U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               AMENDMENT No. 6 to
                                   FORM 10-K/A

________________________________________________________________________________

[ X ] Annual Report under Section 13 or 15(d) of the Securities Exchange Act of
      1934

                   For the fiscal year ended August 31, 2003

[   ]    Transition Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934


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

                       Commission file number: 000-23163

       Texas                                               76-0494995
       -----                                               ----------
(State or Other Jurisdiction of                        (I.R.S. Employer
 Incorporation or Organization)                       Identification No.)

 101 Courageous Drive, League City, Texas                          77573
 ----------------------------------------                          -----
 (Address of Principal Executive Office)                         (Zip Code)

                                  281-538-6000
                                  ------------
              (Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Exchange Act:  Common
Stock

Securities registered pursuant to Section 12(g) of the Exchange Act:  None

Check  whether the issuer:  (1) 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
(2) has been subject to such filing requirements for the past 90 days.

Yes [ X ]  No [   ]

Check if there is no  disclosure of  delinquent  filers in response to Item 405
of Regulation  S-K is not contained in this form, and no disclosure will be
contained,  to the best of registrant's  knowledge,  in definitive proxy or
information  statements  incorporated  by  reference  in Part III of this Form
10-K or any  amendment  to this Form
10-K. [   ]


Indicate by check mark whether the  registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes [ X  ] No [  ]

Issuer's revenues for its fiscal year ended August 31, 2003, were $11,593,000.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant,  based on the closing price of the common stock on the American
Stock Exchange on February 28, 2003,  was  $15,341,000.  As of July 26, 2004,
registrant had 201,964,815 shares of common stock outstanding.


                      DOCUMENTS INCORPORATED BY REFERENCE

The registrant is incorporating by reference in Part III of this Form 10-K
certain information contained in the registrant's proxy statement for its annual
meeting of shareholders, which proxy statement was filed by the registrant
before December 29, 2003.

<PAGE>


                                EXPLANATORY NOTE
                                ----------------

Eagle filed a Report of Form 8-K on August 24, 2004, reflecting that we replaced
Malone & Bailey, LLP, as our independent auditor with Lopez, Blevins, Bork and
Associates, LLP ("Lopez Blevins"). Members of Lopez Blevins, prior to the
formation of Lopez Blevins, performed all the audit-related work while employed
with Malone & Bailey, LLP, in connection with conducting our audit for the
fiscal year ended August 31, 2003. Lopez Blevins reaudited our fiscal year ended
August 31, 2003, which audit is contained herein. There are no other changes to
the Amended Form 10-K previously filed on July 29, 2004.


                                    PART II

Item 8.  Consolidated Financial Statements

     The financial statements commencing on page F-1 have been audited by Lopez,
Blevins, Bork and Associates, LLP as of August 31, 2003, and the related
statements of operations, stockholders' equity, and cash flows for the year then
ended and McManus & Co., P.C., independent certified public accountants, to the
extent and for the periods set forth in their reports appearing elsewhere herein
and are included in reliance upon such reports given upon the authority of said
firm as experts in auditing and accounting.

<PAGE>


Item 15--Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)      Financial Statements and Schedules:

         The financial statements are set forth under Item 8 of this Annual
Report on Form 10-K.  Financial statement schedules have been omitted since they
are either  not  required,  not  applicable,  or the  information  is  otherwise
included.

(b)      Reports on Form 8-K

         The following reports were furnished on Form 8-K during the three
months ended August 31, 2003:

         A report on Form 8-K, announcing information under Item 5 of the
report, was filed on June 30, 2003 with the Securities and Exchange Commission.

         A report on Form 8-K, announcing information under Item 5 of the
report,  was  filed  on  August  27,  2003  with  the  Securities  and  Exchange
Commission.

(c)      Exhibit Listing

         EXHIBIT NO.                IDENTIFICATION OF EXHIBIT

         Exhibit 3.1(a)             Eagle Broadband, Inc. Articles of
                                    Incorporation, as Amended and Restated,
                                    dated February 13, 2002.
         Exhibit 3.1(b)             Eagle Broadband, Inc. Articles of
                                    Incorporation, as Amended, dated February
                                    17, 2004.

         Exhibit 3.2                Amended and Restated Eagle Broadband, Inc.
                                    Bylaws (Incorporated by reference
                                    to Exhibit 3.2 of Form 10-KSB for the fiscal
                                    year ended August 31, 2001, filed
                                    November 16, 2001)
         Exhibit 4.1                Form of Common Stock Certificate
                                    (incorporated by reference to Exhibit 4 of
                                    Form S-3, file no. 333-111160).
         Exhibit 4.2                Purchase Agreement by and between Eagle
                                    Broadband and Investors dated August
                                    23, 2003, including registration rights and
                                    security agreement attached as an exhibit
                                    thereto (incorporated by reference to
                                    Exhibit 10.1 of Form S-3 file  no.
                                    333-109481)
         Exhibit 4.3                Q-Series Bond Agreement (incorporated by
                                    reference to Exhibit 10.3 of Form S-3, file
                                    no. 333-106074)
         Exhibit 4.4                Addendum to Q-Series Bond Agreement
                                    (incorporated by reference to Exhibit 10.4
                                    of Form S-3, file no. 333-106074)
         Exhibit 4.5                Form of Subscription Agreement for Q Series
                                    Bond, between Eagle Broadband and certain
                                    investors (incorporated by reference to
                                    Exhibit 10.5 of Form S-3, file no.
                                    333-106074)
         Exhibit 10.1               Asset Purchase Agreement between Eagle
                                    Telecom International, Inc., a Delaware
                                    corporation and Eagle Telecom International,
                                    Inc., a Texas corporation (incorporated by
                                    reference to Exhibit 10.1 of Form SB-2 file
                                    no. 333-20011)
         Exhibit 10.2               1996 Incentive Stock Option Plan
                                    (incorporated by reference to Exhibit 10.1
                                    of Form S-8 file no. 333-72645)
         Exhibit 10.3               2002 Stock Incentive Plan (incorporated by
                                    reference to Exhibit 10.1 of Form S-8 file
                                    no. 333-97901)

                                       32
<PAGE>

         Exhibit 10.4               2002 Stock Incentive Plan, as Amended
                                    (incorporated by reference to Exhibit
                                    10.1 of Form S-8 file no. 333-102506)
         Exhibit 10.5               2003 Stock Incentive and Compensation Plan
                                    (incorporated by reference to Exhibit 10.1
                                    of Form S-8 file no. 333-103829)
         Exhibit 10.6               2003 Stock Incentive and Compensation Plan,
                                    as Amended (incorporated by reference to
                                    Exhibit 10.1 of Form S-8 file no.
                                    333-105074)
         Exhibit 10.7               2003 Stock Incentive and Compensation Plan,
                                    as Amended (incorporated by reference to
                                    Exhibit 10.1 of Form S-8 file no.
                                    333-109339)
         Exhibit 10.8               2004 Stock Incentive Plan (incorporated by
                                    reference to Exhibit 10.1 of Form S-8 file
                                    no. 333-110309)
         Exhibit 10.9               Agreement and Plan of Reorganization by and
                                    between Eagle Wireless International, Inc.
                                    Clearworks.net, Inc., and Eagle Acquisition
                                    Corporation dated September 15, 2000
                                    (incorporated by reference to Exhibit 10.1
                                    of Form S-4 file no. 333-49688)
         Exhibit 10.10              Stock Purchase Agreement between Eagle
                                    Wireless International, Inc. and the
                                    shareholders of Comtel Communications, Inc.
                                    (incorporated by reference to Exhibit 10.4
                                    of Form 10-KSB for the fiscal year ended
                                    August 31, 2000, filed December 13, 2000)
         Exhibit 10.11              Stock Purchase Agreement between Eagle
                                    Wireless International, Inc. and the
                                    shareholders of Atlantic Pacific
                                    Communications, Inc. (incorporated by
                                    reference to Exhibit 10.5 of Form 10-KSB for
                                    the fiscal year ended August 31, 2000, filed
                                    December 13, 2000)
         Exhibit 10.12              Stock Purchase Agreement between Eagle
                                    Wireless International, Inc. and the
                                    shareholders of Etoolz, Inc. (incorporated
                                    by reference to Exhibit 10.6 of Form 10-KSB
                                    for the fiscal year ended August 31, 2000,
                                    filed December 13, 2000)
         Exhibit 21.1               List of Subsidiaries (incorporated by
                                    reference to Exhibit 21.1 of Form S-4
                                    file no. 333-49688)
         Exhibit 23.1               Consent of McManus & Co., P.C
         Exhibit 23.2               Consent of Malone & Bailey, PLLC
         Exhibit 31.1               Certification of Chief Executive Officer
                                    pursuant to Section 302 of the
                                    Sarbanes-Oxley Act of 2002
         Exhibit 31.2               Certification of Chief Financial Officer
                                    pursuant to Section 302 of the
                                    Sarbanes-Oxley Act of 2002
         Exhibit 32.1               Certification of Chief Executive Officer
                                    pursuant to Section 906 of the
                                    Sarbanes-Oxley Act of 2002
         Exhibit 32.2               Certification of Chief Financial Officer
                                    pursuant to Section 906 of the
                                    Sarbanes-Oxley Act of 2002

<PAGE>

                                   SIGNATURES

        In accordance with the Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                              Eagle Broadband, Inc.



                                              By:  //s// DAVID A. WEISMAN
                                                   -----------------------------
                                                   David A. Weisman
                                                   Chairman of the Board and
                                                   Chief Executive Officer


        In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>

Signature                           Title                                        Date

<S>                                 <C>                                          <C>
/S/ David A. Weisman                Chairman of the Board and                    Oct. 11, 2004
----------------------------------- Chief Executive Officer
David A. Weisman                    (Principal Executive Officer)

/S/ Richard R. Royall               Chief Financial Officer                      Oct. 11, 2004
----------------------------------- (Principal Financial and Accounting Officer)
Richard R. Royall

/S/ H. Dean Cubley                  Director                                     Oct. 11, 2004
-----------------------------------
H. Dean Cubley

/S/ Christopher W. Futer            Director                                     Oct. 11, 2004
-----------------------------------
Christopher W. Futer

/S/ Glenn A. Goerke                 Director                                     Oct 11, 2004
-----------------------------------
Glenn A. Goerke

/S/ J. Reinhartsen                  Director                                     Oct 11, 2004
-----------------------------------
J. Reinhartsen

/S/ A.L. Clifford                   Director                                     Oct 11, 2004
-----------------------------------
A.L. Clifford
</TABLE>

                                       2

<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
   Eagle Broadband, Inc.
   Houston, Texas

We have audited the accompanying consolidated balance sheet of Eagle Broadband,
Inc. as of August 31, 2003, and the related statements of operations,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of Eagle Broadband, Inc.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Eagle Broadband,
Inc. as of August 31, 2003, and the results of its operations and its cash flows
for the year then ended, in conformity with accounting principles generally
accepted in the United States of America.

As discussed in Note 2, to the consolidated financial statements the Company
restated its prior period financial statements.

/S/ Lopez, Blevins, Bork and Associates, LLP
--------------------------------------------
Lopez, Blevins, Bork and Associates, LLP
Houston, Texas


October 11, 2004

                                      F-1
<PAGE>

                         INDEPENDENT ACCOUNTANT'S REPORT


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF EAGLE BROADBAND, INC.:

We have audited the accompanying consolidated balance sheets of Eagle Broadband,
Inc. and subsidiaries as of August 31, 2002, and the related consolidated
statements of earnings, shareholders' equity, and cash flows for each of the two
years ended August 31, 2002 and 2001. These financial statements are the
responsibility of Eagle Broadband, Inc.'s management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Eagle Broadband, Inc. and subsidiaries as of August 31, 2002, and
the results of their earnings, shareholders' equity, and their cash flows for
each of the two years then ended are in conformity with generally accepted
accounting principles.

As discussed in Note 2 the consolidated financial statements, the Company
restated its prior period financial statements.

/S/ McManus & Co., P.C.
----------------------------
McMANUS & CO., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ROCKAWAY, NEW JERSEY

December 13, 2002, except as to Note 2
on which the date is July 27, 2004

                                      F-2
<PAGE>

<TABLE>
<CAPTION>
                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
        (In thousands, except per share amounts, as restated (See Note 2)

                                              ASSETS
                                                                            August 31,
                                                                    2003                2002
                                                                    ----                ----
1.  Current Assets
<S>                                                           <C>                 <C>
      Cash and Cash Equivalents                               $            824    $          1,273
      Securities Available for Sale                                      1,714               2,148
      Accounts Receivable, net                                           1,704               5,028
      Inventories                                                        3,199               6,059
      Prepaid Expenses                                                     668                 358
                                                              ----------------    ----------------
  Total Current Assets                                                   8,109              14,866

    Property and Equipment
      Operating Equipment                                               36,422              34,509
      Less:  Accumulated Depreciation                                   (5,689)             (3,661)
                                                              ----------------    ----------------
  Total Property and Equipment                                          30,733              30,848

    Other Assets:
      Deferred Costs                                                       334                 334
      Goodwill, net                                                      4,095               5,974
      Contract rights, net                                              23,590              25,503
      Customer relationships, net                                        5,912               6,390
      Other Intangible assets, net                                       4,366               4,839
      Other Assets                                                         227                 397
                                                              ----------------    ----------------

  Total Other Assets                                                    38,524              43,437
                                                              ----------------    ----------------

Total Assets                                                  $         77,366    $         89,151
                                                              ================    ================

                         LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts Payable                                            $          5,461    $          4,757
  Accrued Expenses                                                       7,790               2,873
  Notes Payable                                                          5,779               3,653
  Capital Lease Obligation                                                  --                  48
                                                              ----------------    ----------------

    Total Current Liabilities                                           19,030              11,331

Long-Term Liabilities:
  Capital Lease Obligations
    (net of current maturities)                                             --                  70
  Long-Term Debt                                                            --               1,202
                                                              ----------------    ----------------

       Total Long-Term Liabilities                                          --               1,272

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 200,000,000 shares
    Issued and Outstanding at August 31, 2003
    and 2002, 147,447,000 and 73,051,000, respectively                     147                  73
  Paid in Capital                                                      177,017             158,731
  Accumulated Deficit                                                 (118,101)            (81,600)
  Accumulated Comprehensive Income (Loss)                                 (727)               (656)
                                                              ----------------    ----------------

      Total Shareholders' Equity                                        58,336              76,548
                                                              ----------------    ----------------

Total Liabilities and Shareholders' Equity                     $        77,366     $        89,151
                                                              ================    ================
See accompanying notes to consolidated financial statements.

</TABLE>

                                      F-3
<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
       (in thousands, except per share amounts, as restated (See Note 2))


<TABLE>


                                                       For the years ended August 31,
                                               ----------------------------------------------
                                                   2003            2002            2001
                                               --------------  --------------  --------------

Net Sales:
<S>                                                   <C>             <C>             <C>
 Structured wiring                                    $3,692          $8,036          $7,643
 Broadband services                                    2,809           2,657             523
 Products                                              3,342          16,108          19,342
 Other                                                 1,750           3,016             602
                                               --------------  --------------  --------------
Total Sales                                           11,593          29,817          28,110
                                               --------------  --------------  --------------

Costs of Goods Sold:
 Direct Labor and Related Costs                        2,195           3,160           1,638
 Products and Integration Service                      5,400          15,250          14,931
 Structured Wiring Labor and Materials                 1,774           2,121           2,345
 Broadband Services Costs                                903             763             260
 Depreciation and Amortization                           456             377           1,053
 Other Manufacturing Costs                                56           1,033             181
                                               --------------  --------------  --------------
Total Costs of Goods Sold                             10,784          22,704          20,408
                                               --------------  --------------  --------------
Gross Profit                                             809           7,113           7,702
                                               --------------  --------------  --------------

Operating Expenses:
 Selling, General and Administrative:
  Salaries and Related Costs                           6,102           7,795           6,169
  Advertising and Promotion                              247             963             600
  Depreciation and Amortization                        4,776           6,020           4,273
  Other Support Costs                                 12,737           3,974           4,264
  Research and Development                               411             404           1,276
  Impairment, write-downs & restructuring costs        7,611          64,665             ---
                                               --------------  --------------  --------------
Total Operating Expenses                              31,884          83,821          16,582
                                               --------------  --------------  --------------

Loss from Operations                                 (31,075)        (76,708)         (8,880)

Other Income/(Expenses)
 Interest income,                                         68             360           2,348
 Interest expense                                     (5,494)           (625)            ---
                                               --------------  --------------  --------------
Total Other Income (Expense)                          (5,426)           (265)          2,348
                                               --------------  --------------  --------------

Net Loss                                             (36,501)        (76,973)         (6,532)
Other Comprehensive Loss:

Unrealized Holding Loss                                  (71)           (279)           (359)
                                               --------------  --------------  --------------

Other Comprehensive Loss                            $(36,572)       $(77,252)        $(6,891)
                                               --------------  --------------  --------------

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

Net Loss per Common Share:
 Basic                                                $(0.38)         $(1.20)         $(0.13)
 Diluted                                              $(0.38)         $(1.20)         $(0.14)
 Comprehensive Loss                                   $(0.38)         $(1.20)         $(0.14)

See accompanying notes to consolidated financial statements.

</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-4

<PAGE>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
       (in thousands, except per share amounts, as restated (See Note 2))

<TABLE>

                                                                         Additional                  Accumulated       Total
                                            Common Stock     Preferred    Paid in     Retained     Comprehensive    Shareholders
                                           Shares    Value     Stock      Capital     Earnings         Income         Equity
Total Shareholders' Equity
<S>             <C> <C>                    <C>         <C>       <C>      <C>           <C>               <C>        <C>
   As of August 31, 2000                   25,609      $26       $---     $52,160       $1,905            $ (18)     $54,073

Net Loss                                      ---      ---        ---         ---       (6,532)                       (6,532)

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 Loss                       ---      ---        ---         ---                          (359)        (359)

                                        -------------------------------------------------------------------------------------
Total Shareholders' Equity
   As of August 31, 2001                   60,264       60        ---     153,426       (4,627)            (377)     148,482

Net Loss                                      ---      ---        ---         ---      (76,973)                      (76,973)

New Stock Issued to Shareholders
 For Services and Compensation              1,648        2        ---         880          ---                           882
 For Property and Other Assets              2,867        2        ---         591          ---                           593
 For Retirement of Debt and Liabilities     7,846        9        ---       3,577          ---                         3,586
 For Warrants Conversion                      ---      ---        ---         ---          ---                           ---
 For Employee Stock Option Plan               ---      ---        ---         ---          ---                           ---
 For Acquisitions                           2,002        2        ---       1,079          ---                         1,081
 For Licenses and Investments                 ---      ---        ---         100          ---                           100

Syndication Costs                             ---      ---        ---         ---          ---                           ---

Treasury Stock                             (1,576)      (2)       ---        (922)         ---                          (924)

Unrealized Holding Loss                       ---      ---        ---         ---                          (279)        (279)

                                        -------------------------------------------------------------------------------------
Total Shareholders' Equity
   As of August 31, 2002                   73,051       73        ---     158,731      (81,600)            (656)      76,548

Net Loss                                      ---      ---        ---         ---      (36,501)                      (36,501)

New Stock Issued to Shareholders
 For Services and Compensation              7,437        7        ---       1,813          ---                         1,820
 For Property and Other Assets             14,938       15        ---       3,032          ---                         3,047
 For Retirement of Debt and Liabilities    50,816       51        ---      13,827          ---                        13,878
 For Warrants Conversion                      ---      ---        ---         ---          ---                           ---
 For Employee Stock Option Plan             1,647        2        ---         180          ---                           182

Syndication Costs                             ---      ---        ---        (368)         ---                          (368)

Treasury Stock                               (442)      (1)       ---        (198)         ---                          (199)

Unrealized Holding Loss                       ---      ---        ---         ---          ---              (71)         (71)

                                        -------------------------------------------------------------------------------------
Total Shareholders' Equity
   As of August 31, 2003                  147,447     $147        ---    $177,017    $(118,101)          $ (727)     $58,336
                                        =====================================================================================

See accompanying notes to consolidated financial statements.


</TABLE>
                                      F-5

<PAGE>



                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
       (in thousands, except per share amounts, as restated (See Note 2))


<TABLE>



                                                               For the years ended August 31,
                                                       ----------------------------------------------
                                                            2003            2002           2001
                                                       --------------- --------------- --------------

Cash Flows from Operating Activities
<S>                                                          <C>             <C>             <C>
Net Loss                                                     $(36,501)       $(76,973)       $(6,532)

Adjustments to Reconcile Net Loss to Net Cash
Used by Operating Activities:
 Impairment, write-downs & restructuring costs                  7,611          64,665            ---
 Interest for conversion value                                     91             ---            ---
 Depreciation and Amortization                                  5,232           6,397          5,326
 Stock Issed for Services Rendered                              1,820             882            974
 Stock Issued for Interest Expense                              2,477             100            ---
 Changes in Assets and Liabilities
 (Increase)/Decrease in Accounts Receivable                       124           2,479           (462)
 (Increase)/Decrease in Inventories                             1,717           4,578            515
 (Increase)/Decrease in Prepaid Expenses                         (311)            386            516
 Increase/(Decrease) in Accounts Payable                          921             232         (1,793)
 Increase/(Decrease) in Accrued Expenses                        8,557          (3,180)         1,493
 Increase/(Decrease) in Expense Allowable for Doubtful
  Acccounts                                                     2,177            (363)           ---
 Increase/(Decrease) in Federal Income Taxes Payables             ---             ---           (736)
                                                       --------------- ------------------------------
 Total Adjustment                                              30,416          76,176          5,883
                                                       --------------- --------------- --------------
Net Cash Used by Operating Activities                          (6,085)           (797)          (699)
                                                       --------------- --------------- --------------

Cash Flows from Investing Activities
 (Purchase)/Disposal of Property and Equipment                 (2,121)        (12,886)       (16,394)
 (Purchase)/Disposal of Contact Wireless & DSS
  Security, Net of Cash Acquired                                  ---            (869)           ---
 (Increase)/Decrease in Security Deposits                         ---             ---           (102)
 (Increase)/Decrease in Investments                               434              87         (3,189)
 (Increase)/Decrease in Notes Receivable                          ---             ---          8,655
 (Increase)/Decrease in Deferred Advertising Costs                ---             ---             21
 (Increase)/Decrease in Deferred Syndication Costs                ---             ---            270
 (Increase)/Decrease in Other Intangible Assets                   ---             ---          1,009
 (Increase)/Decrease in Other Assets                              411             ---              9
                                                       --------------- --------------- --------------
Net Cash Used by Investing Activities                          (1,276)        (13,668)        (9,721)

Cash Flows from Financing Activities
 Increase/(Decrease) in Notes Payable                           7,297             387          6,148
 Increase/(Decrease) in Capital Leases                             --               3             63
 Increase/(Decrease) in Line of Credit                            ---          (1,846)           230
 Increase/(Decrease) in Deferred Taxes                            ---              32            ---
 Proceeds from Sale of Common Stock, Net                          182             ---          1,078
 Retirement of ESOP Shares                                        ---             ---         (2,740)
 Syndication costs                                               (368)            ---            ---
 Treasury Stock                                                  (199)           (918)        (8,625)
                                                       --------------- --------------- --------------
Net Cash Provided by Financing Activities                       6,912          (2,342)        (3,846)
                                                       --------------- --------------- --------------

Net Increase/(Decrease) in Cash                                  (449)        (16,807)       (14,266)
Cash at the Beginning of the Year                               1,273          18,080         32,346
                                                       --------------- --------------- --------------
Cash at the End of the Year                                      $824          $1,273        $18,080
                                                       --------------- --------------- --------------

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

Supplemental Disclosure of Cash Flow Information:
Net Cash Paid During the Year for:
 Interest                                                      $3,288            $165           $112
 Income Taxes                                                     ---             ---            ---

Supplemental non-cash investing activities (See Notes 5 & Note 12)

See accompanying notes to consolidated financial statements.


</TABLE>

Supplemental non-cash investing activities (See Notes 5 & Note 12)
See accompanying notes to consolidated financial statements.

                                      F-6

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003


NOTE 1 -  Basis of Presentation and Significant Accounting Policies:

          Eagle Broadband, Inc., (the Company or Eagle) incorporated as a Texas
          corporation on May 24, 1993, and commenced business in April of 1996.
          The Company is a 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 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 August 31, 2003, 2002 and 2001, the Company's subsidiaries were:
          Atlantic Pacific Communications, Inc. (APC) - operated as Eagle
          Communication Services; Etoolz, Inc. (ETI); Eagle Wireless
          International, Inc. (EWI); ClearWorks.net, Inc. (.NET); ClearWorks
          Communications, Inc. (COMM) - operated as Eagle BDS Services;
          ClearWorks Home Systems, Inc. (HSI) - operated as Eagle Residential
          Structured Wiring; Contact Wireless, Inc. (CWI) - operating as Eagle
          Paging Services; DSS Security, Inc., (DSS) - operated as Eagle
          Security Services; United Computing Group, Inc. (UCG) - operated as
          Eagle Technology Services; and Link Two Communications, Inc. (LINK II)
          - operated as Eagle Messaging Services. 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 $824,000 and $1,273,000 of cash and cash equivalents
          invested in interest bearing accounts at August 31, 2003, and August
          31, 2002, respectively.

          The Company also has Securities available for sale that include
          1,480,000 shares of common stock of Burst.com, 146,085,264 shares of
          Celerity Systems common stock and $350,000 Celerity Systems Bonds.
          These common stock and bond investments have an aggregate cost basis
          of $1,075,000 and an aggregate fair market value of $1,714,006 and are
          included in the Balance Sheet category of Securities available for
          sale as of August 31, 2003 and 2002. See (Note 10).


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
                    Headend 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. Eagle has
          acquired all of its property and equipment with either cash or stock
          and has not capitalized any interest expenses in its capital assets.


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:

                                                       August 31,
                                                 2003             2002

                  Raw Materials                $ 1,826            $ 4,515
                  Work in Process                1,237              1,262
                  Finished Goods                   136                282
                                                $3,199            $ 6,059

                                      F-7

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003


E)        Revenue Recognition

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


          Eagle adopted EITF 00-21, "Revenue Arrangements with Multiple
          Deliverables," in the fourth quarter of fiscal 2003. The impact of
          adopting EITF 00-21 did not have a material effect to Eagle's results
          of operations. Eagle's contracts that contain multiple elements as of
          May 31, 2004, or prior were immaterial. When elements such as
          hardware, software and consulting services are contained in a single
          arrangement, or in related arrangements with the same customer, Eagle
          allocates revenue to each element based on its relative fair value,
          provided that such element meets the criteria for treatment as a
          separate unit of accounting. The price charged when the element is
          sold separately generally determines fair value. In the absence of
          fair value for a delivered element, Eagle allocates revenue first to
          the fair value of the undelivered elements and allocates the residual
          revenue to the delivered elements. In the absence of fair value for an
          undelivered element, the arrangement is accounted for as a single unit
          of accounting, resulting in a delay of revenue recognition for the
          delivered elements until the undelivered elements are fulfilled. Eagle
          limits the amount of revenue recognition for delivered elements to the
          amount that is not contingent on the future delivery of products or
          services or subject to customer-specified return or refund privileges.


          Deferred Revenues

                Revenues that are billed in advance of services being completed
          are deferred until the conclusion of the period of the service for
          which the advance billing relates. Deferred revenues are included on
          the balance sheet as a current liability under the heading Accrued
          Expenses until the service is performed and then recognized in the
          period in which the service is completed. Eagle's deferred revenues
          primarily consist of billings in advance for cable, internet, security
          and telephone services, which generally are between one and three
          months of services. Eagle had deferred revenues of $230,397 and
          $147,696 as of August 31, 2003 and 2002, respectively.


          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. Eagle's Wireless International Product revenues are
          reported under the category of Products on Eagle's Consolidated
          Statements of Operations included as page F-4 of this report and also
          under the category Eagle within Note 22 - Industry Segments.

          BroadbandMagic
          BroadbandMagic 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 Eagle recognizes the revenue.
          Eagle's Broadband Multimedia and Internet Products revenues are
          reported under the category of Products on Eagle's Consolidated
          Statements of Operations included as page F-4 of this report and also
          under the category Eagle within Note 22 - Industry Segments. Revenue
          from software consists of software licensing. There is no
          post-contract customer support. Software revenue is allocated to the
          license using vendor specific objective evidence of fair value
          ("VSOE") or, in the absence of VSOE, the residual method. The price
          charged when the element is sold separately generally determines VSOE.
          In the absence of VSOE of a delivered element, Eagle allocates revenue
          to the fair value of the undelivered elements and the residual revenue
          to the delivered elements. Eagle recognizes revenue allocated to
          software licenses at the inception of the license.

          Eagle Broadband, Inc.
          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 Eagle'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. Eagle's Broadband, Inc.
          revenues are reported under the category of Products on Eagle's
          Consolidated Statements of Operations included as page F-4 of this
          report and also under the category Eagle within Note 22 - Industry
          Segments.

          Eagle BDS Services - dba 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
          Installation fees are recognized upon completion and acceptance.
          Eagle's BDS Services revenues are reported under the category of
          Broadband Services on Eagle's Consolidated Statements of Operations
          included as page F-4 of this report and also under the category
          EBS/DSS within Note 22 - Industry Segments.

                                      F-8

<PAGE>


                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003


          Eagle Residential Structured Wiring - dba 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. Eagle's
          Residential Structured Wiring revenues are reported under the category
          of Structured Wiring on Eagle's Consolidated Statements of Operations
          included as page F-4 of this report and also under the category
          APC/HSI within Note 22 - Industry Segments.

          Eagle Communication Services - dba Atlantic Pacific Communications,
           Inc.
          Atlantic Pacific 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 services are
          completed. Eagle's Communications Services revenues are reported under
          the category of Structured Wiring on Eagle's Consolidated Statements
          of Operations included as page F-4 of this report and also under the
          category APC/HSI within Note 22 - Industry Segments.

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

          Eagle Messaging Services - dba Link Two Communications, Inc.
          Link Two Communications, Inc., provides customers with one- and
          two-way messaging systems. The revenue from the sale of these products
          is recognized at the time the services are provided. Eagle's Messaging
          Services revenues are reported under the category of Other on Eagle's
          Consolidated Statements of Operations included as page F-4 of this
          report and also under the category Eagle within Note 22 - Industry
          Segments.

          Eagle Paging Services - dba 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.
          Eagle's Paging Services revenues are reported under the category of
          Other on Eagle's Consolidated Statements of Operations included as
          page F-4 of this report and also under the category Other within Note
          22 - Industry Segments.

          Eagle Security Services - dba 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. Installation fees are recognized upon completion and
          acceptance. Eagle's Security Services revenues are reported under the
          category of Broadband Services on Eagle's Consolidated Statements of
          Operations included as page F-4 of this report and also under the
          category EBS/DSS within Note 22 - Industry Segments.

          Eagle Technology Services - dba 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 on completion.. Eagle's Technology Services product revenues
          are reported under the category of "Products" while the services
          components are reported under the category "Other" on Eagle's
          Consolidated Statements of Operations included as page F-4 of this
          report and also under the category UCG within Note 22 - Industry
          Segments.

F)        Research and Development Costs

          For the years ended August 31, 2003, 2002 and 2001, the Company
          performed research and development activities for internal projects
          related to its Orb'Phone Exchange, convergent set-top boxes as well as
          its multi-media entertainment centers. Research and development costs
          of $ 411,000, $404,000, and $1,276,000 were expensed for the years
          ended August 31, 2003, 2002, and 2001, respectively.

          No research and development services were performed for outside
          parties for the year ended August 31, 2003, 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:

                                      F-9

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

<TABLE>
<CAPTION>

                                                                       August 31,
                                                       ------------------------------------------
                                                         2003            2002            2001
                                                       ----------     -----------     -----------
        <S>                                            <C>            <C>             <C>
        Weighted Average Number of Common
          Shares Outstanding Including

        Basic Common Stock Equivalents                    95,465          64,004          49,726
        Fully Diluted Common Stock Equivalents            95,465          64,158          49,880

</TABLE>


I)        Impairment of Long-Lived Assets and Goodwill

          Our long-lived assets primarily  include goodwill, contract rights and
          customer  relationships.  Statement of Financial  Accounting Standards
          No. 142 "Goodwill and Other  Intangible  Assets" ("SFAS 142") requires
          that goodwill and  intangible  assets be tested for  impairment at the
          reporting  unit  level  (operating  segment  or  one  level  below  an
          operating  segment)  on an annual  basis and between  annual  tests in
          certain  circumstances.  Application of the goodwill  impairment  test
          requires  judgment,  including the  identification of reporting units,
          assigning  assets  and  liabilities  to  reporting  units,   assigning
          goodwill and intangible assets to reporting units, and determining the
          fair value of each reporting unit.  Significant  judgments required to
          estimate the fair value of reporting units include  estimating  future
          cash  flows,   determining   appropriate   discount  rates  and  other
          assumptions.   Changes  in  these  estimates  and  assumptions   could
          materially  affect the  determination of fair value for each reporting
          unit.

          The intangible assets primarily are the Company rights to deliver
          bundled digital services such as, Internet, telephone, cable
          television and security monitoring services to residential and
          business users. The Company assessed the fair value of the intangible
          assets. There were a number of significant and complex assumptions
          used in the calculation of the fair value of the intangible assets. If
          any of these assumptions prove to be incorrect, the Company could be
          required to record a material impairment to its intangible assets. The
          assumptions include significant market penetration in its current
          markets under contract and significant market penetration in markets
          where they are currently negotiating contracts.

          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

          At August 31, 2002, Eagle determined that an impairment of Link Two
          paging network equipment and nationwide licenses existed. Link Two
          Communications competes with many established companies in the
          nationwide one and two-way messaging services area. The paging
          industry has declined over the past year and the major paging
          companies have undergone significant beneficial financial
          restructurings. These companies are able to offer products and related
          services at more favorable rates than Link Two. Because the paging
          industry and related financial credit availability from banks for
          financing emerging nationwide networks has been declining over the
          last year, Link Two has been unable to obtain significant funding to
          expand and provide cost effective service to its customers.
          Accordingly, Link Two has had to curtail its development on a
          nationwide basis and restricted its operations to serve the Houston
          and Dallas, Texas, markets. The equipment servicing the nationwide
          network has been inactive and is being dismantled. The equipment
          servicing the nationwide network is inactive and has been impaired as
          well as the value of the related FCC licenses. At August 31, 2002,
          management estimated through recent sales of equipment and industry
          pricing of FCC licenses that an impairment charge of $27,100,000 was
          necessary to reflect the ongoing value of its assets and licenses.

          At August 31, 2003, management determined that a $7,611,000 non-cash
          impairment charge was necessary against realigned operations and the
          discontinued sale of low margin commodity products, residential and
          commercial structured wiring operations and the withdrawal from its
          Austin area BDS development based on the lack of demand for BDS
          services resulting from a slower build out of the development than
          originally projected in conjunction with local market competition.
          Included in the impairment was the write down of goodwill associated
          with the Comtel acquisition of $1,878,000.


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
          were being amortized using the straight-line method over twenty (20)
          years for Atlantic Pacific Communications, Inc., and twenty-five (25)
          years for Bundled Digital Services through June 30, 2001.

          Contract rights and customer relationships relate to the Company
          rights to deliver bundled digital services such as Internet,
          telephone, cable television and security monitoring services to
          certain residential and business users that were aquired in the
          Clearworks.net, Inc. merger and are being amortized over the lives of
          the contracts which is fifteen (15) years.


          Other  intangible  assets  consist of  licenses  and permits and other
          acquired contracts,  which are being amortized using the straight-line
          method over their  estimated  useful  lives of 1 to twenty (20) years.
          Eagle's  licenses  include  FCC  licenses  for  designated  narrowband
          personal  communications  services,  radio  frequencies or spectrum to
          service  providers.  Prior to the adoption of FAS 142, Eagle amortized
          these  licenses  using the straight line method over twenty years.  At
          August  31,  2002,   management  estimated  through  recent  sales  of
          equipment  and  industry  pricing of FCC licenses  that an  impairment
          charge of  $27,100,000  was  necessary to reflect the ongoing value of
          its assets and licenses;  thereby  leaving an  unamortized  balance of
          licenses  on its books of  $1,562,000.  Eagle does not  maintain  that
          these  licenses  have  an  indefinite  life,  but  rather  has  ceased
          amortizing the remaining balance of $1,562,000 as management  believes
          that this balance represents the salvage value of such assets.  Eagle,
          to date,  has  maintained  all  operational  requirements  to keep its
          licenses  current,  and  periodically  assesses both future  operating
          requirements as well as the salvage of such assets.

                                      F-10

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003


          Goodwill is carried at cost less accumulated amortization. Intangible
          assets were amortized on a straight-line basis over the economic lives
          of the respective assets, generally ten to twenty-five years. Prior to
          July 1, 2001, goodwill was amortized over 20 to 25 years. The
          Company's adoption of SFAS 142 eliminated the requirement to amortize
          goodwill subsequent to the fiscal year ending August 31, 2001. Under
          the provisions of SFAS 142, the Company is required to periodically
          assess the carrying value of goodwill associated with each of its
          distinct business units that comprise its business segments of the
          Company to determine if impairment in value has occurred. Impairment
          tests completed as of August 31, 2002 and August 31, 2001 concluded
          that the carrying amount of goodwill for each acquired business unit
          did not exceed its net realizable value based on the Company's
          estimate of expected future cash flows to be generated by its business
          units, except as described above in Note 1, I. The Company updated its
          assessment as of August 31, 2003 and concluded that based on a
          valuation model incorporating expected future cash flows in
          consideration of historical cash flows and results to date, no
          impairment charge was necessary.

          Goodwill and other intangibles of $75,528,000 net of prior impairments
          and amortization were recorded under the purchase method for the
          purchases of ClearWorks.net, Inc., Atlantic Pacific, Inc., DSS
          Security, Inc., Contact Wireless, Inc., and Comtel, Inc. The majority
          of the intangibles were from the ClearWorks acquisition. ClearWorks
          was in the business of selling telecommunications services to
          residential neighborhoods. In fiscal 2003, Eagle realized it had
          failed to successfully achieve profits using the ClearWorks model of
          installing fiber optic cable to neighborhoods under the speculative
          attempt to capture enough individual homeowners in each neighborhood
          via individual selling methods to pay for the cable infrastructure. In
          early 2003, Eagle modified its strategy to deliver the ClearWorks
          developed bundled digital services approach including Internet,
          telephone, cable television and security monitoring services to
          residential and business users by targeting municipalities,
          homebuilders and residential real estate developers that finance and
          install the fiber optic cable backbone in every lot and offer Eagle
          exclusive rights to deliver digital bundled services to homeowners,
          using pre-selling promotions and other low cost mass marketing
          techniques. In October 2003, Eagle hired a new Chief Executive Officer
          with an extensive sales and marketing background and proven senior
          management and operational skills leading high-growth technology
          companies to implement its modified strategy. As of December 5, 2003,
          the date of the auditor's report, Eagle had realized several initial
          successes in projects where the municipalities, public utility
          districts and developers assume the predominate capital cost
          responsibility and contract with Eagle to provide the services and
          content; thereby significantly limiting the Company's capital outlays
          on such projects.

          Eagle assessed the fair value of the intangible assets as of August
          31, 2003 and concluded that the goodwill and other intangible assets
          valuations remains at an amount greater than the current carrying and
          other intangible assets value.

          There were a number of significant and complex assumptions used in the
          calculation of the fair value of the goodwill. If any of these
          assumptions prove to be incorrect, Eagle could be required to record a
          material impairment to its goodwill. The assumptions include
          significant market penetration in its current markets under contract
          and significant market penetration in markets where they are currently
          negotiating contracts.

K)        Advertising Costs

          In fiscal 2003, 2002, and 2001, 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 year ended August 31, 2003, 2002, and 2001, the Company
          expensed $247,000, $963,000 and $600,000 respectively.

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


          Eagle holds minority equity investments in companies having operations
          or technology in areas within Eagle's strategic focus. Eagle applies
          the equity method of accounting for minority investments when Eagle
          has the ability to exert significant influence over the operating and
          financial policies of an investment. In the absence of such ability,
          Eagle accounts for these minority investments under the cost method.
          Certain investments carry restrictions on immediate disposition.
          Investments in public companies (excluding those accounted for under
          the equity method) with restrictions of less than one year are
          classified as available-for-sale and are adjusted to their fair market
          value with unrealized gains and losses, net of tax, recorded as a
          component of accumulated other comprehensive income. Upon disposition
          of these investments, the specific identification method is used to
          determine the cost basis in computing realized gains or losses, which
          are reported in other income and expense. Declines in value that are
          judged to be other than temporary are reported in other income and
          expense.


                                      F-11

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003


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." For the fiscal year ended August
          31, 2003, 2002, and 2001 comprehensive loss was ($71,000), ($279,000)
          and ($359,000), respectively.

P)        Reclassification

          The Company has reclassified certain assets costs and expenses for the
          year ended August 31, 2002, and 2001, to facilitate comparisons.

Q)        Supporting Costs in Selling, General and Administrative Expenses

          Other support cost for the twelve months ended August 31, 2003, 2002,
          and 2001 are as follows, in thousands: -

<TABLE>
<CAPTION>
                                                      2003          2002             2001
                                                 ------------------------------------------
                  <S>                            <C>            <C>             <C>
                  Advertising/Conventions         $     ---              8     $       737
                  Auto Related                           66            174
                  Bad debt                            2,177            ---             ---
                  Contract Labor                        907            100             ---
                  Delivery/Postage                       95            162             178
                  Fees                                  418            ---             ---
                  Insurance                             437            181             263
                  Office & telephone                    675            880             482
                  Other                                 291             21              17
                  Professional                        5,222            424             831
                  Rent                                1,183          1,052             791
                  Travel                                377            459             437
                  Taxes                                 170             53              90
                  Utilities                             719            460             438
                                                  ----------     ----------      ----------
                  Total                           $  12,737          3,974       $   4,264
                                                  ==========     ==========      ==========

</TABLE>

R)        Recent Pronouncements

          In July 2002, the FASB issued Statement of Financial Accounting
          Standards No. 146 ("SFAS 146"), "Accounting for Costs Associated with
          Exit or Disposal Activities," which nullifies EITF Issue No. 94-3,
          "Liability Recognition for Certain Employee Termination Benefits and
          Other Costs to Exit an Activity (including Certain Costs Incurred in a
          Restructuring)." SFAS 146 requires that costs associated with an exit
          or disposal activity be recognized only when the liability is incurred
          (that is, when it meets the definition of a liability in the FASB's
          conceptual framework). SFAS 146 also establishes fair value as the
          objective for initial measurement of liabilities related to exit or
          disposal activities. SFAS 146 is effective for exit or disposal
          activities that are initiated after December 31, 2002. The Company
          adopted SFAS in the first quarter of fiscal 2003.

          In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
          "Guarantor's Accounting and Disclosure Requirements for Guarantees,
          Including Indirect Guarantees of Indebtedness of Others." For certain
          guarantees issued after December 31, 2002, FIN 45 requires a guarantor
          to recognize, upon issuance of a guarantee, a liability for the fair
          value of the obligations it assumes under the guarantee. Guarantees
          issued prior to January 1, 2003, are not subject to liability
          recognition, but are subject to expanded disclosure requirements. The
          Company does not believe that the adoption of this Interpretation has
          had a material effect on its consolidated financial position or
          statement of operations.

          In January 2003, FASB issued Interpretation No. 46 (FIN 46), an
          interpretation of Accounting Research Bulletin No. 51, which requires
          the Company to consolidate variable interest entities for which it is
          deemed to be the primary beneficiary and disclose information about
          variable interest entities in which it has a significant variable
          interest. FIN 46 became effective immediately for variable interest
          entities formed after January 31, 2003 and effective for periods
          ending after December 15, 2003, for any variable interest entities
          formed prior to February 1, 2003. The Company does not believe that
          this Interpretation will have a material impact on its consolidated
          financial statements.

          In April 2002, the FASB issued Statement of Financial Accounting
          Standards No. 145 ("SFAS 145"), "Rescission of FASB Statements No. 4,
          44 and 64, Amendment of FASB Statement No. 13, and Technical
          Corrections," which requires that the extinguishment of debt not be
          considered an extraordinary item under APB Opinion No. 30 ("APB 30"),
          "Reporting the Results of Operations-Reporting the Effects of Disposal
          of a Segment of Business, and Extraordinary, Unusual and Infrequently
          Occurring Events and Transactions," unless the debt extinguishment
          meets the "unusual in nature and infrequent of occurrence" criteria in
          APB 30. SFAS 145 is effective for fiscal years beginning after May 15,
          2002, and, upon adoption, companies must reclassify prior period items
          that do not meet the extraordinary item classification criteria in APB
          30. The Company adopted SFAS 145 and related rules as of August 31,
          2002. The adoption of SFAS 145 had no effect on the Company's
          financial position or results of operations.

                                      F-12

<PAGE>


                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

          In May 2003, the FASB issued Statement of Financial Accounting
          Standards No. 150 ("SFAS 150"), "Accounting for Certain Financial
          Instruments with Characteristics of both Liabilities and Equity." This
          Statement establishes standards for how an issuer classifies and
          measures certain financial instruments with characteristics of both
          liabilities and equity. It requires that an issuer classify a
          financial instrument that is within its scope as a liability (or an
          asset in some circumstances). The provisions of this Statement are
          effective for financial instruments entered into or modified after May
          31, 2003, and otherwise are effective at the beginning of the first
          interim period beginning after June 15, 2003. The adoption of this
          Statement did not have an impact on the Company's financial results of
          operations and financial position.

          In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
          133 on Derivative Instruments and Hedging Activities," which amends
          and clarifies financial accounting and reporting derivative
          instruments, including certain derivative instruments embedded in
          other contracts and for hedging activities under SFAS No. 133,
          "Accounting for Derivative Instruments and Hedging Activities." This
          statement is effective for contracts entered into or modified and for
          hedging relationships designated after June 30, 2003. The adoption of
          this statement did not have an impact on the Company's operating
          results or financial position.

S)        Product Warranties

          The Company warrants its products against defects in design, materials
          and workmanship generally for six months to a year. Other warranties
          from our vendors which are incorporated in our products are passed on
          to the customer at the completion of the sale. Provision for estimated
          warranty costs is made in the period in which such costs become
          probable. Historically, Eagle has not incurred any material warranty
          costs and, accordingly, Eagle has not accrued for these costs at
          August 31, 2003 and 2002. Eagle provides for the estimated cost of
          product warranties at the time it recognizes revenue. Eagle engages in
          product quality programs and processes, including actively monitoring
          and evaluating the quality of its component suppliers; however,
          ongoing product failure rates, material usage and service delivery
          costs incurred in correcting a product failure, as well as specific
          product class failures outside of Eagle's baseline experience, affect
          the estimated warranty obligation. If actual product failure rates,
          material usage or service delivery costs differ from estimates,
          revisions to the estimated warranty liability would be required.

T)        Beneficial Conversion Values:

          Beneficial conversion values are calculated at the difference between
          the conversion price and the fair value of the common stock into which
          the debt is convertible, multiplied by the number of shares into which
          the debt is convertible. The beneficial conversion value is charged to
          interest expense because the debt is convertible at the date of
          issuance. The value is limited to the total proceeds received.

NOTE 2 -  Restatement of Financial Statements


          During the quarter ended May 31, 2004, and subsequent to the issuance
          of the Company's financial statements as of August 31, 2003, it was
          determined that the allocation of the purchase price to net assets
          acquired in connection with its merger with Clearworks.net, Inc. and
          certain other classifications of intangible assets had not been
          appropriately accounted for. The principal change to previously issued
          financial statements related to the reclassification of a portion of
          the Company's goodwill acquired in the Clearwork.net, Inc. merger to
          contract rights, customer relationships and other intangible assets
          that are amortizable versus goodwill not being amortizable following
          the Company's adoption of FAS 142. Eagle also determined that goodwill
          was impaired at August 31, 2002, and recorded an impairment charge of
          $37,565,000 Accordingly, the Company has restated its consolidated
          financial statements for the years ended August 31, 2003, 2002 and
          2001 to correctly present goodwill, intangible assets, amortization
          expense and net loss and restated its consolidated financial
          statements as of May 31, 2003, and February 28, 2003, to increase the
          provision for bad debt.


          The accompanying consolidated financial statements as of August 31,
          2003 and 2002 and for the years ended August 31, 2003, 2002 and 2001
          have been restated to correctly present goodwill, intangible assets
          and amortization expense and net loss.

          A comparison of the Company's consolidated financial position as of
          August 31, 2003 and 2002 prior to and following the restatement
          follows:



                                     August 31, 2003       August 31, 2002
                                  --------------------- ----------------------
                                      As         As         As         As
                                   Reported   Restated   Reported   Restated
                                  ========== ========== ========== ===========
Goodwill                            $82,138     $5,596    $84,017      $7,475
Accumulated amortization             (2,541)    (1,501)    (2,541)     (1,501)
                                  ---------- ---------- ---------- -----------
                                    $79,597     $4,095    $81,476      $5,974
                                  ========== ========== ========== ===========

Contract rights                          $-    $28,691         $-     $28,691
---------------
Accumulated amortization                  -     (5,101)         -      (3,188)
------------------------          ---------- ---------- ---------- -----------
                                         $-    $23,590         $-     $25,503
                                  ========== ========== ========== ===========

Customer relationships                   $-     $7,189         $-      $7,189
----------------------
Accumulated amortization                  -     (1,277)         -        (799)
------------------------          ---------- ---------- ---------- -----------
                                         $-     $5,912         $-      $6,390
                                  ========== ========== ========== ===========

Other Intangible assets              $3,743     $6,839     $3,743      $6,895
Accumulated amortization             (1,737)    (2,473)    (1,737)     (2,056)
                                  ---------- ---------- ---------- -----------
                                     $2,006     $4,366     $2,006      $4,839
                                  ========== ========== ========== ===========

Total Assets                        121,006     77,366    129,983      89,151
Accumulated  deficit                (75,188)  (118,101)   (41,424)    (81,600)
Total Shareholders' Equity          101,976     58,336    117,380      76,548
Total Liabilities and
 Shareholders' Equity               121,006     77,366    129,983      89,151

    The following table summarizes the impact of these adjustments on
the results of operations for the years ended August 31, 2003, 2002
and 2001:

<TABLE>
                          August 31, 2003       August 31, 2002      August 31, 2001
                       --------------------- --------------------- --------------------
                          As          As         As         As        As         As
                        Reported   Restated   Reported   Restated  Reported   Restated
                       ---------- -------------------------------- --------- ----------
<S>                      <C>        <C>        <C>        <C>       <C>        <C>
Depreciation and
 amortization            $ 1,968    $ 4,776    $ 3,399    $ 6,020   $ 3,615    $ 4,273
Impairment                 7,611      7,611     27,100     64,665         -          -
Total Operating
 Expenses                 29,076     31,884     43,635     83,821    15,924     16,582
Loss from Operations     (28,267)   (31,075)   (36,522)   (76,708)   (8,222)    (8,880)
Net Loss                 (33,693)   (36,501)   (36,787)   (76,973)   (5,874)    (6,532)
Other Comprehensive
 Loss                    (33,764)   (36,572)   (37,066)   (77,252)   (6,233)    (6,891)

Basic                     $(0.35)    $(0.38)    $(0.57)    $(1.20)   $(0.12)    $(0.13)
Diluted                   $(0.35)    $(0.38)    $(0.57)    $(1.20)   $(0.12)    $(0.14)
Comprehensive Loss        $(0.35)    $(0.38)    $(0.58)    $(1.21)   $(0.13)    $(0.14)

</TABLE>


NOTE 3 -  Accounts Receivable:

          Accounts receivable consist of the following, in thousands:

                                                          August 31,
                                                     2003              2002
                                                  -----------      ------------
       Accounts Receivable                        $   2,116        $   5,270
       Allowance for Doubtful Accounts                 (412)            (242)
                                                  -----------      ------------
       Net Accounts Receivable                    $   1,704        $   5,028
                                                  ===========      ============

                                      F-13

<PAGE>


                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003


NOTE 4 -  Property, Plant & Equipment and Intangible Assets:

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

<TABLE>
<CAPTION>
                                                                                   August 31,
                                                                              2003            2002
                                                                            ----------      ----------
                  <S>                                                       <C>             <C>
                  Automobile                                                $     143       $     392
                  Headend Facility and Fiber Infrastructure                    26,688          20,090
                  Construction in progress                                        ---           7,074
                  Furniture & Fixtures                                            565             634
                  Leasehold Improvements                                          122             216
                  Office Equipment                                                979           1,015
                  Property, Manufacturing & Equipment                           7,925           5,088
                                                                            ----------      ----------
                      Total Property, Plant & Equipment                     $  36,422       $  34,509
                         Less: Accumulated Depreciation                        (5,689)         (3,661)
                                                                            ----------      ----------
                      Net Property, Plant & Equipment                       $  30,733       $  30,848
                                                                            ==========      ==========
</TABLE>


          Eagle expenses repairs and maintenance against income as incurred
          whereas major improvements are capitalized. Eagle defines major
          improvements as those assets acquired that extend the life of the
          underlying base asset while defining other improvements that do not
          extend the life as repairs and maintenance. Eagle expensed repairs and
          maintenance of $47,000, $63,000, and $47,354 for the three years ended
          August 31, 2003, 2002 and 2001, respectively, whereas it did not have
          any capitalized major improvements for the same time periods.

          Eagle's headend facility and fiber infrastructure consist primarily of
          digital computing and telecommunications equipment that comprise
          Eagle's main headend facility at it headquarters, wireless headend
          equipment, a digital headend facility and a fiber backbone in the
          master planned communities in which it operates and a fiber ring
          connecting the various master planned communities in the Houston area.
          These fiber and headend infrastructures are similar to those that
          would exist in a major telecommunications or cable television provider
          that offers digital services for internet, cable TV, telephone and
          security monitoring services. Eagle determined that a twenty-year
          straight line depreciation method is appropriate for its Headend
          Facility and Fiber Infrastructure based on industry standards for
          these asset types.


          Components of intangible assets are as follows, in thousands:

<TABLE>
<CAPTION>
                                        August 31, 2003                    August 31, 2002
                             -----------------------------------  ----------------------------------
                                   As                 As                As                As
                                Reported           Restated          Reported          Restated
                             ----------------  -----------------  ----------------  ----------------

<S>                              <C>                <C>                <C>               <C>
Goodwill                         $82,138            $ 5,596            $84,017           $ 7,475
Accumulated amortization          (2,541)            (1,501)            (2,541)           (1,501)
                             ----------------  -----------------  ----------------  ----------------
                                 $79,597            $ 4,095            $81,476           $ 5,974
                             ================  =================  ================  ================

Contract rights                  $     -            $28,691            $     -           $28,691
Accumulated amortization               -             (5,101)                 -            (3,188)
                             ----------------  -----------------  ----------------  ----------------
                                 $     -            $23,590            $     -           $25,503
                             ================  =================  ================  ================

Customer relationships           $     -            $ 7,189            $     -           $ 7,189
Accumulated amortization               -             (1,277)                 -              (799)
                             ----------------  -----------------  ----------------  ----------------
                                 $     -            $ 5,912            $     -           $ 6,390
                             ================  =================  ================  ================

Other intangible assets          $ 3,743            $ 6,839            $ 3,743           $ 6,895
Accumulated amortization          (1,737)            (2,473)            (1,737)           (2,056)
                             ----------------  -----------------  ----------------  ----------------
                                 $ 2,006            $ 4,366            $ 2,006           $ 4,839
                             ================  =================  ================  ================

</TABLE>

          The changes in the carrying amount of goodwill amortization for the
          twelve months ended August 31, 2003 are as follows (in thousands):


                                                      Eagle
                  Balance at August 31, 2002    $        7,475
                  Acquisitions and other (1)            (1,879)
                                                ---------------
                  Balance at August 31, 2003    $        5,596
                                                ===============


(1)  Other primarily includes the $1,879,000 of impairment recorded against the
     Comtel goodwill as discussed in Note 1 (J) to the Company's Consolidated
     Financial Statements.


NOTE 5  - Business Combinations:


          On February 1, 2001, the Company completed the purchase of
          ClearWorks.net, Inc., and its subsidiaries, ClearWorks Communication,
          Inc., ClearWorks Structured Wiring Services, Inc., ClearWorks
          Integration Services, Inc., United Computing Group, Link Two
          Communications, Inc., and LD Connect, Inc., (collectively, ClearWorks)
          by acquiring all the outstanding common stock for a total purchase
          price of approximately $99.8 million. The acquisition was accounted
          for using the purchase method of accounting. ClearWorks is a
          communications carrier providing broadband data, video and voice
          communication services to residential and commercial customers,
          currently within Houston, Texas. These services are provided over
          fiber-optic networks ("Fiber-To-The-Home" or "FTTH"), which the
          Company designed, constructed, owned and operated inside large
          residential master-planned communities and office complexes.
          ClearWorks also provides information technology staffing personnel,
          network engineering, vendor evaluation of network hardware,
          implementation of network hardware and support of private and
          enterprise networks, as well as, developing residential, commercial
          and education accounts for deployment of structured wiring solutions.
          The results of operation for ClearWorks are included in the
          accompanying financial statements since the date of acquisition. The
          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 acquisition,
          the Company provided to ClearWorks, working capital and materials
          totaling $8,625,000. During February 2001, ClearWorks repaid these
          advances through the issuance of 7,346,000 shares of its common stock,
          which converted into 5,877,000 Eagle Wireless International, Inc.,
          common stock shares. These shares were converted to Treasury shares at
          this date. The Company allocated (in thousands) the acquisition costs
          to current assets of $11,708, property, plant and equipment of $6,570,
          intangible assets of $96,920 (which consist of $38,594 in goodwill,
          $7,189 in customer relationships, $28,691 in contract rights, $2,921
          in acquired contracts, $175 in non-compete agreement, and $19,350 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 $99,797,000. 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 at August 31, 2002,
          Eagle recorded an impairment charge of $37,565,000.

                                      F-14

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

          Effective January 1, 2002, the Company acquired DSS Security, Inc.,
          and Contact Wireless in a business combination accounted for as a
          purchase. DSS Security, Inc., provides security monitoring to business
          and residential customers. Contact Wireless sells and services mobile
          phones and one- and two-way messaging devices. The Company paid cash
          of $450,000 and issued a short-term note payable of $130,000 for the
          assets of Contact Wireless for a total purchase price of $580,000.
          Additionally, the Company acquired DSS Security, Inc., for $2,002,147.
          In this transaction, the Company issued 2,002,147 shares of its common
          stock with a guaranteed value of $1 per share. The Company allocated
          $51,595 to the fair value of the property and equipment and $1,950,552
          in goodwill. The allocation of the purchase price is based on the fair
          value of the assets acquired based on management's estimates and
          existing contracts. At August 31, 2003 and 2002, the Company has
          accruals for $573,000 and $921,000; respectively for the portion of
          the purchase that represents the difference between purchase price and
          market value of the Company's common stock on the date of purchase.

NOTE 6 -  Notes Payable:

          The following table lists the Company's note obligations as of August
          31, 2003 and 2002, in thousands:

                             Annual
                            Interest                         Amount
                              Rate       Due Date       2003      2002
                          -----------------------------------------------
        Vehicles            Various      Various     $      4  $     27
        5% Convertible
         Debenture
         (Note 9)
        Tail Wind             5.0%       Demand         1,200     2,000
         Convertible
         Debenture            2.0%       Demand         1,595     2,000
        Notes Payable
         - Investor          10.0%       October          900       ---
         Group                            2003
        Notes Payable
         - Q Series
         Bonds               12.0%       Various        1,363       ---
        Other             Various        Various          717       828

                                                     --------  --------
        Total notes
         payable                                     $  5,779  $  4,855
                                                     --------  --------
        Less current
         portion                                        5,779     3,653
                                                     --------  --------
        Total long-term
         debt                                        $    ---  $  1,202
                                                     ========  ========


NOTE 7 -  Capital Lease Obligations:

          The Company historically has leased equipment from various companies
          under capital leases. 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.

NOTE 8 -  Lines of Credit:


          On September 29, 2000, Atlantic Pacific Communications, Inc., "(APC",
          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 was payable monthly with principal due September 28, 2001. APC'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 nine months ended May 31, 2002;
          therefore, there was not a balance outstanding as of August 31, 2002.
          Subsequent to the fiscal year ended August 31, 2002, APC entered into
          a new credit facility with SWBT to provide working capital and fund
          ongoing operations. The new credit facility is a purchase and sale
          agreement against accounts receivable, provides for borrowings up to
          $1,000,000 based on eligible accounts receivable and is secured by APC
          accounts receivable and guaranteed by Eagle Broadband, Inc. As of
          August 31, 2003, APC reduced its accounts receivable by $198,851 to
          reflect the gross sale of $360,003 to SWBT less $161,851 of reserves
          held by SWBT against such purchases. Subsequent to the fiscal year
          ended August 31, 2003, APC repaid and canceled the line of credit in
          full to SWBT in September 2003.

                                      F-15

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

          The Company, through its subsidiary United Computing Group, Inc.
          (UCG), maintained $3,000,000 line of credit with IBM Credit
          Corporation (IBM) bearing a variable rate of interest. At May 31,
          2002, a balance of $1,012,000 existed. During July 2002, UCG entered
          into a credit facility with Southwest Bank of Texas (SWBT) to provide
          working capital, repay the IBM credit line and fund ongoing
          operations. The new credit facility is a purchase and sale agreement
          against accounts receivable, provides for borrowings up to $3,000,000
          based on eligible accounts receivable and is secured by UCG accounts
          receivable and guaranteed by Eagle Broadband, Inc. As of August 31,
          2002, UCG reduced its accounts receivable by $817,401 to reflect the
          gross sale of $961,649 to SWBT less $144,247 of reserves held by SWBT
          against such purchases. As of August 31, 2003, UCG reduced its
          accounts receivable by $44,799 to reflect the gross sale of $52,210 to
          SWBT less $7,832 of reserves held by SWBT against such purchases.
          Subsequent to the fiscal year ended August 31, 2003, APC repaid and
          canceled the line of credit in full to SWBT in September 2003.

          On July 16, 2002_, the Company entered into a $20,000,000 line of
          credit with Cornell Capital Partners, LP (CCP). The Company has not
          drawn on the line of credit and currently has no plans to do so. One
          of the issues in the litigation between CCP and the Company (see Legal
          Proceedings below) is whether the Company owes CCP a commitment fee
          for this line of credit. Cornell contends that the Company owes
          $395,000 of stock; the Company denies the liability

NOTE 9 -  Convertible Debentures:

          During October 2002, the Company entered into a $3,000,000 convertible
          debenture agreement with Cornell Capital Partners, LP (CCP). At CCP's
          option, the entire principal amount and all accrued interest shall be
          either (a) paid to CCP on the third year anniversary from the date of
          the debenture or (b) converted into Company common stock according to
          a schedule set forth in the debenture, or (c) partially repaid and
          partially converted into Company common stock. The significant
          conversion terms are that CCP is entitled, at its option, to convert,
          and sell on the same day, at any time and from time to time subject to
          the terms of the agreement, until payment in full of the debenture,
          all or any part of the principal amount of the debenture, plus accrued
          interest, into shares of the Company's common stock at the price per
          share equal to either (a) $1.00 or (b) 90% of the average of the four
          lowest closing trade prices of the common stock, for the five trading
          days immediately preceding the conversion date. Eagle determined that
          the conversion value of this note to be $91,000. This value has been
          accounted for as interest expense. CCP shall not be entitled to
          convert the debenture for a period of 180 days from the date of the
          debenture. After 180 days, if the conversion price is below $1.00, CCP
          shall be entitled, at its option, to convert, and sell on the same day
          up to $50,000 every five business days. After 12 months from the date
          of the debenture, if the conversion price is below $1.00, CCP shall be
          entitled, at its option, to convert and sell on the same day up to
          $75,000 every five business days. Notwithstanding the foregoing, after
          180 days from the date of the debenture, CCP shall be entitled, at its
          option, to convert and sell on the same day without restriction if the
          conversion price is above $1.00. Under the terms of this agreement
          Eagle received $2,500,000 in cash and a $500,000 secured convertible
          debenture from Celerity Systems, Inc., (CCI) bearing interest at ten
          percent due September 19, 2007. Eagle is entitled, at its option, to
          convert, and sell on the same day, at any time, until payment in full
          of this debenture, all or any part of the principal amount of the
          debenture, plus accrued interest, into CCI shares. The conversion
          price is equal to either $.06 or eighty-seven and one-half percent
          (87.5%) of the lowest bid price of the common stock for the preceding
          five trading days. At August 31, 2003, Eagle has converted $150,000 of
          the bond into 146,085,264 shares of CCI. Eagle intends to liquidate
          the bond into cash through the conversion process and immediate sale
          of CCI shares. This investment is recorded at a cost of $500,000 until
          the debenture or converted shares are sold. At August 31, 2003, the
          underlying value of this debenture is approximately $520,000. Eagle is
          in discussions with CCP to amend certain provisions of the debenture
          as it relates to shares currently issued and stock payments for
          accrued interest. Subsequent to the fiscal year ended August 31, 2003,
          the Company entered into discussions with CCP regarding the retirement
          of the convertible debenture and settlement of CCP commitment fees in
          connection to a $20,000,000 Equity Line of Credit. During the three
          month period ended November 30, 2003, the principal balance of the
          debenture was repaid, although a lawsuit remains outstanding - see
          Legal Proceedings. Subsequent to the fiscal year ended August 31,
          2003, the Company entered into discussions with CCP regarding the
          retirement of the convertible debenture and settlement of CCP
          commitment fees in connection to a $20,000,000 Equity Line of Credit.

          At August 31, 2003, the Company issued $1,363,000 five-year Q-Series
          Bonds as more fully described in Note 14. Subsequent to August 31,
          2003, the bondholders have elected to be repaid in Common Stock as
          defined in the bond agreement. Accordingly, these bonds have been
          classified as a current liability in Notes Payable. The Company
          determined that no significant conversion value existed at the date of
          bond issuance.

          At August 31, 2002, $2,000,000 in principal plus $600,000 of accrued
          interest and fees were outstanding to Candlelight Investors, LLC. In
          November 2002, the Company issued 2,600,000 shares of stock to settle
          this debt.

          During 2001, the Company acquired ClearWorks.net, Inc., and as a
          result, ClearWorks is a wholly owned subsidiary of Eagle. Link Two
          Communications, Inc., is a subsidiary of ClearWorks, and as a result
          of the merger, is now a secondary subsidiary of Eagle. Link Two
          entered an agreement with The Tail Wind Fund Ltd., under which Tail
          Wind purchased from Link Two a 2% convertible note in the initial
          amount of $5,000,000 (the "First Note"), and Link Two has the ability
          to require Tail Wind to purchase additional convertible notes in the
          amount of $4,000,000 (the "Second Note") and $3,000,000 (the "Third
          Note"). The conversion terms of the convertible debentures become
          effective after ninety days of the initial closing date. The note
          balance will be due in fiscal 2003. Link Two may require Tail Wind to
          purchase the Second Note if: (a) the price of Eagle's common stock is
          above $5.00 per share for 20 consecutive trading days during calendar
          2001,and other various terms are met. Link Two may require Tail Wind
          to purchase the Third Note if the price of Eagle's common stock is
          above $8.00 per share for 20 consecutive trading days during calendar
          2001, and the agreed upon covenants are met. In conjunction with the
          issuance of the First Note, Link Two issued Tail Wind a warrant, and
          if Link Two chooses to issue the Second and Third Notes, it will issue
          Tail Wind additional warrants.

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

                                      F-16

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

          The Company has agreed to pre-pay the notes at the rate of a minimum
          of $250,000 per month and a maximum of $500,000 per month. The
          pre-payment may be in cash or in shares of our common stock at the
          rate of 90% of the average of the two lowest market prices of our
          common stock for the applicable month. However, the Company may not
          issue shares of our common stock for pre-payment purposes if the total
          number of shares exceeds the aggregate trading volume of our common
          stock for the twelve trading days preceding the date of payment, in
          which case we must pay the difference in cash. As the number of shares
          to be issued for pre-payment purposes is dependent on the price and
          trading volume of our common stock, there is no way to determine the
          number of shares that may be issued at this time. Eagle has filed a
          registration statement for the potential conversion shares for the
          note and warrants exercise. As of May 31, 2002, the Company has paid
          to Tail Wind $2,000,000 towards the reduction of debt. The current
          financial statements have recorded as current maturity for this debt,
          $1,595,000.

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

          In our agreement with Tail Wind, the Company granted Tail Wind
          anti-dilution rights. If the Company sells common stock or securities
          exercisable for or convertible into shares of our common stock for
          less than $1.79 per share, the Company must reduce the conversion
          price of the notes and the exercise price of the warrants to the price
          the Company sold the common stock or the exercise or conversion price
          the Company issued the convertible securities. The Company has agreed
          to register for resale any additional shares that will be issued
          pursuant to these anti-dilution rights on a future registration
          statement, unless such additional shares are available in the current
          registration statement. In addition, under the terms of the agreement,
          without Tail Wind's approval, the Company may not issue Tail Wind
          shares of common stock such that Tail Wind would ever be considered to
          beneficially own greater than 4.99% of the outstanding common stock.
          In connection with this transaction, Link Two Communications, Inc. has
          paid Ladenburg Thalman and Co. a fee of 5% of the purchase price of
          the notes. Additionally, the Company has valued the conversion feature
          of the convertible debenture and warrants at $1,648,045 and
          $1,270,995, respectively; the amounts were determined by using the
          Black-Scholes calculation. These amounts have been capitalized as part
          of the cost of developing the wireless infrastructure. At August 31,
          2003, Eagle and Tail Wind were renegotiating the terms of this note.
          During the renegotiation period, the Company has agreed to pay
          interest until all new terms and conditions have been resolved.

NOTE 10   Securities held for Resale:

          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 August 31, 2003, 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.

          Securities available for sale include 1,480,000 shares of common stock
          of Burst.com, 146,085,264 shares of Celerity Systems common stock and
          $350,000 Celerity Systems Bonds. These common stock and bond
          investments have an aggregate cost basis of $1,075,000 and an
          aggregate fair market value of $1,714,006 and are included in the
          Balance Sheet category of Securities available for sale as of August
          31, 2003.


NOTE 11 - 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.

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

                                                           August 31,
                                                         2003    2002     2001
                                                          %       %       %
                  U.S. Federal Statutory Tax Rate         34       34     34
                  U.S. Valuation Difference              (34)     (34)   (34)
                  Effective U.S. Tax Rate                  0        0      0
                  Foreign Tax Valuation                    0        0      0
                  Effective Tax Rate                       0        0      0


                                      F-17

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

          Income tax expense (benefit) attributable to income from continuing
          operations differed from the amounts computed by apply 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>
                                                                                 August 31,
                                                                  2003             2002            2001
                                                             ------------       -----------     -----------
                  <S>                                        <C>               <C>              <C>
                  Computed expected tax benefit              $   (12,410)       $  (26,171)     $  (2,220)
                  Increase in valuation allowance                 12,410            26,171          2,220
                                                             ------------       -----------     -----------
                                                             $       ---         $      ---     $      ---
                                                             ============       ===========     ===========

</TABLE>
          The tax effects of temporary differences that give rise to significant
          portions of the deferred tax assets and deferred tax liabilities at
          August 31, 2003 and 2002, are presented below, in thousands and
          include the balances of the merged company ClearWorks.net.

<TABLE>
<CAPTION>

                                                                  2003            2002
                                                                ---------       ---------
                  <S>                                           <C>             <C>
                  Deferred tax assets:
                  Accounts receivable, principally due
                  to allowance for doubtful accounts      $            0  $             0

                  Net operating loss carry-forwards               50,344           37,934
                  Less valuation allowance                       (50,344)         (37,934)
                                                                ---------       ----------
                  Net deferred tax assets                            ---              ---

                  Deferred tax liabilities:
                  Differences in depreciation                          0                0
                                                                ---------       ----------
                  Net deferred tax liabilities            $            0  $             0
                                                                =========       ==========
</TABLE>


          The valuation allowance for deferred tax assets of August 31, 2003,
          and 2002, was $50,344,000 and $37,934,000 respectively. At August 31,
          2003 and 2002, the Company has net operating loss carry-forwards of
          $148,071,000 and $111,571,000, respectively, which are available to
          offset future federal taxable income, if any, with expirations from
          2020 to 2021.


NOTE 12 - Issuance of Common Stock:

          During the fiscal year ended August 31, 2003, the Company issued
          shares of common stock. The following table summarizes the shares of
          common stock issued, in thousands.


<TABLE>
<CAPTION>

                  <S>                                                         <C>
                  Shares Outstanding August 31, 2002                                   73,051
                  Shares issued for Services and Compensation                           7,437
                  Shares issued for Property and Other Assets                          14,938
                  Shares issued for Retirement of Debt and Liabilities                 50,816
                  Shares issued for Stock Option exercise                               1,647
                  Treasury Stock                                                         (442)
                                                                              ----------------
                  Shares Outstanding August 31, 2003                                  147,447
                                                                              ================

</TABLE>


NOTE 13 - Preferred Stock, Stock Options and Warrants:

          In July 1996, the Board of Directors and majority shareholders adopted
          an employee stock option plan under which 400,000 shares of Common
          Stock have been reserved for issuance. Since that time, the Board of
          Directors have amended the July 1996, employee stock option plan under
          which 1,000,000 shares of Common Stock have been reserved for
          issuance. As of August 31, 2003, options to purchase 406,131 are
          outstanding and 551,370 are available to be issued.

          The Company has issued (or has acquired through its acquisitions) and
          has outstanding the following warrants which have not yet been
          exercised at August 31, 2003:

          50,000 stock purchase options issued to L.A. Delmonico Consulting,
          Inc., expiring April 4, 2005. 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 were registered for resale on August
          9, 2002, under the Securities Act of 1933. As of August 31, 2003, none
          of these options have been exercised

          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. As of August 31, 2003, none of
          these warrants have been exercised.

          41,667 stock purchase warrants issued to Peter Miles expiring July 20,
          2004. The warrants are to purchase fully paid and non-assessable
          shares of the common stock, par value $.001 per share at a purchase
          price of $2.00 per share. The shares of common stock underlying these
          have not been registered as of November 30, 2002, under the Securities
          Act of 1933. As of August 31, 2003, none of these warrants have been
          exercised.


                                      F-18

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

          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 August 31, 2003, none of these warrants have been
          exercised. s

          25,000 stock purchase warrants issued to Synchton, Inc., expiring
          April 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 $1.10 per share. The shares of common stock
          underlying these warrants were registered for resale on August 9,
          2002, under the Securities Act of 1933. As of August 31, 2003, 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 August 31, 2003, none of these warrants have been
          exercised.

          25,000 stock purchase warrants issued to Synchton, Inc., expiring July
          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 $1.35 per share. The shares of common stock underlying these
          warrants were registered for resale on August 9, 2002, under the
          Securities Act of 1933. As of August 31, 2003, none of these warrants
          have been exercised.

          25,000 stock purchase warrants issued to Synchton, Inc., expiring
          October 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 $0.69 per share. The shares of common stock
          underlying these warrants were not registered for resale under the
          Securities Act of 1933. As of August 31, 2003, none of these warrants
          have been exercised.

          25,000 stock purchase warrants issued to Synchton, Inc., expiring
          January 1, 2005. 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 $0.61 per share. The shares of common stock
          underlying these warrants were not registered for resale under the
          Securities Act of 1933. As of August 31, 2003, none of these warrants
          have been exercised.

          25,000 stock purchase warrants issued to Synchton, Inc., expiring
          April 1, 2005. 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 $0.38 per share. The shares of common stock
          underlying these warrants were not registered for resale under the
          Securities Act of 1933. As of August 31, 2003, 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 August 31, 2003, none of these
          warrants have been registered, issued or exercised.

          25,000 stock purchase warrants issued to Synchton, Inc., expiring July
          1, 2005. 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 $0.39 per share. The shares of common stock underlying these
          warrants were not registered for resale under the Securities Act of
          1933. As of August 31, 2003, none of these warrants have been
          exercised.

          240,000 stock purchase warrants issued to Shannon D. McLeroy expiring
          April 24, 2008. The warrants are to purchase fully paid and
          non-assessable shares of the common stock, par value $.001 per share
          at a purchase price of $7.50 per share. The shares of common stock
          underlying these warrants have not been registered or issued, under
          the Securities Act of 1933. As August 31, 2003, 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 August 31, 2003, none of these warrants
          have been registered, issued or exercised.

          25,000 stock purchase warrants issued to Synchton, Inc., expiring
          October 1, 2005. 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 $0.35 per share. The shares of common stock
          underlying these warrants were not registered for resale under the
          Securities Act of 1933. As of August 31, 2003, none of these warrants
          have been 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 August 31, 2003, 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 August 31, 2003, none of these warrants
          have been registered, issued or exercised.

          25,000 stock purchase warrants issued to Synchton, Inc., expiring
          January 1, 2006. 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 $0.28 per share. The shares of common stock
          underlying these warrants were not registered for resale under the
          Securities Act of 1933. As of August 31, 2003, none of these warrants
          have been exercised.

          25,000 stock purchase warrants issued to Synchton, Inc., expiring
          April 1, 2006. 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 $0.26 per share. The shares of common stock
          underlying these warrants were not registered for resale under the
          Securities Act of 1933. As of August 31, 2003, none of these warrants
          have been exercised.

          25,000 stock purchase warrants issued to Synchton, Inc., expiring July
          1, 2006. 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 $0.38 per share. The shares of common stock underlying these
          warrants were not registered for resale under the Securities Act of
          1933. As of August 31, 2003, none of these warrants have been
          exercised.

          25,000 stock purchase warrants issued to Synchton, Inc., expiring
          October 1, 2006. 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 $0.45 per share. The shares of common stock
          underlying these warrants were not registered for resale under the
          Securities Act of 1933. As of August 31, 2003, none of these warrants
          have been exercised.

          3,800,000 stock purchase warrants issued to Eagle Broadband employees
          under incentive clauses of employment contracts expiring September 1,
          2008. The warrants vest based on market performance of Eagle's common
          stock at market capitalization between $50 million and $200 million.
          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
          $0.41 per share. The shares of common stock underlying these warrants
          were not registered for resale under the Securities Act of 1933. As of
          August 31, 2003, none of these warrants have been exercised.

                                      F-19

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

          400,000 stock purchase warrants issued to Eagle Broadband employee
          under incentive clauses of employment contracts expiring September 1,
          2008 The warrants vest based on market performance of Eagle's common
          stock at market capitalization between $50 million and $200 million.
          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
          $0.60 per share. The shares of common stock underlying these warrants
          were not registered for resale under the Securities Act of 1933. As of
          August 31, 2003, none of these warrants have been exercised.

          500,000 stock purchase warrants issued to Eagle Broadband employee
          under incentive clauses of employment contracts expiring September 1,
          2008. The warrants vest based on market performance of Eagle's common
          stock at market capitalization between $50 million and $200 million.
          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
          $0.75 per share. The shares of common stock underlying these warrants
          were not registered for resale under the Securities Act of 1933. As of
          August 31, 2003, none of these warrants have been exercised.

          The warrants outstanding are segregated into two categories (issued
          and outstanding and exercisable):


                  Warrants Issued & Outstanding        Warrants Exercisable
Class of                    August 31,                       August 31,
Warrants             2003               2002              2003      2002
---------         -----------------------------        --------------------
    0.26             25,000                  -            25,000         -
    0.28             25,000                  -            25,000         -
    0.35             25,000                  -            25,000         -
    0.38             50,000                  -            50,000         -
    0.39             25,000                  -            25,000         -
    0.41          3,800,000                  -         1,550,000         -
    0.45             25,000                  -            25,000         -
    0.60            400,000                  -                 -         -
    0.61             25,000                  -            25,000         -
    0.69             25,000                  -            25,000         -
    0.75            500,000                  -                 -         -
    1.04             50,000             50,000            50,000    50,000
    1.10             25,000                  -            25,000         -
    1.35             25,000                  -            25,000         -
    1.55                  -             25,000                 -    25,000
    1.75                  -             13,766                 -    13,766
    2.00             25,000             25,000            25,000    25,000
    2.00             41,667             41,667            41,667    41,667
    2.25             41,667             41,667            41,667    41,667
    3.00                  -             50,000                 -    50,000
    3.00             58,333             58,333            58,333    58,333
    3.75                  -             40,000                 -    40,000
    3.75                  -            160,000                 -   160,000
    3.75                  -            232,000                 -   232,000
    3.75                  -            176,000                 -   176,000
    3.95                  -            328,000                 -   328,000
    4.50                  -             25,000                 -    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   192,000
    7.50            240,000            240,000           240,000   240,000
    7.50            168,000            168,000           168,000   168,000
    7.50            200,000            200,000           200,000   200,000
    9.68                  -             50,000                 -    50,000
   10.00                  -            275,000                 -   275,000
   12.00                  -            250,000                 -   250,000
   14.00                  -            350,000                 -   350,000
   18.00                  -            250,000                 -   250,000
   25.00                  -            150,000                 -   150,000
   ESOP             406,131         *  355,170        *  406,131   355,170
                  -----------------------------        --------------------
                  6,397,798     **   4,121,603         3,247,798 4,121,603
                  =============================        ====================

          *Denotes warrants which would have an anti-dilutive effect if
          currently used to calculate earnings per share for the years ended
          August 31, 2003 and 2002.

          **Denotes 12,700,000 warrants for shares that have been excluded from
          this table that are subject to issuance to certain employees under
          incentive clauses of employment contracts expiring 5 years from the
          date of issuance. The warrants vest based on accumulated revenue
          targets ranging from $50 million to $500 million and on market
          performance of Eagle's common stock at market capitalization between
          $450 million and $1 billion. The warrants are to purchase fully paid
          and non-assessable shares of the common stock, par value $0.001 per
          share at purchase prices ranging from $0.41 to $1.50 per share. The
          Company has determined that the probability of the achievement of such
          targets is remote as of the date of the issuance of the Company's
          financial statements and thus has not included them in the outstanding
          warrant table above. The shares of common stock underlying these
          warrants were not registered for resale under the Securities Act of
          1933. As of August 31, 2003, none of these warrants have been
          exercised.

                                      F-20

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003


NOTE 14 - Capitalization Activities:

          Between November 25, 2002 and June 9, 2003, the Company sold
          approximately $6.5 million of convertible debt securities to 45
          accredited investors. The securities consisted of $25,000, 12%
          five-year bonds. The bonds are due and payable upon maturity at the
          end of the five-year period. Interest on the bonds is payable at the
          rate of 12% per annum, and is payable semiannually. The bondholder may
          require the Company to convert the bond (including any unpaid
          interest) into shares of the Company's common stock at any time during
          the first year but not thereafter. The conversion rates vary from
          $0.16 to $0.34 per share. The Company may redeem the bonds at any time
          after the first year.

          Between October 30, 2003 and November 5, 2003, the Company sold
          approximately $4.1 million of convertible debt securities to 36
          accredited investors. The securities consisted of $25,000, 12%
          five-year bonds. The bonds are due and payable upon maturity at the
          end of the five-year period. Interest on the bonds is payable at the
          rate of 12% per annum, and is payable semiannually. The bondholder may
          require the Company to convert the bond (including any unpaid
          interest) into shares of the Company's common stock at any time during
          the first year but not thereafter. The conversion rates vary from
          $0.50 to $0.75 per share. The Company may redeem the bonds at any time
          after the first year.

          These transactions were completed pursuant to Regulation D of the
          Securities Act. With respect to the issuances, the Company determined
          that each purchaser was an "accredited investor" as defined in Rule
          501(a) under the Securities Act.

          Except as otherwise noted, all sales of the Company's securities were
          made by officers of the Company who received no commission or other
          remuneration for the solicitation of any person in connection with the
          respective sales of securities described above. The recipients of
          securities represented their intention to acquire the securities for
          investment only and not with a view to or for sale in connection with
          any distribution thereof and appropriate legends were affixed to the
          share certificates and other instruments issued in such transactions.

NOTE 15 - Risk Factors:

          For the years ended August 31, 2003, 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,
          cabling computer services and broadband industries. Approximately,
          seventy four percent of the Company's revenues and receivables have
          been created solely in the state of Texas, zero percent have been
          created in the international market, and the approximate twenty-six
          percent remainder have been created relatively evenly over the rest of
          the nation during the year ended August 31, 2003. Approximately,
          eighty four percent of the Company's revenues and receivables have
          been created solely in the state of Texas, zero percent have been
          created in the international market, and the approximate sixteen
          percent remainder have been created relatively evenly over the rest of
          the nation during the year ended August 31, 2002. Whereas
          approximately eighty seven 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 eleven percent remainder has been created relatively
          evenly over the rest of the nation for the year ended August 31, 2001.
          Through the normal course of business, the Company generally does not
          require its customers to post any collateral.

NOTE 16 - Foreign Operations:

          Although the Company is based in the United States, its product is
          sold on the international market. Presently, international sales total
          approximately 0%, 0% and 2% at August 31, 2003, 2002, and 2001,
          respectively.

NOTE 17 - Commitments and Contingent Liabilities:

          Leases

          The Company leases its primary office space in League City, Texas, for
          $36,352 per month with Gateway Park Joint Venture. This non-cancelable
          lease commenced on January 1, 2002, and expires on May 31, 2004.

          For the years ending August 31, 2003and 2002, rental expenses of
          approximately $1,183,000 and $436,219 respectively, were incurred.

          The Company also leased 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, 2004. Under the terms of the
          lease, monthly payments will be $2,130 for the first twelve months
          whereas the monthly payments will increase by 3.5% at the beginning of
          both the second and third years.

          The Company's wholly owned subsidiary, Atlantic Pacific, leases office
          space in Houston, Texas with Houston Industrial Partners, Ltd. This
          non-cancelable lease expires December 2005. The monthly payments are
          $9,030 per month.

          Atlantic Pacific also leased office space in Chicago, Illinois with
          Lasalle Bank National Association. This twenty-nine month lease
          commenced on October 1, 2000,and expired February 28, 2003. Under the
          terms of the lease, monthly payments will be $2,220 for the first
          twelve months whereas they will increase by 3.2% at the thirteenth and
          twenty-fifth months.

          Atlantic Pacific also leased office space in Houston, Texas with WL
          and Deborah Miller in the amount of $4,500 per month. This
          non-cancelable lease expired September 2002 and maintains a five-year
          renewal option. The renewal option was waived in September 2002.

          The Company's subsidiary, ClearWorks.net, Inc., leased office space in
          Houston, Texas with 2000 North Loop. This non-cancelable lease expired
          on April 30, 2003. The monthly payments increased from $7,306 to
          $11,091 on April 30, 2000, and again on May 1, 2002, to $11,217 for
          the remaining twelve months.


                                      F-21
<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

          Also, ClearWorks.net, Inc., leased office space in Phoenix, Arizona
          with Airpark Holdings. This non-cancelable lease expired on July 31,
          2003. The monthly payments are variable.

          Also, ClearWorks.net, Inc., leased office space in San Antonio, Texas
          with Wade Holdings. This is a month-to-month lease. The monthly
          payments were $3,300.

          The Company's subsidiary, United Computing Group, leased office space
          in Houston, Texas with Eastgroup Properties, L.P. This non-cancelable
          lease expired on August 31, 2003. The monthly payments were $8,570.
          UCG previously leased office space with Techdyne, Inc., that expired
          August 31, 2002.

          The Company's subsidiary, ClearWorks Home Systems, leases office space
          in Austin, Texas with Ditto Communications Technologies, Inc. This
          non-cancelable lease commenced on September 1, 2002, and expires
          January 31, 2005. The monthly payments are $5,876.

          The Company's subsidiary, United Computing Group, leased office space
          in Dallas, Texas with AMB Property II, LP. This non-cancelable lease
          commenced on June 19, 2000, expired on June 30, 2002, and was extended
          to expire on June 30, 2003. The monthly payments are $2,794. Future
          obligations under the non-cancelable lease terms areas follows:

                         Period Ending
                          August 31,                   Amount

                             2004                    $ 521,000
                             2005                      116,000
                             2006                       58,000
                                                -------------------
                             Total                   $ 695,000
                                                ===================

          Legal Proceedings

          On February 23, 2001, ClearWorks and Eagle became defendants in
          Kaufman Bros., LLP v. Clearworks.Net, Inc. and Eagle Wireless, Inc.,
          Index No. 600939/01, pending in the Supreme Court of the State of New
          York, County of New York. In this action, plaintiff alleges that
          defendants have breached an agreement with ClearWorks to pay plaintiff
          a fee for financial advice and services allegedly rendered by
          plaintiff. The complaint seeks compensatory damages of $4,000,000,
          plus attorneys' fees and costs. The Company settled this lawsuit on
          November 4, 2003 by issuing cash and stock totaling a fair market
          value of $1,320,000 as of the settlement date and consequently,
          $1,320,000 was charged to operations in the Company's fiscal 2003
          financial statements.


          On December 17, 2001, Kevan Casey and Tommy Allen sued ClearWorks.net,
          Inc., ClearWorks Integration, Inc., and Eagle Wireless International,
          Inc. for breach of contract and other related matters in Cause No.
          2001-64056; In the 281st Judicial District Court of Harris County,
          Texas. This lawsuit is scheduled for the two-week docket beginning
          December 1, 2003. The Company denies the claims and intends to
          vigorously defend this lawsuit and claims against it. The Company
          settled this lawsuit on November 26, 2003 for cash and stock to be
          paid and issued totaling a fair market value of $3,000,000 as of the
          settlement date and consequently, $3,000,000 was charged to operations
          in the Company's fiscal 2003 financial statements.


          On July 10, 2003, Eagle became a defendant in Cornell Capital
          Partners, L.P. vs. Eagle Broadband, Inc., et al., Civil Action No.
          03-1860 (KSH), In the United States District Court for the District of
          New Jersey. The suit presents claims for breach of contract, fraud and
          negligent misrepresentation. Plaintiff has also alleged that Eagle has
          defaulted on a convertible debenture for failing to timely register
          the shares of common stock underlying the convertible debenture and is
          seeking to accelerate the maturity date of the debenture. As of August
          31, 2003, the principal balance of the debenture was approximately
          $1.2 million. During the three month period ended November 30, 2003,
          the principal balance of the debenture was repaid, although the suit
          remains outstanding. The Company denies the claims and intends to
          vigorously defend this lawsuit and the claims against it. Eagle has
          asserted counterclaims against Cornell for fraud and breach of
          contract. TheCompany has not accrued any expenses against this
          lawsuit, as the outcome cannot be predicted at this time.


          On December 14, 2000, ClearWorks became 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. The Florida EPA sued ClearWorks.net presenting claims for
          recovery costs and penalties for a waste tire processing facility. The
          suit seeks recovery of costs and penalties in a sum in excess of
          $1,000,000, attorneys' fees and cost of court. ClearWorks denies the
          claims and intends to vigorously contest all claims in this case and
          to enforce its indemnification rights against the principals of
          Southeast Tire Recycling. The Company has not accrued any expenses
          against this lawsuit as the outcome cannot be predicted at this time.



                                      F-22
<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003


          On September 26, 2003 Intratech served a lawsuit on ClearWorks.net in
          Intratech Capital Partners, Ltd. vs. ClearWorks.net, Inc.; Case No.
          CF3 20136 in the High Court of Justice, Queen's Bench Division,
          Cardiff District Registry. This lawsuit presents claims for breach of
          contract for failing to pay the plaintiff for financial advice and
          services allegedly rendered. The complaint seeks damages of
          $6,796,245.50, plus attorneys' fees and costs. ClearWorks denies the
          claims and intends to vigorously defend this lawsuit and claims
          against it. The Company has accrued $100,000 in its fiscal 2003
          financial statements for litigation expenses but has not accrued any
          settlement costs against this lawsuit as the outcome cannot be
          predicted at this time.


          On or about September 2003, Enron sued United Computing Group, Inc. in
          Enron Corp. (Debtors/Plaintiff) vs. United Computing Group, Inc.; Case
          No. 01-16034 in the United States Bankruptcy Court for the Southern
          District of New York. The suit presents claims pursuant to sections
          547 and 550 of the Bankruptcy Code to avoid and recover a transfer in
          the amount of approximately $1,500,000.00. Defendant has filed an
          answer, denies the claims, and intends to vigorously defend this
          lawsuit and claims against it. The Company has not accrued any
          expenses against this lawsuit as the outcome cannot be predicted at
          this time.


          Eagle is involved in lawsuits, claims, and proceedings, including
          those identified above, consisting of, commercial, securities,
          employment and environmental matters, which arise in the ordinary
          course of business. In accordance with SFAS No. 5, "Accounting for
          Contingencies," Eagle makes a provision for a liability when it is
          both probable that a liability has been incurred and the amount of the
          loss can be reasonably estimated. Eagle believes it has adequate
          provisions for any such matters. Eagle reviews these provisions at
          least quarterly and adjusts these provisions to reflect the impacts of
          negotiations, settlements, rulings, advice of legal counsel, and other
          information and events pertaining to a particular case. Litigation is
          inherently unpredictable. However, Eagle believes that it has valid
          defenses with respect to legal matters pending against it.
          Nevertheless, it is possible that cash flows or results of operations
          could be materially affected in any particular period by the
          unfavorable resolution of one or more of these contingencies.

          We intend to vigorously defend these and other lawsuits and claims
          against us. However, we cannot predict the outcome of these lawsuits,
          as well as other legal proceedings and claims with certainty. An
          adverse resolution of pending litigation could have a material adverse
          effect on our business, financial condition and results of operations.
          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
          adverse affect on the Company's financial condition or results of
          operations.


                                      F-23

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

NOTE 18 - 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 year ended August 31, 2003
                                                      Income            Shares           Per-Share
                                                    (Numerator)      (Denominator)        Amount
         <S>                                        <C>              <C>                 <C>

         Net Loss                                   $(36,501)

         Basic EPS:
          Income available to
          common stockholders                        (36,501)           95,465            $(0.38)
         Effect of Dilutive Securities
          Warrants                                   --------          --------          ---------

         Diluted EPS:
           Income available to
           common stockholders
            and assumed conversions.                $(36,501)           95,465            $(0.38)
                                                    =========          ========          =========

</TABLE>



<TABLE>
<CAPTION>

                                                            For the year ended August 31, 2002
                                                      Income            Shares           Per-Share
                                                    (Numerator)      (Denominator)        Amount
         <S>                                        <C>              <C>                 <C>

         Net Loss                                  $ (76,973)

         Basic EPS:
          Income available to
          common stockholders                        (76,973)           64,004             $(1.20)

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

         Diluted EPS:
           Income available to
           common stockholders
           and assumed conversions.                $ (76,973)           64,158             $(1.20)
                                                   =========          ========           =========

</TABLE>



          For the year ended August 31, 2002, and August 31, 2001, anti-dilutive
          securities existed. (see Note 13)

NOTE 19 - Employee Stock Option Plan:

          In July 1996, the Board of Directors and majority stockholders adopted
          a stock option plan under which 400,000 shares of the Company's common
          stock have been reserved for issuance. Since that time, the Board of
          Directors have amended the July 1996, employee stock option plan under
          which 1,000,000 shares of Common Stock have been reserved for
          issuance. Under this plan, as of August 31, 2003, a total of 406,131
          options have been issued to various employees.

          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
          issued and granted during 2003 is estimated as $0.58 on the date of
          grant. Management estimates the average fair value for options granted
          during 2003, to be comparable to those granted in 2002. The impact on
          net loss 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:

                                                     2003           2002
                                                   ---------      --------
                     Dividend Yield                  0.00%        0.00%
                     Volatility                      0.91         0.91
                     Risk-free Interest Rate         4.00%        7.00%
                     Expected Life                      5            5


                                      F-24

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

          The pro forma effect on net loss as if the fair value of stock-based
          compensation had been recognized as compensation expense on a
          straight-line basis over the vesting period of the stock option or
          purchase right was as follows for the years ended August 31, 2003,
          2002 and 2001:



<TABLE>
<CAPTION>


                                                                   2003       2002          2001
                                                                           In thousands,
                                                                      except per share amounts
<S>                                                              <C>        <C>            <C>
Net loss, as reported                                            $(36,501)  $(76,973)      $(6,532)
Add: Stock-based employee compensation included in reported net
 earnings (loss), net of related tax effects                            -          -             -
Less: stock-based employee compensation expense determined
 under fair-value based method for all awards, net of related
 tax effects                                                          (20)       (50)         (181)
                                                                 ---------  ---------  ------------

Pro forma net earnings (loss)                                    $(36,521)  $(77,023)      $(6,713)
                                                                 =========  =========  ============
Net loss per share:
  As reported                                                      $(0.38)    $(1.20)       $(0.13)
  Pro forma                                                        $(0.38)    $(1.20)       $(0.14)

Diluted net loss per share
  As reported                                                      $(0.38)    $(1.20)       $(0.13)
  Pro forma                                                        $(0.38)    $(1.20)       $(0.14)

</TABLE>


Option activity was as follows for the years ended August 31, 2003, 2002 and
2001:

<TABLE>
<CAPTION>

                                   2003                   2002                   2001
                                       Weighted-               Weighted-               Weighted-
                                        Average                 Average                 Average
                                       Exercise                Exercise                Exercise
                             Shares      Price      Shares       Price       Shares      Price
<S>                          <C>          <C>      <C>             <C>      <C>           <C>
Outstanding at beginning of
 year                        355,170       $2.32    355,170         $2.32    242,607       $2.93
Granted                      50,961-        0.45          -             -    237,809        1.83
Assumed through
 acquisitions                      -           -          -             -          -           -
Exercised                          -           -          -             -          -           -
Forfeited/Cancelled                -           -          -             -    125,246        2.62
                            ---------              ---------                ---------

Outstanding at end of year   406,131        1.27    355,170         $2.32    355,170        2.32

Exercisable at year-end      406,131       $1.27    355,170         $2.32    355,170       $2.32

</TABLE>

Information about options outstanding was as follows at August 31, 2003:

<TABLE>
<CAPTION>

                                            Options Outstanding              Options Exercisable
                                                   Weighted-
                                                    Average
                                                   Remaining   Weighted-                Weighted-
                                                  Contractual   Average                  Average
                                     Number        Life in      Exercise      Number    Exercise
   Range of Exercise Prices        Outstanding       Years       Price      Exercisable   Price
   <S>                             <C>               <C>        <C>        <C>          <C>
   $0-$1.00                         264,865          5.0        $0.55        264,865     $0.55
   $1.01-$2.00                      115,766          5.0        $1.73        115,766     $1.73
   $2.01-$7.50                       25,500          5.5        $6.55         25,500     $6.55

                                    406,131          5.2        $2.32        406,131     $2.32

</TABLE>


NOTE 20 - Retirement Plans:

          During October 1997, the Company initiated a 401(k) plan for its
          employees, which is funded through the contributions of its
          participants. This plan maintains that the Company will match up to 3%
          of each participant's contribution. For the year ended August 31, 2003
          and 2002, employee contributions were approximately $279,000 and
          $279,000, respectively. The Company matched approximately $67,850 and
          $67,850, respectively for those same periods.

                                      F-25

<PAGE>


                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003


NOTE 21 - Major Customer:

          The Company had gross revenues of $11,593,000 and $29,817,000 for the
          year ended August 31, 2003 and 2002, respectively. There were no
          parties individually that represented a greater than ten percent of
          these revenues.

NOTE 22 - Industry Segments:

          The Company has adopted the provisions of SFAS No. 131, "Disclosures
          about Segments of an Enterprise and Related Information". At August
          31, 2001, the Company's seven business units have separate management
          teams and infrastructures that offer different products and services.
          The business units have been aggregated into five 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 supplier of broadband and
          telecommunications equipment with related software and broadband
          products. (Including Eagle Wireless International, Inc.,
          BroadbandMagic and Etoolz, Inc., for this summary).

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

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

          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 an accelerator company and
          computer hardware and software reseller. UCG / INT maintains a
          national market presence.

          Link Two Communications, Inc., (Link II) is in the development and
          delivery of one and two way messaging systems.

          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 year ending August 31, 2003

(in thousands)       APC/HSI   EBS/DSS     UCG      Eagle     Other     Elim.    Consol.
                    ----------------------------------------------------------------------
<S>                     <C>       <C>       <C>       <C>         <C>   <C>        <C>
Revenue                 4,220     2,809     2,433     1,803       328       ---    11,593
Segment Loss           (4,500)   (6,083)   (2,279)  (17,849)     (364)      ---   (31,075)
Total Assets            8,929    31,316       114   135,513    83,852  (144,793)  114,931
Capital Expenditures       11     6,254         1       ---       158       ---     6,424
Depreciation              372     1,351        72     3,184       253       ---     5,232

                                   For the year ending August 31, 2002


(in thousands)       APC/HSI   EBS/DSS     UCG      Eagle     Other     Elim.    Consol.
                    ----------------------------------------------------------------------
Revenue                 8,767     2,657    16,143     1,699       551       ---    29,817
Segment Loss             (279)     (193)   (1,304)  (45,740)  (29,192)      ---   (76,708)
Total Assets            5,114    30,980       853   121,458    68,528  (137,782)   89,151
Capital Expenditures      125    12,034       ---       562       156       (11)   12,886
Dep. and Amort.           208       715       166     4,039     1,269       ---     6,397


                                   For the year ending August 31, 2001

(in thousands)       APC/HSI     EBS       UCG      Eagle     Other     Elim.    Consol.
                    ----------------------------------------------------------------------
Revenue                 8,173       571    18,137     1,205        24              28,110
Segment Loss             (990)     (299)     (211)   (5,217)   (2,163)             (8,880)
Total Assets            5,351    13,149     4,394   156,113    34,128   (43,114)  170,021
Capital Expenditures      151     9,350        24       198     6,671              16,394
Dep. and Amort.           149     1,053        19     3,249       857               5,327
</TABLE>

                                      F-26

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003


<TABLE>
<CAPTION>


Reconciliation of Segment Loss from        August 31,     August 31,     August 31,
 Operations to Net Loss:                      2003           2002           2001

<S>                                      <C>            <C>            <C>
Total segment loss from operations       $    (31,075)  $    (76,708)  $     (8,880)

Total Other Income (Expense)                   (5,426)          (265)         2,348
                                         -------------  -------------  -------------
Net Loss                                 $    (36,501)  $    (76,973)  $     (6,532)

</TABLE>

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


Note 23 - Quarterly Financial Data.


                           Nov. 30,    Feb. 28,      May 31,     Aug. 31,
                         ---------------------------------------------------
 Year Ended August 31,    (restated -  (restated -   (restated -  (restated -
  2003                     see Note 2)  see Note 2)   see Note 2)  see Note 2)

   Revenues                    4,618        3,063        1,847        2,065
   Net Earnings (loss)        (1,533)      (2,012)      (3,833)     (29,123)
   Basic Loss per Share        (0.02)       (0.03)       (0.05)       (0.28)
   Diluted Loss per Share      (0.02)       (0.03)       (0.05)       (0.28)

 Year Ended August 31,
  2002
   Revenues                    8,761        7,380        6,485        7,191
   Net Earnings (loss)        (4,026)      (2,668)      (2,479)     (67,799)
   Basic Loss per Share        (0.07)       (0.04)       (0.04)       (1.05)
   Diluted Loss per Share      (0.07)       (0.04)       (0.04)       (1.05)


          For the year ended August 31, 2002, the quarterly financial
          information has been adjusted to reflect the application of Financial
          Accounting Standards Pronouncements No. 142 (Goodwill and other
          Intangible Assets) and No. 144 (Accounting for the Impairment or
          Disposal of Long-Lived Assets).

Note 24 - Exit Activities:.

          During the fiscal year ended August 31, 2003, we implemented cost
          reductions in various operating segments. In the aggregate, the
          Company reduced its overall personnel by 114 headcount or a 50%
          reduction for the fiscal year ended August 31, 2003 as compared to the
          fiscal year ended August 31, 2002. The predominate reduction in
          headcount related to the Company's Atlantic Pacific / Homes Systems
          structured wiring and commercial cabling segment with headcount
          reductions of nine, six and 57 personnel in the first three quarters
          of fiscal 2003; aggregating an overall headcount reduction of 72 or
          71% of this segments workforce. Additionally, the Company reduced its
          United Computing Group computer hardware sales segment by 18, nine,
          and two personnel in the first three quarters of fiscal 2003;
          aggregating an overall reduction of 29 or 59% of this segments
          workforce. These two operating segments accounted for 101 of the 114
          headcount reductions affected in fiscal 2003. Specifically, certain
          components of these operating segments, i.e., home systems structured
          wiring, commercial cabling and computer hardware sales, were not
          expected to provide significant long-term revenues and profitability,
          and therefore were reduced. Following the series of cost reduction
          activities implemented during the first three quarters of fiscal 2003,
          Eagle's management assessed the viability of continued financial
          investment in these unprofitable segments in the fourth quarter of
          fiscal 2003 and into early first quarter of fiscal 2004 and made
          further reductions. In conjunction with the appointment of , Mr.
          Weisman as our new Chief Executive Officer, in early October 2003, the
          Company completed the final consolidation of the United Computing
          Group segment into other Eagle operations while further reducing the
          Atlantic Pacific / Home Systems operations to an outsource commercial
          cabling and structured wiring operation that project manages affiliate
          contractors.

          Additionally, in conjunction with the appointment of Mr. Weisman as
          Chief Executive Officer,, the Company made certain decisions during
          the preparation of its Form 10-K in our first quarter of fiscal 2004
          that affected the value of certain assets as of August 31, 2003. These
          decisions included:

          --   A revised collection assessment of certain accounts receivables
               from these and other down-sized Eagle business segments.
          --   The decision to no longer pursue new commercial structured
               cabling opportunities on a direct basis versus the outsource
               model; thereby resulting in the impairment of goodwill from its
               Atlantic Pacific operations.
          --   The decision to no longer pursue Home Systems structured wiring
               opportunities on a direct standalone model basis outside its BDS
               model; thereby resulting in the impairment of its Home Systems
               inventory.

                                      F-27

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003


          --   The decision to withdraw from certain unprofitable BDS projects,
               namely its Austin area BDS developments; thereby impairing
               certain assets including property, plant and equipment.
          --   The decision to settle numerous existing and threatened legal
               proceedings versus continuing the timing consuming and costly
               process of defending such proceedings; thereby resulting in the
               accrual of numerous reserves for such settlements.
          --   The decisions to consolidate its operating segments into its
               corporate lease space; thereby resulting in reserves for property
               lease settlements.
          --   The decision to negotiate the settlement of certain sales tax
               liabilities that resulted from a sales tax audit of United
               Computing Group operations for periods that preceded the
               acquisition date of this subsidiary.

     Accordingly, Eagle incurred certain asset impairments and operating charges
     in the fourth quarter associated with these decisions. These asset
     impairment charges, allowances, write-off's and reserves included the
     following:

          --   Accounts receivable write-off's and reserves aggregating
               $2,177,000; of which $1,348,000 was attributable to the decisions
               affecting the Company's Atlantic Pacific / Home Systems
               operations, $15,000 attributable to the decisions affecting its
               United Computing Group operations and $814,000 attributable to
               the Company's Eagle, EBS and Other segment operations.
          --   Inventory impairment charges of $2,627,000; of which $501,000 was
               attributable to the decisions affecting the Company's Atlantic
               Pacific / Home Systems operations and $74,000 attributable to the
               decisions affecting its United Computing Group operations.
               Additionally, the Company recorded an impairment charge of
               $1,125,000 for slow-moving and obsolete inventory in its Eagle
               operations. This charge primarily resulted from a major clients
               decision to upgrade from a 400 MHz chip to a 500 MHz chip for the
               Company's convergent set top box.
          --   Litigation settlement costs and reserves of $3,650,000 against
               certain of the legal proceedings previously discussed in Item 3.
               Legal Proceedings. Additionally, the Company recorded charges
               aggregating $2,274,000 to settle threatened and existing legal
               proceeding associated with prior financing transactions,
               including the Kaufman litigation.
          --   Lease settlement costs and reserves of $171,000 were attributable
               to the decision to consolidate various operating segments into
               its corporate lease space; thereby resulting in reserves for
               early exit of such leases.
          --   Impairment, write-down's and restructuring costs aggregating
               $7,611,000; of which $1,878,000 was attributable to an impairment
               of goodwill in the Company's Atlantic Pacific operations
               following the Company's decision to no longer pursue commercial
               cabling opportunities on a direct basis versus an outsource
               model. These costs were also comprised of $3,412,000 in
               impairment of property and equipment following the Company's
               decision to withdraw from certain unprofitable BDS projects,
               namely in the Austin area, and $323,000 of impairment of property
               and equipment from the Company's Atlantic Pacific / Home Systems
               operations following the decision to no longer pursue structured
               wiring opportunities on a direct standalone basis outside of its
               BDS model. Additionally, the aggregate total included a $553,000
               charge for certain sales tax liabilities that resulted from an
               audit of the Company's United Computing Group operations for time
               periods that preceded the acquisition date of this operation.

          --   Eagle incurred approximately $96,000 for severance and accrued
               vacation related to employees terminated in fiscal 2003. Eagle
               does not expect to incur any additional future period costs
               associated with such restructuring activities other than those
               accrued for and recorded in the fourth quarter of fiscal 2003.


An analysis of accrued costs and amounts charged against the provision are as
follows:


                      Beginning                                        Ending
--------------------------------------------------------------------------------
                      Balance         Period                           Balance
--------------------------------------------------------------------------------
                                      Costs           Payments
                      8/31/2002     (Additions)                        8/31/2003
--------------------------------------------------------------------------------
Accrued Exit
 Expenses:
--------------------------------------------------------------------------------
   Severance                 $-         $96,000         $96,000              $-
--------------------------------------------------------------------------------
Terminated Lease
      costs                   -        $171,000               -        $171,000
--------------------------------------------------------------------------------
     Total                   $-        $267,000         $96,000        $171,000
--------------------------------------------------------------------------------

For the year ended August 31, 2003, the Company incurred exit costs of $267,000
which are principally severance and lease termination costs. The total expected
exit costs for severance and terminated leases are $96,000 and $171,000,
respectively. These costs are included in the consolidated statement of income
under the categories of salaries and related costs and other support costs.

These period and accumulated costs are included in the segment reporting as
follows:
<TABLE>
<CAPTION>

Costs             APC/HSI     EBS/DSS      UCG        EAGLE       OTHER       Total
------------------------------------------------------------------------------------
<S>              <C>          <C>        <C>         <C>                    <C>
Severance        $37,000      $24,000    $14,000     $21,000                $96,000
------------------------------------------------------------------------------------
Terminated
 Lease Costs      50,000                 $44,000                 $77,000    171,000
------------------------------------------------------------------------------------
Total            $87,000      $24,000    $58,000     $21,000     $77,000   $267,000
------------------------------------------------------------------------------------
</TABLE>



Note 25 - Subsequent Events.

          Resignation/Appointment of Chief Executive Officer. In October 2003,
          H. Dean Cubley resigned as chief executive officer to become the chief
          technology officer, and David Weisman accepted the position of chief
          executive officer.

          Recent Financings. During the first fiscal quarter of 2004, Eagle has
          received net proceeds of $7,687,000 from private placement offerings
          of stock and bonds and through the sale of stock held as short term
          investments and has retired or reduced certain of its notes payable,
          accounts payable and other obligations including numerous lawsuits;
          thereby significantly reducing the Company's current and contingent
          liabilities.

          Conversion of Outstanding Debt. During the four months ended September
          30, 2003, holders of the Q-Series Bonds elected to convert bonds with
          an aggregate principal balance of 6,483,158 into 31,620,049 shares of
          common stock, of which 2,000,000 shares were registered in a Form S-3
          Registration statement filed in October 2003.

          Private Placement Offering. In October 2003, we received gross
          proceeds of $3,000,000 from a private placement to accredited
          investors in which we issued promissory notes in the aggregate
          principal amount of $3,000,000 ("Notes") and 2,000,000 shares of
          Series A Convertible Preferred Stock ("Series A Preferred"). The
          Series A Preferred is convertible into 29,500,000 shares of common
          stock, subject to adjustment based on certain anti-dilution
          provisions. We received net proceeds from this offering of $2,915,000,
          which we intend to use for general corporate purposes. Terms of the
          Series A Preferred and Notes are described below under the caption
          "Description of Securities." We granted registration rights to the
          selling stockholders covering the resale of shares of our common
          stock, which are issuable upon conversion of the Series A Preferred.
          We registered the resale of 29,500,000 shares of common stock
          underlying 2,000,000 shares Series A Preferred on a Form S-3
          Registration Statement.

                                      F-28

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003



                                   SCHEDULE II


                        VALUATION AND QUALIFYING ACCOUNTS



                   Years Ended August 31, 2003, 2002, and 2001



<TABLE>
<CAPTION>
                                                              Additions

                                                 Balance at   Charged to                   Balance at

                                                Beginning of  Expenses/                      End of

                 Description                       Period      Revenues    Deductions        Period

                                                                     (In thousands)
Allowance for doubtful accounts:

<S>                                                <C>         <C>          <C>             <C>
      2003                                          $242        $2,177       $(2,007 )       $   412

      2002                                          $480        $  125       $  (363 )       $   242

      2001                                          $ 89        $  391       $   ---         $   480


</TABLE>

                                      F-29