<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 FEBRUARY 28, 2001

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


                        COMMISSION FILE NUMBER: 000-23163


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


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


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


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

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


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

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

As of April 20, 2001, there were 62,333,563 shares of common stock outstanding

<PAGE>

               EAGLE WIRELESS INTERNATIONAL, INC. AND SUBSIDIARIES
                                      INDEX


PART 1 - FINANCIAL INFORMATION

                                                                          PAGE

         Item 1. Financial Statements (Unaudited)

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

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

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

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

                 Notes to the Financial Statements                         7-23

         Item 2. Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                      23-24

PART 2 - OTHER INFORMATION

         Item 1. Legal Proceedings                                         24

         Item 2. Recent Sales of Unregistered Securities or Changes
                 in Securities and Use of Proceeds.                        25

         Item 3. Defaults Upon Senior Securities                           25

         Item 4. Submission of Matters to a Vote of Security Holders       25

         Item 5. Other Information                                         25

         Item 6. Exhibits and Reports on Form 8-K                          25

SIGNATURES                                                                 25



                                       2
<PAGE>

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

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

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

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

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

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

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

COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 17)

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

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

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       3
<PAGE>

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


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

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

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

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

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

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

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

Provisions for income taxes                                           --                83                --               100
                                                             ---------------------------------------------------------------------
Net earnings (loss)                                               (1,280)              155            (1,217)              223
Comprehensive income, net of tax
Unrealized holding gain                                            1,182                               1,189
                                                             ---------------------------------------------------------------------
Comprehensive income / (loss)                                    $   (98)              155           $   (28)              223
                                                             =====================================================================
Net earnings (loss) per common share:
Basic                                                            $ (0.03)          $  0.01           $ (0.04)          $  0.02
Diluted                                                          $ (0.03)          $  0.01           $ (0.04)          $  0.02
Comprehensive income - (loss)                                    $   nil           $  0.01           $   nil           $  0.02

</TABLE>


                                       4
<PAGE>

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

<TABLE>
<CAPTION>

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

Net Earnings 2000                                                                                            193              193

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

Syndication Costs                                                                         (653)                              (653)

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

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

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


Syndication Costs                                                                         (876)                              (876)

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

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

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


Total Shareholders' Equity
   As of February 28, 2001                 55,976       $    55       $   ---       $  145,677        $    1,847       $  147,579
                                        =========     ==========    ==========     ===========       ===========      ===========

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                            SIX MONTHS ENDED
                                                                                               FEBRUARY 28,
                                                                                        2001                2000
                                                                                     (UNAUDITED)         (UNAUDITED)
                                                                                     -------------------------------
<S>                                                                                   <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net Earnings / (Loss)                                                           $ (1,217)           $    223

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

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

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

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

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

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

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

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

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

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

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

</TABLE>

Supplemental Non-Cash Investing Activities - See Note 3 & 4.

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       6

<PAGE>

NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:

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

A)       Consolidation

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

B)       Cash and Cash Equivalents

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

C)       Property and Equipment

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

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

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

D)       Inventories

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


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

E)       Revenue Recognition

         The Company designs, manufactures, markets and services its products
         and services under the Eagle, Broadband Magic.com, Inc., ClearWorks.Net
         and AtlanticPacific names. 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, Inc. designs, manufactures
         and markets the convergent set-top boxes. Revenue from these products
         is recognized when the product is shipped. ClearWorks.Net, recognizes
         revenue and the related costs at the time the services are rendered.
         Revenue is derived from fees charged for the delivery of Bundled
         Digital Services, integration services and cabling and wiring.
         Long-term contracts are treated the same as the parent company.
         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



                                       7
<PAGE>

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

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

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

F)       Research and Development Costs

         For the months ended February 28, 2001, the Company commenced research
         and development activities for internal projects related to its
         convergent set-top boxes as well as its multi-media entertainment
         centers. Research and development costs of $687,000 were expensed for
         the six months ended February 28, 2001.

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

G)       Income Taxes

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

H)       Net Earnings Per Common Share

         Net earnings per common share are shown as both basic and diluted.
         Basic earnings per common share are computed by dividing net income
         less any preferred stock dividends (if applicable) by the weighted
         average number of shares of common stock outstanding. Diluted earnings
         per common share are computed by dividing net income less any preferred
         stock dividends (if applicable) by the weighted average number of
         shares of common stock outstanding plus any dilutive common stock
         equivalents. The components used for the computations are shown as
         follows, in thousands:

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

            Primary Common Stock Equivalents             32,156                 19,073
            Fully Dilutive Common Stock Equivalents      32,299                 22,379
</TABLE>


I)       Impairment of Long Lived and Identifiable Intangible Assets

         The Company evaluates the carrying value of long-lived assets and
         identifiable intangible assets for potential impairment on an ongoing
         basis. An impairment loss would be deemed necessary when the estimated
         non-discounted future cash flows are less than the carrying net amount
         of the asset. If an asset were deemed to be impaired, the asset's
         recorded value would be reduced to fair market value. In determining
         the amount of the charge to be recorded, the following methods would be
         utilized to determine fair market value:

                1)      Quoted market prices in active markets.
                2)      Estimate based on prices of similar assets
                3)      Estimate based on valuation techniques

         As of February 28, 2001 and 2000, no impairment existed.

J)       Intangible Assets

         Goodwill represents the excess of the cost of companies acquired over
         the fair value of their net assets at the dates of acquisition and is
         being amortized using the straight-line method over five (5) years for
         Atlantic Pacific and Comtel and twenty-five (25) years for
         ClearWorks.Net contract rights.


                                       8
<PAGE>


         Other intangible assets consist of patents and licenses, which are
         being amortized using the straight-line method over ten (10) years
         and twenty (20) years, respectively.

K)       Advertising Costs

         Beginning in fiscal 2000, advertising costs have been capitalized and
         amortized on the basis of contractual agreements entered into by the
         Company. These contracts are amortized over the life of the individual
         contracts or expensed in the period incurred. For the six months ended
         February 28, 2001, the Company has expensed $263,000 with $374,000
         remaining in prepaid expenses. Prior to fiscal 2000, the Company had no
         contractual arrangements, therefore all advertising related costs were
         expensed as incurred.

L)       Deferred Syndication Costs

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

M)       Use of Estimates

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

N)       Marketable Securities

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

O)       Other Comprehensive Income

         In 1997, the Financial Accounting Standards Board issued Statement of
         Financial Accounting Standards No. 130, "Other Comprehensive Income,"
         effective for fiscal years beginning after December 15, 1997. This
         statement considers the presentation of unrealized holding gains and
         losses attributable to debt and equity securities classified as
         available-for-sale. As stated, any unrealized holding gains or losses
         affiliated to these securities are carried below net income under the
         caption "Comprehensive Income." For the fiscal year ended August 31,
         2000, no other comprehensive income existed.

P)       Reclassification

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

Q)       Supporting Costs in Selling, General and Administrative Expenses

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

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



                                       9
<PAGE>

NOTE 2 - ACCOUNTS RECEIVABLE:

         Accounts receivable consist of the following, in thousands:

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

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

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

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

             Automobile                             $     894     $      58
             Head In Facility                           4,903            --
             Furniture & Fixtures                         581           140
             Leasehold Improvements                        56            24
             Hardware & Software                        1,401            --
             Office Equipment                             908           721
             Property, Manufacturing & Equipment        6,016         1,760
                                                    ---------     ---------

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

      Components of intangible assets are as follows, in thousands:

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

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

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

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 $115 million. The acquisition was accounted for using
         the purchase method of accounting. ClearWorks is a communications
         carrier providing broadband data, video and voice communication
         services to residential and commercial customers, currently within
         Houston, Texas. These services are provided over fiber-optic networks
         ("Fiber-To-The-Home" or "FTTH"), which the Company designs, constructs,
         owns and operated inside large residential master-planned communities
         and office complexes. ClearWorks also provides information technology
         staffing personnel, network engineering, vendor evaluation of network
         hardware, implementation of network hardware and support of private and
         enterprise networks, as well as, developing residential, commercial and
         education accounts for deployment of structured wiring solutions. The
         results of operation for ClearWorks are included in the accompanying
         financial statements since the date of acquisition. The source of funds
         for the acquisition was a combination of cash and common stock totaling
         approximately $115 million. 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



                                       10

<PAGE>

         assets of $11,708, property, plant and equipment of $6,570, intangible
         assets of $96,920, 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
         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.
         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 February 28, 2001, and accordingly any reference to
         balance sheet information is included in the form accompanying
         financial information.

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

<TABLE>
<CAPTION>
                                                        For the fiscal year ended August 31, 2000
                                                                Income Statement Pro Forma
                                                                       (IN THOUSANDS)



                                            EAGLE WIRELESS                           PRO FORMA         COMBINED
                                            INTERNATIONAL       CLEARWORKS.NET          ADJ.            TOTALS
                                            --------------      --------------      -----------       ----------
<S>                                           <C>                <C>                 <C>              <C>
               Total Revenues                 $   5,240          $   21,447          $    ---         $  26,687
               Operating Expenses                 4,951              48,804               ---            22,775
                                              ---------          ----------          --------         ---------
               Net Income / (Loss)            $     289          $  (27,357)         $    ---         $ (27,068)
                                              =========          ----------          --------         ---------


                                                                       Earnings Per Share
                       Basic                                                                             $(0.68)
                                                                                                         ======
                       Diluted                                                                           $(0.63)
                                                                                                         ======

                       Basic Shares                                                                      39,806
                       Diluted Shares                                                                    42,965
</TABLE>

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

<TABLE>
<CAPTION>
                                              For the six months ended February 28, 2001
                                                      Income Statement Pro Forma
                                                             (IN THOUSANDS)

                                           EAGLE WIRELESS                      PRO FORMA (1)        COMBINED
                                           INTERNATIONAL    CLEARWORKS.NET         ADJ.              TOTALS
                                           --------------   --------------     -------------       ----------
<S>                                         <C>              <C>                <C>                <C>
                Total Revenues              $   3,917        $   21,711         $      ---         $  25,628
                Operating Expenses              5,375            45,724             15,324            35,775
                                            ---------        ----------         ----------         ---------
                Net Loss                    $  (1,458)       $  (24,013)        $   15,324         $ (10,147)
                                            ---------        ----------         ----------         ---------

                                                                      Earnings Per Share
                          Basic                                                                      $(0.17)
                                                                                                     ======
                          Diluted                                                                    $(0.17)
                                                                                                     ======

                          Basic Shares                                                               59,688
                          Diluted Shares                                                             59,831
</TABLE>


                                       11
<PAGE>

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

<TABLE>
<CAPTION>
                                                               For the three months ended February 28, 2001
                                                                      Income Statement Pro Forma
                                                                             (IN THOUSANDS)

                                               EAGLE WIRELESS                          PRO FORMA         COMBINED
                                               INTERNATIONAL        CLEARWORKS.NET        ADJ.            TOTALS
                                              ----------------     ---------------   ------------      ------------
<S>                                             <C>                  <C>               <C>              <C>
                 Total Revenues                 $      485           $    8,827        $     ---        $    9,312
                 Operating Expenses                  1,152               15,740              ---            16,892
                                                ----------           ----------        ---------        ----------
                 Net Loss                       $     (667)          $   (6,913)       $     ---        $   (7,580)
                                                ==========           ----------        ---------        ----------

                                                                             Earnings Per Share
                            Basic                                                                           $(0.13)
                                                                                                            ======
                            Diluted                                                                         $(0.13)
                                                                                                            ======

                            Basic Shares                                                                    59,688
                            Diluted Shares                                                                  59,831
</TABLE>

           (1) Interest expense, incentive compensation and other services paid
               to settle contracts and debts which items are not reoccurring in
               future operations.

NOTE 5 - NOTES PAYABLE:

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

<TABLE>
<CAPTION>

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

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

                    Total long-term debt                                                       $      79           $      ---
                                                                                               =========           ==========
</TABLE>

NOTE 6 - CAPITAL LEASE OBLIGATIONS:

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

         Minimum future lease payment under capital lease as of February 28,
         2001 for each of the next five years and in the aggregate are, in
         thousands:

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

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


                                       12
<PAGE>

NOTE 7 - LINE OF CREDIT:

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

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

NOTE 8 - CONVERTIBLE DEBENTURES:

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

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

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

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

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

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

NOTE 9 - MARKETABLE SECURITIES:

         As discussed in Note 1, the Company adopted the provisions of SFAS No.
         115, "Accounting for Certain Investments in Debt and Equity Securities"
         and SFAS No. 130, "Accounting for Other Comprehensive Income." At
         February 28, 2001 all of the Company's marketable equity securities are
         classified as available-for-sale; they were acquired with the intent to
         dispose of them within the next year. For the months ended February 29,
         2000, no marketable securities were held.


                                       13
<PAGE>

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

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

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

NOTE 10 - INCOME TAXES:

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

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

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


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

                                                              August 31,
                                                         2000          1999
                                                      -----------------------
            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
                                                      =========      ========


                                       14

<PAGE>

NOTE 11 - ISSUANCE OF COMMON STOCK:

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


            Shares Outstanding November 30, 2000                    26,317

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

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



NOTE 12 - PREFERRED STOCK, STOCK OPTIONS AND WARRANTS:

         In July 1996, the Board of Directors and majority shareholders adopted
         an employee stock option plan under which 400,000 shares of Common
         Stock have been reserved for issuance. The options granted for under
         this plan are to purchase fully paid and non-assessable shares of the
         Common Stock, par value $.001 per share at a price equal to the
         underlying common stock's market price at the date of issuance. These
         options may be redeemed six months after issuance, expire five years
         from the date of issuance and contain a cash-less exercise feature. The
         underlying shares of common stock were registered for resale under the
         Securities Act of 1933 on February 19, 1999. As of February 28, 2001,
         410,474 options have been granted pursuant to such plan with 72,499
         being exercised and 10,350 being cancelled.

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

            59,998 stock purchase warrants will be issued to Carl A. Chase.
            Expiration of warrants is 6,666 on the ending date of each month
            commencing on November 30, 2001 and ending on July 31, 2002. The
            warrants are to purchase fully paid and non-assessable shares of the
            common stock, par value $.001 per share at a purchase price of $0.31
            per share. The shares of common stock underlying these warrants have
            not been registered or issued, under the Securities Act of 1933. As
            of February 28, 2001, none of these warrants have been registered,
            issued or exercised.

            600,000 stock purchase warrants issued to Paladin Associates
            expiring September 1, 2001. The warrants are to purchase fully paid
            and non-assessable shares of the common stock, par value $.001 per
            share at a purchase price of $1.50 per share. 166,667 warrants are
            not exercisable until and unless the shares of Common Stock trade at
            a minimum of $4.00 per share for twenty-one consecutive trading
            days. 166,667 warrants are not exercisable until and unless the
            shares of Common Stock trade at a minimum of $6.00 per share for
            twenty-one consecutive trading days. 166,666 warrants are not
            exercisable until and unless the shares of Common Stock trade at a
            minimum of $8.00 per share for twenty-one consecutive trading days.
            The shares of common stock underlying 350,000 warrants were
            registered for resale on August 3, 2000, under the Securities Act of
            1933. 100,000 incentive warrants will be made available and will
            vest at the end of October 2000 if the first objective of $4.00 is
            achieved before the end of October. As of February 28, 2001, 250,000
            of the underlying shares of common stock have not yet been
            registered for resale under the Securities Act of 1933.

            50,000 stock purchase warrants issued to Weed & Co. L.P. expiring
            December 10, 2002. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $1.55 per share. The shares of common stock
            underlying the warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As of February 28, 2001,
            25,000 warrants have been exercised resulting in cash proceeds of
            $38,750.

            20,000 stock purchase warrants issued to Kason, Inc. expiring
            October 7, 2002. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $1.75 per share. The shares of common stock
            underlying these warrants were registered for resale on November 30,
            2000, under the Securities Act of 1933. As February 28, 2001, 6,234
            warrants have been exercised resulting cash proceeds of $10,910.

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


                                       15
<PAGE>

            41,667 stock purchase warrants issued to Peter Miles expiring July
            20, 2004. The warrants are to purchase fully paid and non-assessable
            shares of the common stock, par value $.001 per share at a purchase
            price of $2.00 per share. The shares of common stock underlying
            these have not been registered as of February 28, 2001, under the
            Securities Act of 1933. As of February 28, 2001, none of these
            warrants have been exercised.

            50,000 stock purchase warrants issued to Weed & Co. L.P. expiring
            June 10, 2002. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $3.00 per share. The shares of common stock
            underlying these warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As February 28, 2001, none
            of these warrants have been exercised.

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

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

            232,000 stock purchase warrants will be issued to Shannon D. McLeroy
            expiring April 24, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $3.75 per share. The shares of common stock
            underlying these warrants have not been registered or issued, under
            the Securities Act of 1933. As of February 28, 2001, none of these
            warrants have been registered, issued or exercised.

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

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

            25,000 stock purchase warrants issued to Synchton, Inc. expiring
            October 1, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $4.50 per share. The shares of common stock
            underlying these warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As of February 28, 2001,
            none of these warrants have been exercised.

            100,000 stock purchase warrants issued to National Financial
            Communications Corp. expiring June 2003. The warrants are to
            purchase fully paid and non-assessable shares of the common stock,
            par value $.001 per share at a purchase price of $7.00 per share. As
            of February 28, 2001, the underlying shares of common stock have not
            yet been registered for resale under the Securities Act of 1933.

            250,000 stock purchase warrants issued to Sands Brothers & Co., LTD.
            expiring July 13, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $7.49 per share. As of February 28, 2001, the
            underlying shares of common stock have not yet been registered for
            resale under the Securities Act of 1933.

            25,000 stock purchase warrants issued to Synchton, Inc. expiring
            July 1, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $7.50 per share. The shares of common stock
            underlying these warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As February 28, 2001, none
            of these warrants have been exercised.


                                       16
<PAGE>

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

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

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

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

            160,000 stock purchase warrants will be issued to McClere Family
            Trust expiring April 24, 2008. The warrants are to purchase fully
            paid and non-assessable shares of the common stock, par value $.001
            per share at a purchase price of $7.50 per share. The shares of
            common stock underlying these warrants have not been registered or
            issued, under the Securities Act of 1933. As of February 28, 2001,
            none of these warrants have been registered, issued or exercised.

            50,000 stock purchase warrants issued to Weed & Co. L.P. expiring
            June 10, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $9.68 per share. The shares of common stock
            underlying these warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As of February 28, 2001,
            none of these warrants have been exercised.

            25,000 stock purchase warrants issued to Synchton, Inc. expiring
            April 1, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $10.00 per share. The shares of common stock
            underlying these warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As February 28, 2001, none
            of these warrants have been exercised.

            250,000 stock purchase warrants issued to Sands Brothers & Co., LTD.
            expiring July 13, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $10.00 per share. These warrants, however are
            not exercisable until and unless the closing price of Common Stock
            at any time during the exercise period reaches $10.00 per share. As
            of February 28, 2001, the underlying shares of common stock have not
            yet been registered for resale under the Securities Act of 1933.

            250,000 stock purchase warrants issued to Hampton-Porter Investment
            Bankers LLC expiring June 27, 2003. The warrants are to purchase
            fully paid and non-assessable shares of the common stock, par value
            $.001 per share at a purchase price of $12.00 per share. The shares
            of common stock underlying these warrants were registered for resale
            on August 3, 2000, under the Securities Act of 1933. As of February
            28, 2001, none of these warrants have been exercised.

            350,000 stock purchase warrants issued to Sands Brothers & Co., LTD.
            expiring July 13, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $14.00 per share. These warrants, however,
            are not exercisable until and unless the closing price of the Common
            Stock at any time during the exercise period reaches $14.00 per
            share. As of February 28, 2001, the underlying shares of common
            stock have not yet been registered for resale under the Securities
            Act of 1933.

            250,000 stock purchase warrants issued to Hampton-Porter Investment
            Bankers LLC expiring June 27, 2003. The warrants are to purchase
            fully paid and non-assessable shares of the common stock, par value
            $.001 per share at a purchase price of $18.00 per share. The shares
            of common stock underlying these warrants were registered for resale
            on August 3, 2000, under the Securities Act of 1933. As of February
            28, 2001, none of these warrants have been exercised.


                                       17
<PAGE>

            150,000 stock purchase warrants issued to Sands Brothers & Co., LTD.
            expiring July 13, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $25.00 per share. These warrants, however,
            are not exercisable until and unless the closing price of the Common
            Stock at any time during the exercise period reaches $25.00 per
            share. As of February 28, 2001, the underlying shares of common
            stock have not yet been registered for resale under the Securities
            Act of 1933.

         The warrants outstanding are segregated into four categories
         (exercisable, non-exercisable, non-registered, and expired). They are
         summarized as follows:


<TABLE>
<CAPTION>

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

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

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


NOTE 13 - CAPITALIZATION ACTIVITIES:

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

NOTE 14 - RISK FACTORS:

         For the months ended February 28, 2001 and 2000, substantially all of
         the Company's business activities have remained within the United
         States and have been extended to the wireless infrastructure, fiber,
         cabling and broadband industry. Approximately, eighty-four percent of
         the Company's revenues and receivables have been created solely in the
         state of Texas, two percent have been created in the international
         market, and the approximate fourteen percent remainder have been
         created relatively evenly over the rest of the nation during the year
         ended February 28, 2001. Whereas approximately ninety-one percent of
         the Company's revenues and receivables have been created solely in the
         state of Texas, two percent have been created in the international
         market, and the approximate seven percent remainder has been created
         relatively evenly over the rest of the nation for the year ended August
         31, 2000.

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

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

NOTE 15 - FOREIGN OPERATIONS:

         Although the Company is based in the United States, its product is sold
         on the international market. Presently, international sales total
         approximately 2% and 2% at February 28, 2001 and 2000, respectively.



                                       18

<PAGE>

NOTE 16 - COMMITMENTS AND CONTINGENT LIABILITIES:

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

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

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

         The Company also leases office space in Oxnard, California with Tiger
         Ventura County, L.P. This three-year non-cancelable lease commenced
         August 1, 2000 and expires July 31, 2003. Under the terms of the lease,
         monthly payments will be $2,130 for the first twelve months whereat the
         monthly payments will increase by 3.5% at the beginning of both the
         second and third years. For the periods ended February 28, 2001 and
         2000, rental expense of $6,390 and $0, respectively were incurred.

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

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

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

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

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

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

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

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


              Future obligations under the non-cancelable lease terms are:


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


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


                                       19
<PAGE>

         the Company's financial condition or results of operations. All legal
         proceedings are incorporated herein by reference from Company's Form
         8K, which was previously filed on April 16, 2001.

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

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

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

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

NOTE 17 - EARNINGS PER SHARE:

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

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

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

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

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


                                       20
<PAGE>

<TABLE>
<CAPTION>
                                                             FOR THE FISCAL YEAR 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                                              --             3,306
                                                          ------            ------

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

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

NOTE 18 - EMPLOYEE STOCK OPTION PLAN:

         In July 1996, the Board of Directors and majority stockholders adopted
         a stock option plan under which 400,000 shares of the Company's common
         stock have been reserved for issuance. Under this plan, as of February
         28, 2001 and 2000, 410,474 and 192,407 warrants have been issued to
         various employees. Of these outstanding warrants, - 0 - and 32,875 were
         exercised for the three months ended February 28, 2001 and 2000,
         respectively. Additionally, 10,350 warrants have expired as of February
         28, 2001.

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

NOTE 19 - RETIREMENT PLANS:

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

NOTE 20 - MAJOR CUSTOMER:

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

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

             Sprint PC                $  638,000       13.3%        $   -0-          0.0 %
</TABLE>


NOTE 21 - INDUSTRY SEGMENTS:

         The Company has adopted the provisions of SFAS No. 131, "Disclosures
         about Segments of an Enterprise and Related Information". At February
         28, 2001, the Company's seven business units have separate management
         teams and infrastructures that offer different products and services.
         The business units have been aggregated into two reportable segments
         (as described below) since the long-term financial performance of these
         reportable segments is affected by similar economic conditions.

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

         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.


                                       21
<PAGE>

         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 six months ended February 28, 2001
                                                            (In Thousands)

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


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

                             Eagle / Elim.   APC / SW       COMM        HSI    UCG / INT      Link II       .Net    Consolidated
                            ------------------------------------------------------------------------------------------------------

Revenue                               911         992         --          --          --          --          --       1,903
Segment Profit / (Loss)               158          65         --          --          --          --          --         223
Total Assets                       23,918       1,391         --          --          --          --          --      25,309
Capital Expenditures                  664          --         --          --          --          --          --         664
Dep. And Amort                        344          --         --          --          --          --          --         344

</TABLE>

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

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

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS

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

         OVERVIEW

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

         REVENUE RECOGNITION

         The Company designs, manufactures, markets and services its products
         and services under the Eagle, Broadband Magic.com, Inc., ClearWorks.Net
         and AtlanticPacific names. 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, Inc. designs, manufactures
         and markets the convergent set-top boxes. Revenue from these products
         is recognized when the product is shipped. ClearWorks.Net, recognizes
         revenue and the related costs at the time the services


                                       22
<PAGE>

         are rendered. Revenue is derived from fees charged for the delivery of
         Bundled Digital Services, integration services and cabling and wiring.
         Long-term contracts are treated the same as the parent company.
         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, Inc. provides research and
         development support for all Eagle companies and does not currently
         provide billable services to independent third parties.

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

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

         RECEIVABLES

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

         RECENT ACQUISITIONS; GOODWILL

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

         MARKETABLE SECURITIES

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

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

         INVENTORY

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

         RESULTS OF OPERATIONS

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

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

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

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


                                       23
<PAGE>

         A $1,226,000 increase in salaries, as a result of its acquisitions and
         expanded business.

         A $107,000 increase in advertising and promotion, due primarily to
         increased attendance at conventions and trade shows on a worldwide
         basis.

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

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

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

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

         LIQUIDITY AND CAPITAL RESOURCES.

         Current assets for the period ended February 28, 2001 totaled
         $46,622,000 as compared to $13,430,000 reported for the period ended
         February 29, 2000. Of this amount, $27,311,000 consisted of cash. Eagle
         believes that its working capital of $28,019,000 as of February 28,
         2001 should be sufficient to fund operations through the end of the
         fiscal year 2001. Historically, Eagle has financed its operations
         through the sale of debt and equity securities. As such, if its current
         cash is insufficient to fund its long-term capital needs, Eagle will
         rely on future best-efforts financings for capital. Refer to Note 7 and
         Note 8 for descriptions of lines of credit and other immediate forms of
         funding the Company has available. As of February 28, 2001, Eagle had
         no material capital commitments other than its federal income and state
         franchise tax liabilities.

PART 2. - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

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

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


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

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

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

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
         None

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



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<PAGE>

ITEM 5 - OTHER INFORMATION
         None

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

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


SIGNATURES

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



                             EAGLE WIRELESS INTERNATIONAL, INC.


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

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


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