<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 FEBRUARY 28, 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 February 28, 2002, there were 65,411,000 shares of common stock
outstanding.


<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                                      INDEX

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

           Item 1.   Consolidated Financial Statements (Unaudited)

                     Consolidated Balance Sheets at February 28, 2002 and August 31, 2001               3

                     Consolidated Statements of Earnings for the Three and Six
                     Months Ended February 28, 2002 and 2001                                            4

                     Consolidated Statements of Changes In Shareholders' Equity for the
                     Six Months Ended February 28, 2002 and Twelve Months Ended
                     August 31, 2001                                                                    5

                     Consolidated Statements of Cash Flows for the Six months Ended
                     February 28, 2002 and 2001                                                         6

                     Notes to the Consolidated Financial Statements                                    7-29

           Item 2.   Management's Discussion and Analysis of Financial
                     Condition and Results of Operations                                              29-32

           Item 3.   Quantitative and Qualitative Disclosures about Market Risk                        32

PART 2 - OTHER INFORMATION

           Item 1.   Legal Proceedings                                                                 33

           Item 2.   Recent Sales of Unregistered Securities or Changes
                     in Securities and Use of Proceeds.                                                33

           Item 3.   Defaults Upon Senior Securities                                                   33

           Item 4.   Submission of Matters to a Vote of Security Holders                               33

           Item 5.   Other Information                                                                 33

           Item 6.   Exhibits and Reports on Form 8-K                                                  33

SIGNATURES                                                                                             33

</TABLE>

<PAGE>

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

<TABLE>
<CAPTION>

                                        ASSETS
                                                                               February 28,            August 31,
                                                                                  2002                   2001
                                                                              --------------         -------------
                                                                                (Unaudited)             (Audited)
<S>                                                                             <C>                    <C>
CURRENT ASSETS:
      Cash and Cash Equivalents                                                 $  11,191              $  23,843
      Accounts Receivable                                                           5,736                  7,144
      Inventories                                                                   6,832                 10,637
      Prepaid Expenses                                                                968                  1,025
                                                                                ---------              ---------
           TOTAL CURRENT ASSETS                                                    24,727                 42,649

PROPERTY AND EQUIPMENT:
      Operating Equipment                                                          38,220                 28,469
      Less: Accumulated Depreciation                                               (2,649)                (2,005)
                                                                                ---------              ---------
           TOTAL PROPERTY AND EQUIPMENT                                            35,571                 26,464

OTHER ASSETS:
      Deferred Advertising Costs and Security Deposits                                527                    497
      Goodwill                                                                      7,916                  5,966
      Less: Accumulated Amortization                                                 (621)                  (472)
      Other Intangible Assets                                                      98,964                 98,954
      Less: Accumulated Amortization                                               (5,265)                (3,407)
      Other Assets                                                                  1,729                     16
                                                                                ---------              ---------

           TOTAL OTHER ASSETS                                                     103,250                101,554
                                                                                ---------              ---------

TOTAL ASSETS                                                                    $ 163,548              $ 170,667
                                                                                =========              =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
      Accounts Payable                                                          $   3,581              $   4,525
      Accrued Expenses                                                              6,293                  6,406
      Notes Payable                                                                 5,078                  5,933
      Line of Credit                                                                1,033                  1,846
      Capital Lease Obligations                                                        31                     48
      Sales Taxes Payable                                                             493                    598
      Deferred Taxes                                                                   15                     15
                                                                                ---------              ---------

           TOTAL CURRENT LIABILITIES                                               16,524                 19,371

LONG-TERM LIABILITIES:
      Capital Lease Obligations
        (net of current maturities)                                                    95                    115
      Deferred Taxes                                                                   32                     32
      Long-Term Debt                                                                1,210                  2,021
                                                                                ---------              ---------

           TOTAL LONG-TERM LIABILITIES                                              1,337                  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 February 28, 2002
           and 2001, 65,411,000 and 60,264,000, respectively                           65                     60
      Paid in Capital                                                             156,134                153,426
      Retained Earnings                                                           (10,512)                (4,358)
                                                                                ---------              ---------

           TOTAL SHAREHOLDERS' EQUITY                                             145,687                149,128
                                                                                ---------              ---------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                      $ 163,548              $ 170,667
                                                                                =========              =========
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                    For the Three Months                For the Six Months
                                                                      ended February 28                  ended February 28
                                                                        (Unaudited)

                                                                    2002             2001             2002             2001
                                                                  --------         --------         --------         --------
<S>                                                                  <C>              <C>              <C>              <C>
NET SALES:
    Integration Services                                                --              132                               132
    Structured wiring                                                1,892            1,594            3,592            1,594
    Broadband services                                                 303               73              566               73
    Products                                                         4,746            2,871           11,213            4,737
    Other                                                              439              127              770              127
                                                                  --------         --------         --------         --------
TOTAL SALES                                                          7,380            4,797           16,141            6,663
                                                                  --------         --------         --------         --------
COSTS OF GOODS SOLD:
    Materials other than Cable and Wire                                  0               32                1              534
    Direct Labor and Related Costs                                     703              245            1,438              772
    Products and Integration Service                                 3,680            2,255            9,422            2,256
    Structured Wiring Labor and Materials                              375              757              696              757
    Broadband Services Costs                                           204               50              375               50
    Depreciation and Amortization                                       84              208              155              252
    Other Manufacturing Costs                                           19              105               39              113
                                                                  --------         --------         --------         --------
TOTAL COSTS OF GOODS SOLD                                            5,065            3,652           12,126            4,734
                                                                  --------         --------         --------         --------
GROSS PROFIT                                                         2,315            1,145            4,015            1,929
                                                                  --------         --------         --------         --------
OPERATING EXPENSES:
    Selling, General and Administrative:
        Salaries and Related Costs                                   2,192            1,436            4,349            1,966
        Advertising and Promotion                                      108              136              263              263
        Depreciation and Amortization                                1,237              329            2,484              488
        Other Support Costs                                          1,258              717            2,810              884
        Research and Development                                        92              189              264              687
                                                                  --------         --------         --------         --------
TOTAL OPERATING EXPENSES                                             4,887            2,807           10,170            4,288
                                                                  --------         --------         --------         --------

EARNINGS/(LOSS) FROM OPERATIONS BEFORE OTHER
REVENUES/(EXPENSES), INCOME TAXES AND OTHER
COMPREHENSIVE INCOME                                                (2,572)          (1,662)          (6,155)          (2,359)

OTHER REVENUES/(EXPENSES):
    Interest Income - net                                               63              382              275            1,142
    Other Income                                                        --               --               --               --
                                                                  --------         --------         --------         --------
       TOTAL OTHER REVENUES                                             63              382              275            1,142

EARNINGS/(LOSS) BEFORE MINORITY INTEREST IN
AFFILIATE, INCOME TAXES AND OTHER COMPREHENSIVE
INCOME                                                              (2,509)          (1,280)          (5,880)          (1,217)
                                                                  --------         --------         --------         --------

Provisions For Income Taxes                                             --               --               --               --
                                                                  --------         --------         --------         --------
NET EARNINGS/(LOSS)                                                 (2,509)          (1,280)          (5,880)          (1,217)
                                                                  --------         --------         --------         --------
OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized Holding Gain/(Loss)                                         (86)           1,182             (274)           1,189
                                                                  --------         --------         --------         --------
OTHER COMPREHENSIVE INCOME/(LOSS)                                 $ (2,595)         $ ( 98)         $ (6,154)        $    (28)
                                                                  ========         ========         ========         ========
NET EARNINGS/(LOSS) PER COMMON SHARE:
Basic                                                             $  (0.04)        $  (0.03)        $  (0.10)        $  (0.04)
Diluted                                                           $  (0.04)        $  (0.03)        $  (0.10)        $  (0.04)
Comprehensive Income/(Loss)                                       $  (0.04)        $  (0.03)        $  (0.10)        $  (0.04)

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       4
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                 (In thousdands)

<TABLE>
<CAPTION>
                                                                                        ADDITIONAL                   TOTAL
                                                        COMMON STOCK        PREFERRED    PAID IN      RETAINED    SHAREHOLDERS'
                                                    SHARES         VALUE      STOCK      CAPITAL      EARNINGS       EQUITY

<S>                                                   <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 Six Months
   Ended February 28, 2002                               --            --        --           --        (5,880)       (5,880)
New Stock Issued to Shareholders:
   For Services and Compensation                        297            --        --          195            --           195
   For Property and Other Assets                        196            --        --          109            --           109
   For Retirement of Debt and Liabilities             3,664             4        --        2,000            --         2,004
   For Acquisitions                                   2,002             2        --        1,079            --         1,081

Treasury Stock                                       (1,012)           (1)       --         (675)           --          (676)

Unrealized Holding Gain                                  --            --        --           --          (274)         (274)
                                                  ---------     ---------     -----    ---------     ---------     ---------


TOTAL SHAREHOLDERS' EQUITY
AS OF FEBRUARY 28, 2002                              65,411     $      65     $  --    $ 156,134     $ (10,512)    $ 145,687
                                                  =========     =========     =====    =========     =========     =========
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       5
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousdands)

<TABLE>
<CAPTION>
                                                                       For  the Six Months ended February 28,

                                                                             2002                  2001
                                                                          ---------             ---------
                                                                                      (Unaudited)
<S>                                                                       <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earning/(Loss)                                                        $ (5,880)             $ (1,217)

Adjustments To Reconcile Net Earnings to Net Cash
Used By Operating Activities:
   Stock Issued for Services Rendered                                          195                   738
   Depreciation and Amortization                                             2,651                   740
   Allowance for Doubtful Accounts                                             138                    --
   Stock Issued for Interest Expense                                            60                    --
    (Increase)/Decrease in Accounts Receivable                               1,270                 4,864
   (Increase)/Decrease in Inventories                                        3,805                 3,239
   (Increase)/Decrease in Prepaid Expenses                                      57                   187
   Increase/(Decrease) in Accounts Payable                                    (944)                  602
   Increase/(Decrease) in Accrued Expenses                                  (1,263)                   --
   Increase/(Decrease) in Deferred Taxes                                        --                   (15)
                                                                          ------------------------------

      Total Adjustment                                                       5,969               (10,355)

Net Cash Used/Provided by Operating Activities                                  89                 9,138

CASH FLOWS FROM INVESTING ACTIVITIES:
   (Purchase)/Disposal of Property and Equipment                            (9,642)               (5,486)
   Purchase of ClearWorks.Net, Inc.                                             --                (7,654)
   Purchase of DSS Security, Inc., Net of Cash Acquired                          6                    --
    (Increase)/Decrease in Other Intangible Assets                             (10)                  (10)
   (Increase)/Decrease in Other Assets                                      (1,713)                  (81)
                                                                          ------------------------------

Net Cash Used by Investing Activities                                      (11,359)              (13,231)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase/(Decrease) in Notes Payable and Long-Term Debt                     144                  (589)
   Increase/(Decrease) in Capital Leases                                       (37)                   --
   Increase/(Decrease) in Lines of Credit                                     (813)                 (405)
   Increase/(Decrease) in Deferred Taxes                                        --                   (32)
   Proceeds From Sale of Common Stock, Net                                      --                 1,078
   Treasury Stock                                                             (676)                 (994)
                                                                          ------------------------------

Net Cash Used from Financing Activities                                     (1,382)                 (942)
                                                                          ------------------------------

Net Increase/(Decrease) in Cash                                            (12,652)               (5,035)

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

CASH AT THE END OF THE YEAR                                               $ 11,191              $ 27,311
                                                                          ==============================

Supplemental Disclosure of Cash Flow Information:
Net Cash Paid During the Year for
    Interest                                                              $     54              $     12

</TABLE>

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


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       6

<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 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 February 28, 2002, the Company's subsidiaries are: AtlanticPacific
      Communications, Inc. (APC); EToolz, Inc. (ETI); Eagle Wireless
      International, Inc., 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 $11,191,000 and $23,843,000 invested in interest bearing
      accounts and marketable securities (Note 9) at February 28, 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:

                                                             YEARS

             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

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

D)    Inventories

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

                                          FEBRUARY 28,     AUGUST 31,
                                             2002             2001
                                          ------------     ----------
              Raw Materials                 $ 5,063         $ 3,537
              Work in Process                 1,448           6,555
              Finished Goods                    321             545
                                            -------         -------
                                            $ 6,832         $10,637
                                            =======         =======



                                       7
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 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 recognized over the prepayment period as service is provided.


<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


      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 February 28, 2002 and 2001, the Company performed
      research and development activities for internal projects related to its
      convergent set-top boxes, wireless residential network, global satellite
      communications, and multi-media entertainment centers. Research and
      development costs of $ 92,000 and $189,000 were expensed for the three
      months ended February 28, 2002, and 2001, respectively. Research and
      development costs of $264,000 and $687,000 were expensed for the six
      months ended February 28, 2002 and 2001.

      No research and development services were performed for outside parties
      for the three and six months ended February 28, 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:


                                                     February 28,   August 31,
                                                         2002          2001
                                                     ------------   ----------
         Weighted Average Number of
         Common Shares Outstanding Including
            Primary Common Stock Equivalents            65,411        49,726
            Fully Dilutive Common Stock Equivalents     65,793        49,880


I)    Impairment of Long Lived and Identifiable Intangible Assets

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

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

      As of February 28, 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 and twenty (20) years, respectively.


                                       9
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


K)    Advertising Costs

      Beginning in fiscal 2000, advertising costs have been capitalized and
      amortized on the basis of contractual agreements entered into by the
      Company. These contracts are amortized over the life of the individual
      contracts or expensed in the period incurred. For the six months ended
      February 28, 2002, the Company has expensed $263,000 where $0 in costs has
      been deferred.

      For the six months ended, February 28, 2001 the Company expensed $263,000
      whereas $374,000 in costs were 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 months ended February 28, 2001 to facilitate comparison to the three
      months ended February 28, 2002.



                                       10
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


Q)    Supporting Costs in Selling, General and Administrative Expenses

      Other support cost for the six months ended February 28, 2002 and 2001 are
      as follows, in thousands:

                                                    2002        2001
                                                  ------------------
            Advertising/Convention                $   --      $   32
            Auto Related                              76          --
            Bad Debt                                 138          --
            Contract Labor                           192          --
            Delivery/Postage                          44          26
            Fees                                     104          --
            Insurance                                 63          21
            Interest                                 467          --
            Office Supplies                           75          55
            Other                                    103          60
            Professional                             326         317
            Rent                                     729         192
            Repairs and Maintenance                   50          30
            Travel                                    --         117
            Taxes                                     51          10
            Utilities                                392          54
                                                  ------------------
            Total                                 $2,810      $  884
                                                  ==================

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 $99,652,000 of non-amortized goodwill and
      intangibles as of September 1, 2002, which will be subject to the
      transition provisions of SFAS 141 and SFAS 142.

      Amortization expense related to goodwill and intangibles was approximately
      $1,999,774 and $495,000 for the six months ended February 28, 2002 and
      February 28, 2001.

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

      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 May 31, 2002, 10-Q 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 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



                                       11
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


      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:

                                             February 28,      August 31,
                                                 2002            2001
                                               --------        --------
        Accounts Receivable                    $ 6,188          $ 7,624
        Allowance for Doubtful Accounts           (452)            (480)
                                               -------          -------
        Net Accounts Receivable                $ 5,736          $ 7,144
                                               =======          =======


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

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


<TABLE>
<CAPTION>
                                                                 February 28,            August 31,
                                                                     2002                  2001
                                                                -------------          -------------
<S>                                                               <C>                    <C>
        Automobile                                                $     427              $     548
        Head-End Facility and Fiber Infrastructure                   20,675                 15,045
        Furniture and Fixtures                                          532                    481
        Leasehold Improvements                                          201                     84
        Office Equipment                                                686                    654
        Property, Manufacturing and Equipment                        15,699                 11,657
                                                                  ---------              ---------
            Total Property, Plant and Equipment                   $  38,220              $  28,469
                Less: Accumulated Depreciation                       (2,649)                (2,005)
                                                                  ---------              ---------
            Net Property, Plant and Equipment                     $  35,571              $  26,464
                                                                  =========              =========


      Components of intangible assets are as follows, in thousands:

                                                                 February 28,            August 31,
                                                                     2002                  2001
                                                                -------------          -------------
        Goodwill                                                  $   7,916              $   5,966
        Contract Rights                                              74,513                 74,513
        Licenses and Permits                                         24,451                 24,441
                                                                  ---------              ---------
            Total Intangible Assets                               $ 106,880              $ 104,920
                Less: Accumulated Amortization                       (5,886)                (3,879)
                                                                  ---------              ---------
            Net Intangible Assets                                 $ 100,994              $ 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 materials totaling
      $8,625,000. During February 2001, ClearWorks repaid these advances through



                                       12

<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


      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 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
                                FEBRUARY 28, 2002


NOTE 5 - NOTES PAYABLE:

      The following table lists the Company's note obligations as of February
      28, 2002 and August 31, 2001, in thousands:

<TABLE>
<CAPTION>
                                                     Annual                            February 28,       August 31,
                                                  Interest Rate         Due Date           2002              2001
                                                  ------------------------------------------------------------------
<S>                                                                                     <C>               <C>
          Vehicles                                    Various           Various         $      78         $     100
          6% Convertible Debenture (Note 8)            6.0%              Demand             2,000             2,000
          Tail Wind Convertible Debenture              2.0%             May 2003            3,500             5,000
          Other                                       Various           Various               711               854
                                                                                        ---------         ---------

          Total notes payable                                                           $   6,288         $   7,954
          Less current portion                                                              5,078             5,933
                                                                                        ---------         ---------
          Total long-term debt                                                          $   1,210         $   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 February 28, 2002
      and August 31, 2001 for each of the next five years and in the aggregate
      are, in thousands:

<TABLE>
<CAPTION>
                                                              February 28, 2002    August 31, 2001
                                                              -------------------------------------
<S>                                                                <C>                <C>
        Total minimum lease payments                               $    138           $    177
        Less: Amount representing interest                               12                 14
                                                                   --------           --------
        Present value of net minimum lease payments                     126                163
        Less: Current maturity capital lease obligation                  31                 48
                                                                   --------           --------
        Long-term capital lease obligation                               95                115
                                                                   ========           ========
</TABLE>

      Future obligations under the lease terms are as follows:

                       Period Ended            Amount
                                             ---------
                           2003                  75
                           2004                  20
                                             ---------
                        Total                $   95
                                             =========

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 ending 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 February 28, 2002, a balance of
      $1,033,000 existed and is considered current.

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


                                       14
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


      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 Communications, Inc. notes issued to
      Tail Wind and allowed Tail Wind to convert the above mentioned debt into
      Eagle common stock at a rate of $1.79 per share. The agreement also
      permits Tail Wind to convert the Link Two 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



                                       15
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


      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 February 28, 2002, the
      Company has paid to Tail Wind $500,000 towards the reduction of debt. The
      current financial statements have recorded as current and long-term
      maturities for this debt, $3,000,000 and $1,500,000, respectively.

      As part of the above agreements, the Company entered into a registration
      rights agreement with Tail Wind, and the Company filed a registration
      statement, in order to permit Tail Wind to resell to the public the shares
      of common stock that it may acquire upon any conversion of the First Note
      and exercise of the warrant associated with the First Note. The Company
      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.

NOTE 9 - MARKETABLE SECURITIES:

      As discussed in Note 1, the Company adopted the provisions of SFAS No.
      115, "Accounting for Certain Investments in Debt and Equity Securities"
      and SFAS No. 130, "Accounting for Other Comprehensive Income." At February
      28, 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 February 28, 2002, the securities had an original basis of $ determined
      by multiplying the number of shares acquired by the fair market value of
      those shares. At the February 28, 2002 balance sheet date, the fair market
      value of these securities was $1,915,383; 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
                                FEBRUARY 28, 2002

<TABLE>
<CAPTION>
                 Security Name                     Shares             Cost Basis            Current FMV
                                                                     -------------         -------------
<S>                                                 <C>               <C>                   <C>
        Bank of America                             50,000            $   49,688            $   49,750
        Bear Stearns                                55,000                54,948                28,436
        Citicorp                                   110,000               109,500               109,275
        Credit Suisse                               50,000                49,925                50,250
        CWMBS                                        4,000                 3,851                 4,010
        FHLMC                                      220,000                64,089                52,895
        FNMA                                       675,000               104,294                94,992
        GE Capital                                  10,000                 9,282                 9,838
        Ginnie Mae                                  50,000                50,000                49,000
        GNMA                                       194,610               179,642               172,976
        Res. Accredit                               25,102                 2,290                   745
        SB US Government Income                     26,364               276,792               271,551
        SB Government Securities Fund              106,202             1,011,905             1,021,665
                                                                      ----------            ----------
        Totals                                                        $1,966,206            $1,915,383
                                                                      ==========            ==========
</TABLE>

      Other marketable securities, Urbana and Burst.com, with an adjusted cost
      basis of $217,000 and fair market value of $120,000 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>
                                                      February 28, 2002     August 31, 2001
                                                            (%)                   (%)
                                                      -----------------     ---------------
<S>                                                           <C>                   <C>
                U.S. Federal                                  34                    34
                Statutory Tax Rate 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>
                                                        February 28,          August 31,
                                                            2002                 2001
                                                        ------------         -----------
<S>                                                        <C>                  <C>
                Computed Expected Tax                      (2,000)              (1,997)
                Benefit
                Increase in Valuation Allowance             2,000                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
      February 28, 2002 and August 31, 2001are presented below, in thousands,
      and include the balances of the merged company ClearWorks.Net.



                                       17

<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002

<TABLE>
<CAPTION>
                                                                     February 28,           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                         12,954                 10,956
              Less valuation allowance                                 (12,954)               (10,956)
                                                                      --------               --------
              Net deferred tax assets                                       --                     --

              DEFERRED TAX LIABILITIES:
              Differences in depreciation                                   47                     47
                                                                      --------               --------
              Net deferred tax liabilities                            $     47               $     47
                                                                      ========               ========
</TABLE>

      The valuation allowance for deferred tax assets of February 28, 2002, and
      August 31, 2001, was $12,954,000 and $10,956,000, respectively. At
      February 28, 2002, the Company has net operating loss carryforwards of
      $37,748,000, 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 February 28, 2002, the Company issued shares of
      common stock. The following table summarizes the shares of common stock
      issued, in thousands.

<TABLE>
<CAPTION>
              SHARES OUTSTANDING NOVEMBER 30, 2001                            61,093
                                                                            ---------
<S>                                                                            <C>
              Shares Issued for Retirement of Debt and Liabilities             2,204
              Shares Issued for Services and Compensation                        297
              Shares Issued for Property and Assets                              196
              Shares Issued for Acquisition of DSS Security, Inc.              2,002
              Treasury Stock                                                    (381)
                                                                            ---------
              SHARES OUTSTANDING FEBRUARY 28, 2002                            65,411
                                                                            =========
</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 February 28, 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
      February 28, 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
            February 28, 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 February 28, 2002, none of these
            options have been registered, issued or exercised.


                                       18
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


            600,000 stock purchase warrants issued to Paladin Associates
            expiring September 1, 2001. The warrants are to purchase fully paid
            and non-assessable shares of the common stock, par value $.001 per
            share at a purchase price of $1.50 per share. 166,667 warrants are
            not exercisable until and unless the shares of Common Stock trade at
            a minimum of $4.00 per share for twenty-one consecutive trading
            days. 166,667 warrants are not exercisable until and unless the
            shares of Common Stock trade at a minimum of $6.00 per share for
            twenty-one consecutive trading days. 166,666 warrants are not
            exercisable until and unless the shares of Common Stock trade at a
            minimum of $8.00 per share for twenty-one consecutive trading days.
            The shares of common stock underlying 350,000 warrants were
            registered for resale on August 3, 2000, under the Securities Act of
            1933. 100,000 incentive warrants will be made available and will
            vest at the end of October 2000 if the first objective of $4.00 is
            achieved before the end of October. As of February 28, 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. The warrants are to purchase fully paid and
            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $1.55 per share. The shares of common stock
            underlying the warrants were registered for resale on August 3,
            2000, under the Securities Act of 1933. As of February 28, 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. February 28, 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 February 28, 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 February 28, 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 February 28, 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 February 28, 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 February 28, 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


                                       19
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


            underlying these warrants have not been registered or issued, under
            the Securities Act of 1933. As of February 28, 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 February 28, 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 February 28, 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 stock, par value
            $.001 per share at a purchase price of $3.75 per share. The shares
            of common stock underlying these warrants have not been registered
            or issued, under the Securities Act of 1933. As of February 28,
            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 February 28, 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 February 28, 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 February 28, 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 February 28,
            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 February 28, 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 February 28,
            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



                                       20
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


            non-assessable shares of the common stock, par value $.001 per share
            at a purchase price of $7.50 per share. The shares of common stock
            underlying these warrants have not been registered or issued, under
            the Securities Act of 1933. As of February 28, 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 February 28, 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 February 28, 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 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 February 28, 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 February 28, 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 February 28, 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 February 28, 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 February
            28, 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 February 28, 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 February
            28, 2002, none of these warrants have been exercised.



                                       21

<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002

            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 February 28, 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).


<TABLE>
<CAPTION>
                Warrants Issued               Warrants Exercisable                Warrants                   Warrants Expired
Class of          February 28,                    February 28,                   Non-    Non-                  February 28,
Warrants      2002           2001            2002             2001        Exercisable    Registered         2002         2001
--------   ------------------------         -----------------------       -------------------------         -------------------
<S>          <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 FEBRUARY 28,
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 February 28, 2002, 1,325 units have been sold totaling 132,500
      shares and resulting in proceeds of $331,250.



                                       22
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


NOTE 14 - RISK FACTORS:

      For the six months ended February 28, 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, eighty 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 eighteen percent remainder have been created relatively evenly
      over the rest of the nation during the six months ended February 28, 2002.
      Whereas approximately eighty-four percent of the Company's revenues and
      receivables have been created solely in the state of Texas, two percent
      have been created in the international market, and the approximate
      fourteen percent remainder has been created relatively evenly over the
      rest of the nation for the three and six months ended February 28, 2001.
      Through the normal course of business, the Company generally does not
      require its customers to post any collateral.

      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 three months ended February 28, 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 2% and 2% at February 28, 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 through February 28, 2002. This
      non-cancelable lease commenced on June 1, 2001, and expires on May 31,
      2004. For the months ended February 28, 2002 and 2001, rental expenses of
      approximately $103,527 and $64,550 respectively, were incurred.

      The Company also leases office space in Oxnard, California with Tiger
      Ventura County, L.P. This three-year non-cancelable lease commenced August
      1, 2000 and expires July 31, 2003. Under the terms of the lease, monthly
      payments will be $2,130 for the first twelve months whereat the monthly
      payments will increase by 3.5% at the beginning of both the second and
      third years. For the periods ended February 28, 2002 and 2001, rental
      expense of $6,614 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 $2,162. For the periods ended February 28, 2002 and 2001,
      rental expense of $6,511 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 February 28, 2002 and 2001,
      rental expense of $12,561 and $0, respectively were incurred.

      AtlanticPacific Communications, Inc. also leases office space in Houston,
      Texas, with WL and Deborah Miller in the amount of $4,500 per month. This
      non-cancelable lease expiring September 2002 maintains a five-year renewal
      option. Rental expense for the period ended February 28, 2002 and 2001, of
      $13,500 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
      $12,413. For the period ended February 28, 2002 and 2001, rental expense
      of $37,239 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 February
      28, 2002 and 2001, rental expense of $13,121 and $4,706 were incurred.


                                       23
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


      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 February 28, 2002 and 2001,
      rental expense of $9,900 and $0 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 February 28,
      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 $2,179. For the period ended February 28, 2002 and 2001,
      rental expense of $6,537 and $0 was incurred.

      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 February 28,
      2002 and 2001, rental expense of $4,980 and $0, respectively were
      incurred.

            Future obligations under the non-cancelable lease terms are:

                              PERIOD ENDING
                              FEBRUARY 28,             AMOUNT
                              -----------              ------
                                 2003                 634,386
                                 2004                 327,164
                                                   ----------
                                 Total             $  961,550
                                                   ==========

      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. also currently is a defendant in Robert Horn vs.
      ClearWorks Technologies, Inc. The suit was filed March 25, 1999, alleging
      causes of action based on breach of contract in the amount of
      approximately $250,000; 100,000 shares of ClearWorks' common stock;
      alleged lost commissions and attorney fees. 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.

      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 is currently in the discovery
      phase. The Company intends to vigorously contest all claims in this case.

      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


                                       24
<PAGE>


                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


      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.

      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. 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 damages and
      other relief. The Plaintiff has obtained a judgement in the amount of
      $3,200,000, against ClearWorks.Net, Inc. The defendants deny the
      allegations of the complaint.

      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.

      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 $352,743.53 plus interest, attorney's
      fees, and court costs. ClearWorks Communications, Inc. denies the claims
      and will file an answer. 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


                                       25
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002



      three years after said issuance. Although this agreement shall
      automatically renew on an annual basis, it is terminable by the Company
      prior to the annual renewal by providing Synchton, Inc., with ninety days
      advance written notice.

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

NOTE 17 - EARNINGS PER SHARE:

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

<TABLE>
<CAPTION>
                                                         FOR THE SIX MONTHS ENDED FEBRUARY 28, 2002
                                                    -----------------------------------------------------
                                                       INCOME               SHARES            PER-SHARE
                                                     (NUMERATOR)         (DENOMINATOR)          AMOUNT
                                                    --------------      ---------------      ------------
<S>                                                    <C>
        Net Loss                                       $(5,880)

        Basic EPS:
         Income available to
         common stockholders                           $(5,880)              60,707             $(0.10)

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

        Diluted EPS:
          Income available to
          common stockholders
            and assumed conversions                    $(5,880)              60,707             $(0.10)
                                                       =======              =======             =====


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

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

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

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

      For the three months ended February 28, 2002 and 2001, anti-dilutive
      securities existed (see Note 12).

NOTE 18 - EMPLOYEE STOCK OPTION PLAN:


                                       26

<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


      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 February 28, 2002 and 2001, 416,474 and 279,907 warrants
      have been issued to various employees. Of these outstanding warrants, 0
      and 500 were exercised for the months ended February 28, 2002, and 2001,
      respectively. Additionally, 10,350 warrants have expired as of February
      28, 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.
      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:

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

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 three months ended February 28, 2002 and
      2001, employee contributions were approximately $49,914 and $42,920,
      respectively. The Company matched approximately $17,934 and $14,277,
      respectively for those same periods.

NOTE 20  - MAJOR CUSTOMER:

      The Company had gross revenues of $7,380,000 and $4,797,000 for the three
      months ended February 28, 2002 and 2001, respectively. The following
      parties individually represent a greater than ten percent of these
      revenues.

<TABLE>
<CAPTION>
                                           FEBRUARY 28, 2002                 FEBRUARY 28, 2001
            CUSTOMER                   AMOUNT        PERCENTAGE         AMOUNT            PERCENTAGE
            --------                  ---------      ----------       ----------          ----------
<S>                                   <C>                             <C>                   <C>
            Customer A                $    ---           ---          $  866,000            18.10%
            Customer B                $    ---           ---          $  638,000            13.30%
</TABLE>

      During the three months ended February 28, 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 February 28, 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.



                                       27
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002



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

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

      United  Computing  Group,  Inc., (UCG) 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 THREE MONTHS ENDING FEBRUARY 28, 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>
Revenue               153    1,408      473       752     4,398         18          --        71      107         --       7,380
Segment
 Profit/(Loss)     (1,748)     188     (170)     (108)     (146)      (627)        (75)       46       45         --      (2,595)
Total Assets      167,222    2,130   26,537     8,127     3,161     42,920      64,941       659      412   (152,561)    163,548
Capital
 Expenditures          48        1    6,387        31        24         --          --        --       --         --       6,491
Dep. And Amort        833       22       95        21         2        303          45        --       --         --       1,321


                                             FOR THE THREE MONTHS ENDED FEBRUARY 28, 2001

(in thousands)                 Eagle/Elim       APC        COMM         HSI        UCG         LTC          NET      Consol.
                             -------------------------------------------------------------------------------------------------

Revenue                              485       1,565         71         246       2,426           4          --       4,797
Segment Profit / (Loss)             (699)        221       (133)       (134)        (29)       (180)       (358)     (1,312)
Total Assets                     145,875       2,788      4,923         981       5,541       5,312         888     166,308
Capital Expenditures                  13           5        229          --          10           2          --         259
Dep. And Amort                       478           9         20           2           8          20          15         552


                                              FOR THE SIX MONTHS ENDING FEBRUARY 28, 2002

(in thousands)       Eagle      APC        COMM      HSI       UCG     Link II      .Net    Contact    DSS     Elim.     Consol.
                  -----------------------------------------------------------------------------------------------------------------
Revenue                254     2,240        987     1,700    10,758         24         --       71     107         --      16,141
Segment
 Profit/(Loss)      (4,044)      (44)      (310)     (124)     (414)    (1,204)      (105)      46      45         --      (6,154)
Total Assets       167,222     2,130     26,537     8,127     3,161     42,920     64,941      659     412   (152,561)    163,548
Capital
 Expenditures          147         3      8,654        38        26         --         --       --      --         --       8,868
Dep. And Amort.      1,651        56        222        42         8        615         45       --      --         --       2,639


                                              FOR THE SIX MONTHS ENDING FEBRUARY 28, 2001

(in thousands)                   EAG/Elim.      APC        COMM         HSI        UCG         LTC          NET       Consol.
                               -------------------------------------------------------------------------------------------------

Revenue                            1,012       2,904         71         246       2,426           4          --       6,663
Segment Profit / (Loss)             (593)        210       (133)       (134)        (29)       (180)       (358)     (1,217)
Total Assets                     145,875       2,788      4,923         981       5,541       5,312         888     166,308
Capital Expenditures                  26          10        229          --          10           2          --         277
Dep. And Amort                       658          17         20           2           8          20          15         740

</TABLE>

      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.


                                       28
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


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 February 28, 2002, we have completed the
      consolidation and reorganization of the ClearWorks operations into the
      Eagle Broadband, Inc. business plan. The other significant activities of
      this quarter are the completion of the central Texas digital head-in
      facility and commencement of bundle digital product sales in that area;
      initiation of the development of a "technology center" for distribution on
      a nationwide basis of voice, video and data content; completion of the
      acquisition of two companies that provide security and wireless products
      and services to approximately seven thousand customers throughout Texas;
      and expansion of the fiber and wireless network infrastructure in Texas.
      Eagle's revenues, gross profit and net loss for the quarter totaled
      $7,380,000, $2,315,000 and $(2,509,000), respectively. The revenues
      declined from the prior quarter; however the gross profit improved by
      $615,000. 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. The
      contractual negotiations of this nationwide content distribution are
      expected to be completed by the end of our fiscal year for the first group
      of customers. Our loss reflects a continued investment in sales and
      operation personnel and the related administrative costs to support the
      company's growth efforts.

      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



                                       29
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002



      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.

      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 six months ended February 28, 2002, Eagle accounts receivables
      decreased to $5,736,000 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.


                                       30
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002



      INVENTORY

      Inventories are valued at the lower of cost or market. The cost is
      determined by using the first-in first-out method. At February 28, 2002,
      Eagle's inventory totaled $6,832,000 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 SIX MONTHS  ENDED  FEBRUARY 28, 2002 AND
      2001

      NET SALES. For the three months ended February 28, 2002, net sales
      increased to $7,380,000 from $4,797,000 during the three months ended
      February 28, 2001. For the six months ended February 28, 2002, net sales
      increased to $16,141,000 from $6,663,000 during the six months ended
      February 28, 2001. 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 February 28, 2002, cost of
      goods sold increased to $5,065,000 from $3,652,000 during the three months
      ended February 28, 2001. For the six months ended February 28, 2002, cost
      of goods sold increased to $12,126,000 from $4,734,000 during the six
      months ended February 28, 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 31% from 24% during the
      three months ended February 28, 2002. For the six months ended February
      28, 2002, the gross profit percentage declined to 25% from 29% during the
      six months ended February 28, 2001.

      OPERATING EXPENSES. For the three months ended February 28, 2002,
      operating expenses increased to $4,887,000 from $2,807,000 during the
      three months ended February 28, 2001. For the six months ended February
      28, 2002, operating expenses increased to $10,170,000 from $4,288,000
      during the six months ended February 28, 2001. The primary portions of the
      increase are discussed below:

      A $756,000 and $2,383,000 increase in salaries, as a result of its
      acquisitions and expanded business for the three and six months ended
      February 28, 2002, respectively.

      A $908,000 and $1,996,000 increase in depreciation and amortization, due
      to an increase in amortization of goodwill and purchase of additional
      assets for the three and six months ended February 28, 2002, respectively.

      A $541,000 and $1,926,000 increase in other support costs, due to an
      increase in rents, utilities, and communication costs for the three and
      six months ended February 28, 2002, respectively.

      NET EARNINGS. For the three months ended February 28, 2002, Eagle's net
      loss was $2,509,000, compared to a net loss of $1,280,000 during the three
      months ended February 28, 2001. For the six months ended February 28,
      2002, Eagle's net loss was $5,880,000, compared to a net loss of
      $1,217,000 during the six months ended February 28, 2001.

      CHANGES IN CASH FLOW. Eagle's operating activities provided (used) net
      cash of $89,000 in the six months ended February 28, 2002, compared to
      $9,138,000 in the six months ended February 28, 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 $11,359,000 in the six months ended February
      28, 2002, compared to $13,231,000 in the six months ended February 28,


                                       31

<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


      2001. The decrease was due primarily to less cash expended for
      acquisitions activities. Eagle's financing activities used cash of
      $1,382,000, in the six months ended February 28, 2002, compared to cash
      used of $942,000 in the six months ended February 28, 2001. The decrease
      at February 28, 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 six months ended February 28, 2002, totaled
      $24,727,000 as compared to $42,649,000 reported for the year ended August
      31, 2001. Of this amount, $11,191,000 consisted of cash. Eagle believes
      that its working capital of $8,203,000 as of February 28, 2002 should be
      sufficient to fund operations through the end of the fiscal year 2002
      where Eagle anticipates that it will experience positive cash flow from
      operations. However, if additional financing is required beyond this
      point, Eagle believes that a variety of debt and/or equity financings are
      possible. Historically, Eagle has financed its operations through the sale
      of debt and equity securities. As such, if its current cash is
      insufficient to fund its long-term capital needs, Eagle will rely on
      future best-efforts financings for capital. Refer to Note 7 and Note 8 for
      descriptions of lines of credit and other immediate forms of funding the
      Company has available. .

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 February 28, 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 February 28, 2002,
      the outstanding balance was $1,033,000. The Company believes that it does
      not have any other material market risk sensitive instruments.




                                       32
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2002


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


SIGNATURES

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



                              EAGLE BROADBAND, INC.


      Date: April 21, 2002                            By: /s/ H. Dean Cubley
                                                      Dr. H. Dean Cubley
                                                      Chief Executive Officer

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



                                       33