<PAGE>


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington D.C., 20549

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

                                   FORM 10-QSB

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

(Mark One)
[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
         THE SECURITIES EXCHANGE ACT OF 1934
         For the quarterly period ended June 30, 2002



[  ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
         THE SECURITIES EXCHANGE ACT OF 1934
         For the transition period                    to



                         Commission file number: 0-23365



                               US DATAWORKS, INC.
        (Exact name of small business issuer as specified in its charter)



                 NEVADA                                         84-1290152
    (State or other jurisdiction of                         (I.R.S. employer
     incorporation or organization)                      identification number)

     5301 HOLLISTER ROAD, SUITE 250
             HOUSTON, TEXAS                                       77040
(Address of principal executive offices)                        (Zip Code)

                    Issuer's telephone number: (713) 934-3855


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]

Number of shares of Common Stock outstanding as of June 30, 2002:  56,798,034.

Transitional Small Business Disclosure Format (Check one): YES [ ]  NO [X]

<PAGE>
<TABLE>

                               US DATAWORKS, INC.

                                TABLE OF CONTENTS

                                   FORM 10-QSB

                      QUARTERLY PERIOD ENDED JUNE 30, 2002
<CAPTION>

                                                                                            Page
                                                                                            ----
<S>       <C>                                                                                 <C>
PART I -- FINANCIAL INFORMATION.......................................................       F1

     Item 1.  Financial Statements....................................................       F1

         Balance Sheets at June 30, 2002..............................................       F2

         Statements of Operations for the Three Months Ended June 30, 2002  and
              2001....................................................................       F4

         Statements of Cash Flows for the Three Months Ended June 30, 2002 and
              2001....................................................................       F5

         Notes to Financial Statements................................................       F7

     Item 2.  Management's Discussion and Analysis and Results of Operations..........       1

PART II -- OTHER INFORMATION..........................................................       6

     Item 1.  Legal Proceedings.......................................................       6

     Item 2.  Changes in Securities and Use of Proceeds...............................       6

     Item 3.  Default Upon Senior Securities..........................................       7

     Item 6:  Exhibits and Reports on Form 8-K........................................       7

</TABLE>

                                       i
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                                                              US DATAWORKS, INC.
                                                                        CONTENTS
                                                       JUNE 30, 2002 (UNAUDITED)

--------------------------------------------------------------------------------
                                                                   Page
FINANCIAL STATEMENTS

     Balance Sheet                                               F-2 - F-3

     Statements of Operations                                       F-4

     Statements of Cash Flows                                    F-5 - F-6

     Notes to Financial Statements                              F-7 - F-13



                                      F-1
<PAGE>

                                                              US DATAWORKS, INC.
                                                                  BALANCE SHEETS
                                                       JUNE 30, 2002 (UNAUDITED)

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


                                     ASSETS
CURRENT ASSETS
   Cash and cash equivalents....................................... $    95,631
   Accounts receivable, net of allowance for doubtful accounts
     of $0.........................................................     502,641
   Due from related party..........................................      24,000
   Prepaid expenses and other current assets.......................     173,051
                                                                    ------------
         Total current assets......................................     795,323

PROPERTY AND EQUIPMENT, net........................................     191,692

OTHER ASSETS.......................................................      40,353
                                                                    ------------
                                               TOTAL ASSETS         $ 1,027,368
                                                                    ============


   The accompanying notes are an integral part of these financial statements.

                                      F-2
<PAGE>
<TABLE>

                                                                                                     US DATAWORKS, INC.
                                                                                                         BALANCE SHEETS
                                                                                              JUNE 30, 2002 (UNAUDITED)

-----------------------------------------------------------------------------------------------------------------------
<CAPTION>

                      LIABILITIES AND SHAREHOLDERS' DEFICIT

<S>                                                                                                     <C>
CURRENT LIABILITIES
   Notes payable, net of unamortized discount of $13,987...........................................     $       136,013
   Notes payable - related parties.................................................................             734,000
   Current portion of capital lease obligations....................................................              11,924
   Current portion of convertible promissory notes, net of unamortized discount of $170,339........           1,122,161
   Convertible promissory notes - related parties..................................................             250,000
   Deferred revenue................................................................................             125,903
   Accounts payable................................................................................             756,613
   Accrued expenses................................................................................             502,864
   Interest payable, including $20,106 related parties.............................................              36,297
   Net liabilities of discontinued operations......................................................           1,151,543
                                                                                                        ----------------
         Total current liabilities.................................................................           4,827,318

CONVERTIBLE PROMISSORY NOTES, net of current portion...............................................     $       150,000
CAPITAL LEASE OBLIGATIONS, net of current portion..................................................               9,884
                                                                                                        ----------------
         Total liabilities.........................................................................           4,987,318

COMMITMENTS

SHAREHOLDERS' DEFICIT
   Convertible Series A preferred stock, $0.0001 par value
     800,000 shares authorized, 640,000 (unaudited) shares issued and outstanding, $2.50 liquidation
     preference, dividends of $300,863 in arrears..................................................                  64
   Convertible Series B preferred stock, $0.0001 par value
     700,000 shares authorized, 629,666 (unaudited) shares issued and outstanding, $0.75 liquidation
     preference, dividends of $20,952 in arrears...................................................                  63
   Common stock, $0.0001 par value
     90,000,000 shares authorized and 56,798,034 (unaudited) shares issued and outstanding.........               5,679
   Common stock committed, 262,375 shares..........................................................           1,082,438
   Additional paid-in capital......................................................................          22,990,028
   Accumulated deficit.............................................................................         (28,038,106)
                                                                                                        ----------------
         Total shareholders' deficit...............................................................          (3,959,834)
                                                                                                        ----------------
                             TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT                                $     1,027,241
                                                                                                        ================

                       See accompanying notes are an integral part of these financial statements.
</TABLE>

                                                          F-3
<PAGE>
<TABLE>

                                                                                                US DATAWORKS, INC.
                                                                                          STATEMENTS OF OPERATIONS
                                                                                FOR THE THREE MONTHS ENDED JUNE 30

-------------------------------------------------------------------------------------------------------------------
                                                                                       2002               2001
                                                                                   -------------      -------------
                                                                                    (UNAUDITED)        (UNAUDITED)
<S>                                                                                <C>                <C>
REVENUES
   Software licensing revenues ..............................................      $    502,650       $    197,500
   Software maintenance revenues ............................................            55,817                 --
   Software programming revenues ............................................           214,664             76,277
                                                                                   -------------      -------------
     Total revenues .........................................................           773,131            273,777

Cost of sales ...............................................................           168,269            109,846
                                                                                   -------------      -------------
     Gross profit ...........................................................           604,862            163,931

OPERATING EXPENSES
   General and administrative ...............................................           865,544            963,621
                                                                                   -------------      -------------

LOSS FROM OPERATIONS ........................................................          (260,682)          (799,690)
                                                                                   -------------      -------------

OTHER INCOME (EXPENSE)
   Interest income ..........................................................                24              3,563
   Financing costs ..........................................................           (16,782)           (18,301)
   Interest expense .........................................................          (238,518)        (1,958,865)
   Interest expense - related parties .......................................           (11,712)            (8,356)
   Other income (expense) ...................................................             1,568                 --
                                                                                   -------------      -------------
      Total other income (expense) ..........................................          (265,420)        (1,981,959)
                                                                                   -------------      -------------


LOSS BEFORE PROVISION FOR (BENEFIT FROM) INCOME TAXES .......................          (526,102)        (2,781,649)
PROVISION FOR (BENEFIT FROM) INCOME TAXES ...................................                --                400
                                                                                   -------------      -------------
LOSS FROM CONTINUING OPERATIONS .............................................          (526,102)        (2,782,049)
DISCONTINUED OPERATIONS
   Loss from operations of discontinued division, net of provision for income
     taxes of $0 ............................................................                --            148,364
                                                                                   -------------      -------------
      Total discontinued operations .........................................                --            148,364

NET LOSS ....................................................................          (526,102)        (2,633,685)
   Dividends paid ...........................................................                --            264,698
                                                                                   -------------      -------------
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS ...................................      $   (526,102)      $ (2,898,383)
                                                                                   =============      =============
BASIC AND DILUTED LOSS PER SHARE
  From continuing operation .................................................      $      (0.01)      $      (0.08)
  From discontinued operations ..............................................                --                  0
                                                                                   -------------      -------------
      Total basic and diluted loss per share ................................      $      (0.01)      $      (0.08)
                                                                                   =============      =============
BASIC AND DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING .......................        54,987,474         40,747,791
                                                                                   =============      =============

                       See accompanying notes are an integral part of these financial statements.
</TABLE>

                                                          F-4
<PAGE>
<TABLE>

                                                                                                       US DATAWORKS, INC.
                                                                                                  STATEMENTS OF CASH FLOW
                                                                                       FOR THE THREE MONTHS ENDED JUNE 30

-------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                                2002              2001
                                                                                            ------------     ------------
                                                                                             (UNAUDITED)      (UNAUDITED)
<S>                                                                                         <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss from continuing operations.................................................     $  (526,102)     $(2,782,049)
   Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization of property and equipment...........................          18,641           74,465
     Interest charges on convertible promissory notes..................................         192,619        1,849,639
     Issuance of stock for services rendered...........................................         140,622           32,000
     Issuance of stock for legal settlement............................................           2,900                0
     Issuance of stock for lock-up agreement...........................................             400            6,781
     Issuance of warrants for lock-up agreements.......................................               0           11,520
     Issuance of warrants for services.................................................           1,875                0
     (Increase) decrease in
       Accounts receivable.............................................................        (331,968)         129,583
       Work in progress................................................................          11,312                0
       Prepaid expenses and other current assets.......................................        (126,158)         (15,123)
       Other assets....................................................................          (7,750)               0
     Increase (decrease) in
       Deferred revenue................................................................        (137,020)               0
       Accounts payable................................................................         310,552         (139,586)
       Accrued expenses................................................................         193,896          (35,389)
       Interest payable................................................................           1,805            6,347
       Interest payable - related parties..............................................          11,712            5,328
                                                                                            ------------     ------------
Net cash used in continuing operations.................................................        (242,664)        (856,484)
Net cash used in discontinued operations...............................................         (45,952)         (79,596)
                                                                                            ------------     ------------
Net cash used in operating activities..................................................        (288,616)        (936,080)
                                                                                            ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of property and equipment..................................................               0          (12,393)
   Repayments to related parties.......................................................         (78,506)        (160,944)
                                                                                            ------------     ------------
Net cash used in investing activities..................................................         (78,506)        (173,337)
                                                                                            ------------     ------------
</TABLE>

                                                          F-5
<PAGE>
<TABLE>

                                                                                                        US DATAWORKS, INC.
                                                                                                   STATEMENTS OF CASH FLOW
                                                                                        FOR THE THREE MONTHS ENDED JUNE 30
--------------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                                                                2002              2001
                                                                                            ------------     ------------
                                                                                             (UNAUDITED)       (UNAUDITED)
<S>                                                                                         <C>              <C>
CASH FLOWS FROM FINANCING ACTIVITIES
   Payments on capital lease obligations...............................................          (2,988)          (1,623)
   Proceeds from notes payable.........................................................          30,000                0
   Repayment of notes payable..........................................................         (29,785)         (83,391)
   Proceeds from notes payable - related party.........................................         175,000                0
   Repayment of notes payable - related party..........................................         (96,000)        (110,859)
   Proceeds from convertible promissory notes..........................................         240,000          750,000
   Repayment of convertible promissory notes...........................................         (10,000)        (150,000)
   Proceeds from common stock..........................................................               0          104,654
   Stock issuance costs................................................................               0          (34,798)
   Proceeds from subscription receivables..............................................          21,010                0
   Proceeds from exercise of warrants..................................................           1,500                0
   Rescission of preferred stock.......................................................               0          (10,000)
   Payment of dividends................................................................               0         (264,698)
                                                                                            ------------     ------------
Net cash provided by financing activities..............................................         328,737          199,285
                                                                                            ------------     ------------
Net decrease in cash and cash equivalents..............................................         (38,385)        (910,132)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.........................................         134,016        1,159,230
                                                                                            ------------     ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD...............................................     $    95,631      $   249,098
                                                                                            ============     ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
   INTEREST PAID.......................................................................     $    37,322      $    57,188
                                                                                            ============     ============

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

     During the three months ended June 30, 2002, the Company completed the
following:

         o        In April and May 2002, issued 1,424,259 shares of common stock
                  that it had committed to issue during the year ended March 31,
                  2002.

     During the three months ended June 30, 2001, the Company completed the
following:

         o        Certain founding shareholders of US Dataworks, Inc. exchanged
                  1,528,000 shares of common stock for $220,000 of notes
                  payable.


   See accompanying notes are an integral part of these financial statements.
</TABLE>

                                       F-6
<PAGE>

                               US DATAWORKS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND BUSINESS

     US Dataworks, Inc. (the "Company"), a Nevada corporation, develops,
markets, and supports transaction processing software for Windows NT computer
systems. Its customer base includes many of the largest financial institutions
as well as credit card companies, government institutions, and high-volume
merchants in the United States. It also has a strategic alliance with CheckFree
Corporation (NASDAQ: CKFR) to license the Company's software for its banking
customers and Thomson Financial Publishing, a unit of Thomson Corporation (TSE:
TOC), to incorporate its EPICWare database into the Company's products. Prior to
acquiring US Dataworks, Inc., a Delaware corporation, the Company was a
financial services company specializing in the integration of proprietary
software applications with Applications Service Provider ("ASP") services and an
internet service provider ("ISP"). During July and December 2001, the Company
started shutting down its ISP and ASP operations, respectively, and at March 31,
2002 all ISP and ASP activities had ceased. Effective May 9, 2002, the Company
merged with US Dataworks, Inc., a Delaware corporation, and dissolved the
Delaware corporation.

NOTE 2 - DISPOSAL OF OPERATIONS

     Effective July 31, 2001, management of the Company formally decided to
start shutting down the operations of its Internet service provider,
SeeYouOnline. All assets and liabilities of SeeYouOnline were retained by the
Company. SeeYouOnline ceased providing Internet access services on August 15,
2001.

     Effective December 31, 2001, management of the Company formally decided to
start shutting down the operations of its application service provider ("ASP")
division. On February 14, 2002, the Company entered into an agreement (the
"Settlement Agreement") to settle all outstanding matters and terminate any
existing business between the Company and certain affiliates of the Company. As
part of the Settlement Agreement, effective February 14, 2002, the following
occurred:

     o    the Company transferred to an affiliate all rights in its ASP
          technology software which had a net book value of $723,378

     o    664,000 warrants issued on March 31, 2001 with an exercise price of
          $0.73 issued to the controlling shareholders of the affiliates were
          cancelled

     o    an affiliate and two significant shareholders of the Company forgave
          $260,206 of payables due from the Company, and the Company forgave
          $300,519 of receivables due from the affiliate

     o    notes payable in the amounts of $50,000 and $46,000 entered into in
          November 2001 between the Company and the controlling shareholders of
          the affiliates, respectively, remain payable and are to be paid off
          from proceeds from any future finance arrangements

     o    a $1,024,400 balance on the note payable due to an affiliate, issued
          to the Subsidiary on July 12, 2000 and refinanced on April 2, 2001,
          and accrued expenses for two significant shareholders of the Company
          and an affiliate for $105,600 and $20,000, respectively, remain
          payable and are to be paid off from any future financial arrangements.

     At June 30, 2002, net liabilities of discontinued activities included
accounts payable of $37,543, accrued expenses of $89,600, and a note payable to
an affiliate of $1,024,400.

     The results from discontinued operations for the ASP division and
SeeYouOnline for the three months ended June 30, 2001 included total revenues of
$235,177 and $116,752, respectively, and income from operations of $85,309 and
$63,055, respectively.

     At March 31, 2002, all activities relating to these two discontinued
divisions had ceased, and additional costs relating to these two divisions are
not expected to be incurred subsequent to March 31, 2002.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation
     ---------------------

     The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-QSB and
Regulation S-B

                                      F-7
<PAGE>

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
normal, recurring adjustments considered necessary for a fair presentation have
been included. The financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the Company's Annual
Report on Form 10-KSB/A for the year ended March 31, 2002. The results of
operations for the three months ended June 30, 2002 are not necessarily
indicative of the results that may be expected for the year ended March 31,
2003.

     Going Concern
     -------------

     The Company has received a report from its independent auditors that
includes an explanatory paragraph describing the uncertainty as to the Company's
ability to continue as a going concern. These consolidated financial statements
contemplate the ability to continue as such and do not include any adjustments
that might result from this uncertainty.

     Revenue Recognition
     -------------------

     The Company recognizes revenues in accordance with the provisions of the
American Institute of Certified Public Accountants' Statement of Position 97-2,
"Software Revenue Recognition." The Company licenses its software products under
nonexclusive, nontransferable license agreements. For software arrangements that
require significant production, modification, or customization, the entire
arrangement is accounted for in conformity with Accounting Research Bulletin No.
45, "Long-term Construction-Type Contracts," using the relevant guidance
Statement of Position 81-1, "Accounting for Performance of Construction-Type
Contracts and Certain Production-Type Contracts," using the completed contract
method. Software arrangements are considered to be complete following departure
from the site after customization. For those arrangements that do not require
significant production, modification, or customization, revenue is recognized
when a license agreement has been signed, delivery of the software product has
occurred, the related fee is fixed or determinable, and collectibility is
probable.

     For license agreements that include a separately identifiable fee for
contracted maintenance services, such revenues are recognized on a straight-line
basis over the life of the maintenance agreement noted in the license agreement,
but following any installation period of the software.

     In December 1999, Securities and Exchange Commission ("SEC") Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements," was issued. SAB No. 101 provides the SEC staff's views in applying
accounting principles generally accepted in the United States of America to
selected revenue recognition issues, including software revenue recognition. The
Company adopted SAB No. 101 in the fourth quarter of the year ended March 31,
2002.

     Loss per Share
     --------------

     The Company calculates loss per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share." Basic loss per
share is computed by dividing the loss available to common shareholders by the
weighted-average number of common shares outstanding. Diluted loss per share is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive.

                                      F-8
<PAGE>

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     The following potential common shares have been excluded from the
computation of diluted net loss per share for the periods presented because the
effect would have been anti-dilutive:

<TABLE>
<CAPTION>
                                                                     For the Three Months Ended
                                                                             June 30,
                                                                  -------------------------------
                                                                      2002                2001
                                                                  -----------         -----------
                                                                   (unaudited)        (unaudited)
<S>                                                                 <C>                 <C>
Options outstanding under the Company's stock
    option plans                                                    2,222,500           2,900,000
Options granted outside the Company's stock
    option plans                                                    1,050,250           1,050,250
Warrants issued in conjunction with convertible
    Series B preferred stock                                          629,667             642,999
Warrants issued in conjunction with private
    placements                                                        531,000             287,358
Warrants issued as a financing cost for notes
    payable and convertible notes payable                           3,332,500           1,599,000
Warrants issued in conjunction with lock-up
    agreements                                                        729,759             369,789
Warrants issued for services rendered                               1,748,250             500,000
Warrants issued as part of the acquisition of US
    Dataworks, a Delaware corporation                                 336,000           1,000,000
Convertible Series A preferred stock                                  640,000             640,000
Convertible Series B preferred stock                                  629,666             843,999

</TABLE>

     Concentrations of Credit Risk
     -----------------------------

     The Company sells its products throughout the United States and extends
credit to its customers. It also performs ongoing credit evaluations of such
customers. The Company does not obtain collateral to secure its accounts
receivable. The Company evaluates its accounts receivable on a regular basis for
collectibility and provides for an allowance for potential credit losses as
deemed necessary.

     One strategic partner of the Company accounted for 78% of the Company's net
sales for the three months ended June 30, 2002. At June 30, 2002, amounts due
from this strategic partner was 99% of accounts receivable.

     Recently Issued Accounting Pronouncement
     ----------------------------------------

     In June 2002, the Financial Accounting Standards Board issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities." This
statement addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies Emerging Issues Task Force ("EITF")
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." This statement requires that a liability for a cost associated
with an exit or disposal activity be recognized when the liability is incurred.
Under EITF Issue 94-3, a liability for an exit cost, as defined, was recognized
at the date of an entity's commitment to an exit plan. The provisions of this
statement are effective for exit or disposal activities that are initiated after
December 31, 2002 with earlier application encouraged. The Company does not
expect adoption of SFAS No. 146 to have a material impact, if any, on its
financial position or results of operations.

                                      F-9
<PAGE>

NOTE 4 - PROPERTY AND EQUIPMENT

         Property and equipment at June 30, 2002 consisted of the following:

                  Furniture and fixtures                            $   68,966
                  Telephone equipment                                   91,017
                  Computer equipment                                   221,603
                  Leasehold improvements                                 6,575
                                                                    ----------
                                                                       388,161
                  Less accumulated depreciation and amortization       196,469
                                                                    ----------
                  TOTAL                                             $  191,692
                                                                    ==========

     Depreciation and amortization expense for the three months ended June 30,
2002 and 2001 was $18,641 and $74,465, respectively. For the three months ended
June 30, 2001, $52,578 of depreciation and amortization expense was related to
discontinued operations.

NOTE 5 - NOTES PAYABLE

<TABLE>
<CAPTION>

Notes payable at June 30, 2002 consisted of the following:

         <S>                                                                    <C>
         Notes payable, interest at 10% per annum, unsecured, due in May
             2002 through March 2003.                                           $     20,000
         Notes payable, interest at 12% per annum, unsecured, due in April
             2002 through January 2003.                                              100,000
         Notes payable, interest at 10% per annum, unsecured, due in April
             2003                                                                     30,000
                                                                                ------------
                                                                                     150,000
         Less current portion                                                        150,000
                                                                                ------------
                  Long-term portion                                             $    --
                                                                                ============
</TABLE>

     On July 1, 2000, the Company entered into a note payable agreement for
$52,500. The note is for a 20-month term and bears interest at 10% per annum.
Principal and interest are due monthly. As of March 31, 2002, the balance on the
note payable was $4,785. In May 2002, the outstanding balance on the note was
paid in full.

     During the period October 30, 2001 through January 28, 2002, the Company
entered into Subscription Agreements to issue certain units in exchange for
gross proceeds of $125,000. The first unit was for $50,000 and consisted of a
promissory note, a warrant to purchase 2,500 shares of the Company's common
stock, and 18,750 shares of the Company's common stock. The second unit was for
$15,000 and consisted of a promissory note, a warrant to purchase 1,500 shares
of the Company's common stock, and 11,250 shares of the Company's common stock.
Six other units were each for $10,000, and each unit consisted of a promissory
note, a warrant to purchase 1,000 shares of the Company's common stock, and
7,500 shares of the Company's common stock. The $50,000 promissory note is for a
six-month term, the $15,000 promissory note is for a one-year term, and the
$10,000 promissory notes are for a term of one year. All of the notes bear
interest at 12% per annum and are unsecured. In May 2002, the Company repaid
$25,000 on the $50,000 promissory note. The remaining $25,000 was repaid in
August 2002.

     In April 2002, the Company entered into Subscription Agreements for gross
proceeds of $30,000. Each of the three $10,000 units consisted of a promissory
note and a warrant to purchase 1,000 shares of the Company's common stock. The
promissory notes are for a term of one year, bear interest at 10% per annum, and
are unsecured. Each warrant vests immediately and entitles the holder to
purchase one share of the Company's common stock at $0.40 per share and expires
three years from the date of issuance. The amount to be allocated to the
warrants as a debt discount was determined to be immaterial.

NOTE 6 - NOTES PAYABLE - RELATED PARTIES

     On November 1 and November 28, 2001, the Company entered into note
agreements with a shareholder and an affiliate for $50,000 and $46,000,
respectively. The notes bear interest at 5% per annum, are unsecured, and are
due upon demand. During May 2002, the principal was repaid, and the interest
accrued was forgiven by the note holders.

                                      F-10
<PAGE>

NOTE 6 - NOTES PAYABLE - RELATED PARTIES (CONTINUED)

     On May 2, 2002, the Company entered into a note agreement for $75,000 with
the Company's Chief Executive Officer. On May 22, 2002, an additional note
agreement for $100,000 was entered into with the Company's Chief Executive
Officer. The note proceeds were used to fund the Company's business operations.
The notes bear interest at 12% per annum, are unsecured, and are due upon
demand.

NOTE 7 - CONVERTIBLE PROMISSORY NOTES

     On May 7, 2002 through June 27, 2002, the Company entered into Subscription
Agreements in exchange for gross proceeds of $240,000. The units issued
consisted of 10 convertible promissory notes and warrants to purchase 169,000
shares of the Company's common stock. The holders of eight of the promissory
notes for a total of $100,000 have the option to convert the notes at any time
after 31 days following the issuance date of the note. The holders of two of the
promissory notes for a total of $140,000 have the option to convert the notes at
any time after 91 days following the issuance date of the note.

     The Company has the option to redeem $100,000 of the notes at any time
prior to the notes' maturity date at 105% of the face value of the note, plus
accrued interest, if any, at any time prior to the maturity date. The notes are
convertible at 80% of the average closing price for the 20 trading days
immediately preceding the conversion date, but not less than $0.20 per share
(for $10,000 of the notes) or $0.15 per share (for $90,000 of the notes). The
notes earn interest at 10% per annum, the principal and any unpaid interest are
due one year following the issuance date of the note, and interest is payable in
cash on June 1, 2002, September 1, 2002, December 1, 2002, and March 1, 2003.

     The Company has the option to redeem $140,000 of the notes at any time
prior to the notes' maturity date at 110% of the face value of the notes if the
notes are redeemed within 90 days of the issuance date of the notes, or at 105%
of the face value of the notes if the notes are redeemed more than 90 days from
the issuance date of the notes. The notes are convertible at 80% of the average
closing price for the 20 trading days immediately preceding the conversion date,
but not less than $0.13 per share. The notes earn interest at 10% per annum, the
principal and any unpaid interest are due one year following the issuance date
of the notes, and interest is payable in cash on September 1, 2002, December 1,
2002, and March 1, 2003.

     The warrants to purchase 169,000 shares of the Company's common stock are
exercisable at prices ranging from $0.17 to $0.23 per share and expire three
years from the date of issuance.

     The Company allocates the proceeds received from debt or convertible debt
with detachable warrants or shares of common stock using the relative fair value
of the individual elements at the time of issuance. The amount allocated to the
warrants as a debt discount was calculated at $148,849 and will be recognized as
interest expense over the period until the notes mature. In the event the debt
is settled prior to the maturity date, an expense will be recognized based on
the difference between the carrying amount and the amount of the payment. During
the three months ended June 30, 2002, the Company recognized $98,971 in interest
expense related to the accretion of the debt discount.

NOTE 8 - CONVERTIBLE PROMISSORY NOTES - RELATED PARTIES

     On January 17 and January 26, 2000, the Company entered into a Subscription
Agreement for two, 10% Convertible Promissory Notes (the "January Notes") for
$100,000 and $150,000, respectively, with a director of the Company. The holder
of the January Notes has the option to convert the January Notes at any time
after the closing date of the January Notes. The January Notes are convertible
at the lesser of $2.50 or 75% of the average closing bid price of the Company's
common stock for the five trading days prior to conversion.

     The Company recorded a financing charge of $169,374, representing the
difference between the $2.50 exercise price of the January Notes and the
Company's stock price of $4.20 and $4.19 on the respective issuance dates.
Interest is due on the January Notes on April 1 and October 1. Principal and any
unpaid interest are due on February 28, 2002, if the January Notes have not been
converted prior to such date by either party to the January Notes.

     On May 9, 2002, the note holder resigned as a director. On August 13, 2002,
the Company settled with the note holder for $299,800, representing the
principal of $250,000 plus accrued interest to the settlement date of $49,800,
plus 10% interest on the settlement amount, with the settlement amount to be
paid over 12 months from the settlement date.

                                      F-11
<PAGE>

NOTE 9 - SHAREHOLDERS' DEFICIT

     Convertible Series A Preferred Stock
     ------------------------------------

     At June 30, 2002, there were dividends in arrears of $300,863, or $0.47 per
share, on the Series A.

     Convertible Series B Preferred Stock
     ------------------------------------

     At June 30, 2002, there were dividends in arrears of $20,952, or $0.03 per
share, on the Series B.

     Payment of Dividends
     --------------------

     On May 24, 2001 and June 4, 2001, the Company declared and paid dividends
of $120,000 and $120,000, respectively, on the Company's Series A. On April 18,
2001, the Company declared and paid dividends of $24,698 on the Company's Series
B.

     Common Stock
     ------------

     During the three months ended June 30, 2002, the Company completed the
following:

     o    In April and May 2002, issued 1,424,259 shares of common stock that it
          had committed to issue during the year ended March 31, 2002.

     o    In April 2002, issued 10,000 shares of common stock as a litigation
          settlement.

     o    In May 2002, issued 6,250 warrants as payment for services rendered
          valued at $1,875, which was the fair market value of the services
          rendered.

     o    In May 2002, issued 74,300 shares of stock upon the receipt of funds
          from a subscription receivable for $21,010.

     o    In June 2002, issued 6,250 shares of common stock in exchange for
          proceeds of $1,500 upon the exercise of warrants.

     Common Stock for Services Rendered
     ----------------------------------

         During the three months ended June 30, 2002, the Company completed the
following:

     o    In May 2002, the Company issued 108,750 shares of common stock as
          payment for services rendered valued at $40,865, which was the fair
          market value of the services rendered.

     o    In June 2002, the Company issued 525,000 shares of common stock for
          services rendered valued at $99,750, which was the fair market value
          of the services rendered.

     Common Stock for Lock-Up Agreements
     -----------------------------------

     During the three months ended June 2002, the Company issued 1,740 shares of
common stock valued at $400. This stock was issued to certain purchasers of the
Company's common stock as consideration for the purchasers to enter into lock-up
agreements for the sale of their shares of common stock for a period of one
year. The cost of the issuance of the shares was recognized as a financing cost
in the statement of operations.

NOTE 10 - RELATED PARTY TRANSACTIONS

     During the three months ended June 30, 2002, the Company paid rent expense
totaling $3,000 to an affiliated company, which is owned by significant
shareholders of the Company.

NOTE 11 - SUBSEQUENT EVENTS

     Common Stock and Warrants as a Financing Cost
     ---------------------------------------------

     On July 17, 2002, the Company issued 5,137 shares of common stock and
warrants to purchase 685 shares of common stock to a note holder as compensation
for the note holder to extend the maturity date of $25,000 of the holder's
$50,000 promissory note with the Company.

                                      F-12
<PAGE>

NOTE 11 - SUBSEQUENT EVENTS (CONTINUED)

     Convertible Promissory Notes
     ----------------------------

     Between July 8, 2002 and August 9, 2002, the Company entered into
Subscription Agreements in exchange for gross proceeds of $88,000. The units
issued consisted of twelve convertible promissory notes and warrants to purchase
44,000 shares of the Company's common stock. The holders of the promissory notes
have the option to convert the notes at any time after 31 days following the
issuance date of the note. The Company has the option to redeem the notes at any
time prior to the notes' maturity date at 105% of the face value of the note,
plus accrued interest, if any, at any time prior to the maturity date. The notes
are convertible at 80% of the average closing price for the 20 trading days
immediately preceding the conversion date, but not less than $0.10 per share
(for $68,000 of the notes) or $0.15 per share (for $20,000 of the notes). The
notes earn interest at 10% per annum, the principal and any unpaid interest are
due one year following the issuance date of the note, and interest is payable in
cash on June 1, 2002, September 1, 2002, December 1, 2002, and March 1, 2003.

     The warrants to purchase 44,000 shares of the Company's common stock are
exercisable at prices ranging from $0.10 to $0.17 per share and expire three
years from the date of issuance.

     The Company allocates the proceeds received from debt or convertible debt
with detachable warrants or shares of common stock using the relative fair value
of the individual elements at the time of issuance. The amount allocated to the
warrants as a debt discount will be recognized as interest expense over the
period until the notes mature. In the event the debt is settled prior to the
maturity date, an expense will be recognized based on the difference between the
carrying amount and the amount of the payment.

                                      F-13
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS

     The following discussion and analysis of our financial condition and
results of operations should be read with the unaudited consolidated financial
statements and related notes included elsewhere in this Report.

     When used in this Report, the words "expects," "anticipates," "believes,"
"plans," "will" and similar expressions are intended to identify forward-looking
statements. These are statements that relate to future periods and include, but
are not limited to, statements as to statements regarding our critical
accounting policies, adequacy of cash, expectations regarding net losses and
cash flow, statements regarding our growth and profitability, investments in
marketing and promotion, our need for future financing, our dependence on
personnel and our ability to respond to rapid technological change.
Forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected. These
risks and uncertainties include, but are not limited to, those discussed below,
as well as risks related to our ability to develop and timely introduce products
that address market demand, the impact of alternative technological advances and
competitive products, market fluctuations, our ability to obtain future
financing, and the risks set forth below under "Factors that May Affect Our
Results." These forward-looking statements speak only as of the date hereof. US
Dataworks expressly disclaims any obligation or undertaking to release publicly
any updates or revisions to any forward-looking statements contained herein to
reflect any change in the our expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.

     All references to "US Dataworks," "we," "us" or "our" means US Dataworks,
Inc.

     MICRworks, Returnworks, Remitworks and Remoteworks are trademarks of US
Dataworks. Other trademarks referenced herein are the property of their
respective owners.

OVERVIEW

     US Dataworks is a developer of electronic check processing software,
serving several of the top 25 banking institutions, top 10 credit card issuers,
and the United States Government. We generate revenue from the licensing, system
integration and maintenance of our core products: MICRworks, Returnworks,
Remitworks and Remoteworks for the financial services industry. The software
developed by us is designed to enable organizations to transition from
traditional paper-based payment and billing processes to electronic solutions.
US Dataworks' products include check processing, point-of-purchase transactions
and turnkey Automated Clearing House, or ACH, payments. Our products are
designed to provide organizations with an in-house solution that will complement
such organizations' existing technologies and systems. We also offer
comprehensive solutions to support the outsourcing requirements of traditional
and Internet-based organizations, in particular, financial service-related
vendors. US Dataworks' strategy is to identify, design and develop products that
fill specific niches in the financial transaction processing industry.

     US Dataworks was incorporated as JLQ, Inc. in December 1994, in the state
of Colorado and we changed our name to New World Publishing in October 1997. In
May 1999, we acquired Communications Television, Inc., a California corporation,
and changed our business to an Internet marketing and technology infrastructure
company specializing in supporting cost effective business-to-business and
business-to-consumer revenue based marketing initiatives. We changed our name to
Sonicport.com, Inc. in October 1999 and in February 2000, changed our state of
incorporation from Colorado to Nevada. In February 2001, we changed our name to
Sonicport, Inc.

     We acquired US Dataworks, Inc., a Delaware corporation, in April 2001.
Following the acquisition, we focused our business on developing electronic
check processing software. In March 2002, we changed our name to US Dataworks,
Inc. Effective May 9, 2002, the Company merged with US Dataworks, Inc., a
Delaware corporation, and the dissolved the Delaware corporation.

CRITICAL ACCOUNTING POLICIES

     The discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate these estimates, including those
related to revenue recognition and concentration of credit risk. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

                                       1
<PAGE>

     We believe that of the significant accounting policies used in the
preparation of our consolidated financial statements (see Note 3 to the
Consolidated Financial Statements), the following are critical accounting
policies, which may involve a higher degree of judgment, complexity and
estimates.

     REVENUE RECOGNITION

     We license our software products under non-exclusive, non-transferable
license agreements. For license agreements that require significant production,
modification or customization, we do not recognize revenue until we have
completed the work under the agreement. For those license agreements that do not
require significant production, modification or customization, we recognize
revenue when the license agreement has been signed, delivery of the software
product has occurred, the related fee is fixed or determinable and
collectibility is probable. If the license agreement includes a separate fee for
maintenance services, we recognize revenue ratably over the term of the
agreement.

     CONCENTRATIONS OF CREDIT RISK

     We extend credit to our customers and perform ongoing credit evaluations of
our customers. We do not obtain collateral from our customers to secure our
accounts receivables. We evaluate our accounts receivable on a regular basis for
collectibility and provide for an allowance for potential credit losses as
deemed necessary.

RESULTS OF OPERATIONS

     The results of operations reflected in this discussion include the
operations of US Dataworks for the three months ended June 30, 2002 and 2001.
The acquisition agreement between US Dataworks and US Dataworks, Inc., a
Delaware corporation, was signed on March 31, 2001, with an effective date of
April 2, 2001. Balance sheet information, as well as revenue and expenses, are
affected by this consolidation and it is important to understand this when
viewing the overall results.

     REVENUE

     Revenue increased by $499,354 or 182% to $773,131 for the three months
ended June 30, 2002 from $273,777 for the three months ended June 30, 2001. The
increase in revenue was primarily attributable to an increase in the number of
license agreements we entered into in first fiscal quarter of 2003. The increase
in license agreements led to increased installations, generating more revenue
from custom programming and maintenance contracts related to these licenses.

     COST OF SALES

     Cost of sales increased by $58,423 or 53% to $168,269 for the three months
ended June 30, 2002 from $109,846 for the three months ended June 30, 2001. The
increase was primarily attributable to an increase in labor related costs.

     OPERATING EXPENSES

     Total operating expenses decreased by $98,077 or 10% to $865,544 for the
three months ended June 30, 2002 from $963,621 for the three months ended June
30, 2001. The decrease was primarily attributable to reductions in marketing
expenses, salary expenses and administrative costs.

     OTHER EXPENSES

     Other expenses, including interest expense and financing costs, decreased
during the three months ended June 30, 2002 primarily due to reduced interest
charges on our convertible promissory notes in the form of fixed conversion
features and amounts allocated to warrants as a debt discount. Interest expense
decreased by $1,716,991 or 87% to $250,230 for the three months ended June 30,
2002 from $1,967,221 for the three months ended June 30, 2001.

     DISCONTINUED OPERATIONS

     For the three months ended June 30, 2002, we did not recognize a gain or a
loss on discontinued operations of our internet service provider, or ISP, and
application services provider, or ASP, divisions, as compared to a gain of
$148,364 for the three months ended June 30, 2001. In April 2001, we completed
the acquisition of US Dataworks, Inc., a Delaware corporation, a developer of
electronic check processing software. In August 2001, we ceased operations in
our ISP division due to the increased competition in the ISP market and the
resulting negative effect on our cash flow. In February 2002, we sold our ASP
technology software and ceased operations in our ASP division in order to focus
on our core business of software development.

                                       2
<PAGE>

     NET LOSS

     Net loss decreased by $2,107,583 or 80% to a net loss of $526,102 for the
three months ended June 30, 2002 from $2,633,685 for the three months ended June
30, 2001.

LIQUIDITY AND CAPITAL RESOURCES

     Cash and cash equivalents decreased by $153,467 or 67% to $95,631 for the
three months ended June 30, 2002 from $249,098 for the three months ended June
30, 2001. This decrease was primarily due to a decrease in interest charges on
our convertible promissory notes and financing costs and a decrease in our
investing activities, offset by an increase in proceeds from our financing
activities. Cash used for operating activities was $288,616 for the three months
ended June 30, 2002, of which $45,952 was used in discontinued operating
activities, compared to $936,080 for the three months ended June 30, 2001, of
which $79,596 was used in discontinued operating activities. Net loss from
operations reduced cash by $526,102.

     Cash used for investment activities for the three months ended June 30,
2002 consisted of repayments to our affiliates totaling $78,506. Cash used for
investment activities for three months ended June 30, 2001 consisted of the
purchase of property and equipment and repayments to our affiliates totaling
$173,337.

     Financing activities provided cash of $328,737 for the three months ended
June 30, 2002 and included the issuance of $205,000 in promissory notes,
$240,000 in convertible promissory notes and $1,500 proceeds from the exercise
of warrants. Subsequent to June 30, 2002, we received an aggregate of $88,000
pursuant to twelve convertible promissory notes.

     Financing activities provided cash of $199,285 for the three months ended
June 30, 2001 and included the issuance of $750,000 in promissory notes and
$104,654 from the sales of our common stock.

FACTORS THAT MAY OUR AFFECT RESULTS

WE HAVE A GENERAL HISTORY OF LOSSES AND CANNOT ASSURE YOU THAT WE WILL OPERATE
PROFITABLY IN THE FUTURE.

     We have incurred losses for the last two fiscal years and expect that our
net losses and negative cash flow will continue for the foreseeable future. Our
auditors have included an explanatory paragraph in their Independent Auditor's
Report included in our audited financial statements for the years ended March
31, 2002 and 2001 filed with our annual report on Form 10-KSB for fiscal year
ended March 31, 2002, to the effect that our loss from operations for the year
ended March 31, 2002, and the accumulated deficit at March 31, 2002 raise
substantial doubt about our ability to continue as a going concern. We have
incurred significant losses in the last two years. As of June 30, 2002, our
accumulated deficit was $28,038,106. We believe that our planned growth and
profitability will depend in large part on our ability to promote our brand name
and gain and expand clients for whom we would provide licensing agreements and
system integration. Accordingly, we intend to invest heavily in marketing and
promotion, development of our client base and development of our marketing
technology and operating infrastructure.

WE WILL NEED TO RAISE ADDITIONAL CAPITAL IN THE NEXT 6 MONTHS.

     We believe we currently have adequate cash to fund anticipated cash needs
for at least the next 6 months. We will need to raise additional capital and are
actively pursuing various financing options. However, we may not be able to
raise additional funds on favorable terms or at all. If we are unable to acquire
additional capital or are required to raise it on terms that are less
satisfactory than we desire, it will have a material adverse effect on our
financial condition and our ability to continue to operate our business. If we
raise capital through additional equity financings, these financings may result
in dilution to existing shareholders.

OUR OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS CAUSED BY MANY FACTORS WHICH
COULD RESULT IN US DATAWORKS' FAILURE TO ACHIEVE ITS REVENUE OR PROFITABILITY
EXPECTATIONS.

     Our operating results can vary significantly depending upon a number
factors, many of which are outside our control. Factors that may affect our
quarterly operating results include:

     o    market acceptance of and changes in demand for our products and
          services;

     o    gain or loss of clients or strategic relationships;

                                       3
<PAGE>

     o    announcement or introduction of new software, services and products by
          us or by our competitors;

     o    our ability to build brand recognition;

     o    timing of sales to customers;

     o    price competition;

     o    our ability to upgrade and develop systems and infrastructure to
          accommodate growth;

     o    our ability to attract and integrate new personnel in a timely and
          effective manner;

     o    our ability to introduce and market products and services in
          accordance with market demand;

     o    changes in governmental regulation;

     o    reduction in or delay of capital spending by our clients due to the
          effects of terrorism, war and political instability; and

     o    general economic conditions, including economic conditions specific to
          the financial services industry.

     In addition, each quarter we derive a significant portion of our revenue
from agreements signed at the end of the quarter. Our operating results could
suffer if the timing of these agreements is delayed. Depending on the type of
agreements we enter into, we may not be able to recognize revenue under these
agreement in the quarter in which they are signed. Some of all of these factors
could negatively affect demand for our products and services, and our future
operating results.

     Most of our operating expenses are relatively fixed in the short-term. We
may be unable to rapidly adjust spending to compensate for any unexpected sales
shortfall, which could harm our quarterly operating results. Because of the
emerging nature of the markets in which we compete, we do not have the ability
to predict future operating results with any certainty. Because of the above
factors, you should not rely on period-to-period comparisons of results of
operation as an indication of future performances.

BECAUSE A SMALL NUMBER OF CUSTOMERS HAS HISTORICALLY ACCOUNTED FOR AND MAY IN
FUTURE PERIODS ACCOUNT FOR SUBSTANTIAL PORTIONS OF OUR REVENUE, OUR REVENUE
COULD DECLINE BECAUSE OF DELAYS OF CUSTOMER ORDERS OR THE FAILURE TO RETAIN
CUSTOMERS.

     We have a small number of customers that account for a significant portion
of our revenue. Our revenue could decline because of a delay in signing
agreements with a single customer or the failure to retain an existing customer.
We may not obtain additional customers. The failure to obtain additional
customers and the failure to retain existing customers will harm our operating
results.

OUR BUSINESS IS DEPENDENT ON GENERAL ECONOMIC AND BUSINESS CONDITIONS.

     The revenue growth and profitability of our business depends on the overall
demand for computer software and services in the product segments in which we
compete. Because our sales are primarily to major banking and government
customers, our business also depends on general economic and business
conditions. A softening of demand caused by a weakening of the economy may
result in decreased revenue or lower growth rates. There can be no assurances
that we will be able to effectively promote future license revenue growth in our
application business.

WE MAY NOT BE ABLE TO ATTRACT, RETAIN OR INTEGRATE KEY PERSONNEL, WHICH MAY
PREVENT US FROM SUCCEEDING.

     We may not be able to retain our key personnel or attract other qualified
personnel in the future. Our success will depend upon the continued service of
key management personnel. The loss of services of any of the key members of our
management team or our failure to attract and retain other key personnel could
disrupt operations and have a negative effect on employee productivity and
morale and harm our financial results.

WE OPERATE IN A MARKET THAT IS INTENSELY AND INCREASINGLY COMPETITIVE.

     The market for financial services software is relatively new and highly
competitive. Our future success will depend on our ability to adapt to rapidly
changing technologies, evolving industry standards, product offerings and
evolving demands of the marketplace.

                                       4
<PAGE>

     Some of our competitors have longer operating histories, larger installed
customer bases, greater name recognition and longer relationships with clients
and significantly greater financial, technical, marketing and public relations
resources than US Dataworks. Our competitors may also be better positioned to
address technological and market developments or may react more favorably to
technological changes. We compete on the basis of a number of factors, including
the breadth and quality of services, creative design and systems engineering
expertise, pricing, and technological innovation and understanding clients'
strategies and needs. Competitors may develop or offer strategic services that
provide significant technological, creative, performance, price or other
advantages over the services offered by US Dataworks. If we fail to gain market
share or lose existing market share, our financial condition, operating results
and business could be adversely affected and the value of the investment in us
could be reduced significantly. We may not have the financial resources,
technical expertise or marketing, distribution or support capabilities to
compete successfully.

WE MAY BE RESPONSIBLE FOR MAINTAINING THE CONFIDENTIALITY OF OUR CLIENT'S
SENSITIVE INFORMATION.

     The services we provide for our clients may grant us access to confidential
or proprietary client information. Although we have implemented policies to
prevent such client information from being disclosed to unauthorized parties or
used inappropriately, any unauthorized disclosure or use could result in a claim
against us for substantial damages. Our contractual provisions attempting to
limit these damages may not be enforceable in all instances or may otherwise
fail to adequately protect us from liability for damages.

OUR PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS HAVE SIGNIFICANT
VOTING POWER AND MAY TAKE ACTIONS THAT MAY NOT BE IN THE BEST INTEREST OF OUR
OTHER STOCKHOLDERS.

     Our principal stockholders, executive officers, directors and their
affiliates, in the aggregate, own more than 40% of our outstanding common stock.
These stockholders, if they act together, will be able to control our management
and affairs and all matters requiring shareholder approval, including the
election and removal of directors and approval of significant corporate
transactions. This influence over our affairs might be adverse to the interest
of our other stockholders. In addition, this concentration of ownership may
delay or prevent a change in control and might have an adverse effect on the
market price of our common stock.

FUTURE SALES OF OUR COMMON STOCK MAY CAUSE THE MARKET PRICE OF OUR COMMON STOCK
TO DECLINE.

     As of June 30, 2002, there were approximately 56,798,034 shares of common
stock outstanding, of which approximately 45,000,000 are restricted securities
under the Securities Act, a majority of which are held by affiliates of US
Dataworks. These restricted securities will be eligible for sale from time to
time upon expiration of applicable holding periods under Rule 144 under the
Securities Act. If these holders sell in the public market, these sales could
cause the market price of our common stock to decline. This also could make it
more difficult for us to raise funds through future offerings of our common
stock.

OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY MAY HINDER OUR ABILITY TO
COMPETE.

     We rely on a combination of patent, trademark, trade secrets,
confidentiality procedures and contractual procedures to protect our
intellectual property rights. If we are unable to adequately protect our
intellectual property, our business may suffer from the piracy of our technology
and the associated loss in revenue. Any patents that we may hold may not
sufficiently protect our intellectual property and may be challenged by third
parties. Our efforts to protect our intellectual property rights, may not
prevent the misappropriation of our intellectual property. Other parties may
also independently develop similar or competing products that do not infringe
upon our intellectual property rights. These infringement claims or any future
claims could cause us to spend significant time and money to defend our
products, redesign our products or develop or license a substitute technology.
We may be unsuccessful in acquiring or developing substitute technology and any
required license may be unavailable on commercially reasonable terms, if at all.
In the event of litigation to determine the validity of any third party claims
or claims by us against such third party, such litigation, whether or not
determined in our favor, could result in significant expense and divert the
efforts of our technical and management personnel, regardless of the outcome of
such litigation.

                                       5
<PAGE>

                          PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     On July 19, 2002, an individual and former director of US Dataworks, H. J.
Frazier, filed a lawsuit against US Dataworks in Los Angeles Superior Court
alleging breach of debenture agreement. In the complaint, the plaintiff prays
for damages in the amount of $275,000, plus prejudgment interest and cost of
suit. US Dataworks and Mr. Frazier have reached a settlement pursuant to which
US Dataworks will make monthly payments in the amount of $23,800 per month until
March 1, 2003. On March 1, 2003, US Dataworks has the option to pay the
remaining balance or to make monthly payments in the amount of $26,167 through
August 1, 2003. US Dataworks also agreed to pay Mr. Frazier's attorney's fees
and costs, up to a maximum of $5,000, and reimburse Mr. Frazier for the cost of
the suit. Upon payment in full, Mr. Frazier will dismiss the lawsuit with
prejudice.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(c)      Recent Sales of Unregistered Securities

     During the three months ended June 30, 2002, we issued shares of our common
stock and warrants to purchase shares of our common stock in exchange for
services rendered, including the execution of certain lock up agreements. The
following table summarizes these transactions:

   Date           Type of Security    Value of Services ($)   Amount Issued (#)
   ----           ----------------    ---------------------   -----------------
May 1, 2002          Common Stock               400                  1,740
May 1, 2002          Common Stock            12,725                 45,000
May 23, 2002         Common Stock             8,285                 29,300
May 23, 2002           Warrant                1,875                  6,250
May 23, 2002         Common Stock            40,865                108,750
June 4, 2002         Common Stock            99,750                525,000


     At various times between April 3, 2002 and June 30, 2002, we issued units
through private placements, each consisting of a promissory note and a warrant
to purchase shares of our common stock, or a combination thereof. The following
table summarizes these transactions.

<TABLE>
<CAPTION>

                                                                           Terms of
     Date        Unit Price($)   Title of Security     Amount Sold    Conversion/Exercise
     ----        -------------   -----------------     -----------    -------------------
<S>                   <C>         <C>                   <C>             <C>
May 15, 2002          10,000      Promissory Note       $10,000               (1)
                                      Warrant             5,000         $0.23 per share
June 27, 2002          5,000      Promissory Note        $5,000               (1)
                                      Warrant             2,500         $0.17 per share
June 27, 2002          5,000      Promissory Note        $5,000               (1)
                                       Warrant            2,500         $0.17 per share
</TABLE>

-----------------
(1)  The conversion price is equal 80% of the average closing price of our
     common stock during the 20 trading days immediately prior to the conversion
     date, however the conversion price cannot be less than $0.15.

     On April 17, 2002, we issued 10,000 shares of our common stock in
connection with a lawsuit settlement.

     On June 14, 2002, we issued 6,250 share of our common stock at $0.24 per
share upon exercise of a warrant.

                                       6
<PAGE>

     The issuances disclosed in this Item 2 were made to accredited investors
and were deemed to be exempt from registration under the Securities Act of 1933
in reliance upon section 4(2) of the Securities Act or Regulation D promulgated
thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     On July 19, 2002, an individual and former director of US Dataworks, H. J.
Frazier, filed a lawsuit against US Dataworks in Los Angeles Superior Court
alleging breach of debenture agreement. In the complaint, the plaintiff prays
for damages in the amount of $275,000, plus prejudgment interest and cost of
suit. US Dataworks and Mr. Frazier have reached a settlement pursuant to which
US Dataworks will make monthly payments in the amount of $23,800 per month until
March 1, 2003. On March 1, 2003, US Dataworks has the option to pay the
remaining balance or to make monthly payments in the amount of $26,166 through
August 1, 2003. US Dataworks also agreed to pay Mr. Frazier's attorney's fees
and costs, up to a maximum of $5,000, and reimburse Mr. Frazier for the cost of
the suit. Upon payment in full, Mr. Frazier will dismiss the lawsuit with
prejudice.

     US Dataworks has issued and outstanding shares of Series A Convertible
Preferred Stock, holders of which are entitled to receive dividends at a rate of
15% per annum. As of August 20, 2002, there were dividends in arrears of
$334,397, or $0.52 per share.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

     None.

(b)      Reports on Form 8-K.

     The Company did not file any reports on Form 8-K with the Securities and
Exchange Commission during the three months ended June 30, 2002.


                                       7
<PAGE>

                                    SIGNATURE


     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

     Dated:  August 20, 2002

                                 US DATAWORKS, INC.



                                 By  /s/ Richard Shapiro
                                    --------------------------------------------
                                                  Richard Shapiro
                                              Chief Financial Officer
                                    (Principal Financial and Accounting Officer)

                                       8