<PAGE>

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

                                   -----------

                                  FORM 10-QSB/A
                                SECOND AMENDMENT

                                   -----------

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28,
      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 November 1, 2001, there were 59,210,971 shares of common stock
outstanding


<PAGE>

               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                                      INDEX


PART 1 - FINANCIAL INFORMATION
                                                                          PAGE

    Item 1. Financial Statements (Unaudited)

            Balance Sheets at February 28, 2001 and August 31, 2000         3

            Statements of Income for the Six
            Months Ended February 28, 2001 and 2000                         4

            Statements of Changes In Shareholders' Equity for the
            Six Months Ended February 28, 2001 and 2000                     5

            Statements of Cash Flows for the Six Months Ended
            February 28, 2001 and 2000                                      6

            Notes to the Financial Statements                              7-23

    Item 2. Management's Discussion and Analysis of Financial
            Condition and Results of Operations                           23-26

PART 2 - OTHER INFORMATION

    Item 1. Legal Proceedings                                              26

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

    Item 3. Defaults Upon Senior Securities                                26

    Item 4. Submission of Matters to a Vote of Security Holders            26

    Item 5. Other Information                                              26

    Item 6. Exhibits and Reports on Form 8-K                               26

SIGNATURES                                                                 27


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


                                     ASSETS
<TABLE>
<CAPTION>
                                                                     FEBRUARY 28,        AUGUST 31,
                                                                        2001               2000
                                                                     (UNAUDITED)         (AUDITED)
                                                                    -------------      -------------
<S>                                                                   <C>                <C>
CURRENT ASSETS
      Cash and Cash Equivalents (Notes 1 & 9)                         $  27,311          $  32,346
      Accounts Receivable (Note 2)                                       10,473              9,902
      Inventories (Note 1)                                                7,913              5,756
      Notes Receivable                                                       --                971
      Prepaid Expenses                                                      925                716
                                                                      ---------          ---------
           TOTAL CURRENT ASSETS                                          46,622             49,691

PROPERTY AND EQUIPMENT (NOTES 1 & 3):
      Operating Equipment                                                14,759              2,703
      Less:  Accumulated Depreciation                                    (1,268)            (1,023)
                                                                      ---------          ---------
           TOTAL PROPERTY AND EQUIPMENT                                  13,491              1,680

OTHER ASSETS:
      Deferred Syndication (Note 1)                                          --                270
      Intangible Assets (Notes 1, 3 & 4)                                106,667              6,137
      Less: Accumulated Amortization                                       (689)              (194)
      Other Assets, principally security deposits                           217                 57
                                                                      ---------          ---------
           TOTAL OTHER ASSETS                                           106,195              6,270
                                                                      ---------          ---------

TOTAL ASSETS                                                          $ 166,308          $  57,641
                                                                      =========          =========

                 LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
      Accounts Payable                                                $   8,009          $   2,007
      Accrued Expenses                                                    4,979                308
      Notes Payable (Note 5)                                              2,720                 42
      Line of Credit (Note 7)                                             1,211                266
      Capital Lease Obligations (Note 6)                                     70                 59
      Federal Income Taxes Payable (Notes 1 & 10)                           772                736
      Other Payables                                                        136                 57
      Sales Taxes Payable                                                   706                 17
      Deferred Taxes (Note 10)                                               --                 15
                                                                      ---------          ---------
           TOTAL CURRENT LIABILITIES                                     18,603              3,507

LONG-TERM LIABILITIES:
      Capital Lease Obligations
        (net of current maturities) (Note 6)                                 47                 41
      Deferred Taxes (Note 10)                                               --                 32
      Long-Term Debt                                                         79                 --
                                                                      ---------          ---------
           TOTAL LONG-TERM LIABILITIES                                      126                 73

COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 17)

SHAREHOLDERS' EQUITY:
      Preferred Stock - $.001 par value
           Authorized 5,000,000 shares
           Issued -0- shares                                                 --                 --
      Common Stock - $.001 par value
           Authorized  100,000,000 shares
           Issued and Outstanding at February 28, 2001
           and August 31, 2000
           55,977,216 and 25,609,263, respectively                           55                 26
      Paid in Capital                                                   145,677             52,160
      Unrealized Gain on marketable securities                            1,189                 --
      Retained Earnings                                                     658              1,875
                                                                      ---------          ---------
           TOTAL SHAREHOLDERS' EQUITY                                   147,579             54,061
                                                                      ---------          ---------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                            $ 166,308          $  57,641
                                                                      =========          =========
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                          Three months     Three months     Six months      Six months
                                                             ended            ended           ended            ended
                                                          February 28,     February 29,     February 28,    February 29,
                                                             2001              2000            2001             2000
                                                         ----------------------------------------------------------------
<S>                                                         <C>              <C>             <C>              <C>
Net sales:
    Integration services                                    $   132          $    --         $   132          $    --
    Structured wiring                                         1,594               --           1,594               --
    Broadband services                                           73               --              73               --
    Products                                                  2,870            1,247           4,736            1,903
    Other                                                       127               --             127               --
                                                         ----------------------------------------------------------------
Total sales                                                   4,797            1,247           6,663            1,903
                                                         ----------------------------------------------------------------
Costs of goods sold:
    Materials other than cable and wire                          32              225             535              332
    Direct labor and related costs                              245              235             772              353
    Integration services and materials                          309               --             309               --
    Products                                                  1,947               --           1,947               --
    Structured wiring labor and materials                       757               --             757               --
    Broadband costs                                              50               --              50               --
    Depreciation and amortization                               208               17             252               34
    Other manufacturing costs                                   105               42             113               49
                                                         ----------------------------------------------------------------
Total costs of goods sold                                     3,652              519           4,734              770
                                                         ----------------------------------------------------------------

Gross profit                                                  1,145              728           1,929            1,133
                                                         ----------------------------------------------------------------
Operating expenses
    Selling, general and administrative:
        Salaries and related costs                            1,436              210           1,966              342
        Advertising and promotion                               136               29             263               32
        Depreciation and amortization                           329               39             488               55
        Other support costs                                     717              279             884              532
        Research and Development                                189              125             687              256
                                                         ----------------------------------------------------------------
Total operating expenses                                      2,807              682           4,288            1,216
                                                         ----------------------------------------------------------------

Income (loss) from operations                                (1,662)              46          (2,359)             (83)

Other income, principally interest income                       382              192           1,142              443
                                                         ----------------------------------------------------------------

Earnings (loss) Before Income Taxes & Loss
From Minority Interest in Affiliate                          (1,280)             238          (1,217)             361
                                                         ----------------------------------------------------------------

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

Income (loss) before income taxes                            (1,280)             238          (1,217)             323

Provisions for income taxes                                      --               83              --              100
                                                         ----------------------------------------------------------------
Net earnings (loss)                                          (1,280)             155          (1,217)             223
Comprehensive income, net of tax
Unrealized holding gain                                       1,182                            1,189
                                                         ----------------------------------------------------------------
Comprehensive income / (loss)                               $   (98)             155         $   (28)             223
                                                         ================================================================
Net earnings (loss) per common share:

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

</TABLE>


                                       4
<PAGE>

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

<TABLE>
<CAPTION>

                                                                                            ADDITIONAL                  TOTAL
        AUGUST 31, 1999                                COMMON STOCK             PREFERRED    PAID IN      RETAINED   SHAREHOLDER'S
     TO FEBRUARY 28, 2001                           SHARES       VALUE           STOCK       CAPITAL      EARNINGS      EQUITY
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>        <C>           <C>           <C>           <C>          <C>
Total Shareholders' Equity
   As of August 31, 1999                            13,480     $      13     $      --     $   7,181     $   1,700    $   8,894

Net Earnings 2000                                                                                              193          193

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

Syndication Costs                                                                               (653)                      (653)

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

Total Shareholders' Equity
   As of August 31, 2000                            25,609            26            --        52,160         1,875       54,061
                                                 ---------     ---------     ---------     ---------     ---------    ---------

Net Loss for Six Months
    Ended February 28, 2001                                                                                 (1,217)      (1,217)
New Stock Issued:
   Issuance of Common Stock
      For Services and Compensation                     63                                       546                        546
      For Warrants Conversion                          645                                     1,078                      3,506
      For Employee Stock Option Plan                    96                                       192                        192
      For Acquisition of ClearWorks, Inc.           35,287            35                      99,762                     99,797
      For Licenses and Investments                     500                                     2,428                      2,428


Syndication Costs                                                                               (876)                      (876)

Retirement of ESOP Shares                             (347)                                     (994)                      (994)

Treasury Stock                                      (5,877)           (6)                     (8,619)                    (8,625)

Unrealized Holding Gain                                                                                      1,189        1,189
                                                 ---------     ---------     ---------     ---------     ---------    ---------


Total Shareholders' Equity
   As of February 28, 2001                          55,976     $      55     $      --     $ 145,677     $   1,847    $ 147,579
                                                 =========     =========     =========     =========     =========    =========
</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>
                                                                                          SIX MONTHS ENDED
                                                                                            FEBRUARY 28,
                                                                                     2001                 2000
                                                                                  (UNAUDITED)         (UNAUDITED)
                                                                                 -------------       -------------
<S>                                                                                <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net Earnings / (Loss)                                                        $ (1,217)           $    223

      Adjustments to Reconcile Net Earnings to Net Cash
       Used by Operating Activities:
        Stock for Services Rendered                                                     738                  --
        Depreciation and Amortization                                                   740                 344
        Changes in Assets and Liabilities, Net of Effects from Purchase
        of ClearWorks.Net
          (Increase) / Decrease in Accounts Receivable                                4,864              (1,720)
          (Increase) / Decrease in Inventories                                        3,239              (1,181)
          (Increase) / Decrease in Prepaid Expenses                                     187                  40
          Increase / (Decrease) in Accounts Payable                                     602               2,142
          Increase / (Decrease) in Accrued Expenses                                      --                  29
          Increase / (Decrease) in Deferred Revenues                                     --                (480)
          Increase / (Decrease) in Deferred Taxes                                       (15)                  8
          Increase / (Decrease) in Federal Income Taxes Payable                          --                (368)
          Increase / (Decrease) in Franchise Taxes Payable                               --                   4
                                                                                   --------            --------

        Total Adjustments                                                            10,355              (1,182)
                                                                                   --------            --------

      Net Cash (Used) / Provided by Operating Activities                              9,138                (959)

CASH FLOWS FROM INVESTING ACTIVITIES
        Purchase of Property and Equipment                                           (5,486)               (664)
        Purchase of ClearWorks.Net, Net of Cash Acquired                             (7,654)                 --
        (Increase) / Decrease in Other Intangible Assets                                (10)                 --
        (Increase) / Decrease in Other Assets                                           (81)               (232)
                                                                                   --------            --------

      Net Cash Used by Investing Activities                                         (13,231)               (896)

CASH FLOWS FROM FINANCING ACTIVITIES
        Increase / (Decrease) in Notes Payable                                         (589)                461
        Increase / (Decrease) in Line of Credit                                        (405)                 --
        Increase / (Decrease) in Deferred Taxes                                         (32)
        Repurchase of ESOP Shares                                                      (994)                 --
        Proceeds from Sale of Common Stock, Net                                       1,078               8,891
                                                                                   --------            --------

      Net Cash Used by Financing Activities                                            (942)              9,352

      Net Increase / (Decrease) in Cash                                              (5,035)              7,497

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

CASH AT THE END OF THE PERIOD                                                      $ 27,311            $  7,685
                                                                                   ========            ========

        Supplemental Disclosures of Cash Flow Information:
        Net cash paid during the year for:
             Interest                                                              $    144            $     --
             Income Taxes                                                          $     --            $     --

        Supplemental Non-Cash Investing Activities - See Note 3 & 4
        Licenses and Investments                                                   $  2,428            $     --

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       6

<PAGE>



NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:

      Eagle Wireless International, Inc., (the Company), incorporated as a Texas
      corporation on May 24, 1993 and commenced business in April of 1996. The
      Company is a worldwide supplier of broadband products and services,
      providing telecommunications equipment with related software, broadband
      products, and fiber and cable as used by service providers in the paging
      and other wireless personal communications markets. The Company designs,
      manufactures, markets and services its products under the Eagle and
      BroadbandMagic.com, Inc. names. These products include transmitters,
      receivers, controllers, software, convergent set-top boxes, fiber, cable,
      and other equipment used in commercial and personal communications systems
      and radio and telephone systems. Additionally the Company provides cable
      television, telephone, security, internet connectivity and related
      services under a bundled digital services package, commonly known as
      "BDS", through single source billing.

A)    Consolidation

      At February 28, 2001 the Company has four wholly owned subsidiaries:
      AtlanticPacific Communications, Inc., eToolz, Inc., BroadbandMagic.com,
      Inc., ClearWorks.Net, Inc. and its subsidiaries, (ClearWorks
      Communication, Inc., ClearWorks Structured Wiring Services, Inc.,
      ClearWorks Integration Services, Inc., United Computing Group and Link-Two
      Communications, Inc.). The consolidated financial statements include the
      accounts of the Company and its subsidiaries. All significant
      inter-company transactions and balances have been eliminated in
      consolidation.

B)    Cash and Cash Equivalents

      The Company has $27,311 and $32,346, in thousands, invested in interest
      bearing accounts and marketable securities (Note 9) at February 28, 2001
      and August 31, 2000, respectively.

C)    Property and Equipment

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


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


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

D)    Inventories

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

                                     February 28,       August 31,
                                         2001             2000
                                    -------------     ------------
             Raw Materials          $       5,603     $      2,823
             Work in Process                1,000            2,933
             Finished Goods                 1,283              ---
                                    -------------     ------------
                                    $       7,913     $      5,756
                                    =============     ============

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., 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.


                                       7
<PAGE>

      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.

      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.

F)    Research and Development Costs

      For the months ended February 28, 2001, the Company commenced 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 $687,000 were expensed for the six months ended
      February 28, 2001.

      Prior to Fiscal 2000, the Company's research and development costs
      included obligations to perform contractual services for outside parties.
      These costs were expensed as contract revenues were earned. Research and
      development costs of $256,000 were expensed for the six months ended
      February 29, 2000. Contract revenues earned for the months ended February
      28, 2001 and 2000 were $0. No research and development services were
      performed for outside parties for the months ended February 28, 2001.

G)    Income Taxes

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


                                       8
<PAGE>


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:

<TABLE>
<CAPTION>
                                                     FEBRUARY 28, 2001       AUGUST 31, 2000
                                                     -----------------       ---------------
<S>                                                        <C>                    <C>
            Weighted Average Number of Common
                Shares Outstanding Including:

            Primary Common Stock Equivalents               32,156                 19,073
            Fully Dilutive Common Stock Equivalents        32,299                 22,379

</TABLE>


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 February 28, 2001 and 2000, no impairment existed.

J)    Intangible Assets

      Goodwill represents the excess of the cost of companies acquired over the
      fair value of their net assets at the dates of acquisition and is being
      amortized using the straight-line method over five (5) 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.

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 six months ended
      February 28, 2001, the Company has expensed $263,000 with $374,000
      remaining in prepaid expenses. Prior to fiscal 2000, the Company had no
      contractual arrangements, therefore all advertising related costs were
      expensed as incurred.

L)    Deferred Syndication Costs

      Deferred syndication costs consist of those expenditures incurred that are
      directly attributable to fundraising and the collection thereto. Upon
      successful collection of the funds, all deferred syndication costs are
      charged to additional paid in capital.

M)    Use of Estimates

      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent asset and liabilities at the date of the
      financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.

N)    Marketable Securities

      In May 1993, the Financial Accounting Standards Board issued Statements of
      Financial Accounting Standards No. 115, "Accounting for Certain
      Investments in Debt and Equity Securities", effective for fiscal years
      beginning after December 15, 1993. This statements considers debt
      securities that the Company has both the positive intent and ability to
      hold to maturity are carried at amortized cost. Debt securities that the
      company does not have the positive intent and ability to hold to maturity
      and all marketable equity securities are classified as available-for-sale
      or trading securities and are carried



                                       9
<PAGE>

      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 "Comprehensive Income." For the fiscal year ended August 31, 2000,
      no other comprehensive income existed.

P)    Reclassification

      The Company has reclassified certain assets costs and expenses for the six
      months ended February 28, 2001 to facilitate comparison to the six months
      ended February 29, 2000 and August 31, 2000.

Q)    Supporting Costs in Selling, General and Administrative Expenses

      Other support costs for the six months ending February 28, 2001 and
      February 29, 2000:

                                            2001            2000
                                        ------------     ----------
            Rent                        $      192       $    155
            Travel                             117            119
            Utilities                           54             37
            Professional                       317            112
            Office Supplies                     55             28
            Insurance                           21             22
            Conventions                         32             24
            Postage & Delivery                  26             22
            Taxes                               10             10
            Other                               61              3
                                        ------------     ----------
            Total                       $      884       $    532
                                        ============     ==========

NOTE 2 - ACCOUNTS RECEIVABLE:

      Accounts receivable consist of the following, in thousands:


                                        February 28,     August 31,
                                          2001              2000
                                        ----------       ---------
             Accounts Receivable        $   11,005       $  9,991
             Allowance for
             Doubtful Accounts                 532             89
                                        ----------       --------
             Net Accounts Receivable    $   10,473       $  9,902
                                        ==========       =========



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

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

<TABLE>
<CAPTION>
                                                         February 28,       August 31,
                                                            2001              2000
                                                       ---------------    --------------
<S>                                                      <C>               <C>
         Automobile                                      $     894         $      58
         Head In Facility                                    4,903                --
         Furniture & Fixtures                                  581               140
         Leasehold Improvements                                 56                24
         Hardware & Software                                 1,401                --
         Office Equipment                                      908               721
         Property, Manufacturing & Equipment                 6,016             1,760
                                                         ---------         ---------

         Total Property, Plant & Equipment               $  14,759         $   2,703
         Less:  Accumulated Depreciation                    (1,268)           (1,023)
                                                         ---------         ---------
         Net Property, Plant & Equipment                 $  13,491         $   1,680
                                                         =========         =========

      Components of intangible assets are as follows, in thousands:

                                                         February 28,       August 31,
                                                            2001              2000
                                                       ---------------    --------------

         Goodwill                                        $   5,966         $   5,966
         Contract Rights                                    74,513                --
         Licenses and Permits                               26,188               171
                                                         ---------         ---------

         Total Intangible Assets                         $ 106,667         $   6,137
         Less:  Accumulated Amortization                      (689)             (194)
                                                         ---------         ---------
         Net Intangible Assets                           $ 150,978         $   5,943
                                                         =========         =========
</TABLE>


                                       10
<PAGE>

NOTE 4 - BUSINESS COMBINATIONS:

      On February 1, 2001, the Company completed the purchase of ClearWorks.Net,
      Inc. and its subsidiaries, ClearWorks Communication, Inc., ClearWorks
      Structured Wiring Services, Inc., ClearWorks Integration Services, Inc.,
      United Computing Group, Link-Two Communications, Inc. and LD Connect, Inc.
      (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, 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


                                       11

<PAGE>

      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.

      The following unaudited pro forma combined condensed financial statement
      has been prepared to give effect to the acquisition of ClearWorks. The
      acquisition of ClearWorks has been accounted for using the purchase method
      of accounting pursuant to APB 16, the effects of which are reflected in
      the accompanying pro forma financial statement.

      Unaudited pro forma combined condensed financial information is presented
      for illustrative purposes only and is not necessarily indicative of the
      financial position or result of operations that would have actually been
      reported had the merger occurred at the beginning of the period presented,
      nor is it necessarily indicative of future financial position or results
      of operations. The unaudited pro forma combined condensed financial
      statement is based upon the respective historical consolidated financial
      statements of Eagle and ClearWorks and notes thereto. The unaudited pro
      forma combined condensed financial statement does not incorporate, nor
      does it assume any benefits from cost savings or synergies of operations
      of the combined company. This transaction is reflected in the Eagle
      Wireless International, Inc. balance sheet at February 28, 2001, and
      accordingly any reference to balance sheet information is included in the
      form accompanying financial information.

      The following summarized pro forma (unaudited) information assumes the
      transactions related to ClearWorks.net, Inc. and subsidiaries had occurred
      September 1, 2000 and September 1, 1999.



        For the six months ended February 28, 2001 and February 29, 2000
                           Income Statement Pro Forma
                                 (IN THOUSANDS)



                                           6 Months Ended       6 Months Ended
                                          February 28, 2001   February 29, 2000

            Revenue                            $ 25,628            $  8,055
            Net Income / (Loss)1               $(10,147)           $ (6,038)

            Basic EPS                          $  (0.19)           $  (0.14)
            Diluted EPS                        $  (0.19)           $  (0.14)

            Basic Shares                         53,711              43,665
            Diluted Shares                       53,711              43,665


      The following summarized pro forma (unaudited) information assumes the
      transactions related to ClearWorks.net, Inc. and subsidiaries had occurred
      December 1, 2000 and December 1, 1999.

       For the three months ended February 28, 2001 and February 29, 2000
                           Income Statement Pro Forma
                                 (IN THOUSANDS)


                                         3 Months Ended         3 Months Ended
                                        February 28, 2001     February 29, 2000

            Revenue                        $  9,312                $  6,641
            Net Income / (Loss)1           $ (7,580)               $ (3,743)

            Basic EPS                      $  (0.14)               $  (0.08)
            Diluted EPS                    $  (0.14)               $  (0.08)

            Basic Shares                     53,811                  44,516
            Diluted Shares                   53,811                  44,516


      (1)Pro forma adjustment to record respective amortization of the
         intangible assets as if the acquisition consummated at the beginning
         fiscal year 2000 and 1999.


                                       12
<PAGE>

NOTE 5 - NOTES PAYABLE:

      The following table lists the Company's note obligations as of February
      28, 2001 and August 31, 2000, in thousands:

<TABLE>
<CAPTION>
                                                Annual                                           Amount
                                               Interest                             February 28,         August 31,
                                                 Rate                Due Date           2001               2000
                                           ----------------      ----------------  --------------      ------------
<S>                                                                                  <C>                <C>
            Vehicles                            Various               Various        $     106          $     --
            6% Convertible Debenture
            (Note8)                             6.0%                  Demand             2,000                --
            Hou-Tex                             10.0%                 Demand               500                --
            Other                               Various               Various              193                42
                                                                                     ---------          --------

            Total notes payable                                                      $   2,799$               42
            Less current portion                                                        (2,720)              (42)
                                                                                     ---------          --------

            Total long-term debt                                                     $      79          $     --
                                                                                     =========          ========

</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 February 28, 2001
      for each of the next five years and in the aggregate are, in thousands:

            Period Ended                               Amount
                                                      --------
               2002                                   $    70
               2003                                        34
               2004                                        13
                                                      -------

            Total minimum lease payment               $   117
                                                      -------
            Less: Amount representing interest             14
                                                      -------
            Present value of net
            minimum lease payments                    $   103
                                                      =======

NOTE 7 - LINE OF CREDIT:

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

      The Company, through its subsidiary United Computing Group (UCG),
      maintains a $3,000,000 line of credit with IBM Credit Corporation (IBM)
      bearing a variable rate of interest. At February 28, 2001, a balance of
      $661,433 existed. Payments are due every ten (10) days. Subsequent to
      February 28, 2001, the credit line has been increased to $6,000,000. As
      part of the agreement, UCG must maintain annual revenues of greater than
      zero and equal to or less than 40.0 : 1.0; a ratio of net profit after tax
      to revenues equal to or greater than 1.25 percent; and a ratio of total
      liabilities to tangible net worth greater than zero and equal to or less
      than 10.0 : 1.0. Additionally, UCG must maintain a standard all-risk
      insurance policy in the amount of at least $300,000 with IBM being named
      lender loss payee.

      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



                                       13
<PAGE>

      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.

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 February
      28, 2001 all of the Company's marketable equity securities are classified
      as available-for-sale; they were acquired with the intent to dispose of
      them within the next year. For the months ended February 29, 2000, no
      marketable securities were held.

      At February 28, 2001, the securities had an original basis of $1,376,824;
      determined by multiplying the number of shares being acquired by the fair
      market value of those shares. At the February 28, 2001 balance sheet date,
      the fair market value of these securities was $2,566,151; determined by
      multiplying the number of shares held by the fair market value of those
      shares at the balance sheet date. The difference between the cost and fair
      market value represents an unrealized holding gain and is included below
      current earnings in "Comprehensive Income".

              Security Name                Cost Basis        Current FMV
           ----------------------     ------------------   ----------------
           Citicorp                    $    49,900          $    49,063
           CMC Security                     16,660               16,979
           Countrywide                      17,348               17,820
           CWMBS                            44,655               45,490
           FHLMC                           205,814              209,549
           FHLMG                            26,723               26,305
           FNMA                             11,677               12,082
           Fannie Mae                       31,810               32,286
           FNMA Gtd.                       162,558              164,687
           GE Capital                       15,559               15,732
           GNMA                             88,736               87,957
           Headlands                        41,732               42,624
           Norwest                          12,717               12,935
           Prudential                       32,260               32,641
           Westam                           18,674               19,125
                                       ------------        -------------
           Totals                      $   776,823         $    785,275
                                       ============        =============



                                       14


<PAGE>

      Other marketable securities, Urbana and Busrt.com, with a cost basis of
      $600,000 and fair market value of $1,780,875 are included in non-current
      investment category and are not currently held for resale.

NOTE 10 - INCOME TAXES:

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

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

                                                        AUGUST 31,
                                                        ----------
                                                    2000         1999
                                                    ----         ----
                                                      %            %
            U.S. Federal Statutory Tax Rate          34           34
            U.S. Valuation Difference                (1)           1
                                                    ---          ---
            Effective U.S. Tax Rate                  33           35
            Foreign Tax Valuation                     0            0
                                                    ---          ---
            Effective Tax Rate                       33           35
                                                    ===          ===


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

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

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

            Deferred Tax Liability:

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

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

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

NOTE 11 - ISSUANCE OF COMMON STOCK:

      During the three months ended February 28, 2001, the Company issued shares
      of common stock. The following table summarizes the shares of common stock
      issued, in thousands.


         Shares Outstanding November 30, 2000                     26,317

         Shares issued for Employee Stock Option Plan                 96
         Shares issued for Acquisition                            35,287
         Shares retired from Employee Stock Option Plan             (347)

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



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. 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 February 28, 2001, 410,474 options have been
      granted pursuant to such plan with 72,499 being exercised and 10,350 being
      cancelled.

      The Company has issued or has acquired through its acquisitions and
      outstanding the following warrants which have not yet been exercised at
      February 28, 2001:



                                       15
<PAGE>

            59,998 stock purchase warrants will be 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 February 28, 2001, none of these warrants have been registered,
            issued or exercised.

            600,000 stock purchase warrants issued to Paladin Associates
            expiring September 1, 2001. The warrants are to purchase fully paid
            and non-assessable shares of the common stock, par value $.001 per
            share at a purchase price of $1.50 per share. 166,667 warrants are
            not exercisable until and unless the shares of Common Stock trade at
            a minimum of $4.00 per share for twenty-one consecutive trading
            days. 166,667 warrants are not exercisable until and unless the
            shares of Common Stock trade at a minimum of $6.00 per share for
            twenty-one consecutive trading days. 166,666 warrants are not
            exercisable until and unless the shares of Common Stock trade at a
            minimum of $8.00 per share for twenty-one consecutive trading days.
            The shares of common stock underlying 350,000 warrants were
            registered for resale on August 3, 2000, under the Securities Act of
            1933. 100,000 incentive warrants will be made available and will
            vest at the end of October 2000 if the first objective of $4.00 is
            achieved before the end of October. As of February 28, 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 February 28, 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. As February 28, 2001, 6,234
            warrants have been exercised resulting cash proceeds of $10,910.

            25,000 stock purchase warrants issued to Synchton, Inc. expiring
            January 1, 2004. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $2.00 per share. The shares of common stock
            underlying these have not been registered as of February 28, 2001,
            under the Securities Act of 1933. As of February 28, 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 as of February 28, 2001, under the
            Securities Act of 1933. As of February 28, 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 February 28, 2001, none
            of these warrants have been exercised.

            40,000 stock purchase warrants will be issued to Rachel McClere 1998
            Trust expiring April 24, 2003. The warrants are to purchase fully
            paid and non-assessable shares of the common stock, par value $.001
            per share at a purchase price of $3.75 per share. The shares of
            common stock underlying these warrants have not been registered or
            issued, under the Securities Act of 1933. As of February 28, 2001,
            none of these warrants have been registered, issued or exercised.

            160,000 stock purchase warrants will be issued to McClere Family
            Trust expiring April 24, 2003. The warrants are to purchase fully
            paid and non-assessable shares of the common stock, par value $.001
            per share at a purchase price of $3.75 per share. The shares of
            common stock underlying these warrants have not been registered or
            issued, under the Securities Act of 1933. As of February 28, 2001,
            none of these warrants have been registered, issued or exercised.

            232,000 stock purchase warrants will be issued to Shannon D. McLeroy
            expiring April 24, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value



                                       16
<PAGE>

            $.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 February 28,
            2001, none of these warrants have been registered, issued or
            exercised.

            176,000 stock purchase warrants will be issued to Tech Technologies
            Services, LLC expiring April 24, 2003. The warrants are to purchase
            fully paid and non-assessable shares of the common stock, par value
            $.001 per share at a purchase price of $3.75 per share. The shares
            of common stock underlying these warrants have not been registered
            or issued, under the Securities Act of 1933. As of February 28,
            2001, none of these warrants have been registered, issued or
            exercised.

            328,000 stock purchase warrants will be issued to Candlelight
            Investors, LLC. Expiration of warrants is as follows: 104,000 on
            December 31, 2002, 112,000 on February 15, 2003 and the remaining
            112,000 on April 19, 2003. The warrants are to purchase fully paid
            and non-assessable shares of the common stock, par value $.001 per
            share at a purchase price of $3.95 per share. The shares of common
            stock underlying these warrants have not been registered or issued,
            under the Securities Act of 1933. As of February 28, 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 February 28, 2001,
            none of these warrants have been exercised.

            100,000 stock purchase warrants issued to National Financial
            Communications Corp. expiring June 2003. The warrants are to
            purchase fully paid and non-assessable shares of the common stock,
            par value $.001 per share at a purchase price of $7.00 per share. As
            of February 28, 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 February 28, 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 February 28, 2001, none
            of these warrants have been exercised.

            192,000 stock purchase warrants will be issued to Tech Technologies
            Services, LLC. expiring April 24, 2008. The warrants are to purchase
            fully paid and non-assessable shares of the common stock, par value
            $.001 per share at a purchase price of $7.50 per share. The shares
            of common stock underlying these warrants have not been registered
            or issued, under the Securities Act of 1933. As of February 28,
            2001, none of these warrants have been registered, issued or
            exercised.

            240,000 stock purchase warrants will be issued to Shannon D. McLeroy
            expiring April 24, 2008. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $7.50 per share. The shares of common stock
            underlying these warrants have not been registered or issued, under
            the Securities Act of 1933. As of February 28, 2001, none of these
            warrants have been registered, issued or exercised.

            168,000 stock purchase warrants will be issued to Michael T. McClere
            expiring April, 24, 2008. The warrants are to purchase fully paid
            and non-assessable shares of the common stock, par value $.001 per
            share at a purchase price of $7.50 per share. The shares of common
            stock underlying these warrants have not been registered or issued,
            under the Securities Act of 1933. As of February 28, 2001, none of
            these warrants have been registered, issued or exercised.

            40,000 stock purchase warrants will be issued to Rachel McClere 1998
            Trust expiring April 24, 2008. The warrants are to purchase fully
            paid and non-assessable shares of the common stock, par value $.001
            per share at a purchase price of $7.50 per share. The shares of
            common stock underlying these warrants have not been registered or
            issued, under the Securities Act of 1933. As of February 28, 2001,
            none of these warrants have been registered, issued or exercised.

            160,000 stock purchase warrants will be issued to McClere Family
            Trust expiring April 24, 2008. The warrants are to purchase fully
            paid and non-assessable shares of the common stock, par value



                                       17
<PAGE>

            $.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 February 28,
            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 February 28, 2001,
            none of these warrants have been exercised.

            25,000 stock purchase warrants issued to Synchton, Inc. expiring
            April 1, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $10.00 per share. The shares of common stock
            underlying these warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As February 28, 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 February 28, 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 February
            28, 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 February 28, 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 February
            28, 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 February 28, 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).

      They are summarized as follows:


                                       18

<PAGE>

<TABLE>
<CAPTION>

                 Warrants Issued                Warrants Exercisable              Warrants                    Warrants Expired
Class of           February 28,                     February 28,             Non-           Non-                February 28,
Warrants       2001            2000                2001         2000      Exercisable   Registered          2001           2000
--------  --------------------------       -------------------------     -------------------------      ------------------------
<S>          <C>                   <C>                <C>          <C>      <C>            <C>                  <C>            <C>
1.50         600,000               0                  0            0        350,000        250,000              0              0
1.55          50,000               0             25,000            0              0              0              0              0
1.75          20,000               0             13,766            0              0              0              0              0
2.00          25,000               0             25,000            0              0              0              0              0
3.00          50,000               0             50,000            0              0              0              0              0
4.50          25,000               0                  0            0              0              0              0              0
7.00         100,000               0                  0            0              0        100,000              0              0
7.49         250,000               0                  0            0              0        250,000              0              0
7.50          25,000               0             25,000            0              0              0              0              0
9.68          50,000               0             50,000            0              0              0              0              0
10.00         25,000               0             25,000            0              0              0              0              0
10.00        250,000               0                  0            0              0        250,000              0              0
12.00        250,000               0            250,000            0              0              0              0              0
14.00        350,000               0                  0            0              0        350,000              0              0
18.00        250,000               0            250,000            0              0              0              0              0
25.00        150,000               0            250,000            0              0        150,000              0              0

2.00         Expired               0   *              0            0              0              0         50,000              0
ESOP         281,474   *           0   *        127,525            0        153,949              0              0              0
ESOP         129,000         192,407             43,500       82,250         85,500              0         10,350         41,875
          --------------------------       -------------------------     -------------------------      ------------------------
           2,880,474         192,407          1,134,791       82,250        589,449      1,350,000         60,350         41,875
          ==========================       =========================     =========================      ========================
</TABLE>


AN ASTERISK (*) DENOTES WARRANTS WHICH WOULD HAVE AN ANTI-DILUTIVE EFFECT IF
CURRENTLY USED TO CALCULATE EARNINGS PER SHARE FOR THE MONTHS ENDED FEBRUARY 28,
2001 AND 2000, RESPECTIVELY.


NOTE 13 - CAPITALIZATION ACTIVITIES:

      On July 10, 2000, AtlanticPacific Communications, Inc. (a wholly-owned
      subsidiary) initiated a stock offering in accordance with Regulation D
      promulgated under the Securities Act of 1933. AtlanticPacific is offering
      units at $25,000 per unit. Each unit consists of 10,000 shares of common
      stock and 10,000 Class A warrants to purchase AtlanticPacific common stock
      at a price of $6.00 per share with one warrant being issued as a unit with
      each common share sold. AtlanticPacific will sell up to 4,000,000 shares
      of common stock and up to 4,000,000 Class A warrants; 400 units. As of
      February 28, 2001, 1,325 units have been sold totaling 132,500 shares and
      resulting in proceeds of $331,250.

NOTE 14 - RISK FACTORS:

      For the months ended February 28, 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, eighty-four 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 fourteen percent remainder have been created relatively evenly
      over the rest of the nation during the year ended February 28, 2001.
      Whereas approximately ninety-one percent of the Company's revenues and
      receivables have been created solely in the state of Texas, two percent
      have been created in the international market, and the approximate seven
      percent remainder has been created relatively evenly over the rest of the
      nation for the year ended August 31, 2000.

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

      Although the Company concentrated its efforts in the wireless
      infrastructure industry for the year ended August 31, 2000 and has since
      expanded into the fiber, cable and broadband markets for the six months
      ended February 28, 2001, it is management's belief that the Company faces
      little credit or economic risk due to the continuous growth the market is
      experiencing.

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 February 28, 2001 and 2000, respectively.

NOTE 16 - COMMITMENTS AND CONTINGENT LIABILITIES:

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

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



                                       19
<PAGE>

      For the periods ending February 28, 2001 and 2000, rental expenses of
      approximately $64,550 and $64,550, respectively, were incurred.

      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 February 28, 2001 and 2000, rental
      expense of $6,390 and $0, respectively were incurred.

      The Company's wholly owned subsidiary, AtlanticPacific, leases office
      space in Houston, Texas with Houston Industrial Partners, Ltd. This
      non-cancelable lease expires October 2001. The monthly payments through
      October 2000 are $1,420 whereat they will increase to $1,498 for the
      remaining twelve months. Additionally, AtlanticPacific is responsible for
      monthly CAM fees of approximately $450. For the periods ended February 28,
      2001 and 2000, rental expense of $4,494 and $0, respectively were
      incurred.

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

      AtlanticPacific also leases office space in Houston, Texas with WL and
      Deborah Miller in the amount of $4,500 per month. This non-cancelable
      lease expiring September 2002 maintains a five-year renewal option. Rental
      expense for the period ended February 28, 2001 and 2000 of $13,500 and $0
      were incurred.

      The Company's subsidiary, ClearWorks.Net, Inc., leases office space in
      Houston, Texas with 2000 North Loop. This non-cancelable lease expires on
      April 30, 2003. The monthly payments will increase from $3,659 to $3,785
      on May 30, 2000 and again on May 1, 2002 to $3,911 for the remaining
      twelve months. For the period ended February 28, 2001, rental expense of
      $3,785 was incurred.

      Also, ClearWorks.Net, Inc., leases office space in Phoenix, Arizona with
      Airpark Holdings. This non-cancelable lease expires on July 31, 2003. The
      monthly payments are variable. For the period ended February 28, 2001,
      rental expense of $4,706 was incurred.

      Also, ClearWorks.Net, Inc., leases office space in San Antonio, Texas with
      Wade Holdings. This is a month-to-month lease. The monthly payments are
      $2,000. For the period ended February 28, 2001, rental expense of $2,000
      was incurred.

      The Company's subsidiary, United Computing Group, leases office space in
      Houston, Texas with Techdyne, Inc. This non-cancelable lease expires on
      August 31, 2002. The monthly payments will increase from $6,000 to $6,100
      on September 1, 2000 and again on September 1, 2001 to $6,300 for the
      remaining twelve months. For the period ended February 28, 2001, rental
      expense of $6,100 was incurred.

      Also, United Computing Group, leases office space in Dallas, Texas with
      Trammell Crow. This non-cancelable lease expires on June 30, 2002. The
      monthly payments are $2,179 for the life of the contract. For the period
      ended February 28, 2001, rental expense of $2,179 was incurred.

          Future obligations under the non-cancelable lease terms are:

                   PERIOD ENDING
                    FEBRUARY 28,                     AMOUNT
                  ----------------                ------------
                       2001                        $ 254,125
                       2002                          274,565
                       2003                           76,274
                                                   ---------
                       Total                       $ 604,964
                                                   =========


      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. All
      legal proceedings are incorporated herein by reference from Company's Form
      8K, which was previously filed on April 16, 2001.

      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



                                       20
<PAGE>

      additional 35% shall vest when and if the closing price of the common
      stock at any time during the exercise period reaches $14.00 per share and
      shall be exercisable at $14.00 per share; an additional 15% shall vest at
      any time during the exercise period when the closing price of the common
      stock at any time reaches $25.00 per share and shall be exercisable at
      $25.00 per share. Additionally, Sands shall receive further compensation
      for other activities such as fund raising based upon a percent of all
      monies raised.

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

      On April 1, 2000, the Company entered a one-year agreement with Synchton,
      Inc. whereby Synchton, Inc. will provide professional business services.
      As compensation for these services, the Company will pay $10,000 per month
      as well as issue 100,000 stock purchase warrants. These warrants shall be
      issued in 25,000 increments on the first day of each quarter of the
      agreement with an exercise price equal to the closing price of the
      Company's common stock of the prior day to issuance. Additionally, these
      warrants are not exercisable until six months after issuance and expire
      three years after said issuance. Although this agreement shall
      automatically renew on an annual basis, it is terminable by the Company
      prior to the annual renewal by providing Synchton, Inc. with ninety days
      advance written notice.

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

NOTE 17 - EARNINGS PER SHARE:

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

<TABLE>
<CAPTION>
                                                                    FOR THE SIX MONTHS ENDED FEBRUARY 28, 2001
                                                                  ---------------------------------------------
                                                                     INCOME           SHARES         PER-SHARE
                                                                   (NUMERATOR      (DENOMINATOR)      AMOUNT
                                                                  -------------   ---------------   -----------
<S>                                                                  <C>               <C>            <C>
            Net Income                                               $(1,217)

            Basic EPS:
             Income available to common stockholders                  (1,217)          32,156         $0.04
                                                                                                      =====

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

            Diluted EPS:
              Income available to common stockholders
                and assumed conversions                              $(1,217)          32,299         $0.04
                                                                     =======          =======         =====


                                                                      FOR THE FISCAL YEAR ENDED AUGUST, 2000
                                                                  ---------------------------------------------
                                                                     INCOME           SHARES         PER-SHARE
                                                                   (NUMERATOR      (DENOMINATOR)      AMOUNT
                                                                  -------------   ---------------   -----------

            Net Income                                               $   193

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

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

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

      For the Months  ended  February  28, 2001 and August 31,  2000,
      anti-dilutive securities existed. (see Note 12)


                                       21
<PAGE>


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. Under this plan, as of February 28, 2001
      and 2000, 410,474 and 192,407 warrants have been issued to various
      employees. Of these outstanding warrants, - 0 - and 32,875 were exercised
      for the years ended February 28, 2001 and 2000, respectively.
      Additionally, 10,350 warrants have expired as of February 28, 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. 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

      On September 22, 2000, the Company's board of directors authorized a stock
      repurchase program whereby the Company may repurchase up to 1,000,000
      shares of its outstanding common stock. These shares will be repurchased
      periodically in the open market or in negotiated transactions and be held
      for issuance in connection with the Company's ESOP and other employee
      plans. As of February 28, 2001, 438,800 shares of the Company's common
      stock have been repurchased for a total price of $1,165,357.

NOTE 19 - RETIREMENT PLANS:

      During October 1997, the Company initiated a 401(k) plan for its
      employees, which is funded through the contributions of its participants.
      This plan maintains that the Company will match up to 3% of each
      participant's contribution. For the months ended February 28, 2001 and
      2000, employee contributions were approximately $42,920 and $44,802,
      respectively. The Company matched approximately $14,277 and $28,634,
      respectively for those same periods.

NOTE 20 - MAJOR CUSTOMER:

      The Company had gross revenues of $4,797,000 and $1,247,000 for the three
      months ended February 28, 2001 and 2000, respectively. The following
      parties individually represent a greater than ten percent of these
      revenues.

<TABLE>
<CAPTION>
                                       FEBRUARY 28, 2001                FEBRUARY 29, 2000
           CUSTOMER                 AMOUNT      PERCENTAGE           AMOUNT      PERCENTAGE
           --------               ------------------------           -----------------------
<S>                               <C>              <C>               <C>   <C>       <C>
           Enron                  $  866,000       18.1%             $   - 0 -       0.0 %

           Sprint PC              $  638,000       13.3%             $   - 0 -       0.0 %

</TABLE>

NOTE 21 - INDUSTRY SEGMENTS:

      The Company has adopted the provisions of SFAS No. 131, "Disclosures about
      Segments of an Enterprise and Related Information". At February 28, 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).


                                       22

<PAGE>

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

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

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

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

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


                     For six months ended February 28, 2001
                                 (In Thousands)

<TABLE>
<CAPTION>

                           Eagle / Elim.  APC / SW     COMM        HSI     UCG / INT      Link II      .Net   Consolidated
                          ------------------------------------------------------------------------------------------------
<S>                            <C>         <C>         <C>        <C>       <C>             <C>                   <C>
Revenue                        1,012       2,904       71 *       246 *     2,426 *         4 *          --       6,663
Segment Profit / (Loss)         (593)        210       (133)       (134)        (29)       (180)       (358)     (1,217)
Total Assets                 145,875       2,788      4,923         981       5,541       5,312         888     166,308
Capital Expenditures              26          10        229          --          10           2          --         277
Dep. And Amort                   658          17         20           2           8          20          15         740

</TABLE>

                     For six months ended February 29, 2000
                                 (In Thousands)


<TABLE>
<CAPTION>

                           Eagle / Elim.   APC / SW     COMM         HSI      UCG / INT    Link II      .Net   Consolidated
                          -------------------------------------------------------------------------------------------------
<S>                              <C>         <C>                                                                  <C>
Revenue                          911         992         --          --          --          --          --       1,903
Segment Profit / (Loss)          158          65         --          --          --          --          --         223
Total Assets                  23,918       1,391         --          --          --          --          --      25,309
Capital Expenditures             664          --         --          --          --          --          --         664
Dep. And Amort                   344          --         --          --          --          --          --         344

</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 that these revenues were only reported for a period of 28 days for
      the purpose of this consolidation.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS

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

      OVERVIEW

      During the three months ended February 28, 2001, the Company's primary
      operations were concentrated in the completion of the merger with
      ClearWorks.Net, Inc., finalization of long-term set-top box sales
      agreements, marketing of wireless infrastructure, cabling, multi-media
      devices, high definition television products and sale of bundle digital
      services (BDS). The new combined company commenced a marketing program to
      significantly increased sales of commercial and residential bundled
      digital services, cabling to various educational institutions, financing
      of the expansion of Clearworks.Net broadband infrastructure in Texas and
      Arizona.


                                       23
<PAGE>

      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.

      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 six months ended February 28, 2001, Eagle accounts receivables
      increased to $10,473,000 from $9,902,000 at August 31, 2000. The majority
      of this increase is due to additional revenues and related receivables
      from the merged companies.


                                       24
<PAGE>

      RECENT ACQUISITIONS; GOODWILL

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

      MARKETABLE SECURITIES

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

      During the three months ended February 28, 2001, the Company acquired
      1,500,000 common stock shares of Burst.com and 750,000 common stock shares
      of Urbana, Inc. with a cost of $500,000 and $100,000, respectively.

      INVENTORY

      Inventories are valued at the lower of cost or market. The cost is
      determined by using the first-in first-out method. At February 28, 2001,
      Eagle's inventory total of $7,913,000 as compared to $5,756,000 at August
      31, 2000. The additional inventory is primarily attributable to the
      set-top boxes and cabling.

      RESULTS OF OPERATIONS

      THREE MONTHS ENDED  FEBRUARY 28, 2001  COMPARED TO THREE MONTHS
      ENDED FEBRUARY 29, 2000

      NET SALES. For the three months ended February 28, 2001, net sales
      increased to $4,797,000 from $1,247,000 during the three months ended
      February 29, 2000. The increase was primarily attributable to added sales
      from Atlanticpacific and ClearWorks companies (Home Systems,
      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. Only twenty-eight
      days of sales from ClearWorks, UCG, Link Two were reported due to timing
      considerations.

      COST OF GOODS SOLD. For the three months ended February 28, 2001, cost of
      goods sold increased to $3,652,000 from $519,000 during the three months
      ended February 29, 2000. This is primarily associated with the cable and
      fiber products. Although the cost of sales increased, the Company's gross
      profit percentage for products sold decreased to 24% from 58% during the
      three months ended February 29, 2000.

      OPERATING EXPENSES. For the three months ended February 28, 2001,
      operating expenses increased to $2,807,000 from $682,000 during the three
      months ended February 29, 2000. The primary portions of the increase are
      discussed below:

      A $1,226,000 increase in salaries, as a result of its acquisitions and
      expanded business. A $107,000 increase in advertising and promotion, due
      primarily to increased attendance at conventions and trade shows on a
      worldwide basis.

      A $290,000 increase in depreciation and amortization, due to an increase
      in amortization of goodwill and purchase of additional assets.

      A $438,000 increase in other support costs, due to an increase in rents,
      travel, utilities and communication costs.

      NET EARNINGS. For the three months ended February 28, 2001, Eagle's net
      loss was $1,280,000, compared to net earnings of $155,000 during the three
      months ended February 29,2000.

      CHANGES IN CASH FLOW. Eagle's operating activities provided net cash of
      $9,138,000 in the six months ended February 28, 2001, compared to $959,000
      used in the six months ended February 29, 2000. The increase in net cash
      provided by operating activities was primarily attributable to decrease in
      receivables and inventory. Eagle's investing activities used net cash of
      $13,231,000 in the six months ended February 28, 2001, compared to
      $896,000 in the six months ended February 29, 2000. The increase was due
      primarily to investment activities and purchase of equipment and the cash
      portion of the ClearWorks.Net acquisition. Eagle's financing activities
      used cash of $942,000, in the six months ended February 28, 2001, compared
      to $9,352,000 provided in the six months ended February 29, 2000. The
      decrease was primarily the result of the retirement of the ESOP Plan.



                                       25
<PAGE>

      LIQUIDITY AND CAPITAL RESOURCES.

      Current assets for the period ended February 28, 2001 totaled $46,622,000
      as compared to $13,430,000 reported for the period ended February 29,
      2000. Of this amount, $27,311,000 consisted of cash. Eagle believes that
      its working capital of $28,019,000 as of February 28, 2001 should be
      sufficient to fund operations through the end of the fiscal year 2001.
      Historically, Eagle has financed its operations through the sale of debt
      and equity securities. As such, if its current cash is insufficient to
      fund its long-term capital needs, Eagle will rely on future best-efforts
      financings for capital. 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 February 28, 2001, Eagle had no material capital
      commitments other than its federal income and state franchise tax
      liabilities.

PART 2. - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

      The Company is subject to legal proceedings and claims that arise in the
      ordinary course of business. The Company's management does not expect that
      the results in any of these legal proceedings will have a material adverse
      effect on the Company's financial condition or results of operations. All
      legal proceedings are incorporated herein by reference from Company's Form
      8K, which was previously filed on April 16, 2001.

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


      In January 2001, Eagle issued 35,287,000 common shares, which were
      registered in an S-4 filing with Securities and Exchange Commission. This
      issuance was in conjunction with the merger.

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

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

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
         None

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         Approval of the issuance of ClearWorks.Net, Inc. shares.

ITEM 5 - OTHER INFORMATION
         None

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


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


                                       26

<PAGE>

SIGNATURES

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




                              EAGLE WIRELESS INTERNATIONAL, INC.


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

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


                                       27