<PAGE>


                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                    FORM 10-Q

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

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30,
      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 January 14, 2002, there were 63,093,474 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 November 30, 2001
                    and August 31, 2001                                      3

                    Consolidated Statements of Earnings for the Three
                    Months Ended November 30, 2001 and 2000                  4

                    Consolidated Statements of Changes In Shareholders'
                    Equity for the Three Months Ended November 30, 2001
                    and Twelve Months Ended August 31, 2001                  5

                    Consolidated Statements of Cash Flows for the Three
                    Months Ended November 30, 2001 and 2000                  6

                    Notes to the Consolidated Financial Statements         7-30

          Item 2.   Management's Discussion and Analysis of Financial
                    Condition and Results of Operations                   30-33

          Item 3.   Quantitative and Qualitative Disclosures about
                    Market Risk                                             33

PART 2 - OTHER INFORMATION

          Item 1.   Legal Proceedings                                       33

          Item 2.   Recent Sales of Unregistered Securities or Changes
                    in Securities and Use of Proceeds.                      33

          Item 3.   Defaults Upon Senior Securities                         34

          Item 4.   Submission of Matters to a Vote of Security Holders     34

          Item 5.   Other Information                                       34

          Item 6.   Exhibits and Reports on Form 8-K                        34

SIGNATURES                                                                  34

<PAGE>

--------------------------------------------------------------------------------
              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                  ASSETS
                                                                    November 30,       August 31,
                                                                       2001               2001
                                                                  ---------------    --------------
                                                                    (Unaudited)        (Audited)
<S>                                                                  <C>               <C>
CURRENT ASSETS:
      Cash and Cash Equivalents                                      $  16,280         $  23,843
      Accounts Receivable                                                5,903             7,144
      Inventories                                                       12,034            10,637
      Prepaid Expenses                                                     993             1,025
                                                                     ---------         ---------
           TOTAL CURRENT ASSETS                                         35,210            42,649

PROPERTY AND EQUIPMENT:
      Operating Equipment                                               30,853            28,469
      Less: Accumulated Depreciation                                    (2,315)           (2,005)
                                                                     ---------         ---------
           TOTAL PROPERTY AND EQUIPMENT                                 28,538            26,464

OTHER ASSETS:
      Security Deposits                                                    165               134
      Deferred Advertising Costs                                           363               363
      Goodwill                                                           5,966             5,966
      Less: Accumulated Amortization                                      (547)             (472)
      Other Intangible Assets                                           98,952            98,954
      Less: Accumulated Amortization                                    (4,340)           (3,407)
      Other Assets                                                         347                16
                                                                     ---------         ---------

           TOTAL OTHER ASSETS                                          100,906           101,554
                                                                     ---------         ---------

TOTAL ASSETS                                                         $ 164,654         $ 170,667
                                                                     =========         =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
      Accounts Payable                                               $   4,940         $   4,525
      Accrued Expenses                                                   5,425             6,406
      Notes Payable                                                      5,344             5,933
      Line of Credit                                                       769             1,846
      Capital Lease Obligations                                             35                48
      Sales Taxes Payable                                                  500               598
      Deferred Taxes                                                        15                15
                                                                     ---------         ---------

           TOTAL CURRENT LIABILITIES                                    17,028            19,371

LONG-TERM LIABILITIES:
      Capital Lease Obligations
        (net of current maturities)                                        115               115
      Deferred Taxes                                                        32                32
      Long-Term Debt                                                     1,525             2,021
                                                                     ---------         ---------

           TOTAL LONG-TERM LIABILITIES                                   1,672             2,168

               COMMITMENTS AND CONTINGENT LIABILITIES

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 August 31, 2001,
           and 2000, 61,093,000 and 60,264,000, respectively                61                60
      Paid in Capital                                                  153,810           153,426
      Retained Earnings                                                 (7,917)           (4,358)
                                                                     ---------         ---------

           TOTAL SHAREHOLDERS' EQUITY                                  145,954           149,128
                                                                     ---------         ---------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                           $ 164,654         $ 170,667
                                                                     =========         =========
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                                       3
<PAGE>

--------------------------------------------------------------------------------
              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                                 (In Thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                               For the Three Months ended November 30,
                                                                            (Unaudited)

                                                                       2001             2000
                                                                     -------           -------
<S>                                                                    <C>
NET SALES:
    Structured wiring                                                  1,700                --
    Broadband services                                                   263                --
    Products                                                           6,467             1,866
    Other                                                                331                --
                                                                     -------           -------
TOTAL SALES                                                            8,761             1,866
                                                                     -------           -------
COSTS OF GOODS SOLD:
    Materials other than Cable and Wire                                    1                --
    Direct Labor and Related Costs                                       735               527
    Products and Integration Service                                   5,742               503
    Structured Wiring Labor and Materials                                321                --
    Broadband Services Costs                                             171                --
    Depreciation and Amortization                                         71                44
    Other Manufacturing Costs                                             20                 8
                                                                     -------           -------
TOTAL COSTS OF GOODS SOLD                                              7,061             1,082
                                                                     -------           -------
GROSS PROFIT                                                           1,700               784
                                                                     -------           -------
OPERATING EXPENSES:
    Selling, General and Administrative:
        Salaries and Related Costs                                     2,157               498
        Advertising and Promotion                                        155               127
        Depreciation and Amortization                                  1,247               159
        Other Support Costs                                            1,552               498
        Research and Development                                         172               167
                                                                     -------           -------
TOTAL OPERATING EXPENSES                                               5,283             1,449
                                                                     -------           -------

EARNINGS/(LOSS) FROM OPERATIONS BEFORE OTHER
REVENUES/(EXPENSES), INCOME TAXES AND OTHER
COMPREHENSIVE INCOME                                                  (3,583)             (665)

OTHER REVENUES/(EXPENSES):
    Interest Income - net                                                212               760
    Other Income                                                          --                --
                                                                     -------           -------
       TOTAL OTHER REVENUES                                              212               760
EARNINGS/(LOSS) BEFORE MINORITY INTEREST IN
AFFILIATE, INCOME TAXES & OTHER COMPREHENSIVE INCOME                  (3,371)               95
                                                                     -------           -------

Provisions For Income Taxes                                               --               (32)
                                                                     -------           -------
NET EARNINGS/(LOSS)                                                   (3,371)               63
                                                                     -------           -------
OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized Holding Gain/(Loss)                                          (188)                7
                                                                     -------           -------
OTHER COMPREHENSIVE INCOME/(LOSS)                                    $(3,559)          $    70
                                                                     =======           =======
NET EARNINGS/(LOSS) PER COMMON SHARE:
Basic                                                                $ (0.06)          $  0.02
Diluted                                                              $ (0.06)          $  0.02
Comprehensive Income/(Loss)                                          $ (0.06)          $  0.02

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       4
<PAGE>

--------------------------------------------------------------------------------
              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                 (In Thousands)
                                  (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                         ADDITIONAL                    TOTAL
                                                        COMMON STOCK          PREFERRED   PAID IN       RETAINED    SHAREHOLDERS'
                                                     SHARES         VALUE       STOCK     CAPITAL       EARNINGS       EQUITY

<S>                                                    <C>               <C>                <C>            <C>          <C>
TOTAL SHAREHOLDERS' EQUITY
   AS OF AUGUST 31, 2000                               25,609            26        --       52,160         1,875        54,061
                                                    ---------     ---------     -----    ---------     ---------     ---------

Net Loss for Twelve Months
   Ended August 31, 2001                                   --            --        --           --        (5,874)       (5,874)
New Stock Issued to Shareholders:
   For Services and Compensation                        1,370             1        --          973            --           974
   For Property and Other Assets                          127            --        --        2,837            --         2,837
   For Retirement of Debt and Liabilities               3,004             3        --        5,693            --         5,696
   For Warrants Conversion                                645             1        --        1,078            --         1,079
   For Employee Stock Option Plan                          96            --        --          192            --           192
   For acquisition of ClearWorks, Inc.                 35,287            35        --       99,762            --        99,797
   For Licenses and Investments                         1,204             1        --        2,965            --         2,966

Syndication Costs                                          --            --        --         (876)           --          (876)

Treasury Stock                                         (7,078)           (7)       --      (11,358)           --       (11,365)

Unrealized Holding Gain                                    --            --        --           --          (359)         (359)
                                                    ---------     ---------     -----    ---------     ---------     ---------
TOTAL SHAREHOLDERS' EQUITY
   AS OF AUGUST 31, 2001                               60,264     $      60     $  --    $ 153,426     $  (4,358)    $ 149,128
                                                    =========     =========     =====    =========     =========     =========

Net Loss for Three Months
   Ended November 30, 2001                                 --            --        --           --        (3,371)       (3,371)

New Stock Issued to Shareholders:
   For Services and Compensation                           --            --        --           39            --            38
   For Property and Other Assets                           --            --        --           --            --            --
   For Retirement of Debt and Liabilities               1,460             2        --          821            --           821
   For Warrants Conversion                                 --            --        --           --            --            --
   For Employee Stock Option Plan                          --            --        --           --            --            --
   For Licenses and Investments                            --            --        --           --            --            --

Syndication Costs                                          --            --        --           --            --            --

Treasury Stock                                           (631)           (1)       --         (476)           --          (476)

Unrealized Holding Gain                                    --            --        --           --          (188)         (188)
                                                    ---------     ---------     -----    ---------     ---------     ---------


TOTAL SHAREHOLDERS' EQUITY
AS OF NOVEMBER 30, 2001                                61,093     $      61     $  --    $ 153,810     $  (7,917)    $ 145,954
                                                    =========     =========     =====    =========     =========     =========
</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>
                                                                      For the Three Months ended November 30,
                                                                              2001             2000
                                                                            --------         --------
                                                                                   (Unaudited)
<S>                                                                         <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earning/(Loss)                                                          $ (3,371)        $     63

Adjustments To Reconcile Net Earnings to Net Cash
Used By Operating Activities:
   Depreciation and Amortization                                               1,318              169
   Stock Issued for Interest Expense                                              12               --
   Allowance for Doubtful Accounts                                               138               --
   Stock Issued for Services Rendered                                             38               --
   Unrealized Holding Gain/(Loss) on Marketable Securities                      (188)               7
   (Increase)/Decrease in Accounts Receivable                                  1,103             (557)
   (Increase)/Decrease in Inventories                                         (1,397)            (775)
   (Increase)/Decrease in Prepaid Expenses                                        32               64
   Increase/(Decrease) in Accounts Payable                                       415             (191)
   Increase/(Decrease) in Accrued Expenses                                    (1,079)            (194)
   Increase/(Decrease) in Federal Income Taxes Payables                           --               36
   Increase/(Decrease) in Franchise Taxes Payables                                --              (15)
                                                                            -------------------------
      Total Adjustment                                                           392           (1,456)

Net Cash Used by Operating Activities                                         (2,979)          (1,393)

CASH FLOWS FROM INVESTING ACTIVITIES:
   (Purchase)/Disposal of Property and Equipment                              (2,384)             (62)
   (Increase)/Decrease in Notes Receivable Clearworks.net                         --           (2,000)
   (Increase)/Decrease in Security Deposits                                      (31)             (16)
   (Increase)/Decrease in Deferred Advertising Costs                              --               11
   (Increase)/Decrease in Deferred Syndication Costs                              --              270
   (Increase)/Decrease in Other Intangible Assets                                  2              (29)
   (Increase)/Decrease in Other Assets                                          (331)            (713)
                                                                            -------------------------
Net Cash Used by Investing Activities                                         (2,744)          (2,539)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase/(Decrease) in Notes Payable & Long-Term Debt                        (262)             380
   Increase/(Decrease) in Capital Leases                                         (13)             (15)
   Increase/(Decrease) in Line of Credit                                      (1,077)            (266)
   Proceeds From Sale of Common Stock, Net                                        --            3,177
   Treasury Stock                                                               (476)              --
                                                                            -------------------------
Net Cash Provided By Financing Activities                                     (1,840)           3,276
                                                                            -------------------------

Net Increase/(Decrease) in Cash                                               (7,563)            (656)

CASH AT THE BEGINNING OF THE YEAR                                             23,843           33,317
                                                                            -------------------------
CASH AT THE END OF THE YEAR                                                 $ 16,280         $ 32,661

Supplemental Disclosure of Cash Flow Information:
Net Cash Paid During the Year for
    Interest                                                                $     54         $     12
    Income Taxes                                                                  --               36

</TABLE>

Supplemental non-cash investing activities (See Note 4):


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       6

<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


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 Wireless
      International, Inc. 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 November 30, 2001 the Company's subsidiaries are: AtlanticPacific
      Communications, Inc. (APC), eToolz, Inc.(ETI), BroadbandMagic.com,
      Inc.(BBM), ClearWorks.Net, Inc. (.NET), ClearWorks Communication,
      Inc.(COMM), ClearWorks Home Systems, Inc.(HSI), United Computing Group
      (UCG) and Link-Two Communications, Inc.(LINK II). 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 $16,280,000 and $23,843,000 invested in interest bearing
      accounts and marketable securities (Note 9) at November 30, 2001 and
      August 31, 2001, 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-End Facility and Fiber Infrastructure           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:


                                  November 30,       August 31,
                                     2001              2001
                                 -------------      ------------

              Raw Materials        $  4,739          $   3,537
              Work in Process         5,997              6,555
              Finished Goods          1,298                545
                                   --------          ---------
                                   $ 12,034          $  10,637
                                   ========          =========


                                       7
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


E)    Revenue Recognition

      The Company designs, manufactures, markets and services its products and
      services under the Eagle Wireless International, Inc., Broadband
      Magic.com, Inc., ClearWorks Communications, Inc., ClearWorks Home Systems,
      Inc., Atlantic Pacific Communications, Inc., Link Two Communications, Inc.
      and United Computing Group, Inc. names.

      EAGLE WIRELESS INTERNATIONAL

      Eagle designs, manufactures and markets transmitters, receivers,
      controllers and 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.

      BROADBANDMAGIC.COM

      BroadbandMagic.com, Inc. designs, manufactures and markets the convergent
      set-top boxes. Products are sent principally to commercial customers for a
      pre-sale test period of ninety days. Upon the end of the pre-sale test
      period, the customer either returns the product or accepts the product, at
      which time the Company recognizes the revenue.

      Eagle Wireless International, Inc. and BroadbandMagic.com 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 the companies with
      manufacturing business sales leads. The transactions from these
      distributors and agents are subject to the companies' approval prior to
      sale. The distributorship or sales agent receives commissions based on the
      amount of the sales invoice from the companies 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.

      CLEARWORKS COMMUNICATIONS

      ClearWorks Communications provides Bundle Digital Services to business and
      residential customers, primarily in the Texas market. Revenue is derived
      from fees charged for the delivery of Bundled Digital Services, which
      includes telephone, long distance, internet, security monitoring and cable
      services. This subsidiary recognizes revenue and the related costs at the
      time the services are rendered.

      CLEARWORKS HOME SYSTEMS

      ClearWorks Home Systems sells and installs structured wiring, audio and
      visual components to homes. This subsidiary recognizes revenue and the
      related costs at the time the services are performed. Revenue is derived
      from the billing of structured wiring to homes and the sale of audio and
      visual components to the homebuyers.

      ATLANTIC PACIFIC COMMUNICATIONS

      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 of
      completion of the project. Most projects are completed in less than one
      month, therefore, matching revenue and expense in the period incurred.
      Service, training and extended warranty contract revenues are recognized
      as earned.

      ETOOLZ

      Etoolz, Inc. provides research and development support for all Eagle
      companies and does not currently provide billable services to independent
      third parties.

      LINK TWO COMMUNICATIONS

      Link Two provides customers with one and two way messaging systems over a
      national high-speed wireless broadband network. The revenue from these
      services is recognized as it is earned from the customer.

      UNITED COMPUTING GROUP

      United Computing Group provides business-to-business hardware and software
      network solutions and a network monitoring services. The revenue from the
      hardware and software sales is recognized at the time of shipment. The
      monitoring services recognition policy is to record revenue as earned.



                                       8
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


F)    Research and Development Costs

      For the months ended November 30, 2001, and 2000, the Company performed
      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 $ 172,000 and $498,000 were expensed for
      the three months ended November 30, 2001, and 2000, respectively.

      No research and development services were performed for outside parties
      for the three months ended November 30, 2001 and 2000.

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:

                                                 November 30,     August 31,
                                                    2001             2001
                                                --------------   ------------
            Weighted Average Number of Common
              Shares Outstanding Including

            Primary Common Stock Equivalents        61,093          49,726
            Fully Dilutive Common Stock
            Equivalents                             61,247          49,880


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 November 30, 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 twenty (20) years for
      Atlantic Pacific and Comtel and twenty-five (25) years for ClearWorks.Net.
      contract rights. Other intangible assets consist of patents and licenses,
      which are being amortized using the straight-line method over ten (10)
      years and twenty (20) years, respectively.



                                       9
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


K)    Advertising Costs

      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 three months ended
      November 30, 2001, the Company has expensed $155,000 where $0 in costs has
      been deferred.

      For the three months ended, November 30, 2000, the Company has expensed
      $127,000 whereas $374,000 in costs has been deferred.

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 statement 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." For the three months ended November
      30, 2001 and 2000, comprehensive loss of $188,000 and a gain of $7,000,
      respectively.

P)    Reclassification

      The Company has reclassified certain assets costs and expenses for the
      three months ended November 30, 2000 to facilitate comparison to the three
      months ended November 30, 2001.



                                       10
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


Q)    Supporting Costs in Selling, General and Administrative Expenses

      Other support cost for the three months ending November 30, 2001 and 2001
      are as follows, in thousands:


                                              2001             2000
                                             ------           ------

            Advertising/Convention           $   --           $   38
            Auto Related                         53               --
            Bad Debt                            138               --
            Contract Labor                      130               --
            Delivery/Postage                     26               21
            Fees                                 43               --
            Insurance                            10               18
            Interest                            291               --
            Office Supplies                      38               50
            Other                                35               25
            Professional                        218              108
            Rent                                305               99
            Repairs & Maintenance                30               --
            Travel                               --              107
            Taxes                                31                7
            Utilities                           204               25
                                             ------           ------
            Total                            $1,552           $  498
                                             ======           ======

R)    Recent Pronouncements

      In July 2001, the FASB issued Statement No. 141, Business Combinations,
      ("SFAS 141") and Statement No. 142, Goodwill and Other Intangible Assets
      ("SFAS 142"). SFAS 141 requires that the purchase method of accounting be
      used for all business combinations completed after June 30, 2001. SFAS 141
      also specifies that intangible assets acquired in a purchase method
      business combination must meet certain criteria to be recognized and
      reported apart from goodwill. SFAS 142 will require that goodwill and
      intangible assets with indefinite useful lives no longer be amortized, but
      instead they will be tested for impairment at least annually in accordance
      with the provisions of SFAS 142. SFAS 142 will also require that
      intangible assets with definite useful lives be amortized over their
      respective estimated useful lives to their estimated residual values and
      reviewed for impairment in accordance with SFAS No. 121, Accounting for
      the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
      Disposed Of. The Company is required to adopt the provisions of SFAS 141,
      for acquisitions initiated after June 30, 2001, and SFAS 142 effective
      September 1, 2002. Goodwill and intangible assets acquired in business
      combinations completed before July 1, 2001 will continue to be amortized
      until the Company's adoption of SFAS No. 142 on September 1, 2002. In
      connection with the transitional goodwill impairment evaluation, SFAS 142
      will require the Company to perform an assessment of whether there is an
      indication that goodwill is impaired as of the date of adoption. To the
      extent an indication exists that the goodwill and intangible assets may be
      impaired, the Company must measure the impairment loss, if any. Any
      transitional impairment loss will be recognized as the cumulative effect
      of a change in accounting principle in the Company's statement of
      earnings. Based on current goodwill and intangible asset balances, the
      Company will have approximately $99,652,000 of non-amortized goodwill and
      intangibles as of September 1, 2002, which will be subject to the
      transition provisions of SFAS 141 and SFAS 142.

      Amortization expense related to goodwill and intangibles was approximately
      $1,008,000 and $80,000 for the three months ended November 30, 2001 and
      November 30, 2000.

      The impact of the adoption of SFAS 141 and 142 is not currently known; the
      company will assess the impairment of its goodwill and intangible assets
      no later than May 31, 2002.

      The impact of other significant matters that might result from the
      adoption of SFAS 141 and 142 is not currently known, but will be assessed
      prior to the issuance of the Company's May 31, 2002, 10-Q filing.


                                       11

<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


      On October 3, 2001, the FASB issued the Statement of Financial Accounting
      Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived
      Assets" ("FAS 144"). FAS 144 addresses financial accounting and reporting
      for the disposal of long-lived assets. FAS 144, becomes effective for
      financial statements issued for fiscal years beginning after December 15,
      2001 and interim periods within those fiscal years. The Company does not
      expect the pronouncement to have a material impact on its consolidated
      financial position, consolidated results of operations or consolidated
      cash flows.


NOTE 2 - ACCOUNTS RECEIVABLE:

          Accounts receivable consist of the following, in thousands:

<TABLE>
<CAPTION>
                                                                   November 30,        August 31,
                                                                      2001                2001
                                                                  -------------       -----------
<S>                                                                 <C>                <C>
            Accounts Receivable                                     $   6,357          $   7,624
            Allowance for Doubtful Accounts                              (454)              (480)
                                                                    ---------          ---------
            Net Accounts Receivable                                 $   5,903          $   7,144
                                                                    =========          =========
</TABLE>

NOTE 3 - PROPERTY, PLANT & EQUIPMENT AND INTANGIBLE ASSETS:

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

<TABLE>
<CAPTION>
                                                                    November 30,       August 31,
                                                                        2001             2001
                                                                   --------------    -------------
<S>                                                                 <C>                <C>
            Automobile                                              $     425          $     548
            Head-End Facility and Fiber Infrastructure                 17,310             15,045
            Furniture & Fixtures                                          517                481
            Leasehold Improvements                                        127                 84
            Office Equipment                                              670                654
            Property, Manufacturing & Equipment                        11,804             11,657
                                                                    ---------          ---------
                Total Property, Plant & Equipment                   $  30,853          $  28,469
                    Less: Accumulated Depreciation                     (2,315)            (2,005)
                                                                    ---------          ---------
                Net Property, Plant & Equipment                     $  28,538          $  26,464
                                                                    =========          =========
</TABLE>

           Components of intangible assets are as follows, in thousands:

<TABLE>
<CAPTION>
                                                                    November 30,       August 31,
                                                                        2001             2001
                                                                   --------------    -------------
<S>                                                                 <C>                <C>
            Goodwill                                                $   5,966          $   5,966
            Contract Rights                                            74,513             74,513
            Licenses & Permits                                         24,439             24,441
                                                                    ---------          ---------
                Total Intangible Assets                             $ 104,918          $ 104,920
                    Less: Accumulated Amortization                     (4,887)            (3,879)
                                                                    ---------          ---------
                Net Intangible Assets                               $ 100,031          $ 101,041
                                                                    =========          =========
</TABLE>

NOTE 4 - BUSINESS COMBINATIONS:

      On February 1, 2001, the Company completed the purchases of
      ClearWorks.Net, Inc., ClearWorks Communication, Inc., ClearWorks
      Structured Wiring Services, Inc., ClearWorks Integration Services, Inc.,
      United Computing Group, Link-Two Communications, Inc. and LD Connect, Inc.
      (collectively, ClearWorks) by acquiring all the outstanding common stock
      for a total purchase price of approximately $99.8 million. The acquisition
      was accounted for using the purchase method of accounting. 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,



                                       12
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


      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 acquired the net assets of ClearWorks for
      $99,797,000 through the issuance of 29,410,000 shares of its common stock
      valued at $91,172,000 and a cash total of $8,625,000. Prior to the merger,
      the Company provided to ClearWorks, working capital and materials totaling
      $8,625,000. During February 2001, ClearWorks repaid these advances through
      the issuance of 7,346,000 shares of its common stock, which converted into
      5,877,000 Eagle Wireless International, Inc. common stock shares. These
      shares were converted to Treasury shares at this date. The Company
      allocated (in thousands) the acquisition costs to current assets of
      $11,708, property, plant and equipment of $6,570, intangible assets of
      $96,920 (which consist of $74,513 in contract rights and $22,407 in
      licenses), other assets of $79 and assumed liabilities of accounts payable
      and accrued expenses of $10,784, banks lines of credit and notes of $4,696
      for a total acquisition of $99,797. The allocation of the purchase price
      is based on the fair value of assets and liabilities assumed as determined
      either by independent third parties or management's estimates, based on
      existing contracts, recent purchases of assets and underlying loan
      documents.

      On January 1, 2000, the Company acquired APC in a business combination
      accounted for as a purchase. APC is primarily engaged in the nationwide
      sales and installation of fiber and cable to commercial enterprises. The
      Company issued 518,919 shares of common stock valued at $2,044,541 to
      acquire the net assets of APC. The Company allocated (in thousands) the
      acquisition costs to current assets of $395, property, plant and equipment
      of $125, intangible assets of $3,663, other assets of $1 and assumed
      liabilities of accounts payable and accrued expenses of $1,760, bank lines
      of credit and notes of $380 for a total acquisition of $2,044. The
      allocation of the purchase price is based on the fair value of assets and
      liabilities assumed as determined by independent third parties or
      management's estimates, based on existing contracts, recent purchases of
      assets and underlying loan documents.

      Concurrently with the closing of this acquisition, the Company entered
      into a two-year agreement with the former principals of APC. These
      principals may earn up to 3,000,000 shares of common stock based on APC
      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. In addition,
      the principals must maintain a "Gross Profit Margin" of 25% and an "EBITDA
      Profit" of 10%. These contingencies and attainment thereof are considered
      remote and, accordingly, have been excluded from the determination of the
      acquisition price.

      On January 1, 2000, the Company acquired 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 Company issued 300,000 shares of common stock valued at
      $1,182,000 to acquire the net assets of Comtel. The Company allocated (in
      thousands) the acquisition costs to current assets of $968, property,
      plant and equipment of $67, intangible assets of $1,879, and assumed
      liabilities of accounts payable and accrued expenses of $1,459, bank lines
      of credit and notes of $273 for a total acquisition of $1,182. The
      allocation of the purchase price is based on the fair value of assets and
      liabilities assumed as determined by independent third parties or
      management's estimates, based on existing contracts, recent purchases of
      assets and underlying loan documents.

      On March 17, 2000, the Company acquired ETI in a business combination
      accounted for as a purchase. ETI specializes in the development of leading
      edge, innovative, commercial, industrial and military technologies. The
      Company issued 50,000 shares of common stock valued at $437,500 to acquire
      the net assets of ETI. The Company allocated (in thousands) the
      acquisition costs to property, plant and equipment of $13, intangible
      assets of $424, for a total acquisition of $437. The allocation of the
      purchase price is based on the fair value of assets and liabilities
      assumed as determined by independent third parties or management's
      estimates, based on existing contracts, recent purchases of assets and
      underlying loan documents.



                                       13
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


NOTE 5 - NOTES PAYABLE:

      The following table lists the Company's note obligations as of November
      30, 2001 and August 31, 2001, in thousands:

<TABLE>
<CAPTION>
                                                  Annual
                                                 Interest                          November 30,        August 31,
                                                   Rate           Due Date            2001                2000
                                             -------------------------------------------------------------------
<S>                                               <C>             <C>               <C>                 <C>
         Vehicles                                 Various         Various           $     90            $    100
         6% Convertible Debenture (Note 8)        6.0%            Demand               2,000               2,000
         Tail Wind Convertible Debenture          2.0%            May 2003             4,500               5,000
         Other                                    Various         Various                279                 854
                                                                                    --------            --------

         Total notes payable                                                        $  6,869            $  7,954
         Less current portion                                                          5,344               5,933
                                                                                    --------            --------
         Total long-term debt                                                       $  1,525            $  2,021
                                                                                    =========           ========
</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.

      Minimum future lease payment under capital lease as of November 30, 2001
      and August 31, 2001 for each of the next five years and in the aggregate
      are, in thousands:

<TABLE>
<CAPTION>
                                                                     November 30, 2001     August 31, 2001
                                                                     -----------------     ---------------
<S>                                                                       <C>                  <C>
         Total minimum lease payments                                     $   163              $   177
         Less : Amount representing interest                                   13                   14
                                                                          -------              -------
         Present value of net minimum lease payments                          150                  163
         Less: Current maturity capital lease obligation                       35                   48
                                                                          -------              -------
           Long-term capital lease obligation                                 115                  115
                                                                          =======              =======

 Future obligations under the lease terms are as follows:

          Period Ended                                                     Amount
                                                                          -------
               2003                                                            95
               2004                                                            20
                                                                          -------
          Total                                                           $   115
                                                                          =======
</TABLE>

NOTE 7 - LINE OF CREDIT:

      On September 29, 2000, Atlantic Pacific 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. Atlantic Pacific's account receivable is
      pledged as collateral with Eagle Wireless the guarantor. This line of
      credit was repaid to Southwest Bank of Texas in the three months ending
      November 30, 2001; therefore, there is not a current balance outstanding.

      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 November 30, 2001, a balance of
      $769,331 existed. Payments are due every ten (10) days. The Company is
      negotiating an additional amount of $3,000,000 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;



                                       14

<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


      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.

      The subsidiaries are in compliance with all debt covenants at the date of
      the balance sheet, the Company does not foresee any changes from this
      status in the future.

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 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. At the date of
      merger, Link Two Communications, Inc. also became a 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"). The
      conversion terms of the convertible debentures become effective after
      ninety days of the initial closing date. The maturity of the convertible
      note is August 15, 2002. 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,
      registers the conversion shares are current



                                       15
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


      and 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.

      As a result of the merger, Eagle, the parent of Link Two, has guaranteed
      the Link Two notes issued to Tail Wind and allowed Tail Wind to convert
      the above mentioned debt into Eagle common stock at a rate of $1.79 per
      share. The agreement also permits Tail Wind to convert the Link Two
      warrant into Eagle warrants to purchase shares of our common stock. 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 $1.83 per share.

      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.
      Eagle has filed a registration statement for the potential conversion
      shares for the note and warrants exercise, this registration statement is
      not effective as of this date. As of November 30, 2001, the Company has
      paid to Tail Wind $500,000 towards the reduction of debt. Until the
      registration statement is effective, the Company will continue to pay each
      month $250,000 towards this debt reduction. The current financial
      statements have recorded as current and long-term maturities for this
      debt, $3,000,000 and $1,500,000, respectively.

      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
      has 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 sells 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.



                                       16
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


NOTE 9 - MARKETABLE SECURITIES:

      As discussed in Note 1, the Company adopted the provisions of SFAS No.
      115, "Accounting for Certain Investments in Debt and Equity Securities"
      and SFAS No. 130, "Accounting for Other Comprehensive Income." At August
      31, 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.

      At November 30, 2001, the securities had an original basis of $1,942,065
      determined by multiplying the number of shares acquired by the fair market
      value of those shares. At the November 30, 2001 balance sheet date, the
      fair market value of these securities was $1,954,813; 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 (loss) 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          $   49,688          $   50,312
           Bear Stearns                                   55,000              54,948              50,402
           Citicorp                                      110,000             109,500             109,200
           CMC Security                                   17,000              16,660              15,869
           Credit Suisse                                  50,000              49,925              50,188
           CWMBS                                           4,000               3,851               4,000
           FHLMC                                         274,000              91,562              96,390
           FNMA                                          690,000             105,702             108,682
           GE Capital                                     32,000              14,101              14,691
           Ginnie Mae                                     50,000              50,000              50,250
           GNMA                                          194,610             179,642             177,803
           Res. Accredit                                  25,102               2,290               2,318
           SB US Government Income                        19,179             202,292             199,854
           SB Government Securities Fund                 106,202           1,011,905           1,024,851
                                                                          ----------          ----------
           Totals                                                         $1,942,065          $1,954,813
                                                                          ==========          ==========
</TABLE>

      Other marketable securities, Urbana and Burst.com, with an adjusted cost
      basis of $418,000 and fair market value of $217,000 are included in cash
      and cash equivalents category and are 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:

<TABLE>
<CAPTION>
                                                  November 30,       August 31,
                                                     2001              2000
                                                  -----------        ----------
                                                       %                 %
<S>                                                    <C>               <C>
           U.S. Federal Statutory Tax Rate             34                34
           U.S. Valuation Difference                  (34)              (34)
                                                      ---               ---
           Effective U.S. Tax Rate                      0                 0
           Foreign Tax Valuation                        0                 0
                                                      ---               ---
           Effective Tax Rate                           0                 0
                                                      ===               ===
</TABLE>


                                       17
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


            Income tax expense (benefit) attributable to income from continuing
      operations differed from the amounts computed by apply the U.S. Federal
      income tax rate of 34% to pretax income from continuing operations as a
      result of the following: (in thousands)

<TABLE>
<CAPTION>
                                                    November 30,       August 31,
                                                       2001               2001
                                                   -------------      -----------
<S>                                                  <C>                <C>
           Computed expected tax benefit             $(1,145)           $(1,997)
           Increase in valuation allowance             1,145              1,997
                                                     -------            -------
                                                     $   ---            $   ---
                                                     =======            =======
</TABLE>

      The tax effects of temporary differences that give rise to significant
      portions of the deferred tax assets and deferred tax liabilities at
      November 30, 2001 and August 31, 2001are presented below, in thousands,
      and include the balances of the merged company ClearWorks.Net.

<TABLE>
<CAPTION>
                                                               November 30,        August 31,
                                                                  2001                2000
                                                              -------------       -----------
<S>                                                             <C>                 <C>
           DEFERRED TAX ASSETS:
           Accounts receivable, principally due to
           allowance for doubtful accounts                      $    102            $    102

           Net operating loss carry-forwards                      12,101              10,956
           Less valuation allowance                              (12,101)            (10,956)
                                                                --------            --------
           Net deferred tax assets                                    --                  --

           DEFERRED TAX LIABILITIES:
           Differences in depreciation                                47                  47
                                                                --------            --------
           Net deferred tax liabilities                         $     47            $     47
                                                                ========            ========
</TABLE>

      The valuation allowance for deferred tax assets of November 31, 2001 and
      August 31, 2001 was $12,101,000 and $10,956,000, respectively. At November
      30, 2001 the Company has net operating loss carryforwards of $35,239,000,
      which are available to offset future federal taxable income, if any, with
      expirations from 2020 to 2021.

NOTE 11 - ISSUANCE OF COMMON STOCK:

      For the three months ended November 30, 2001, the Company issued shares of
      common stock. The following table summarizes the shares of common stock
      issued, in thousands.

<TABLE>
<CAPTION>
<S>                                                                     <C>
           SHARES OUTSTANDING AUGUST 31, 2001                           60,264
                                                                       -------
           Shares issued for Retirement of Debt and Liabilities          1,460
           Treasury Stock                                                 (631)
                                                                       -------
           SHARES OUTSTANDING NOVEMBER 30, 2001                         61,093
                                                                       =======

</TABLE>

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 November 30, 2001,
      416,474 options have been granted pursuant to such plan with 72,499 being
      exercised and 10,350 being cancelled.



                                       18

<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


      The Company has issued or has acquired through its acquisitions and
      outstanding the following warrants which have not yet been exercised at
      November 30, 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
            November 30, 2001, all of these warrants have been exercised.

            50,000 stock purchase options issued to L.A. Delmonico Consulting,
            Inc. 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 $1.04 per share. The shares of common stock underlying
            these warrants have not been registered or issued, under the
            Securities Act of 1933. As of November 30, 2001, none of these
            options 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 November 30, 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 November 30, 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. November 30, 2001, 6,234
            warrants have been exercised resulting in 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 under the Securities Act
            of 1933. As of November 30, 2001, none of these 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 under the Securities Act of 1933. As
            of November 30, 2001, none of these warrants have been exercised.



                                       19
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


            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 $2.25 per share. The shares of common stock underlying
            these warrants have not been registered or issued, under the
            Securities Act of 1933. As of November 30, 2001, none of these
            warrants have been exercised.

            58,333 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 $3.00 per share. The shares of common stock underlying
            these warrants have not been registered or issued, under the
            Securities Act of 1933. As of November 30, 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 of November 30, 2001,
            none of these warrants have been exercised.

            40,000 stock purchase warrants 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 November 30, 2001, none of these
            warrants have been registered, issued or exercised.

            160,000 stock purchase warrants 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 of November 30, 2001, none of these
            warrants have been registered, issued or exercised.

            232,000 stock purchase warrants 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 of November 30, 2001, none of these
            warrants have been registered, issued or exercised.

            176,000 stock purchase warrants 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 November 30,
            2001, none of these warrants have been registered, issued or
            exercised.

            328,000 stock purchase warrants 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 November 30, 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 November 30, 2001,
            none of these warrants have been exercised.



                                       20
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


            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 November 30, 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 November 30, 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 of November 30, 2001,
            none of these warrants have been exercised.

            192,000 stock purchase warrants 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 November 30,
            2001, none of these warrants have been registered, issued or
            exercised.

            240,000 stock purchase warrants 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 of November 30, 2001, none of these
            warrants have been registered, issued or exercised.

            168,000 stock purchase warrants 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 of November 30, 2001, none of
            these warrants have been registered, issued or exercised.

            40,000 stock purchase warrants 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 November 30, 2001, none of these
            warrants have been registered, issued or exercised.

            160,000 stock purchase warrants 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 November 30, 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 November 30, 2001,
            none of these warrants have been exercised.


                                       21
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


            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 of November 30, 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 November 30, 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 November
            30, 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 November 30, 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 1933. As of November
            30, 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 November 30, 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).


                                       22

<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001

<TABLE>
<CAPTION>

                      Warrants Issued               Warrants Exercisable             Warrants                 Warrants Expired
Class of                November 30,                    November 30,            Non-            Non-             November 30,
Warrants            2001           2000           2001             2000      Exercisable     Registered        2001      2000
---------       --------------------------     ---------------------------  ------------------------------   --------------------
<S>                <C>                                                          <C>             <C>
1.04               50,000            -                 -              -         50,000          50,000          -         -
1.50              600,000            -                 -              -        350,000         250,000          -         -
1.55               50,000            -            25,000              -              -               -          -         -
1.75               20,000            -            13,766              -              -               -          -         -
2.00               25,000            -            25,000              -              -               -          -         -
2.00               41,667            -            41,667              -              -               -          -         -
2.25               41,667            -            41,667              -                              -          -         -
3.00               50,000            -            50,000              -              -               -          -         -
3.00               58,333            -            58,333              -              -               -          -         -
3.75               40,000            -            40,000              -              -          40,000          -         -
3.75              160,000            -           160,000              -              -         160,000          -         -
3.75              232,000            -           232,000              -              -         232,000          -         -
3.75              176,000            -           176,000              -              -         176,000          -         -
3.95              328,000            -           328,000              -              -         328,000
4.50               25,000            -                 -              -              -               -          -         -
7.00              100,000            -                 -              -              -         100,000          -         -
7.49              250,000            -                 -              -              -         250,000          -         -
7.50               25,000            -            25,000              -              -               -          -         -
7.50              192,000            -           192,000              -              -         192,000          -         -
7.50              240,000            -           240,000              -              -         240,000          -         -
7.50              168,000            -           168,000              -              -         168,000          -         -
7.50               40,000            -            40,000              -              -          40,000          -         -
7.50              160,000            -           160,000              -              -         160,000          -         -
9.68               50,000            -            50,000              -              -               -          -         -
10.00              25,000            -            25,000              -              -               -          -         -
10.00             250,000            -                 -              -              -         250,000          -         -
12.00             250,000            -           250,000              -              -               -          -         -
14.00             350,000            -                 -              -              -         350,000          -         -
18.00             250,000            -           250,000              -              -               -          -         -
25.00             150,000            -           250,000              -              -         150,000          -         -

2.00              Expired            - *               -              -              -               -     50,000         -
ESOP              416,474 *     51,700 *         322,125      35,700.00         11,500               -     10,350    10,350
ESOP                    -      228,207                 -        114,908              -               -
              -----------    ---------        -------------------------      -------------------------    -----------------
                4,814,141      279,907         3,163,558        150,608        411,500       3,136,000     60,350    10,350
              ========================        =========================      =========================    =================

</TABLE>

AN ASTERISK (*) DENOTES WARRANTS WHICH WOULD HAVE AN ANTI-DILUTIVE EFFECT IF
CURRENTLY USED TO CALCULATE EARNINGS PER SHARE FOR THE MONTHS ENDED NOVEMBER 30,
2001 AND 2000, RESPECTIVELY.


NOTE 13 - CAPITALIZATION ACTIVITIES:

      On July 10, 2000, Atlantic Pacific Communications, Inc. (a wholly owned
      subsidiary) initiated a stock offering in accordance with Regulation D
      promulgated under the Securities Act of 1933. Atlantic Pacific 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 Atlantic Pacific common
      stock at a price of $6.00 per share with one warrant being issued as a
      unit with each common share sold. Atlantic Pacific will sell up to
      4,000,000 shares of common stock and up to 4,000,000 Class A warrants; 400
      units. As of November 30, 2001, 1,325 units have been sold totaling
      132,500 shares and resulting in proceeds of $331,250.

NOTE 14 - RISK FACTORS:

      For the three months ended November 30, 2001 and 2000, 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, seventy-two 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 twenty-six percent remainder have been created relatively
      evenly over the rest of the nation during the three months ended November
      30, 2001. Whereas approximately seventy 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
      twenty-eight percent remainder has been created relatively evenly over the
      rest of the nation for the



                                       23
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


      three months ended November 30, 2000. Through the normal course of
      business, the Company generally does not require its customers to post any
      collateral.

      Although the Company had previously concentrated its efforts in the
      wireless infrastructure industry and has since expanded into the fiber,
      cable and broadband markets for the three months ended November 30, 2001
      and 2000, 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:

      Although the Company is based in the United States, its product is sold on
      the international market. Presently, international sales total
      approximately 2% and 2% at November 30, 2001 and 2000, respectively.

NOTE 16 - COMMITMENTS AND CONTINGENT LIABILITIES:

      LEASES

      The Company leases its primary office space in League City, Texas for
      $30,824 per month with Gateway Park Joint Venture through November 30,
      2001. This non-cancelable lease commenced on June 1, 2001 and expires on
      May 31, 2004. For the months ended November 30, 2001 and 2000, rental
      expenses of approximately $92,472 and $64,548 respectively, were incurred.

      A new three-year non-cancelable lease commenced June 1, 2001 and expires
      May 31, 2004. Under the terms of the new lease, monthly payments will be
      $36,352 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 11,180 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 November 30, 2001 and 2000, rental
      expense of $6,614 and $6,390, 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 November 30, 2000 and 2001, rental expense of $4,494 and
      $4,338, 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 November 30, 2001 and 2000, rental expense of $6,802 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 November 30, 2001 and 2000 of $13,500 and
      $13,500 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 $7,306 to $11,091
      on April 30, 2000 and again on May 1, 2002 to $11,217 for the remaining
      twelve months. For the period ended November 30, 2001 and 2000, rental
      expense of $33,273 and $0 were 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 November 30, 2001 and
      2000, rental expense of $17,091 and $0 were incurred.



                                       24
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


      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 November 30, 2001 and 2000, rental expense of
      $6,000 and $0 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 November 30, 2001 and 2000,
      rental expense of $18,900and $0 was incurred.

      The Company's subsidiary, ClearWorks Home Systems, leases office space in
      Austin, Texas with Ditto Communications Technologies, Inc. This
      non-cancelable lease commenced on August 1, 2001 and expires August 30,
      2002. The monthly payments are $4,732. For the period ended November 30,
      2001 and 2000, rental expense of $14,196 and $0 was incurred.

      The Company's subsidiary, United Computing Group, leases office space in
      Dallas, Texas with AMB Property II, LP. This non-cancelable lease
      commenced on June 19, 2000 and expires June 30, 2002. The monthly payments
      are $2,179. For the period ended November 30, 2001 and 2000, rental
      expense of $6,537 and $0 was incurred.


            Future obligations under the non-cancelable lease terms are:
                                  Period Ending

                            AUGUST 31,                AMOUNT
                           -----------             -----------
                               2002                $   677,427
                               2003                    634,386
                               2004                    327,164
                                                   -----------
                               Total               $ 1,638,977
                                                   ===========

      LEGAL PROCEEDINGS

      ClearWorks.Net "Clearworks" is subject to legal proceedings and claims
      that arise in the ordinary course of business. 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 shares of the
      ClearWorks 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. ClearWorks intends to vigorously defend its position
      by requesting the court release the stock for payment of all alleged
      claims as was originally intended. Management does not expect that the
      results of this legal proceeding will have a material adverse effect on
      the ClearWorks financial condition or results of operations.

      ClearWorks 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. ClearWorks filed an answer on April 16,
      1999, denying the claim and asserting its affirmative defenses. This suit
      is scheduled for March 11, 2002 two week trial docket. ClearWorks
      continues to vigorously contest these claims by Robert Horn on the basis
      that they are without merit.

      ClearWorks 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.


                                       25
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


      ClearWorks 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. 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. This suit is currently in discovery phase and
      is scheduled for the February 25, 2002 two-week trial docket. 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.

      ClearWorks 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 ClearWorks 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.

      ClearWorks 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. This suit is currently in the discovery phase.
      The defendants deny the allegations of the complaint.

      ClearWorks is a defendant in Merger Communications Inc. vs.
      Clearworks.Net, Inc; in the 281st Judicial District Court of Harris
      County, Texas. On June 16, 2000, Merger Communications sued Clearworks.
      The suit presents claims for breach of contract to provide Clearworks
      public relation services. The suit seeks recovery of damages in the sum of
      $7,798, the value of 106,667 restricted shares of Clearworks common stock
      as of the date of the alleged breach plus interest, attorney fees, and
      court costs. Clearworks denies the claims and has filed an answer. This
      suit is scheduled for the February 2, 2002 two-week trial docket.
      Clearworks intends to vigorously contest all claims in this case.

      On October 2, 2001, Metro Networks sued ClearWorks. The suit presents
      claims for breach of contract to provide ClearWorks radio advertisement.
      The suit seeks recovery of damages in the sum of $146,750 plus interest,
      attorney's fees and court costs. ClearWorks denies the claims and will
      file an answer. This suit is currently in the discovery phase. ClearWorks
      intends to vigorously contest all claims in this case.



                                       26
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


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



                                       27

<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001



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 THREE MONTHS ENDED NOVEMBER 30, 2001
                                                     -----------------------------------------------------
                                                        INCOME              SHARES             PER-SHARE
                                                      (NUMERATOR)        (DENOMINATOR)           AMOUNT
                                                     -------------      ---------------      -------------
<S>                                                     <C>
           Net Loss                                     $(3,371)

           Basic EPS:
            Income available to
            common stockholders                         $(3,371)             61,093            $ (0.06)

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

           Diluted EPS:
             Income available to
             common stockholders
               and assumed conversions                  $(3,371)             61,247            $ (0.06)
                                                        =======             =======            =======


                                                         FOR THE THREE MONTHS ENDED NOVEMBER 30, 2000
                                                     -----------------------------------------------------
                                                        INCOME              SHARES             PER-SHARE
                                                      (NUMERATOR)        (DENOMINATOR)           AMOUNT
                                                     -------------      ---------------      -------------

           Net Income                                   $    63

           Basic EPS:
            Income available to
            common stockholders                              63              26,317            $ 0.002

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

           Diluted EPS:
             Income available to
             common stockholders
             and assumed conversions                    $    63              26,471            $ 0.002
                                                        =======             =======            =======

</TABLE>

      For the three months ended November 30, 2001 and 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 November 30, 2001 and 2000, 416,474 and 279,907 warrants
      have been issued to various employees. Of these outstanding warrants, 0
      and 500 were exercised for the months ended November 30, 2001 and 2000,
      respectively. Additionally, 10,350 warrants have expired as of November
      30, 2001.

      The Company has elected to follow APB 25, "Accounting for Stock Issued to
      Employees." Accordingly, since employee stock options are granted at
      market price on the date of grant, no compensation expense is recognized.
      However, SFAS 123 requires presentation of pro forma net income and
      earnings per share as if the Company had accounted for its employee stock
      options granted under the fair value method of that statement. The
      weighted average fair value of the individual options granted during 2000
      is estimated as $0.58 on the date of grant. A meaningful weighted average
      fair value of the individual options granted during 2000 using the method
      prescribed by SFAS 123 could not be determined due to the volatility of
      the share price during the measurement period.


                                       28
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


      Management estimates the average fair value for options granted during
      2001 to be comparable to those granted in 2000. The impact on net income
      is minimal; therefore, the pro forma disclosure requirements prescribed by
      SFAS 123 are not significant to the Company. The fair values were
      determined using a Black-Scholes option-pricing model with the following
      assumptions:

                                              2001        2000
                                            --------    --------
               Dividend Yield                 0.00%       0.00%
               Volatility                     0.91       15.14
               Risk-free Interest Rate        7.00%       7.00%
               Expected Life                     5           5


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 three months ended November 30, 2001
      and 2000, employee contributions were approximately $34,505 and $26,461,
      respectively. The Company matched approximately $12,038 and $9,082,
      respectively for those same periods.

NOTE 20 - MAJOR CUSTOMER:

      The Company had gross revenues of $8,761,000 and $1,866,000 for the three
      months ended November 30, 2001 and 2000, respectively. The following
      parties individually represent a greater than ten percent of these
      revenues.

<TABLE>
<CAPTION>

                                     NOVEMBER 30, 2001                 NOVEMBER 30, 2000
             CUSTOMER              AMOUNT      PERCENTAGE           AMOUNT      PERCENTAGE
             --------              ------      ----------           ------      ----------
<S>                                <C>           <C>                <C>             <C>
             Customer A            $ 1,463,000   16.70%             $    ---        0.00%
             Customer B            $     ---      0.00%             $  206,000     11.02%
             Customer C            $     ---      0.00%             $  388,000     20.75%
</TABLE>

      Subsequent to the three months ended November 30, 2001, the Company had
      outstanding accounts receivable with Enron Corporation and many of its'
      subsidiaries. The exposure from the bankruptcy totals approximately
      $205,000, which has been accounted for through allowance of doubtful
      accounts in these financials.

NOTE 21 - INDUSTRY SEGMENTS:

      The Company has adopted the provisions of SFAS No. 131, "Disclosures about
      Segments of an Enterprise and Related Information". At November 30, 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) 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.


                                       29
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


      United Computing Group, Inc. (UCG) 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.

      ClearWorks.Net, Inc. (.NET) is inactive with exception of debt related
      expenses.


<TABLE>
<CAPTION>
                                                 FOR THE THREE MONTHS ENDING NOVEMBER 30, 2001

(in thousands)               Eagle      APC       COMM        HSI        UCG      Link II     .Net          Elim.      Consol.
                           -----------------------------------------------------------------------------------------------------
<S>                             <C>      <C>        <C>        <C>      <C>             <C>                             <C>
Revenue                         101      832        514        948      6,360           6       ---          ---        8,761
Segment Profit / (Loss)      (2,296)    (232)      (140)       (16)      (268)       (577)      (30)         ---       (2,559)
Total Assets                154,096    1,533     15,788      3,019      4,287      30,125     1,257      (45,451)     164,654
Capital Expenditures             99        2      2,267          7          2         ---       ---          ---        2,377
Dep. And Amort.                 818       34        127         21          6         312       ---          ---        1,318


                                             FOR THE THREE MONTHS ENDING NOVEMBER 30, 2000

                    (in thousands)                          Eagle         APC           Elim.           Consol.
                                                     ----------------------------------------------------------
                    Revenue                                   527        1,339           ---             1,866
                    Segment Profit / (Loss)                   106          (11)          ---                95
                    Total Assets                           58,816        2,572          (765)           60,623
                    Capital Expenditures                       47           15           ---                62
                    Dep. And Amort.                           179           24           ---               203

</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 amortization expense, accounting changes and
      non-recurring items.

NOTE 22 - SUBSEQUENT EVENTS.

      Subsequent to the November 30, 2001 quarter end, the Company acquired a
      paging and messaging company for cash approximately $580,000. This
      transaction is immaterial and does not require pro-forma disclosure
      information.

      On December 17, 2001, certain former employees of ClearWorks sued Eagle
      and ClearWorks for breach of contract and other related matters. The suit
      seeks recovery of damages in excess of $10,000,000 plus attorney's fees
      and court costs. The court granted ClearWorks a temporary restraining
      order, wherein the Court enforced a covenant against competition provision
      found in the individual's employment contracts with the Company. Such
      order restrains these individuals from competing against ClearWorks for a
      period of six months.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS.

      The following discussion and analysis should be read in conjunction with
      the Financial Statements and Notes thereto appearing elsewhere in this
      Form 10-Q. Information included herein relating to projected growth and
      future results and events constitutes forward-looking statements. Actual
      results in future periods may differ materially from the forward-looking
      statements due to a number of risks and uncertainties, including but not
      limited to fluctuations in the construction, technology, communication and
      industrial sectors; the success of the Company's restructuring and cost
      reduction plans; the success of the Company's competitive pricing; the
      Company's relationship with its suppliers; relations with the Company's
      employees; the Company's ability to manage its operating costs; the
      continued availability of financing; governmental regulations; risks
      associated with regional, national, and world economies; and consummation
      of the merger and asset purchase transactions. Any forward-looking
      statements should be considered in light of these factors.


                                       30
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


      OVERVIEW

      During the quarter ended November 30, 2001, Eagle's operations were
      concentrated in the continued development and expansion of its bundled
      digital services network in the Houston and Austin, Texas areas; expansion
      of its nationwide customer care center for technology solutions and
      network monitoring on a seven day by twenty four hour operation; reduction
      of duplicate overhead resulting from the merger with Clearworks.net;
      entered into acquisition agreements with a security and a messaging
      company; and, settled numerous lawsuits . Eagle's consolidated revenues,
      gross profit and net loss for the quarter ended November 30, 2001 totaled
      $8,761,000, $1,700,000 and $(3,371,000), respectfully. The increase in
      revenues is directly related to increases in computer and fiber sales to
      residential and commercial customers. The net loss is attributable to the
      expenses associated with the development of the digital set-top box and
      related customers, expenses incurred with the postponement of commercial
      fiber contracts with nationwide customers, continued development of our
      customer care centers and messaging network. We believe that the
      acquisition of existing security and messaging companies, reduction of
      personnel costs, consolidation of facilities, and expanded sales
      activities in our product and service businesses will build a near and
      long-term solution to an improved financial condition.

      REVENUE RECOGNITION

      The Company designs, manufactures, markets and services its products and
      services under the Eagle Wireless International, Inc., Broadband
      Magic.com, Inc., ClearWorks Communications, Inc., ClearWorks Home Systems,
      Inc., AtlanticPacific Communications, Inc., Link Two Communications, Inc.
      and United Computing Group, Inc. names.

      EAGLE WIRELESS INTERNATIONAL

      Eagle designs, manufactures and markets transmitters, receivers,
      controllers and 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

      Broadband Magic.com, Inc. designs, manufactures and markets the convergent
      set-top boxes. Products are sent principally to commercial customers for a
      pre-sale test period of 90-days. Upon the end of the pre-sale test period,
      the customer either returns the product or accepts the product, at which
      time the Company recognizes the revenue.

      Eagle Wireless International and Broadband Magic.com 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 the companies with manufacturing
      business sales leads. The transactions from these distributors and agents
      are subject to the companies' approval prior to sale. The distributorship
      or sales agent receives commissions based on the amount of the sales
      invoice from the companies 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.

      CLEARWORKS COMMUNICATIONS

      ClearWorks Communications provides Bundle Digital Services to business and
      residential customers, primarily in the Texas market. Revenue is derived
      from fees charged for the delivery of Bundled Digital Services, which
      includes telephone, long distance, internet, security monitoring and cable
      services. This subsidiary recognizes revenue and the related costs at the
      time the services are rendered.

      CLEARWORKS HOME SYSTEMS

      ClearWorks Home Systems provides structured wiring to homes, audio and
      visual components. This subsidiary recognizes revenue and the related
      costs at the time the services are performed. Revenue is derived from the
      billing of structured wiring to homes and the sale of audio and visual
      components to the homebuyers.

      ATLANTIC PACIFIC COMMUNICATIONS

      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 of
      completion of the project. Most projects are completed in less than one
      month, therefore, matching revenue and expense in the period incurred.
      Service, training and extended warranty contract revenues are recognized
      as earned.


                                       31
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


      ETOOLZ

      Etoolz, Inc. provides research and development support for all Eagle
      companies and does not currently provide billable services to independent
      third parties.

      LINK TWO COMMUNICATIONS

      Link Two provides customers with one and two way messaging systems over a
      national high-speed wireless broadband network. The revenue from these
      services is recognized as it is earned from the customer and incurs
      expense in the current period.

      UNITED COMPUTING GROUP

      United Computing Group provides business-to-business hardware and software
      network solutions and a network monitoring services. The revenue from the
      hardware and software sales is recognized at the time of shipment. The
      monitoring services recognition policy is to record revenue as earned.

      Earnings are charged with a provision for doubtful accounts based on
      collection experience and current review of the collectability of accounts
      receivable. Accounts receivable deemed uncollectable are charged against
      the allowance for doubtful accounts.

      RECEIVABLES

      For the three months ended November 30, 2001, Eagle accounts receivables
      decreased to $5,903,000 from $7,144,000 at August 31, 2001. The majority
      of this decrease is due to outstanding receivable collection efforts and a
      slow down in customer purchases in the commercial fiber sector.

      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.

      INVENTORY

      Inventories are valued at the lower of cost or market. The cost is
      determined by using the first-in first-out method. At November 30, 2001,
      Eagle's inventory total of $12,034,000 as compared to $10,637,000 at
      August 31, 2001. The additional inventory is primarily attributable to the
      purchase of fiber, cabling and computer products.

      RESULTS OF OPERATIONS

      THREE MONTHS ENDED  NOVEMBER 30, 2001  COMPARED TO THREE MONTHS ENDED
      NOVEMBER 30, 2000

      NET SALES. For the three months ended November 30, 2001, net sales
      increased to $8,761,000 from $1,866,000 during the three months ended
      November 30, 2000. The increase was primarily attributable to added sales
      from Atlanticpacific, ClearWorks Home Systems, ClearWorks Communications
      and United Computing Group. Atlantic Pacific provides project planning,
      installation, project management, testing and documentation of fiber and
      cable to commercial and industrial clients throughout the United States.
      ClearWorks Home Systems provides structured wiring solutions and audio /
      visual equipment to single and multi-family dwellings. ClearWorks
      Communications 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. United Computing Group provides
      business-to-business hardware and software network solutions and a network
      monitoring services.

      COST OF GOODS SOLD. For the three months ended November 30, 2001, cost of
      goods sold increased to $7,061,000 from $1,082,000 during the three months
      ended November 30, 2000. This is primarily associated with the cable,
      fiber and hardware products. Although the cost of sales increased, the
      Company's gross profit percentage for products sold decreased to 19% from
      42% during the three months ended November 30, 2001.


                                       32

<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


      OPERATING EXPENSES. For the three months ended November 30, 2001,
      operating expenses increased to $5,283,000 from $1,449,000 during the
      three months ended November 30, 2000. The primary portions of the increase
      are discussed below:

      A $1,659,000 increase in salaries, as a result of its acquisitions and
      expanded business.
      A $28,000 increase in advertising and promotion, due primarily to
      increased attendance at conventions and trade shows on a worldwide basis.
      A $1,088,000 increase in depreciation and amortization, due to an increase
      in amortization of goodwill and purchase of additional assets.
      A $1,054,000 increase in other support costs, due to an increase in rents,
      travel, utilities and communication costs.

      NET EARNINGS. For the three months ended November 30, 2001, Eagle's net
      loss was $3,370,000, compared to net earnings of $63,000 during the three
      months ended November 30,2000.

      CHANGES IN CASH FLOW. Eagle's operating activities used net cash of
      $2,979,000 in the three months ended November 30, 2001, compared to
      $1,393,000 in the three months ended November 30, 2000. The decrease 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 $2,744,000 in the three months ended
      November 30, 2001, compared to $2,539,000 in the three months ended
      November 30, 2000. The increase was due primarily to investment activities
      and purchase of equipment. Eagle's financing activities used cash of
      $1,840,000, in the three months ended November 30, 2001, compared to cash
      provided of $3,276,000 in the three months ended November 30, 2000. The
      decrease at November 30, 2001 is attributable to pay off of the Atlantic
      Pacific's line of credit, pay down on United Computing Group's line of
      credit and purchase of shares in the open market for retirement.

      LIQUIDITY AND CAPITAL RESOURCES.

      Current assets for the three months ended November 30, 2001 totaled
      $35,210,000 as compared to $49,306,000 reported for the three months ended
      November 30, 2000. Of this amount, $16,280,000 consisted of cash. Eagle
      believes that its working capital of $18,182,000 as of November 30, 2001
      should be sufficient to fund operations through the end of the fiscal year
      2002. 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. Refer to Note 7 and Note 8 for
      descriptions of lines of credit and other immediate forms of funding the
      Company has available. As of November 30, 2001, Eagle had no material
      capital commitments other than its federal income and state franchise tax
      liabilities.

ITEM  3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

      The Company's bank line of credit bears interest, payable monthly, at a
      floating rate equal to the lending bank's prime rate plus 1.0%, which
      floating rate was 6.0% on November 30, 2001. A 1% increase in interest
      rates would reduce the Company's annual earnings by $210,000 if the full
      balance of the line of credit were outstanding over the entire year. As of
      November 30, 2001, the outstanding balance was $769,331. The Company
      believes that it does not have any other material market risk sensitive
      instruments.

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

         None


                                       33
<PAGE>

              EAGLE WIRELESS INTERNATIONAL, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 2001


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 REPORTS ON FORM 8-K

                  (a)  Exhibit
                       None
                  (b)  Reports on Form 8-K
                       None


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: January 14, 2002                      By:   /s/ H. Dean Cubley
                                                        Dr. H. Dean Cubley
                                                        President

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

                                       34