<PAGE>

                     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, 2001

[ ]   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 July 13, 2001, there were 62,208,194 shares of common stock outstanding

<PAGE>

               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                                      INDEX


PART 1 - FINANCIAL INFORMATION

                                                                            PAGE

    Item 1. Consolidated Financial Statements (Unaudited)

            Consolidated Balance Sheets at May 31, 2001 and August 31, 2000   3

            Consolidated Statements of Earnings for the Nine
            Months Ended May 31, 2001 and 2000                                4

            Consolidated Statements of Changes In Shareholders' Equity
            for the Nine Months Ended May 31, 2001 and 2000                   5

            Consolidated Statements of Cash Flows for the Nine Months
            Ended May 31, 2001 and 2000                                       6

            Notes to the Consolidated Financial Statements                 7-24

    Item 2. Management's Discussion and Analysis of Financial
            Condition and Results of Operations                           25-26

PART 2 - OTHER INFORMATION

    Item 1. Legal Proceedings                                                26

    Item 2. Recent Sales of Unregistered Securities or Changes
            in Securities and Use of Proceeds.                               26

    Item 3. Defaults Upon Senior Securities                                  27

    Item 4. Submission of Matters to a Vote of Security Holders              27

    Item 5. Other Information                                                27

    Item 6. Exhibits and Reports on Form 8-K                                 27

SIGNATURES                                                                   27


                                       2
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                 ASSETS
                                                          MAY 31,    AUGUST 31,
                                                           2001         2000
                                                        (UNAUDITED)   (AUDITED)
                                                         ---------    ---------
<S>                                                      <C>          <C>
CURRENT ASSETS
   Cash and Cash Equivalents (Notes 1 & 9)               $  27,747    $  32,346
   Accounts Receivable (Note 2)                             10,665        9,902
   Inventories (Note 1)                                     10,010        5,756
   Notes Receivable                                           --            971
   Prepaid Expenses                                          1,554          716
                                                         ---------    ---------
      TOTAL CURRENT ASSETS                                  49,976       49,691

PROPERTY AND EQUIPMENT (NOTES 1 & 3):
   Operating Equipment                                      18,353        2,703
   Less:  Accumulated Depreciation                          (1,651)      (1,023)
                                                         ---------    ---------
      TOTAL PROPERTY AND EQUIPMENT                          16,702        1,680

OTHER ASSETS:
   Deferred Syndication (Note 1)                              --            270
   Goodwill (Notes 1 & 4)                                   76,754        5,966
   Other Intangible Assets (Note 1)                         43,381          171
   Less:  Accumulated Amortization                          (1,653)        (194)
   Other Assets, principally security deposits                 124           57
                                                         ---------    ---------
      TOTAL OTHER ASSETS                                   118,606        6,270
                                                         ---------    ---------

TOTAL ASSETS                                             $ 185,284    $  57,641
                                                         =========    =========

              LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts Payable                                      $   3,988    $   2,007
   Accrued Expenses                                          4,115          308
   Notes Payable (Notes 5 & 8)                               3,214           42
   Line of Credit (Note 7)                                   1,813          266
   Capital Lease Obligations (Note 6)                           70           59
   Federal Income Taxes Payable (Notes 1 & 10)                 734          736
   Other Payables                                            3,150           57
   Sales Taxes Payable                                         462           17
   Deferred Taxes (Note 10)                                   --             15
                                                         ---------    ---------
      TOTAL CURRENT LIABILITIES                             17,546        3,507

LONG-TERM LIABILITIES:
   Capital Lease Obligations
     (net of current maturities) (Note 6)                       46           41
   Deferred Taxes (Note 10)                                   --             32
   Long-Term Debt                                            4,038         --
                                                         ---------    ---------
      TOTAL LONG-TERM LIABILITIES                            4,084           73

COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 17)

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, 2001,
      and August 31, 2000
      61,865,000 and 25,609,263, respectively                   62           26
   Paid in Capital                                         164,644       52,160
   Unrealized Gain on marketable securities                      7         --
   Retained Earnings                                        (1,059)       1,875
                                                         ---------    ---------
      TOTAL SHAREHOLDERS' EQUITY                           163,654       54,061
                                                         ---------    ---------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY               $ 185,284    $  57,641
                                                         =========    =========
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       3
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                          Three months    Three months     Nine months      Nine months
                                                             ended           ended            ended            ended
                                                          May 31, 2001    May 31, 2000     May 31, 2001     May 31, 2000
<S>                                                        <C>              <C>              <C>              <C>
Net sales:
    Structured wiring                                      $  3,772         $   --           $  5,366         $   --
    Broadband services                                          220             --                293             --
    Products                                                  6,901            1,270           11,769            3,173
    Other                                                       465             --                592             --
                                                           -----------------------------------------------------------
Total sales                                                  11,358            1,270           18,020            3,173
                                                           -----------------------------------------------------------
Costs of goods sold:
    Materials other than cable and wire                         368              207              903              539
    Direct labor and related costs                              597              107            1,369              460
    Products and integration services                         7,377             --              9,633             --
    Structured wiring labor and materials                       393             --              1,150             --
    Broadband costs                                             107             --                157             --
    Depreciation and amortization                               185               18              437               53
    Other manufacturing costs                                    22               14              135               63
                                                           -----------------------------------------------------------
Total costs of goods sold                                     9,050              346           13,785            1,115
                                                           -----------------------------------------------------------

Gross profit                                                  2,308              925            4,235            2,058
                                                           -----------------------------------------------------------
Operating expenses
    Selling, general and administrative:
        Salaries and related costs                            1,322              432            3,288              774
        Advertising and promotion                                96               83              359              115
        Depreciation and amortization                         1,163               36            1,651               91
        Other support costs                                   1,845              343            2,729              875
        Research and development                                 42              157              729              412
                                                           -----------------------------------------------------------
Total operating expenses                                      4,468            1,051            8,756            2,267
                                                           -----------------------------------------------------------

Loss from operations                                         (2,160)            (126)          (4,521)            (209)

Other income, principally interest income                       445              460            1,587              903
                                                           -----------------------------------------------------------

Earnings (loss) Before Income Taxes and Loss
From Minority Interest in Affiliate                          (1,715)             334           (2,934)             695
                                                           -----------------------------------------------------------

Gain/(Loss) From Minority Interest in Affiliate                --               --               --                (37)

Income (loss) before income taxes                            (1,715)             334           (2,934)             658

Provisions for income taxes                                    --                114             --                214
                                                           -----------------------------------------------------------
Net earnings (loss)                                          (1,715)             220           (2,934)             444
Other comprehensive income, net of tax
Unrealized holding gain / (loss)                             (1,182)                                7
                                                           -----------------------------------------------------------
Other comprehensive income / (loss)                        $ (2,897)        $    220         $ (2,927)        $    444
                                                           ===========================================================
Net earnings (loss) per common share:

Basic                                                      $  (0.03)        $   0.01         $  (0.07)        $   0.02
Diluted                                                    $  (0.03)        $   0.01         $  (0.04)        $   0.02
Comprehensive income - (loss)                              $  (0.04)        $   0.01         $  (0.04)        $   0.02

</TABLE>


                                       4

<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGAES IN SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                       ADDITIONAL                   TOTAL
      AUGUST 31, 2000                            COMMON STOCK             PREFERRED      PAID IN      RETAINED   SHAREHOLDER'S
      TO MAY 31, 2001                            SHARES       VALUE        STOCK         CAPITAL      EARNINGS      EQUITY
-------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>        <C>           <C>           <C>          <C>          <C>
Total Shareholders' Equity
   As of August 31, 1999                         13,480     $      13     $    --       $   7,181    $   1,700    $   8,894

Net Earnings 2000                                                                                          193          193

New Stock Issued to Shareholders
   Issuance of Common Stock
      For Acquisitions                              869             1                       3,661                     3,662
      For Services and Compensation                 981             1                       1,642                     1,643
      For Warrant Conversion                      9,411             9                      38,559                    38,568
      For Debt Conversion                           828             1                       1,612                     1,613
      For Employee Stock Option Plan                 40             1                         158                       158

Syndication Costs                                                                            (653)                     (653)

Unrealized Holding Loss                                                                                    (18)         (18)
                                              ---------     ---------     ---------     ---------    ---------    ---------

Total Shareholders' Equity
   As of August 31, 2000                         25,609            26          --          52,160        1,875       54,060
                                              ---------     ---------     ---------     ---------    ---------    ---------

Net Earnings for Nine Months
    Ended May 31, 2001                                                                                  (2,934)      (2,934)
New Stock Issued to Shareholders
    For Services and Compensation                   575             1                       1,231                     1,232
    For Warrants Conversion                         645                                     3,576                     3,576
    For Employee Stock Option Plan                   96                                       192                       192
    For acquisition of ClearWorks, Inc.          35,287            35                     109,355                   109,390

Syndication Costs                                                                            (876)                     (876)

Retirement of ESOP shares                          (347)                                     (994)                     (994)

Unrealized Holding Gain                                                                                      7            7
                                              ---------     ---------     ---------     ---------    ---------    ---------
                                                                                                                      1,196

Total as of May 31, 2001                         61,865     $      62     $    --       $ 164,644    $ (1,052)    $ 163,653
                                              =========     =========     =========     =========    =========    =========

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                                       5
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                      NINE MONTHS ENDED
                                                                                           MAY 31,
                                                                                   2001                2000
                                                                                (UNAUDITED)        (UNAUDITED)
                                                                                -----------        -----------
<S>                                                                              <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net Earnings                                                               $ (2,934)           $    444

      Adjustments to Reconcile Net Earnings to Net Cash
       Used by Operating Activities:
        Stock for Services Rendered                                                 1,424               1,054
        Depreciation and Amortization                                               2,088                 377
        Unrealized Holding Gain on Marketable Securities                                7                --
        (Increase) / Decrease in Accounts Receivable                                5,974              (1,656)
        (Increase) / Decrease in Inventories                                       (1,296)             (3,453)
        (Increase) / Decrease in Prepaid Expenses                                     126                  49
        Increase / (Decrease) in Accounts Payable and Accrued Expense              (8,409)              1,085
                                                                                 --------            --------

        Total Adjustments                                                             (86)             (2,544)
                                                                                 --------            --------

      Net Cash Used by Operating Activities                                        (3,020)             (2,100)

CASH FLOWS FROM INVESTING ACTIVITIES
        (Purchase) / Disposal of Property and Equipment                            (4,202)             (1,094)
        (Increase) / Decrease in Investments                                       (5,646)               --
         (Increase) / Decrease in Other Assets                                         47                 (96)
                                                                                 --------            --------

      Net Cash Used by Investing Activities                                        (9,801)             (1,190)

CASH FLOWS FROM FINANCING ACTIVITIES
        Increase / (Decrease) in Notes Payable, Net                                 4,962                 333
        Increase / (Decrease) in Capital Leases                                        16                  44
        Increase / (Decrease) in Line of Credit                                     1,547                --
        Increase / (Decrease) in Shareholders' Advances                              --                  (695)
        Proceeds from Sale of Common Stock, Net                                     1,697              30,078
                                                                                 --------            --------

      Net Cash Provided by Financing Activities                                     8,222              29,760

      Net Increase / (Decrease) in Cash                                            (4,599)             26,470

CASH AT BEGINNING OF THE PERIOD                                                    32,346                 188
                                                                                 --------            --------

CASH AT THE END OF THE PERIOD                                                    $ 27,747            $ 26,658
                                                                                 ========            ========

        Supplemental Disclosures of Cash Flow Information:
        Net cash paid during the year for:
             Interest                                                            $    143
             Income Taxes                                                        $   --

</TABLE>

Supplemental Non-Cash Investing Activities - See Note 4.

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                                       6
<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 broadband products and services,
      providing telecommunications equipment with related software, broadband
      products, and fiber and cable as used by service providers in the paging
      and other wireless personal communications markets. The Company designs,
      manufactures, markets and services its products under the Eagle and
      BroadbandMagic.com, Inc. names. These products include transmitters,
      receivers, controllers, software, convergent set-top boxes, fiber, cable,
      and other equipment used in commercial and personal communications systems
      and radio and telephone systems. Additionally the Company provides cable
      television, telephone, security, internet connectivity and related
      services under a bundled digital services package, commonly known as
      "BDS", through single source billing.

A)    Consolidation

      At May 31, 2001 the Company has four wholly owned subsidiaries:
      AtlanticPacific Communications, Inc., eToolz, Inc., BroadbandMagic.com,
      Inc., ClearWorks.Net, Inc. and its subsidiaries, (ClearWorks
      Communication, Inc., ClearWorks Structured Wiring Services, Inc.,
      ClearWorks Integration Services, Inc., United Computing Group and Link-Two
      Communications, Inc.). The consolidated financial statements include the
      accounts of the Company and its subsidiaries. All significant
      inter-company transactions and balances have been eliminated in
      consolidation.

B)    Cash and Cash Equivalents

      The Company has $27,747,000 and $33,346,000, invested in interest bearing
      accounts and marketable securities (Note 9) at May 31, 2001 and August 31,
      2000, respectively.

C)    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
                                                 ---------
                  Head-In Facility                  20
                  Manufacturing Equipment          3-7
                  Furniture and Fixtures           2-7
                  Office Equipment                  5
                  Leasehold Improvements      Life of Lease
                  Property and Equipment            5
                  Vehicles                          5


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

D)    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, in thousands:

                                                  May 31
                                         2001               2000
                  -----------------------------------------------
                  Raw Materials       $  7,477            $ 5,302
                  Work in Process        2,177                508
                  Finished Goods           356                  0
                                      --------            -------
                                      $ 10,010            $ 5,810
                                      ========            =======

E)    Revenue Recognition

      The Company designs, manufactures, markets and services it products and
      services under the Eagle, Broadband Magic.com, Inc. and AtlanticPacific
      names. Eagle designs, manufactures and markets transmitters, receivers,
      controllers, software, along with other equipment used in commercial and
      personal communication systems, radio and telephone systems. Revenues from
      these products are recognized when the product is shipped. Broadband
      Magic.com, Inc. designs, manufactures and markets the convergent set-top
      boxes. Revenues from these products are recognized when the product is
      shipped. AtlanticPacific provides project planning, installation, project
      management, testing and documentation of fiber and cable to commercial and
      industrial clients throughout the United States. The revenue from the
      fiber and cable installation and services is recognized upon percentage
      completion of the project, most projects are completed in less than a
      month, therefore, matching revenue and expense in the period incurred.
      Service, training and extended warranty contract


                                       7
<PAGE>

      revenues are recognized as earned. EToolz, Inc. provides research and
      development support for all Eagle companies and does not currently
      provide billable services to independent third parties. Clearworks.net
      provides residential fiber and cabling to developers and builders,
      these services and products are recognized upon percentage completion of
      the installation, most installations are completed in less than three
      months. Additionally, Clearworks.net revenues for bundled digital
      services are billed monthly as services are provided to the end customer.

      The companies engage independent agents for sales principally in foreign
      countries and certain geographic regions in the United States. Under the
      terms of these one-year agreements the distributor or sales agents provide
      Eagle with manufacturing business sales leads. The transactions from these
      distributors and agents are subject to Eagle's approval prior to sale. The
      distributorship or sales agent receives commissions based on the amount of
      the sales invoice from Eagle to the customer. The sale is recognized at
      the time of shipment to the customer. These sales agents and distributors
      are not a significant portion of total sales in any of the periods
      presented.

F)    Research and Development Costs

      For the nine months ended May31, 2001 and 2000, the Company continued
      research and development activities for internal projects related to its
      convergent set-top boxes as well as its multi-media entertainment centers.
      Research and development costs of $729,000 and $412,000 were expensed for
      the nine months ended May 31, 2001 and 2000.

      Prior to Fiscal 2000, the Company's research and development costs
      included obligations to perform contractual services for outside parties.
      These costs were expensed as contract revenues were earned. Research and
      development costs of $145,501 were expensed for the nine months ended May
      31, 2000. Contract revenues earned for the months ended May 31, 2001 and
      2000 were $0. No research and development services were performed for
      outside parties for the nine months ended May 31, 2001.

G)    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.

H)    Net Earnings Per Common Share

      Net earnings per common share are 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, in thousands:


                                                    MAY 31, 2001   MAY 31, 2000
                                                   -------------   ------------
           Weighted Average Number of Common
               Shares Outstanding Including:

           Primary Common Stock Equivalents            40,054         20,981
           Fully Dilutive Common Stock Equivalents     40,208         21,055

I)    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, 2001 and 2000, no impairment existed.

J)    Intangible Assets

      Goodwill represents the excess of the cost of companies acquired over the
      fair value of their net assets at the dates of acquisition and is being
      amortized using the straight-line method over five years for Atlantic
      Pacific and Comtel and twenty (20) years for ClearWorks.Net.

      Other intangible assets consist of patents, licenses and the intrinsic
      value trade-show costs. Patents and trade show costs are being amortized
      using the straight-line method over ten (10) years, (25) years and
      eighteen (18) months, respectively.

K)    Advertising Costs


                                       8

<PAGE>

      Beginning in fiscal 2000, advertising costs have been capitalized and
      amortized on the basis of contractual agreements entered into by the
      Company. These contracts are amortized over the life of the individual
      contracts or expensed in the period incurred. For the nine months ended
      May 31, 2001 and 2000, the Company has expensed $332,000 and $115,000,
      respectively. Prior to fiscal 2000, the Company had no contractual
      arrangements, therefore all advertising related costs were expensed as
      incurred.

L)    Deferred Syndication Costs

      Deferred syndication costs consist of those expenditures incurred that are
      directly attributable to fundraising and the collection thereto. Upon
      successful collection of the funds, all expenses incurred will be
      reclassified to additional paid in capital and treated as syndication
      costs; netted against the funds raised.

M)    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.

N)    Marketable Securities

      In May 1993, the Financial Accounting Standards Board issued Statements of
      Financial Accounting Standards No. 115, "Accounting for Certain
      Investments in Debt and Equity Securities", effective for fiscal years
      beginning after December 15, 1993. This statements considers debt
      securities that the Company has both the positive intent and ability to
      hold to maturity are carried at amortized cost. Debt securities that the
      company does not have the positive intent and ability to hold to maturity
      and all marketable equity securities are classified as available-for-sale
      or trading securities and are carried at fair market value. Unrealized
      holding gains and losses on securities classified as trading are reported
      in earnings. Unrealized holding gains and losses on securities classified
      as available-for-sale were previously carried as a separate component of
      stockholders' equity. SFAS No. 115 as amended by Financial Accounting
      Standards Board issued Statement of Financial Accounting Standards No.
      130, "Other Comprehensive Income". Management determines the appropriate
      classification of marketable equity and debt securities at the time of
      purchase and re-evaluates such designation as of each balance sheet date.

O)    Other Comprehensive Income

      In 1997, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards No. 130, "Other Comprehensive Income,"
      effective for fiscal years beginning after December 15, 1997. This
      statement considers the presentation of unrealized holding gains and
      losses attributable to debt and equity securities classified as
      available-for-sale. As stated, any unrealized holding gains or losses
      affiliated to these securities are carried below net income under the
      caption "Other Comprehensive Income." Prior to August 31, 2000, the
      Company did not invest in marketable securities.

P)    Reclassification

      The Company has reclassified certain assets costs and expenses for the
      nine months ended May 31, 2001 to facilitate comparison to the nine months
      ended May 31, 2000 and August 31, 2000.

Q)    Supporting Costs in Selling, General and Administrative Expenses

      Other support cost for the nine ending May 31, 2001 and 2000 are as
      follows:

                                                   2001        2000
                                                 -------      ------
            Rent                                 $  423       $  220
            Travel                                  375          172
            Utilities                               186           91
            Professional                            319          167
            Office Supplies                         392           24
            Insurance                               112           69
            Conventions                             650           80
            Postage & Delivery                      142           31
            Taxes                                    28           20
            Other                                    10            1
                                                 ------       ------
            Total                                $2,729       $  875
                                                 ======       ======


                                       9
<PAGE>

NOTE 2 - ACCOUNTS RECEIVABLE:

            Accounts receivable consist of the following, in thousands:

<TABLE>
<CAPTION>
                                                         May 31,      August 31,
                                                          2001          2000
                                                       -------------------------
<S>                                                    <C>             <C>
            Accounts Receivable                        $ 11,195        $  9,991
            Allowance for Doubtful Account                  530              89
                                                       --------        --------
            Net Accounts Receivable                    $ 10,665        $  9,902
                                                       ========        ========
</TABLE>

NOTE 3 - PROPERTY, PLANT & EQUIPMENT:

      Components of property, plant & equipment are as follows, in thousands:

<TABLE>
<CAPTION>
                                                         May 31,      August 31,
                                                          2001           2000
                                                       -------------------------
<S>                                                    <C>             <C>
            Automobile                                 $    287        $     58
            Head In Facilities                            5,517            --
            Furniture & Fixtures                            464             140
            Leasehold Improvements                           72              24
            Office Equipment                                786             721
            Property, Manufacturing & Equipment          11,227           1,760
                                                       --------        --------

               Total Property, Plant & Equipment         18,353           2,703
                 Less:  Accumulated Depreciation         (1,651)         (1,023)
                                                       --------        --------
               Net Property, Plant & Equipment         $ 16,702        $  1,680
                                                       ========        ========
</TABLE>

NOTE 4 - BUSINESS COMBINATIONS:

      On February 1, 2001, the Company acquired ClearWorks.Net, Inc.
      (ClearWorks) and its subsidiaries, ClearWorks Communication, Inc.,
      ClearWorks Structured Wiring Services, Inc., ClearWorks Integration
      Services, Inc., United Computing Group, Link-Two Communications, Inc. and
      LD Connect, Inc. in a business combination accounted for as a purchase.
      ClearWorks is a communications carrier providing broadband data, video and
      voice communication services to residential and commercial customers,
      currently within Houston, Texas. These services are provided over
      fiber-optic networks ("Fiber-To-The-Home" or "FTTH") which the Company
      designs, constructs, owns and operated inside large residential
      master-planned communities and office complexes. ClearWorks also provides
      information technology staffing personnel, network engineering, vendor
      evaluation of network hardware, implementation of network hardware and
      support of private and enterprise networks, as well as, developing
      residential, commercial and education accounts for deployment of
      structured wiring solutions. The results of operation for ClearWorks are
      included in the accompanying financial statements since the date of
      acquisition. The Company issued 35,287,000 shares of its common stock to
      ClearWorks. The total cost of the acquisition was $109,389,526, which
      exceeded the fair value of the net assets of ClearWorks by $67,765,000.
      The excess is being amortized as goodwill using the straight-line method
      over twenty (20) years.

      On January 1, 2000, the Company acquired AtlanticPacific Communications,
      Inc. (AtlanticPacific) in a business combination accounted for as a
      purchase. AtlanticPacific is primarily engaged in the nationwide sales and
      installation of fiber and cable to commercial enterprises. The results of
      operations for AtlanticPacific are included in the accompanying financial
      statements since the date of acquisition. To culminate this transaction,
      the Company issued 518,919 shares of its common stock and paid no cash to
      AtlanticPacific. However, the Company assumed debt of $1,304,080 and
      immediately paid off $830,000. The total cost of the acquisition was
      $3,131,850, which exceeded the fair value of the net assets of
      AtlanticPacific by $3,662,890. The excess is being amortized using the
      straight-line method over twenty (20) years.

      On January 1, 2000, the Company acquired Comtel Communications, Inc.
      (Comtel) in a business combination accounted for as a purchase. Comtel is
      primarily engaged in the sales and installation of fiber and cable to
      commercial enterprises in Texas and Louisiana. The results of operations
      for Comtel are included in the accompanying financial statements since the
      date of acquisition. The Company issued 300,000 shares of its common stock
      to Comtel in culminating this transaction. The total cost of the
      acquisition was $2,269,856, which exceeded the fair value of the net
      assets of Comtel by $1,878,528. The excess is being amortized as goodwill
      using the straight-line method over twenty (20) years.

      On March 17, 2000, the Company acquired eToolz, Inc. (ETI) in a business
      transaction accounted for as a purchase. ETI specializes in the
      development of leading edge, innovative, commercial, industrial and
      military technologies. The results of operations for ETI are included in
      the accompanying financial statements since the date of acquisition. The
      Company


                                       10
<PAGE>

      issued 50,000 shares of its common stock to ETI in culminating the
      transaction. The total cost of the transaction was $437,500, which
      exceeded the fair market of the net assets of ETI by $424,019. The excess
      is being amortized as goodwill using the straight-line method over twenty
      (20) years.

      The Company has entered into an employment agreement with the former
      principal of AtlanticPacific at the time of acquisition. Additionally,
      the principal of AtlanticPacific may earn up to 3,000,000 shares of the
      Company's common stock based on accumulated sales goals. Under the terms
      of the agreement, the Company will issue an additional 500,000 shares
      for $10,000,000 in accumulated sales, 1,000,000 shares for $30,000,000
      in accumulated sales and 1,500,000 shares for $60,000,000 in
      accumulated sales. These sales have to be achieved within a two-year
      period commencing January 1, 2000.

A)    Pro Forma Results

      The accompanying unaudited pro forma condensed combined financial
      statements reflect the results of its condensed consolidated balance sheet
      as of November 30, 2000 and condensed consolidated operations for the
      fiscal year ended August 31, 2000 and the three month period ended
      November 30, 2000. The fiscal year end audited results of Eagle Wireless
      and ClearWorks.Net are August 31, 2000 and December 31, 1999,
      respectively.

      Eagle Wireless will acquire all outstanding common shares of
      ClearWorks.Net in a transaction accounted for by the purchase method of
      accounting. Eagle Wireless International, Inc. is deemed to be the
      surviving corporation due to its financial control through loans, voting
      rights agreements with significant shareholders of ClearWorks.Net and
      limitation of ClearWorks.Net representation on the surviving entities
      board of directors.

      The pro forma adjustments do not reflect any operating efficiencies and
      cost savings which respect to the combined companies. The pro forma
      adjustments do not include any adjustments to historical sales for any
      future price changes nor any adjustments to selling and marketing expenses
      for any future operating changes.

      The unaudited pro forma below is for the nine months ended May 31, 2000
      for Eagle and ClearWorks.Net, respectively.

<TABLE>
<CAPTION>

                                           Eagle Wireless                           Pro Forma            Combined
                                           International     ClearWorks.Net            Adj.               Totals
                                          ----------------  ----------------     ---------------      --------------
<S>                                           <C>                     <C>                  <C>             <C>
Total Revenues                                 5,734              29,440                  -0-              35,174
Cost of Revenues/Expenses                      8,525              42,202                  -0-              50,727
                                    ----------------           ---------            ---------           ---------
Earnings                                      (2,791)            (12,761)                 -0-             (15,552)
                                    ================           =========            =========           =========

Earnings Per Share
Basic                               (43,281,000 SHS)                                                         (.36)
                                    ===============                                                      =========
Diluted                             (43,355,000 SHS)                                                         (.36)
                                    ===============                                                      =========
</TABLE>


                                       11
<PAGE>

     The unaudited pro forma below is for nine months ended May 31, 2001
     for Eagle and ClearWorks.Net, respectively.

<TABLE>
<CAPTION>


                                             Eagle Wireless                         Pro Forma          Combined
                                             International     ClearWorks.Net          Adj.             Totals
                                            ----------------  -----------------   --------------    --------------
<S>                                             <C>                    <C>                <C>            <C>

Total Revenues                                   5,734             29,440                -0-             35,174
Cost of Revenues/Expenses                        8,525             42,202                -0-             50,727
                                       ---------------           --------            -------           --------
Earnings                                         2,791            (12,761)               -0-            (15,552)
                                       ===============           ========            =======           ========
Earnings Per Share
Basic                                  (40,054,000 SHS)                                                    (.39)
                                       ===============                                                 ========
Diluted                                (40,054,000 SHS)                                                    (.39)
                                       ===============                                                 ========
</TABLE>

      This pro forma includes the acquisition of ClearWorks.Net of Link Two
      Communications, Inc. and LD Connect, Inc. The results operations for these
      companies are included in the balances of ClearWorks.Net, Inc. The
      elimination entries reflect the adjustments of intangible assets arising
      from the acquisition of ClearWorks.Net, Inc. by the Company and to
      eliminate the Company's investment in ClearWorks.Net, Inc. All items of
      amortization arising from this acquisition are included in the pro forma
      results above.

NOTE 5 - NOTES PAYABLE:

      The following table lists the Company's note obligations as of May 31,
      2001 and 2000, in thousands:

<TABLE>
<CAPTION>
                                                 Annual
                                                Interest                                        Amount
                                                  Rate              Due Date           2001             2000
                                              -----------------------------------------------------------------
<S>                                              <C>                 <C>            <C>               <C>
        Vehicles                                 Various             Various        $      142        $     ---
        6% Convertible Debenture (Note8)         6.0%                Demand              2,000              ---
        Tailwind Convertible Debenture           2.0%                May 2003            5,000
        Other                                    Various             Various               110              350
                                                                                    ----------        ---------

        Total notes payable                                                         $    7,252        $     350
        Less current portion                                                            (3,214)            (350)
                                                                                    ----------        ---------

        Total long-term debt                                                        $    4,038        $     ---
                                                                                    ==========        =========

</TABLE>

NOTE 6 - CAPITAL LEASE OBLIGATIONS:

      The Company leases equipment from various companies under capital leases
      with varying expiration dates. The assets and liabilities under the
      capital lease are recorded at the lower of the present value of the
      minimum lease payments or the fair value of the asset. The assets are
      depreciated over the estimated useful life with the value and depreciation
      being included as a component of Property and Equipment under operating
      equipment.


                                       12

<PAGE>

      Minimum future lease payment under capital lease as of May 31, 2001 for
      each of the next five years and in the aggregate are, in thousands:

            Period Ended                          Amount
                                                ---------
               2002                             $     83
               2003                                   34
               2004                                   12
                                                ---------

            Total minimum lease payment         $    129
                                                ---------
            Less: Amount representing
            interest                                  13
                                                ---------
            Present value of net
            minimum lease payments              $    116
                                                =========


NOTE 7 - LINE OF CREDIT:

      On September 29, 2000, AtlanticPacific Communications, Inc. (a wholly
      owned subsidiary of the Company) entered into a one year $900,000 line of
      credit agreement with Southwest Bank of Texas (SWBT). This note bears
      interest at SWBT's prime rate plus .25%, which is payable monthly with
      principal due September 28, 2001. AtlanticPacific's accounts receivable
      are pledged as collateral with Eagle Wireless the guarantor.

      The Company, through its subsidiary United Computing Group (UCG),
      maintains a $3,000,000 line of credit with IBM Credit Corporation (IBM)
      bearing a variable rate of interest. At May 31, 2001, a balance of
      $1,262,777 existed. Payments are due every ten (10) days. Prior to May 31,
      2001, the credit line was increased to $5,000,000, concurrently, the
      Company is negotiating an additional amount of $1,000,000 to a total line
      of credit of $6,000,000. As part of the agreement, UCG must maintain
      annual revenues of greater than zero and equal to or less than 40.0 : 1.0;
      a ratio of net profit after tax to revenues equal to or greater than 1.25
      percent; and a ratio of total liabilities to tangible net worth greater
      than zero and equal to or less than 10.0 : 1.0. Additionally, UCG must
      maintain a standard all-risk insurance policy in the amount of at least
      $300,000 with IBM being named lender loss payee.

NOTE 8 - CONVERTIBLE DEBENTURES:

      On December 13, 1999, ClearWorks.Net, Inc. (ClearWorks), closed a private
      placement transaction with Candlelight Investors, LLC, and ("Candlelight")
      a Delaware limited liability company. In the private placement, ClearWorks
      received from Candlelight a total of $3,000,000 in exchange for $3,000,000
      total face value 6% convertible debentures due December 13, 2001, together
      with warrants to purchase up to 210,000 shares of common stock. ClearWorks
      determined the warrants to have a total value of $215,000 on the date of
      issuance and recorded this amount as a discount against the convertible
      debentures.

      The warrants are exercisable at $3.16 per share. The debentures are
      convertible at the lower of $3.30 per share or ninety-two percent (92%) of
      the average of the three lowest closing bid prices for ClearWorks' common
      stock during the 30 days immediately preceding conversion. However, if the
      average lowest closing price is less than $1.50 per share, then the
      conversion price of the debentures shall be equal to the average lowest
      closing price without modification. Because the conversion price of these
      debentures was less than the fair value of ClearWorks' common stock on the
      date of issuance, ClearWorks has recorded as interest expense the
      intrinsic value of the beneficial conversion feature. The intrinsic value
      of the beneficial conversion feature was determined to be $650,000.

      In connection with the private placement, ClearWorks agreed not to sell
      any of its securities until July 4, 2000, unless the securities are (1)
      issued in connection with a public offering of at least $15 million, (2)
      in connection with an acquisition of additional businesses or assets or
      (3) as compensation to employees, consultants, officers or directors.

      On April 19, 2000, ClearWorks issued an additional $2,000,000 of 6%
      convertible debentures to Candlelight with conversion features similar to
      those noted above. Because the conversion price of these debentures was
      less than the fair value of ClearWorks' common stock on the date of
      issuance, ClearWorks has recorded as interest expense the value of the
      beneficial conversion feature. The value of the beneficial conversion
      feature exceeded the carrying value of the debentures (net of discount
      allocable to detachable warrants discussed below), therefore, the charge
      to interest expense was limited to $1,716,000.

      The 6% convertible debentures issued on April 19, 2000 were also issued
      with detachable warrants, exercisable at $3.16 per share. The warrants can
      be converted into 140,000 shares of common stock. ClearWorks determined
      the warrants have a total value of $284,000 on the date of issuance and
      recorded this amount as a discount against the convertible debentures.
      This discount will be amortized to interest expense over the term on the
      convertible debenture.

      This debenture contained a stipulation that required ClearWorks to
      register all underlying shares of common stock by May


                                       13
<PAGE>

      19, 2000. This registration did not occur resulting in a situation of
      default. As a result of said default. On December 13, 2000, Candlelight
      served notice that the principal and accrued interest of the 6%
      convertible debenture dated April 19, 2000 to be repaid in accordance with
      the terms of the debenture. As a result of this call and the subsequent
      lawsuit served by Candlelight against ClearWorks, all deferred costs and
      penalties associated with this debenture have been expensed.

      During 2001, the Company merged with ClearWorks.net, Inc., and as a
      result, ClearWorks is a wholly owned subsidiary of Eagle. Link Two
      Communications, Inc. is a subsidiary of ClearWorks, and as a result of the
      merger, is now a secondary subsidiary of Eagle. Link Two entered an
      agreement with The Tail Wind Fund Ltd., under which Tail Wind purchased
      from Link Two a 2% convertible note in the initial amount of $5,000,000
      (the "First Note"), and Link Two has the ability to require Tail Wind to
      purchase additional convertible notes in the amount of $4,000,000 (the
      "Second Note") and $3,000,000 (the "Third Note"). Link Two may require
      Tail Wind to purchase the Second Note if: (a) the price of Eagle's common
      stock is above $5.00 per share for 20 consecutive trading days during
      calendar 2001, (b) Eagle has more than $10,000,000 in cash less payments
      for capital leases that will become due within the next two years, (c) the
      registration statement, of which this prospectus is a part, is effective,
      (d) Eagle does reflect a net loss of more than $4,000,000 during any
      quarter, and (e) no material adverse event has occurred. Link Two may
      require Tail Wind to purchase the Third Note if the price of Eagle's
      common stock is above $8.00 per share for 20 consecutive trading days
      during calendar 2001, and the conditions set forth in (b) through (e) of
      the preceding sentence are satisfied. In conjunction with the issuance of
      the First Note, Link Two issued Tail Wind a warrant, and if Link Two
      chooses to issue the Second and Third Notes, it will issue Tail Wind
      additional warrants.

      The notes discussed above are the obligation of Link Two. As a result of
      the merger, and Eagle becoming the parent of Link Two, we have agreed to
      guarantee the Link Two notes issued to Tail Wind, and we have entered into
      an agreement with Tail Wind that allows them to convert the above notes
      into our common stock at the rate of $1.79 per share. The agreement also
      permits Tail Wind to convert the Link Two warrant into shares of our
      common stock such that upon conversion, Tail Wind would have a warrant to
      purchase 1,396,648 shares of our common stock at an exercise price of
      $1.83 per share, exercisable between August 2002 and September 2006. If
      Link Two requires Tail Wind to purchase the Second and Third Note, the
      additional warrants it issues will also be convertible into shares of our
      common stock. The number of shares that the additional warrants may be
      converted into will depend on the price of our common stock, and cannot be
      determined at this time. However, the exercise price of the additional
      warrants may not be less than $1.79 per share.

      Commencing upon the effectiveness of the registration statement,
      discussed below the Company has agreed to pre-pay the notes at the
      rate of a minimum of $250,000 per month and a maximum of $500,000 per
      month. The pre-payment may be in cash or in shares of our common stock
      at the rate of 90% of the average of the two lowest market prices of
      our common stock for the applicable month. However, the Company may not
      issue shares of our common stock for pre-payment purposes if the total
      number of shares exceeds the aggregate trading volume of our common
      stock for the twelve trading days preceding the date of payment, in
      which case we must pay the difference in cash. As the number of shares
      to be issued for pre-payment purposes is dependent on the price and
      trading volume of our common stock, there is no way to determine the
      number of shares that may be issued at this time.

      As part of the above agreements, the Company entered into a registration
      rights agreement with Tail Wind, and the Company filed a registration
      statement, in order to permit Tail Wind to resell to the public the
      shares of common stock that it may acquire upon any conversion of the
      First Note and exercise of the warrant associated with the First Note.
      The Company have registered for resale 5,000,000 shares of common stock,
      which represents 122% of the shares to be issued upon conversion of the
      First Note at $1.79 per share and 100% of the exercise of the warrant
      associated with the First Note at $1.83 per share. The additional shares
      registered is to account for the shares that may be issued for
      pre-payment as described in the above paragraph, or upon the exercise of
      the anti-dilution rights provided for in the following paragraph. If
      Link Two chooses to require Tail Wind to purchase the Second and Third
      Notes, we will file another registration statement covering the resale
      of the shares that may be issued on conversion of the Second and Third
      Notes and upon the exercise of the warrants associated with the Second
      and Third Notes.

      In our agreement with Tail Wind, the Company granted Tail Wind
      anti-dilution rights. If the Company sell common stock or securities
      exercisable for or convertible into shares of our common stock for less
      than $1.79 per share, the Company must reduce the conversion price of the
      notes and the exercise price of the warrants to the price the Company sold
      the common stock or the exercise or conversion price the Company issued
      the convertible securities. The Company has agreed to register for resale
      any additional shares that will be issued pursuant to these anti-dilution
      rights on a future registration statement, unless such additional shares
      are available in the current registration statement. In addition, under
      the terms of the agreement, without Tail Wind's approval, the Company may
      not issue Tail Wind shares of common stock such that Tail Wind would ever
      be considered to beneficially own greater than 4.99% of the outstanding
      common stock. In connection with this transaction, Link Two has paid
      Ladenburg Thalman & Co. a fee of 5% of the purchase price of the notes.
      Additionally the Company has valued the conversion feature of the
      convertible debenture and warrants at $1,648,045 and $1,270,995,
      respectively; the amounts were determined by using the Black-Scholes
      calculation. These amounts have been capitalized as part of the cost of
      developing the wireless infrastructure.

NOTE 9 - MARKETABLE SECURITIES:

      As discussed in Note 1, the Company adopted the provisions of SFAS No.
      115, "Accounting for Certain Investments in


                                       14
<PAGE>

      Debt and Equity Securities" and SFAS No. 130, "Accounting for Other
      Comprehensive Income." At May31, 2001 all of the Company's marketable
      equity securities are classified as available-for-sale; they were acquired
      with the intent to dispose of them within the next year. For the months
      ended May 31, 2000, no marketable securities were held.

      At May 31, 2001 the securities had an original basis of $1,033,545;
      determined by multiplying the number of shares being acquired by the fair
      market value of those shares. At the May 31, 2001 balance sheet date, the
      fair market value of these securities was $1,033,842; determined by
      multiplying the number of shares held by the fair market value of those
      shares at the balance sheet date. The difference between the cost and fair
      market value represents an unrealized holding gain and is included below
      current earnings in "Other Comprehensive Income

<TABLE>
<CAPTION>
       Security Name        Shares      Cost Basis    Current FMV
<S>                         <C>       <C>               <C>
      Bank of America       50,000    $    49,687    $     49,500
      Bear Stearns          55,000         54,948          53,556
      Citicorp             110,000        109,500         106,212
      CMC Security          17,000         16,660          16,872
      Countrywide           18,000         16,562          16,539
      Credit
      Suisse                50,000         49,925          50,375
      CWMBS                 46,000         41,497          42,217
      FHLMC                422,000        169,574         174,658
      FNMA                 840,000        187,398         188,956
      GE Capital            32,000         31,141          31,232
      GNMA                 294,610        256,015         252,179
      Norwest               13,000         12,716          12,825
      Prudential            15,000         13,595          13,902
      Res.
      Accredit              25,102          5,648           5,639
      Westam                20,000         18,674          19,175
                                      -----------     -----------
      Totals                          $ 1,033,544     $ 1,033,842
                                      ===========     ===========
</TABLE>

      Other marketable securities, Urbana and Burst.com, with a cost basis of
      $600,000 and fair market value of $607,000 are included in non-current
      investment category and are not currently held for resale.

NOTE 10 - 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,
                                                      2000    1999
                                                      ----    ----
                                                       %         %
            U.S. Federal Statutory Tax Rate            34       34
            U.S. Valuation Difference                  (1)       1
                                                      ----    ----
            Effective U.S. Tax Rate                    33       35
            Foreign Tax Valuation                       0        0
                                                      ----    ----
            Effective Tax Rate                         33       35
                                                      ====    ====


      Items giving rise to deferred tax assets / liabilities are as follows:

<TABLE>
<CAPTION>
                                                              August 31,
                                                          2000          1999
                                                        ---------------------
<S>                                                     <C>           <C>
            Deferred Tax Assets:

                 Tax Loss Carry-forward                 $     0       $     0
                                                        -------       -------

            Deferred Tax Liability:

                 Depreciation                            47,480        13,852
                                                        -------       -------

            Valuation Allowance                               0             0
                                                        -------       -------

                 Net Deferred Tax Asset / Liability     $47,480       $13,852
                                                        =======       =======
</TABLE>

                                       15
<PAGE>

NOTE 11 - ISSUANCE OF COMMON STOCK:

      During the three months ended May 31, 2001, the Company issued shares of
      common stock. The following table summarizes the shares of common stock
      issued, in thousands.

            Shares Outstanding February 28, 2001                  61,353
                                                              ----------

            Shares issued for Services and Compensation              512

                                                              ----------
            Shares Outstanding May 31, 2001                       61,865
                                                              ==========


NOTE 12 - PREFERRED STOCK, STOCK OPTIONS AND WARRANTS:

      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. Since that time, the Board of Directors have
      amended the July 1996, employee stock option plan under which 1,000,000
      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 May 31, 2001, 404,974
      options have been granted pursuant to such plan with 72,499 being
      exercised and 10,350 being cancelled.

      The Company has issued or has acquired through its acquisitions and
      outstanding the following warrants which have not yet been exercised at
      May 31, 2001:

            39,998 stock purchase warrants issued to Carl A. Chase. Expiration
            of warrants is 6,666 on the ending date of each month commencing on
            November 30, 2001 and ending on July 31, 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 $0.31 per share.
            The shares of common stock underlying these warrants have not been
            registered or issued, under the Securities Act of 1933. As of May
            31, 2001, none of these warrants have been registered, issued or
            exercised.

            600,000 stock purchase warrants issued to Paladin Associates
            expiring September 1, 2001. 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. 166,667 warrants are
            not exercisable until and unless the shares of Common Stock trade at
            a minimum of $4.00 per share for twenty-one consecutive trading
            days. 166,667 warrants are not exercisable until and unless the
            shares of Common Stock trade at a minimum of $6.00 per share for
            twenty-one consecutive trading days. 166,666 warrants are not
            exercisable until and unless the shares of Common Stock trade at a
            minimum of $8.00 per share for twenty-one consecutive trading days.
            The shares of common stock underlying 350,000 warrants were
            registered for resale on August 3, 2000, under the Securities Act of
            1933. 100,000 incentive warrants will be made available and will
            vest at the end of October 2000 if the first objective of $4.00 is
            achieved before the end of October. As of May 31, 2001, 250,000 of
            the underlying shares of common stock have not yet been registered
            for resale under the Securities Act of 1933.

            50,000 stock purchase warrants issued to Weed & Co. L.P. expiring
            December 10, 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 $1.55 per share. The shares of common stock
            underlying the warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As of May 31, 2001, 25,000
            warrants have been exercised resulting in cash proceeds of $38,750.

            20,000 stock purchase warrants issued to Kason, Inc. expiring
            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. The shares of common stock
            underlying these warrants were registered for resale on November 30,
            2000, under the Securities Act of 1933. May 31, 2001, 6,234 warrants
            have been exercised resulting cash proceeds of $10,910.

            25,000 stock purchase warrants issued to Synchton, Inc. expiring
            January 1, 2004. 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. The shares of common stock
            underlying these have not been registered as of May 31, 2001, under
            the Securities Act of 1933. As of May 31, 2001, none of these


                                       16

<PAGE>

            warrants have been exercised.

            41,667 stock purchase warrants issued to Peter Miles expiring July
            20, 2004. 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. The shares of common stock underlying
            these have not been registered as of May 31, 2001, under the
            Securities Act of 1933. As of May 31, 2001, none of these warrants
            have been exercised.

            50,000 stock purchase warrants issued to Weed & Co. L.P. expiring
            June 10, 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 $3.00 per share. The shares of common stock
            underlying these warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As May 31, 2001, none of
            these warrants have been exercised.

            40,000 stock purchase warrants will be issued to Rachel McClere 1998
            Trust expiring April 24, 2003. 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 $3.75 per share. The shares of
            common stock underlying these warrants have not been registered or
            issued, under the Securities Act of 1933. As of May 31, 2001, none
            of these warrants have been registered, issued or exercised.

            160,000 stock purchase warrants will be issued to McClere Family
            Trust expiring April 24, 2003. 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 $3.75 per share. The shares of
            common stock underlying these warrants have not been registered or
            issued, under the Securities Act of 1933. As May 31, 2001, none of
            these warrants have been registered, issued or exercised.

            232,000 stock purchase warrants will be issued to Shannon D. McLeroy
            expiring April 24, 2003. 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 $3.75 per share. The shares of common stock
            underlying these warrants have not been registered or issued, under
            the Securities Act of 1933. As May 31, 2001, none of these warrants
            have been registered, issued or exercised.

            176,000 stock purchase warrants will be issued to Tech Technologies
            Services, LLC expiring April 24, 2003. 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 $3.75 per share. The shares
            of common stock underlying these warrants have not been registered
            or issued, under the Securities Act of 1933. As of May 31, 2001,
            none of these warrants have been registered, issued or exercised.

            328,000 stock purchase warrants will be issued to Candlelight
            Investors, LLC. Expiration of warrants is as follows: 104,000 on
            December 31, 2002, 112,000 on February 15, 2003 and the remaining
            112,000 on April 19, 2003. 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 $3.95 per share. The shares of common
            stock underlying these warrants have not been registered or issued,
            under the Securities Act of 1933. As of May 31, 2001, none of these
            warrants have been registered, issued or exercised.

            25,000 stock purchase warrants issued to Synchton, Inc. expiring
            October 1, 2003. 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 $4.50 per share. The shares of common stock
            underlying these warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As of May 31, 2001, none of
            these warrants have been exercised.

            100,000 stock purchase warrants issued to National Financial
            Communications Corp. expiring June 2003. 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. As
            of May 31, 2001, the underlying shares of common stock have not yet
            been registered for resale under the Securities Act of 1933.

            250,000 stock purchase warrants issued to Sands Brothers & Co., LTD.
            expiring July 13, 2003. 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 $7.49 per share. As of May 31, 2001, the
            underlying shares of common stock have not yet been registered for
            resale under the Securities Act of 1933.

            25,000 stock purchase warrants issued to Synchton, Inc. expiring
            July 1, 2003. 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 $7.50 per share. The shares of common stock
            underlying these warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As May 31, 2001, none of
            these warrants have been exercised.


                                       17
<PAGE>

            192,000 stock purchase warrants will be issued to Tech Technologies
            Services, LLC. expiring April 24, 2008. 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 $7.50 per share. The shares
            of common stock underlying these warrants have not been registered
            or issued, under the Securities Act of 1933. As of May 31, 2001,
            none of these warrants have been registered, issued or exercised.

            240,000 stock purchase warrants will be issued to Shannon D. McLeroy
            expiring April 24, 2008. 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 $7.50 per share. The shares of common stock
            underlying these warrants have not been registered or issued, under
            the Securities Act of 1933. As May 31, 2001, none of these warrants
            have been registered, issued or exercised.

            168,000 stock purchase warrants will be issued to Michael T. McClere
            expiring April, 24, 2008. 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 $7.50 per share. The shares of common
            stock underlying these warrants have not been registered or issued,
            under the Securities Act of 1933. As May 31, 2001, none of these
            warrants have been registered, issued or exercised.

            40,000 stock purchase warrants will be issued to Rachel McClere 1998
            Trust expiring April 24, 2008. 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 $7.50 per share. The shares of
            common stock underlying these warrants have not been registered or
            issued, under the Securities Act of 1933. As of May 31, 2001, none
            of these warrants have been registered, issued or exercised.

            160,000 stock purchase warrants will be issued to McClere Family
            Trust expiring April 24, 2008. 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 $7.50 per share. The shares of
            common stock underlying these warrants have not been registered or
            issued, under the Securities Act of 1933. As May 31, 2001, none of
            these warrants have been registered, issued or exercised.

            50,000 stock purchase warrants issued to Weed & Co. L.P. expiring
            June 10, 2003. 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 $9.68 per share. The shares of common stock
            underlying these warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As of May 31, 2001, none of
            these warrants have been exercised.

            25,000 stock purchase warrants issued to Synchton, Inc. expiring
            April 1, 2003. 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 $10.00 per share. The shares of common stock
            underlying these warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As May 31, 2001, none of
            these warrants have been exercised.

            250,000 stock purchase warrants issued to Sands Brothers & Co., LTD.
            expiring July 13, 2003. 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 $10.00 per share. These warrants, however are
            not exercisable until and unless the closing price of Common Stock
            at any time during the exercise period reaches $10.00 per share. As
            of May 31, 2001, the underlying shares of common stock have not yet
            been registered for resale under the Securities Act of 1933.

            250,000 stock purchase warrants issued to Hampton-Porter Investment
            Bankers LLC expiring June 27, 2003. 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 $12.00 per share. The shares
            of common stock underlying these warrants were registered for resale
            on August 3, 2000, under the Securities Act of 1933. As of May 31,
            2001, none of these warrants have been exercised.

            350,000 stock purchase warrants issued to Sands Brothers & Co., LTD.
            expiring July 13, 2003. 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 $14.00 per share. These warrants, however,
            are not exercisable until and unless the closing price of the Common
            Stock at any time during the exercise period reaches $14.00 per
            share. As of May 31, 2001, the underlying shares of common stock
            have not yet been registered for resale under the Securities Act of
            1933.

            250,000 stock purchase warrants issued to Hampton-Porter Investment
            Bankers LLC expiring June 27, 2003. 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 $18.00 per share. The shares
            of common stock underlying these warrants were registered for resale
            on August 3, 2000, under the Securities Act of



                                       18
<PAGE>

            1933. As of May 31, 2001, none of these warrants have been
            exercised.

            150,000 stock purchase warrants issued to Sands Brothers & Co., LTD.
            expiring July 13, 2003. 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 $25.00 per share. These warrants, however,
            are not exercisable until and unless the closing price of the Common
            Stock at any time during the exercise period reaches $25.00 per
            share. As of May 31, 2001, the underlying shares of common stock
            have not yet been registered for resale under the Securities Act of
            1933.

      The warrants outstanding are segregated into four categories (exercisable,
      non-exercisable, non-registered, and expired).


<TABLE>
<CAPTION>

                 Warrants Issued               Warrants Exercisable              Warrants                Warrants Expired
Class of            May 31,                           May 31,              Non-             Non-              May 31,
Warrants       2001           2000               2001          2000     Exercisable     Registered      2001          2000
--------     ------------------------        ------------------------   ---------------------------    ---------------------
<S>           <C>                                <C>          <C>        <C>            <C>             <C>          <C>
0.31          39,998              -              39998            -             -               -            -            -
1.50         600,000              -                  -            -       350,000         250,000            -            -
1.55          50,000              -           25,000.0            -             -               -            -            -
1.75          20,000              -           13,766.0            -             -               -            -            -
2.00          25,000              -           25,000.0            -             -               -            -            -
2.00          41,667              -                  -            -             -               -            -            -
3.00          50,000              -           50,000.0            -             -               -            -            -
4.50          25,000              -                  -            -             -               -            -            -
7.00         100,000              -                  -            -             -         100,000            -            -
7.49         250,000              -                  -            -             -         250,000            -            -
7.50          25,000              -           25,000.0            -             -               -            -            -
9.68          50,000              -           50,000.0            -             -               -            -            -
10.00         25,000              -           25,000.0            -             -               -            -            -
10.00        250,000              -                  -            -             -         250,000            -            -
12.00        250,000              -          250,000.0            -             -               -            -            -
14.00        350,000              -                  -            -             -         350,000            -            -
18.00        250,000              -          250,000.0            -             -               -            -            -
25.00        150,000              -          250,000.0            -             -         150,000            -            -

2.00         Expired              -   *              -            -             -               -       50,000            -
ESOP         216,067  *      28,200   *         94,400            -       215,067               -            -            -
ESOP         188,907        194,907            186,157       74,250       107,058               -       10,350       10,250
           ------------------------        ------------------------   ---------------------------    ----------------------
           2,956,639        223,107          1,284,321       74,250       672,125       1,350,000       60,350       10,250
           ========================        ========================   ===========================    ======================

</TABLE>

AN ASTERISK (*) DENOTES WARRANTS WHICH WOULD HAVE AN ANTI-DILUTIVE EFFECT IF
CURRENTLY USED TO CALCULATE EARNINGS PER SHARE FOR THE MONTHS ENDED MAY 31, 2001
AND 2000, RESPECTIVELY.


NOTE 13 - CAPITALIZATION ACTIVITIES:

      On July 10, 2000, AtlanticPacific Communications, Inc. (a wholly-owned
      subsidiary) initiated a stock offering in accordance with Regulation D
      promulgated under the Securities Act of 1933. AtlanticPacific is offering
      units at $25,000 per unit. Each unit consists of 10,000 shares of common
      stock and 10,000 Class A warrants to purchase AtlanticPacific common stock
      at a price of $6.00 per share with one warrant being issued as a unit with
      each common share sold. AtlanticPacific will sell up to 4,000,000 shares
      of common stock and up to 4,000,000 Class A warrants; 400 units. As of May
      31, 2001, 1325 units have been sold totaling 132,500 shares and resulting
      in proceeds of $331,250.

NOTE 14 - RISK FACTORS:

      For the three months ended May 31, 2001, substantially all of the
      Company's business activities have remained within the United States and
      have been extended to the wireless infrastructure, fiber, cabling and
      broadband industry. Approximately, eighty-six percent of the Company's
      revenues and receivables have been created solely in the state of Texas,
      two percent have been created in the international market, and the
      approximate twelve percent remainder have been created relatively evenly
      over the rest of the nation during the year ended May 31, 2001. Whereas
      approximately ninety-one percent of the Company's revenues and receivables
      have been created solely in the state of Texas, two percent have been
      created in the international market, and the approximate seven percent
      remainder has been created relatively evenly over the rest of the nation
      for the year ended August 31, 2000.

      Through the normal course of business, the Company generally does not
      require its customers to post any collateral.

      Although the Company concentrated its efforts in the wireless
      infrastructure industry for the year ended August 31, 2000 and has since
      expanded into the fiber, cable and broadband markets for the nine months
      ended May 31, 2001, it is management's belief that the Company's
      diversification into other products and services reduces its credit and
      economic risk exposures in the technology and manufacturing sectors.

NOTE 15 - FOREIGN OPERATIONS:


                                       19
<PAGE>

      Although the Company is based in the United States, its product is sold on
      the international market. Presently, international sales total
      approximately 2% and 0.01% at May 31, 2001 and 2000, respectively.

NOTE 16 - COMMITMENTS AND CONTINGENT LIABILITIES:

      LEASES

      The Company leases its primary office space in League City, Texas 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)

      For the periods ending May 31, 2001 and 2000, rental expenses of
      approximately $59,581 and $164,142, respectively, were incurred. The
      Company made payments in the amount of $21,517, $19,032 and $19,032 in the
      three months ending May 31, 2001. The two payments of $19,032 were agreed
      payments by both parties during the negotiation period of the new lease.

      A new three-year non-cancelable lease commenced June 1, 2001 and expires
      May 31, 2004. Under the terms of the lease, monthly payments will be
      $30,824 over the course of the lease. The monthly payment amount includes
      tax escrow payments, insurance escrow payments and common area
      maintenance. The Company has retained the original 23,195 square feet of
      space, plus an additional 7,000 square feet for office space and storage
      of materials used in subdivision infrastructure development for the
      southern region of Houston.

      The Company also leases office space in Oxnard, California with Tiger
      Ventura County, L.P. This three-year non-cancelable lease commenced August
      1, 2000 and expires July 31, 2003. Under the terms of the lease, monthly
      payments will be $2,130 for the first twelve months whereat the monthly
      payments will increase by 3.5% at the beginning of both the second and
      third years. For the periods ended May 31, 2001 and 2000, rental expense
      of $6,390 and $0, respectively were incurred.

      The Company's wholly owned subsidiary, AtlanticPacific, leases office
      space in Houston, Texas with Houston Industrial Partners, Ltd. This
      non-cancelable lease expires October 2001. The monthly payments through
      October 2000 are $1,420 whereat they will increase to $1,498 for the
      remaining twelve months. Additionally, AtlanticPacific is responsible for
      monthly common area maintenance fees of approximately $450. For the
      periods ended May 31, 2001 and 2000, rental expense of $4,494 and $0,
      respectively were incurred.

      AtlanticPacific also leases office space in Chicago, Illinois with Lasalle
      Bank National Association. This twenty-nine month lease commenced on
      October 1, 2000 and expires February 28, 2003. Under the terms of the
      lease, monthly payments will be $2,220 for the first twelve months whereat
      they will increase by 3.2% at the thirteenth and twenty-fifth months. For
      the periods ended May 31, 2001 and 2000, rental expense of $6,660 and $0,
      respectively were incurred.

      AtlanticPacific also leases office space in Houston, Texas with WL and
      Deborah Miller in the amount of $4,500 per month. This non-cancelable
      lease expiring September 2002 maintains a five-year renewal option. Rental
      expense for the period ended May 31, 2001 and 2000 of $13,500 and $0 were
      incurred.

      The Company's subsidiary, ClearWorks.Net, Inc., leases office space in
      Houston, Texas with 2000 North Loop. This non-cancelable lease expires on
      April 30, 2003. The monthly payments will increase from $3,659 to $3,785
      on May 30, 2000 and again on May 1, 2002 to $3,911 for the remaining
      twelve months. For the period ended May 31, 2001, rental expense of
      $11,103 was incurred.

      Also, ClearWorks.Net, Inc., leases office space in Phoenix, Arizona with
      Airpark Holdings. This non-cancelable lease expires on July 31, 2003. The
      monthly payments are variable. For the period ended May 31, 2001, rental
      expense of $14,118 was incurred.

      Also, ClearWorks.Net, Inc., leases office space in San Antonio, Texas with
      Wade Holdings. This is a month-to-month lease. The monthly payments are
      $2,000. For the period ended May 31, 2001, rental expense of $6,000 was
      incurred.

      The Company's subsidiary, United Computing Group, leases office space in
      Houston, Texas with Techdyne, Inc. This non-cancelable lease expires on
      August 31, 2002. The monthly payments will increase from $6,000 to $6,100
      on September 1, 2000 and again on September 1, 2001 to $6,300 for the
      remaining twelve months. For the period ended May 31, 2001, rental expense
      of $18,300 was incurred.

      Also, United Computing Group, leases office space in Dallas, Texas with
      Trammell Crow. This non-cancelable lease expires on June 30, 2002. The
      monthly payments are $2,179 for the life of the contract. For the period
      May 31, 2001, rental expense of $6,537 was incurred.


                                       20

<PAGE>

           Future obligations under the non-cancelable lease terms are:


                          Period Ending
                             May 31,            Amount
                        ----------------    -------------
                              2001            $  367,274
                              2002               664,453
                              2003                446162
                              2004               154,120
                                              ----------
                             Total            $1,612,008
                                              ==========

      LEGAL PROCEEDINGS

      The Company is subject to legal proceedings and claims that arise in the
      ordinary course of business. The Company's management does not expect that
      the results in any of these legal proceedings will have a material adverse
      effect on the Company's financial condition or results of operations.

      Coinciding with the reverse merger with Southeast, the former management
      of Southeast established a trust to provide for the orderly liquidation of
      any alleged claims existing as of the date of acquisition. Certain
      stockholders of Southeast have contributed 86,000 free trading shares of
      the Company's common stock to the trust to satisfy approximately $150,000
      of alleged claims. Due to the resignation of the trustee, the trust shares
      have been deposited in the registry of the Harris County Texas District
      Court, and the Company has been named a nominal defendant in an
      Interpleader action. The Company intends to vigorously defend its position
      by requesting the court release the stock for payment of all alleged
      claims as was originally intended. The Company's management does not
      expect that the results of this legal proceeding will have a material
      adverse effect on the Company's financial condition or results of
      operations.

      The Company also currently is a defendant in Robert Horn vs. ClearWorks
      Technologies, Inc. The suit was filed March 25, 1999, alleging causes of
      action based on breach of contract in the amount of approximately
      $250,000; 100,000 shares of ClearWorks common stock; alleged lost
      commissions and attorney fees. The facts underlying this lawsuit are as
      follows: Robert Horn entered into an employment agreement with the Company
      effective April 1, 1998. The employment agreement contained a condition
      precedent which stated: "The completion and subsequent release of escrow
      money associated with the initial 504 offering of the Company's securities
      on or before May 1, 1998, is a condition precedent to the obligation of
      any party hereunder". The condition precedent was not met because the
      Company did not have a 504 offering prior to May 1, 1998. On July 1, 1998,
      Mr. Horn tendered his notice of resignation effective July 31, 1998. On
      March 25, 1999, Mr. Horn filed a lawsuit claiming that the Company had
      terminated Mr. Horn's employment without cause. The Company filed an
      answer on April 16, 1999, denying the claim and asserting its affirmative
      defenses. The Company attempted to mediate this case but was unsuccessful.
      The suit is currently in the discovery phase, a continuance has been
      granted. The Company continues to vigorously contest these claims by
      Robert Horn on the basis that they are without merit.

      The Company is a defendant in Sherman Gerald Mason, d/b/a Castle
      Developments, Ltd. vs. ClearWorks Technologies, Inc. On December 17, 1999,
      Sherman Mason d/b/a Castle Developments, Ltd. filed suit against the
      Company. In his Original Petition, Mr. Mason alleges the breach of a
      consulting agreement with the Company and seeks recovery of 500,000 shares
      of stock. He also seeks recovery of alleged monthly retainer payments in
      an undisclosed amount and seeks injunctive relief. The Company has filed
      an answer disputing all liability, asserting that the contract was
      terminable and that the contract is not enforceable because of the prior
      breaches of the consulting agreement by Mr. Mason. In October 2000, both
      parties have agreed to binding arbitration. This suit is currently in the
      discovery phase, arbitration has been set for October 2001.

      The Company is a defendant in Carl Thompson Associates, Inc. vs.
      ClearWorks.net, Inc. On October 4, 2000, Carl Thompson Associates, Inc.
      filed suit presenting claims for breach of contract, unjust enrichment,
      action on account, quantum meruit, and breach of contract-implied covenant
      of good faith and fair dealing and seeks recovery of damages in the sum of
      $521,415 plus court costs. The Company denies the claims and has filed an
      answer disputing the claims with affirmative defenses.

      The Company is a defendant in Valley First Community Bank vs.
      ClearWorks.net, Inc. and ClearWorks Home Systems, Inc. On August 16, 2000,
      Valley First Community Bank (Valley) filed suit alleging a breach of
      contract, breach of implied duty of good faith and fair dealing,
      conversion, intentional interference with contract, and promissory
      estoppel/detrimental reliance. This suit arose when ClearWorks Home
      Systems, Inc. (CHS) executed a binding letter of intent to purchase from
      Valley certain assets, which Valley represented to CHS that it held first
      lien for a purchase price of $150,000. Subsequently, CHS learned Valley
      did not in fact hold a first lien on such assets, rather such assets were
      sold in a landlord's auction. As a result, CHS did not remit $150,000 to
      Valley for payment. (see Note 2) This suit is currently in the discovery
      phase. The Company intends to vigorously contest all claims in this case.

      The Company is a defendant in STATE OF FLORIDA DEPARTMENT OF ENVIRONMENTAL
      PROTECTION VS. RECO TRICOTE, INC. AND SOUTHEAST TIRE RECYCLING, INC. A/K/A
      CLEARWORK.NET, INC.; IN THE CIRCUIT COURT OF THE TENTH JUDICIAL CIRCUIT IN
      AND FOR POLK COUNTY, FLORIDA. On December 13, 2000, Florida EPA sued the
      Company presenting claims for recovery costs and penalties for a waste
      tire processing facility. The suit seeks recovery of costs and penalties
      in a sum in excess of $1,000,000, attorneys' fees and cost of court.


                                       21
<PAGE>

      The Company immediately filed a Motion to Strike Portions of the
      Complaint/or for a More Definite Statement and a Motion to Dismiss. The
      Florida EPA is amending the petition. ClearWorks denies the claims and
      intends to vigorously contest all claims in this case and to enforce its
      indemnification rights against the principals of Southeast Tire Recycling.

      ClearWorks Structured Wiring Services is a defendant in CHARTERWOOD
      ASSOCIATES, LTD. V. CLEARWORKS STRUCTURED WIRING SERVICES, INC.; IN THE
      COUNTY CIVIL COURT AT LAW NUMBER THREE (3), HARRIS COUNTY, TEXAS. On
      January 21, 2000, Charterwood Associates, a Texas Limited Partnership,
      sued ClearWorks Structured Wiring Services, Inc., a subsidiary of
      ClearWorks. The suit presents claims for breach of a contract to design,
      operate and maintain "bundled digital services" to Plaintiff's apartment
      complex. The suit seeks recovery of damages in the sum of $78,746.69 plus
      interest, attorneys' fees and court costs. ClearWorks denies the claims.
      ClearWorks maintains its own claims for breach of contract in connection
      with the same project. ClearWorks has filed an affidavit claiming a lien
      against the apartment project owned by the Plaintiffs, claiming that
      $52,800 is unpaid for services and materials provided. ClearWorks will
      seek attorneys' fees, interest and cost of court in connection with its
      counter-claim, when filed. No discovery has been taken. A motion for
      continuance has been granted by the courts. ClearWorks intends to
      vigorously contest all claims in this case. ClearWorks also expects to
      vigorously pursue collection of its claims for services rendered and
      materials provided.

      The Company is a defendant in BUCKALEW EMPLOYMENT SERVICES, INC. VS.
      CLEARWORK.NET, INC. D.B.A. CLEARWORKS TECHNOLOGIES, INC.; IN THE DISTRICT
      COURT OF KLEBERG COUNTY, TEXAS. On July 14, 2000, Buckalew sued the
      Company presenting claims for payment of an account. The suit seeks
      recovery of damages in the sum of $13,833, attorneys' fees and cost of
      court. Buckalew filed a motion for substitute service and the company was
      served on September 27, 2000 by posting the petition to the door at 2450
      Fondren, Suite 200, Houston, Texas 77063. The Company, however, never
      became aware of such lawsuit, and Buckalew made no attempt to contact the
      Company's general counsel. In the interim, the Company made a substantial
      payment directly to Buckalew and, at the time the lawsuit was filed, owed
      not more than $1,000 to Buckalew. The Company became aware of such lawsuit
      on October 25, 2000 and immediately contacted Buckalew's counsel. Upon
      receiving a copy of the lawsuit via fax, the Company immediately filed an
      answer denying all claims. At this time, Buckalew is demanding over $6,000
      in attorney fees.

      The Company is a defendant in Candlelight Investors LLC v. Clearworks.net,
      Inc. et al which is pending in the Supreme Court of the State of New York,
      County of New York. Plaintiff seeks a judgment against the Company arising
      out of the alleged failure of Clearworks.net, Inc. to convert certain
      debentures of the Company into common stock of ClearWorks, to register
      stock to permit such conversion, and for other alleged breaches relating
      to agreements between plaintiff and ClearWorks. Plaintiff seeks
      compensatory damages exceeding $2,763,998, injunctive relief, specific
      performance, punitive damages and other relief. The Plaintiff has obtained
      a judgement in the amount of $3,200,000, against ClearWorks. Plaintiffs
      will be conducting jurisdictional discovery on Eagle and Dr. H. Dean
      Cubley. The defendants deny the allegations of the complaint.

      The Company is defendant in Kaufman Bros., LLP v. Clearworks.Net, Inc., et
      al, (Index No. 600939/01), which is pending in the Supreme Court of the
      State of New York, County of New York. In this action, plaintiff alleges
      that defendants have breached an agreement with ClearWorks to pay
      plaintiff a fee for financial advice and services allegedly rendered by
      plaintiff. The complaint seeks compensatory damages of $4,000,000, plus
      attorneys' fees and costs. The defendants, including the Company, have
      moved to dismiss the action on the grounds that the court has no personal
      jurisdiction over them. Briefing on those motions has not been completed.
      The defendants deny the allegations of the complaint.

      OTHER COMMITMENTS

      On July 13, 2000, the Company entered into an agreement with Sands
      Brothers & Co., LTD. (Sands) whereby Sands will perform financial advisory
      services and assist the Company with mergers and acquisitions, corporate
      finances and other related matters for a period of two years. As
      compensation for these services, the Company will immediately pay Sands
      $50,000 and issue them 10,000 shares of the Company's common stock. As an
      additional inducement, the Company has issued Sands 1,000,000 stock
      purchase warrants to be exercisable for a three year period expiring July
      13, 2003. These warrants shall vest and be exercisable as follows: 25% of
      such warrants shall vest upon execution of this agreement and shall have
      an exercise price per share of $7.49; an additional 25% shall vest when
      and if the closing price of the common stock at any time during the
      exercise period reaches $10.00 per share and shall be exercisable at
      $10.00 per share; an additional 35% shall vest when and if the closing
      price of the common stock at any time during the exercise period reaches
      $14.00 per share and shall be exercisable at $14.00 per share; an
      additional 15% shall vest at any time during the exercise period when the
      closing price of the common stock at any time reaches $25.00 per share and
      shall be exercisable at $25.00 per share. Additionally, Sands shall
      receive further compensation for other activities such as fund raising
      based upon a percent of all monies raised.

      On May 25, 2000, the Company entered into an agreement with Hampton-Porter
      Investment Bankers LLC.(Hampton) whereby Hampton will provide a variety of
      professional services. As compensation for this agreement, the Company
      will issue 100,000 restricted shares of the Company's common stock and
      500,000 stock purchase warrants of which 250,000 are exercisable at $12.00
      per share and 250,000 are exercisable at $18.00 per share. Additionally,
      these warrants expire three years from the signing of this contract.
      Hampton shall receive further compensation for other activities such as
      fund raising based upon an escalating percentage of all monies raised.
      This agreement is terminable by either party upon giving five days written
      notice to the other party.

      On April 1, 2000, the Company entered a one-year agreement with Synchton,
      Inc. whereby Synchton, Inc. will provide


                                       22
<PAGE>

      professional business services. As compensation for these services, the
      Company will pay $10,000 per month as well as issue 100,000 stock purchase
      warrants. These warrants shall be issued in 25,000 increments on the first
      day of each quarter of the agreement with an exercise price equal to the
      closing price of the Company's common stock of the prior day to issuance.
      Additionally, these warrants are not exercisable until six months after
      issuance and expire three years after said issuance. Although this
      agreement shall automatically renew on an annual basis, it is terminable
      by the Company prior to the annual renewal by providing Synchton, Inc.
      with ninety days advance written notice.

      On September 1, 1999, the Company entered into an agreement with Paladin
      Associates (Paladin) whereby Paladin will assist the Company with general
      financial related services. These services shall include, but not be
      limited to, assistance in writing news releases, stockholder
      communications, communications with retail brokers and brokerage firms,
      consulting to large shareholders and general image and public relations
      issues. As compensation for the services to be rendered under this
      twelve-month contract, the Company will pay $3,500 and issue 2,000 free
      trading shares of the Company's common stock per month. This agreement
      also contains incentive based bonuses tied to the consecutive twenty-one
      day average closing bid price of the Company's common stock. This
      incentive will consist of 500,000 two-year options for the purchase of the
      Company's common stock at $1.50. These options will be vested in three
      equal portions based upon the Company's performance in the stock market.
      One-third will vest when the closing bid price reaches $4.00 and remains
      above this level for a minimum of twenty-one consecutive trading days. The
      second one-third will vest when the closing bid price reaches $6.00 and
      remains above this level for a minimum of twenty-one consecutive trading
      days. The remaining one-third shall vest when the closing bid price
      reaches $8.00 and remains above this level for a minimum of twenty-one
      consecutive trading days. This agreement is cancelable by either party
      without cause given ten days written notice.

NOTE 17 - EARNINGS PER SHARE:

      The following table sets forth the computation of basic and diluted
      earnings per share, in thousands except Per-Share Amount:

<TABLE>
<CAPTION>
                                                          FOR THE NINE MONTHS ENDED MAY 31, 2001
                                                         ----------------------------------------
                                                           INCOME         SHARES      PER-SHARE
                                                         (NUMERATOR)   (DENOMINATOR)    AMOUNT
                                                         -----------   -------------  -----------
<S>                                                        <C>             <C>          <C>
      Net Income                                           $(2,934)

      Basic EPS:
       Income available to common stockholders              (2,934)        40,054       $(0.07)
                                                                                        ======

      Effect of Dilutive Securities
        Warrants                                              --              154
                                                           -------        -------

      Diluted EPS:
        Income available to common stockholders
          and assumed conversions                          $(2,934)        40,208       $(0.07)
                                                           =======        =======       =====


                                                            FOR THE MONTHS ENDED AUGUST, 2001
                                                         ----------------------------------------
                                                           INCOME         SHARES      PER-SHARE
                                                         (NUMERATOR)   (DENOMINATOR)    AMOUNT
                                                         -----------   -------------  -----------

    Net Income                                           $   193

      Basic EPS:
       Income available to common stockholders                 193         19,073       $0.01
                                                                                        =====

      Effect of Dilutive Securities
        Warrants                                                 0          3,306
                                                           -------        -------

      Diluted EPS:
        Income available to common stockholders
          and assumed conversions                          $   193         22,379       $0.01
                                                           =======        =======       =====
</TABLE>

      For the Months ended May 31, 2001 and August 31, 2000, anti-dilutive
      securities existed. (see Note 12)

NOTE 18 - 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. Since that time, the Board of Directors
      have amended the July 1996, employee stock option plan under which
      1,000,000 shares of Common Stock have been reserved for issuance. Under
      this plan, as of May 31, 2001 and 2000, 404,974 and 223,107 warrants have
      been issued to various employees. Of these outstanding warrants, - 0 - and
      66,875 were exercised for the three months ended May 31, 2001 and 2000,
      respectively. Additionally, 10,350 warrants have expired as of May 31,
      2001.


                                       23
<PAGE>

NOTE 19 - RETIREMENT PLANS:

      During October 1997, the Company initiated a 401(k) plan for its
      employees, which is funded through the contributions of its participants.
      This plan maintains that the Company will match up to 3% of each
      participant's contribution. For the months ended May 31, 2001 and 2000,
      employee contributions were approximately $109,905 and $272,914,
      respectively. The Company matched approximately $36,914 and $44,775,
      respectively for those same periods.

NOTE 20 - MAJOR CUSTOMER:

      The Company had gross revenues of $11,358,000 and $1,270,000 for the three
      months ended May 31, 2001 and 2000, respectively. The following parties
      individually represent a greater than ten percent of these revenues.

<TABLE>
<CAPTION>
                                           MAY 31, 2001                 MAY 31, 2000
         CUSTOMER                     AMOUNT        PERCENTAGE      AMOUNT     PERCENTAGE
         --------                  ------------     ----------     ---------   ----------
<S>                                <C>                 <C>          <C>            <C>
         Enron                     $  4,490,000        39.5%        $ - 0 -        0.0 %
         Duke                      $  2,198,000        19.4%        $ - 0 -        0.0 %
         Weatherford               $  1,851,000        16.3%        $ - 0 -        0.0 %
         Sprint PC                 $  1,6,48,000       14.5%        $ - 0 -        0.0 %

</TABLE>

NOTE 21 - INDUSTRY SEGMENTS:

      The Company has adopted the provisions of SFAS No. 131, "Disclosures about
      Segments of an Enterprise and Related Information". At May 31, 2001, the
      Company's seven business units have separate management teams and
      infrastructures that offer different products and services. The business
      units have been aggregated into two reportable segments (as described
      below) since the long-term financial performance of these reportable
      segments is affected by similar economic conditions.

      Eagle Wireless International, Inc. (Eagle) is a worldwide supplier of
      broadband and telecommunications equipment with related software and
      broadband products. (Including Eagle Wireless, Broadband Magic and etoolz
      for this summary).

      AtlanticPacific Communications, Inc. (APC / SW) specializes in providing
      professional data and voice cable and fiber optic installations through
      project management services on a nationwide basis for multiple
      site-cabling installations for end users and re-sellers.

      ClearWorks Communications, Inc. (COMM) provides solutions to consumers by
      implementing technology both within the residential community and home.
      This is accomplished through the installation of fiber optic backbones to
      deliver voice, video and data solutions directly to consumers.

      ClearWorks Home Systems, Inc. (HSI) specializes in providing fiber optic
      and copper based structured wiring solutions and audio and visual
      equipment to single family and multi-family dwelling units.

      United Computing Group, Inc. (UCG / INT) is an accelerator company and
      computer hardware and software reseller. UCG / INT maintains a national
      market presence.

      Link Two Communications, Inc. (Link II) is in the development and delivery
      of one and two way messaging systems over a national high-speed wireless
      broadband network. Link II continues to add to the paging customer base.

<TABLE>
<CAPTION>

                                                   FOR THE NINE MONTHS ENDING MAY 31, 2001

(in thousands)               Eagle    APC / SW     COMM      HSI    UCG / INT   Link II        .Net       Elim.      Consol.
                          ----------------------------------------------------------------------------------------------------
<S>                          <C>       <C>          <C>     <C>      <C>              <C>                             <C>
Revenue                      1,037     4,697        331     1,168    10,778           9          ---        ---       18,020
Segment (Profit) / Loss      3,166      (375)       167       109        53         411          990        ---        4,521
Total Assets               194,006     2,441      5,439     2,248     5,180      13,609       37,311    (74,927)     185,307
Capital Expenditures           192         1        613       ---        19       6,657           14        ---        7,496
Dep. And Amort.              1,200        66        118        28        13         115          548        ---        2,088

</TABLE>

      The accounting policies of the reportable segments are the same as those
      described in Note 1. The Company evaluates the performance of its
      operating segments based on income before net interest expense, income
      taxes, depreciation and


                                       24

<PAGE>

      amortization expense, accounting changes and non-recurring items.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS

      The following discussion should be read in conjunction with Eagle's
      financial statements and accompanying notes to the financial statements.

      OVERVIEW

      During the quarter ended May 31, 2001, Eagle and Clearwork.net continued
      to consolidate their management and operations. The consolidated
      operations reflect a significant increase in sales of computer and network
      support products, commercial fiber and cable installations, residential
      fiber and home entertainment systems, wireless product and systems and
      bundle digital services to residential and hotel customers. Other
      significant activities include the expansion of Clearworks.net fiber
      infrastructure to new and existing residential communities in the greater
      Houston and Austin, Texas areas in order to build its bundle digital
      services customer base. Eagle is currently negotiating to purchase
      wireless one and two way businesses in San Antonio and Dallas to add to
      the current customer base of Link Two Communications, Inc. Additional
      expenses associated with the completion of the merger, settlement of
      various lawsuits, increase in corporate management staff, additional
      travel and convention show expense, integration of all companies into a
      uniform system wide accounting and reporting standard, and continued
      refinement of the set top box for commercial businesses have increased the
      losses for this three month period. Through consolidation of management
      positions and marketing efforts, Eagle believes that the companies will
      recognize economies of scale in purchasing, research and development and
      marketing of all products and services which will benefit all companies in
      future periods.

      REVENUE RECOGNITION

      The Company designs, manufactures, markets and services it products and
      services under the Eagle, Broadband Magic.com, Inc. and AtlanticPacific
      names. Eagle designs, manufactures and markets transmitters, receivers,
      controllers, software, along with other equipment used in commercial and
      personal communication systems, radio and telephone systems. Revenues from
      these products are recognized when the product is shipped. Broadband
      Magic.com, Inc. designs, manufactures and markets the convergent set-top
      boxes. Revenues from these products are recognized when the product is
      shipped. AtlanticPacific provides project planning, installation, project
      management, testing and documentation of fiber and cable to commercial and
      industrial clients throughout the United States. The revenue from the
      fiber and cable installation and services is recognized upon percentage
      completion of the project, most projects are completed in less than a
      month, therefore, matching revenue and expense in the period incurred.
      Service, training and extended warranty contract revenues are recognized
      as earned. EToolz, Inc. provides research and development support for all
      Eagle companies and does not currently provide billable services to
      independent third parties. Clearworks.net provides residential fiber
      and cabling to developers and builders, these services and products are
      recognized upon completion of the installation, most installations are
      completed in less than three months. Additionally, Clearworks.net
      revenues for bundle digital services are billed monthly as services are
      provided to the end customer.

      The companies engage in independent and agents for sales principally in
      foreign countries and certain geographic regions in the United States.
      Under the terms of these one-year agreements the distributor or sales
      agents provide Eagle with manufacturing business sales leads. The
      transactions from these distributors and agents are subject to Eagle's
      approval prior to sale. The distributorship or sales agent receives
      commissions based on the amount of the sales invoice from Eagle to the
      customer. The sale is recognized at the time of shipment to the customer.
      These sales agents/distributors are not a significant portion of total
      sales in any of the periods presented.


      RECEIVABLES

      For the nine months ended May 31, 2001, Eagle accounts receivables
      increased to $10,665,000 from $9,902,000 at August 31, 2000. The majority
      of this increase is due to additional revenues and related receivables
      from the merged companies.

      RECENT ACQUISITIONS; GOODWILL

      In September 2000, Eagle entered into a merger agreement with
      ClearWorks.net, whereby it agreed to acquire 100% of the outstanding
      common stock of ClearWorks.net in exchange for 0.8 shares of Eagle common
      stock for each share of ClearWorks.net common stock at the closing. In
      addition to the share issuance, Eagle will assume all outstanding
      ClearWorks.net stock options and warrants based upon the same 0.8 exchange
      ratio. On January 31, 2001, Eagle and Clearworks.net voted unanimously to
      conduct the merger of the two companies.

      MARKETABLE SECURITIES

      Eagle has adopted the provisions of SFA No. 115, as amended by SFAS No.
      130, which provides that all marketable equity securities be classified as
      available-for-sale or trading securities, and be carried on the balance
      sheet at fair market value. Any unrealized holding gains or losses
      affiliated to these securities are carried below net income under the
      caption "Other Comprehensive Income," net of tax.

      During the nine months ended May 31, 2001, the Company acquired 1,500,000
      common stock shares of Burst.com and


                                       25
<PAGE>

      750,000 common stock shares of Urbana, Inc. with a cost of $500,000 and
      $100,000, respectively.

      INVENTORY

      Inventories are valued at the lower of cost or market. The cost is
      determined by using the first-in first-out method. At May 31, 2001,
      Eagle's inventory total of $10,010,000 as compared to $5,809,000 at May
      31, 2000. The additional inventory is primarily attributable to the
      purchase of fiber, cabling and computer products.

      RESULTS OF OPERATIONS

      THREE MONTHS ENDED MAY 31, 2001 COMPARED TO THREE MONTHS ENDED MAY 31,
      2000

      NET SALES. For the three months ended May 31, 2001, net sales increased to
      $11,358,000 from $1,270,000 during the three months ended May 31, 2000.
      The increase was primarily attributable to added sales from
      Atlanticpacific, Comtel and ClearWorks.Net companies.

      COST OF GOODS SOLD. For the three months ended May 31, 2001, cost of goods
      sold increased to $9,050,000 from $346,000 during the three months ended
      May 31, 2000. This is primarily associated with the cable and fiber
      products. Although the cost of sales increased, the Company's gross profit
      percentage for products sold decreased to 20% from 27% during the three
      months ended May 31, 2000.

      OPERATING EXPENSES. For the three months ended May 31, 2001, operating
      expenses increased to $4,468,000 from $1,051,000 during the three months
      ended May 31, 2000. The primary portions of the increase are discussed
      below:

      A $1,322,000 increase in salaries, as a result of its acquisitions and
      expanded business. A $96,000 increase in advertising and promotion, due
      primarily to increased attendance at conventions and trade shows on a
      worldwide basis. A $1,163,000 increase in depreciation and amortization,
      due to an increase in amortization of goodwill and purchase of additional
      assets. A $1,845,000 increase in other support costs, due to an increase
      in rents, travel, utilities and communication costs.

      NET EARNINGS. For the three months ended May31, 2001, Eagle's net loss was
      $1,715,000, compared to net earnings of $220,000 during the three months
      ended May 31,2000.

      CHANGES IN CASH FLOW. Eagle's operating activities used net cash of
      $3,020,000 in the nine months ended May 31, 2001, compared to $(2,100,000)
      in the nine months ended May 31, 2000. The increase in net cash used by
      operating activities was primarily attributable to increases in inventory
      and reductions in accounts payable. Eagle's investing activities used net
      cash of $9,801,000 in the nine months ended May 31, 2001, compared to
      $1,190,000 in the nine months ended May 31, 2000. The increase was due
      primarily to investment activities and purchase of equipment. Eagle's
      financing activities provided cash of $8,222,000, in the nine months ended
      May 31, 2001, compared to $29,760,000 in the nine months ended May 31,
      2000. The increase of May 31, 20001, attributable to Link Two
      Communications, Inc. loan from Tailwind.

      LIQUIDITY AND CAPITAL RESOURCES.

      Current assets for the three months ended May 31, 2001 totaled $49,976,000
      as compared to $34,602,000 reported for the three months ended May 31,
      2000. Of this amount, $27,747,000 consisted of cash. Eagle believes that
      its working capital of $32,430,000 as of May 31, 2001 should be sufficient
      to fund operations through the end of the fiscal year 2001. Historically,
      Eagle has financed its operations through the sale of debt and equity
      securities. As such, if its current cash is insufficient to fund its
      long-term capital needs, Eagle will rely on future best-efforts financings
      for capital. As of May 31, 2001, Eagle had no material capital commitments
      other than its federal income and state franchise tax liabilities.

PART 2. - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

      The Company is subject to legal proceedings and claims that arise in the
      ordinary course of business. The Company's management does not expect that
      the results in any of these legal proceedings will have a material adverse
      effect on the Company's financial condition or results of operations (Note
      16).

ITEM 2 - RECENT SALES OF UNREGISTERED SECURITIES OR CHANGES IN SECURITIES AND
         USE OF PROCEEDS



                                       26
<PAGE>

      In October 2000, holders of options issued under Eagle's employee stock
      option, exercised options to purchase an aggregate of 500 shares of
      common. The exercise of these options resulted in cash proceeds of $750.
      Eagle believes the transactions were exempt from registration pursuant to
      Section 4(2) of the Securities Act, as the issuances were to accredited
      investors and since the transactions were non-recurring and privately
      negotiated.

      In October 2000, in exchange for consulting services, Eagle issued an
      aggregate of 62,500 shares on common stock. Eagle believes the
      transactions were exempt from registration pursuant to Section 4(2) of the
      Securities Act, as the issuances were to accredited investors and since
      the transactions were non-recurring and privately negotiated.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
         None

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         None

ITEM 5 - OTHER INFORMATION
         None

ITEM 6 - EXHIBITS AND REPORT S ON FORM 8-K


          (a) Exhibit
              None
          (b) Reports on Form 8-K
              Form 8-K filed on April 16, 2001 in conjunction with the merger of
              ClearWorks.Net, Inc.


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: April 20, 2001                       By: /s/ H. Dean Cubley
                                                     Dr. H. Dean Cubley
                                                     President

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



                                       27