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

                                    FORM 10-K
    -----------------------------------------------------------------------

  [ 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 Identification No.)
Incorporation or Organization)

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:  Common
Stock

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 [ ] No [ X ]

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  December  5, 2003,
registrant had 188,188,269 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 will be filed by the registrant
on or before December 29, 2003.

<PAGE>

     This annual report contains  forward-looking  statements.  These statements
relate to future events or future  financial  performance  and involve known and
unknown risks, uncertainties and other factors that may cause Eagle's or Eagle's
industry's actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by the forward- looking statements.

     In some cases, you can identify  forward-looking  statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates,"  "believes,"
"estimates,"  "predicts,"  "potential,"  or the negative of these terms or other
comparable terminology. These statements are only predictions. Actual results in
future periods may differ materially from the forward-looking  statements due to
a number of risks and  uncertainties,  including but not limited to fluctuations
in the  construction,  technology,  communication  and industrial  sectors;  the
success of the Company's  restructuring and cost reduction plans; the success of
the  Company's   competitive  pricing;  the  Company's   relationship  with  its
suppliers;  relations  with the Company's  employees;  the Company's  ability to
manage its operating costs; the continued  availability of financing and working
capital to fund business operations;  governmental regulations; risks associated
with regional, national, and world economies; and consummation of the merger and
asset purchase transactions. Any forward-looking statements should be considered
in light of these factors.

     Although   Eagle   believes   that  the   expectations   reflected  in  the
forward-looking  statements  are  reasonable,   Eagle  cannot  guarantee  future
results,  levels of activity,  performance or  achievements.  Moreover,  neither
Eagle  nor  any  other  person  assumes  responsibility  for  the  accuracy  and
completeness  of  these  forward-looking  statements.  Eagle is under no duty to
update any of the  forward-looking  statements  after the date of this report to
conform its prior statements to actual results.

                                     PART I

Item 1.  Description of Business

Overview

     Eagle Broadband,  Inc., (the "Company" or "Eagle") is a worldwide  supplier
of broadband,  communications,  project  management  and  enterprise  management
products and services.  Eagle's  exclusive  "four-play" suite of very high-speed
Internet,  cable-style television, voice and security monitoring Bundled Digital
Services  (BDSSM),  HDTV-ready  multimedia  set-top boxes,  and turnkey suite of
financing,  design,  deployment and operational services enables municipalities,
real estate  developers,  hotels,  multi-tenant  owners and service providers to
deliver  exceptional  value,  state-of-the-art  entertainment and communications
choices and single-bill convenience to their residential and business customers.
Eagle has extensive "last mile" cable and fiber  installation  capabilities  and
provides  complete IT business  integration,  project  management and enterprise
management   solutions   including   network  security,   intrusion   detection,
anti-virus,  managed  firewall and content  filtering to Fortune 1000 companies.
Eagle also  markets  the  Orb'Phone  Exchange  non-line-of-sight  communications
system  that  provides   true,   "total"   global   voice,   data  and  Internet
communications  services through the Iridium  Satellite  network to Fortune 1000
enterprises, commercial aviation, government, the military and homeland security
customers.

     As of August 31,  2003,  the  Company's  active  subsidiaries  were:  Eagle
Broadband  Services,  Inc.  (EBS) - operating as Eagle BDS; DSS  Security,  Inc.
(DSS) - operating as Eagle Security Services;  Atlantic Pacific  Communications,
Inc. (APC) - operating as Eagle  Communications  Services;  Etoolz, Inc. (ETI) -
Eagle's research and development subsidiary; Eagle Wireless International,  Inc.
(EWI);  and Contact  Wireless,  Inc. (CWI) - operated as Eagle Paging  Services.
Additionally,  Eagle has a number of inactive  subsidiaries  that had results in
one or more of the periods included in the financial  statements covered by this
report. These inactive subsidiaries  include:  ClearWorks  Communications,  Inc.
(COMM) - formerly operated as BDS; ClearWorks.net,  Inc. (.NET); ClearWorks Home
Systems,  Inc. (HSI) - operated as Eagle Residential  Structured Wiring;  United
Computing Group,  Inc. (UCG) - operated as Eagle Technology  Services;  and Link
Two Communications, Inc. (LINK II) - operated as Eagle Messaging Services. Eagle
has incorporated  certain ongoing  operations of the inactive  subsidiaries into
the active  subsidiaries  listed above.  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.

     Eagle  designs and  manufactures  a wide range of  broadband  products  and
provides  complete  installation  services  for copper,  fiber,  and wireless to
commercial and residential  markets.  Core products  offered by Eagle target end
users of broadband services and include Internet,  telephone,  cable television,
and security monitoring services,  which services we refer to as bundled digital
services (or BDSSM).  Each subscriber  provides the company with the opportunity
to create a recurring  revenue  stream as well as up-front  product  revenues by
providing hardware, software and service products, such as Eagle's set-top-boxes
to existing customers. This balance of near-term and long-term recurring revenue
is a  combination  that in the opinion of management  is highly  desirable.  The
combination of Eagle's convergent hardware products, network services,  wireless
products,  wireless network and spectrum services,  strong manufacturing and R&D
capabilities  and the BDSSM  "last  mile"  cable and fiber  installation  should
provide  a  well-balanced  revenue  mix as the  combined  company  offers a full
complement of broadband products and services to its customers.


                                       1
<PAGE>

     Eagle designs,  manufactures,  markets, and services its products under the
Eagle  name.  These  products  include  transmitters,   receivers,  controllers,
software and other equipment used in personal  communications  systems and radio
and  telephone  systems.  Most of Eagle's  broad line of products,  covering the
messaging  spectrum  as well as specific  personal  communication  systems,  and
specialized mobile radio products,  have been tested and approved by the Federal
Communications Commission.  Eagle provides service and support for its products,
as well as consulting and research development on a contract basis. In addition,
Eagle has introduced a completely new line of multi-media and Internet  products
to the  telecommunications  industry,  including a family of digital set-top-box
products and markets these products under the name of BroadbandMagic.

     Eagle through its subsidiary,  Atlantic  Pacific  Communications,  Inc., is
engaged in the business of project  management  of  professional  quality  data,
voice, and fiber optic cable  installations and services for both re-sellers and
end-users.

     Eagle was incorporated in May 1993 and changed its name in February 2002 to
Eagle Broadband,  Inc., its current name. Eagle's principal place of business is
located at 101  Courageous  Drive,  League City,  Texas 77573 and its  telephone
number is (281) 538-6000.

Product and Service Categories

Eagle BDS Services

     Eagle   provides    fiber-to-the-user   ("FTTU")   network   services   for
neighborhoods  and  businesses  utilizing its Bundled  Digital  Services.  These
services include  high-speed  Internet  connectivity,  home security,  telephone
service,  and cable-style TV service over fiber.  Eagle's exclusive  "four-play"
suite of very high-speed Internet, video/cable TV, voice and security monitoring
Bundled Digital Services, HDTV-ready multimedia set-top boxes, and turnkey suite
of financing,  network  design,  deployment  and  operational  services  enables
municipalities,  real-estate developers, hotels, multi-tenant owners and service
providers  to deliver  exceptional  value,  state-of-the-art  entertainment  and
communication  choices and  single-bill  convenience  to their  residential  and
business customers.

     Eagle  provides  up to 100 Mbps  switched  service  per home with up to six
drops per home wired by Eagle's wiring standards.  Connections of up to 100 Mbps
are approximately  2,000 times faster than a 56K modem. The fiber optic networks
that Eagle deploys into  residential  communities and businesses  consist of two
parts: (a) the headend facility and (b) the fiber optic cable installed into the
home.

     Eagle also sells structured  wiring and audio/video  products to single and
multi-family units. These products and services are being made available to both
residential and commercial customers on a national basis.

     Eagle's BDS Services  revenues are reported under the category of Broadband
Services on the Company'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 Security Services

     Eagle,    through   its   subsidiary,    DSS   Security,    Inc.,   markets
security-monitoring  services. DSS Security's principal business activity is the
providing  of  monthly  security  monitoring  service  to  both  commercial  and
residential  customers.  Currently  DSS Security is  providing  services to over
6,000 customers.

     Eagle's  Security  Services  revenues  are  reported  under the category of
Broadband  Services  on the  Company'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 Satellite-Based Voice and Data Communications Services

The Orb'Phone Exchange

     The   Orb'Phone   Exchange   is  the  first   and  only   non-line-of-sight
communications technology that enables users of the Iridium(R) satellite network
to quickly and easily establish highly reliable voice and data communications to
and from any  location  where  the user is  unable  to gain  line of sight to an
orbiting Iridium Satellite such as onboard in-flight aircraft, within buildings,
under ground or from  obstructed  areas.  The  technology  enables  truly global
communications  that  enhance  user  productivity,  mobility,  problem  solving,
field-to-headquarters  collaboration  and emergency  backup/response  for a wide
range of  mission-critical  and  everyday  communications  needs.  By  extending
coverage indoors to areas not traditionally  served by satellite  networks,  the
Orb'Phone Exchange


                                       2
<PAGE>

extends customers' usage area, while enhancing the utility and overall value for
both new and existing Iridium aviation, government,  military, homeland security
and  commercial/enterprise  customers. The company has received certification by
both the Federal  Communications  Commission  (FCC  Certification  Identifier  #
LOKJHJLBT05A00021) and Iridium Satellite LLC for the Orb' Phone Exchange..

     Subsequent to the fiscal year ending August 31, 2003, the Company announced
that General Dynamics  Decision  Systems,  a business unit of General  Dynamics,
signed a distribution  agreement to sell and support Eagle's Orb'Phone  Exchange
to  customers  in  the  U.S.  Department  of  Defense  (DOD),  General  Services
Administration  (GSA), Defense Information Systems Agency (DISA), and other U.S.
and foreign government agencies.

     Revenues for Eagle's Orb' Phone  Exchange were not applicable in the fiscal
year ended August 31, 2003,  as the product was released  subsequent to year end
and in future  periods  will be reported  under the  category of Products on the
Company's  Consolidated  Statements of  Operations  included as page F-4 of this
report and also under the category Eagle within Note 22 - Industry Segments.

Broadband Multimedia and Internet Products

     Eagle,  under  the  brand  BroadbandMagic,  markets  broadband  multi-media
set-top-box products. These multimedia and Internet based products provide users
the ability to interface their Internet  connection,  broadcast video,  cable or
DSL, or satellite video source directly to their  television  receiver.  Eagle's
BroadbandMagic markets the set-top boxes to Internet service providers or ISP's,
systems  integrators and OEM customers who typically bundle  set-top-boxes  with
their own products and/or services.

Host Pro

     Service  providers,  such  as  hotels,  broadcasters,  DSL  providers,  and
healthcare  facilities  can take  advantage  of the Host  Pro Web  Flyer's  full
complement of on-demand TV, Internet and entertainment services. The Host Pro is
specifically designed to allow service providers to generate additional revenues
by supplying their customers with a variety of entertainment,  educational,  and
business applications.

Computer Plus

     The Computer  Plus Web Flyer is a complete  home  entertainment  system and
full function computer.  Using a television set as a monitor,  the Computer Plus
Web Flyer  allows  users to connect to the ISP of their  choice and bring  their
multimedia  center into the comfort of their living  room.  Users can access the
Internet, play the latest video games, watch TV, listen to CDs, send and receive
email, and watch DVD movies. This unit combines several entertainment appliances
into a single, integrated unit.

IP Express

     The IP Express  provides users with either  dial-up or high-speed  Internet
access,  the ability to check  e-mail,  surf the web,  or play  games.  With the
built-in  TV  tuner  card,   users  can   auto-tune,   have   picture-in-picture
capabilities, and channel preview while connected to the Internet. This unit can
be attached either to a monitor or basic TV.

Media Pro

     The Media Pro's architecture,  which includes exceptional ED graphics, MPEG
2 hardware  decoder and low-power  CPU,  makes it ideally  suited for multimedia
environments such as Video-on-Demand (VOD) and Video Conferencing.  This unit is
marketed to the hospitality market, hospitals, schools, and in Multiple Dwelling
Units (i.e. apartments, etc.).

     The VP-2100 along with Eagle's Video-View  software enables the consumer to
do  point-to-point  video  conferencing,  as  well as  have  up to  eight  video
conferencing feeds using our advanced video  multicasting.  The VP-2100 provides
corporate  executives and other  customers a cost  effective  alternative to the
high cost and risk of  travel,  as well as  eliminating  the  unproductive  time
associated with long distance business meetings.

EZMagic-HD

     EZMagic-HD is a  software-based  middleware  platform capable of delivering
Eagle's complete "four-play" of voice, video, data, and security services over a
wide variety of standard hardware systems.  EZMagic-HD expands Eagle Broadband's
advanced  EZMagic  middleware  software  platform  to  include  a  range  of new
multi-media capabilities.  The advanced capabilities made possible by EZMagic-HD
enable hotel and casino owners, municipalities,  real estate developers, schools
and health care facilities to deliver


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<PAGE>

enhanced  high-demand  multimedia  services that can improve the satisfaction of
residents and guests,  increase  revenues,  maximize occupancy rates and improve
brand loyalty.

     EZMagic-HD  features  include high  definition  streaming  video,  improved
digital  audio  and  Internet  capabilities,  easier  navigation  of  hotel  and
community  services  (e.g.  concierge,  local  restaurants  and  events,  etc.),
increased content and system security,  and additional operating system support.
EZMagic-HD  is designed for a range of higher margin  applications  and services
including (i) high-end hospitality systems requiring sophisticated secure video,
(ii) data and gaming services,  (iii)  educational  distance learning systems to
improve  both  teacher  and  student  education,  (iv)  on-demand  entertainment
including concerts, movies, music videos, etc. with superior visual clarity, (v)
internet  access,  video  programming and other patient services for health care
facilities,  and (vi) Fiber-to-the-User  IP-based entertainment  terminals/media
centers.

     Eagle's  Broadband  Multimedia and Internet  Products revenues are reported
under the  category of  Products on the  Company'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 Communications Services

     Eagle,  through its  Atlantic  Pacific  Communications,  Inc.,  subsidiary,
provides data,  telephony and fiber optic  installation,  project management and
support  services from initial  concept  through  engineering  to completion and
documentation.  Atlantic  Pacific  resells  and  installs  fiber and  cabling to
commercial  and  industrial  clients  throughout  the  United  States.  Services
include:

     o    Multi-site rollout installation
     o    Statement of Work/Request For Quotation preparation
     o    Installation supervision
     o    Structured wiring design
     o    Comprehensive project management
     o    Copper wiring configuration
     o    Fiber optic acceptance testing
     o    Aerial and underground OSP
     o    Fiber optic and copper cable
     o    Field service and support

     Eagle's Communications Services revenues are reported under the category of
Structured  Wiring  on  the  Company'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 Technology Services

     Eagle,  through its United Computing Group, Inc.,  subsidiary,  provides IT
Business  Integration  and  Enterprise  Management  solutions to companies  with
complex computing and communication  systems and needs.  Eagle helps its clients
integrate  and  deploy  the  latest  technologies  to help  ensure  they  remain
competitive within their industry,  while reducing the cost of integrating these
solutions in order to maximize the return on their technology investments.

     Eagle has historically targeted  medium-sized  businesses and organizations
as its  primary  client  base but has  recently  expanded  its focus to  include
Fortune 1000 enterprises. Medium-sized businesses tend to rely on specialized IT
service  providers  to help  implement  and manage  their IT systems and complex
computing  environments.  Eagle believes its expertise will allow its clients to
address all or selected parts of the full, IT life cycle  management,  including
network  management  and  monitoring,   network  design,  security,   anti-virus
protection, product fulfillment, configuration, implementation, fault diagnosis,
fault resolution,  reporting,  upgrading and  documentation.  Eagle accomplishes
this through its different service offerings that are managed by its Client Care
Center that is operated  24 hours per day,  seven days per week in League  City,
Texas.

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

Eagle Consulting Services

     Eagle routinely provides consulting services on a contract basis to support
the sale of its main  product  lines.  Examples  of  these  consulting  services
include the design and  installation of radio  messaging  systems and technology
and engineering support for fiber-to-the-user (FTTU) headend and optical network
integration. Eagle also performs research and development on a contract basis.


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<PAGE>

     Eagle's  Consulting  Services  revenues are reported  under the category of
Other on the Company'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 Service and Support

     Eagle  provides  service and  support to  customers  on an  on-going  basis
including installation, project management of turnkey systems, training, service
or extended warranty  contracts with Eagle.  Eagle believes that it is essential
to  provide  reliable  service  to  customers  in  order  to  solidify  customer
relationships  and be the vendor of choice when a customer seeks new services or
system  expansions.  This relationship is further developed as customers come to
depend  upon  Eagle  for  installation,   system   optimization,   warranty  and
post-warranty services.

     Eagle has a warranty  and  maintenance  program for both its  hardware  and
software products and maintains  customer service  facilities.  Eagle's standard
warranty  provides its  customers  with repair or  replacement  of any defective
Eagle  manufactured  equipment.  The  warranty is valid on all  products for the
period of one year from the later of the date of shipment or the installation by
an Eagle qualified technician.

     Eagle's  Service and  Support  Services  revenues  are  reported  under the
category  of  Other  on the  Company'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 Paging Services.

     Eagle,  through its subsidiary  Contact Wireless,  Inc., markets paging and
mobile  telephone  solutions.  Eagle acquired  Contact Wireless in January 2001.
Contact Wireless  provides  customers with paging and mobile telephone  products
and related monthly services in San Antonio and Houston areas. Subsequent to the
fiscal  year ended  August 31,  2003,  Eagle  intends to divest  this  operating
subsidiary in a related-party transaction.

     Eagle's Paging  Services  revenues are reported under the category of Other
on the Company'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 Messaging Services

     Eagle,  through  its  subsidiary  Link Two  Communications,  Inc.,  markets
messaging network services.  Eagle is a common carrier of exclusively  wholesale
one-way messaging and two-way messaging network services. Its customers purchase
messaging network services as an aggregator and resell Link Two  Communication's
network services to individual  subscribers and other communications  providers.
Link Two  Communications  has been classified as an incumbent carrier by the FCC
and has secured the rights to use or options to purchase  spectrum in all of the
major metropolitan U.S. cities on five PCP frequencies.  Link Two Communications
has also secured several exclusive RCC frequencies  providing  regional coverage
in two of the top ten markets.  Link Two Communications has secured an exclusive
block of FCC  spectrum  covering a  majority  of the  population  centers in the
southern and western United States in a successful bidding at the FCC auction.

     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 several 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 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.

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


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<PAGE>

Eagle Wireless International

Wireless Messaging Hardware

     Messaging  is a method of wireless  communications,  which uses an assigned
radio  frequency  to contact a messaging  subscriber  anywhere  within a service
area. A messaging system is generally operated by a service provider that incurs
the cost of building and  operating  the system.  Each  service  provider in the
United States  licenses  spectrum from the FCC and elsewhere from the authorized
government  body to  operate  a  messaging  frequency  within  either  a  local,
regional, or national geographical area. Each messaging subscriber is assigned a
distinct  telephone  number  that a caller  dials to activate  the  subscriber's
pager, a  pocket-sized  radio receiver  carried by the  subscriber.  A messaging
switch receives telephone calls by the subscriber. The transmitters manufactured
by Eagle are  specifically  designed to simulcast,  which is the transmission of
the same signal over two or more  transmitters  on the same  channel at the same
time in an overlap  area,  resulting  in  superior  voice and data  quality  and
coverage area. The radio signal causes the messaging device to emit a beep or to
vibrate,  and to provide the subscriber with  information from the caller in the
form of a voice, tone, numeric, or alphanumeric message.

     A messaging  device has an advantage over a landline  telephone in that the
messaging device's reception is not restricted to a single location,  and has an
advantage  over a cellular  portable  telephone  in that a  messaging  device is
smaller,  has a much longer  battery life, has excellent  coverage,  and is less
expensive  to use.  Historically,  the  principal  disadvantage  of  traditional
messaging  service in  comparison to landline  telephones  or cellular  portable
telephones  has  been  that  messaging   provided  only  one-way   communication
capabilities.

     However,  this  limitation may have been overcome in the United States as a
result of the auction in 1994 by the FCC of nationwide and regional licenses for
designated  narrowband  personal  communication  services,  radio frequencies or
spectrum to service  providers.  Many of the nationwide license holders and many
of the  regional  license  holders  are  current  Eagle  customers,  directly or
indirectly.  The cost of the licenses to the narrowband  personal  communication
services  auction  winners  in  1994  was  approximately  $1  billion.  The  FCC
anticipates that these narrowband personal  communication services licenses will
be used to provide such new services as pager location,  two-way  acknowledgment
messaging, advanced voice messaging and data services.

     The  narrowband  personal   communication  services  radio  frequencies  or
spectrum are located at three separate  points within the total radio  spectrum,
at 902-928 MHz, 930-931 MHz and 940-941 MHz.  Initially,  the radio  frequencies
located at 930-931 MHz and 940-941 MHz have been designated for outbound message
transmission,  to the pager,  and the 902-928 MHz have been designated  response
channels,  from the pager. This application is similar to traditional  messaging
except that these license  holders have been granted wider  frequency  bandwidth
permitting the user to transmit  substantially  more  information.  In addition,
Eagle manufactures other messaging infrastructure products that cater to the VHF
and UHF messaging  frequencies in the United States and other areas of the world
as well as supporting most international messaging brands.

     The narrowband  personal  communication  services nationwide licenses cover
all fifty states,  the District of Columbia,  American Samoa, Guam, the Northern
Marianas  Islands,  Puerto  Rico and the United  States  Virgin  Islands.  These
licenses are divided into 50 kHz paired and unpaired channel categories.  Paired
channels  permit both outbound and inbound  signals while unpaired  channels are
limited  to  only  outbound   signals.   The  FCC  has  imposed   infrastructure
construction or build-out  requirements on all narrowband personal communication
services  license  holders.  Each  narrowband  personal  communication  services
license holder must establish minimum service availability for at least 37.5% of
the  population in its geographic  region within five years after  receiving the
license.  After ten  years,  each  narrowband  personal  communication  services
license  holder  must make the service  available  to at least 75% of the area's
population. If a narrowband personal communication services license holder fails
to achieve these build-out requirements, it risks cancellation by the FCC of its
narrowband  personal  communication  services  license and a  forfeiture  of any
auction monies paid.

     Eagle  manufactures  products that will enable messaging license holders to
legally put their  systems into  operation at a low cost, a strategy  adopted by
Eagle to create a "captive" customer in terms of future build-out.

     Eagle offers its customers an end-to-end  solution for narrowband  personal
communication  services  applications.  Eagle has developed new technology based
products with enhanced  architecture and technology from its existing  messaging
systems to accommodate the advanced  services  available  through  messaging and
PCS. This system approach includes full product lines of radio frequency network
controllers,  transmitters,  receivers, and a special satellite receiver system,
to receive the response message from the end-user.


                                       6
<PAGE>

     The design of a messaging system is customer specific and depends on:

     o    The number of messaging  subscribers the service  provider  desires to
          accommodate,
     o    The operating radio frequency,
     o    The geography of the service area,
     o    The expected system growth, and
     o    Specific features desired by the customer.

     Messaging  equipment  hardware and software  developed by Eagle may be used
with all types of messaging  service,  including voice, tone numeric  (telephone
number display) or alphanumeric messaging (words and numbers display).

Switches

     Eagle is  involved at an early stage in the  development  of industry  wide
technology  standards and is familiar with  developments  in messaging  protocol
standards  throughout  the world.  Eagle works closely with its customers in the
design of large, complex messaging networks.  Eagle believes that its customers'
purchasing  decisions are based, in large part, on the quality and technological
capabilities  of such networks.  Eagle  believes that the advanced  hardware and
software  features of its switches ensure high  reliability and high volume call
processing.

Radio Frequency Equipment, Transmitters and Receivers

     Transmitters  are available in frequency ranges of 70 MHz to 960 MHz and in
power  levels of 2 Watts to 500 Watts.  Radio link  receivers  are  available in
frequency  ranges of 70 MHz to 960 MHz.  Satellite  link receivers are available
for  integration  directly  with  the  transmitters  at  both  Ku-  and C-  band
frequencies.

     Eagle's  range of  receivers  detects the  responses  back from the two-way
narrowband personal  communication  services  subscriber devices.  The receivers
take advantage of Digital Sound Processing demodulation techniques that maximize
receiver performance.  Depending upon frequency,  antenna height, topography and
power,  Eagle  transmitter  systems are designed to cover broadcast cells with a
diameter from 3 to 100 miles.  Typical  simulcast  systems have broadcast  cells
that  vary  from 3 to 15 miles in  diameter.  Eagle  transmitters  are  designed
specifically  for the high  performance and reliability  required for high speed
simulcast networks.

Controllers

     Eagle currently  offers  products for transmitter  control known as Eagle's
L20X transmitter control system,  which is a medium-feature  transmitter control
system used in domestic and international markets.

     The principal  products and enhancements  currently being  manufactured and
sold by  Eagle  relate  to its  wireless  messaging  products  and  include  the
following:

Base Stations and Transmitters

     Transmitters and full-featured  transmitters  called Base Stations are used
by  messaging  carriers to  broadcast  radio-frequency  messages to  subscribers
carrying  pagers.   Eagle  offers  a  slimline  Stealth  and  a  larger  Quantum
transmitter  that is available  in the 72MHz,  VHF,  UHF,  and 900MHz  broadcast
frequency  ranges.  Each unit can be equipped to provide an output power ranging
from 15 Watts up to 500 Watts on almost any domestic or international  messaging
frequency.

Radio Frequency Power Amplifiers

     Radio-frequency  power amplifiers are a sub-component of both messaging and
SMR transmitters and base stations.  The high, medium and low power base station
and link transmitter  power amplifiers are designed to operate with any FCC type
accepted  exciter or may be combined with an Eagle optional plug-in base station
in the same space as the power  amplifier.  All Eagle power amplifiers above 100
Watts are equipped  with Eagle "Heat  Trap"(TM)  design to provide the user with
long life and high reliability performance.

Extend-A-Page

     Extend-a-Page  is  a  compact  lower-power  transmitter  and  receiver  set
designed to provide fill-in  coverage in fringe locations where normal messaging
service from a wide-area  messaging  system is not adequate.  The  Extend-a-Page
receives the messaging data


                                       7
<PAGE>

on either a radio  frequency  control link or wireline  link and  converts  this
information into low power simulcast compatible  messaging  transmissions on any
of the common messaging frequencies.  The Extend-a-Page  transmits the messaging
information  at a one to two Watt level  directly  into hard to reach  locations
such as hospitals,  underground  structures,  large industrial  plants, and many
locations near the outer coverage contour of messaging systems.

Link Products

     Radio  frequency  and  wireline  communication  links are needed to connect
multiple  transmitters  within a messaging  network.  Eagle  provides  both Link
equipment  (the Link  20TX,  20RX,  20GX and 20PX) and the Link 20  software  to
facilitate this interconnection.  Major competitors have licensed the Eagle Link
20  software  and  have  incorporated  it as an  industry  standard  into  their
radio-messaging  terminals.  Customers  may  also  purchase  the  same  software
directly  from  Eagle as part of an Eagle  system at a lesser  cost.  Management
believes  that its  software  allows the user to mix and match the  products  of
different vendors on a common radio-messaging system.

     In December 2002, the Company  entered into a 4-year  agreement,  licensing
its wireless infrastructure products and service technology to DX Radio Systems,
Inc., of Sun Valley, California. The contract allows DX Radio to manufacture and
market the wireless  infrastructure  products and services  that Eagle  Wireless
International has been supplying for several years to the paging and specialized
mobile radio (SMR) markets. Eagle Wireless products covered under this agreement
include transmitters,  base stations, paging terminals,  controllers,  repeaters
and receivers in all three major paging frequency bands.  These products are now
being sold under the DX Eagle trade name. Additionally,  Eagle consigned certain
inventory,  sold certain trade booth assets and subleased certain facility space
as a part of the  agreement.  The  agreement  allows  Eagle  Wireless  to derive
monthly revenue  through the licensing  agreement over the life of the contract,
while  totally  eliminating  the  overhead  associated  in  its  Eagle  Wireless
subsidiary.

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

Customers

     Eagle sells to a broad range of customers worldwide.

     BroadbandMagic sells to customers worldwide.  These customers are primarily
within  the  hospitality  industry,   business-to-business  and  the  government
sectors.

     Eagle BDS Services historically sold its products and services primarily in
the Houston, San Antonio, Austin and Phoenix markets although today markets such
products and services nationwide.  Eagle BDS Services markets these products and
services  through  direct  marketing  efforts  and via  Eagle's  sales staff and
service  centers.  The  majority of its  customers  historically  have been real
estate developers, which required the structured wiring component in addition to
the BDS services.  Today,  the Company has  experienced  significant  success in
marketing  the  BDS  Services  to   municipalities,   real  estate   developers,
hospitality   operators  and  public  utility  districts  with  residential  and
commercial  customers  typically  subscribing  to one or  more  bundled  digital
services such as voice, video, data/Internet and security monitoring.

     Eagle Technology Services markets its products and services nationwide to a
wide range of companies  including  small to medium sized  businesses as well as
Fortune  1000  enterprises.  The  primary  industries  are  oil / gas,  medical,
hardware / software, real estate, staff leasing and government.

     Eagle  Communications  Services sells its project management  services on a
nationwide  basis to a wide  range of  customers  including  telecommunications,
hospitality,  industrial and  petrochemical,  oil / gas companies and government
sectors.

     Eagle Messaging  Services sells its messaging products and services to both
individual consumers and businesses.

     Eagle  markets  the Orb' Phone  Exchange  non-line-of-sight  communications
system  to  Fortune  1000  enterprises,  commercial  aviation,  government,  the
military and homeland security customers.

     The Company did not have any customers that  aggregated ten percent or more
of consolidated  revenues in fiscal year 2003 and 2002; and had two customers in
fiscal year 2001 that accounted for 30% and 15% of consolidated revenues.


                                       8
<PAGE>

Marketing and Sales

     The majority of the  company's  products and services are marketed  through
its  employees  using  direct  sales  and  various  types  of  direct  marketing
techniques.

     Eagle BDS Services  sells its  products and services on a nationwide  basis
through direct marketing efforts of its sales staff and service centers. For the
years ended August 31, 2003,  2002,  and 2001,  Eagle BDS Services,  represented
15%, 7%, and 2% of consolidated revenues, respectively.

     Eagle  Technology  Services  are  marketed  through  direct sales staff and
through various types of direct marketing.  For the years ended August 31, 2003,
2002,  and 2001,  Eagle  Technology  Services  represented  21%, 54%, and 65% of
consolidated revenues, respectively.

     Eagle  Communications  Services are marketed  through  Eagle's direct sales
staff. For the years ended August 31, 2003, 2002, and 2001, Eagle Communications
Services, represented 34%, 18%, and 20% of consolidated revenues, respectively.

     Eagle Messaging  Services  marketed  through Eagle's direct sales staff and
publication advertising.

     Eagle also markets the Orb'Phone Exchange non-line-of-sight  communications
system directly to Fortune 1000 enterprises,  commercial  aviation,  government,
the military  and homeland  security  customers.  Subsequent  to the fiscal year
ending August 31, 2003,  the Company  announced that General  Dynamics  Decision
Systems,  a business unit of General Dynamics,  signed a five-year  distribution
agreement  to  sell  and  support  Eagle's   breakthrough   Orb'Phone   Exchange
communications  platform to customers in the U.S.  Department of Defense  (DOD),
General  Services  Administration  (GSA),  Defense  Information  Systems  Agency
(DISA), and other U.S. and foreign government agencies.

     Eagle Paging  Services  products and services are marketed  through Eagle's
direct sales staff.

     Eagle Security Services, are marketed through Eagle's direct sales staff.

     Eagle  maintains  an Internet  web site at,  www.eaglebroadband.com;  where
information  can be found on Eagle and its  subsidiaries  products and services.
The  web  site  provides  customers  with  a  mechanism  to  request  additional
information  on products and allows the customer to quickly  identify and obtain
contact information for their regional sales representative.  Information on the
web site of Eagle or any of its subsidiaries is not part of this annual report.

Research and Development

     Eagle  believes  that a strong  commitment to research and  development  is
essential to the continued growth of its business.  One of the key components of
Eagle's  development  strategy is the promotion of a close relationship  between
its  development  staff,  internally  with  Eagle  manufacturing  and  marketing
personnel, and externally with Eagle customers.  This strategy has allowed Eagle
to develop and bring to market customer-driven  products that meet real customer
needs.

     From 1999 to 2003, Eagle has focused a large portion of its new development
resources  on the  development  of the new  broadband  multimedia  and  Internet
product line. In addition,  Eagle has formed a number of strategic relationships
with  other  large  suppliers  and  manufacturers  that will allow the latest in
technology  and   techniques  to  be  utilized  in  the  company's   convergence
set-top-box  product line. Eagle will continue to incur research and development
expenses  with respect to the  convergence  set-top-box  product line during the
current fiscal year.

     Eagle has  extensive  expertise  in the  technologies  required  to develop
wireless   communications  systems  and  products  including  high  power,  high
frequency RF design digital signal processing,  real-time  software,  high-speed
digital logic,  wireless DSL products,  radio frequency and data network design.
Eagle believes that by having a research and development staff with expertise in
these key areas, it is well positioned to develop  enhancements for its existing
products  as well as the next  generation  of personal  communication  products.
Investment in advanced  computer-aided  design tools for simulation and analysis
has  allowed  Eagle to reduce  the time for  bringing  new  products  to market.
Research  and  development  expenditures  incurred by Eagle for the fiscal years
ended August 31, 2003,  2002,  and 2001 were  $411,000,  $404,000 and $1,276,000
respectively.

Manufacturing

     Eagle  currently   manufactures  its  satellite-based   communications  and
wireless products at its facilities in League City,  Texas.  Some  subassemblies
are manufactured for Eagle by subcontractors at various locations throughout the
world. Eagle's manufacturing


                                       9
<PAGE>

expertise  resides  in  assembling  subassemblies  and  final  systems  that are
configured to its customers' specifications.  The components and assemblies used
in Eagle's products include electronic components such as resistors, capacitors,
transistors,  and semiconductors such as field programmable gate arrays, digital
signal processors and microprocessors, and mechanical materials such as cabinets
in which the systems are built.  Substantially  all of the  components and parts
used in Eagle's products are available from multiple sources. In those instances
where  components are purchased  from a single source,  the supplier is reviewed
frequently  for stability and  performance.  Additionally,  as necessary,  Eagle
purchases sufficient  quantities of components that have long-lead  requirements
in the world  market.  Eagle  ensures that all  products  are tested,  tuned and
verified prior to shipment to the customer.

     Eagle has determined that the most cost effective  manufacturing method for
its high volume  multimedia  and Internet  product  line is to utilize  offshore
contract production facilities supplemented with high volume United States based
contract facilities.  The high volume requirements of the company's  convergence
set-top-box  product  line are  well  beyond  the  capabilities  of the  current
facilities and would be cost prohibitive to construct. However, in the selection
of a high volume international  manufacturer,  Eagle has selected EpoX, a Taiwan
Stock Exchange  company with established  subsidiaries in the USA,  Netherlands,
China and Germany. With a strong research and development team, EpoX is not only
able to  produce a wide range of  products,  but also has been  recognized  as a
pioneer  in the  field.  EpoX is  both  ISO-9001  and  ISO-9002  certified.  The
manufacturing  location for the convergence  set-top-box is the EpoX facility in
Taiwan.

Competition

     Eagle competes with many established  companies in the set-top-box business
including  Scientific Atlanta,  General Instrument,  and many smaller companies.
Most of these companies have greater resources available than Eagle. The markets
that are currently developing for multimedia and other Internet related products
are extremely large and rapidly growing.  Eagle has studied these markets and is
of the belief based on this  research that it can  effectively  compete in these
markets with its new convergence set-top-box product line. However, there can be
no assurance  that these  conclusions  are correct and that the  multimedia  and
Internet  markets will  continue to expand at their current rates and that Eagle
can gain significant market share in the future.

     Eagle BDS competes  indirectly with many established  companies and service
providers   that  provide  fiber  and  cable,   structured   wiring,   broadband
data/Internet,  security  monitoring,  cable television and telephone  services.
Most of these companies have greater resources than Eagle BDS. Eagle has studied
these markets, and is of the belief that the bundled digital services offered to
its customers as a complete  package with one source  billing,  is a competitive
advantage for Eagle BDS. Eagle's residential  customers are subject to developer
and  homeowner  association  agreements  that allow  Eagle BDS to be the primary
single source  provider of these  services.  However,  there can be no assurance
that these  conclusions are correct and that the bundled digital services market
will  continue  to expand  at their  current  rates and that  Eagle BDS can gain
significant market share in the future.

     Eagle Technology  Services competes with many established  companies in the
enterprise  integration and network management solutions markets.  Historically,
this  business  unit also  participated  in  product  fulfillment  by  reselling
hardware.  Most of these companies have greater  resources  available than Eagle
Technology  Services.  Eagle has studied these markets and is of the belief that
by offering  enterprise  and network  management  and product  fulfillment  as a
turnkey  solution,  to medium sized companies and Fortune 1000  enterprises with
competitive  pricing is a competitive  advantage for Eagle Technology  Services.
However,  there can be no assurance that these  conclusions are correct and that
the demand for these  products  and  services  will  continue to expand at their
current rates and that Eagle  Technology  Services can gain  significant  market
share in the future.

     Eagle Communications  Services competes with many established  companies in
the fiber and cable,  structured wiring and project  management  services areas.
Most  of  these   companies   have  greater   resources   available  than  Eagle
Communications  Services.  Eagle has studied  these markets and is of the belief
that  the  offering  of the  collective  services  on a  nationwide  scale  is a
competitive  advantage  for  Eagle  Communications  Services.  The  use  of  the
sub-contractors  located across the nation allows Eagle Communications  Services
to complete  large  projects in an efficient  manner,  which is a valuable tool.
However,  there can be no assurance that these  conclusions are correct and that
these  services  will  continue to expand at their  current rates and that Eagle
Communications Services can gain significant market share in the future.

     Eagle Messaging  Services  competes with many established  companies in the
nationwide one and two-way messaging services area. Most of these companies have
greater resources available than Eagle Messaging Services.

Proprietary Information

     Eagle attempts to protect its proprietary  technology through a combination
of trade secrets,  non-disclosure  agreements,  patent  applications,  copyright
filings,  technical  measures,  and  common  law  remedies  with  respect to its
proprietary  technology.  This  protection  may not  preclude  competitors  from
developing products with features similar to Eagle's products.  The laws of some
foreign  countries  in which Eagle sells or may sell its products do not protect
Eagle's proprietary rights in the products to the same extent as do


                                       10
<PAGE>

the laws of the United  States.  Although  Eagle  believes that its products and
technology do not infringe on the proprietary rights of others,  there can be no
assurance that third parties will not assert  infringement  claims against Eagle
in the future.  If litigation  resulted in Eagle's  inability to use technology,
Eagle might be required to expend substantial  resources to develop  alternative
technology.  There can be no  assurance  that Eagle could  successfully  develop
alternative  technology on commercially  acceptable terms.  Eagle has registered
and trademarked  the name of  BroadbandMagic  for this wholly owned  subsidiary.
This name is  thought  by Eagle to be a valuable  addition  to the  intellectual
property rights of Eagle.

Regulation

     Many of Eagle's  products  operate on radio  frequencies.  Radio  frequency
transmissions and emissions, and certain equipment used in connection therewith,
are regulated in the United  States and  internationally.  Regulatory  approvals
generally must be obtained by Eagle in connection  with the manufacture and sale
of its products,  and by customers to operate Eagle's products.  There can be no
assurance that appropriate regulatory approvals will continue to be obtained, or
that  approvals  required  with  respect to  products  being  developed  for the
personal  communications  services  market will be  obtained.  The  enactment by
federal, state, local or international governments of new laws or regulations or
a change in the  interpretation of existing  regulations could affect the market
for  Eagle's   products.   Although   recent   deregulation   of   international
telecommunications   industries  along  with  recent  radio  frequency  spectrum
allocations  made by the FCC have  increased the demand for Eagle's  products by
providing users of those products with  opportunities to establish new messaging
and other wireless personal communications  services,  there can be no assurance
that the trend toward deregulation and current regulatory developments favorable
to the  promotion  of new and expanded  personal  communications  services  will
continue or that future regulatory changes will have a positive impact on Eagle.

Employees

     As of  November  14,  2003,  Eagle  employed  approximately  73 persons and
retained 4 independent contractors.  Eagle believes its employee relations to be
good.  Eagle  enters into  independent  contractual  relationships  with various
individuals, from time to time, as needed.

     Risk factors that may affect  Eagle's  results of operations  and financial
condition.

     You should  carefully  consider the risks  described below before making an
investment  decision.  The risks and  uncertainties  described below are not the
only ones facing the company.  Additional risks and  uncertainties not presently
known to or that are currently deem immaterial also may impair Eagle's  business
operations. If any of the following risks actually occur, Eagle's business could
be harmed.

     We have a history of operating  losses and reliance on external sources for
working capital.

     From  inception  through  August 31, 2003, we have incurred an  accumulated
deficit in the amount of $75,188,000. For the fiscal year ended August 31, 2003,
we incurred  losses in the amount of  $33,764,000.  We will  continue to rely on
external sources for working capital for the foreseeable future.

We may need additional working capital.

     At  August  31,  2003,  we had  $2,538,000  in cash and  cash  equivalents.
Subsequent to the fiscal year ended August 31, 2003, we received net proceeds of
$7,687,000 from private  placement  offerings of stock and bonds and through the
sale of marketable  securities  held as short-term  investments.  We believe our
current  working  capital  and  expected  cash  flow  from  operations  will  be
sufficient  to  fund  operations  for  the  next  twelve  months.  See  Item 7 -
Management's Discussion and Analysis - Liquidity and Capital Resources.

     Historically,  we have  financed  operations  through  the sale of debt and
equity securities.  We do not have any significant  credit facilities  available
with financial  institutions  or other third parties and  historically,  we have
relied  upon  best  efforts  third-party  funding  from  individual   accredited
investors.  Though we have been  successful at raising  additional  capital on a
best  efforts  basis in the past,  we can provide no  assurance  that we will be
successful  in any future best efforts  financing  efforts.  If we are unable to
either obtain  financing from external  sources or generate  internal  liquidity
from  operations  before  September 2004 or  thereafter,  we may need to curtail
operations or sell assets.

     Our ability to raise capital  through equity  offerings is limited  because
nearly all shares of common  stock  have  either  been  issued or  reserved  for
issuance.


                                       11
<PAGE>

We have been named a defendant in several lawsuits, which if determined
adversely, could have a material adverse effect on our business.

     Eagle Broadband and its subsidiaries  have been named defendants in several
lawsuits in which  plaintiffs are seeking damages ranging from several  thousand
dollars to several  million  dollars.  These lawsuits are discussed in detail in
Item 3 herein under the heading of Legal  Proceedings.  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.

Our revenues may be adversely affected by downward price pressure on fiber optic
cables and computer hardware and software.

     For the twelve  months  ended  August 31,  2003,  approximately  34% of our
revenue was generated by our subsidiary Atlantic Pacific  Communications and 21%
from United Computing Group. Because Atlantic Pacific and United Computing Group
are engaged in a commodity-related  business,  their ability to generate revenue
and  operate at a profit is  susceptible  to  downward  price  pressure in their
respective  markets.  If Atlantic  Pacific  and/or  United  Computing  Group are
required  to reduce  prices on their  products,  our  ability  to  compete  with
competitors and to operate at a profit may be adversely effected.

Cancellations of recurring-revenue contracts could have a material adverse
effect on our business.

     For the twelve  months  ended  August 31,  2003,  approximately  24% of our
revenue  was  generated  by  recurring-revenue  contracts  with Eagle  Broadband
Services and DSS Security.  Any defects or errors in our services or any failure
to meet customers'  expectations could result in the cancellation of services or
require us to provide additional services to a client at no charge,  which could
reduce revenue or the margins associated with this revenue segment.

     Our products are subject to rapid technological change. If we are unable to
adapt or adjust our  technology  to our  business  may have a  material  adverse
effect on our business.

     The  design,  development,  and  manufacturing  of  personal  communication
systems,   specialized  mobile  radio  products,  and  multimedia  entertainment
products are highly  competitive and characterized by rapid technology  changes.
We  compete  with  other  existing  products  and  will  compete  against  other
technologies.  Development by others of new or improved products or technologies
may make our products  obsolete or less  competitive.  While we believe that our
products are based on established  state-of-the-art  technology, there can be no
assurance that they will not become  obsolete in the near future or that we will
be able to develop a  commercial  market for our  products in response to future
technology advances and developments.


We will be required to record a significant charge to earnings if we determine
our goodwill is impaired.

     We are required under generally  accepted  accounting  principles to review
our  intangible  assets for impairment  when events or changes in  circumstances
indicate the carrying value may not be  recoverable.  Goodwill is required to be
tested for impairment at least annually. If the result indicates that impairment
exists,  we will be required to record a  significant  charge to earnings in our
financial  statements  during the period in which any impairment of our goodwill
is determined. At August 31, 2003, our goodwill was $76.3 million

Our success depends upon our ability to protect proprietary technologies.

     We rely on  non-disclosure  agreements with employees and consultants,  and
common law remedies  with respect to our  proprietary  technology.  We also file
patent  applications on our key  technologies.  We can provide no assurance that
others will not  misappropriate  our  proprietary  technologies  or will develop
competitive  technologies or products that could adversely  affect our business.
In addition,  although we are not aware of any infringement claims against us or
any  circumstances  that could lead to such claims,  there can be no  assurances
that such claims will not be made.

     Our efforts to protect our intellectual property may require that we become
involved  in costly and  lengthy  litigation,  which  could  seriously  harm our
business.  In recent years, there has been significant  litigation in the United
States involving  patents and other  intellectual  property rights.  Although we
have  not been  involved  in any  intellectual  property  litigation,  we may be
required to file lawsuits to in the future to protect our intellectual  property
rights or to defend allegations of infringement  asserted by others. We could be
subject to  significant  liability  for damages or the value of our  proprietary
rights could be diminished if we are  unsuccessful  in  prosecuting or defending
lawsuits.  Any  litigation,  regardless  of its  outcome,  would  likely be time
consuming  and  expensive  to resolve  and would  divert  management's  time and
attention. Any potential intellectual property litigation also could force us to
take specific actions, including:


                                       12
<PAGE>

     o    Cease selling products that use the challenged intellectual property;
     o    Obtain from the owner of the infringed intellectual property a license
          to sell or use  the  relevant  technology,  which  license  may not be
          available on reasonable terms, or at all; or
     o    Redesign those products that use infringing intellectual property.

We face substantial competition from competitors with significantly greater
resources.

     We face competition from many entities with significantly greater financial
resources,  well-established  brand names,  and larger  customer  bases.  We may
become  subject to severe  price  competition  for our  products and services as
companies  seek to enter our  industry  or current  competitors  attempt to gain
market  share.  We expect  competition  to  intensify  in the  future and expect
significant  competition from traditional and new  telecommunications  companies
including, local, long distance, cable modem, Internet, digital subscriber line,
microwave, mobile and satellite data providers.

     A system  failure could delay or interrupt our ability to provide  products
or services and have a materially adverse effect on our business.

     Our  operations  are dependant upon our ability to support a highly complex
network  infrastructure.  Many of our customers are particularly dependent on an
uninterrupted   supply  of   services.   Any  damage  or  failure   that  causes
interruptions in our operations could result in loss of these customers. Because
of the nature of the services we supply and the complexity of our network, it is
not feasible in all cases to maintain  backup  systems,  and the occurrence of a
natural disaster,  operational  disruption or other unanticipated  problem could
cause interruptions in the services we provide.

Stockholders face possible volatility of stock price for our common stock.

     The market price of our common stock may experience  fluctuations  that are
unrelated to our operating performance.  As the market price of our common stock
has been quite volatile in the last 12 months,  we can provide no assurance that
the current price will be maintained.

New government regulation could hurt our business.

     Eagle's  telecommunication  and cable  products  are  regulated by federal,
state, and local  governments.  We are generally  required to obtain  regulatory
approvals in connection with providing  telephone and television  services.  For
example,  the cable and satellite  television  industry is regulated by Congress
and  the  Federal  Communications   Commission,   and  various  legislative  and
regulatory  proposals under  consideration  from time to time may  substantially
affect our business. There is no guarantee that new laws or regulations will not
affect our operations or that appropriate  regulatory approvals will continue to
be obtained.

Item 2.   Description of Property

     Eagle's  headquarters  are  located  in  League  City,  Texas  and  include
approximately  34,375  square  feet of leased  office,  production,  and storage
space. The lease expires in May 2004. Eagle also maintains subsidiary offices in
one other Houston area location, with the lease expiring in December 2005 and in
San Antonio,  Texas,  with a lease expiring in July 2006.  Facilities leases are
described herein in further detail in the Note 17 to the Company's  Consolidated
Financial Statements included herein.

     Eagle  believes  that all  rental  rents  are at market  prices.  Eagle has
insured its  facilities  in an amount that it believes is adequate and customary
in the industry.  Eagle believes that it has access to available facilities that
are  adequate  to meet its  current  requirements  but  anticipates  the need to
acquire additional space within the next two years. Eagle believes that suitable
additional  space  in  close  proximity  to its  existing  headquarters  will be
available  as needed to  accommodate  the growth of its  operations  through the
foreseeable future.

Item 3.   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.


                                       13
<PAGE>

     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. 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.

     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.  The Company  denies the claims and intends to  vigorously  defend this
lawsuit and the claims against it.

     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.

     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.

     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.

     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.

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

     None.


                                       14
<PAGE>

                                     PART II

Item 5.   Market for Common Equity and Related Shareholder Matters

     Shares of Eagle  common  stock are listed on the  American  Stock  Exchange
under the symbol  "EAG." On November  14, 2003,  Eagle's  common stock closed at
$1.53 per  share.  Eagle is  authorized  to issue  200,000,000  shares of common
stock, 186,964,041 of which were issued and outstanding at November 14, 2003. At
November  14,  2003 there were  approximately  1,069  holders of record of Eagle
common stock.

     The table set forth below,  for the periods  indicated,  lists the reported
high and low sale prices per share of Eagle common  stock on the American  Stock
Exchange.

                                                             Eagle Common Stock
                                                             ------------------
                                                              High         Low
          FISCAL 2003
                 Quarter ended November 30, 2002               $0.54       $0.27
                 Quarter ended February 28, 2003               $0.53       $0.16
                 Quarter ended May 31, 2003                    $0.37       $0.12
                 Quarter ended August 31, 2003                 $0.63       $0.33
          FISCAL 2002
                 Quarter ended November 30, 2001               $0.95       $0.52
                 Quarter ended February 28, 2002               $1.00       $0.40
                 Quarter ended May 31, 2002                    $0.47       $0.33
                 Quarter ended August 31, 2002                 $0.72       $0.32

     Eagle has never paid any cash  dividends  on its common  stock and does not
anticipate  paying cash dividends within the next two years.  Eagle  anticipates
that all earnings, if any, will be retained for development of its business. Any
future dividends will be subject to the discretion of the board of directors and
will depend on, among other  things,  future  earnings,  Eagle's  operating  and
financial   condition,   Eagle's  capital   requirements  and  general  business
conditions.

Recent Sales of Unregistered Securities

     The Company is currently  offering up to  $10,000,000 in "Units," each Unit
consisting  of a $25,000,  12% five-year  Q-series  bond  ("Bonds") to a limited
number of Accredited  Investors  pursuant to Rule 506 of the Securities Act. 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 Eagle 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. Eagle may redeem the Bonds at any time
after the first year but not before.  The issuance of the Bonds, or any share of
the common stock to be issued in payment of the Bonds,  has not been  registered
or approved  by the  Securities  and  Exchange  Commission  ("SEC") or any state
securities  commission nor has the SEC or any state securities commission passed
on the accuracy of the  Confidential  Private  Placement  Memorandum under which
these Bonds are being  offered  and no  commissions  have been paid.  During the
fourth  quarter  ended  August  31,  2003,  the  Company  received  proceeds  of
$2,866,000 from the sale of such bonds.


                                       15
<PAGE>

Item 6. Selected Financial Data

     The data that  follows  should be read in  conjunction  with the  Company's
consolidated  financial  statements and the notes thereto included in Item 8 and
"Management's Discussion and Analysis."

<TABLE>
<CAPTION>
                                                                       Year Ended August 31,
                                                                   ------------------------------
    ($ in thousands)                       2003               2002             2001             2000               1999
                                      ----------------  ----------------- ---------------  ----------------  ------------------

Operating Data:
<S>                                           <C>                <C>             <C>                <C>                 <C>
Net sales                                     $11,593            $29,817         $28,110            $5,240              $2,217
Operating expenses                            $29,076            $43,635         $15,924            $3,985              $1,319
Operating income (loss)                      $(28,267)          $(36,522)        $(8,222)          $(1,227)              $(438)
Other income (expense), net                   $(5,426)             $(265)         $2,348            $1,516                $789
Income tax provision                               $0                 $0              $0               $96                 $91
                                      ----------------  ----------------- ---------------  ----------------  ------------------
Net income (loss)                            $(33,693)          $(36,787)        $(5,874)             $175                $168
                                      ================  ================= ===============  ================  ==================

Earnings per share  (basic)                    $(0.35)            $(0.57)         $(0.12)            $0.01               $0.01

Statement of Cash Flows Data:
Cash provided by operating
    activities                                $(6,085)            $ (797)        $(1,609)          $(5,299)            $(1,902)
Cash used by investing                        $(1,710)          $(13,755)        $(6,512)          $(2,224)               $(33)
    activities
Cash provided (used) by financing              $6,912           $ (2,406)        $(3,846)          $39,681              $1,025
    activities
                                                                          As of August 31,
                                                                          ----------------
                                           2003               2002             2001             2000               1999
                                      ----------------  ----------------- ---------------  ----------------  ------------------
Balance Sheet Data:
Total assets                                 $121,006           $129,983        $170,667           $57,641             $10,320
Long-term debt                                    ---             $1,272          $2,136               $73                 $12
Total stockholders' equity                   $101,976           $117,380        $149,128           $54,061              $8,894

</TABLE>

Item 7.  Management's Discussion and Analysis

Overview

     For the year ended August 31, 2003, Eagle's business  operations  reflected
further  investment  and  expansion  into the  broadband  products  and services
sector; paving the way for future growth of the BDS business in conjunction with
one of the Company's objectives of producing profitable recurring revenues while
moving away from commodity product and service sales with low gross margins.  In
addition,  during fiscal 2003 and 2002,  the Company  conducted  extensive  cost
reduction and  containment  activities  associated with such  restructuring.  We
believe that the effects of these cost  reduction  measures  will  significantly
reduce our fiscal 2004 ongoing expenses. The Company's  consolidated  operations
generated revenues of $11,593,000 with a corresponding  gross profit of $809,000
for the fiscal year ended August 31, 2003. The  significant  decline in revenues
in fiscal 2003 is primarily  attributable to the  discontinuance of direct sales
of low-margin  commodity  computer  products in the Company's  subsidiary United
Computing Group,  Inc.  consistent with their previously  announced  strategy of
concentrating  UCG's  going-forward  efforts as a  technology  service  provider
versus its historical emphasis on direct product  fulfillment.  Additionally,  a
decline in the sale of commercial  and  residential  home cabling  occurred as a
result  of  a  deferral  of   implementation   of  national   contracts   and  a
discontinuance  of home cabling  projects in Arizona,  Houston,  San Antonio and
Austin, Texas markets, partially offset by increased sales of broadband products
and services.

     The Company  incurred a net loss of  $33,693,000  for the fiscal year ended
August 31, 2003. The loss was primarily  attributable to the Company's loss from
operations that included  non-cash  impairment,  write-downs  and  restructuring
charges of $7,611,000  associated with restructured and discontinued  operations
of  low  margin  commodity  and  unprofitable  business  operations,  litigation
settlement  costs of  $3,650,000,  bad debt  expense of  $2,177,000  and various
charges included in accrued expenses related to


                                       16
<PAGE>

restructuring costs and settlement of various supplier payment obligations.  The
Company  consolidated   management  positions  and  centralized   financial  and
administrative  functions,  research and development activities and marketing of
all  products and  services in an effort to minimize  unnecessary  expenditures,
increase profitability,  and provide management with timely information to react
to changing market conditions in the broadband industry.

     During  the  fiscal  year  ended  August  31,  2003,  we  implemented  cost
reductions  in various  operating  segments  that were not  expected  to provide
significant  long-term revenues and profitability.  These reductions will impact
the expense  categories of salaries and benefits,  rents,  travel,  research and
development and other support expenses on a run-rate basis. Also, the company is
continuing  the  development  and  expansion  of the  Company's  BDS  model  for
distribution on a nationwide basis of voice,  video and data content;  increased
sales efforts in the telephone,  cable, internet, security services and wireless
segments;  and securing of long-term  relationships  for content for the bundled
digital services activities; and marketing/sales agreements with other companies
for the sale of broadband  products and services.  On a nationwide basis, we are
entering into business  relationships with financial and technology companies to
provide bundled digital services (digital content) to cities and  municipalities
that  currently have or are in the process of completing  construction  of their
own fiber  infrastructure  to the home. We believe that our  companies  have the
technology,  products and capabilities to provide these fiber-ready  cities with
digital content set-top boxes and structured wiring services.

CRITICAL ACCOUNTING POLICIES

     The  Company  has  identified  the  following  policies  as critical to its
business  and the  understanding  of its  results  of  operations.  The  Company
believes it is improbable  that materially  different  amounts would be reported
relating  to  the  accounting  policies  described  below  if  other  acceptable
approaches were adopted.  However, the application of these accounting policies,
as described  below,  involve the exercise of judgment and use of assumptions as
to future uncertainties;  therefore,  actual results could differ from estimates
generated from their use.

Impairment of Long-Lived Assets and Goodwill

     Our  long-lived  assets  predominantly  include  goodwill..   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.

     Goodwill  is  primarily  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 obtained an independent
appraisal to assess 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  included  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 (i) quoted
market prices in active markets, (ii) estimate based on prices of similar assets
and (iii)  estimate  based on  valuation  techniques.  The  Company  obtained an
independent valuation to assist it in testing the fair value of its goodwill and
intangibles  as of August 31, 2003 and  determined  that these  assets  totaling
$81.6 million were not impaired.

Revenue Recognition

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


                                       17
<PAGE>

Eagle Wireless International

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

BroadbandMagic

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

     Eagle Wireless  International and BroadbandMagic  engage independent agents
for sales principally in foreign countries and certain geographic regions in the
United States.  Under the terms of these one-year  agreements the distributor or
sales agents provide the companies with manufacturing  business sales leads. The
transactions  from these  distributors  and agents are subject to the companies'
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 Broadband Services

     Eagle Broadband  Services provides Bundled Digital Services to business and
residential customers, primarily in the Texas market to date. 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.

Eagle Broadband Residential Structured Wiring

     Eagle Broadband Residential Structured Wiring 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 Broadband Communications Services

     Eagle  Broadband   Communication   Services   provides  project   planning,
installation,  project management,  testing and documentation of fiber and cable
to commercial and industrial  clients  throughout the United States. The revenue
from the fiber and cable installation and services is recognized upon percentage
of  completion  of the project.  Most  projects  are  completed in less than one
month, therefore,  matching revenue and expense in the period incurred. Service,
training and extended warranty contract revenues are recognized as earned.

Etoolz

     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

     Eagle Messaging  Services provides customers with one and two way messaging
systems.  The revenue from these services is recognized as it is earned from the
customer.

Eagle Paging Services

     Eagle Paging Services  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.


                                       18
<PAGE>

Eagle Security Services

     Eagle Security  Services 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.

Eagle Technology Services

     Eagle  Technology  Services  provides   business-to-business  hardware  and
software network solutions and a network monitoring  services.  The revenue from
the hardware  and  software  sales is  recognized  at the time of shipment.  The
monitoring services recognition policy is to record revenue as earned.

Receivables

     For the year ended August 31, 2003, Eagle accounts receivables decreased to
$1,704,000 from $5,028,000 at August 31, 2002. The majority of this decrease was
due to the decline in lower margin  commodity  computer  product and  structured
cabling  revenues  compared  to the prior year  combined  with the write down of
$2,177,000 in accounts receivable for allowance for doubtful accounts associated
with  discontinued  operations  and the sale of a net of  $243,650  in  accounts
receivable to Southwest  Bank of Texas in  conjunction  with a purchase and sale
agreement  entered into by the Company's  subsidiaries,  United Computing Group,
Inc. and Atlantic Pacific Communications, Inc.

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

Inventory

     Inventories  are  valued  at the  lower  of cost  or  market.  The  cost is
determined by using the first-in  first-out method. At August 31, 2003,  Eagle's
inventory  totaled  $3,199,000 as compared to $6,059,000 at August 31, 2002. The
majority  of this  decrease  was due to a decrease  in raw  materials  inventory
resulting  from  reserves,  write-downs  and  allowances  for  restructured  and
discontinued commodity related product lines.

Recent Accounting 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


                                       19
<PAGE>

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.

     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.

Results of Operations

Year Ended August 31, 2003 Compared to Year Ended August 31, 2002

     Net  Sales.  For the year ended  August 31,  2003,  net sales  declined  to
$11,593,000 from $29,817,000  during the year ended August 31, 2002. The overall
decrease of 61% was primarily attributable to the discontinuance of direct sales
of low-margin  commodity  computer  products in the Company's  subsidiary United
Computing Group,  Inc.  consistent with their previously  announced  strategy of
concentrating  UCG's  going-forward  efforts as a  technology  service  provider
versus its historical emphasis on direct product  fulfillment.  Additionally,  a
decline in the sale of commercial  and  residential  home cabling  occurred as a
result  of  a  deferral  of   implementation   of  national   contracts   and  a
discontinuance  of home cabling  projects in Arizona,  Houston,  San Antonio and
Austin, Texas markets, partially offset by increased sales of broadband products
and services.

     Cost Of Goods Sold. For the year ended August 31, 2003,  cost of goods sold
declined to $10,784,000 from $22,704,000  during the year ended August 31, 2002.
The decrease was primarily attributable to the discontinuance of direct sales of
low-margin  commodity computer products and commercial  structured wiring in the
markets  referenced  above. The Company's overall gross profit percentage was 7%
and 24% for the years ended August 31, 2003 and August 31, 2002.  This  decrease
is primarily attributable to write-downs and reserves of inventory in connection
with the  discontinuance  of commodity based products combined with the baseline
operating infrastructure costs being spread over fewer revenue dollars.

     Operating Expenses.  For the year ended August 31, 2003, operating expenses
decreased to $29,076,000  from  $43,635,000  for the year ended August 31, 2002.
The primary portions of the decrease are discussed below:

     A $19,489,000  decrease in non-cash  impairment  charges  resulting from: a
     $7,611,000  non-cash  impairment  charge was  expensed  at August 31,  2003
     associated  with  restructured  and  discontinued  operations of low margin
     commodity  business  units  discussed  above as compared  to a  $27,100,000
     non-cash   impairment  charge  being  expensed  at  August  31,  2002,  for
     impairment of licenses and equipment in the Company's Link Two subsidiary.

     A $1,693,000 decrease in salaries and related costs, as a result of overall
     staffing  reductions  across all  business  units;  the  majority  of which
     occurred in discontinued and restructured operations.

     A  $716,000  decrease  in  advertising  and  promotion,  due  primarily  to
     extensive  cost  reductions  measures  implemented  in  fiscal  2003 as the
     Company  placed more  emphasis  on  directly  marketing  its  products  and
     services to its customers as well as entering  into business  relationships
     with financial and  technology  companies to provide BDS services to cities
     and municipalities and decreased attendance at conventions and tradeshows.

     A $1,431,000 decrease in depreciation and amortization,  due principally to
     the  disposal  of  certain  assets  from   restructured   and  discontinued
     operations.

     An $8,763,000  increase  in other  support  costs,  due to an  increase  in
     litigation  settlement costs of $3,650,000,  bad debt expense of $2,177,000
     and various charges  included in accrued  expenses related to restructuring
     costs and settlement of various


                                       20
<PAGE>

     supplier payment obligations.

     Net  Loss.  For the  year  ended  August  31,  2003,  Eagle's  net loss was
$33,693,000,  compared to a net loss of $36,787,000 during the year ended August
31, 2002.

     Changes  in Cash  Flow.  Eagle's  operating  activities  used  net  cash of
$6,085,000  in the year ended  August 31,  2003,  compared to use of net cash of
$797,000 in the year ended  August 31,  2002.  The  increase in net cash used by
operating activities was primarily  attributable to an increase in the Company's
net operating loss, net of non-cash charges.  Eagle's investing  activities used
net  cash  of  $1,710,000  in the  year  ended  August  31,  2003,  compared  to
$13,755,000 in the year ended August 31, 2002. The decrease was due primarily to
a  significant  decline in  investment  activities  and  purchase  of  equipment
associated with the prior years build out of Eagle's network and  infrastructure
for the delivery of broadband  services.  Eagle's financing  activities provided
cash of $6,912,000, in the year ended August 31, 2003, compared to $2,406,000 of
cash used in the year ended August 31, 2002. The increase is  attributable to an
increase  in  notes  payable  aggregating  $7,297,000  in  conjunction  with the
Company's  financing  activities  in fiscal 2003 as compared to a net  repayment
against  lines of credit in the amount of  $1,846,000  and  purchase of treasury
stock of $918,000 in fiscal 2002.

     Liquidity and Capital  Resources.  Current assets for the year ended August
31, 2003 totaled  $8,109,000  (includes cash and cash equivalents of $2,538,000)
as compared to $14,866,000  reported for the year ended August 31, 2002.  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
marketable  securities 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.  Additionally,  the Company has $1,259,000 of Burst.com
stock held in short term investments; valued as of November 21, 2003.

     The  Company  anticipates  that it will incur  significantly  less  capital
expenditures  for broadband fiber  infrastructure  on a going forward basis as a
result of an emphasis of the sale of its BDS  services to  municipalities,  real
estate developers,  hotels, multi-tenant units and service providers that own or
will build out their own fiber networks versus the Company's history of building
out and owning these networks.  Additionally,  the Company  anticipates  that it
will  generate  annualized  cost savings  aggregating  $7,822,000  from staffing
reductions and related operating expense  reductions  discussed in the Company's
overall  restructuring  plan in Note 24 to the Company's  financial  statements,
(Subsequent Events). The Company's current cash and cash equivalents,  including
net proceeds  received  during the first fiscal  quarter,  will be sufficient to
fund operations for the next twelve months.

     Historically,  we have  financed  operations  through  the sale of debt and
equity securities.  We do not have any significant  credit facilities  available
with financial  institutions  or other third parties and  historically,  we have
relied  upon  best  efforts  third-party  funding  from  individual   accredited
investors.  Though we have been  successful at raising  additional  capital on a
best  efforts  basis in the past,  we can provide no  assurance  that we will be
successful  in any future best efforts  financing  efforts.  If we are unable to
either obtain  financing from external  sources or generate  internal  liquidity
from  operations  before  September 2004 or  thereafter,  we may need to curtail
operations or sell assets.  Our ability to raise capital  through further equity
offerings is limited  because nearly all shares of common stock have either been
issued or reserved for issuance.

Contractual Obligations

     Contractual obligations                    Payments due by period
                              -----------------------------------------------
                               Total  Less than    1-3     3-5   More than 5
                                       1 year     years   years    years
                              -----------------------------------------------
     Long-Term Debt            5,779     5,779     ---     ---       ---
     Obligations
                              -----------------------------------------------
     Operating Lease             695       521     174     ---       ---
     Obligations
                              -----------------------------------------------
                      Total    6,474     6,300     174     ---       ---
                              -----------------------------------------------

     The  Company's  contractual  obligations  consist of long-term  debt as set
forth in Note 6, (Notes  Payable),  to the Company's  financial  statements  and
certain   off-balance  sheet  obligations  for  office  space  operating  leases
requiring future minimal commitments under non-cancelable leases. - See Item 7 -
Management's  Discussion  and  Analysis  under the  heading  (Off-Balance  Sheet
Arrangements)  and  Note 17 to the  Company's  financial  statements  under  the
heading (Commitments and Contingent Liabilities).


                                       21
<PAGE>


Year Ended August 31, 2002 Compared to Year Ended August 31, 2001

     Net Sales.  For the year ended  August 31,  2002,  net sales  increased  to
$29,817,000 from $28,110,000  during the year ended August 31, 2001. The overall
increase of 6% was  primarily  attributable  to added  sales from the  Company's
broadband service offerings through its subsidiaries  ClearWorks  Communications
and ClearWorks Home Systems,  along with revenues from its Contact  Wireless and
DSS Security  subsidiaries  that were acquired in January 2002.  These increases
were partially offset by a decline in product revenues from the Company's United
Computing  Group  subsidiary  due to the loss of a major  customer in the energy
sector and an overall  decline in the IT procurement  market in 2002 and a minor
decrease  in  revenues  from  the  Company's  Atlantic  Pacific   Communications
subsidiary.  Atlantic Pacific provides project planning,  installation,  project
management,  testing  and  documentation  of fiber and cable to  commercial  and
industrial  clients  throughout the United States while United  Computing  Group
provides  business-to-business  hardware  and  software  network  solutions  and
network monitoring services.

     Cost Of Goods Sold. For the year ended August 31, 2002,  cost of goods sold
increased to $22,704,000 from $20,408,000 during the year ended August 31, 2001.
The  increase was  primarily  attributable  to added cost of sales  comprised of
direct labor,  materials and related costs for both  broadband  services and the
Company's Atlantic Pacific Communications subsidiary.  Atlantic Pacific provides
project planning, installation, project management, testing and documentation of
fiber and cable to  commercial  and  industrial  clients  throughout  the United
States.  The Company's  overall gross profit  percentage was 24% and 27% for the
years ended  August 31, 2002 and August 31,  2001.  This  decrease is  primarily
attributable  to lower profit  margins on volume sales of computers  and related
equipment  and  increases  in  other  manufacturing  costs  associated  with the
production of the convergent set-top box.

     Operating Expenses.  For the year ended August 31, 2002, operating expenses
increased to $43,635,000  from  $15,924,000  for the year ended August 31, 2001.
The primary portions of the increase are discussed below:

     A $27,100,000  non-cash  impairment charge was expensed at August 31, 2002,
     for  impairment  of  licenses  and  equipment  in the  Company's  Link  Two
     subsidiary.

     A  $1,626,000  increase in salaries and related  costs,  as a result of its
     acquisitions and expanded business.

     A  $363,000  increase  in  advertising  and  promotion,  due  primarily  to
     introductions  and  expansion  of  the  Company's  broadband  services  and
     convergent set-top box offerings.

     A $335,000  net  increase  in other  support  costs,  due to an increase in
     salary and related costs,  rents,  interest,  contract labor,  professional
     fees and  communication  costs.  This net  increase  included  an offset of
     $729,000  associated  with a decrease in  advertising  and  promotion,  due
     primarily  to  decreased  attendance  at  conventions  and trade shows on a
     worldwide basis

     Net  Earnings.  For the year ended  August 31,  2002,  Eagle's net loss was
$36,787,000,  compared to a net loss of $5,874,000  during the year ended August
31, 2001.

     Off-Balance  Sheet  Arrangements.  The  Company  has no  off-balance  sheet
structured  financing  arrangements.  The Company has operating leases primarily
for  office  space.   The  Company  incurred  office  space  rental  expense  of
$1,183,000,  $436,219 and $232,195 in fiscal years ended August 31, 2003,  2002,
and 2001,  respectively.  Future minimum rental commitments under non-cancelable
leases are  $521,000,  $116,000  and $58,000 for fiscal  years ended  August 31,
2004, 2005 and 2006, respectively. .

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

Interest Rate and Equity Market Risks

     The Company is exposed both to market risk from  changes in interest  rates
on funded debt and changes in equity values on common stock investments it holds
in publicly traded companies.  The Company also has exposure that relates to the
Company's  revolving  credit  facility.  The Company fully retired its revolving
credit  facility in September 2003 and thus no longer has such exposure  related
to interest  rate risk.  Borrowings  under the credit  facility bear interest at
variable  rates  based on the bank  prime  rate.  The  extent  of this risk with
respect to interest rates on funded debt is not  quantifiable or predictable due
to the  variability  of future  interest  rates;  however,  the Company does not
believe a change in these  rates  would  have a material  adverse  effect on the
Company's operating results, financial condition, and cash flows.

     The Company's cash and cash  equivalents are invested in mortgage and asset
backed  securities,  mutual  funds,  money  market  accounts  and common  stock.
Accordingly, the Company is subject to both changes in market interest rates and
the equity market  fluctuations and risk. There is an inherent roll over risk on
these funds as they accrue interest at current market rates.  The extent of this
risk  is not  quantifiable  or  predictable  due to the  variability  of  future
interest rates.  The Company does not believe a change in these rates would have
a  material  adverse  effect  on  the  Company's  operating  results,  financial
condition, and cash flows with respect to


                                       22
<PAGE>

invested funds in mortgage and asset backed  securities,  mutual funds and money
market  accounts,  however;  the company does have both cash and liquidity risks
associated with its common stock  investments  aggregating  $1,714,006 in market
value as of August 31, 2003.

Credit Risks

     The  Company   monitors  its  exposure  for  credit  losses  and  maintains
allowances for anticipated  losses,  but does not require  collateral from these
parties.  The company did not have any customers which represented  greater than
10% of its revenues  during fiscal 2002 and, as such,  does not believe that the
credit risk posed by any specific  customer would have a material adverse affect
on its financial condition.

International Business Risk

     Eagle  generated  net sales in markets  outside  the United  States,  which
amount to less than 5% of total Eagle net sales in the last three  years.  Sales
are subject to the customary risks associated with  international  transactions,
including  political risks,  local laws and taxes,  the potential  imposition of
trade  or  currency  exchange  restrictions,  tariff  increases,  transportation
delays,  difficulties or delays in collecting accounts receivable,  and exchange
rate  fluctuations.  Pre-payments  and  letters of credit  drawn on  American or
limited foreign corresponding banks are required from international customers to
reduce the risk of non-payment.

Item 8.  Consolidated Financial Statements

     The financial statements commencing on page F-1 have been audited by Malone
& Bailey,  PLLC 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.

Item 9.   Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

     This  disclosure  has been  previously  reported in the Company's  Form 8-K
filed September 15, 2003.

Item 9A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company's Chief Executive Officer and Chief Financial Officer have evaluated
the effectiveness of the Company's  disclosure  controls and procedures (as such
term is defined in Rules 13a-15(b) under the Securities Exchange Act of 1934, as
amended (the Exchange  Act)) as of the end of the period  covered by this annual
report.  Based  on such  evaluation,  such  officers  have  concluded  that  the
Company's disclosure controls and procedures are effective in alerting them on a
timely  basis to material  information  relating to the Company  (including  its
consolidated  subsidiaries)  required to be included in the  Company's  periodic
filings under the Exchange Act. Changes In Internal Controls

     There has been no change in the Company's  internal  control over financial
reporting  that  occurred  during  the  year  ended  August  31,  2003  that has
materially affected, or is reasonably likely to materially affect, the Company's
internal controls over financial reporting.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

     The information  required by this item is incorporated  herein by reference
from the information provided in the Company's Proxy Statement.

Item 11.  Executive Compensation

     The information  required by this item is incorporated  herein by reference
from the information provided in the Company's Proxy Statement.


                                       23
<PAGE>

Item 12.  Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

Equity Compensation Plan Information

     The following  table sets forth  information,  as of August 31, 2003,  with
respect  to the  Company's  compensation  plans  under  which  common  stock  is
authorized for issuance

<TABLE>
<CAPTION>
                                                                                                            Number of Securities
                                                                                                          Remaining Available for
                                                  Number of Securities            Weighted Average         Future Issuance Under
                                                   To be Issued Upon              Exercise Price of         Equity Compensation
                                                Exercise of Outstanding              Outstanding              Plans (Excluding
                                                 Options, Warrants and                Options,                   Securities
                                                         Rights                  Warrants and Rights       Reflected in Column A)
                Plan Category                             (A)                            (B)                        (C)
       -----------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                            <C>                       <C>
       Equity Compensation Plans                         406,131                        $1.27                     551,370
       Approved by Security Holders
       Equity Compensation Plans Not
       Approved by Security Holders
       (1)                                             5,991,667                        $1.47                        0
                                              -----------------------------      --------------------    ---------------------------
                                                       6,397,798                        $1.45                     551,370
                    Total

       (1) A description of the equity compensation not approved by the security
       holders is set forth in note 13 to the financial statements contained in
       this Form 10-K.

</TABLE>

Item 13.  Certain Relationships and Related Transactions

     The information  required by this item is incorporated  herein by reference
from the information provided in the Company's Proxy Statement.

Item 14.  Principal Accounting Fees and Services

     The information  required by this item is incorporated  herein by reference
from the information provided in the Company's Proxy Statement.


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.


                                       24
<PAGE>

(c)  Exhibit Listing

     EXHIBIT NO.       IDENTIFICATION OF EXHIBIT

     Exhibit 3.1       Eagle Wireless International, Inc. Articles of
                       Incorporation, as Amended (incorporated by reference to
                       Exhibit 3.1 of Form SB-2 file no. 333-20011)

     Exhibit 3.2       Amended and Restated Eagle Wireless International, 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 4.1 of Form SB-2 file no. 333-20011)

     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      Stock Option Plan (incorporated by reference to Exhibit
                       10.2 of Form SB-2 file no. 333-20011)

     Exhibit 10.3      Agreement and Plan of Reorganization dated September 15,
                       2000 (incorporated by reference to Exhibit 10.1 of Form
                       S-4 file no. 333-49688)

     Exhibit 10.4      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 10.5      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 10.6      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


                                       25
<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 Weisman
                                                         -----------------------
                                                     David Weisman,
                                                     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 Weisman            Chief Executive Officer, Director      December 8, 2003
-----------------------
David Weisman

/S/Richard R. Royall        Chief Financial Officer                December 8, 2003
-----------------------
Richard R. Royall

/S/H. Dean Cubley           Director, Chairman of the Board        December 8, 2003
-----------------------
H. Dean Cubley

/S/Christopher W. Futer     Director                               December 8, 2003
-----------------------
Christopher W. Futer

/S/A. L. Clifford           Director                               December 8, 2003
-----------------------
A. L. Clifford

/S/Glenn A. Goerke          Director                               December 8, 2003
-----------------------
Glenn A. Goerke

/S/Lorne E. Persons         Director                               December 8, 2003
-----------------------
Lorne E. Persons

/S/Jim Reinhartsen          Director                               December 8, 2003
-----------------------
Jim Reinhartsen

</TABLE>


                                       26
<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,  the  Company  restated  its  prior  period  financial
statements.

/S/ Malone & Bailey, PLLC
-------------------------
Malone & Bailey, PLLC
Houston, Texas
www.malone-bailey.com

December 5, 2003

                                      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.


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

December 13, 2002

                                      F-2

<PAGE>
--------------------------------------------------------------------------------
                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                     ASSETS
                                                                        August 31,
                                                                   2003            2002
                                                                   ----            ----
                                                                                (Restated)
Current Assets
<S>                                                        <C>              <C>
  Cash and Cash Equivalents                                $       2,538    $        3,421
  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                                                        76,273            78,151
  Other Intangible assets                                          5,330             5,387
  Other Assets                                                       227               397
                                                           -------------    --------------

     Total Other Assets                                           82,164            84,269
                                                           -------------    --------------

Total Assets                                               $     121,006    $      129,983
                                                           =============    ==============

                     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                                            (75,188)          (41,424)
                                                           -------------    --------------

     Total Shareholders' Equity                                  101,976           117,380
                                                           -------------    --------------

Total Liabilities and Shareholders' Equity                 $     121,006    $      129,983
                                                           =============    ==============
See accompanying notes to consolidated financial statements.

</TABLE>

                                      F-3

<PAGE>

--------------------------------------------------------------------------------
                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (In Thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                        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                                  1,968               3,399                3,615
    Other Support Costs                                           12,737               3,974                4,264
    Research and Development                                         411                 404                1,276
    Impairment, write-downs & restructuring costs                  7,611              27,100                  ---
                                                           ----------------    ----------------    -----------------
Total Operating Expenses                                          29,076              43,635               15,924
                                                           ----------------    ----------------    -----------------

Loss from Operations                                             (28,267)            (36,522)              (8,222)

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                                                         (33,693)            (36,787)              (5,874)
Other Comprehensive Loss:

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

Other Comprehensive Loss                                      $  (33,764)          $ (37,066)          $   (6,233)
                                                           ----------------    ----------------    -----------------
                                                           ----------------    ----------------    -----------------

Net Loss per Common Share:
  Basic                                                       $    (0.35)          $   (0.57)          $    (0.12)
  Diluted                                                     $    (0.35)          $   (0.57)          $    (0.12)
  Comprehensive Loss                                          $    (0.35)          $   (0.58)          $    (0.13)

See accompanying notes to consolidated financial statements.

</TABLE>

                                      F-4

<PAGE>

--------------------------------------------------------------------------------
                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                 (In Thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                       Additional                            Total
                                               Common Stock           Preferred        Paid in         Retained        Shareholders'
                                           Shares         Value         Stock          Capital         Earnings            Equity

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

Net Earnings                                  ---           ---           ---              ---           (5,874)             (5,874)

New Stock Issued to Shareholders
  For Services and Compensation             1,370             1           ---              973              ---                 974
  For Property and Other Assets               127           ---           ---            2,837              ---               2,837
  For Retirement of Debt and Liabilities    3,004             3           ---            5,693              ---               5,696
  For Warrants Conversion                     645             1           ---            1,078              ---               1,079
  For Employee Stock Option Plan               96           ---           ---              192              ---                 192
  For Acquisition of ClearWorks, Inc.      35,287            35           ---           99,762              ---              99,797
  For Licenses and Investments              1,204             1           ---            2,965              ---               2,966

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

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

Unrealized Holding Loss                       ---           ---           ---              ---             (359)               (359)

                                         -------------------------------------------------------------------------------------------
Total Shareholders' Equity                 60,264            60           ---          153,426           (4,358)            149,128
   As of August 31, 2001

Net Loss                                      ---           ---           ---              ---          (36,787)            (36,787)

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                 73,051            73           ---          158,731         (41,424)             117,380
   As of August 31, 2002

Net Loss                                      ---           ---           ---              ---          (33,693)            (33,693)

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                147,447         $ 147           ---        $ 177,017        $ (75,188)           $101,976
                                          =======         =====                      =========        =========            ========
   As of August 31, 2003

See accompanying notes to consolidated financial statements.
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

                                      F-5

<PAGE>
<TABLE>
<CAPTION>

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


                                                                               For the years ended August 31,
                                                                  ---------------------------------------------------------
                                                                        2003                2002                2001
                                                                  -----------------   -----------------    ----------------
<S>                                                                   <C>                <C>                 <C>
        Cash Flows from Operating Activities
        Net Loss                                                      $ (33,693)         $  (36,787)         $   (5,874)

        Adjustments to Reconcile Net Loss to Net Cash
        Used by Operating Activities:
          Impairment, write-downs & restructuring costs                    7,611              27,100                 ---
          Interest for conversion value                                       91                 ---                 ---
          Depreciation and Amortization                                    2,424               3,776               4,667
          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 Marketable Securities                       ---                 ---               (910)
          (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)               1,494
          Increase/(Decrease) in Expense Allowable for
            Doubtful Acccounts                                             2,177               (363)                 ---
          Increase/(Decrease) in Federal Income Taxes
          Payables                                                           ---                 ---               (736)
                                                                  -----------------   ----------------- -- ----------------
          Total Adjustment                                                27,008              35,990               4,265
                                                                  -----------------   -----------------    ----------------
        Net Cash Used by Operating Activities                            (6,085)               (797)             (1,609)
                                                                  -----------------   -----------------    ----------------

        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                                 ---                 ---                  20
          (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                            (1,710)            (13,755)             (6,512)

        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             (2,406)             (3,846)
                                                                  -----------------   -----------------    ----------------

        Net Increase/(Decrease) in Cash                                    (883)            (16,958)            (11,967)
        Cash at the Beginning of the Year                                  3,421              20,379              32,346
                                                                  -----------------   -----------------    ----------------
        Cash at the End of the Year                                     $  2,538            $  3,421            $ 20,379
                                                                  =================   =================    ===============


        Supplemental Disclosure of Cash Flow Information:
        Net Cash Paid During the Year for:
           Interest                                                    $   3,288             $   165             $   112
           Income Taxes                                                      ---                 ---                 ---
</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 worldwide supplier of broadband products and services,
         providing telecommunications equipment with related software, broadband
         products, and fiber and cable as used by service providers in the
         paging and other personal communications markets. The Company designs,
         manufactures, markets and services its products under the Eagle
         Broadband, Inc., and BroadbandMagic 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 $2,538,000 and $3,421,000 invested in interest bearing
         accounts and marketable securities (Note 10) at August 31, 2003, and
         August 31, 2002, respectively.

C)       Property and Equipment

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

                                                               Years
                                                               -----
                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.

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
                                    =========                   =======

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 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.

                                       F-7
<PAGE>

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

         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 the Company recognizes the revenue.

         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 the Company's approval prior to sale. The distributorship or sales
         agent receives commissions based on the amount of the sales invoice
         from the companies to the customer. The sale is recognized at the time
         of shipment to the customer. These sales agents and distributors are
         not a significant portion of total sales in any of the periods
         presented.

         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.

         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  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 earned.

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

         Eagle Messaging Services - dba Link Two Communications, Inc.
         Link  Two  Communications,  Inc.,  provides  customers  with  one- and
         two-way  messaging  systems.   The  revenue  from  these  services  is
         recognized as it is earned from the customer.

         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 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.

         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 as earned.

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.

                                       F-8
<PAGE>

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

H)       Net Earnings Per Common Share

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


                                                                      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 include predominantly goodwill. 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 obtained an independent appraisal to assess 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, the Company 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
         restructured and discontinued operations of low margin commodity
         product fulfillment operations, 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. Other intangible
         assets consist of patents and licenses, which are being amortized using
         the straight-line method over their estimated useful life of ten (10)
         years and twenty (20) years, respectively.

                                       F-9
<PAGE>

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

         Goodwill and other intangible assets are 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 and
         certain purchased intangible assets (i.e., licenses) were amortized
         over 10 to 25 years. The Company's adoption of SFAS 142 eliminated the
         requirement to amortize goodwill and licenses 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 and licenses 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 and licenses 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 $82,164,000 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 CEO 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 utilized an independent third party appraiser to assess the fair
         value of the intangible assets as of August 31, 2003. This is the same
         appraiser who Eagle hired to issue a fairness opinion in the ClearWorks
         purchase in 2001 and who has consulted for Eagle in presentations made
         in various subsequent litigation proceedings to defend the ClearWorks
         purchase transaction. This appraiser still maintains that the goodwill
         valuation remains at an amount greater than the current carrying 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

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

                                       F-10
<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: -

                                       2003          2002             2001
                                      ------------------------------------
       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
                                      ======================================

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-11
<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.

NOTE 2 -  RESTATEMENT OF FINANCIAL STATEMENTS
          -----------------------------------

         In August 2003, the Company determined its reporting of its intangible
         assets as "contract rights" was misleading and has reclassed contract
         rights to goodwill. There was no effect on cash or cash flows or on the
         net loss. The accompanying consolidated financial statements as of
         August 31, 2002 have been restated for the correction.

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

                                              As Restated       As Reported
                  Goodwill                   $     82,429     $      7,916
                  Contract rights            $          -     $     74,513

NOTE 3 - Accounts Receivable:
         --------------------

         Accounts receivable consist of the following, in thousands:
<TABLE>
<CAPTION>

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

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>


         Components of intangible assets are as follows, in thousands:
<TABLE>
<CAPTION>

                                                                                   August 31,
                                                                              2003            2002
                                                                           -----------      ------------
<S>                                                                   <C>              <C>
                  Goodwill                                            $        80,551  $       82,429
                  Licenses & Permits                                            5,330           5,387
                                                                           -----------      ------------
                      Total Intangible Assets                         $        85,881  $       87,816
                         Less: Accumulated Amortization                        (4,278)         (4,278)
                                                                           -----------      ------------
                      Net Intangible Assets                           $        81,603  $       83,538
                                                                           ===========      ============
</TABLE>

                                       F-12
<PAGE>

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

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 merger, the
         Company provided to ClearWorks, working capital and materials totaling
         $8,625,000. During February 2001, ClearWorks repaid these advances
         through the issuance of 7,346,000 shares of its common stock, which
         converted into 5,877,000 Eagle Wireless International, Inc., common
         stock shares. These shares were converted to Treasury shares at this
         date. The Company allocated (in thousands) the acquisition costs to
         current assets of $11,708, property, plant and equipment of $6,570,
         intangible assets of $96,920 (which consist of $74,513 in goodwill and
         $22,407 in licenses), other assets of $79 and assumed liabilities of
         accounts payable and accrued expenses of $10,784, banks lines of credit
         and notes of $4,696 for a total acquisition of $99,797. The allocation
         of the purchase price is based on the fair value of assets and
         liabilities assumed as determined either by independent third parties
         or management's estimates, based on existing contracts, recent
         purchases of assets and underlying loan documents.

         Effective January 1, 2002, the Company acquired the assets of DSS
         Security, Inc., and Contact Wireless in a business combination
         accounted for as a purchase. DSS Security, Inc., provides security
         monitoring to business and residential customers. Contact Wireless
         sells and services mobile phones and one- and two-way messaging
         devices. The Company paid cash of $450,000 and issued a short-term note
         payable of $130,000 for the assets of Contact Wireless for a total
         purchase price of $580,000. Additionally, the Company acquired DSS
         Security, Inc., for $2,002,147. In this transaction, the Company issued
         2,002,147 shares of its common stock with a guaranteed value of $1 per
         share. The Company allocated $51,595 to the fair value of the property
         and equipment and $1,950,552 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:
<TABLE>
<CAPTION>

                                                         Annual
                                                        Interest                                 Amount
                                                          Rate           Due Date           2003         2002
                                                    ------------------------------------------------------------
<S>                                                     <C>              <C>         <C>             <C>
                 Vehicles                                Various         Various     $            4  $        27
                 6% Convertible Debenture (Note 9)       6.0%            Demand               1,200        2,000
                 Tail Wind Convertible Debenture         2.0%            Demand               1,595        2,000
                 Notes Payable - Investor Group          10.0%           October 2003           900          ---
                 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
                                                                                         =========    ==========
</TABLE>


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,
                                      F-13
<PAGE>
                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

         Inc., the guarantor. This line of credit was repaid to
         Southwest Bank of Texas in the six months ended February 28, 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.

         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.

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 the
         Company'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. The three-year debenture bears
         interest at 5% and is repayable in stock or cash. The method of
         repayment is determined by the Company. 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. 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 May 31, 2003, Eagle has converted $75,000 of the bond into
         65,598,524 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 May 31, 2003, the underlying value of
         this debenture is approximately $850,000. Subsequent to May 31, 2003,
         Eagle has submitted additional bond conversion notices of $75,000 which
         will convert into 80,486,740 shares of CCI common stock. 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.

         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 merged with 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-14
<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 - Marketable Securities:
          ----------------------

         As discussed in Note 1, the Company adopted the provisions of SFAS No.
         115, "Accounting for Certain Investments in Debt and Equity Securities"
         and SFAS No. 130, "Accounting for Other Comprehensive Income." At
         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.

         Other marketable securities include 1,480,000 shares of common stock of
         Burst.com, 65,598,000 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 cash and cash
         equivalents category and are held for resale 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-15
<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         $       (11,456)      $   (12,508)     $  (1,997)
     Increase in valuation allowance                 11,456            12,508           1997
                                                   ---------        -----------------------
                                           $         ---         $      -----     $     ---
                                                   =========        =======================
</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.

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

      Net operating loss carry-forwards               35,503           24,047
      Less valuation allowance                      (35,503)         (24,047)
                                                    ---------       ----------
      Net deferred tax assets                            ---              ---

      Deferred tax liabilities:
      Differences in depreciation                          0                0
                                                    ---------       -----------
      Net deferred tax liabilities              $          0    $           0
                                                    =========       ===========

         The valuation allowance for deferred tax assets of August 31, 2003,
         2002, and 2001, was $35,503,000, $24,047,000, and $10,956,000,
         respectively. At August 31, 2003 and 2002, the Company has net
         operating loss carry-forwards of $104,420,588 and $70,727,000,
         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.

   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
                                                               ================

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-16
<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

                                      F-17
<PAGE>
                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

          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.

          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):
<TABLE>
<CAPTION>

                                   Warrants Issued & Outstanding             Warrants Exercisable
  Class of                               August 31,                                August 31,
  Warrants                   2003                     2002                     2003        2002
--------------            -------------------------------------            -------------------------
<C>                            <C>                        <C>                    <C>           <C>
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
                          =====================================            =========================
</TABLE>

*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-18
<PAGE>
                    Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

NOTE 14 - Capitalization Activities:
          --------------------------

         The Company is currently offering up to $10,000,000 in "Units," each
         Unit consisting of a $25,000, 12% five-year Q-series bond ("Bonds") to
         a limited number of Accredited Investors. 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 Eagle 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. Eagle may redeem the Bonds at
         any time after the first year but not before. The issuance of the
         Bonds, or any share of the common stock to be issued in payment of the
         Bonds, has not been registered or approved by the Securities and
         Exchange Commission ("SEC") or any state securities commission nor has
         the SEC or any state securities commission passed on the accuracy of
         the Confidential Private Placement Memorandum under which these Bonds
         are being offered. Furthermore, the Bonds may not be assigned,
         transferred, sold, or otherwise hypothecated. Any representation to the
         contrary is a criminal offense. The Confidential Private Placement
         Memorandum does not constitute any offer in any jurisdiction in which
         an offer is not authorized. The Bonds, and any share of common stock to
         be issued in payment of the Bonds, are "restricted securities" as that
         term is defined in Rule 144 of the Securities Act of 1933, and may not
         be sold or otherwise disposed of except in transactions that are
         subsequently registered under applicable federal and state securities
         laws, or in transactions exempt from such registration

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.

         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.
                                      F-19
<PAGE>
                    Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003

         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.

         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.

         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.
         The Company denies the claims and intends to vigorously defend this
         lawsuit and the claims against it.

         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.

         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.

         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.

         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-20
<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                                   $(32,025)

         Basic EPS:
          Income available to
          common stockholders                        (33,693)           95,465            $(0.35)
         Effect of Dilutive Securities
           Warrants
                                                     --------         ----------          -------

         Diluted EPS:
           Income available to
           common stockholders
             and assumed conversions.               $(33,693)           95,465            $(0.35)
                                                    ==========        ========            =======


                                                            For the year ended August 31, 2002
                                                            ----------------------------------
                                                      Income            Shares           Per-Share
                                                    (Numerator)      (Denominator)        Amount
                                                    -----------      ------------       ----------
         Net Income                                $  (36,787)

         Basic EPS:
          Income available to
          common stockholders                         (36,787)           64,004             $(0.57)

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

         Diluted EPS:
           Income available to
           common stockholders
           and assumed conversions.                $  (36,787)           64,158            $(0.57)
                                                    ==========           ======             ======
</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

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-21
<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 two reportable segments (as
         described below) since the long-term financial performance of these
         reportable segments is affected by similar economic conditions.

         Eagle Broadband,  Inc.,  (Eagle) is a worldwide  supplier of broadband
         and  telecommunications  equipment with related software and broadband
         products.    (Including    Eagle   Wireless    International,    Inc.,
         BroadbandMagic 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)   (20,467)     (364)        ---   (33,693)
                Total Assets               8,929     31,316        114    141,588    83,852   (144,793)   121,006
                Capital Expenditures          11      6,254          1        ---       158        ---      6,424
                Depreciation                 372      1,351         72        376       253        ---      2,424

                               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)    (5,819)  (29,192)        ---   (36,787)
                Total Assets               5,114     30,980        853    162,290    68,528   (137,782)   129,983
                Capital Expenditures         125     12,034        ---        562       156       (11)     12,886
                Dep. and Amort.              208        715        166      1,418     1,269        ---      3,776

                               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)    (2,211)   (2,163)               (5,874)
                Total Assets               5,351     13,149      4,394    156,760    34,128   (43,114)    170,668
                Capital Expenditures         151      9,350         24        198     6,671                16,394
                Dep. and Amort.              149      1,053         19      2,591       857                 4,669
</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.

                                      F-22
<PAGE>
               Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003


Note 23 - Quarterly Financial Data.
          -------------------------
<TABLE>
<CAPTION>


                                                  Nov. 30,            Feb. 28,              May 31,            Aug. 31,
                                              ------------------ ------------------ ------------------- -------------------
<S>                                                    <C>                <C>                 <C>                 <C>
          Year Ended August 31, 2003
             Revenues                                  4,618              3,063               1,847               2,065
             Net Earnings (loss)                       (831)              (979)             (2,921)            (28,962)
             Basic Loss per Share                     (0.01)             (0.01)              (0.04)              (0.29)
             Diluted Loss per Share                   (0.01)             (0.02)              (0.04)              (0.29)

          Year Ended August 31, 2002
             Revenues                                  8,761              7,380               6,485               7,191
             Net Earnings (loss)                     (3,371)            (2,013)             (1,824)            (29,579)
             Basic Loss per Share                     (0.06)             (0.03)              (0.03)              (0.45)
             Diluted Loss per Share                   (0.06)             (0.03)              (0.03)              (0.45)
</TABLE>

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 - 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.

         Restructuring Plan. On October 1, 2003 the Company announced the
         implementation of a strategic, company-wide restructuring designed to
         enable the company to better meet customer needs, increase revenue
         growth and position the company to achieve cash flow positive
         operations within 90 days.

              Key components of the plan include:
              ----------------------------------

          o    The  consolidation  and integration of multiple Eagle businesses,
               divisions and  functional  areas under a single brand name with a
               structure  organized by customers and markets  versus the current
               product-based  structure.  The re-branding  process has begun and
               will take place over the next  several  months and will include a
               single, integrated Eagle Broadband web site, an updated corporate
               identity, etc.

          o    New  management  additions,  staff  reassignments  and reductions
               where  necessary in order to operate more  efficiently and ensure
               every  Eagle  team  member  have the right  skills to best  serve
               customers.

          o    Establish centralized sales and marketing functions, increase our
               direct  sales  coverage  and  signing  and train and  support key
               channel partners to drive revenues across all target markets.

          o    Integration of Eagle's  products and services to more effectively
               and  efficiently  leverage  its  portfolio  of assets in order to
               create comprehensive communications solutions.

                                      F-23
<PAGE>
                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                 August 31, 2003


              The goals of the new organization include:
              -----------------------------------------

          o    Implementing   a  structure   that  will  enable  Eagle's  sales,
               marketing   and   support    personnel   to   better   understand
               customer/partner  needs,  recommend the most  appropriate  mix of
               Eagle products and services and provide a single contact point to
               make it very easy for customers to do business with Eagle.

          o    Simplifying  Eagle's portfolio of assets,  pulling all of Eagle's
               capabilities  under a single  Eagle  Broadband  name and  clearly
               communicating   how   prospective    customers,    partners   and
               shareholders can benefit from doing business with or investing in
               Eagle.

          o    Streamlining  the  organization  and eliminating  redundancies to
               simplify   business   processes  and  achieve   significant  cost
               efficiencies.

          o    Maximizing sales productivity and effectiveness by ensuring sales
               teams have the requisite  tools,  resources and support needed to
               best serve Eagle customers and partners.

          o    Positioning   the   company   to  achieve   aggressive   customer
               acquisition,  revenue growth and profitability  goals in order to
               maximize shareholder value.

              The plan calls for targeted investments in four key areas:
              ----------------------------------------------------------

          o    Aggressive  expansion  of  Eagle's  turnkey  suite  of  broadband
               infrastructure  finance,  design,  implementation,  operation and
               maintenance services for municipalities,  real estate developers,
               hotels,   multi-tenant  units  and  service  providers  to  drive
               recurring  revenues from Eagle's  exclusive  four-play of Bundled
               Digital Services (i.e.  high-speed Internet access,  phone, cable
               TV, security monitoring, etc.).

          o    Eagle's  state-of-the-art,  IP-services Set-Top Box (STB) product
               portfolio    (including   a   new    generation    of   IP-based,
               high-definition  TV/MPEG4  set-top  boxes  with  exclusive  IP-TV
               streaming  capabilities) to capture revenues from such high value
               customer  applications as bundled digital  services for hotel and
               apartment  owners,  hospital or  home-based  patient  monitoring,
               video-conferencing-based   distance  learning  for  employees  or
               students, remote security monitoring, etc.

          o    Increased direct and partner sales/marketing programs for Eagle's
               Orb' Phone Exchange  satellite-based system that enables airline,
               government/military  and enterprise  customers to deliver "total"
               global  communications  services  to users  in  non-line-of-sight
               environments.

          o    Outsourced,     managed     services    for    residential    and
               commercial/enterprise    customers   including   security/network
               monitoring,  help-desk,  intrusion  detection,  managed firewall,
               anti-virus protection, spam filtering, etc.

                                      F-24