<PAGE>


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

                                   -----------

                                    FORM 10-Q

                                   -----------

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 31, 2002

[ ]   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 BROADBAND, 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 May 31, 2002, there were 67,050,000 shares of common stock outstanding.


<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                                      INDEX


<Table>
<Caption>

                                                                                                 PAGE
<S>                                                                                              <C>
PART 1 - FINANCIAL INFORMATION

         Item 1.  Consolidated Financial Statements (Unaudited)

                  Consolidated Balance Sheets at May 31, 2002 and August 31, 2001                  3

                  Consolidated Statements of Earnings for the Three and Nine
                  Months Ended May 31, 2002 and 2001                                               4

                  Consolidated Statements of Changes In Shareholders' Equity for the
                  Nine Months Ended May 31, 2002 and Twelve Months Ended
                  August 31, 2001                                                                  5

                  Consolidated Statements of Cash Flows for the Nine months Ended
                  May 31, 2002 and 2001                                                            6

                  Notes to the Consolidated Financial Statements                                  7-28

         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                            28-32

         Item 3.  Quantitative and Qualitative Disclosures about Market Risk                      32

PART 2 - OTHER INFORMATION

         Item 1.  Legal Proceedings                                                               32

         Item 2.  Recent Sales of Unregistered Securities or Changes
                  in Securities and Use of Proceeds.                                              32

         Item 3.  Defaults Upon Senior Securities                                                 32

         Item 4.  Submission of Matters to a Vote of Security Holders                             32

         Item 5.  Other Information                                                               32

         Item 6.  Exhibits and Reports on Form 8-K                                                32

SIGNATURES                                                                                        33

</Table>

<PAGE>


                                      EAGLE BROADBAND, INC., AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS
                                                   (In thousands)



<Table>
<Caption>

                                                                              May 31,         August 31,
                                                                               2002             2001
                                                                               ----             ----
                                                                            (Unaudited)       (Audited)
<S>                                                                         <C>               <C>
                                             ASSETS

CURRENT ASSETS:
     Cash and Cash Equivalents                                              $    6,983        $   23,843
     Accounts Receivable                                                         5,595             7,144
     Inventories                                                                 7,852            10,637
     Prepaid Expenses                                                              974             1,025
                                                                            ----------        ----------
         TOTAL CURRENT ASSETS                                                   21,404            42,649

PROPERTY AND EQUIPMENT:
     Operating Equipment                                                        42,283            28,469
     Less: Accumulated Depreciation                                             (3,018)           (2,005)
                                                                            ----------        ----------
         TOTAL PROPERTY AND EQUIPMENT                                           39,265            26,464

OTHER ASSETS:
     Deferred Advertising Costs and Security Deposits                              625               497
     Goodwill                                                                    7,916             5,966
     Less: Accumulated Amortization                                               (696)             (472)
     Other Intangible Assets                                                    98,965            98,954
     Less: Accumulated Amortization                                             (6,191)           (3,407)
     Other Assets                                                                  153                16
                                                                            ----------        ----------
         TOTAL OTHER ASSETS                                                    100,772           101,554
                                                                            ----------        ----------
TOTAL ASSETS                                                                $  161,441        $  170,667
                                                                            ==========        ==========

                               LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts Payable                                                       $    4,049        $    4,525
     Accrued Expenses                                                            5,683             6,406
     Notes Payable                                                               5,346             5,933
     Line of Credit                                                              1,012             1,846
     Capital Lease Obligations                                                      12                48
     Sales Taxes Payable                                                           426               598
     Deferred Taxes                                                                 15                15
                                                                            ----------        ----------
         TOTAL CURRENT LIABILITIES                                              16,543            19,371

LONG-TERM LIABILITIES:
     Capital Lease Obligations
       (net of current maturities)                                                  95               115
     Deferred Taxes                                                                 32                32
     Long-Term Debt                                                                850             2,021
                                                                            ----------        ----------
         TOTAL LONG-TERM LIABILITIES                                               977             2,168

COMMITMENTS AND CONTINGENT LIABILITIES

SHAREHOLDERS' EQUITY:
     Preferred Stock - $.001 par value
         Authorized 5,000,000 shares
         Issued -0- shares                                                         --                --
     Common Stock - $.001 par value
         Authorized 100,000,000 shares
         Issued and Outstanding at May 31, 2002
         and August 31, 2001, 67,050,000 and 60,264,000, respectively               67                60
     Paid in Capital                                                           156,726           153,426
     Retained Earnings                                                         (12,872)           (4,358)
                                                                            ----------        ----------
         TOTAL SHAREHOLDERS' EQUITY                                            143,921           149,128
                                                                            ----------        ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                  $  161,441        $  170,667
                                                                            ==========        ==========

</Table>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                 3

<PAGE>

                                      EAGLE BROADBAND, INC., AND SUBSIDIARIES
                                        CONSOLIDATED STATEMENTS OF EARNINGS
                                                   (In thousands)



<Table>
<Caption>



                                              For the Three Months ended May 31        For the Nine Months ended May 31
                                                         (Unaudited)
                                                   2002               2001                 2002                2001
                                                   ----               ----                 ----                ----
<S>                                              <C>                <C>                  <C>                 <C>
NET SALES:
    Structured wiring                            $ 1,988            $ 3,772              $ 5,580             $ 5,366
    Broadband services                               348                220                  914                 293
    Products                                       3,278              6,901               14,491              11,769
    Other                                            871                465                1,641                 592
                                                 -------            -------              -------             -------
TOTAL SALES                                        6,485             11,358               22,626              18,020
                                                 -------            -------              -------             -------
COSTS OF GOODS SOLD:
    Materials other than Cable and Wire                0                368                    1                 903
    Direct Labor and Related Costs                   670                597                2,108               1,369
    Products and Integration Service               2,167              7,378               11,589               9,634
    Structured Wiring Labor and Materials            691                393                1,387               1,150
    Broadband Services Costs                         266                107                  641                 157
    Depreciation and Amortization                    124                185                  279                 437
    Other Manufacturing Costs                        102                 22                  141                 135
                                                 -------            -------              -------             -------
TOTAL COSTS OF GOODS SOLD                          4,020              9,050               16,146              13,785
                                                 -------            -------              -------             -------
GROSS PROFIT                                       2,465              2,308                6,480               4,235
                                                 -------            -------              -------             -------
OPERATING EXPENSES:
    Selling, General and Administrative:
        Salaries and Related Costs                 2,442              1,322                6,791               3,288
        Advertising and Promotion                    118                 96                  381                 359
        Depreciation and Amortization              1,243              1,163                3,727               1,651
        Other Support Costs                        1,194              1,845                4,004               2,729
        Research and Development                      85                 42                  349                 729
                                                 -------            -------              -------             -------
TOTAL OPERATING EXPENSES                           5,082              4,468               15,252               8,756
                                                 -------            -------              -------             -------

EARNINGS/(LOSS) FROM OPERATIONS BEFORE
OTHER REVENUES/(EXPENSES), INCOME TAXES
AND OTHER COMPREHENSIVE INCOME                    (2,617)            (2,160)              (8,772)             (4,521)

OTHER REVENUES/(EXPENSES):
    Interest Income - net                             49                445                  324               1,587
    Other Income                                      --                 --                   --                  --
                                                 -------            -------              -------             -------
       TOTAL OTHER REVENUES                           49                445                  324               1,587

EARNINGS/(LOSS) BEFORE MINORITY INTEREST
IN AFFILIATE, INCOME TAXES AND OTHER
COMPREHENSIVE INCOME                              (2,568)            (1,715)              (8,448)             (2,934)
                                                 -------            -------              -------             -------

Provisions For Income Taxes                           --                 --                   --                  --
                                                 -------            -------              -------             -------

NET EARNINGS/(LOSS)                               (2,568)            (1,715)              (8,448)             (2,934)
                                                 -------            -------              -------             -------

OTHER COMPREHENSIVE INCOME, NET OF TAX

Unrealized Holding Gain/(Loss)                       208             (1,182)                 (66)                  7
                                                 -------            -------              -------             -------

OTHER COMPREHENSIVE INCOME/(LOSS)                $(2,360)           $(2,897)             $(8,514)            $(2,927)
                                                 =======            =======              =======             =======

NET EARNINGS/(LOSS) PER COMMON SHARE:
Basic                                            $ (0.04)           $ (0.03)             $ (0.13)            $ (0.07)
Diluted                                          $ (0.04)           $ (0.03)             $ (0.13)            $ (0.07)
Comprehensive Income/(Loss)                      $ (0.04)           $ (0.04)             $ (0.13)            $ (0.07)

</Table>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                 4


<PAGE>

--------------------------------------------------------------------------------
                    EAGLE BROADBAND, INC. AND SUBSIDIARIES
          CONSOLIDTED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                (in thousands)
                                 (Unaudited)
--------------------------------------------------------------------------------

<Table>
<Caption>

                                                                                  ADDITIONAL                       TOTAL
                                        COMMON STOCK             PREFERRED         PAID IN         RETAINED     SHAREHOLDERS'
                                      SHARES       VALUE           STOCK           CAPITAL         EARNINGS       EQUITY
<S>                                   <C>        <C>            <C>              <C>             <C>          <C>
TOTAL SHAREHOLDERS' EQUITY
   AS OF AUGUST 31, 2000              25,609          26              ---             52,160         1,875        54,061
                                    --------      ------         --------         ----------      -------      ---------

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

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

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

Unrealized Holding Gain                  ---         ---              ---                ---         (359)          (359)
                                    --------      ------         --------         ----------      -------      ---------

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


Net Loss for Nine Months
   Ended May 31, 2002                    ---         ---              ---                ---       (8,448)        (8,448)

New Stock Issued to Shareholders:
   For Services and Compensation         418         ---              ---                243          ---            243
   For Property and Other Assets         274         ---              ---                181          ---            181
   For Retirement of Debt and
      Liabilities                      5,375           6              ---              2,579          ---          2,585
   For Acquisitions                    2,002           2              ---              1,079          ---          1,081

Treasury Stock                        (1,283)         (1)             ---               (782)         ---           (783)

Unrealized Holding Gain                  ---         ---              ---                ---          (66)           (66)
                                    --------      ------         --------         ----------      -------      ---------

TOTAL SHAREHOLDERS' EQUITY
AS OF MAY 31, 2002                    67,050     $    67        $     ---        $   156,726     $(12,872)    $  143,921
                                    ========      ======         ========         ==========      =======      =========
</Table>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       5
<PAGE>

--------------------------------------------------------------------------------
                    EAGLE BROADBAND, INC. AND SUBSIDIARIES
                     CONSOLIDTED STATEMENTS OF CASH FLOWS
                                (in thousands)
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                    For the Nine Months ended May 31,
                                                                             2002      2001
                                                                             ----      ----
                                                                               (Unaudited)
<S>                                                                 <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earning/(Loss)                                                          $(8,514)  $ (2,927)

Adjustments To Reconcile Net Earnings to Net Cash
Used By Operating Activities:
   Stock Issued for Services Rendered                                           243      3,325
   Depreciation and Amortization                                              4,006      2,087
   Allowance for Doubtful Accounts                                              138        ---
   Stock Issued for Interest Expense                                             92        ---
   (Increase)/Decrease in Accounts Receivable                                 1,411      4,672
   (Increase)/Decrease in Inventories                                         2,785      1,142
   (Increase)/Decrease in Prepaid Expenses                                       51       (172)
   Increase/(Decrease) in Accounts Payable                                     (506)     1,981
   Increase/(Decrease) in Accrued Expenses                                   (1,575)    (5,023)
                                                                            -------   --------

     Total Adjustment                                                         6,645      8,012

Net Cash Used/Provided by Operating Activities                               (1,869)     5,085

CASH FLOWS FROM INVESTING ACTIVITIES:
   (Purchase)/Disposal of Property and Equipment                            (13,633)    (6,161)
   Purchase of ClearWorks.Net, Inc.                                             ---     (7,654)
   Purchase of DSS Security, Inc., Net of Cash Acquired                           6        ---
   (Increase)/Decrease in Other Intangible Assets                                (9)       (10)
   (Increase)/Decrease in Other Assets                                         (234)        12
                                                                            -------   --------

Net Cash Used by Investing Activities                                       (13,870)   (13,813)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase/(Decrease) in Notes Payable and Long-Term Debt                      552      3,864
   Increase/(Decrease) in Capital Leases                                        (56)        16
   Increase/(Decrease) in Lines of Credit                                      (834)       197
   Increase/(Decrease) in Deferred Taxes                                        ---        (32)
   Proceeds From Sale of Common Stock, Net                                      ---      1,078
   Treasury Stock                                                              (783)      (994)
                                                                            -------   --------

Net Cash Used from Financing Activities                                      (1,121)     4,129
                                                                            -------   --------

Net Increase/(Decrease) in Cash                                             (16,860)    (4,599)

CASH AT BEGINNING OF THE PERIOD                                              23,843     32,346
                                                                            -------   --------

CASH AT THE END OF THE YEAR                                                 $ 6,983   $ 27,747
                                                                            =======   ========

Supplemental Disclosure of Cash Flow Information:
Net Cash Paid During the Year for
    Interest                                                                $    96   $    143

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

</Table>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       6
<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:

      Eagle Broadband, Inc., (formerly 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 personal communications markets.
      The Company designs, manufactures, markets and services its products under
      the Eagle Broadband, Inc. and BroadbandMagic, 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. Also
      provided is last mile cable and fiber installation services as well as
      comprehensive IT products and services.

A)    Consolidation

      At May 31, 2002, the Company's subsidiaries are: AtlanticPacific
      Communications, Inc. (APC); EToolz, Inc. (ETI); Eagle Wireless
      International, Inc. (EWI); BroadbandMagic, Inc. (BBM); ClearWorks.Net,
      Inc. (.NET); ClearWorks Communications, Inc. (COMM); ClearWorks Home
      Systems, Inc. (HSI); Contact Wireless, Inc. (CWI); DSS Security, Inc.
      (DSS); United Computing Group, Inc. (UCG); and Link Two Communications,
      Inc. (LINK II).  The consolidated financial statements include the
      accounts of the Company and its subsidiaries. All significant
      inter-company transactions and balances have been eliminated in
      consolidation.

B)    Cash and Cash Equivalents

      The Company has $6,983,000 and $23,843,000 invested in interest bearing
      accounts and marketable securities (Note 9) at May 31, 2002 and August 31,
      2001, respectively.

C)    Property and Equipment

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


<Table>
<Caption>

                                                                        Years
                                                                        -----
                   <S>                                               <C>
                   Head-End Facility and Fiber Infrastructure             20
                   Manufacturing Equipment                               3-7
                   Furniture and Fixtures                                2-7
                   Office Equipment                                        5
                   Leasehold Improvements                            Life of Lease
                   Property and Equipment                                  5
                   Vehicles                                                5

</Table>

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

D)    Inventories

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


<Table>
<Caption>

                                         May 31, 2002      August 31, 2001
                                         ------------      ---------------
                   <S>                   <C>               <C>
                   Raw Materials            $5,937             $ 3,537
                   Work in Process           1,676               6,555
                   Finished Goods              239                 545
                                            ------             -------
                                            $7,852             $10,637
                                            ======             =======

</Table>

                                       7

<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


E)    Revenue Recognition

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

      EAGLE WIRELESS INTERNATIONAL, INC.
      Eagle designs, manufactures and markets transmitters, receivers,
      controllers and software, along with other equipment used in commercial
      and personal communication systems, radio and telephone systems.
      Revenues from these products are recognized when the product is shipped.

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

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

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

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

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

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

      CONTACT WIRELESS, INC.
      Contact Wireless, Inc., provides customers with paging and mobile
      telephone products and related monthly services. Revenue from product
      sales is recorded at the time of shipment.  Revenue for the mobile phone
      and paging service is billed monthly as the service is provided.

      DSS SECURITY, INC.
      DSS Security, Inc., provides monthly security monitoring services to
      residential customers. The customers are billed three months in advance of
      service usage. The revenues are deferred at the time of billing and
      ratably


                                       8

<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


      recognized over the prepayment period as service is provided.

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

F)    Research and Development Costs

      For the months ended May 31, 2002 and 2001, the Company performed research
      and development activities for internal projects related to its convergent
      set-top boxes, wireless residential network, commercial and military
      communications, and multi-media entertainment centers. Research and
      development costs of $85,000 and $42,000 were expensed for the three
      months ended May 31, 2002, and 2001, respectively. Research and
      development costs of $349,000 and $729,000 were expensed for the nine
      months ended May 31, 2002 and 2001.

      No research and development services were performed for outside parties
      for the three and nine months ended May 31, 2002 and 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>

                                                                      May 31,         August 31,
                                                                       2002              2001
                                                                      -------         ----------
                  <S>                                                 <C>             <C>
                  Weighted Average Number of Common Shares
                  Outstanding Including
                      Primary Common Stock Equivalents                 63,455           49,726
                      Fully Dilutive Common Stock Equivalents          63,609           49,880

</Table>

I)    Impairment of Long Lived and Identifiable Intangible Assets

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

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

      As of May 31, 2002 and 2001, no impairment existed.

J)    Intangible Assets

      Goodwill represents the excess of the cost of companies acquired over the
      fair value of their net assets at the dates of acquisition and is being
      amortized using the straight-line method over twenty (20) years for
      AtlanticPacific Communications, Inc. and twenty-five (25) years for
      Bundled Digital Services contract rights. Other intangible assets consist
      of patents and licenses, which are being amortized using the straight-line
      method over ten (10) years


                                       9

<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


      and twenty (20) years, respectively.

K)    Advertising Costs

      Beginning in fiscal 2000, advertising costs have been capitalized and
      amortized on the basis of contractual agreements entered into by the
      Company. These contracts are amortized over the life of the individual
      contracts or expensed in the period incurred. For the nine months ended
      May 31, 2002, the Company has expensed $381,000 where $0 in costs has been
      deferred.

L)    Deferred Syndication Costs

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

M)    Use of Estimates

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

N)    Marketable Securities

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

O)    Other Comprehensive Income

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

P)    Reclassification

      The Company has reclassified certain assets costs and expenses for the
      three and nine months ended May 31, 2001 to facilitate comparison to the
      three and nine months ended May 31, 2002.


                                      10

<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


Q)    Supporting Costs in Selling, General and Administrative Expenses

      Other support cost for the nine months ended May 31, 2002 and 2001 are as
      follows, in thousands:


<Table>
<Caption>

                                                     2002          2001
                                                  ------------------------
                  <S>                             <C>           <C>
                  Advertising/Conventions         $      --     $      650
                  Auto Related                          119             92
                  Bad Debt                              138             --
                  Contract Labor                        257             --
                  Delivery/Postage                       67            142
                  Fees                                   91             --
                  Insurance                              96            112
                  Interest                              598             --
                  Office                                118            392
                  Other                                 196             10
                  Professional                          453            319
                  Rent                                1,099            423
                  Repairs and Maintenance                82             --
                  Travel                                 --            375
                  Taxes                                  87             28
                  Utilities                             603            186
                                                  ------------------------
                  Total                           $   4,004     $    2,729
                                                  ========================

</Table>

R)    Recent Pronouncements

      In July 2001, the FASB issued Statement No. 141, Business Combinations,
      ("SFAS 141") and Statement No. 142, Goodwill and Other Intangible Assets
      ("SFAS 142"). SFAS 141 requires that the purchase method of accounting be
      used for all business combinations completed after June 30, 2001. SFAS 141
      also specifies that intangible assets acquired in a purchase method
      business combination must meet certain criteria to be recognized and
      reported apart from goodwill. SFAS 142 will require that goodwill and
      intangible assets with indefinite useful lives no longer be amortized, but
      instead they will be tested for impairment at least annually in accordance
      with the provisions of SFAS 142. SFAS 142 will also require that
      intangible assets with definite useful lives be amortized over their
      respective estimated useful lives to their estimated residual values and
      reviewed for impairment in accordance with SFAS No. 121, Accounting for
      the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
      Disposed Of. The Company is required to adopt the provisions of SFAS 141,
      for acquisitions initiated after June 30, 2001, and SFAS 142 effective
      September 1, 2002. Goodwill and intangible assets acquired in business
      combinations completed before July 1, 2001 will continue to be amortized
      until the Company's adoption of SFAS No. 142 on September 1, 2002. In
      connection with the transitional goodwill impairment evaluation, SFAS 142
      will require the Company to perform an assessment of whether there is an
      indication that goodwill is impaired as of the date of adoption. To the
      extent an indication exists that the goodwill and intangible assets may be
      impaired, the Company must measure the impairment loss, if any. Any
      transitional impairment loss will be recognized as the cumulative effect
      of a change in accounting principle in the Company's statement of
      earnings. Based on current goodwill and intangible asset balances, the
      Company will have approximately $106,880 of non-amortized goodwill and
      intangibles as of September 1, 2002, which will be subject to the
      transition provisions of SFAS 141 and SFAS 142.

      Amortization expense related to goodwill and intangibles was approximately
      $3,008,000 and $1,459,000 for the nine months ended May 31, 2002 and 2001,
      respectively.

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

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

      On October 3, 2001, the FASB issued the Statement of Financial Accounting
      Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived
      Assets" ("FAS 144"). FAS 144 addresses financial accounting and


                                      11

<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


      reporting for the disposal of long-lived assets. FAS 144, becomes
      effective for financial statements issued for fiscal years beginning
      after December 15, 2001, and interim periods within those fiscal years.
      The Company does not expect the pronouncement to have a material impact
      on its consolidated financial position, consolidated results of
      operations or consolidated cash flows.

NOTE 2 - ACCOUNTS RECEIVABLE:

            Accounts receivable consist of the following, in thousands:


<Table>
<Caption>

                                                                        May 31,         August 31,
                                                                         2002              2001
                                                                      -----------      -----------
                  <S>                                                 <C>              <C>
                  Accounts Receivable                                 $     6,040      $     7,624
                  Allowance for Doubtful Accounts                            (445)            (480)
                                                                      -----------      -----------
                  Net Accounts Receivable                             $     5,595      $     7,144
                                                                      ===========      ===========

</Table>

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

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


<Table>
<Caption>

                                                                        May 31,         August 31,
                                                                         2002              2001
                                                                      -----------      -----------
                  <S>                                                 <C>              <C>
                  Automobile                                          $       421      $       548
                  Head-End Facility and Fiber Infrastructure               22,600           15,045
                  Furniture and Fixtures                                      538              481
                  Leasehold Improvements                                      209               84
                  Office Equipment                                            693              654
                  Property, Manufacturing and Equipment                    17,822           11,657
                                                                      -----------      -----------
                      Total Property, Plant and Equipment             $    42,283      $    28,469
                         Less: Accumulated Depreciation                    (3,018)          (2,005)
                                                                      -----------      -----------
                      Net Property, Plant and Equipment               $    39,265      $    26,464
                                                                      ===========      ===========

</Table>


      Components of intangible assets are as follows, in thousands:


<Table>
<Caption>

                                                                        May 31,         August 31,
                                                                         2002              2001
                                                                      -----------      -----------
                  <S>                                                 <C>              <C>
                  Goodwill                                            $     7,916      $     5,966
                  Contract Rights                                          74,513           74,513
                  Licenses and Permits                                     24,452           24,441
                                                                      -----------      -----------
                      Total Intangible Assets                         $   106,881      $   104,920
                         Less: Accumulated Amortization                    (6,887)          (3,879)
                                                                      -----------      -----------
                      Net Intangible Assets                           $    99,994      $   101,041
                                                                      ===========      ===========

</Table>

NOTE 4  - BUSINESS COMBINATIONS:

      On February 1, 2001, the Company completed the purchases of
      ClearWorks.Net, Inc., ClearWorks Communications, Inc., ClearWorks
      Structured Wiring Services, Inc., ClearWorks Integration Services, Inc.,
      United Computing Group, Inc., Link Two Communications, Inc., and LD
      Connect, Inc., (collectively, ClearWorks) by acquiring all the outstanding
      common stock for a total purchase price of approximately $99.8 million.
      The acquisition was accounted for using the purchase method of accounting.
      ClearWorks is a communications carrier providing broadband data, video and
      voice communication services to residential and commercial customers,
      currently within Austin and Houston, Texas. These services are provided
      over fiber-optic networks ("Fiber-To-The-Home" or "FTTH"), which the
      Company designs, constructs, owns and operates 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 operations for ClearWorks are
      included in the accompanying financial statements since the date of
      acquisition. The Company acquired the net assets of ClearWorks for
      $99,797,000 through the issuance of 29,410,000 shares of its common stock
      valued at $91,172,000 and a cash total of $8,625,000. Prior to the merger,
      the Company provided to ClearWorks, working capital and


                                      12

<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


      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 Broadband, Inc., common
      stock shares. These shares were converted to Treasury shares at this
      date. The Company allocated (in thousands) the acquisition costs to
      current assets of $11,708, property, plant and equipment of $6,570,
      intangible assets of $96,920 (which consist of $74,513 in contract
      rights and $22,407 in licenses), other assets of $79 and assumed
      liabilities of accounts payable and accrued expenses of $10,784, banks
      lines of credit and notes of $4,696 for a total acquisition of $99,797.
      The allocation of the purchase price is based on the fair value of
      assets and liabilities assumed as determined either by independent third
      parties or management's estimates, based on existing contracts, recent
      purchases of assets and underlying loan documents.

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

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

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

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

      Effective January 1, 2002, the Company acquired the assets of DSS
      Security, Inc. and Contact Wireless in a business combination accounted
      for as a purchase. DSS Security, Inc. provides security monitoring to
      business and residential customers. Contact Wireless sells and services
      mobile phones and one- and two-way messaging devices. The Company paid
      cash of $450,000 and issued a short-term note payable of $130,000 for the
      assets of Contact Wireless for a total purchase price of $580,000.
      Additionally, the Company acquired DSS Security, Inc., for $2,002,147. In
      this transaction, the Company issued 2,002,147 shares of its common stock
      with a guaranteed value of $1 per share. The Company allocated $51,595 to
      the fair value of the property and equipment and $1,950,552 to intangible
      assets. The intangible assets include, among other things, approximately
      4,000 current customers being billed monthly for wireless messaging
      services. The allocation of the purchase price is based on the fair value
      of the assets acquired based on management's estimates and existing
      contracts.

                                      13


<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002

NOTE 5 - NOTES PAYABLE:

      The following table lists the Company's note obligations as of May 31,
      2002 and August 31, 2001, in thousands:

<Table>
<Caption>
                                                      Annual
                                                     Interest                         May 31,         August 31,
                                                       Rate           Due Date         2002              2001
                                                     --------         --------    --------------   ---------------
                 <S>                                 <C>              <C>         <C>              <C>
                 Vehicles                             Various         Various     $           70   $           100
                 6% Convertible Debenture (Note 8)      6.0%           Demand              2,000             2,000
                 Tail Wind Convertible Debenture        2.0%          May 2003             3,000             5,000
                 Other                                Various         Various              1,126               854
                                                                                  --------------   ---------------

                 Total notes payable                                              $        6,196   $         7,954
                 Less current portion                                                      5,346             5,933
                                                                                  --------------   ---------------
                 Total long-term debt                                             $          850   $         2,021
                                                                                  ==============   ===============
</Table>

NOTE 6 - CAPITAL LEASE OBLIGATIONS:

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

      Minimum future lease payment under capital lease as of May 31, 2002 and
      August 31, 2001 for each of the next five years and in the aggregate are,
      in thousands:

<Table>
<Caption>
                                                             May 31, 2002     August 31, 2001
                                                           --------------     ---------------
              <S>                                          <C>                <C>
              Total minimum lease payments                 $       115        $       177
              Less: Amount representing interest                     8                 14
                                                           --------------     ---------------
              Present value of net minimum lease
              payments                                             107                163
              Less: Current maturity capital lease
              obligation                                            12                 48
                                                           --------------     ---------------
              Long-term capital lease obligation           $        95        $       115
                                                           ==============     ===============

</Table>


      Future obligations under the lease terms are as follows:

<Table>
<Caption>
                                    Period Ended            Amount
                                    ------------            ------
                                    <S>                     <C>
                                         2003               $   75
                                         2004                   20
                                                            ------
                                    Total                   $   95
                                                            ======

</Table>

NOTE 7 - LINE OF CREDIT:

      On September 29, 2000, AtlanticPacific Communications, Inc. (a wholly
      owned subsidiary of the Company) entered into a one year $900,000 line of
      credit agreement with Southwest Bank of Texas (SWBT). This note bears
      interest at SWBT's prime rate plus .25%, which is payable monthly with
      principal due September 28, 2001. AtlanticPacific Communications, Inc.'s
      accounts receivable are pledged as collateral with Eagle Wireless
      International, Inc. the guarantor. This line of credit was repaid to
      Southwest Bank of Texas in the six months ended February 28, 2002;
      therefore, there is not a current balance outstanding.

      The Company, through its subsidiary United Computing Group, Inc. (UCG),
      maintains a $3,000,000 line of credit with IBM Credit Corporation (IBM)
      bearing a variable rate of interest. At May 31, 2002, a balance of
      $1,012,000 existed. During July 2002, UCG entered into a loan agreement
      with a bank to provide working capital to repay the IBM credit line and
      fund ongoing operations. The new credit facility is secured by UCG
      accounts receivable and guaranteed by Eagle Broadband, Inc.

                                       14
<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002

NOTE 8 - CONVERTIBLE DEBENTURES:

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

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

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

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

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

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

      During 2001, the Company merged with ClearWorks.net, Inc., and as a
      result, ClearWorks is a wholly owned subsidiary of Eagle. At the date of
      merger, Link Two Communications, Inc., also became a subsidiary of Eagle.
      Link Two Communications, Inc. entered an agreement with The Tail Wind Fund
      Ltd., under which Tail Wind purchased from Link Two Communications, Inc. a
      2% convertible note in the initial amount of $5,000,000 (the "First
      Note"), and Link Two Communications, Inc. has the ability to require Tail
      Wind to purchase additional convertible notes in the amount of $4,000,000
      (the "Second Note") and $3,000,000 (the "Third Note"). The conversion
      terms of the convertible debentures become effective after ninety days of
      the initial closing date. The maturity of the convertible note is August
      15, 2002. Link Two Communications, Inc. may require Tail Wind to purchase
      the Second Note if: (a) the price of Eagle's common stock is above $5.00
      per share for 20 consecutive trading days during calendar 2001, (b) Eagle
      has more than $10,000,000 in cash less payments for capital leases that
      will become due within the next two years, (c) the registration statement,
      registers the conversion shares are current and effective, (d) Eagle does
      not reflect a net loss of more than $4,000,000 during any quarter, and (e)
      no material adverse event has occurred. Link Two Communications, Inc. may
      require Tail Wind to purchase the Third Note if the price of Eagle's
      common stock is above $8.00 per share for 20 consecutive trading days
      during calendar 2001, and the conditions set forth in (b) through (e) of
      the preceding sentence are satisfied. In conjunction with the issuance of
      the First Note, Link Two Communications, Inc., issued Tail Wind a warrant,
      and if Link Two chooses to issue the Second and Third Notes, it will issue
      Tail Wind additional warrants.

      As a result of the merger, Eagle, the parent of Link Two Communications,
      Inc., has guaranteed the Link Two

                                       15
<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002

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

      The Company has agreed to pre-pay the notes at the rate of a minimum of
      $250,000 per month and a maximum of $500,000 per month. The pre-payment
      may be in cash or in shares of our common stock at the rate of 90% of the
      average of the two lowest market prices of our common stock for the
      applicable month. However, the Company may not issue shares of our common
      stock for pre-payment purposes if the total number of shares exceeds the
      aggregate trading volume of our common stock for the twelve trading days
      preceding the date of payment, in which case we must pay the difference in
      cash. As the number of shares to be issued for pre-payment purposes is
      dependent on the price and trading volume of our common stock, there is no
      way to determine the number of shares that may be issued at this time.
      Eagle has filed a registration statement for the potential conversion
      shares for the note and warrants exercise. As of May 31, 2002, the Company
      has paid to Tail Wind $2,000,000 towards the reduction of debt. The
      current financial statements have recorded as current maturity for this
      debt, $3,000,000.

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

      In our agreement with Tail Wind, the Company granted Tail Wind
      anti-dilution rights. If the Company sells common stock or securities
      exercisable for or convertible into shares of our common stock for less
      than $1.79 per share, the Company must reduce the conversion price of the
      notes and the exercise price of the warrants to the price the Company sold
      the common stock or the exercise or conversion price the Company issued
      the convertible securities. The Company has agreed to register for resale
      any additional shares that will be issued pursuant to these anti-dilution
      rights on a future registration statement, unless such additional shares
      are available in the current registration statement. In addition, under
      the terms of the agreement, without Tail Wind's approval, the Company may
      not issue Tail Wind shares of common stock such that Tail Wind would ever
      be considered to beneficially own greater than 4.99% of the outstanding
      common stock. In connection with this transaction, Link Two
      Communications, Inc. has paid Ladenburg Thalman and Co. a fee of 5% of the
      purchase price of the notes. Additionally, the Company has valued the
      conversion feature of the convertible debenture and warrants at $1,648,045
      and $1,270,995, respectively; the amounts were determined by using the
      Black-Scholes calculation. These amounts have been capitalized as part of
      the cost of developing the wireless infrastructure. At May 31, 2002, Eagle
      and Tail Wind are negotiating the payment terms of this note.

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 May 31,
      2002, all of the Company's marketable equity securities are classified as
      available-for-sale; they were acquired with the intent to dispose of them
      within the next year.

      At May 31, 2002, the securities had an original basis of $1,867,936
      determined by multiplying the number of shares acquired by the fair market
      value of those shares. At the May 31, 2002 balance sheet date, the fair
      market value of these securities was $1,874,603; determined by multiplying
      the number of shares held by the fair market value of those shares at the
      balance sheet date. The difference between the cost and fair market value
      represents an unrealized holding gain (loss) and is included below current
      earnings in "Other Comprehensive Income."

                                       16
<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


<Table>
<Caption>

                    Security Name                  Shares        Cost Basis       Current FMV
                                                   ------       ------------     ------------
         <S>                                       <C>          <C>              <C>
         Bank of America                            50,000      $    49,688      $    50,062
         Bear Stearns                               55,000            2,061            2,103
         Citicorp                                  110,000          109,500          110,113
         Credit Suisse                              50,000           49,925           50,250
         FHLMC                                     129,000           20,181           21,585
         FNMA                                      637,000           68,266           68,124
         GE Capital                                 10,000            9,282            9,838
         Ginnie Mae                                 50,000           50,000           49,000
         GNMA                                      194,610          167,065          168,031
         SB US Government Income                    31,501          330,063          323,832
         SB Government Securities Fund             106,202        1,011,905        1,021,665
                                                                ------------     ------------
         Total                                                    1,867,936        1,874,603
                                                                ============     ============

</Table>

      Other marketable securities, Urbana and Burst.com, with an adjusted cost
      basis of $120,000 and fair market value of $330,000 are included in cash
      and cash equivalents category and are held for resale.

NOTE 10 - INCOME TAXES:

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

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

<Table>
<Caption>
                                                          May 31, 2002         August 31, 2001
                                                              (%)                    (%)
                                                          ------------         ---------------
                        <S>                               <C>                  <C>
                        U.S. Federal Statutory Tax
                           Rate                                 34                   34
                        U.S. Valuation Difference              (34)                 (34)
                                                              -----                -----
                        Effective U.S. Tax Rate                  0                    0
                        Foreign Tax Valuation                    0                    0
                                                              -----                -----
                        Effective Tax Rate                       0                    0
                                                              =====                =====

</Table>

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

<Table>
<Caption>
                                                            May 31,             August 31,
                                                              2002                 2001
                                                            -------             ----------
                      <S>                                   <C>                 <C>
                      Computed Expected Tax Benefit           2,872                (1,997)
                      Increase in Valuation Allowance        (2,872)                1,997
                                                             ------                ------
                                                               ---                   ---
                                                             ======                ======

</Table>

      The tax effects of temporary differences that give rise to significant
      portions of the deferred tax assets and deferred tax liabilities at May
      31, 2002 and August 31, 2001 are presented below, in thousands, and
      include the balances of the merged company ClearWorks.Net.

<Table>
<Caption>

                                                                May 31,        August 31,
                                                                 2002            2001
                                                             -------------    ------------
                  <S>                                        <C>              <C>
                  DEFERRED TAX ASSETS:
                  Accounts receivable, principally
                  due to allowance for doubtful
                  accounts                                   $         102    $        102

                  Net operating loss carry-forwards                 13,828          10,956
                  Less valuation allowance                        (13,828)        (10,956)
                                                             -------------    ------------
                  Net deferred tax assets                              ---             ---

                  DEFERRED TAX LIABILITIES:
                  Differences in depreciation                           47              47
                                                             -------------    ------------
                  Net deferred tax liabilities               $          47    $         47
                                                             =============    ============

</Table>

                                       17
<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


      The valuation allowance for deferred tax assets as of May 31, 2002, and
      August 31, 2001, was $13,828,000 and $10,956,000, respectively. At May 31,
      2002, the Company has net operating loss carryforwards of $40,316,000,
      which are available to offset future federal taxable income, if any, with
      expirations from 2020 to 2022.

NOTE 11 - ISSUANCE OF COMMON STOCK:

      For the three months ended May 31, 2002, the Company issued shares of
      common stock. The following table summarizes the shares of common stock
      issued, in thousands.

<Table>
<Caption>
                  <S>                                                                  <C>

                  SHARES OUTSTANDING FEBRUARY 28, 2002                                 65,411
                                                                                    ---------
                  Shares Issued for Retirement of Debt and Liabilities                  1,711
                  Shares Issued for Services and Compensation                             121
                  Shares Issued for Property and Assets                                    78
                  Treasury Stock                                                         (271)
                                                                                    ---------
                  SHARES OUTSTANDING MAY 31, 2002                                      67,050
                                                                                    =========

</Table>

NOTE 12 - PREFERRED STOCK, STOCK OPTIONS AND WARRANTS:

      In July 1996, the Board of Directors and majority shareholders adopted an
      employee stock option plan under which 400,000 shares of Common Stock have
      been reserved for issuance. Since that time, the Board of Directors has
      amended the July 1996, employee stock option plan under which 1,000,000
      shares of Common Stock have been reserved for issuance. The options
      granted for under this plan are to purchase fully paid and non-assessable
      shares of the Common Stock, par value $.001 per share at a price equal to
      the underlying common stock's market price at the date of issuance. These
      options may be redeemed six months after issuance, expire five years from
      the date of issuance and contain a cash-less exercise feature. The
      underlying shares of common stock were registered for resale under the
      Securities Act of 1933 on February 19, 1999. As of May 31, 2002, 416,474
      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
      May 31, 2002:

            39,998 stock purchase warrants issued to Carl A. Chase. Expiration
            of warrants is 6,666 on the ending date of each month commencing on
            February 28, 2002 and ending on July 31, 2002. The warrants are to
            purchase fully paid and non-assessable shares of the common stock,
            par value $.001 per share at a purchase price of $0.31 per share.
            The shares of common stock underlying these warrants have not been
            registered or issued, under the Securities Act of 1933. As of May
            31, 2002, all of these warrants have been exercised.

            50,000 stock purchase options issued to L.A. Delmonico Consulting,
            Inc. The warrants are to purchase fully paid and non-assessable
            shares of the common stock, par value $.001 per share at a purchase
            price of $1.04 per share. The shares of common stock underlying
            these warrants have not been registered or issued, under the
            Securities Act of 1933. As of May 31, 2002, none of these options
            have been registered, issued or exercised.

            600,000 stock purchase warrants issued to Paladin Associates
            expiring September 1, 2001. The warrants are to purchase fully paid
            and non-assessable shares of the common stock, par value $.001 per
            share at a purchase price of $1.50 per share. 166,667 warrants are
            not exercisable until and unless the shares of Common Stock trade at
            a minimum of $4.00 per share for twenty-one consecutive trading
            days. 166,667 warrants are not exercisable until and unless the
            shares of Common Stock trade at a minimum of $6.00 per share for
            twenty-one consecutive trading days. 166,666 warrants are not
            exercisable until and unless the shares of Common Stock trade at a
            minimum of $8.00 per share for twenty-one consecutive trading days.
            The shares of common stock underlying 350,000 warrants were
            registered for resale on August 3, 2000, under the Securities Act of
            1933. 100,000 incentive warrants will be made available and will
            vest at the end of October 2000 if the first objective of $4.00 is
            achieved before the end of October. As of May 31, 2002, 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 and Co. L.P. expiring
            December 10, 2002.

                                       18
<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 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 $1.55 per share. The shares of common stock underlying the
            warrants were registered for resale on August 3, 2000, under the
            Securities Act of 1933. As of May 31, 2002, 25,000 warrants have
            been exercised resulting in cash proceeds of $38,750.

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

            25,000 stock purchase warrants issued to Synchton, Inc., expiring
            January 1, 2004. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $2.00 per share. The shares of common stock
            underlying these have not been registered, under the Securities Act
            of 1933. As of May 31, 2002, none of these warrants have been
            exercised.

            41,667 stock purchase warrants issued to Peter Miles expiring July
            20, 2004. The warrants are to purchase fully paid and non-assessable
            shares of the common stock, par value $.001 per share at a purchase
            price of $2.00 per share. The shares of common stock underlying
            these have not been registered, under the Securities Act of 1933. As
            of May 31, 2002, none of these warrants have been exercised.

            41,667 stock purchase warrants issued to Peter Miles expiring July
            20, 2004. The warrants are to purchase fully paid and non-assessable
            shares of the common stock, par value $.001 per share at a purchase
            price of $2.25 per share. The shares of common stock underlying
            these warrants have not been registered or issued, under the
            Securities Act of 1933. As of May 31, 2002, none of these warrants
            have been exercised.

            58,333 stock purchase warrants issued to Peter Miles expiring July
            20, 2004. The warrants are to purchase fully paid and non-assessable
            shares of the common stock, par value $.001 per share at a purchase
            price of $3.00 per share. The shares of common stock underlying
            these warrants have not been registered or issued, under the
            Securities Act of 1933. As of May 31, 2002, none of these warrants
            have been exercised.

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

            40,000 stock purchase warrants issued to Rachel McClere 1998 Trust
            expiring April 24, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $3.75 per share. The shares of common stock
            underlying these warrants have not been registered or issued, under
            the Securities Act of 1933. As of May 31, 2002, none of these
            warrants have been registered, issued or exercised.

            160,000 stock purchase warrants issued to McClere Family Trust
            expiring April 24, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $3.75 per share. The shares of common stock
            underlying these warrants have not been registered or issued, under
            the Securities Act of 1933. As of May 31, 2002, none of these
            warrants have been registered, issued or exercised.

            232,000 stock purchase warrants issued to Shannon D. McLeroy
            expiring April 24, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $3.75 per share. The shares of common stock
            underlying these warrants have not been registered or issued, under
            the Securities Act of 1933. As of May 31, 2002, none of these
            warrants have been registered, issued or exercised.

            176,000 stock purchase warrants issued to Tech Technologies
            Services, LLC expiring April 24, 2003. The warrants are to purchase
            fully paid and non-assessable shares of the common

                                       19
<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002

            stock, par value $.001 per share at a purchase price of $3.75 per
            share. The shares of common stock underlying these warrants have
            not been registered or issued, under the Securities Act of 1933.
            As of May 31, 2002, none of these warrants have been registered,
            issued or exercised.

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

            25,000 stock purchase warrants issued to Synchton, Inc., expiring
            October 1, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $4.50 per share. The shares of common stock
            underlying these warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As of May 31, 2002, 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 May 31, 2002, 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 and Co.,
            LTD. expiring July 13, 2003. The warrants are to purchase fully paid
            and non-assessable shares of the common stock, par value $.001 per
            share at a purchase price of $7.49 per share. As of May 31, 2002,
            the underlying shares of common stock have not yet been registered
            for resale under the Securities Act of 1933.

            25,000 stock purchase warrants issued to Synchton, Inc., expiring
            July 1, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $7.50 per share. The shares of common stock
            underlying these warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As of May 31, 2002, none of
            these warrants have been exercised.

            192,000 stock purchase warrants issued to Tech Technologies
            Services, LLC. expiring April 24, 2008. The warrants are to purchase
            fully paid and non-assessable shares of the common stock, par value
            $.001 per share at a purchase price of $7.50 per share. The shares
            of common stock underlying these warrants have not been registered
            or issued, under the Securities Act of 1933. As of May 31, 2002,
            none of these warrants have been registered, issued or exercised.

            240,000 stock purchase warrants issued to Shannon D. McLeroy
            expiring April 24, 2008. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $7.50 per share. The shares of common stock
            underlying these warrants have not been registered or issued, under
            the Securities Act of 1933. As of May 31, 2002, none of these
            warrants have been registered, issued or exercised.

            168,000 stock purchase warrants issued to Michael T. McClere
            expiring April, 24, 2008. The warrants are to purchase fully paid
            and non-assessable shares of the common stock, par value $.001 per
            share at a purchase price of $7.50 per share. The shares of common
            stock underlying these warrants have not been registered or issued,
            under the Securities Act of 1933. As of May 31, 2002, none of these
            warrants have been registered, issued or exercised.

            40,000 stock purchase warrants issued to Rachel McClere 1998 Trust
            expiring April 24, 2008. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $7.50 per share. The shares of common stock
            underlying these warrants have not been registered or issued, under
            the Securities Act of 1933. As of May 31, 2002, none of these
            warrants have been registered, issued or exercised.

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

                                       20
<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002

            value $.001 per share at a purchase price of $7.50 per share. The
            shares of common stock underlying these warrants have not been
            registered or issued, under the Securities Act of 1933. As May 31,
            2002, none of these warrants have been registered, issued or
            exercised.

            50,000 stock purchase warrants issued to Weed and Co. L.P. expiring
            June 10, 2003. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $9.68 per share. The shares of common stock
            underlying these warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As of May 31, 2002, 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 of May 31, 2002, none of
            these warrants have been exercised.

            250,000 stock purchase warrants issued to Sands Brothers and Co.,
            LTD. expiring July 13, 2003. The warrants are to purchase fully paid
            and non-assessable shares of the common stock, par value $.001 per
            share at a purchase price of $10.00 per share. These warrants,
            however are not exercisable until and unless the closing price of
            Common Stock at any time during the exercise period reaches $10.00
            per share. As of May 31, 2002, 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 May 31,
            2002, none of these warrants have been exercised.

            350,000 stock purchase warrants issued to Sands Brothers and Co.,
            LTD. expiring July 13, 2003. The warrants are to purchase fully paid
            and non-assessable shares of the common stock, par value $.001 per
            share at a purchase price of $14.00 per share. These warrants,
            however, are not exercisable until and unless the closing price of
            the Common Stock at any time during the exercise period reaches
            $14.00 per share. As of May 31, 2002, the underlying shares of
            common stock have not yet been registered for resale under the
            Securities Act of 1933.

            250,000 stock purchase warrants issued to Hampton-Porter Investment
            Bankers LLC expiring June 27, 2003. The warrants are to purchase
            fully paid and non-assessable shares of the common stock, par value
            $.001 per share at a purchase price of $18.00 per share. The shares
            of common stock underlying these warrants were registered for resale
            on August 3, 2000, under the Securities Act of 1933. As of May 31,
            2002, none of these warrants have been exercised.

            150,000 stock purchase warrants issued to Sands Brothers and Co.,
            LTD. expiring July 13, 2003. The warrants are to purchase fully paid
            and non-assessable shares of the common stock, par value $.001 per
            share at a purchase price of $25.00 per share. These warrants,
            however, are not exercisable until and unless the closing price of
            the Common Stock at any time during the exercise period reaches
            $25.00 per share. As of May 31, 2002, 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).

                                       21
<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


<Table>
<Caption>

      Class of              May 31                          May 31                  Non-              Non-              May 31
      Warrants       2002            2001             2002         2001         Exercisable       Registered         2002    2001
      --------     ------------------------        ---------------------        ----------------------------        --------------
<S>                <C>               <C>           <C>             <C>          <C>               <C>               <C>      <C>
         1.04         50,000             -                 -           -            50,000            50,000             -       -
         1.50        600,000             -                 -           -           350,000           250,000             -       -
         1.55         50,000             -            25,000           -                 -                 -             -       -
         1.75         20,000             -            13,766           -                 -                 -             -       -
         2.00         25,000             -            25,000           -                 -                 -             -       -
         2.00         41,667             -            41,667           -                 -                 -             -       -
         2.25         41,667             -            41,667           -                                   -             -       -
         3.00         50,000             -            50,000           -                 -                 -             -       -
         3.00         58,333             -            58,333           -                 -                 -             -       -
         3.75         40,000             -            40,000           -                 -            40,000             -       -
         3.75        160,000             -           160,000           -                 -           160,000             -       -
         3.75        232,000             -           232,000           -                 -           232,000             -       -
         3.75        176,000             -           176,000           -                 -           176,000             -       -
         3.95        328,000             -           328,000           -                 -           328,000
         4.50         25,000             -                 -           -                 -                 -             -       -
         7.00        100,000             -                 -           -                 -           100,000             -       -
         7.49        250,000             -                 -           -                 -           250,000             -       -
         7.50         25,000             -            25,000           -                 -                 -             -       -
         7.50        192,000             -           192,000           -                 -           192,000             -       -
         7.50        240,000             -           240,000           -                 -           240,000             -       -
         7.50        168,000             -           168,000           -                 -           168,000             -       -
         7.50         40,000             -            40,000           -                 -            40,000             -       -
         7.50        160,000             -           160,000           -                 -           160,000             -       -
         9.68         50,000             -            50,000           -                 -                 -             -       -
        10.00         25,000             -            25,000           -                 -                 -             -       -
        10.00        250,000             -                 -           -                 -           250,000             -       -
        12.00        250,000             -           250,000           -                 -                 -             -       -
        14.00        350,000             -                 -           -                 -           350,000             -       -
        18.00        250,000             -           250,000           -                 -                 -             -       -
        25.00        150,000             -           250,000           -                 -           150,000             -       -

         2.00        Expired             - *               -           -                 -                 -        50,000       -
        ESOP         416,474 *      51,700 *         322,125   35,700.00            11,500                 -        10,350  10,350
        ESOP               -       228,207                 -     114,908                 -                 -
                   -----------------------         ---------------------           -------------------------        --------------

                   4,814,141       279,907         3,163,558     150,608           411,500         3,136,000        60,350  10,350
                   =======================         =====================           =========================        ==============

</Table>

      AN ASTERISK (*) DENOTES WARRANTS WHICH WOULD HAVE AN ANTI-DILUTIVE EFFECT
      IF CURRENTLY USED TO CALCULATE EARNINGS PER SHARE FOR THE MONTHS ENDED
      MAY 31, 2002 AND 2001, 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
      Communications, Inc. 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 Communications, Inc. common stock at a price of
      $6.00 per share with one warrant being issued as a unit with each common
      share sold. AtlanticPacific Communications, Inc. will sell up to 4,000,000
      shares of common stock and up to 4,000,000 Class A warrants (400 units).
      As of May 31, 2002, 1,325 units have been sold totaling 132,500 shares and
      resulting in proceeds of $331,250.

NOTE 14 - RISK FACTORS:

      For the nine months ended May 31, 2002 and 2001, substantially all of the
      Company's business activities have remained within the United States and
      have been extended to the wireless infrastructure, fiber, and cabling and
      broadband industry. Approximately, seventy-six percent of the Company's
      revenues and receivables have been created solely in the state of Texas,
      one percent have been created in the international market, and the
      approximate twenty-three percent remainder have been created relatively
      evenly over the rest of the nation during the nine months ended May 31,
      2002. Whereas approximately eighty-six 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
      twelve percent remainder has been created relatively evenly over the rest
      of the nation for the nine months ended May 31, 2001. Through the normal
      course of business, the Company generally does not require its customers
      to post any collateral.


                                      22

<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


      Although the Company had previously concentrated its efforts in the
      wireless infrastructure industry and has since expanded into the fiber,
      cable and broadband markets for the nine months ended May 31, 2002 and
      2001, it is management's belief that the Company's diversification into
      other products and services reduces its credit and economic risk exposures
      in the technology and manufacturing sectors.

NOTE 15 - FOREIGN OPERATIONS:

      Although the Company is based in the United States, its product is sold on
      the international market. Presently, international sales total
      approximately 1% and 2% at May 31, 2002 and 2001, respectively.

NOTE 16 - COMMITMENTS AND CONTINGENT LIABILITIES:

      LEASES

      The Company leases its primary office space in League City, Texas, for
      $36,352 per month with ANREM Corporation. This non-cancelable lease
      commenced on June 1, 2001, and expires on May 31, 2004. For the three
      months ended May 31, 2002 and 2001, rental expenses of approximately
      $109,055 and $59,581 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 May 31, 2002 and 2001, rental expense
      of $6,612 and $6,390, respectively were incurred.

      The Company's wholly owned subsidiary, AtlanticPacific Communications,
      Inc., leases office space in Houston, Texas, with Houston Industrial
      Partners, Ltd. This non-cancelable lease expires October 2002. The monthly
      payments are $2,160. For the periods ended May 31, 2002 and 2001, rental
      expense of $6,480 and $4,494, respectively were incurred.

      AtlanticPacific Communications, Inc. also leases office space in Chicago,
      Illinois with Prime Group Realty Services. 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 $4,187 for the first twelve
      months whereat they will increase by 3.2% at the thirteenth and
      twenty-fifth months. For the periods ended May 31, 2002 and 2001, rental
      expense of $11,023 and $6,660, respectively were incurred.

      AtlanticPacific Communications, Inc. also leases office space in Houston,
      Texas, with WL and Deborah Miller in the amount of $6,500 per month. This
      non-cancelable lease expiring September 2002 maintains a five-year renewal
      option. Rental expense for the period ended May 31, 2002 and 2001, of
      $19,500 and $13,500 were incurred.

      The Company's subsidiary, ClearWorks Home Systems, Inc., leases office
      space in Houston, Texas, with Transwestern Commercial Services. This
      non-cancelable lease expires on April 30, 2003. The monthly payments are
      $12,667. For the period ended May 31, 2002 and 2001, rental expense of
      $46,074 and $0 were incurred.

      Also, ClearWorks Home Systems, Inc., leases office space in Phoenix,
      Arizona, with Airpark Holdings. This non-cancelable lease expires on July
      31, 2003. The monthly payments are variable. For the period ended May 31,
      2002 and 2001, rental expense of $27,397 and $14,118 were incurred.

      Also, ClearWorks Home Systems, Inc., leases office space in San Antonio,
      Texas, with Glenn Gaiser.  This is a month-to-month lease. The monthly
      payments are $3,300.  For the period ended May 31, 2002 and 2001, rental
      expense of $9,900 and $6,000 was incurred.

      The Company's subsidiary, ClearWorks Home Systems, Inc., leases office
      space in Austin, Texas, with Ditto Communications Technologies, Inc. This
      non-cancelable lease commenced on August 1, 2001, and expires August 30,
      2002. The monthly payments are $5,876. For the period ended May 31, 2002
      and 2001, rental expense of $17,629 and $0 was incurred.

      The Company's subsidiary, United Computing Group, Inc., leases office
      space in Dallas, Texas, with AMB Property II, LP. This non-cancelable
      lease commenced on June 19, 2000 and expires June 30, 2002. The monthly
      payments are $3,164. For the period ended May 31, 2002 and 2001, rental
      expense of $10,007 and $6,537 was incurred.

                                      23

<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


      The Company's wholly-owned subsidiary, Contact Wireless, Inc., leases
      office space in San Antonio, Texas, with Cotter and Sons, Inc. This
      non-cancelable lease commenced on August 1, 1998, and expires on July 31,
      2002. The monthly payments are $2,490. For the periods ended May 31, 2002
      and 2001, rental expense of $7,470 and $0, respectively were incurred.

            Future obligations under the non-cancelable lease terms are:


<Table>
<Caption>

                             Period Ending
                                May 31,             Amount
                               --------             ------
                             <S>                  <C>
                                 2003                571,135
                                 2004                181,760
                                                  ----------
                                 Total            $  752,895
                                                  ==========

</Table>

      LEGAL PROCEEDINGS

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

      ClearWorks.Net, Inc. is currently a defendant in Robert Horn vs.
      ClearWorks Technologies, Inc. The suit was filed March 25, 1999, alleging
      causes of action based on breach of contract in the amount of
      approximately $250,000; 100,000 shares of ClearWorks' common stock;
      alleged lost commissions and attorney fees. ClearWorks.Net, Inc. filed an
      answer on April 16, 1999, denying the claim and asserting its affirmative
      defenses. During March 2002, a jury found in favor of Horn in the amount
      of 225,000 plus pre- and post-judgment interest. Post discovery has been
      served on ClearWorks.Net, Inc.

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

      ClearWorks.Net, Inc. is a defendant in STATE OF FLORIDA DEPARTMENT OF
      ENVIRONMENTAL PROTECTION VS. RECO TRICOTE, INC., AND SOUTHEAST TIRE
      RECYCLING, INC., A/K/A CLEARWORK.NET, INC.; IN THE CIRCUIT COURT OF THE
      TENTH JUDICIAL CIRCUIT IN AND FOR POLK COUNTY, FLORIDA. On December 13,
      2000, Florida EPA sued the Company presenting claims for recovery costs
      and penalties for a waste tire processing facility. The suit seeks
      recovery of costs and penalties in a sum in excess of $1,000,000,
      attorneys' fees and cost of court. The Company immediately filed a
      Motion to Strike Portions of the Complaint/or for a More Definite
      Statement and a Motion to Dismiss. The Florida EPA is amending the
      petition. ClearWorks.Net, Inc. denies the claims and intends to
      vigorously contest all claims in this case and to enforce its
      indemnification rights against the principals of Southeast Tire
      Recycling.  No discovery has been conducted in this lawsuit.

      ClearWorks.Net, Inc. is a defendant in Candlelight Investors LLC v.
      ClearWorks.Net, Inc., et al which is pending in the Supreme Court of the
      State of New York, County of New York, ("New York lawsuit"). Plaintiff
      seeks a judgment against ClearWorks.Net, Inc. arising out of the alleged
      failure of ClearWorks.Net, Inc., to convert certain debentures of the
      Company into common stock of ClearWorks.Net, Inc., to register stock to
      permit such conversion, and for other alleged breaches relating to
      agreements between plaintiff and ClearWorks.Net, Inc.  Plaintiff seeks
      compensatory damages exceeding $2,763,998, injunctive relief, specific
      performance, punitive


                                      24

<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


      damages and other relief.  The Plaintiff has obtained a judgement in the
      amount of $3,200,000, against ClearWorks.Net, Inc.  Plaintiffs will be
      conducting jurisdictional discovery on Eagle Broadband, Inc. and Dr. H.
      Dean Cubley.  The defendants deny the allegations of the complaint.

      Candlelight Investors LLC is also suing Eagle Broadband, Inc. and
      ClearWorks.Net, Inc. in Texas for issues that arise in connection with
      the New York lawsuit ("Texas Lawsuit").  The lawsuit is currently in the
      discovery phase.  Plaintiff has filed a motion for summary judgment and
      has set same for hearing before the judge in August 2002.

      ClearWorks.Net, Inc. is a defendant in Kaufman Bros., LLP v.
      Clearworks.Net, Inc., et al, (Index No. 600939/01), which is pending in
      the Supreme Court of the State of New York, County of New York. In this
      action, plaintiff alleges that defendants have breached an agreement
      with ClearWorks.Net, Inc. to pay plaintiff a fee for financial advice
      and services allegedly rendered by plaintiff. The complaint seeks
      compensatory damages of $4,000,000, plus attorneys' fees and costs. This
      suit is currently in the discovery phase.  The defendants deny the
      allegations of the complaint.

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

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

      On December 31, 2001, Optibase, Inc., sued ClearWorks Communications,
      Inc.  The suit presents claims based on a sworn account and breach of
      contract to provide ClearWorks Communications, Inc. equipment.  The suit
      seeks recovery of damages in the sum of $353,000 plus interest,
      attorney's fees, and court costs.  No discovery has been conducted in
      this case.  ClearWorks Communications, Inc. intends to vigorously
      contest all claims in this case.

      OTHER COMMITMENTS

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

      On April 1, 2000, the Company entered into 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


                                      25

<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


      for the services to be rendered under this twelve-month contract, the
      Company will pay $3,500 and issue 2,000 free trading shares of the
      Company's common stock per month. This agreement also contains incentive
      based bonuses tied to the consecutive twenty-one day average closing bid
      price of the Company's common stock. This incentive will consist of
      500,000 two-year options for the purchase of the Company's common stock
      at $1.50. These options will be vested in three equal portions based
      upon the Company's performance in the stock market. One-third will vest
      when the closing bid price reaches $4.00 and remains above this level
      for a minimum of twenty-one consecutive trading days. The second
      one-third will vest when the closing bid price reaches $6.00 and remains
      above this level for a minimum of twenty-one consecutive trading days.
      The remaining one-third shall vest when the closing bid price reaches
      $8.00 and remains above this level for a minimum of twenty-one
      consecutive trading days. This agreement is cancelable by either party
      without cause given ten days written notice.

NOTE 17 - EARNINGS PER SHARE:

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


<Table>
<Caption>

                                                         For the nine months ended May 31, 2002
                                                         --------------------------------------
                                                      Income            Shares          Per-Share
                                                    (Numerator)      (Denominator)        Amount
                                                    -----------      -------------        ------
         <S>                                        <C>              <C>                <C>
         Net Loss                                     $(8,448)

         Basic EPS:
          Income available to
          common stockholders                         $(8,448)           63,455            $(0.13)

         Effect of Dilutive Securities
           Warrants                                                         154
                                                      -------            ------
         Diluted EPS:
           Income available to
           common stockholders
             and assumed conversions.                 $(8,448)           63,609            $(0.13)
                                                      =======            ======            ======



                                                         For the nine months ended May 31, 2001
                                                         --------------------------------------
                                                      Income            Shares          Per-Share
                                                    (Numerator)      (Denominator)        Amount
                                                    -----------      -------------        ------
         Net Income                                   $(2,934)

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

         Effect of Dilutive Securities
         Warrants                                                           154
                                                      -------            ------
         Diluted EPS:
           Income available to
           common stockholders
           and assumed conversions.                   $(2,934)           41,127            $(0.07)
                                                      =======            ======            ======


</Table>

      For the nine months ended May 31, 2002 and 2001, anti-dilutive securities
      existed (see Note 12).

NOTE 18 - EMPLOYEE STOCK OPTION PLAN:

      In July 1996, the Board of Directors and majority stockholders adopted a
      stock option plan under which 400,000 shares of the Company's common stock
      have been reserved for issuance. Since that time, the Board of Directors
      have amended the July 1996, employee stock option plan under which
      1,000,000 shares of Common Stock have been reserved for issuance. Under
      this plan, as of May 31, 2002 and 2001, 416,474 and 404,974 warrants have
      been issued to various employees. Of these outstanding warrants, 0 and 0
      were exercised for the months ended May 31, 2002, and 2001, respectively.
      Additionally, 10,350 warrants have expired as of May 31, 2002.

      The Company has elected to follow APB 25, "Accounting for Stock Issued to
      Employees." Accordingly, since employee stock options are granted at
      market price on the date of grant, no compensation expense is recognized.


                                      26

<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


      However, SFAS 123 requires presentation of pro forma net income and
      earnings per share as if the Company had accounted for its employee stock
      options granted under the fair value method of that statement. The
      weighted average fair value of the individual options granted during 2000
      is estimated as $0.58 on the date of grant. A meaningful weighted average
      fair value of the individual options granted during 2000 using the method
      prescribed by SFAS 123 could not be determined due to the volatility of
      the share price during the measurement period. Management estimates the
      average fair value for options granted during 2001 to be comparable to
      those granted in 2000. The impact on net income is minimal; therefore, the
      pro forma disclosure requirements prescribed by SFAS 123 are not
      significant to the Company. The fair values were determined using a
      Black-Scholes option-pricing model with the following assumptions:


<Table>
<Caption>

                                              2002          2001
                                             ------        ------
               <S>                           <C>           <C>
               Dividend Yield                 0.00%         0.00%
               Volatility                     0.91         15.14
               Risk-free Interest Rate        7.00%         7.00%
               Expected Life                    5             5

</Table>

NOTE 19 - RETIREMENT PLANS:

      During October 1997, the Company initiated a 401(k) plan for its
      employees, which is funded through the contributions of its participants.
      This plan maintains that the Company will match up to 50% of each
      participants' contribution up to a total of 6% of their salary (i.e. up to
      3% of their salary.) For the nine months ended May 31, 2002 and 2001,
      employee contributions were approximately $174,578 and $109,905,
      respectively. The Company matched approximately $65,115 and $36,914,
      respectively for those same periods.

NOTE 20  - MAJOR CUSTOMER:

      The Company had gross revenues of $6,485,000 and $11,358,000 for the three
      months ended May 31, 2002 and 2001, respectively. The following parties
      individually represent a greater than ten percent of these revenues.


<Table>
<Caption>

                                       May 31, 2002                   May 31, 2001
              Customer             Amount     Percentage          Amount      Percentage
              --------             -------    ----------          ------      ----------
              <S>                  <C>        <C>               <C>           <C>
              Customer A           $    --            --        $4,490,000       39.5%
              Customer B           $    --            --        $2,198,000       19.4%
              Customer C           $    --            --        $1,851,000       16.3%
              Customer D           $    --            --        $1,648,000       14.5%
              Customer E           $713,000        11.0%        $      --           --

</Table>

      During the nine months ended May 31, 2002, the Company had outstanding
      accounts receivable with Enron Corporation and many of its subsidiaries.
      The exposure from the bankruptcy totals approximately $205,000, which has
      been accounted for through allowance of doubtful accounts in these
      financials.

NOTE 21 - INDUSTRY SEGMENTS:

      The Company has adopted the provisions of SFAS No. 131, "Disclosures about
      Segments of an Enterprise and Related Information". At May 31, 2002, the
      Company's nine 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 Broadband, Inc., (Eagle) is a worldwide supplier of broadband and
      telecommunications equipment with related software and broadband
      products.  (Including Eagle Wireless International, Inc.,
      BroadbandMagic, Inc., and Etoolz, Inc. for this summary).

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

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


                                      27

<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


      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) is IT products and services company.
      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.

      DSS Security, Inc. is a security monitoring company.

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

      Contact Wireless, Inc. is a paging, cellular, and mobile services provider
      and reseller.


<Table>
<Caption>

                                                          FOR THE NINE MONTHS ENDING MAY 31, 2002

(in thousands)             Eagle      APC      COMM      HSI       UCG    Link II    .Net     Contact    DSS      Elim.     Consol.
                         -----------------------------------------------------------------------------------------------------------
<S>                      <C>          <C>      <C>       <C>     <C>       <C>       <C>        <C>      <C>   <C>          <C>
Revenue                       478     3,812     1,811    2,465   13,582        39        --     288       226       (75)     22,626
Segment Profit/(Loss)      (5,522)      (27)     (277)    (398)    (744)   (1,644)     (130)    150        90       (12)     (8,514)
Total Assets              166,169     2,402    29,283    8,610    2,847    42,026    64,950     735       412  (155,993)    161,441
Capital Expenditures          152         8    12,647       67       40         1        --      --       309       (11)     13,213
Dep. And Amort.             2,474        90       393       63        8       918        60      --        --        --       4,006

</Table>


<Table>
<Caption>

                                                        FOR THE NINE MONTHS ENDING MAY 31, 2001

    (in thousands)               EAG         APC     COMM        HSI       UCG       LTC        NET      Elim.      Consol.
                               --------------------------------------------------------------------------------------------
    <S>                        <C>          <C>      <C>        <C>       <C>       <C>        <C>      <C>        <C>
    Revenue                      1,037      4,697      331      1,168     10,778         9         --        --     18,020

    Segment Profit/(Loss)       (3,166)       375     (167)      (109)       (53)     (411)      (990)       --     (4,521)

    Total Assets               194,006      2,441    5,439      2,248      5,180    13,609     37,311   (74,927)   185,307

    Capital Expenditures           192          1      613         --         19     6,657         14        --      7,496

    Dep. And Amort.              1,200         66      118         28         13       115        548        --      2,088

</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.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS.

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

      OVERVIEW

      During the quarter ended May 31, 2002, we have initiated the
      implementation of cost reductions in various operating segments which
      were not expected to provide significant long-term revenues and
      profitability. These reductions will impact the expense categories of
      salaries and benefits, rents, travel, research and development and
      other support expenses. We anticipate that additional cost reduction
      efforts will continue through August 31, 2002. Also, the company is
      continuing the development of the "technology center" for distribution
      on a nationwide basis of voice, video and data content; increased
      sales efforts in the telephone, cable, internet, security services and


                                      28

<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


      wireless segments; and securing of long-term relationships for content
      for the bundled digital services activities; and marketing/sales
      agreements with other companies for the sale of broadband products and
      services. Eagle's revenues, gross profit and net loss for the quarter
      totaled $6,485,000, $2,465,000 and $(2,568,000), respectively. The
      revenues declined from the prior quarter; however the gross profit
      improved by $150,000. The improvement in gross profit is a result of
      increased sales of broadband products, wireless infrastructure equipment
      and service, set-top boxes and structured wiring products. The sales of
      computer products and related engineering services declined due to the
      loss of a significant customer in this quarter. On a nationwide basis,
      we are entering into business relationships with financial and
      technology companies to provide bundle digital services (digital
      content) to cities and municipalities that currently have constructed
      their own fiber infrastructure to the home. We believe that our
      companies have the technology, products and capabilities to provide
      these fiber-ready cities with digital content set-top boxes and
      structured wiring services. By the end of our fiscal year, the development
      of our nationwide digital "technology center" will be complete providing
      us with operational capabilities to market BDS services to these
      municipalities and other fiber-ready communities by the first quarter
      of fiscal year 2003. Our loss reflects a continued investment in our
      24-7 customer service center, lower gross profits due to a decrease in
      sales, and increased costs associated with personnel terminations and
      facilities consolidation.

      REVENUE RECOGNITION

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

      EAGLE WIRELESS INTERNATIONAL, INC.
      Eagle designs, manufactures and markets transmitters, receivers,
      controllers and software, along with other equipment used in commercial
      and personal communication systems, radio and telephone systems. Revenues
      from these products are recognized when the product is shipped.

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

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

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

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

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

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                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002

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

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

      CONTACT WIRELESS, INC.
      Contact Wireless, Inc., provides customers with paging and mobile
      telephone products and related monthly services. Revenue from product
      sales is recorded at the time of shipment.  Revenue for the mobile phone
      and paging service is billed monthly as the service is provided.

      DSS SECURITY, INC.
      DSS Security, Inc., principal business activity is the providing of
      monthly security monitoring service to residential customers. The
      customers are billed three months in advance of service usage. The
      revenues are deferred at the time of billing and ratably recognized over
      the prepayment period as service is provided.

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

      RECEIVABLES

      For the nine months ended May 31, 2002, Eagle accounts receivables
      decreased to $5,595,000 from $7,144,000 at August 31, 2001. The majority
      of this decrease is due to increased receivable collection efforts and a
      temporary slow down in customer purchases of IT products and structured
      wiring.

      MARKETABLE SECURITIES

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

      INVENTORY

      Inventories are valued at the lower of cost or market. The cost is
      determined by using the first-in first-out method. At May 31, 2002,
      Eagle's inventory totaled $7,852,000 as compared to $10,637,000 at August
      31, 2001. The decrease in inventory is primarily attributable to the
      internal utilization for the development of the digital headends and
      expansion of the fiber networks in the residential communities.

      RESULTS OF OPERATIONS

      FOR THE THREE MONTHS AND NINE MONTHS ENDED MAY 31, 2002 AND 2001

      NET SALES. For the three months ended May 31, 2002, net sales decreased to
      $6,485,000 from $11,358,000 during the three months ended May 31, 2001.
      For the nine months ended May 31, 2002, net sales increased to $22,626,000
      from $18,020,000 during the nine months ended May 31, 2001. For the
      quarter ended May 2002, product and structured wiring sales have decreased
      due to delays in customer contract implementation and the loss of a
      significant customer which used to purchase the majority of United
      Computing Group, Inc.'s products. Currently, United Computing Group, Inc.
      has added new customer that are purchasing significant product and IT
      services. The decrease in the sales of structured wiring products and
      services is directly attributable to a deferment of purchasing by certain
      major customers. During June and July 2002, these major customers have
      resumed purchasing of products and services under the terms of their
      contracts with AtlanticPacific Communications, Inc. For the nine months,
      net sales increased $4,606,000 to $22,626,000 in 2002 as compared to
      $18,020,000 results in 2001. During February 2001, Eagle merged with
      ClearWorks.Net, Inc. and, accordingly, the net sales for the nine months
      ended May 31, 2001 include only four months of the merged companies
      revenues. The majority of this


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<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


      increase is due to including a complete nine months of merged companies
      consolidated revenue for 2002 as compared to the prior period which does
      not include pre-merger revenues of ClearWorks.Net, Inc. These increases
      were primarily attributable to added sales from Eagle Wireless
      International, Inc., BroadbandMagic, Inc., Atlanticpacific
      Communications, Inc., ClearWorks Home Systems, Inc., ClearWorks
      Communications, Inc., and United Computing Group, Inc. AtlanticPacific
      Communications, Inc. provides project planning, installation, project
      management, testing, and documentation of fiber and cable to commercial
      and industrial clients throughout the United States. ClearWorks Home
      Systems, Inc. provides structured wiring solutions and audio/visual
      equipment to single- and multi-family dwellings. ClearWorks
      Communications, Inc. provides solutions to consumers by implementing
      technology both within the residential community and home. This is
      accomplished through the installation of fiber optic backbones to
      deliver voice, video, and data solutions directly to consumers. United
      Computing Group, Inc. provides business-to-business hardware and
      software network solutions and network monitoring services. Eagle
      Wireless International, Inc. provides wireless infrastructure and
      services. Broadband Magic, Inc. provides digital set-top boxes and
      broadband solutions.

      COST OF GOODS SOLD. For the three months ended May 31, 2002, cost of goods
      sold decreased to $4,020,000 from $9,050,000 during the three months ended
      May 31, 2001. For the nine months ended May 31, 2002, cost of goods sold
      increased to $16,146,000 from $13,785,000 during the nine months ended May
      31, 2001. This increase is primarily associated with the purchase of
      cable, fiber, and hardware products for the increased sales level.
      Although the cost of sales increased, the Company's gross profit
      percentage for products sold increased to 38% from 20% during the three
      months ended May 31, 2002 compared to the three months ended May 31, 2001.
      For the nine months ended May 31, 2002, the gross profit percentage
      increased to 29% from 23% compared to the nine months ended May 31, 2001.

      OPERATING EXPENSES. For the three months ended May 31, 2002, operating
      expenses increased to $5,082,000 from $4,468,000 during the three months
      ended May 31, 2001. For the nine months ended May 31, 2002, operating
      expenses increased to $15,252,000 from $8,756,000 during the nine months
      ended May 31, 2001. The primary portions of the increase are discussed
      below:

      A $1,120,000 and $3,503,000 increase in salaries, as a result of its
      acquisitions and expanded business for the three and nine months ended May
      31, 2002, respectively.

      A $19,000 and $1,918,000 increase in depreciation and amortization, due to
      an increase in amortization of goodwill and purchase of additional assets
      for the three and nine months ended May 31, 2002, respectively.

      A $651,000 decrease and $1,275,000 increase in other support costs, the
      nine month increases are in rents, utilities, and communication costs and
      the three month decrease is principally related to a decrease in
      convention, travel and related costs.

      NET EARNINGS. For the three months ended May 31, 2002, Eagle's net loss
      was $2,568,000, compared to a net loss of $1,715,000 during the three
      months ended May 31, 2001. For the nine months ended May 31, 2002, Eagle's
      net loss was $8,448,000, compared to a net loss of $2,934,000 during the
      nine months ended May 31, 2001.

      CHANGES IN CASH FLOW. Eagle's operating activities provided (used) net
      cash of $(1,869,000) in the nine months ended May 31, 2002, compared to
      $5,085,000 in the nine months ended May 31, 2001. The decrease in net cash
      used by operating activities was primarily attributable to less cash
      collections and reductions in accrued expenses. Eagle's investing
      activities used net cash of $13,870,000 in the nine months ended May 31,
      2002, compared to $13,813,000 in the nine months ended May 31, 2001. The
      increase was due primarily to cash expended for equipment. Eagle's
      financing activities used cash of $1,121,000, in the nine months ended May
      31, 2002, compared to cash provided of $4,129,000 in the nine months ended
      May 31, 2001. The decrease at May 31, 2002, is attributable to the pay off
      of AtlanticPacific Communications, Inc.'s line of credit, pay down on
      United Computing Group, Inc.'s line of credit, and purchase of shares in
      the open market.

      LIQUIDITY AND CAPITAL RESOURCES

      Current assets for the nine months ended May 31, 2002, totaled $21,404,000
      as compared to $42,649,000 reported for the year ended August 31, 2001. Of
      this amount, $6,983,000 consisted of cash. Eagle believes that its working
      capital of $4,861,000 as of May 31, 2002 should be sufficient to fund
      operations through the end of the fiscal year 2002. Currently, Eagle is
      raising capital through the issuance of debt and, in addition, Eagle is
      negotiating other funding alternatives. 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


                                      31

<Page>

                  EAGLE BROADBAND, INC., AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2002


      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.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

      The Company's line of credit bears interest, payable monthly, at a
      floating rate equal to the prime rate plus 2.0%, which floating rate was
      8.0% on May 31, 2002. A 1% increase in interest rates would reduce the
      Company's annual earnings by $300,000 if the full balance of the line of
      credit were outstanding over the entire year. As of May 31, 2002, the
      outstanding balance was $1,146,000. The Company believes that it does not
      have any other material market risk sensitive instruments.

PART 2. - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

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

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

      None

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

      None

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None

ITEM 5 - OTHER INFORMATION

      None

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

      (a)  Exhibit

           None

      (b)  Reports on Form 8-K

           None

                                      32

<Page>

SIGNATURES

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



      Date: July 22, 2002                        By:     /s/ H. Dean Cubley
                                                         Dr. H. Dean Cubley
                                                         Chief Executive Officer

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



























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