U.S. SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                   -----------

                                   FORM 10-QSB

                                   -----------

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 31, 2000

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____

                        COMMISSION FILE NUMBER: 000-23163

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

              TEXAS                                         76-0494995
 (State or other jurisdiction)                            (IRS Employer
of incorporation or organization                       Identification No.)

                              101 COURAGEOUS DRIVE
                          LEAGUE CITY TEXAS 77573-3925
          (Address of principal executive offices, including zip code)

                                 (281) 538-6000
              (Registrant's telephone number, including area code)

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


Indicate by check mark whether the registrant (I) has 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 (ii) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]

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

  AS OF JUNE 30, 2000 THERE WERE 24,214,736 SHARES OF COMMON STOCK OUTSTANDING
<PAGE>
                    EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                                      INDEX

PART 1 - FINANCIAL INFORMATION
                                                                  PAGE

    Item 1. Financial Statements (Unaudited)

            Balance Sheets at May 31, 2000 and August 31, 1999        3

            Statements of Earnings for the three and nine
            months ended May 31, 2000  and 1999                       4

            Statements of Changes In Shareholders' Equity for the
            nine months ended May 31, 2000 and 1999                   5

            Statements of Cash Flows for the nine months ended
            May 31, 2000 and 1999                                     6

            Notes to the financial statements                      7-20

    Item 2. Management's Discussion and Analysis of Financial
            Condition and Results of Operations                   20-23

PART 2 - OTHER INFORMATION

    Item 2. Changes in Securities and Use of Proceeds                19

    Item 6. Exhibits of Report on Form 8-K                           20

SIGNATURES                                                           21

                                      -2-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                                 BALANCE SHEETS
                                 (IN THOUSANDS)

                                     ASSETS
<TABLE>
<CAPTION>
                                                                       MAY 31, 2000    AUGUST 31, 1999
                                                                        (UNAUDITED)       (AUDITED)
                                                                       ------------    ---------------
<S>                                                                    <C>             <C>
CURRENT ASSETS:
      Cash  and  Cash  Equivalents (Note 1) ........................   $     26,658    $           188
      Accounts  Receivable (Note 2) ................................          1,942                286
      Inventories (Note 1) .........................................          5,809              2,356
      Prepaid Expenses .............................................            193                242
                                                                       ------------    ---------------
           Total Current Assets ....................................         34,602              3,072

PROPERTY AND EQUIPMENT (NOTE 1):
      Operating Equipment ..........................................          2,016                922
      Less: Accumulated Depreciation ...............................           (710)              (333)
                                                                       ------------    ---------------
           Total Property and Equipment ............................          1,306                589

OTHER ASSETS:
      Security Deposits ............................................             20                 17
      Trade Show Capitalization (net) ..............................             30
      Goodwill .....................................................          3,823               --
      Patents ......................................................            135
      Deferred Advertising .........................................            749
      Other ........................................................            532
      Investment In Affiliate (Note 9) .............................          6,605              6,642
                                                                       ------------    ---------------
           Total Other Assets ......................................         12,589              6,659

      TOTAL ASSETS .................................................   $     47,802    $        10,320
                                                                       ============    ===============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
      Accounts Payable .............................................   $      1,916    $           208
      Accrued Expenses .............................................            144                106
      Notes Payable (Note 3) .......................................            350                 17
      Capital Lease Obligations (Note 4) ...........................             36                 15
      Deferred Revenues ............................................           --                  533
      Federal Income Taxes Payable (Notes 1 & 5) ...................            300                468
      Franchise Taxes Payable ......................................             17                 13
      Sales Taxes Payable ..........................................             84                 48
      Deferred Taxes (Note 5) ......................................              6                  6
                                                                       ------------    ---------------
           Total Current Liabilities ...............................          2,853              1,414

LONG - TERM LIABILITIES:
      Capital Lease Obligations (net of current maturities) (Note 4)             27                  4
      Deferred Taxes (Note 5) ......................................              8                  8
                                                                       ------------    ---------------
           Total Long - Term Liabilities ...........................             35                 12

SHAREHOLDERS' EQUITY:
      Preferred Stock - $.001 par value, Authorized 5,000,000 shares
           Issued -0- shares .......................................           --                 --
      Common Stock - $.001 par value, Authorized 100,000,000 shares
           Issued and Outstanding at May 31, 2000 and August 31,
             1999, 23,984,446 shares and 13,479,833, respectfully ..             24                 13
      Paid in Capital ..............................................         42,746              7,181

      Retained Earnings ............................................          2,144              1,700
                                                                       ------------    ---------------
           Total Shareholders' Equity ..............................         44,914              8,894

      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...................   $     47,802    $        10,320
                                                                       ============    ===============
</TABLE>
See accompanying notes to the financial statements.

                                      -3-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                       STATEMENTS OF EARNINGS (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                     THREE MONTHS    THREE MONTHS    NINE MONTHS     NINE MONTHS
                                                         ENDED           ENDED           ENDED          ENDED
                                                     MAY 31, 2000    MAY 31, 1999    MAY 31, 2000    MAY 31, 1999
                                                     ------------    ------------    ------------    ------------
<S>                                                  <C>             <C>             <C>             <C>
Net sales ........................................   $      1,270    $        395    $      3,173    $      2,053

Costs of goods sold:
    Materials and supplies .......................            207             111             545             455
    Direct labor and related costs ...............            107              84             451             421
    Depreciation and amortization ................             18              18              70              54
    Other manufacturing costs ....................             14              43              63             152
                                                     ------------    ------------    ------------    ------------
Total costs of goods sold ........................            346             256           1,116           1,082
                                                     ------------    ------------    ------------    ------------
Gross profit .....................................            925             139           2,058             971
                                                     ------------    ------------    ------------    ------------
Operating expenses
    Selling, general and administrative:
        Salaries and related costs ...............            432              90           1,029             338
        Advertising and promotion ................             83               1             197              96
        Depreciation and amortization ............             36              16             136              42
        Other support costs ......................            343             194           1,046             520
        Research and Development .................            157              42             569             312
                                                     ------------    ------------    ------------    ------------

        Total operating expenses .................          1,051             343           2,267           1,308
                                                     ------------    ------------    ------------    ------------
Income from operations ...........................           (126)           (204)           (209)           (337)

Other income
    Interest income (net) ........................            457             209             894             573
    Other Income .................................              3            --                12            --
                                                     ------------    ------------    ------------    ------------
        Total other income .......................            460             209             903             573
                                                     ------------    ------------    ------------    ------------
Earnings Before Income Taxes & Loss From
Minority Interest in Affiliate ...................            334               5             695             236
                                                     ------------    ------------    ------------    ------------
Gain/(Loss) From Minority Interest in Affiliate ..           --                13             (37)             13

Income before income taxes .......................            334              18             658             249

Provisions for income taxes ......................            114               4             214              85
                                                     ------------    ------------    ------------    ------------
Net income .......................................   $        220    $         14    $        444    $        164
                                                     ============    ============    ============    ============
Net earnings per common share:
Basic ............................................   $       0.01    $       0.00    $       0.02    $       0.01
Diluted ..........................................   $       0.01    $       0.00    $       0.02    $       0.01
                                                     ============    ============    ============    ============
Weighted average basic common shares outstanding .     16,261,854      11,929,698      20,980,673      11,762,236
Weighted average diluted common shares outstanding     16,336,104      26,522,241      21,054,923      26,354,779
</TABLE>
See accompanying notes to the financial statements.

                                      -4-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                    UNAUDITED
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 31, 1998                        COMMON    PREFERRED   PAID IN    RETAINED   SHAREHOLDERS'
TO MAY 31, 2000                         STOCK      STOCK     CAPITAL    EARNINGS      EQUITY
------------------------------------   -------   ---------   -------    --------   -------------
<S>                                    <C>       <C>         <C>        <C>         <C>
Total  As of August 31, 1998 .......        12        --       5,973       1,532           7,516

Net  Earnings 1999..................                                         168             168
New  Stock  Issued  to  Shareholders
      For Services Rendered ........      --                     163        --               163
      For Exercise of Warrants .....         2                 1,045        --             1,047
                                       -------   ---------   -------    --------   -------------
Total As Of August 31, 1999 ........        14        --       7,181       1,700           8,894

Net Earnings For The Nine Months
      Beginning September 1, 1999
       To May 31, 2000 .............                                         444             444

New  Stock  Issued  to  Shareholders
      For Services Rendered ........      --          --       1,054        --             1,054
      For Syndication Cost .........      --          --        (695)       --              (695)
      For Exercise of Warrants .....         9        --      30,078        --            30,087
      For Exercise of ESOP .........      --          --         139        --               139
      For Acquisitions and Other ...         1        --       3,454        --             3,455
      For Convertible Debt .........      --          --       1,535        --             1,535
                                       -------   ---------   -------    --------   -------------
Total As Of May 31, 2000 ...........        24        --      42,746       2,144          44,914
</TABLE>
See accompanying notes to the financial statements

                                      -5-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                     NINE MONTHS     NINE MONTHS
                                                                        ENDED           ENDED
                                                                     MAY 31, 2000    MAY 31, 1999
                                                                     (UNAUDITED)     (UNAUDITED)
                                                                     ------------    ------------
<S>                                                                  <C>             <C>
Cash Flows From Operating Activities
      Net  Earnings ..............................................   $        444    $        164

      Adjustments To Reconcile Net Earnings To Net Cash
           Used By Operating  Activities:
           (Loss)/Gain on Sale of Asset ..........................           --                13
           Depreciation and Amortization .........................            377              84
           Services Paid using Common Stock ......................          1,054
           (Increase)/Decrease in Accounts Receivable ............         (1,656)         (1,291)
           (Increase)/Decrease in Inventories ....................         (3,453)           (210)
           (Increase)/Decrease in Prepaid Expenses ...............             49              31
           Increase/(Decrease) in Accounts Payable and Accrued Exp          1,746            (127)
           Increase/(Decrease) in Deferred Taxes .................           --              --
           Increase/(Decrease) in Deferred Revenues ..............           (533)             (2)
           Increase/(Decrease) in Sales Taxes Payable ............             36              11
           Increase/(Decrease) in Fed Inc Taxes Payable ..........           (168)             89
           Increase/(Decrease) in Franchise Taxes Payable ........              4              13
                                                                     ------------    ------------
           Total Adjustments .....................................         (2,544)         (1,389)
                                                                     ------------    ------------
      Net Cash Used By Operating Activities ......................         (2,100)         (1,225)

Cash Flows From Investing Activities
      Purchase of Property and Equipment .........................         (1,094)             (3)
      (Increase)/Decrease in Other Assets ........................            (96)             (4)
                                                                     ------------    ------------
Net Cash Used By Investing Activities ............................         (1,190)             (7)

Cash Flows From Financing Activities
      Increase/(Decrease) in Notes Payable and Capital Leases ....            377              18
      Increase/(Decrease) in Shareholders' Advances ..............           --               (24)
      Increase/(Decrease) in Syndication Costs ...................           (695)           --
      Proceeds From Sale of Common Stock, Net ....................         30,078             423
                                                                     ------------    ------------
Net Cash Provided/(Used) By Financing Activities .................         29,760             417

Net Increase/(Decrease) in Cash ..................................         26,470            (815)

Cash at the Beginning of the Year ................................            188           1,097
                                                                     ------------    ------------
Cash at the End of the Year ......................................   $     26,658    $        282
                                                                     ============    ============
</TABLE>
See accompanying notes to the financial statements.

                                      -6-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:

      Eagle Wireless International, Inc., and Subsidiaries (the Company), was
      incorporated as a Texas corporation on May 24, 1993 and commenced business
      in April of 1996. The Company and its subsidiaries, BroadbandMagic.com,
      Atlanticpacific Communications, Inc. and Comtel Communications are
      suppliers of cabling, multi-media set top devices, telecommunications
      equipment and related software used by service providers in the computer,
      paging and other wireless personal communications markets. The Company
      designs, manufactures, markets and services its products under the Eagle,
      BroadbandMagic.com and Atlanticpacific Communications, Inc. names. These
      products include cabling, multi-media set top devices, transmitters,
      receivers, controllers, software and other equipment used in personal
      communications systems (including paging, voice messaging and mobile data
      systems) and radio telephone systems.

A)    Cash and Cash Equivalents

      The Company had $25,234,314 and $29,059 invested in interest bearing
      accounts at May 31, 2000 and August 31, 1999, respectively.

B)    Property and Equipment

      Property and equipment are carried at cost less accumulated depreciation.
      Depreciation is calculated by using the straight-line method for financial
      reporting and accelerated methods for income tax purposes. The recovery
      classifications for these assets are listed as follows:

                                                  YEARS
                                                  -----
            Machinery and equipment                 7
            Furniture and Fixtures                  7

      Expenditures for maintenance and repairs are charged against income as
      incurred and major improvements are capitalized.

C)    Inventories

      Inventories are valued at the lower of cost or market. The cost is
      determined by using the FIFO method. Inventories consist of the following
      items:

                                                MAY 31, 2000     AUGUST 31, 1999
                                                ------------     ---------------
                Raw Materials .............     $  5,301,863     $     1,215,003
                Work in Process ...........          507,645           1,119,672
                Finished Goods ............              -0-              21,186
                                                ------------     ---------------
                                                $  5,809,508     $     2,355,861
                                                ============     ===============

D)    Research and Development Costs

      The Company's research and development costs include obligations to
      perform contractual services for outside parties. These costs are expensed
      as contract revenues are earned. Research and development costs of
      $313,386 and $312,269 were expensed for the periods ended May 31, 2000 and
      1999, respectively. Contract revenues earned for the periods ended May 31,
      2000 and 1999 were approximately $-0- and $690,000 respectively.

E)    Income Taxes

      The Company adopted the provisions of Statement of Financial Accounting
      Standards (SFAS) No. 109, "Accounting for Income Taxes", which requires a
      change from the deferral method to assets and liability method of
      accounting for income taxes. Timing differences exist between book income
      and tax income which relate primarily to depreciation methods.

                                      -7-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)

F)    Net Earnings Per Common Share

      Net earnings per common share is shown as both basic and diluted. Basic
      earnings per common share are computed by dividing net income less any
      preferred stock dividends (if applicable) by the weighted average number
      of shares of common stock outstanding. Diluted earnings per common share
      are computed by dividing net income less any preferred stock dividends (if
      applicable) by the weighted average number of shares of common stock
      outstanding plus any dilutive common stock equivalents. The components
      used for the computations are shown as follows:

                                                   MAY 31, 2000     MAY 31, 1999
                                                   ------------     ------------

      Weighted Average Number of Common
          Shares Outstanding Including:
      Primary Common Stock Equivalents........       20,980,673       11,929,698
      Fully Dilutive Common Stock Equivalents.       21,054,923       26,522,241

G)    Impairment of Long Lived and Identifiable Intangible Assets

      The Company evaluates the carrying value of long-lived assets and
      identifiable intangible assets for potential impairment on an ongoing
      basis. An impairment loss would be deemed necessary when the estimated
      non-discounted future cash flows are less than the carrying net amount of
      the asset. If an asset were deemed to be impaired, the asset's recorded
      value would be reduced to fair market value. In determining the amount of
      the charge to be recorded, the following methods would be utilized to
      determine fair market value:

                1)    Quoted market prices in active markets.
                2)    Estimate based on prices of similar assets
                3)    Estimate based on valuation techniques

      As of May 31, 2000 and August 31, 1999, no impairment existed.

H)    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
      May 31, 2000 and 1999, the Company had expensed $145,501 and $96,498,
      respectively.

I)    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.

                                      -8-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

NOTE 1 -BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)

J)    Comprehensive Income

      There were no items of other comprehensive income in 2000 and 1999, and,
      thus, net income is equal to comprehensive income for each of those years.

K)    Reclassification

      The Company has reclassified certain costs and expenses for the nine
      months ended May 31, 2000 to facilitate comparison to the nine months
      ended May 31, 1999.

NOTE 2 - ACCOUNTS RECEIVABLE:

      Accounts receivable consist of the following:

                                                  MAY 31, 2000   AUGUST 31, 1999
                                                  ------------   ---------------
            Accounts Receivable ...............   $  1,941,716   $       286,269
            Allowance for Doubtful Accounts ...          - 0 -             - 0 -
                                                  ------------   ---------------
            Net Accounts Receivable ...........   $  1,941,716   $       286,269
                                                  ============   ===============


NOTE 3 -  NOTES PAYABLE:
<TABLE>
<CAPTION>
                                                                    MAY 31, 2000   AUGUST 31, 1999
                                                                    ------------   ---------------
<S>                                                                 <C>            <C>
             Unsecured note to Imperial Premium
             Finance bearing interest at 15.9%,
             due $1,690 monthly until February 2001  ............   $     10,140   $         5,386

             Unsecured note to Central Insurance
             bearing no interest, due $886
             monthly until January 2001  ........................          7,085             5,220

             Unsecured note Kemper Insurance
             bearing no interest, due $694 monthly
             until November 2000  ...............................          4,164             1,124

             Unsecured note to West Coast Life
             Insurance bearing no interest, due
             $2,457 quarterly until May 2001  ...................          7,370             4,913

             $50,000 Line-of-Credit, Compass Bank,
             secured by accounts receivable
             Atlanticpacific Communications bearing
             interest at 9.5%, interest payable
             monthly, principal due on demand,
             or if no demand made, due August 2000 ..............         54,141              --
</TABLE>
                                      -9-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

NOTE 3 -  NOTES PAYABLE: (continued)
<TABLE>
<CAPTION>
<S>                                                                                <C>            <C>
      Note to Compass Bank, secured by
      accounts receivable of Atlanticpacific Communications,
      bearing interest at 9.5%, interest payable monthly,
      principal due April 2001 .................................................         12,069              --

      Note to PrimeBank secured by inventory And assignment of life insurance
      Policies, principal payable in monthly Installments of $2,984, including
      interest At prime plus 2%, due on demand or, If no demand made, due
      January 2001 Security is accounts receivable .............................         26,854              --

      $250,000 Line-of-Credit, secured by accounts receivable of Comtel
      Communications, inventory and assignment of life insurance policies,
      bearing interest at prime plus 1%, interest payable monthly, principal due
      on demand, or if no demand made, due August 2000 .........................        228,000              --
                                                                                   ------------   ---------------

            Total ..............................................................   $    349,823            16,643
            Less Current Portion of
               Long - Term Debt ................................................        349,823            16,643
                                                                                   ------------   ---------------

            Total Long - Term Debt .............................................          $ -0-             $ -0-
                                                                                   ============   ===============


NOTE 4 - CAPITAL LEASE OBLIGATIONS:
<CAPTION>
                                                                                   MAY 31, 2000   AUGUST 31, 1999
                                                                                   ------------   ---------------
      Equipment lease with Konica bearing
      interest at 8.9%, payable in monthly
      installments of $445; due Aug. 2001 ......................................   $      6,676   $         9,720

      Software lease with Manifest Group
      bearing interest at 14%, payable in
      monthly installments of $751; due
      August 2000  .............................................................          2,211             8,487

      Equipment lease with Agilent Technologies,
      Payable in monthly installments of $1,076;
      due  April 2003 ..........................................................         37,669              --

      Vehicle lease with GE Capital
      Bearing interest, payable in monthly
      Installments of $465; due June 2002 ......................................         13,369              --
</TABLE>
                                      -10-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

NOTE 4 - CAPITAL LEASE OBLIGATIONS: (continued)
<TABLE>
<CAPTION>
<S>                                                  <C>
      Equipment lease with GE Capital
      Bearing interest,  payable in monthly
      Installments ........................          3,963              --
                                              ------------   ---------------
       Total Obligations ..................         63,888            18,902
              Less Current Portion of
                 Lease Obligations ........         27,353            15,047
                                              ------------   ---------------
              Total Long - Term Capital
                 Lease Obligations ........   $     36,535   $         3,855
                                              ============   ===============
</TABLE>
      The capitalized lease obligations are collateralized by the related
      equipment acquired with a net book value of approximately $68,526 and
      $29,600 at May 31, 2000 and August 31, 1999, respectively. The future
      minimum lease payments under the capital leases and the net present value
      of the future lease payments at May 31, 2000 and August 31, 1999 are as
      follows:
<TABLE>
<CAPTION>
                                                           MAY 31, 2000   AUGUST 31, 1999
                                                           ------------   ---------------
<S>                                                        <C>            <C>
      Total minimum lease payments .....................   $     58,213   $        20,405
      Less: Amount representing interest ...............          5,675             1,503
                                                           ------------   ---------------
      Present value of net minimum
          lease payments ...............................   $     63,888   $        18,902
                                                           ============   ===============
</TABLE>
      Future obligations under the lease terms are:

                    PERIOD ENDING
                    MAY 31, 2000,            AMOUNT
                    ------------            ---------
                        2001                $  26,085
                        2002                   19,827
                        2003                   12,301
                                            ---------
                        Total               $  58,213
                                            =========

NOTE 5 - INCOME TAXES:

      As discussed in note 1, the Company adopted the provisions of Statement of
      Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
      Taxes". Implementation of SFAS 109 did not have a material cumulative
      effect on prior periods nor did it result in a change to the current
      year's provision.

A)    The effective tax rate for the Company is reconcilable to statutory tax
      rates as follows:

                                                  AUGUST 31,
                                                -------------
                                                1999     1998
                                                ----     ----
                                                   %        %
            U.S. Federal Statutory Tax Rate       34       34
            U.S. Valuation Difference              1       (1)
                                                ----     ----
            Effective U.S. Tax Rate               35       33
            Foreign Tax Valuation                -0-      -0-
                                                ----     ----
            Effective Tax Rate                    35       33
                                                ====     ====

                                      -11-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

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 May
      31, 2000, 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 nine
      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 May 31, 2000, 223,107 options have been granted
      pursuant to such plan with 66,875 being exercised and 10,250 have expired.

      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. As of May 31, 2000, all such warrants had been
      exercised or had expired.

      The Company has issued the following warrants that have since been
      exercised or expired:

            700,000 stock purchase warrants which expire July 2000. The warrants
            are to purchase fully paid and non-assessable shares of the common
            stock, par value $.001 per share at a purchase price of $.01 per
            share. These warrants were exercised as of August 31, 1997.

            1,050,000 stock purchase warrants which expire July 1999. The
            warrants are to purchase fully paid and non-assessable shares of the
            common stock, par value $.001 per share at a purchase price of $.05
            per share. These warrants, however, are not exercisable until and
            unless the shares of Common Stock trade at a minimum of $5.50 per
            share for twenty consecutive trading days, yet still expire July
            1999 if not exercised. During April 1999, the Company's Board of
            Directors removed the requirement that the Company's common stock
            trade at a price of no less than $5.50 per share for twenty
            consecutive trading days provided that the holders of the warrants
            exercise the warrants prior to the expiration date and remit to the
            Company a fee of $.70 per underlying share upon exercise of the
            warrants. Prior to expiration, 1,037,500 warrants were exercised and
            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 were exercised and
            50,000 warrants expired.

                                      -12-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

      NOTE 6 - PREFERRED STOCK, STOCK OPTIONS AND WARRANTS: (continued)

            425,000 stock purchases warrants that expire July 1999. The warrants
            are to purchase fully paid and non-assessable shares of the common
            stock, par value $.001 per share at a purchase price of $5.00 per
            share. These warrants are subject to restrictions regarding the
            timing of exercise. The underlying shares of common stock were
            registered for resale on September 4, 1997 under the Securities Act
            of 1933. These warrants were not exercised.

            43,641 stock purchase warrants which expire October 7, 2002. The
            warrants are to purchase fully paid and non-assessable shares of the
            common stock, par value $.001 per share, at a purchase price of
            $1.75 per share. These warrants were exercised as of May 31, 2000.

            100,000 stock purchase warrants which expire October 7, 2002. The
            warrants are to purchase fully paid and non-assessable shares of the
            common stock, par value $.001 per share, at a purchase price of
            $1.54 per share. These warrants were exercised as of May 31, 2000.

            The Company has issued 450,000 shares of common stock in exchange
            for the cancellation of the following warrants as of February 29,
            1999:

            150,000 stock purchase warrants. The warrants are to purchase fully
            paid and non-assessable shares of the common stock, par value $.001
            per share at a purchase price of $1.50 per share. These warrants,
            however, are not exercisable until and unless the shares of Common
            Stock trade at a minimum of $4.00 per share for sixty-one
            consecutive trading days. The underlying shares of common stock were
            registered for resale under the Securities Act of 1933 on March 19,
            1999. These warrants will expire on March 19, 2000.

            150,000 stock purchase warrants. The warrants are to purchase fully
            paid and non-assessable shares of the common stock, par value $.001
            per share at a purchase price of $2.00 per share. These warrants,
            however, are not exercisable until and unless the shares of Common
            Stock trade at a minimum of $5.50 per share for sixty-one
            consecutive trading days. The underlying shares of common stock were
            registered for resale under the Securities Act of 1933 on March 19,
            1999. These warrants will expire on March 19, 2000.

            50,000 stock purchase warrants which expire August 31 2000. The
            warrants are to purchase fully paid and non-assessable shares of the
            common stock, par value $.001 per share, at a purchase price of
            $2.00 per share. If, however, the closing bid price of the Common
            Stock shall have equaled or exceeded $5.50 per share for a period of
            twenty consecutive trading days at any time, the Company may redeem
            the warrants by paying holders $.05 per warrant. As of August 31,
            1999, the underlying shares of common stock have not yet been
            registered for resale under the Securities Act of 1933.

            200,000 stock purchase warrants. The warrants are to purchase fully
            paid and non-assessable shares of the common stock, par value $.001
            per share at a purchase price of $3.00 per share. These warrants,
            however, are not exercisable until and unless the shares of Common
            Stock trade at a minimum of $7.50 per share for sixty-one
            consecutive trading days. The underlying shares of common stock were
            registered for resale under the Securities Act of 1933 on March 19,
            1999. These warrants will expire on March 19, 2000.

                                      -13-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

      NOTE 6 - PREFERRED STOCK, STOCK OPTIONS AND WARRANTS: (continued)

            200,000 stock purchase warrants. The warrants are to purchase fully
            paid and non-assessable shares of the common stock, par value $.001
            per share at a purchase price of $5.00 per share. These warrants,
            however, are not exercisable until and unless the shares of Common
            Stock trade at a minimum of $10.00 per share for thirty-one
            consecutive trading days. These warrants will expire three years
            from the date of effective registration of the underlying shares of
            common stock. As of August 31, 1999, the underlying shares of common
            stock have not yet been registered for resale under the Securities
            Act of 1933 and thus have no set expiration date.

            200,000 stock purchase warrants. The warrants are to purchase fully
            paid and non-assessable shares of the common stock, par value $.001
            per share at a purchase price of $7.00 per share. These warrants,
            however, are not exercisable until and unless the shares of Common
            Stock trade at a minimum of $12.00 per share for thirty-one
            consecutive trading days. These warrants will expire three years
            from the date of effective registration of the underlying shares of
            common stock. As of August 31, 1999, the underlying shares of common
            stock have not yet been registered for resale under the Securities
            Act of 1933 and thus have no set expiration date.

            200,000 stock purchase warrants. The warrants are to purchase fully
            paid and non-assessable shares of the common stock, par value $.001
            per share at a purchase price of $9.00 per share. These warrants,
            however, are not exercisable until and unless the shares of Common
            Stock trade at a minimum of $14.00 per share for thirty-one
            consecutive trading days. These warrants will expire five years from
            the date of effective registration of the underlying shares of
            common stock. As of August 31, 1999, the underlying shares of common
            stock have not yet been registered for resale under the Securities
            Act of 1933 and thus have no set expiration date.

            200,000 stock purchase warrants. The warrants are to purchase fully
            paid and non-assessable shares of the common stock, par value $.001
            per share at a purchase price of $11.00 per share. These warrants,
            however, are not exercisable until and unless the shares of Common
            Stock trade at a minimum of $16.00 per share for thirty-one
            consecutive trading days. These warrants will expire five years from
            the date of effective registration of the underlying shares of
            common stock. As of August 31, 1999, the underlying shares of common
            stock have not yet been registered for resale under the Securities
            Act of 1933 and thus have no set expiration date.

                                      -14-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

      NOTE 6 - PREFERRED STOCK, STOCK OPTIONS AND WARRANTS: (continued)

            The Company has issued and outstanding the following warrants which
            have not yet been fully exercised at May 31, 2000:

            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. As of
            May 31, 2000, 4,544,174 warrants had been exercised.

            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. As of May 31, 2000, 1,574,442 warrants had been
            exercised. These warrant trade under the symbol "EAG/WS/B".

            1,050,000 Class C stock purchase warrants which expire August 31
            2000. The warrants are to purchase fully paid and non-assessable
            shares of the common stock, par value $.001 per share, at a purchase
            price of $2.00 per share. If, however, the closing bid price of the
            Common Stock shall have equaled or exceeded $5.50 per share for a
            period of twenty consecutive trading days at any time, the Company
            may redeem the Class C Warrants by paying holders $.05 per Class C
            Warrant. The underlying shares of common stock were registered for
            resale on September 4, 1997 under the Securities Act of 1933. As of
            May 31, 2000, 1,050,000 warrants had been fully exercised.

      The warrants outstanding are segregated into four categories (exercisable,
      non-exercisable, non-registered, and expired). They are summarized as
      follows:

<TABLE>
<CAPTION>
                 WARRANTS  ISSUED       WARRANTS  EXERCISABLE          WARRANTS           WARRANTS EXPIRED
CLASS  OF            MAY 31,                   MAY 31,             NON          NON           MAY 31,
WARRANTS        2000         1999         2000        1999       EXERCISED   REGISTERED    2000      1999
-------      ----------   ----------    ---------  ----------    ----------  ----------   -------  -------
<S>             <C>            <C>        <C>          <C>         <C>                     <C>
   4.00       5,033,334     5,033,334     489,160   5,033,334         --          --         --      --
   6.00       5,033,334     5,033,334   3,458,892   5,033,334         --          --         --      --
   2.00       1,050,000     1,050,000       --      1,050,000         --          --         --      --

ESOP         *   28,200   *     5,000                   5,000       28,200        --         --      --
ESOP            194,907        88,375     74,250       62,875      117,782        --       10,250    --
</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.

                                      -15-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

NOTE 7 - SEGMENT INFORMATION:

      The Company had gross revenues of $1,270,299 and $395,045 for the nine
      months ended May 31, 2000 and 1999, respectively. The following parties
      individually represent a greater than ten percent of these revenues.

                                        MAY 31, 2000            MAY 31, 1999
                      CUSTOMER       AMOUNT    PERCENTAGE   AMOUNT    PERCENTAGE
                ------------------   -------   ----------   -------   ----------
                Link - Two .......   $  --           -- %    69,900         18 %
                RFTL .............   $  --           -- %   213,075         54 %


NOTE 8 - INVESTMENT IN LINK - TWO COMMUNICATIONS, INC.:

      The Company and Link - Two Communications, Inc. (Link II) have executed an
      agreement, whereby the Company would receive up to an eight percent equity
      interest in Link II in lieu of accruing finance charges on the outstanding
      balance owed by Link II to the Company. Under the agreement, equity in
      Link II was earned at a rate of 0.2% per month per $100,000 payable and
      outstanding for more than thirty days. At May 31, 2000 and 1999, the
      Company had earned a 5.0% and 5.0%, respectively, minority equity interest
      in Link II. This is evidenced by the issuance of 240,000 shares of Link II
      common stock to the Company. As of August 31, 1999 and 1998, the Company
      has recorded it share of losses in this unconsolidated affiliate. The loss
      as a minority shareholder totaled $91,678 and $28,663, respectively. The
      Company has reclassified its balances due from Link II as additional
      advances to affiliates.

      Certain principal stockholders (or affiliates thereof) of the Company,
      including James Futer, executive vice president, director, and chief
      operating officer, and A.L. Clifford, a director of the Company, are also
      principal stockholders of Link II. Mr. Clifford is also the chairman,
      president, and chief executive officer of Link II and Dr. Cubley is a
      director of Link II. Subsequent to August 31, 1999, Link II has entered
      into negotiations to acquire existing paging operations in Dallas, San
      Antonio and Houston. Additionally the company is currently negotiating
      with a utility company to install wireless meter reading equipment which
      will utilize the Link II radio frequency licenses and equipment.

      On October 1, 1999, Link II refinanced its existing accounts payable to
      Eagle Wireless International through the issuance of a $733,571 ten
      percent (10%) note secured by all lease station licenses and a $6,000,000
      ten percent (10%) note secured by all assets (excluding licenses). These
      notes are due September 1, 2000. During October 1999, the Company pledged
      as collateral on a $4,500,000 convertible note, the $6,000,000 note
      receivable and its underlying collateral.

NOTE 9 - RISK FACTORS:

      For the nine months ended May 2000 and 1999, substantially all of the
      Company's business activities have remained within the United States and
      have been extended to the wireless infrastructure industry. Approximately
      fifty-three percent of the Company's revenues and receivables have been
      created solely in the state of Texas, one percent have been created in the
      international market, and the approximate forty-six remainder has been
      created relatively evenly over the rest of the nation during the nine
      months ended May 31, 2000. Approximately 75% of the Company's revenues and
      receivables have been created solely in the state of Texas, and the
      approximate 25% remainder has been created relatively evenly over the rest
      of the nation during the nine months ended May 31, 1999

                                      -16-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

NOTE 9 - RISK FACTORS: (continued)

      Through the normal course of business, the Company generally does not
      require its customers to post any collateral. However, because Link II
      constitutes 43% and 60% of the Company's gross revenues and 64% and 60% of
      its gross assets for the years ended August 31, 1999 and 1998,
      respectively, the two companies have reached an agreement whereby the
      Company has received a minority interest in Link II based upon accounts
      receivable and has fully collateralized the debt.(See Note 9)

      Although the Company has concentrated its efforts in the wireless
      infrastructure industry and convergent set top market during the years
      ended August 31, 1999 and for the nine months ended May 31, 2000 it is
      management's belief that the Company faces little credit or economic risk
      due to the continuous growth the market is experiencing.

NOTE 10 - FOREIGN OPERATIONS:

      Although the Company is based in the United States, its product is sold on
      the international market. Presently, international sales total
      approximately .01% and 0% at May 31, 2000 and 1999, respectfully.

NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES:

      The Company leases its primary office space for $10,000 per month with
      Space Industries, Inc. ("Space"). This non-cancelable lease commenced on
      July 1, 1999 and expires on March 29, 2001. In addition to the monthly
      rental, the Company will issue 100,000 shares of its common stock to
      Space. Space will have the right to sell no more than 10,000 shares per
      month until all shares have been sold. Additionally, Space will have the
      right to put to the Company all unsold shares held by Space in exchange
      for a payment calculated using the following formula:

            $173,000 - (gross proceeds from stock sales above $1.70 per share)
            minus ($1.73 x quantity of shares sold below $1.70 per share)

      It is understood and agreed, and it is the intention of both parties, that
      this put right will provide Space with a guarantee that, so long as (a)
      Space does not sell or otherwise dispose of the common stock for less than
      $1.70 per share, and (b) Space exercises its put right between August 15,
      2000 and August 31, 2000, Space will receive a minimum economic benefit of
      at least $170,000 from the common stock issued by the Company to Space.
      For the periods ending May 31, 2000 and 1999, rental expenses of $164,142
      and $74,272 respectively, were incurred.

            Future obligations under the non-cancelable lease terms are:

                  PERIOD ENDING
                   NOVEMBER 30,                 AMOUNT
                  -------------              -----------
                      2000                   $    54,714
                      2001                   $   127,666
                                             ===========

      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.

                                      -17-
<PAGE>
                       EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES: (continued)

      The Company has been named as defendant in a lawsuit involving the
      Company's previous landlord with regard to breach of the lease. The
      Company has counter-claimed, also alleging breach of the lease. The
      Company intends to vigorously defend this matter as well as prosecute its
      counter-claim.

      The Company has provided a finance company a limited manufacturer's
      guarantee for an amount not to exceed $910,845 for equipment and services
      sold to a customer of the Company. In the event of default by the
      customer, after a minimum period of ninety days from the date default is
      declared and after having exhausted all available remedies against the
      customer, the finance company may seek payment directly from the Company.
      Under this guarantee, the Company may elect to assume the lease from the
      finance company under the original terms and conditions or may elect to
      pay all amounts due in arrears under the original agreement and pay-off
      the lease through a one-time payment of the unamortized balance. The
      company is currently negotiating with the lease company to purchase these
      certain assets.

NOTE 12 - EARNINGS PER SHARE:

      The following table sets forth the computation of basic and diluted
      earnings per share:
<TABLE>
<CAPTION>
                                                       FOR THE 9 MONTHS ENDED MAY, 2000
                                                   ---------------------------------------
                                                               (In thousands)
                                                     INCOME         SHARES       PER-SHARE
                                                   (NUMERATOR)   (DENOMINATOR)    AMOUNT
                                                   -----------   -------------   ---------
<S>                                                <C>           <C>             <C>
      Net Income ...............................   $       444

      Basic EPS:
        Income available to common stockholder .   $       444          20,981   $    0.02

      Effect of Dilutive Securities:
        Warrants ...............................           -0-             -0-
                                                   -----------   -------------   ---------
      Diluted EPS:
        Income available to common stockholders
          and assumed conversions ..............   $       444          20,981   $    0.02
                                                   ===========   =============   =========
<CAPTION>
                                                      FOR THE YEAR ENDED AUGUST, 1999
                                                   ---------------------------------------
                                                     INCOME         SHARES       PER-SHARE
                                                   (NUMERATOR)   (DENOMINATOR)    AMOUNT
                                                   -----------   -------------   ---------
      Net Income ...............................   $       168

      Basic EPS:
        Income available to common stockholder .   $       168          12,000   $    0.01

      Effect of Dilutive Securities:
        Warrants ...............................           -0-             -0-
                                                   -----------   -------------   ---------
      Diluted EPS:
        Income available to common stockholders
          and assumed conversions ..............   $       168          12,000   $    0.01
                                                   ===========   =============   =========
</TABLE>
                                      -18-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

NOTE 13- EMPLOYEE STOCK OPTION PLAN:

      In July 1996, the Board of Directors and majority stockholders adopted a
      stock option plan under which 400,000 shares of the Company's common stock
      have been reserved for issuance. Under this plan, as of May 31, 2000 and
      1999, 223,107 and 88,875 warrants have been issued to various employees.
      Of these outstanding warrants, 66,875 and 17,500 were exercised for the
      months ended May 31, 2000 and 1999, respectively. Additionally, 10,250
      warrants have expired as of August 31, 1999.

NOTE 14 - RETIREMENT PLANS:

      During October 1997, the Company initiated a 401(k) plan for its
      employees, which is funded through the contributions of its participants.
      This plan maintains that the Company will match up to 3% of each
      participant's contribution. For the nine months ended May 31, 2000 and
      1999, employee contributions were approximately $272,914 and $123,189
      respectively. The Company matched approximately $44,775 and $38,636
      respectively for those same periods.

NOTE 15 - MAJOR CUSTOMER:

      As of May 31, 2000, the Company had a receivable due from Link - Two
      Communications (Link II) in the amount of $6,641,892. This account
      receivable has been converted to a note receivable (see Note 9). As of
      August 31, 1999, Link II is continuing to sell equity securities, assets,
      and products that are being used to retire this note receivable. This
      receivable is secured by substantially all assets of Link II including
      radio frequency licenses that have been valued by outside appraisal firms
      to in excess of twenty million dollars. In August 1999, Link II commenced
      operations of its nationwide two-way messaging system. Based upon the
      aforementioned, management believes the risks involved with this
      receivable are minimal.

NOTE 16 -   BUSINESS COMBINATIONS

      Effective January 1, 2000, the Company acquired Atlanticpacific
      Communications, Inc. in a business combination accounted for as purchase.
      Atlanticpacific Communications, Inc. is primarily in the business of
      nationwide sales and installation of fiber optic and Internet wiring to
      commercial customers. The results of operations are included in the
      accompanying financial statements since the date of acquisition. The
      Company issued 518,919 shares in restricted stock and assumed certain
      notes and accounts payable. Additionally, the principal shareholders of
      Atlanticpacific Communications, Inc. can earn an additional 3,000,000
      shares of the Company's common stock based on accumulated sales goals.
      Under the terms of this agreement, the Company will issue an additional
      500,000 shares at $10,000,000 in accumulated sales, 1,000,000 shares at
      $30,000,000 in accumulated sales and 1,500,000 shares at $60,000,000 in
      accumulated sales. The total cost of the acquisition exceeded the fair
      value of the assets by $2,568,210. This excess is being amortized over
      fifteen years.

      Effective January 1, 2000, the Company acquired Comtel Communications,
      Inc. in a business combination accounted for as purchase. Comtel
      Communications, Inc. is primarily in the business of nationwide sales and
      installation of fiber optic and Internet wiringto commercial customers.
      The results of operations are included in the accompanying financial
      statements since the date of acquisition. The Company issued 300,000
      shares in restricted stock for the net assets of Comtel Communications,
      Inc. The total cost of the acquisition exceeded the fair value of the
      assets by $1,455,362. This excess is being amortized over fifteen years.

                                      -19-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

      NOTE 16 -   BUSINESS COMBINATIONS(CONTINUED)

      The following summarized pro forma (unaudited) information assumes the
      transactions related to Eagle Wireless International, Inc., (EAG)
      Atlanticpacific Communications, Inc., (APC) and Comtel Communications,
      Inc., (CTC):

                           1999 PRO FORMA INFORMATION
                                 (In Thousands)
<TABLE>
<CAPTION>
                                     EAG        APC       CCT       ADJ.    COMBINED TOTAL
                                   -------    ------    -------    -----    --------------
<S>                                <C>        <C>       <C>                  <C>
Net Sales                          $ 2,217    $1,567    $ 4,135              $       7,919
Cost of Goods Sold                   1,337     1,207      3,249                      5,793
                                   -------    ------    -------    -----    --------------
Gross Profit                           880       360        886                      2,126
Operating Expenses                   1,319       853        850                      3,022
                                   -------    ------    -------    -----    --------------
Income (loss) from operations         (439)     (493)        36                       (896)
Other, net                             697       (11)                                  686
                                   -------    ------    -------    -----    --------------
Income before income taxes             258      (504)        36                       (210)
Income taxes                            91         -         15     (106)                -
                                   -------    ------    -------    -----    --------------
Net income                         $   167    $ (504)   $    21    $ 106    $         (210)
                                   =======    ======    =======    =====    ==============
</TABLE>
NOTE 17 - SUBSEQUENT EVENTS:

      Through July 14, 2000, the Company has received an additional $1,253,416
      from the exercise of all warrants.

ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

      During the nine months ended May 31, 2000, we have acquired two companies
      in the fiber optics industry, completed the majority of the field testing
      of the set top boxes for commercial and residential distribution, and
      developed new products for wireless DSL and advanced television interface
      applications. Additionally, we have filed patents for the Java
      Acceleration Card and the Bluetooth Set Top Box integration technology.
      Concurrent with these activities, we have been marketing the company's
      products at numerous domestic and international shows, which target both
      commercial and residential electronic distribution companies.

      Revenues for the nine months ended May 31, 2000 and 1999 totaled
      $1,903,000 and $1,658,000, respectively. The increase in revenues is
      principally due a increase in sales to commercial customers which require
      structured wiring for computers and infrastructure communications
      equipment. During this current quarter, the Company's marketing resources
      were directed to identifying product demand for the set top devices,
      world-wide sales shows, and development new wireless application
      customers. The Company anticipates that these sales efforts will provide
      new customers in the wireless, internet and convergent set top device
      markets and constitute the majority of sales in the ensuing fiscal year.
      Concurrent with this marketing effort, the Company has engaged
      international manufacturers to produce the multi-media set top devices.

      Operating expenses for the nine months ended May 31, 2000 and 1999 totaled
      $2,267,000 and $1,308,000, respectively. These expenses increased as a
      result of the employment of new sales and engineering personnel to support
      the marketing of multi-media set top devices, development of the advanced
      television entertainment interface, wireless products for expanding DSL
      services and completion of the java accelerator card. Additionally, the
      company continues to incur certain costs in identifying potential cable
      and fiber industries for acquisition. The Companies research

                                      -20-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

      and development costs will continue to increase as new multi-media
      software and hardware products are developed which integrate with current
      and evolving television technology.

      Current assets as of May 31, 2000 and August 31, 1999 totaled $34,602,000
      and $3,072,000, respectively. The principal increase in working capital
      was due to the increase in cash from the exercise of warrants. Current
      liabilities as of May 31, 2000 and August 31, 1999 totaled $2,853,000 and
      $1,414,000, respectively. This increase is attributable to the increase in
      the purchase of set top box component and fiber wiring.

      The Company's shareholders' equity as of May 31, 2000 and August 31, 1999
      totaled $44,914,000 and $8,894,000, respectively. This increase is
      attributable to the significant exercise of the various categories of
      warrants. As disclosed, the Company is continuing to receive substantial
      sums of cash from additional warrant exercises. The Company expects this
      warrant exercise trend to continue. Cash flows used by operating
      activities for the nine months ended May 31, 2000 and 1999 totaled
      $2,100,000 and $788,000, respectively. Cash flows used by investing
      activities for the nine months ended May 31, 2000 and 1999 totaled
      $1,190,00 and $7,000, respectively. Cash flows provided by financing
      activities for the nine months ended May 31, 2000 and 1999 totaled
      $29,760,000 and $417,000 respectively.

      A substantial portion of the Company's other assets is concentrated in
      notes receivable due from Link-Two Communications, Inc. The collection of
      this amount is contingent upon the successful sale of equity by Link-Two
      and the generation of operating revenues from their two-way messaging
      system The Company has established a credit committee to assist Link-Two
      in its securing of financing. Additionally, Link-Two's receivable is
      secured by substantially all assets of Link-Two including radio frequency
      licenses which management believes to be valued in excess of the amounts
      due the Company.

      We entered into a $4,500,000 convertible note credit facility, of which we
      have drawn down and repaid $1,500,000. The balance is available subject to
      certain terms and conditions. We believe that our current cash position
      will provide sufficient working capital through August 2002. Additionally,
      the Company is negotiating with lenders to obtain acquisition and
      production financing, although there is no assurance that such financing
      can be obtained.

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 are 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

                                      -21-
<PAGE>
               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                  MAY 31, 2000

IMPACT OF YEAR 2000 (CONTINUED)

      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, 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.

PART 2. - OTHER INFORMATION

ITEM 2 - RECENT SALES OF UNREGISTERED SECURITIES

      In September 1999, the company issued 61,667 shares of common stock to two
      individuals for $36,317. The company believes that these issuances were
      exempt from registration pursuant to Section 4(2) of the Act as
      transactions by an issuer not involving any public offering.

      In October 1999, the company issued a convertible note in the amount of
      $1,500,000. The company believes that this issuance was exempt from
      registration pursuant to Section 4(2) of the Act as a transaction by an
      issuer not involving any public offering.

ITEM 6 - EXHIBITS OF REPORT ON FORM 8-K

           (a) Exhibit
               exhibit 27 - Financial Data Schedule
           (b) Reports on Form 8-K
               none

                                      -22-
<PAGE>
                                   SIGNATURES

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

                                              EAGLE WIRELESS INTERNATIONAL, INC.

      Date: March 17, 2000                    By:   /s/ H. Dean Cubley
                                              Dr. H. Dean Cubley
                                              President

                                              /s/ Richard R. Royall
                                              Richard R. Royall
                                              Chief Financial Officer

                                      -23-