<Page>

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

                                   -----------

                                  FORM 10-QSB/A

                                   -----------

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 31, 2001

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

                        COMMISSION FILE NUMBER: 000-23163

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

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

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

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

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

Indicate by check mark whether the registrant (I) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (ii) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]

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

As of November 1, 2001, there were 59,210,971 shares of common stock
outstanding

<Page>



               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                                      INDEX
<Table>
<Caption>
PART 1 - FINANCIAL INFORMATION                                                                    PAGE
<S>                                                                                               <C>
         Item 1.  Consolidated Financial Statements (Unaudited)

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

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

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

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

                  Notes to the Consolidated Financial Statements                                  7-26

         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                            26-29

PART 2 - OTHER INFORMATION

         Item 1.  Legal Proceedings                                                               29

         Item 2.  Recent Sales of Unregistered Securities or Changes
                  in Securities and Use of Proceeds.                                              29

         Item 3.  Defaults Upon Senior Securities                                                 29

         Item 4.  Submission of Matters to a Vote of Security Holders                             29

         Item 5.  Other Information                                                               29

         Item 6.  Exhibits and Reports on Form 8-K                                                29

SIGNATURES                                                                                        30
</Table>


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

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

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

OTHER ASSETS:
     Deferred Syndication (Note 1)                                                 ---               270
     Other Intangibles (Notes 1, 3 & 4)                                        106,667             6,137
     Less:  Accumulated Amortization                                            (1,653)             (194)
     Other Assets, principally security deposits                                   124                57
                                                                         -------------    --------------
         TOTAL OTHER ASSETS                                                    105,138             6,270
                                                                         -------------    --------------

TOTAL ASSETS                                                             $     171,816    $       57,641
                                                                         =============    ==============
                                   LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts Payable                                                    $       3,988    $        2,007
     Accrued Expenses                                                            4,115               308
     Notes Payable (Notes 5 & 8)                                                 5,214                42
     Line of Credit (Note 7)                                                     1,813               266
     Capital Lease Obligations (Note 6)                                             70                59
     Federal Income Taxes Payable (Notes 1 & 10)                                   734               736
     Other Payables                                                              3,150                57
     Sales Taxes Payable                                                           462                17
     Deferred Taxes (Note 10)                                                      ---                15
                                                                         -------------    --------------
         TOTAL CURRENT LIABILITIES                                              19,546             3,507

LONG-TERM LIABILITIES:
     Capital Lease Obligations
       (net of current maturities) (Note 6)                                         46                41
     Deferred Taxes (Note 10)                                                      ---                32
     Long-Term Debt                                                              2,038               ---
                                                                         -------------    --------------
         TOTAL LONG-TERM LIABILITIES                                             2,084                73

COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 17)

SHAREHOLDERS' EQUITY:
     Preferred Stock  -  $.001 par value
         Authorized  5,000,000 shares
         Issued  -0- shares                                                        ---               ---
     Common Stock  -  $.001 par value
         Authorized  100,000,000 shares
         Issued and Outstanding at May 31, 2001,
         and August 31, 2000
         55,988,000 and 25,609,263, respectively                                    56                26
     Paid in Capital                                                           151,182            52,160
     Unrealized Gain on marketable securities                                        7               ---
     Retained Earnings                                                          (1,059)            1,875
                                                                         -------------    --------------
         TOTAL SHAREHOLDERS' EQUITY                                            150,186            54,061
                                                                         -------------    --------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                               $     171,816    $       57,641
                                                                         =============    ==============

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</Table>

                                        3

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

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

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

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

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

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

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

Provisions for income taxes                                        ---              114               ---               214
                                                    ------------------- ---------------- ----------------- -----------------
Net earnings (loss)                                             (1,715)             220            (2,934)              444
Other comprehensive income, net of tax
Unrealized holding gain / (loss)                                (1,182)                                 7
                                                    ------------------- ---------------- ----------------- -----------------
Other comprehensive income / (loss)                        $    (2,897)         $   220         $  (2,927)          $   444
                                                    =================== ================ ================= =================
Net earnings (loss) per common share:
Basic                                                           $(0.03)           $0.01            $(0.07)            $0.02
Diluted                                                         $(0.03)           $0.01            $(0.07)            $0.02

Comprehensive income - (loss)                                   $(0.04)           $0.01            $(0.04)            $0.02
</Table>


                                        4
<Page>
                          EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                             (IN THOUSANDS)
<Table>
<Caption>
                                                                                  ADDITIONAL                     TOTAL
         AUGUST 31, 2000                COMMON STOCK             PREFERRED         PAID IN       RETAINED    SHAREHOLDERS'
         TO MAY 31, 2001                SHARES     VALUE           STOCK           CAPITAL       EARNINGS       EQUITY
---------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>        <C>            <C>              <C>             <C>         <C>
Total Shareholders' Equity
   As of August 31, 1999              13,480     $    13        $     ---        $     7,181     $  1,700     $    8,894

Net Earnings 2000                                                                                     193            193

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

Syndication Costs                                                                       (653)                       (653)

Unrealized Holding Loss                                                                               (18)           (18)
                                    --------     -------        ---------          ---------    ---------     ----------
Total Shareholders' Equity
   As of August 31, 2000              25,609          26              ---             52,160        1,875         54,060
                                    --------     -------        ---------          ---------    ---------      ---------
Net Earnings for Nine Months
    Ended May 31, 2001                                                                             (2,934)        (2,934)
New Stock Issued to Shareholders
    For Services and Compensation
       (Note 8)                           75           1                               6,051                       6,052
    For Warrants Conversion              645                                           1,078                       1,078
    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                                                                                 7              7
                                     -------     -------        ---------        -----------     --------       --------
Total as of May 31, 2001              55,988     $    56        $     ---        $   151,182     $ (1,052)      $150,186
                                    ========     =======        =========        ===========     ========       ========
</Table>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                        5
<Page>

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

     Adjustments to Reconcile Net Earnings to Net Cash
      Used by Operating Activities:
       Stock for Services Rendered                                            3,325            1,054
       Depreciation and Amortization                                          2,087              377

       Changes in Assets and Liabilities, Net of Effect from Purchase
       of ClearWorks.Net
       (Increase) / Decrease in Accounts Receivable                           4,672           (1,656)
       (Increase) / Decrease in Inventories                                   1,142           (3,453)
       (Increase) / Decrease in Prepaid Expenses                               (172)              49
       Increase / (Decrease) in Accounts Payable and Accrued Expense         (3,035)           1,085
                                                                          ---------         --------

       Total Adjustments                                                      8,019           (2,544)
                                                                          ---------         --------

     Net Cash Used by Operating Activities                                    5,085           (2,100)

CASH FLOWS FROM INVESTING ACTIVITIES
       Purchase of Property and Equipment                                    (6,161)          (1,094)
       Purchase of ClearWorks.Net, Net of Cash Acquired                      (7,654)             ---

       (Increase) / Decrease in Other Intangible Assets                         (10)             ---
        (Increase) / Decrease in Other Assets                                    12              (96)
                                                                          ----------        --------

     Net Cash Used by Investing Activities                                  (13,813)          (1,190)

CASH FLOWS FROM FINANCING ACTIVITIES
       Increase / (Decrease) in Notes Payable, Net                            3,864              333
       Increase / (Decrease) in Capital Leases                                   16               44
       Increase / (Decrease) in Line of Credit                                  197              ---
       Increase / (Decrease) in Deferred Taxes                                  (32)             ---
       Repurchase of ESOP Shares                                               (994)             ---
       Increase / (Decrease) in Shareholders' Advances                          ---             (695)
       Proceeds from Sale of Common Stock, Net                                1,078           30,078
                                                                          ----------        --------

     Net Cash Provided by Financing Activities                                4,129           29,760

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

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

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

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

       SUPPLEMENTAL NON-CASH INVESTING ACTIVITIES - SEE NOTE 4.
       Licenses and Investments                                           $   2,428         $    ---
       Property, Plant & Equipment                                        $   2,919         $    ---

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</Table>

                                        6
<Page>

              EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                NOVEMBER 30, 2000

NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:

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

A)       Consolidation

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

B)       Cash and Cash Equivalents

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

C)       Property and Equipment

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

         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:
<Table>
<Caption>
                                                                     May 31
                                                           2001                      2000
-----------------------------------------------------------------------------------------
<S>                                                   <C>                        <C>
                           Raw Materials                 $7,477                    $5,302
                           Work in Process                2,177                       508
                           Finished Goods                   356                         0
                                                      ---------                  --------
                                                        $10,010                    $5,810
                                                      =========                  ========
</Table>

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 ninety days. Upon the end of
         the pre-sale test period, the customer either returns the product or
         accepts the product, at which time the Company recognizes the revenue.

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

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

G)       Income Taxes

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


                                        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>
                                                                            May 31, 2001         May 31, 2000
                                                                       -----------------         ------------
<S>                                                                    <C>                       <C>
                  Weighted Average Number of Common
                      Shares Outstanding Including:

                  Primary Common Stock Equivalents                            40,973                20,981
                  Fully Dilutive Common Stock Equivalents                     41,127                21,055
</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 May 31, 2001 and 2000, no impairment existed.

J)       Intangible Assets

         Goodwill represents the excess of the cost of companies acquired over
         the fair value of their net assets at the dates of acquisition and is
         being amortized using the straight-line method over five (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 nine months ended
         May 31, 2001 and 2000, the Company has expensed $332,000 and $115,000,
         respectively. Prior to fiscal 2000, the Company had no contractual
         arrangements, therefore all advertising related costs were expensed as
         incurred.

L)       Deferred Syndication Costs

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

M)       Use of Estimates

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

N)       Marketable Securities

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


                                        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 "Other Comprehensive Income." Prior to August 31, 2000, the
         Company did not invest in marketable securities.

P)       Reclassification

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

Q)       Supporting Costs in Selling, General and Administrative Expenses

         Other support cost for the nine ending May 31, 2001 and 2000 are as
         follows:
<Table>
<Caption>
                                                                     2001           2000
                                                                 -----------      ---------
<S>                                                        <C>               <C>
                  Rent                                     $          423    $       220
                  Travel                                              375            172
                  Utilities                                           186             91
                  Professional                                        319            167
                  Office Supplies                                     392             24
                  Insurance                                           112             69
                  Conventions                                         650             80
                  Postage & Delivery                                  142             31
                  Taxes                                                28             20
                  Other                                                10              1
                                                                 -----------       --------
                  Total                                    $        2,729     $      875
                                                                 ===========       ========
</Table>

R)       Recent Pronouncements

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

         Amortization expense related to goodwill and intangibles was
         approximately $194,000 and $1,459,000 for the fiscal year ended August
         31, 2000 and the nine months ended May 31, 2001, respectively.

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



                                        10

<Page>

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

S)       Restatement of Financial Statements

         The Company has reclassified two transactions in this amended form
         filing. The current portion of the Tail Wind debt increased to
         $3,000,000 from $1,000,000 and concurrently decreased the long-term
         portion from $4,000,000 to $2,000,000. Based on the terms of the
         agreement, Tail Wind has the right to received $250,000 in pre-payment
         until the shares regarding the convertible debt and detachable warrants
         are registered, refer to Note 8 for more information regarding this
         transaction. Goodwill and Other Intangible Assets have been combined
         and changed to reflect the acquisition of ClearWorks through contract
         rights and licenses, more information regarding this change is in Note
         4.

NOTE 2 - ACCOUNTS RECEIVABLE:

                  Accounts receivable consist of the following, in thousands:
<Table>
<Caption>
                                                                               May 31,          August 31,
                                                                                 2001                2000
                                                                           ----------          ----------
<S>                                                                        <C>                <C>
                  Accounts Receivable                                      $    11,195        $     9,991
                  Allowance for Doubtful Account                                   530                 89
                                                                           -----------        -----------
                  Net Accounts Receivable                                  $    10,665        $     9,902
                                                                           ===========        ===========
</Table>

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

         Components of property, plant & equipment are as follows, in thousands:
<Table>
<Caption>
                                                                               May 31,          August 31,
                                                                                 2001                2000
                                                                           ----------          ----------
<S>                                                                        <C>                <C>
                  Automobile                                               $       287        $        58
                  Head In Facilities                                             5,517                ---
                  Furniture & Fixtures                                             464                140
                  Leasehold Improvements                                            72                 24
                  Office Equipment                                                 786                721
                  Property, Manufacturing & Equipment                           11,227              1,760
                                                                           -----------        -----------

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

         Components of intangible assets are as follows, in thousands:
<Table>
<Caption>
                                                                               May 31,          August 31,
                                                                                 2001                2000
                                                                           ----------          ----------
<S>                                                                        <C>                <C>
                   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                                (1,653)              (194)
                                                                               ----------        -----------
                   Net Intangible Assets                                    $    105,014      $       5,943
                                                                               ==========        ===========
</Table>

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


                                        11
<Page>

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

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

         Concurrently with the closing of this acquisition the Company entered
         into a two-year agreement with the former principals of APC. These
         principals may earn up to 3,000,000 shares of common stock based on APC
         accumulated sales goals. Under the terms of the agreement, the Company
         will issue an additional 500,000 shares for $10,000,000 in accumulated
         sales, 1,000,000 shares for $30,000,000 in accumulated sales and
         1,500,000 shares for $60,000,000 in accumulated sales. These sales have
         to be achieved within a two-year period commencing January 1, 2000. In
         addition, the principals must maintain a "Gross Profit Margin" of 25%
         and an "EBITDA Profit" of 10%. These contingencies and attainment
         thereof are considered remote and, accordingly, have been excluded from
         the determination of the acquisition price.

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

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

         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 May 31, 2001, and accordingly any reference to balance
         sheet information is included in the form accompanying financial
         information.

A)       Pro Forma Results

         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.

                                        12
<Page>

           For the nine months ended May 31, 2001 and May 31, 2000
                          Income Statement Pro Forma
                                (IN THOUSANDS)
<Table>
<Caption>
                                                       9 Months Ended           9 Months Ended
                                                        May 31, 2001              May 31, 2000
<S>                                               <C>                     <C>
                           Revenue                $        35,174         $          15,422
                           Net Income /           $       (17,339)        $         (10,292)
                           (Loss)1

                           Basic EPS              $         (0.32)        $           (0.23)
                           Diluted EPS            $         (0.32)        $           (0.23)

                           Basic Shares                    54,353                    44,007
                           Diluted Shares                  54,353                    44,007
</Table>

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

           For the three months ended May 31, 2001 and May 31, 2000
                          Income Statement Pro Forma
                                (IN THOUSANDS)
<Table>
<Caption>
                                                       3 Months Ended           3 Months Ended
                                                        May 31, 2001              May 31, 2000
<S>                                               <C>                     <C>
                              Revenue               $        11,357          $          7,368
                              Net Income /          $        (4,972)         $         (4,255)
                              (Loss)1

                              Basic EPS             $         (0.09)         $          (0.09)
                              Diluted EPS           $         (0.09)         $          (0.09)

                              Basic Shares                   55,678                    45,671
                              Diluted Shares                 55,678                    45,671
</Table>

         (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.

NOTE 5 - NOTES PAYABLE:

         The following table lists the Company's note obligations as of May 31,
2001 and 2000, in thousands:
<Table>
<Caption>
                                                      Annual
                                                     Interest                               Amount
                                                       Rate          Due Date           2001          2000
                                                 ------------------------------------------------------------
<S>                                              <C>                 <C>          <C>              <C>
                 Vehicles                             Various        Various      $       142    $      ---
                 6% Convertible Debenture (Note8)     6.0%           Demand             2,000           ---
                 Tailwind Convertible Debenture       2.0%           May 2003           5,000
                 Other                                Various        Various              110           350
                                                                                     --------     ---------
                 Total notes payable                                              $     7,252    $      350
                 Less current portion                                                  (5,214)         (350)
                                                                                     --------     ---------
                 Total long-term debt                                             $     2,038    $      ---
                                                                                     ========     =========
</Table>

NOTE 6 - CAPITAL LEASE OBLIGATIONS:

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

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

                                        13
<Page>

         are, in thousands:
<Table>
<Caption>
                 Period Ended                                            Amount
                                                                       ------------

<S>                                                                    <C>
                     2002                                              $       83
                     2003                                                      34
                     2004                                                      12
                                                                       ------------

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

NOTE 7 - LINE OF CREDIT:

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

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

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

NOTE 8 - CONVERTIBLE DEBENTURES:

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

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

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

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

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

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


                                        14
<Page>

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

         During 2001, the Company merged with ClearWorks.net, Inc., and as a
         result, ClearWorks is a wholly owned subsidiary of Eagle. Link Two
         Communications, Inc. is a subsidiary of ClearWorks, and as a result of
         the merger, is now a secondary subsidiary of Eagle. Link Two entered an
         agreement with The Tail Wind Fund Ltd., under which Tail Wind purchased
         from Link Two a 2% convertible note in the initial amount of $5,000,000
         (the "First Note"), and Link Two has the ability to require Tail Wind
         to purchase additional convertible notes in the amount of $4,000,000
         (the "Second Note") and $3,000,000 (the "Third Note"). The conversion
         terms of the convertible debentures become effective after ninety days
         of the initial closing date. The maturity of the convertible note is
         August 15, 2002. Link Two may require Tail Wind to purchase the Second
         Note if: (a) the price of Eagle's common stock is above $5.00 per share
         for 20 consecutive trading days during calendar 2001, (b) Eagle has
         more than $10,000,000 in cash less payments for capital leases that
         will become due within the next two years, (c) the registration
         statement, registers the conversion shares are current and effective,
         (d) Eagle does reflect a net loss of more than $4,000,000 during any
         quarter, and (e) no material adverse event has occurred. Link Two may
         require Tail Wind to purchase the Third Note if the price of Eagle's
         common stock is above $8.00 per share for 20 consecutive trading days
         during calendar 2001, and the conditions set forth in (b) through (e)
         of the preceding sentence are satisfied. In conjunction with the
         issuance of the First Note, Link Two issued Tail Wind a warrant, and if
         Link Two chooses to issue the Second and Third Notes, it will issue
         Tail Wind additional warrants.

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

         The Company has agreed to pre-pay the notes at the rate of a minimum of
         $250,000 per month and a maximum of $500,000 per month. The pre-payment
         may be in cash or in shares of our common stock at the rate of 90% of
         the average of the two lowest market prices of our common stock for the
         applicable month. However, the Company may not issue shares of our
         common stock for pre-payment purposes if the total number of shares
         exceeds the aggregate trading volume of our common stock for the twelve
         trading days preceding the date of payment, in which case we must pay
         the difference in cash. As the number of shares to be issued for
         pre-payment purposes is dependent on the price and trading volume of
         our common stock, there is no way to determine the number of shares
         that may be issued at this time. Eagle has filed a registration
         statement for the potential conversion shares for the note and warrants
         exercise, this registration statement is not effective as of this date.
         Subsequent to May 31, 2001, the Company has paid to Tail Wind $750,000
         towards the reduction of debt. Until the registration statement is
         effective, the Company will continue to pay each month $250,000 towards
         this debt reduction. The current financial statements have recorded as
         current and long-term maturities for this debt, $3,000,000 and
         $2,000,000, respectively.

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

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

                                        15
<Page>

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
         May31, 2001 all of the Company's marketable equity securities are
         classified as available-for-sale; they were acquired with the intent to
         dispose of them within the next year. For the nine months ended May 31,
         2000, no marketable securities were held.

         At May 31, 2001 the securities had an original basis of $1,033,545;
         determined by multiplying the number of shares acquired by the fair
         market value of those shares. At the May 31, 2001 balance sheet date,
         the fair market value of these securities was $1,033,842; determined by
         multiplying the number of shares held by the fair market value of those
         shares at the balance sheet date. The difference between the cost and
         fair market value represents an unrealized holding gain and is included
         below current earnings in "Other Comprehensive Income".
<Table>
<Caption>
               Security Name             Shares               Cost Basis            Current FMV
<S>                                     <C>                   <C>                   <C>
         Bank of America                    50,000           $       49,688        $       49,500
         Bear Stearns                       55,000                   54,948                53,556
         Citicorp                          110,000                  109,500               106,213
         CMC Security                       17,000                   16,660                16,873
         Countrywide                        18,000                   16,562                16,539
         Credit Suisse                      50,000                   49,925                50,375
         CWMBS                              46,000                   41,497                42,218
         FHLMC                             422,000                  169,574               174,659
         FNMA                              840,000                  187,398               188,957
         GE Capital                         32,000                   31,142                31,233
         GNMA                              294,610                  256,015               252,179
         Norwest                            13,000                   12,717                12,825
         Prudential                         15,000                   13,596                13,903
         Res. Accredit                      25,102                    5,649                 5,639
         Westam                             20,000                   18,674                19,175
                                                             ---------------       ---------------
         Totals                                              $    1,033,544        $    1,033,842
                                                             ===============       ===============
</Table>

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

NOTE 10 - INCOME TAXES:

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

A)       The effective tax rate for the Company is reconcilable to statutory tax
         rates as follows:
<Table>
<Caption>
                                                                                  August 31,
                                                                                  ----------
                                                                                2000    1999
                                                                                ----    ----
<S>                                                                             <C>     <C>
                                                                                 %       %
                  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
                                                                                 ==       ==
</Table>


                                        16
<Page>

         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 May 31, 2001, the Company issued shares
         of common stock. The following table summarizes the shares of common
         stock issued, in thousands.
<Table>
<S>                                                                           <C>
                  Shares Outstanding February 28, 2001                                 55,976
                                                                              ----------------

                  Shares issued for Services and Compensation                              12

                                                                              ----------------
                  Shares Outstanding May 31, 2001                                      55,988
                                                                              ================
</Table>
NOTE 12 - PREFERRED STOCK, STOCK OPTIONS AND WARRANTS:

         In July 1996, the Board of Directors and majority shareholders adopted
         an employee stock option plan under which 400,000 shares of Common
         Stock have been reserved for issuance. Since that time, the Board of
         Directors have amended the July 1996, employee stock option plan under
         which 1,000,000 shares of Common Stock have been reserved for issuance.
         The options granted for under this plan are to purchase fully paid and
         non-assessable shares of the Common Stock, par value $.001 per share at
         a price equal to the underlying common stock's market price at the date
         of issuance. These options may be redeemed six months after issuance,
         expire five years from the date of issuance and contain a cash-less
         exercise feature. The underlying shares of common stock were registered
         for resale under the Securities Act of 1933 on February 19, 1999. As of
         May 31, 2001, 404,974 options have been granted pursuant to such plan
         with 72,499 being exercised and 10,350 being cancelled.

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

                  39,998 stock purchase warrants issued to Carl A. Chase.
                  Expiration of warrants is 6,666 on the ending date of each
                  month commencing on November 30, 2001 and ending on July 31,
                  2002. The warrants are to purchase fully paid and
                  non-assessable shares of the common stock, par value $.001 per
                  share at a purchase price of $0.31 per share. The shares of
                  common stock underlying these warrants have not been
                  registered or issued, under the Securities Act of 1933. As of
                  May 31, 2001, none of these warrants have been registered,
                  issued or exercised.

                  600,000 stock purchase warrants issued to Paladin Associates
                  expiring September 1, 2001. The warrants are to purchase fully
                  paid and non-assessable shares of the common stock, par value
                  $.001 per share at a purchase price of $1.50 per share.
                  166,667 warrants are not exercisable until and unless the
                  shares of Common Stock trade at a minimum of $4.00 per share
                  for twenty-one consecutive trading days. 166,667 warrants are
                  not exercisable until and unless the shares of Common Stock
                  trade at a minimum of $6.00 per share for twenty-one
                  consecutive trading days. 166,666 warrants are not exercisable
                  until and unless the shares of Common Stock trade at a minimum
                  of $8.00 per share for twenty-one consecutive trading days.
                  The shares of common stock underlying 350,000 warrants were
                  registered for resale on August 3, 2000, under the Securities
                  Act of 1933. 100,000 incentive warrants will be made available
                  and will vest at the end of October 2000 if the first
                  objective of $4.00 is achieved before the end of October. As
                  of May 31, 2001, 250,000 of the underlying shares of common
                  stock have not yet been registered for resale under the
                  Securities Act of 1933.

                  50,000 stock purchase warrants issued to Weed & Co. L.P.
                  expiring December 10, 2002. The warrants are to purchase fully
                  paid and non-assessable shares of the common stock, par value
                  $.001


                                        17
<Page>

                  per share at a purchase price of $1.55 per share. The
                  shares of common stock underlying the warrants were registered
                  for resale on August 3, 2000, under the Securities Act of
                  1933. As of May 31, 2001, 25,000 warrants have been exercised
                  resulting in cash proceeds of $38,750.

                  20,000 stock purchase warrants issued to Kason, Inc. expiring
                  October 7, 2002. The warrants are to purchase fully paid and
                  non-assessable shares of the common stock, par value $.001 per
                  share at a purchase price of $1.75 per share. The shares of
                  common stock underlying these warrants were registered for
                  resale on November 30, 2000, under the Securities Act of 1933.
                  May 31, 2001, 6,234 warrants have been exercised resulting
                  cash proceeds of $10,910.

                  25,000 stock purchase warrants issued to Synchton, Inc.
                  expiring January 1, 2004. The warrants are to purchase fully
                  paid and non-assessable shares of the common stock, par value
                  $.001 per share at a purchase price of $2.00 per share. The
                  shares of common stock underlying these have not been
                  registered as of May 31, 2001, under the Securities Act of
                  1933. As of May 31, 2001, none of these warrants have been
                  exercised.

                  41,667 stock purchase warrants issued to Peter Miles expiring
                  July 20, 2004. The warrants are to purchase fully paid and
                  non-assessable shares of the common stock, par value $.001 per
                  share at a purchase price of $2.00 per share. The shares of
                  common stock underlying these have not been registered as of
                  May 31, 2001, under the Securities Act of 1933. As of May 31,
                  2001, none of these warrants have been exercised.

                  50,000 stock purchase warrants issued to Weed & Co. L.P.
                  expiring June 10, 2002. The warrants are to purchase fully
                  paid and non-assessable shares of the common stock, par value
                  $.001 per share at a purchase price of $3.00 per share. The
                  shares of common stock underlying these warrants were
                  registered for resale on August 3, 2000, under the Securities
                  Act of 1933. As May 31, 2001, none of these warrants have been
                  exercised.

                  40,000 stock purchase warrants will be issued to Rachel
                  McClere 1998 Trust expiring April 24, 2003. The warrants are
                  to purchase fully paid and non-assessable shares of the common
                  stock, par value $.001 per share at a purchase price of $3.75
                  per share. The shares of common stock underlying these
                  warrants have not been registered or issued, under the
                  Securities Act of 1933. As of May 31, 2001, none of these
                  warrants have been registered, issued or exercised.

                  160,000 stock purchase warrants will be issued to McClere
                  Family Trust expiring April 24, 2003. The warrants are to
                  purchase fully paid and non-assessable shares of the common
                  stock, par value $.001 per share at a purchase price of $3.75
                  per share. The shares of common stock underlying these
                  warrants have not been registered or issued, under the
                  Securities Act of 1933. As May 31, 2001, none of these
                  warrants have been registered, issued or exercised.

                  232,000 stock purchase warrants will be issued to Shannon D.
                  McLeroy expiring April 24, 2003. The warrants are to purchase
                  fully paid and non-assessable shares of the common stock, par
                  value $.001 per share at a purchase price of $3.75 per share.
                  The shares of common stock underlying these warrants have not
                  been registered or issued, under the Securities Act of 1933.
                  As May 31, 2001, none of these warrants have been registered,
                  issued or exercised.

                  176,000 stock purchase warrants will be issued to Tech
                  Technologies Services, LLC expiring April 24, 2003. The
                  warrants are to purchase fully paid and non-assessable shares
                  of the common stock, par value $.001 per share at a purchase
                  price of $3.75 per share. The shares of common stock
                  underlying these warrants have not been registered or issued,
                  under the Securities Act of 1933. As of May 31, 2001, none of
                  these warrants have been registered, issued or exercised.

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

                  25,000 stock purchase warrants issued to Synchton, Inc.
                  expiring October 1, 2003. The warrants are to purchase fully
                  paid and non-assessable shares of the common stock, par value
                  $.001 per share at a purchase price of $4.50 per share. The
                  shares of common stock underlying these warrants were
                  registered for resale on August 3, 2000, under the Securities
                  Act of 1933. As of May 31, 2001, none of these warrants have
                  been exercised.

                  100,000 stock purchase warrants issued to National Financial
                  Communications Corp. expiring June


                                        18
<Page>

                  2003. The warrants are to purchase fully paid and non-
                  assessable shares of the common stock, par value $.001
                  per share at a purchase price of $7.00 per share. As of
                  May 31, 2001, the underlying shares of common stock have
                  not yet been registered for resale under the Securities
                  Act of 1933.

                  250,000 stock purchase warrants issued to Sands Brothers &
                  Co., LTD. expiring July 13, 2003. The warrants are to purchase
                  fully paid and non-assessable shares of the common stock, par
                  value $.001 per share at a purchase price of $7.49 per share.
                  As of May 31, 2001, the underlying shares of common stock have
                  not yet been registered for resale under the Securities Act of
                  1933.

                  25,000 stock purchase warrants issued to Synchton, Inc.
                  expiring July 1, 2003. The warrants are to purchase fully paid
                  and non-assessable shares of the common stock, par value $.001
                  per share at a purchase price of $7.50 per share. The shares
                  of common stock underlying these warrants were registered for
                  resale on August 3, 2000, under the Securities Act of 1933. As
                  May 31, 2001, none of these warrants have been exercised.

                  192,000 stock purchase warrants will be issued to Tech
                  Technologies Services, LLC. expiring April 24, 2008. The
                  warrants are to purchase fully paid and non-assessable shares
                  of the common stock, par value $.001 per share at a purchase
                  price of $7.50 per share. The shares of common stock
                  underlying these warrants have not been registered or issued,
                  under the Securities Act of 1933. As of May 31, 2001, none of
                  these warrants have been registered, issued or exercised.

                  240,000 stock purchase warrants will be issued to Shannon D.
                  McLeroy expiring April 24, 2008. The warrants are to purchase
                  fully paid and non-assessable shares of the common stock, par
                  value $.001 per share at a purchase price of $7.50 per share.
                  The shares of common stock underlying these warrants have not
                  been registered or issued, under the Securities Act of 1933.
                  As May 31, 2001, none of these warrants have been registered,
                  issued or exercised.

                  168,000 stock purchase warrants will be issued to Michael T.
                  McClere expiring April, 24, 2008. The warrants are to purchase
                  fully paid and non-assessable shares of the common stock, par
                  value $.001 per share at a purchase price of $7.50 per share.
                  The shares of common stock underlying these warrants have not
                  been registered or issued, under the Securities Act of 1933.
                  As May 31, 2001, none of these warrants have been registered,
                  issued or exercised.

                  40,000 stock purchase warrants will be issued to Rachel
                  McClere 1998 Trust expiring April 24, 2008. The warrants are
                  to purchase fully paid and non-assessable shares of the common
                  stock, par value $.001 per share at a purchase price of $7.50
                  per share. The shares of common stock underlying these
                  warrants have not been registered or issued, under the
                  Securities Act of 1933. As of May 31, 2001, none of these
                  warrants have been registered, issued or exercised.

                  160,000 stock purchase warrants will be issued to McClere
                  Family Trust expiring April 24, 2008. The warrants are to
                  purchase fully paid and non-assessable shares of the common
                  stock, par value $.001 per share at a purchase price of $7.50
                  per share. The shares of common stock underlying these
                  warrants have not been registered or issued, under the
                  Securities Act of 1933. As May 31, 2001, none of these
                  warrants have been registered, issued or exercised.

                  50,000 stock purchase warrants issued to Weed & Co. L.P.
                  expiring June 10, 2003. The warrants are to purchase fully
                  paid and non-assessable shares of the common stock, par value
                  $.001 per share at a purchase price of $9.68 per share. The
                  shares of common stock underlying these warrants were
                  registered for resale on August 3, 2000, under the Securities
                  Act of 1933. As of May 31, 2001, none of these warrants have
                  been exercised.

                  25,000 stock purchase warrants issued to Synchton, Inc.
                  expiring April 1, 2003. The warrants are to purchase fully
                  paid and non-assessable shares of the common stock, par value
                  $.001 per share at a purchase price of $10.00 per share. The
                  shares of common stock underlying these warrants were
                  registered for resale on August 3, 2000, under the Securities
                  Act of 1933. As May 31, 2001, none of these warrants have been
                  exercised.

                  250,000 stock purchase warrants issued to Sands Brothers &
                  Co., LTD. expiring July 13, 2003. The warrants are to purchase
                  fully paid and non-assessable shares of the common stock, par
                  value $.001 per share at a purchase price of $10.00 per share.
                  These warrants, however are not exercisable until and unless
                  the closing price of Common Stock at any time during the
                  exercise period reaches $10.00 per share. As of May 31, 2001,
                  the underlying shares of common stock have not yet been
                  registered for resale under the Securities Act of 1933.

                  250,000 stock purchase warrants issued to Hampton-Porter
                  Investment Bankers LLC expiring June 27, 2003. The warrants
                  are to purchase fully paid and non-assessable shares of the
                  common stock, par value $.001 per share at a purchase price of
                  $12.00 per share. The shares of common stock


                                        19
<Page>

                  underlying these warrants were registered for resale on August
                  3, 2000, under the Securities Act of 1933. As of May 31, 2001,
                  none of these warrants have been exercised.

                  350,000 stock purchase warrants issued to Sands Brothers &
                  Co., LTD. expiring July 13, 2003. The warrants are to purchase
                  fully paid and non-assessable shares of the common stock, par
                  value $.001 per share at a purchase price of $14.00 per share.
                  These warrants, however, are not exercisable until and unless
                  the closing price of the Common Stock at any time during the
                  exercise period reaches $14.00 per share. As of May 31, 2001,
                  the underlying shares of common stock have not yet been
                  registered for resale under the Securities Act of 1933.

                  250,000 stock purchase warrants issued to Hampton-Porter
                  Investment Bankers LLC expiring June 27, 2003. The warrants
                  are to purchase fully paid and non-assessable shares of the
                  common stock, par value $.001 per share at a purchase price of
                  $18.00 per share. The shares of common stock underlying these
                  warrants were registered for resale on August 3, 2000, under
                  the Securities Act of 1933. As of May 31, 2001, none of these
                  warrants have been exercised.

                  150,000 stock purchase warrants issued to Sands Brothers &
                  Co., LTD. expiring July 13, 2003. The warrants are to purchase
                  fully paid and non-assessable shares of the common stock, par
                  value $.001 per share at a purchase price of $25.00 per share.
                  These warrants, however, are not exercisable until and unless
                  the closing price of the Common Stock at any time during the
                  exercise period reaches $25.00 per share. As of May 31, 2001,
                  the underlying shares of common stock have not yet been
                  registered for resale under the Securities Act of 1933.

         The warrants outstanding are segregated into four categories
         (exercisable, non-exercisable, non-registered, and expired).
<Table>
<Caption>
         Warrants Issued   Warrants Exercisable      Warrants          Warrants Expired
Class of       May 31,             May 31,       Non-         Non-          May 31,
Warrants    2001    2000        2001    2000  Exercisable  Registered    2001     2000
-------- ----------------  -----------------  -----------------------  ----------------
<S>       <C>      <C>        <C>       <C>   <C>          <C>         <C>        <C>
0.31       39,998     -           39998  -        -            -           -       -
1.50      600,000     -          -       -     350,000      250,000        -       -
1.55       50,000     -        25,000.0  -        -            -           -       -
1.75       20,000     -        13,766.0  -        -            -           -       -
2.00       25,000     -        25,000.0  -        -            -           -       -
2.00       41,667     -           -      -        -            -           -       -
3.00       50,000     -        50,000.0  -        -            -           -       -
4.50       25,000     -           -      -        -            -           -       -
7.00      100,000     -           -      -        -         100,000        -       -
7.49      250,000     -           -      -        -         250,000        -       -
7.50       25,000     -        25,000.0  -        -            -           -       -
9.68       50,000     -        50,000.0  -        -            -           -       -
10.00      25,000     -        25,000.0  -        -            -           -       -
10.00     250,000     -          -       -        -         250,000        -       -
12.00     250,000     -       250,000.0  -        -            -           -       -
14.00     350,000     -          -       -        -         350,000        -       -
18.00     250,000     -       250,000.0  -        -            -           -       -
25.00     150,000     -       250,000.0  -        -         150,000        -       -
2.00      Expired     -   *      -       -        -            -         50,000    -
ESOP      216,067*  28,200*    94,400    -     215,067         -           -       -
ESOP      188,907  194,907    186,157  74,250  107,058         -         10,350  10,250
        ------------------  -----------------  -----------------------  ----------------
        2,956,639  223,107  1,284,321  74,250  672,125    1,350,000      60,350  10,250
        ==================  =================  =======================  ================
</Table>

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

NOTE 13 - CAPITALIZATION ACTIVITIES:

         On July 10, 2000, AtlanticPacific Communications, Inc. (a wholly-owned
         subsidiary) initiated a stock offering in accordance with Regulation D
         promulgated under the Securities Act of 1933. AtlanticPacific is
         offering units at $25,000 per unit. Each unit consists of 10,000 shares
         of common stock and 10,000 Class A warrants to purchase AtlanticPacific
         common stock at a price of $6.00 per share with one warrant being
         issued as a unit with each common share sold. AtlanticPacific will sell
         up to 4,000,000 shares of common stock and up to 4,000,000 Class A
         warrants; 400 units. As of May 31, 2001, 1,325 units have been sold
         totaling 132,500 shares and resulting in proceeds of $331,250.

NOTE 14 - RISK FACTORS:

         For the three months ended May 31, 2001, substantially all of the
         Company's business activities have remained within the United States
         and have been extended to the wireless infrastructure, fiber, cabling
         and broadband industry. Approximately, eighty-six percent of the
         Company's revenues and receivables have been created solely in the
         state of


                                        20
<Page>

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

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

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

NOTE 15 - FOREIGN OPERATIONS:

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

NOTE 16 - COMMITMENTS AND CONTINGENT LIABILITIES:

         LEASES

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

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

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

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

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

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

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

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

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


                                        21
<Page>

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

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

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

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

         Future obligations under the non-cancelable lease terms are:
<Table>
<Caption>
                                            Period Ending
                                               May 31,                         Amount
                                               ------                          ------
<S>                                                                        <C>
                                                 2001                         $367,274
                                                 2002                          664,453
                                                 2003                           446162
                                                 2004                          154,120
                                                                           -----------
                                                Total                      $ 1,612,008
                                                                           ===========
</Table>

         LEGAL PROCEEDINGS

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

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

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

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

         The Company is a defendant in Carl Thompson Associates, Inc. vs.
         ClearWorks.net, Inc. On October 4, 2000, Carl Thompson Associates, Inc.
         filed suit presenting claims for breach of contract, unjust enrichment,
         action on account,


                                        22
<Page>

         quantum meruit, and breach of contract-implied covenant of good faith
         and fair dealing and seeks recovery of damages in the sum of $521,415
         plus court costs. The Company denies the claims and has filed an answer
         disputing the claims with affirmative defenses.

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

         The Company is a defendant in STATE OF FLORIDA DEPARTMENT OF
         ENVIRONMENTAL PROTECTION VS. RECO TRICOTE, INC. AND SOUTHEAST TIRE
         RECYCLING, INC. A/K/A CLEARWORK.NET, INC.; IN THE CIRCUIT COURT OF THE
         TENTH JUDICIAL CIRCUIT IN AND FOR POLK COUNTY, FLORIDA. On December 13,
         2000, Florida EPA sued the Company presenting claims for recovery costs
         and penalties for a waste tire processing facility. The suit seeks
         recovery of costs and penalties in a sum in excess of $1,000,000,
         attorneys' fees and cost of court. The Company immediately filed a
         Motion to Strike Portions of the Complaint/or for a More Definite
         Statement and a Motion to Dismiss. The Florida EPA is amending the
         petition. ClearWorks denies the claims and intends to vigorously
         contest all claims in this case and to enforce its indemnification
         rights against the principals of Southeast Tire Recycling.

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

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

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

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

         OTHER COMMITMENTS

         On July 13, 2000, the Company entered into an agreement with Sands
         Brothers & Co., LTD. (Sands) whereby Sands will perform financial
         advisory services and assist the Company with mergers and acquisitions,
         corporate finances and other related matters for a period of two years.
         As compensation for these services, the Company will immediately pay
         Sands


                                        23
<Page>

         $50,000 and issue them 10,000 shares of the Company's common
         stock. As an additional inducement, the Company has issued Sands
         1,000,000 stock purchase warrants to be exercisable for a three year
         period expiring July 13, 2003. These warrants shall vest and be
         exercisable as follows: 25% of such warrants shall vest upon execution
         of this agreement and shall have an exercise price per share of $7.49;
         an additional 25% shall vest when and if the closing price of the
         common stock at any time during the exercise period reaches $10.00 per
         share and shall be exercisable at $10.00 per share; an additional 35%
         shall vest when and if the closing price of the common stock at any
         time during the exercise period reaches $14.00 per share and shall be
         exercisable at $14.00 per share; an additional 15% shall vest at any
         time during the exercise period when the closing price of the common
         stock at any time reaches $25.00 per share and shall be exercisable at
         $25.00 per share. Additionally, Sands shall receive further
         compensation for other activities such as fund raising based upon a
         percent of all monies raised.

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

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

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

NOTE 17 - EARNINGS PER SHARE:

         The following table sets forth the computation of basic and diluted
         earnings per share, in thousands except Per-Share Amount:
<Table>
<Caption>
                                                             For the nine months ended May 31, 2001
                                                            ----------------------------------------
                                                      Income            Shares           Per-Share
                                                    (Numerator)      (Denominator)        Amount
                                                    -----------      -------------        ------
<S>                                                <C>               <C>                 <C>
         Net Income                                $   (2,934)

         Basic EPS:
          Income available to common stockholders      (2,934)          40,973           $ (0.07)
                                                                                         ========

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

         Diluted EPS:
           Income available to common stockholders
             and assumed conversions.               $   (2,934)         41,127           $ (0.07)
                                                    ===========        =======           ========
</Table>


                                        24
<Page>

<Table>
<Caption>
                                                            For the months ended August, 2000
                                                            ----------------------------------
                                                      Income            Shares           Per-Share
                                                    (Numerator)      (Denominator)        Amount
                                                    -----------      -------------        ------
<S>                                                <C>               <C>                 <C>
         Net Income                                  $    193

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

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

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

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

NOTE 18 - EMPLOYEE STOCK OPTION PLAN:
          --------------------------

         In July 1996, the Board of Directors and majority stockholders adopted
         a stock option plan under which 400,000 shares of the Company's common
         stock have been reserved for issuance. Since that time, the Board of
         Directors have amended the July 1996, employee stock option plan under
         which 1,000,000 shares of Common Stock have been reserved for issuance.
         Under this plan, as of May 31, 2001 and 2000, 404,974 and 223,107
         warrants have been issued to various employees. Of these outstanding
         warrants, - 0 - and 66,875 were exercised for the three months ended
         May 31, 2001 and 2000, respectively. Additionally, 10,350 warrants have
         expired as of May 31, 2001.

         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:
<Table>
<Caption>
                                                   2001      2000
                                                  -----      ----
<S>                                               <C>        <C>
               Dividend yield                     0.00%      0.00%
               Volatility                         0.91      15.14
               Risk-free interest rate            7.00%      7.00%
               Expected life                      5          5
</Table>

NOTE 19 - RETIREMENT PLANS:

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

NOTE 20 - MAJOR CUSTOMER:

         The Company had gross revenues of $11,358,000 and $1,270,000 for the
         three months ended May 31, 2001 and 2000, respectively. The following
         parties individually represent a greater than ten percent of these
         revenues.
<Table>
<Caption>
                                                              May 31, 2001            May 31, 2000
              Customer                                    Amount    Percentage     Amount   Percentage
              --------                                  ----------------------     -------------------
<S>                                                     <C>         <C>            <C>      <C>
              Enron                                     $  4,490,000   39.5%       $  - 0 -     0.0%

              Duke                                      $  2,198,000   19.4%       $  - 0 -     0.0%

              Weatherford                               $  1,851,000   16.3%       $  - 0 -     0.0%

              Sprint PC                                 $  1,648,000   14.5%       $  - 0 -     0.0%
</Table>


                                        25
<Page>

NOTE 21 - INDUSTRY SEGMENTS:

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

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

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

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

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

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

         Link Two Communications, Inc. (Link II) is in the development and
         delivery of one and two way messaging systems over a national
         high-speed wireless broadband network. Link II continues to add to the
         paging customer base.
<Table>
<Caption>
                                          FOR THE NINE MONTHS ENDING MAY 31, 2001

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

<Caption>
                                          FOR THE NINE MONTHS ENDING MAY 31, 2000

(in thousands)             Eagle    APC / SW     COMM       HSI     UCG / INT   Link II    .Net      Elim.     Consol.
                         ---------- ---------- ---------- -------- ------------ -------- ---------- ---------- ----------
<S>                      <C>        <C>        <C>        <C>      <C>          <C>      <C>        <C>        <C>
Revenue                        984      2,189       ---       ---          ---      ---        ---       ---      3,173
Segment (Profit) / Loss       (120)       560       ---       ---          ---      ---        ---       ---        440
Total Assets                46,317      1,485       ---       ---          ---      ---        ---       ---     47,802
Capital Expenditures           602        492       ---       ---          ---      ---        ---       ---      1,094
Dep. And Amort.                332         45       ---       ---          ---      ---        ---       ---        377
</Table>

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

NOTE 22 - SUBSEQUENT EVENTS.

         Refer to Note 8 - convertible debentures for subsequent event
         information.

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


                                        26
<Page>

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

         REVENUE RECOGNITION

         The Company designs, manufactures, markets and services 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.

                                        27
<Page>

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

         RECENT ACQUISITIONS; GOODWILL

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

         MARKETABLE SECURITIES

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

         During the nine months ended May 31, 2001, the Company acquired
         1,500,000 common stock shares of Burst.com and 750,000 common stock
         shares of Urbana, Inc. with a cost of $500,000 and $100,000,
         respectively.

         INVENTORY

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

         RESULTS OF OPERATIONS

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

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

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

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

         A $1,322,000 increase in salaries, as a result of its acquisitions and
         expanded business. A $96,000 increase in advertising and promotion, due
         primarily to increased attendance at conventions and trade shows on a
         worldwide basis.

         A $1,163,000 increase in depreciation and amortization, due to an
         increase in amortization of goodwill and purchase of additional assets.

         A $1,845,000 increase in other support costs, due to an increase in
         rents, travel, utilities and communication costs.


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

         CHANGES IN CASH FLOW. Eagle's operating activities provided net cash of
         $5,085,000 in the nine months ended May 31, 2001, compared to
         $2,100,000 in the nine months ended May 31, 2000. The increase in net
         cash used by operating activities was primarily attributable to
         increases in inventory and reductions in accounts payable. Eagle's
         investing activities used net cash of $13,813,000 in the nine months
         ended May 31, 2001, compared to $1,190,000 in the nine months ended May
         31, 2000. The increase was due primarily to investment activities and
         purchase of equipment. Eagle's financing activities provided cash of
         $4,129,000, in the nine months ended May 31, 2001, compared to
         $29,760,000 in the nine months ended May 31, 2000. The increase at May
         31, 2001 is attributable to Link Two Communications, Inc. loan from
         Tailwind.

         LIQUIDITY AND CAPITAL RESOURCES.

         Current assets for the three months ended May 31, 2001 totaled
         $49,976,000 as compared to $34,602,000 reported for the three months
         ended May 31, 2000. Of this amount, $27,747,000 consisted of cash.
         Eagle believes that its working capital of $30,430,000 as of May 31,
         2001 should be sufficient to fund operations through the end of the
         fiscal year 2001. Historically, Eagle has financed its operations
         through the sale of debt and equity securities. As such, if its current
         cash is insufficient to fund its long-term capital needs, Eagle will
         rely on future best-efforts financings for capital. 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 May 31, 2001, Eagle had no
         material capital commitments other than its federal income and state
         franchise tax liabilities.

PART 2. - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

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

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

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

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

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
         None

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

ITEM 5 - OTHER INFORMATION
         None

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K/A

                (a) Exhibit
                    None
                (b) Reports on Form 8-K/A
                    Form 8-K/A filed on October 29, 2001 in conjunction with the
                    merger of ClearWorks.Net, Inc.


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<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



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