Eagle Telephonics, Inc. is involved in telephony infrastructure development. We work with local telecommunications providers, helping them to improve their service by providing them with a flexible, efficient, low cost operating system. Eagle's product offerings include a central office, CDMA wireless local loop system, satellite networks, and billing systems. Eagle's primary product is a microprocessor driven central office called the Eagle DSCO. Eagle Telephonics, Inc. has revolutionized and simplified telephony in every facet, from the establishment of telephone networks to the billing of customers for services.

Eagle provides a fast, economical service. Our technology is simple to install and to use and is flexible, enabling the expansion of the infrastructure to accommodate a company's growth. We achieve all this through the innovative design of our microprocessor driven Eagle DSCO switch. All major component levels of this system are connectorized, ensuring easy, error-free installation. The miniaturization of circuitry allows for high subscriber line density. Reduced circuitry also facilitates expansion, maintenance, and programming, and reduces training requirements. In addition to simplicity and flexibility of design, Eagle DSCO's field proven micro-design, VLSI and DSP technology, and critical redundancy assure long-term reliable service. The micro-design also allows for reduced power consumption.

Eagle also works with several satellite companies that further increase the ease of installation and maintenance of the DSCO technology. Eagle now has the ability to place switches very quickly anywhere in the world. Locally installed DSCO's can join with other towns and villages in a network that is interconnected via satellite. The DSCO is also designed for ease of connection with "Wireless Local Loop" technology. Our product line also offers a fully integrated state of the art CDMA system.

Eagle is also a pioneer in solving one problem that plagues rural telecom infrastructure -- billing. The DSCO is designed to overcome the difficulties of spotty or non-existent payment for services in rural locations or subscriber unfamiliarity with the concept of credit billing. The DSCO allows for the programming of pre-paid subscriber accounts and then continually checks the usage of the subscriber against the prepaid amount. Should the subscriber reach the prepaid amount limit, the DSCO will terminate or limit a subscriber's calling ability according to a pre-programmed set of parameters. The unique feature of this switch, when used with a well administrated prepaid system results in a "Bad Debt Free" system.

Eagle's product line is ideally suited for telephone companies in emerging countries or ones that are involved in infrastructure construction projects. We can help a company get off the ground and we can accommodate its growth. Simplicity, cost-effectiveness, reliability, and flexibility enable Eagle to guide a company in every phase of growth.

The Company's specific business strategy is based on leveraging at the maximum the competitive advantages of Eagle by not only selling Eagle equipment but also creating JVs with qualified partners that will provide high added value telecommunication services with growing recurrent revenue using the Eagle technology.

1. Equipment Sales:

Eagle sells hardware and software to:

• Major telecom suppliers / system integrators / OEM manufacturers;
• Service providers/telecom operators;
• Ancillary service providers;
• Internet providers.

2. Recurrent Revenue Sharing

Selected telecom retail services with high added value such as debit card platforms, international gateways, and broadband wireless local loop services can provide exceptional cash flow opportunities. Eagle will leverage its competitive cost and price-to-market advantage by providing partial vendor financing against equity participation as a joint venture partner in telecom service providers based upon the following principles:

a) Only retail services with high added value
b) Short term repayment of the Eagle equipment cost from operating revenues
c) Ownership of the Eagle equipment transfers only when it's fully repaid
d) Full control of the J/V cash flow locally by Eagle's management, remotely controlled by Eagle's Real Time Billing System

There are several factors that make recurring revenue sharing possible and attractive:

• The telecom markets in the Emerging Nations are under intense pressure to liberalize so that telecom infrastructure can help drive the economy. Emerging Nations are appointing new service providers because the incumbent PSTNs are traditionally governmental agencies that are notoriously inefficient and international traffic revenue artificially props up these agencies. International pressure to lower costs has already forced the Developed Nations to dramatically lower interconnecting tariffs between these countries. The Emerging Nations have little choice but to appoint market driven service providers and to allow these companies to transport both national and international traffic. This trend is already taking place. Because the new service providers control the subscriber network side, they become the retail market. The retail side of the market will enjoy attractive margins on international traffic because of the monopoly nature of the new network providers. International traffic wholesale providers margins will continue to shrink as competition in this field will intensify.
• Based upon Eagle top management's experience in emerging markets, the very nature of helping to build new networks for new service providers requires Eagle to work very closely with their upper management teams. Earning their trust and respect leads to Eagle's equipment becoming the very heart of their network. 
• The opportunity for participating in the recurring revenue of new service providers can be very attractive for Eagle. We intend to participate only at the retail level where acceptable margins can be maintained and ROI is very high. The Company intends to use this policy to finance service provider customers only when outstanding business opportunities present themselves.