our common stock since trading
commenced on the OTC Electronic Bulletin Board on October 27, 1997, as reported
by the OTC Electronic Bulletin Board. These prices reflect inter-dealer prices,
without retail mark-ups, mark-downs or commissions, and may not necessarily
represent actual transactions.

     FISCAL YEAR ENDED AUGUST 31, 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 YEAR ENDED AUGUST 31, 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

      On January 20, 2000, the last sales price of our common stock as reported
by the OTC Electronic Bulletin Board was $6.19. We believe that as of January
20, 1999, there were over 230 record owners of our common stock. Our present
policy is not to pay cash dividends and to retain future earnings to support
future 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
may deem relevant.

RECENT SALES OF UNREGISTERED SECURITIES IN FISCAL 1999

      In February 1999, we issued 34,470 shares to a consultant for services
rendered in the amount of $67,927.69. We believe 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, we issued 1,775,209 shares of common stock to seven
individuals, four trusts and two entities upon the exercise of certain warrants.
We believe 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, we issued 61,667 shares of common stock to two
individuals for $36,317. WE believe 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, we issued a convertible note in the amount of $1,500,000.
We believe 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.

                                       9
<PAGE>
ITEM 6.     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.

      We plan to concentrate our business efforts in the 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. We plan to focus our marketing resources to
identify product demand for the set-top devices and development new wireless
application customers. Concurrent with this marketing effort, we intend to
negotiate 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 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

                                       10
<PAGE>
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.

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 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 will provide sufficient working capital
through June 2000. However, 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. Thereafter, we will need additional working capital,
either by drawing down on our credit facility through the exercise of warrants,
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 20, 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.

                                       11
<PAGE>
      As of January 20, 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:

      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.

ITEM 7.     FINANCIAL STATEMENTS

      The financial statements prepared in accordance with Item 310 of
Regulation S-B are included in this report commencing on page F-1.

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE

      There have been no disagreements concerning matters of accounting
principles or financial statement disclosure between Eagle Wireless and McManus
& Company of the type requiring disclosure hereunder.

                                       12
<PAGE>
                                    PART III

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
            COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

      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 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, from October 1990 until
February 1991. Mr. Futer resigned from Universal Cellular in February 1991 due
to his disagreement with Universal Cellular 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.

                                       13
<PAGE>
      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.

      During the fiscal year ended August 31, 1999, our board of directors had
four meetings. No incumbent director attended fewer than 75% of the aggregate
number of meetings of the Board. 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.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

      Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers, and persons who own beneficially more than ten
percent of our common stock, to file reports of ownership and changes of
ownership with the Securities and Exchange Commission. Based solely on the
reports received by Eagle Wireless and on representations from certain reporting
persons, we believe that the directors, executive officers, and greater than ten
percent beneficial owners have complied with all applicable filing requirements.

ITEM 10.    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.

                                       14
<PAGE>
                           SUMMARY COMPENSATION TABLE
                               ANNUAL COMPENSATION
<TABLE>
<CAPTION>
                                        ANNUAL COMPENSATION                                   LONG-TERM COMPENSATION
                               -------------------------------------            -------------------------------------------------
NAME AND PRINCIPAL                                                              RESTRICTED
POSITION                       YEAR       SALARY     BONUS     OTHER            STOCK AWARD            OPTIONS              OTHER
                               ----     ---------    ------    -----            -----------            -------              -----
<S>                            <C>      <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
<TABLE>
<CAPTION>

                                   OPTIONS GRANTED         PERCENT OF TOTAL        EXERCISE PRICE
            NAME                      (SHARES)              OPTIONS GRANTED         (PER SHARE)               EXPIRATION DATE
------------------------------ ------------------------ ------------------------ ------------------- -------------------------------
<S>                            <C>                      <C>                      <C>                 <C>
H. Dean Cubley                            -                        -                     -                           -
</TABLE>



         AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
                                                                                                                 VALUE OF
                          SHARES ACQUIRED      VALUE         NUMBER OF SECURITIES UNDERLYING            UNEXERCISED IN-THE-MONEY
          NAME              ON EXERCISE       REALIZED             UNEXERCISED 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 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.

                                       15
<PAGE>
ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS MANAGEMENT

      The following table sets forth, as of January 21, 2000, the number and
percentage of outstanding shares of our common stock owned by (1) each person
known to beneficially own more than 5% of our outstanding common stock, (2) each
director, (3) each named executive officer, and (4) all officers and directors
as a group.


                                       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                        1,484,000              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

                                       16
<PAGE>
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.

      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.

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED 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. On October 1, 1999, Link II refinanced its existing accounts payable
to us through the issuance of a $733,571 ten percent note secured by all lease
station licenses and a $6,000,000 ten percent note secured by all assets,
excluding licenses. These notes are due September 1, 2000. During October 1999,
we pledged as collateral on the $4,500,000 convertible note, the $6,000,000 note
receivable and its underlying collateral.

      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.

ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits.

EXHIBIT NO.                   IDENTIFICATION OF EXHIBIT

3.1(1)            Articles of Incorporation of the Company, as Amended
3.1(a)(1)         Amendment to the Articles of Incorporation
3.2(1)            By-laws
4.1(1)            Form of Common Stock Certificate
4.2(1)            Class A Warrant Agreement and Form of Warrant
4.3(1)            Class B Warrant Agreement and Form of Warrant
4.4(1)            Form of $.05 Warrant
4.5(1)            Form of $.50 Warrant
4.6(1)            Form of $5.00 Warrant
4.7(1)            Class C Warrant Agreement and Form of Warrant
10.1(1)           Asset Purchase Agreement
10.2(1)           Stock Option Plan
10.3(1)           Form of Purchase Order

                                       17
<PAGE>
10.4(1)           Mega Holding Corporation Agreement
10.5(2)           Stock Purchase Agreement by and between Eagle Wireless and GCA
                  Strategic Investment Fund Limited
23.1(3)           Consent of McManus & Co., Inc.
27.1(3)           Financial Data Schedule
---------------
(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 as Exhibit 10.1 to the company's Registration Statement on Form S-3
(File No. 333-20011) and incorporated by reference.
(3) Filed herewith.


      (b)   Reports on 8-K.


            None.

                                       18
<PAGE>
                                   SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                       EAGLE WIRELESS INTERNATIONAL, INC.


                  By:    //s// H. DEAN CUBLEY
                         --------------------------
                         H. Dean Cubley
                         President


Date: January 26, 2000

      In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

      SIGNATURE                          TITLE                      DATE

//s// H. DEAN CUBLEY          President, Chief Executive       January 26, 2000
--------------------          Officer, Director
H. Dean Cubley

//s// RICHARD ROYALL          Chief Financial Officer          January 26, 2000
--------------------
Richard Royall

//s// CHRISTOPHER W. FUTER    Vice President, Director         January 26, 2000
--------------------------
Christopher W. Futer

//s// A. L. CLIFFORD          Director                         January 26, 2000
---------------------
A. L. Clifford

                                       19
<PAGE>
                       EAGLE WIRELESS INTERNATIONAL, INC.
                              FINANCIAL STATEMENTS

                                TABLE OF CONTENTS

Independent Accountant's Report............................................F-1
Balance Sheets.............................................................F-2
Income Statement...........................................................F-3
Statement of Changes in Shareholders' Equity...............................F-4
Statements of Cash Flows...................................................F-5
Notes......................................................................F-6
<PAGE>
                       EAGLE WIRELESS INTERNATIONAL, INC.
                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                    ASSETS

                                                                      AUGUST 31,
                                                             ----------------------------
                                                                 1999            1998
                                                             ------------    ------------
<S>                                                          <C>             <C>
Current Assets:
     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-2
<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
      Affilite ...................................       (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-3
<PAGE>
                       EAGLE WIRELESS INTERNATIONAL, INC.
                  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                              COMMON STOCK                        ADDITIONAL                       TOTAL
         SEPTEMBER 1, 1996             -------------------------    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       (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-4
<PAGE>
                       EAGLE WIRELESS INTERNATIONAL, INC.
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                         FOR THE YEARS ENDED AUGUST 31,
                                                                   -----------------------------------------
                                                                       1999          1998            1997
                                                                   -----------    -----------    -----------
<S>                                                                <C>            <C>            <C>
CASH  FLOWS  FROM  OPERATING  ACTIVITIES
   Net  Earnings ...............................................   $   168,271    $   770,968    $   728,494

   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-5
<PAGE>
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.

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.

                                      F-6
<PAGE>
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.

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.

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.

                                      F-7
<PAGE>
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
                                                          ========    ========

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 -
                                                          ========    ========

                                      F-8
<PAGE>
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

      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:

                                                               AUGUST 31,
                                                          --------------------
                                                            1999        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
                                                 ======

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.

                                      F-9
<PAGE>
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.

      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,

                                      F-10
<PAGE>
            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.

            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

                                      F-11
<PAGE>
            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.

            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

                                      F-12
<PAGE>
            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.

      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%
                                     ==========    =====   ==========   =====

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.

                                      F-13
<PAGE>
      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.

      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-14
<PAGE>
      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.

      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:

                                              FOR THE YEAR ENDED  AUGUST, 1999
                                            ------------------------------------
                                              INCOME       SHARES      PER-SHARE
                                            (NUMERATOR) (DENOMINATOR)   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
                                            ==========   ==========   ==========

                                      F-15
<PAGE>
                                           FOR THE YEAR ENDED AUGUST 31, 1998
                                           -----------------------------------
                                              INCOME        SHARES     PER-SHARE
                                           (NUMERATOR)   (DENOMINATOR)   AMOUNT
                                           ----------     ----------   ---------
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
                                           ==========     ==========     =====

      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.

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-16
<PAGE>
      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-17