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

                                   -----------

                                    FORM 10-Q

                                   -----------

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 31, 2005

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____

                       Commission File Number: 001-154649


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

                     Texas                                      76-0494995
        (State or other jurisdiction)                         (IRS Employer
       of incorporation or organization                    Identification No.)

                              101 Courageous Drive
                          League City Texas 77573-3925
          (Address of principal executive offices, including zip code)

                                 (281) 538-6000
              (Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant (i) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (ii) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]


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


As of July 7, 2005, there were 269,168,427 shares of common stock outstanding.


<PAGE>


<TABLE>
<CAPTION>
                     EAGLE BROADBAND, INC. AND SUBSIDIARIES
                                    Form 10-Q
                       For the Quarter Ended May 31, 2005

                                Table of Contents

<S>                                                                                                           <C>
Part 1 - Financial Information                                                                              Page

         Item 1.  Consolidated Financial Statements (Unaudited)

                  Consolidated Balance Sheets at May 31, 2005, and August 31, 2004                            1

                  Consolidated Statements of Operations for the Three Months and Nine Months Ended
                  May 31, 2005 and May 31, 2004                                                               2

                  Consolidated Statements of Changes in Shareholders' Equity for the Nine Months Ended
                  May 31, 2005, and Twelve Months Ended August 31, 2004                                       3

                  Consolidated Statements of Cash Flows for the Nine Months Ended
                  May 31, 2005 and May 31, 2004                                                               4

                  Notes to the Consolidated Financial Statements                                              5

         Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations      15

         Item 3.  Quantitative and Qualitative Disclosures about Market Risk                                 22

         Item 4.  Controls and Procedures                                                                    23

Part 2 - Other Information

         Item 1.  Legal Proceedings                                                                          23

         Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                                24

         Item 3.  Defaults upon Senior Securities                                                            24

         Item 4.  Submission of Matters to a Vote of Security Holders                                        24

         Item 5.  Other Information                                                                          24

         Item 6.  Exhibits                                                                                   24

Signatures                                                                                                   25
</TABLE>

<PAGE>


Part 1 - Financial Information
Item 1.  Consolidated Financial Statements (Unaudited)

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

                                               May 31,      August 31,
                                                2005          2004
                                              ----------    ----------

                                ASSETS

Current Assets
  Cash and cash equivalents                      $2,876        $2,051
  Securities available for sale                       -           551
  Accounts receivable, net                        2,823         1,470
  Inventories                                       884           403
  Net investment in direct financing leases         485           291
  Other assets                                    1,003             -
  Prepaid expenses                                  346           327
                                              ----------    ----------
    Total current assets                          8,417         5,093
                                              ----------    ----------

Property and equipment
  Operating equipment                            35,992        36,415
  Less accumulated depreciation                  (8,566)       (7,837)
                                              ----------    ----------
    Total property and equipment                 27,426        28,578
                                              ----------    ----------

Other assets:
  Net investment in direct financing leases         849           623
  Goodwill, net                                   4,095         4,095
  Contract rights, net                           20,243        21,678
  Customer relationships, net                     5,072         5,431
  Other intangible assets, net                    3,864         4,034
  Other assets                                      676           679
                                              ----------    ----------
    Total other assets                           34,799        36,540
                                              ----------    ----------

Total assets                                 $  $70,642    $  $70,211
                                             =========================

    LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                           $   $6,248    $   $4,445
  Accrued expenses                                5,770         9,647
  Notes payable                                     614         5,920
  Deferred revenue                                  552            96
                                             -----------    ----------
    Total current liabilities                    13,184        20,108
                                              ----------    ----------

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 350,000,000 shares
    Issued and outstanding at May 31, 2005,
     and August 31, 2004,  260,758,000 and
     205,509,000, respectively                      261           206
  Additional paid in capital                    233,076       208,051
  Accumulated deficit                          (175,879)     (157,106)
  Accumulated comprehensive income (loss)             -        (1,048)
                                              ----------    ----------
    Total shareholders' equity                   57,458        50,103
                                              ----------    ----------

Total liabilities and shareholders' equity   $  $70,642    $  $70,211
                                             =========================
See accompanying notes to consolidated financial statements.

                                       1

<PAGE>



<TABLE>
<CAPTION>

                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (in thousands)




                                              For the three months ended May 31,    For the nine months ended May 31,
                                              ---------------------------------     --------------------------------
                                                   2005             2004                  2005            2004
                                               ------------     ------------        ---------------  ---------------
<S>                                                <C>             <C>                   <C>              <C>
Net sales:
 Structured wiring                                 $    369        $    156              $   1,002        $    673
 Broadband services                                   1,797             709                  3,537           4,805
 Products                                               774           4,226                  2,553           5,673
 Other                                                   36               -                     96              81
                                                   --------        --------              ---------        --------
Total sales                                           2,976           5,091                  7,188          11,232
                                                   --------        --------              ---------        --------

Costs of goods sold:
 Direct labor and related costs                         516             226                  1,300           1,078
 Products and integration service                       799           3,937                  3,002           4,375
 Impairment, slow moving and obsolete inventory         300               -                    300               -
 Structured wiring labor and materials                  270             115                    776             376
 Broadband services costs                               207             304                  1,465           2,550
 Depreciation and amortization                          291             285                    867             856
 Other manufacturing costs                                -               -                      -              26
                                                   --------        --------             ----------       ---------
Total costs of goods sold                             2,383           4,867                  7,710           9,261
                                                   --------        --------             ----------       ---------
Gross profit                                            593             224                   (522)          1,971
                                                   --------        --------             ----------       ---------
Operating expenses:
 Selling, general and administrative:
  Salaries and related costs                          1,194             884                  4,737           7,686
  Advertising and promotion                              (5)              -                     45              20
  Depreciation and amortization                         805             960                  2,451           2,945
  Other support costs                                 3,382           2,494                  8,989           6,586
  Research and development                              197             129                    572             395
  Impairment, write-downs and
   restructuring costs                                    -               -                  1,050               -
                                                   --------        --------             ----------       ---------
Total operating expenses                              5,573           4,467                 17,844          17,632
                                                   --------        --------             ----------       ---------

Loss from operations                                 (4,980)         (4,243)               (18,366)        (15,661)
                                                   --------        --------             ----------       ----------
Other income/(expenses):
 Interest income                                         17              10                     25              21
 Interest expense                                       (17)           (140)                  (562)         (7,789)
 Gain (loss) on sale of assets                            -               -                      -            (642)
 Gain (loss) on sale of marketable securities            (5)              -                    144             466
 Gain (loss) on extinguishment of debt                1,034               -                  1,034
                                                   --------        --------             ----------       ---------
Total other income (expense)                          1,029            (130)                   641          (7,944)
                                                   --------        --------             ----------       ---------

Net loss                                             (3,951)         (4,373)               (17,725)        (23,605)
                                                   --------        --------             ----------       ---------

Other comprehensive loss:
 Unrealized holding gain (loss)                           -             (11)                (1,048)             44
                                                   --------        --------             ----------       ---------
Total other comprehensive loss                     $      -        $    (11)            $   (1,048)      $      44
                                                   ========         =======             ==========       =========
Comprehensive losses                               $ (3,951)       $ (4,384)            $  (18,773)      $ (23,561)
                                                   ========        ========             ==========       =========
Net loss per common share:
 Basic                                             $  (0.02)       $  (0.02)            $    (0.08)      $  (0.13)
 Diluted                                           $  (0.02)       $  (0.02)            $    (0.08)      $  (0.13)
 Comprehensive loss                                $  (0.02)       $  (0.02)            $    (0.08)      $  (0.13)

See accompanying notes to consolidated financial statements.
</TABLE>

                                       2

<PAGE>


<TABLE>
<CAPTION>
                                      EAGLE BROADBAND, INC., AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                                  (in thousands)
                                                    (Unaudited)

                                                         Common Stock             Additional             Accumulated       Total
                                                      ---------------- Preferred   Paid in     Retained  Comprehensive Shareholders'
                                                       Shares   Value    Stock     Capital     Earnings     Income        Equity
                                                      -------- ------- --------- ----------- ------------------------ --------------
<S>                                                   <C>        <C>         <C>   <C>       <C>               <C>          <C>
 Total shareholders' equity
    as of August 31, 2003                             147,447    $147         -    $177,017  $(118,101)        $(727)       $58,336
                                                      -------- ------- --------- ----------- ---------- ------------- --------------


 Net loss                                                   -       -         -           -    (39,005)            -        (39,005)

 New stock issued to shareholders:                                                                                                -
   For services and compensation                       11,016      12         -       6,335          -             -          6,347
   For retirement of debt and liabilities              47,046      47         -      13,294          -             -         13,341
   Stock-based compensation                                 -       -         -       4,493          -             -          4,493
   Beneficial conversion features on
     convertible debentures                                 -       -         -       6,912          -             -          6,912
 Unrealized holding loss                                    -       -         -                      -          (321)          (321)

                                                      -------- ------- --------- ----------- ---------- ------------- --------------
 Total shareholders' equity
    as of August 31, 2004                             205,509    $206        $-    $208,051  $(157,106)      $(1,048)       $50,103
                                                      ======== ======= ========= =========== ========== ============= ==============


 Net loss for the nine months ended
   May 31, 2005

 Net loss                                                   -       -         -           -    (18,773)            -        (18,773)

 New stock issued to shareholders:                                                                                                -
   For services, compensation and settlement of
     accrued liabilities                               14,105      14         -       9,632          -             -          9,646
   For retirement of debt                               6,903       7         -       4,039          -             -          4,046
   Proceeds from sale of common stock, net             30,000      30         -       9,409          -             -          9,439
   Proceeds from exercise of options                    4,125       4         -       1,945          -             -          1,949
   Beneficial conversion features on
     convertible debentures                                 -       -         -           -          -             -              -
   Unrealized holding loss                                  -       -         -           -                    1,048          1,048

                                                      -------- ------- --------- ----------- ---------- ------------- --------------
 Total shareholders' equity
    as of May 31,  2005                               260,642    $261         -    $233,076  $(175,879)            -        $57,458
                                                      ======== ======= ========= =========== ========== ============= ==============


 See accompanying notes to consolidated financial statements.
</TABLE>

                                       3

<PAGE>

<TABLE>
<CAPTION>
                                      EAGLE BROADBAND, INC., AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (in thousands)

                                                                       For the Nine Months Ended
                                                                       -------------------------
                                                                          May 31,      May 31,
                                                                           2005         2004
                                                                       ------------ ------------
<S>                                                                       <C>          <C>

Cash flows from operating activities
Net loss                                                                  $(18,773)    $(23,605)
                                                                       ------------ ------------

Adjustments to reconcile net loss to net cash Used by operating activities:
  Impairment and write-downs                                                 1,050            -
  (Gain)/loss on sale of assets                                                904          611
  (Gain)/loss on extinguishment of debt                                     (1,034)           -
  Interest for beneficial conversion value                                       -        6,912
  Depreciation and amortization                                              3,318        3,801
  Stock issued for interest expense                                            546          108
  Stock issued for services rendered                                         1,479        8,947
  Provision for bad debt                                                        23          372
  (Increase)/decrease in accounts receivable                                (1,376)      (3,246)
  (Increase)/decrease in inventories                                          (481)         340
  (Increase)/decrease in other assets                                       (1,003)
  (Increase)/decrease in prepaid expenses                                      (19)         248
  Increase/(decrease) in accounts payable                                    1,803        3,467
  Increase/(decrease) in accrued expenses                                    4,363       (1,453)
                                                                       ------------ ------------
    Total Adjustment                                                         9,573       20,107
                                                                       ------------ ------------
Net cash provided/(used) by operating activities                            (9,200)      (3,498)
                                                                       ------------ ------------

Cash flows from investing activities
  (Purchase)/disposal of property and equipment                             (1,248)        (686)
  Increase/(decrease) deferred costs                                             -          334
  Increase/(decrease) in intangible costs                                       (4)           -
  Increase/(decrease) in marketable securities                                 695          151
  (Increase)/decrease in other assets                                            3         (557)
  Gross equipment purchase for direct financing leases                        (803)        (538)
  Principal collections on direct financing leases                             206            -
                                                                       ------------ ------------
Net cash provided/(used) by investing activities                            (1,151)      (1,296)
                                                                       ------------ ------------

Cash flows from financing activities
  Increase/(decrease) in notes payable and long-term debt                     (212)       5,597
  Proceeds from sale of common stock, net                                    9,439            -
  Proceeds from exercise of options                                          1,949            -
                                                                       ------------ ------------
Net cash provided/(used) by financing activities                            11,176        5,597
                                                                       ------------ ------------

Net increase/(decrease) in cash                                                825          803
Cash at the beginning of the period                                          2,051          824
                                                                       ------------ ------------
Cash at the end of the period                                               $2,876       $1,627
                                                                       ============ ============

Supplemental disclosure of cash flow information: Net cash paid during the year
for:
  Interest                                                                     $33         $312
  Income taxes                                                                  $-           $-

Supplemental non-cash investing activities (See Note 18) and changes in
shareholders equity.

See accompanying notes to consolidated financial statements.
</TABLE>

                                       4

<PAGE>

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 provider of broadband, Internet Protocol (IP)
           and communications technology and services that aim to create new
           revenue opportunities for broadband providers and enhance
           communications for government, military and corporate customers. The
           Company leverages years of proven experience delivering advanced
           IP-based broadband bundled services to provide service provider
           partners with a way to deliver advanced entertainment, communications
           and security services to their customers. The Company's product
           offerings include IPTVCompleteTM, a faster, lower cost way for
           broadband providers to deliver competitive IP video services; the
           MediPro line of standard and high definition IP set-top boxes that
           enable broadband providers and hotel operators to maximize revenues
           by delivering advanced interactive entertainment services; and the
           SatMAXTM satellite communications system that provides civilian
           government, military, homeland security and corporate customers with
           reliable, non-line-of-sight, satellite voice and data communications
           from any location on Earth.

           The Company's balance sheet as of May 31, 2005, the related
           statements of operations for the nine months ended May 31, 2005, and
           May 31, 2004, and the statements of cash flows for the nine months
           ended May 31, 2005, and May 31, 2004, included in the condensed
           financial statements have been prepared by the Company without audit.
           In the opinion of management, the accompanying condensed financial
           statements include all adjustments (consisting of normal, recurring
           adjustments) necessary to fairly summarize the Company's financial
           position and results of operations. The results of operations for the
           nine months ended May 31, 2005, are not necessarily indicative of the
           results of operations for the full year or any other interim period.
           The information included in this Form 10-Q should be read in
           conjunction with Management's Discussion and Analysis and Financial
           Statements and notes thereto included in the Company's August 31,
           2004, Form 10-K.

NOTE 2 - Related Party Transactions:

           In February 2004, compensation for certain officers and key employees
           under incentive clauses of their employment contracts (i) includes a
           non-cash expense of $4,493,000 incurred on the issuance of promissory
           notes upon the modification of outstanding options for 4,200,000
           common shares and (ii) reflects a guaranteed compensation of the
           modified options equivalent to $1.75 less the option strike price,
           which was an additional $4,074,000 accrued in August 2004. The amount
           of the accrual varies at each quarter end depending on the stock
           market value fluctuation or upon exercise of options subject to
           employment agreements. At quarter end May 31, 2005, the Company had
           accrued net additional $1,246,000 in compensation. The total amount
           of the guarantee liability at May 31, 2005, net of principal payments
           was $4,010,000. Subsequent to May 31, 2005 the Company entered into
           note exchange agreements whereby the note holders representing
           $2,086,000 agreed to accept 7,954,000 of the Company's common stock
           to fully satisfy such debt obligation. The remaining principal amount
           of $1,924,000 is currently in default and is accruing interest per
           the terms of the original agreement. Additional details are in Note
           20 under subsequent events.

NOTE 3 - Accounts Receivable:

           Accounts receivable consist of the following (in thousands):

                                                         May 31,   August 31,
                                                           2005        2004
                                                       ---------- -----------
           Accounts receivable                            $5,147      $3,866
           Allowance for doubtful accounts                (2,324)     (2,396)
                                                       ---------- -----------
           Accounts receivable, net                       $2,823      $1,470
                                                       ========== ===========

           Allowance for doubtful accounts
            percentage of accounts receivable                 45%         62%

                                       5

<PAGE>

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

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

                                                 May 31,  August 31,
                                                  2005       2004
                                                -------- -----------
Automobile                                         $143        $143
Headend facility and fiber infrastructure        27,800      27,146
Furniture and fixtures                              520         516
Leasehold improvements                              183         133
Office equipment                                  1,027       1,023
Property, manufacturing and equipment             6,319       7,454
                                                -------- -----------
  Total property, plant and equipment           $35,992     $36,415
    Less accumulated depreciation                (8,566)     (7,837)
                                                -------- -----------
  Net property, plant and equipment             $27,426     $28,578
                                                ======== ===========

Eagle's headend facilities and fiber infrastructure consist primarily of digital
computing and telecommunications equipment that comprise the Company's main
headend facility at its headquarters, wireless headend equipment, a digital
headend facility and a fiber backbone in the master planned communities in which
it operates and a fiber ring connecting the various master planned communities
in the Houston area. The Company determined that twenty-year straight-line
depreciation method is appropriate for its headend facilities and fiber
infrastructure based on industry standards for these asset types.

The Company expensed repairs and maintenance of $32,000 and $16,000 for the
three months ended May 31, 2005, and May 31, 2004, respectively. The Company did
not have any capitalized major improvements for these periods. The Company
expensed repairs and maintenance of $55,000 and $36,000 for the nine months
ended May 31, 2005, and May 31, 2004, respectively and did not have any
capitalized major improvements for these periods.

Components of intangible assets are as follows (in thousands):

                                               May 31,        August 31,
                                                 2005            2004
                                             -----------      ----------

           Goodwill                              $5,596          $5,596
           Accumulated amortization              (1,501)         (1,501)
                                             -----------      ----------
                                                 $4,095          $4,095
                                             ===========      ==========

           Contract rights                      $28,691         $28,691
           Accumulated amortization              (8,448)         (7,013)
                                             -----------      ----------
                                                $20,243         $21,678
                                             ===========      ==========

           Customer relationships                $7,189          $7,189
           Accumulated amortization              (2,117)         (1,758)
                                             -----------      ----------
                                                 $5,072          $5,431
                                             ===========      ==========

           Other intangible assets               $6,885          $6,839
           Accumulated amortization              (3,021)         (2,805)
                                             -----------      ----------
                                                 $3,864          $4,034
                                             ===========      ==========


           Total intangibles                    $48,361         $48,315
           Total accumulated amortization      $(15,087)       $(13,077)
                                             -----------      ----------
           Net of amortization                  $33,274         $35,238
                                             ===========      ==========


                                       6

<PAGE>


NOTE 5 - Notes Payable:

         The following table lists the Company's note obligations as of May 31,
         2005, and August 31, 2004 (in thousands):

                                                           Amount
                          Annual                  ------------------------
                         Interest                  May 31,    August 31,
                           Rate      Due Date         2005        2004
                         ---------  -----------   ------------------------

Notes payable:
  Investor group            8.0%      Demand         $  538      $  4,888
  Q-series bonds           12.0%      Various             -           744
  Other                   Various     Various            76           288
                                                  ---------- -------------

Total notes payable                                  $  614      $  5,920
                                                  ---------- -------------
  Less current portion                                  614         5,920
                                                  ---------- -------------
Total long-term debt                                 $    -      $      -
                                                  ========== =============

           The Company entered into an agreement in June 2004 with four
           accredited investors, pursuant to which the Company issued debentures
           in the principal amount of $4,888,400, bearing interest at 8% per
           annum and maturing June 2007, convertible into shares of the Company
           common stock together with 5-year warrants to purchase an aggregate
           of 1,340,022 shares of common stock at an exercise price of $.2035
           per share. At May 31, 2005, $538,000 of convertible debt remains
           outstanding. On June 23, 2005, one of the investors converted
           $200,000 of the principal convertible debt into shares of common
           stock at $0.2035 pre share. Additionally, a warrant to purchase
           548,246 shares of common stock at $0.2035 per share was exercised on
           June 23, 2005.

NOTE 6 - Income Taxes:

           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:

                                                       May 31,  August 31,
                                                        2005       2004
                                                         (%)        (%)
                                                     ---------- -----------
                U. S. Federal statutory tax rate            34          34
                U.S. valuation difference                  (34)        (34)
                Effective U. S. tax rate                     0           0
                Foreign tax valuation                        0           0
                Effective tax rate                           0           0

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

                                                      May 31,     August 31,
                                                        2005         2004
                                                     ----------  -----------
                Computed expected tax benefit         $(6,383)     $(13,262)
                Increase in valuation allowance         6,383        13,262
                                                     ---------   -----------
                Income tax expense                    $     -      $      -
                                                     =========   ===========

            The tax effects of temporary differences that give rise to
            significant portions of the deferred tax assets and deferred tax
            liabilities at May 31, 2005, and August 31, 2004, are presented
            below (in thousands) and include the balances of the merged company
            ClearWorks.net.

                                       7

<PAGE>

                                                   May 31,    August 31,
                                                      2005        2004
                                                  ----------- -----------
                Deferred tax assets:
                Net operating loss carry forwards   $69,989      $63,606
                Less valuation allowance            (69,989)     (63,606)
                                                  ----------  -----------
                Net deferred tax assets             $     -      $     -
                                                  ==========  ===========

            The valuation allowance for deferred tax assets of May 31, 2005, and
            August 31, 2004, was $69,989,000 and $63,606,000, respectively. As
            of May 31, 2005, the Company has a net operating loss carry-forward
            of $134,624,000, which is available to offset future federal taxable
            income, if any, with expirations from 2021 to 2023.

NOTE 7 - Assets Held for Sale

            The Company entered into an agreement to repurchase security
            contracts for $1,003,316. Per the terms of the agreement, $985,000
            of the $1,003,316 was offset against a receivable the Company had
            from the seller. These contracts are considered an asset held for
            sale and included in other current assets. The company intends to
            resell the security contracts in the fourth quarter. If the
            contracts are not sold, the purchase price of the contracts will be
            amortized over their remaining life.


NOTE 8 - Preferred Stock, Stock Options and Warrants:

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

                           Options/Warrants
                         Issued & Outstanding       Options/Warrants Exercisable
                       -------------------------    ----------------------------
Class of   Expiration    May 31,      August 31,       May 31,       August 31,
Warrants      Date        2005          2004            2005           2004
---------  ----------  -----------    ----------    -------------   ------------
0.19         Oct-09     6,700,000                        186,111
0.20         Jun-07     1,340,022                      1,340,022
0.41         Sep-08       900,000     3,800,000          900,000      1,550,000
0.48         Oct-06        25,000        25,000           25,000         25,000
0.60         Sep-06       400,000       400,000          400,000              -
0.61         Oct-09       500,000             -          146,181              -
0.62         Oct-09       500,000             -          111,112              -
0.73         Oct-07        25,000             -                -              -
0.75         Sep-08       500,000       500,000          500,000              -
0.78        Various       424,991             -          424,991              -
0.97         Jul-07        25,000        25,000                -              -
1.00         May-09       362,500             -          362,500              -
1.04         Apr-05        50,000        50,000           50,000         50,000
1.13         Sep-08        99,999             -           99,999              -
1.23         Apr-07        25,000        25,000           25,000              -
1.31         Jan-07        25,000        25,000           25,000         25,000
7.50         Apr-08       800,000       800,000          800,000        800,000
ESOP        Various       516,120  *    346,002  *       346,002        346,002
                       -----------    ----------    -------------   ------------
                       13,218,632  ** 5,996,002  **    5,741,918      2,796,002
                       ===========    ==========    =============   ============

*Denotes warrants which would have an anti-dilutive effect if currently used to
calculate earnings per share for the three months ended May 31, 2005, and fiscal
year ended August 31, 2004.

** The shares of common stock underlying these warrants were not registered for
resale under the Securities Act of 1933. As of May 31, 2005, none of these
warrants have been exercised.

NOTE 9 - Risk Factors:

For the nine months ended May 31, 2005, 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 33% of the Company's revenues and
receivables were generated in the state of Texas, 1% in the international
market, and the approximate 66% remainder relatively evenly over the rest of the
nation during the nine months ended May 31, 2005; whereas approximately 85% of
the Company's revenues and receivables were generated in the state of Texas, 0%
in the international market, and the approximate 15% remainder relatively evenly
over the rest of the nation during the nine months ended May 31, 2004. Through
the normal course of business, the Company generally does not require its
customers to post any collateral.

                                       8

<PAGE>

NOTE 10 - Foreign Operations:

          Although the Company is based in the United States, certain of its
          products are sold in international markets. Presently, international
          sales total approximately 1% and 0% for the nine months ended May 31,
          2005, and May 31, 2004, respectively.

NOTE 11 - Commitments and Contingent Liabilities:

          Leases

          For the nine months ended May 31, 2005, and May 31, 2004, rental
          expenses of approximately $345,000 and $464,000, respectively, were
          incurred.

           The Company renewed its primary office lease space in League City,
           Texas, for $24,983 per month with South Shore Harbor Development,
           Ltd. The renewal lease commenced on June 1, 2004, and expires on May
           31, 2009. The Lessor agreed to grant the Company a one-time option
           to terminate the lease at 36 months by paying an unamortized leasing
           commission of $35,000 and a penalty of 1.5 months rent of $37,000
           for a combined total of $72,000.

                           Period Ending
                             August 31,         Amount
                          ---------------- ---------------
                               2005            $   74,950
                               2006               299,801
                               2007               306,180
                               2008               325,316
                               2009               243,987
                                           ---------------
                               Total           $1,250,234
                                           ===============

           LLV Broadband, LLC, Agreement

           In November 2004, the Company entered into a Limited Liability
           Company Agreement with Neva Holdings, LLC ("Neva"), whereby both
           parties are members of LLV Broadband, LLC ("LLV"), and a Delaware
           limited liability company. The purpose of LLV is to construct,
           develop, and operate a system for the provision of television,
           video-on-demand, audio, broadband data and Internet, telephone, and
           security monitoring services to commercial, recreational, and
           residential facilities located within the Lake Las Vegas Resort in
           Clark County, Nevada, and the surrounding geographic areas.

           LLV currently owns cable television assets including, without
           limitation, cable real property easements, franchises and
           governmental and third-party consents necessary for the operation of
           the system (collectively the "Existing System Assets"). Neva's
           capital account shall consist of the initial capital contribution of
           the "Existing System Assets" and existing system documents having an
           aggregate net fair value of $3,000,000 plus amounts funded by Neva or
           its affiliates to or for the benefit of LLV between January 1, 2004,
           and the effective date of this agreement.

           The Company's capital account shall be an initial cash contribution
           of $3,000,000 plus amounts funded by the Company or its affiliates
           to, or for the benefit of LLV between January 1, 2004, and the
           effective date of this agreement.

           If at any time LLV's Board determines that additional funds are
           needed as set forth in the approved budget and plan for the
           development, construction or marketing of the system for any direct
           out-of-pocket costs and expenses incurred by LLV in connection with
           the formation, financing and operation of LLV or normal day-to-day
           business affairs of LLV, then the Company shall be required to make
           additional cash contributions in the amount of such deficit not to
           exceed $2 million.

           The Company shall act as the initial Manager of LLV. The Manager
           shall be responsible for the conduct of the business of LLV
           including without limitation the design, construction and operation
           of the system. The Manager shall have full power, authority and duty
           to manage the operations and affairs of LLV and to act for and to
           bind LLV to the extent provided by the Act, and shall have the duty
           and authority to do all things appropriate to the accomplishment of
           the purposes of LLV. The Manager shall be reimbursed for the direct
           costs and expenses of its employees and agents who provide services
           to LLV.

                                       9

<PAGE>

           Allocations of net income and distributions are generally made to
           each member in proportion to their respective ownership and will
           vary from quarter to quarter depending on capital balance from both
           parties. As of May 31, 2005, the Company has yet to fund the $3
           million initial capitalization contribution. Both parties are
           discussing responsibilities going forward and are currently
           operating under an oral agreement.

           Legal Proceedings

           In July 2003, the Company 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,
           state and federal securities fraud and negligent misrepresentation.
           Plaintiff has also alleged that the Company 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. In November 2003, the
           principal balance of the debenture was repaid, although the suit
           remains outstanding. Cornell claims damages in excess of $1,000,000.
           The Company denies the claims and intends to vigorously defend this
           lawsuit and the claims against it. The Company has asserted
           counterclaims against Cornell for fraud and breach of contract in
           the amount of $2,000,000. The Company has not accrued any expenses
           against this lawsuit, as the outcome cannot be predicted at this
           time.

           In December 2000, ClearWorks became a defendant in State Of Florida
           Department Of Environmental Protection vs. Reco Tricote, Inc. And
           Southeast Tire Recycling, Inc., A/K/A Clearwork.net, Inc.; In the
           Circuit Court of The Tenth Judicial Circuit In And For Polk County,
           Florida. The Florida EPA sued ClearWorks.net presenting claims for
           recovery costs and penalties for a waste tire processing facility.
           The suit seeks recovery of costs and penalties in a sum in excess
           of $1,000,000, attorneys' fees and cost of court. ClearWorks denies
           the claims and intends to vigorously contest all claims in this case
           and to enforce its indemnification rights against the principals of
           Southeast Tire Recycling. The Company has not accrued any expenses
           against this lawsuit, as the outcome cannot be predicted at this
           time.

           In 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. Defendant has filed an
           answer, denies the claims and intends to vigorously defend this
           lawsuit and claims against it. The Company has not accrued any
           expenses against this lawsuit, as the outcome cannot be predicted at
           this time.

           In fiscal 2004, The Tail Wind Fund Ltd. sued Link Two Communications
           and Eagle, Civil Action 04-CV-05776, in the United States District
           Court for the Southern District of New York. Tail Wind claims breach
           of contract seeking $25 million. The Company intends to vigorously
           defend this claim. The Company has accrued $500,000 in expenses
           against this lawsuit, although the outcome cannot be predicted at
           this time.

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

           We intend to vigorously defend these and other lawsuits and claims
           against us. However, we cannot predict the outcome of these
           lawsuits, as well as other legal proceedings and claims with
           certainty. An adverse resolution of pending litigation could have a
           material adverse effect on our business, financial condition and
           results of operations. The Company is subject to legal proceedings
           and claims that arise in the ordinary course of business. The
           Company's management does not expect that the results in any of
           these legal proceedings will have adverse affect on the Company's
           financial condition or results of operations.

                                       10

<PAGE>

NOTE 12 - Earnings Per Share:

<TABLE>
<CAPTION>
          The following table sets forth the computation of basic and diluted
          earnings per share (in thousands, except per-share amount):

                                                        For the nine months ended May 31, 2005
                                                -------------------------------------------------------
                                                    Income              Shares           Per-Share
                                                 (Numerator)         (Denominator)         Amount
                                                --------------    -------------------------------------
<S>                                                   <C>                   <C>                  <C>
Net loss                                             $(18,773)                    -             $    -
Basic EPS:
  Income available to common stockholders             (18,773)              230,439              (0.08)
  Effect of dilutive securities warrants                    -                     -                  -
Diluted EPS:
                                                --------------    ------------------ ------------------
  Income available to common stockholders
    and assumed conversions                          $(18,773)              230,439             $(0.08)
                                                ==============    ================== ==================


                                                        For the nine months ended May 31, 2004
                                                -------------------------------------------------------
                                                    Income              Shares           Per-Share
                                                 (Numerator)         (Denominator)         Amount
                                                --------------    -------------------------------------
Net loss                                             $(23,605)             $      -             $    -
Basic EPS:
  Income available to common stockholders             (23,605)              179,228              (0.13)
  Effect of dilutive securities warrants                    -                     -                  -
Diluted EPS:
                                                --------------    ------------------ ------------------
  Income available to common stockholders
    and assumed conversions                          $(23,605)             $179,228             $(0.13)
                                                ==============    ================== ==================
</TABLE>

          For the nine months ended May 31, 2005, and May 31, 2004,
          anti-dilutive securities existed. (See Note 8.)

NOTE 13 - Employee Stock Option Plan:

          In July 1996, the Board of Directors and majority stockholders
          adopted a stock option plan under which 400,000 shares of the
          Company's common stock have been reserved for issuance. Since that
          time, the Board of Directors have amended the July 1996, employee
          stock option plan under which 1,000,000 shares of Common Stock have
          been reserved for issuance. Under this plan, as of May 31, 2005, a
          total of 516,120 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 the nine months ended May 31 2005,
          and 2004, is estimated as $1.08 on the date of grant. Management
          estimates the average fair value for options granted during fiscal
          2005 to be comparable to those granted in fiscal 2004. 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:

                                                  May 31,    May 31,
                                                   2005       2004
                                                 ---------- ----------
                        Dividend yield             0.00%      0.00%
                        Volatility                 0.91%      0.91%
                        Risk-free interest rate    4.00%      4.00%
                        Expected life               4.5         5


          The pro forma effect on net loss as if the fair value of stock-based
          compensation had been recognized as compensation expense on a
          straight-line basis over the vesting period of the stock option or
          purchase right was as follows for the three months ended May 31,
          2005, and May 31, 2004:

                                       11

<PAGE>

<TABLE>
                                                        May 31,                 May 31,
      (in thousands, except share amounts)               2005                    2004
                                                  -------------------     -------------------

<S>                                                         <C>                     <C>
Net loss, as reported                                       $(18,773)               $(23,605)
  Add: Stock-based employee
  compensation included in reported net
  earnings/(loss), net of related tax effects                                              -
  Less: Stock-based employee
  compensation expense determined
  under fair-value based method for all
  awards, net of related tax effects                             (61)                      -
                                                  -------------------     -------------------
Pro forma net earnings/(loss)                               $(18,834)               $(23,605)
                                                  ===================     ===================

Net loss per share:
  As reported                                               $  (0.08)               $  (0.13)
  Pro forma                                                 $  (0.08)               $  (0.13)

Diluted net loss per share:
  As reported                                               $  (0.08)               $  (0.13)
  Pro forma                                                 $  (0.08)               $  (0.13)
</TABLE>

       Option activity was as follows for the nine months ended May 31, 2005:

                                                                  2005
                                                             Weighted-Average
                                                   Shares     Exercise Price
                                                 ----------- ----------------

Outstanding at beginning of year                    346,002            $1.27
Granted                                             170,118             0.50
Assumed through acquisitions                              -                -
Exercised                                                 -                -
Forfeited/cancelled                                       -                -
                                                 -----------  ---------------

Outstanding throughout the period                   516,120            $1.08
                                                 ===========  ===============

Exercisable at year end                             516,120            $1.08
                                                 ===========  ===============

       Information about options outstanding was as follows at May 31, 2005:

                                Remaining     Average                   Average
    Range of         Number    Contractual   Exercise       Number     Exercise
 Exercise Prices  Outstanding Life in Years    Price     Exercisable     Price
----------------- ------------------------------------- ------------------------

     $0 - $1.00       379,278         4.50        0.53       379,278        0.53
  $1.01 - $2.00       111,342         4.00        1.73       111,342        1.73
  $2.01 - $7.50        25,500         4.50        6.55        25,500        6.55
                  ------------                          -------------
                      516,120                     1.08       516,120        1.08
                  ============                          =============

NOTE 14 - Retirement Plans:

           During October 1997, the Company initiated a 401(k) plan for its
           employees, funded through the contributions of its participants.
           Prior to March 2003, the Company matched the participant's
           contribution up to 3% of their salary. Subsequent to March 2003, the
           plan was amended and the Company match became elective. For the nine
           months ended May 31, 2005, and May 31, 2004, employee contributions
           were approximately $91,254 and $28,091, respectively. The Company
           matched $0 and $0, respectively, for these periods.

NOTE 15 - Major Customer:

           The Company had gross revenues of $2,976,000 and $5,091,000 for the
           three months ended May 31, 2005, and May 31, 2004, respectively. The
           three-month period ended May 31, 2005, included $1,390,000 or 47% of
           the quarter's total broadband services sales from Alarm Security
           Group, LLC. The contract, valued at $1,737,000, was executed with the
           Company's broadband services division, The remaining $347,000 has
           been deferred in conjunction with a twelve month holdback provision
           of the contract.  There were no other customers individually that
           represented greater than 10% of the revenues in the three months
           ended May 31, 2005.

                                       12

<PAGE>

           The Company had gross sales of $7,188,000 and $11,232,000 for the
           nine months ended May 31, 2005, and May 31, 2004, respectively. The
           nine-month period ended May 31, 2005, included $756,000 or 11% of
           the period's total sales from Sweetwater Security Capital, LLC, that
           were executed with the Company's security-monitoring service
           subsidiary, DSS Security, Inc. Additionally, the nine months ended
           May 31, 2005, included $1,957,000 or 27% of the nine months total
           product sales from General Dynamics and also included $1,390,000 or
           19% of the nine months total broadband services sales from Alarm
           Security Group, LLC which the contract is valued at $1,737,000 that
           was executed with the Company's broadband services division. The
           remaining $347,000 has been deferred in conjunction with a twelve
           month holdback provision of the contract. There were no other
           customers individually that represented greater than 10% of the
           revenues in the nine months ended May 31, 2005.

NOTE 16 - Industry Segments:

          This summary reflects the Company's current and past operating
          segments, as described below. All have discontinued operations except
          Eagle Broadband, Inc., Eagle Broadband Services, Inc., and DSS
          Security, Inc.:

            Eagle:
            -----

              Eagle Broadband, Inc., (Eagle) is a provider of broadband,
              Internet Protocol (IP) and communications technology and equipment
              with related software and broadband products (including past
              subsidiaries Eagle Wireless International, Inc.; BroadbandMagic;
              and Etoolz, Inc., for this summary).

            EBS/DSS:
            -------

              Eagle Broadband Services, Inc., (EBS) provides broadband services
              to residential and business customers in select communities.

              DSS Security, Inc., (DSS) is a wholesale security monitoring
              company.

              ClearWorks Communications, Inc., provided solutions to consumers
              by implementing technology both within the residential community
              and home, through the installation of fiber optic backbones to
              deliver voice, video and data solutions directly to consumers.
              (Has discontinued operations.)

            APC/HSI:
            -------

              Atlantic Pacific Communications, Inc., (APC) specialized 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. (Has discontinued operations.)

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

            UCG:
            ---

              United Computing Group, Inc., (UCG) was a computer hardware and
              software reseller. (Has discontinued operations.)

            Other:
            -----

              Link Two Communications, Inc., (Link II) was a developer and
              marketer of messaging systems. (Has discontinued operations.)

              ClearWorks.net, Inc., (.NET) is inactive with exception of
              debt related expenses. (Has discontinued operations.)

              Contact Wireless, Inc., was a paging, cellular, and mobile
              services provider and reseller whose assets were sold October 10,
              2003. (Has discontinued operations.)


<TABLE>
<CAPTION>
For the nine months ended May 31, 2005

              (in thousands)            APC/HSI EBS/DSS  UCG   Eagle    Other    Elim.   Consol.
                                        ------- ------- ----- -------- ------- --------- --------
<S>                                        <C>  <C>       <C>  <C>         <C>       <C>  <C>
   Revenue                                 $21  $3,537    $-   $3,630      $-        $-   $7,188
   Segment Loss                            (98) (2,534)   (3) (14,660) (1,071)        -  (18,366)
   Total Assets                              8  30,529    30  129,253  55,885  (144,730)  70,975
   Capital Expenditures                      -   1,156     -       92       -         -    1,248
   Depreciation                             31   1,192     2    2,072      21         -    3,318

For the nine months ended May 31, 2004

              (in thousands)            APC/HSI EBS/DSS  UCG   Eagle    Other    Elim.   Consol.
                                        ------- ------- ----- -------- ------- --------- --------
   Revenue                                $673  $4,805  $445   $5,228     $81        $-  $11,232
   Segment Loss                           (688) (1,475)  (19) (13,449)    (30)        -  (15,661)
   Total Assets                            361  28,830    72  130,788  57,006  (139,615)  77,442
   Capital Expenditures                      -     692    16       41       -         -      749
   Depreciation                            132   1,156    46    2,391      76         -    3,801
</TABLE>

                                       13

<PAGE>

            Reconciliation of Segment Loss             May 31,      May 31,
               from Operations to Net Loss               2005         2004
           ----------------------------------        -----------  -----------
           Total segment loss from operations         $(18,366)     $(15,661)
           Total other income (expense)                   (407)       (7,944)
                                                     ----------   -----------
           Net loss                                   $(18,773)     $(23,605)
                                                     ==========   ===========


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

NOTE 17 - Quarterly Financial Data:

                                            Nov. 30  Feb. 28  May 31   Aug. 31
                                            -------  -------  -------  --------
      Year Ended August 31,
       2005
        Revenues                            $1,528   $2,683   $2,976
        Net earnings (loss)                 (5,496)  (9,326)  (3,951)
        Basic loss per share                 (0.02)   (0.04)   (0.02)
        Diluted loss per share               (0.02)   (0.04)   (0.02)
       2004
        Revenues                            $2,397   $3,744   $5,091    $1,258
        Net earnings (loss)                 (8,461)  (9,398)  (4,373)  (16,773)
        Basic loss per share                 (0.05)   (0.05)   (0.02)    (0.08)
        Diluted loss per share               (0.05)   (0.05)   (0.02)    (0.08)
       2003
        Revenues                            $4,618   $3,063   $1,947    $1,965
        Net earnings (loss)                 (1,533)  (2,012)  (3,833)  (29,123)
        Basic loss per share                 (0.02)   (0.03)   (0.05)    (0.28)
        Diluted loss per share               (0.02)   (0.03)   (0.05)    (0.28)

NOTE 18 - Supplemental Non-Cash Disclosures:

          During the nine month period ended May 31, 2005, the Company issued
          stock in lieu of cash as payment for the following:

                   For the nine months ended May 31, 2005

                              (in thousands)             Non Cash
                                                         Settlements
                                                       --------------
                   Settlements including Legal                  $784
                   Interest Expense                              546
                   Professional Fees                             502
                   Salary and Compensation                       151
                   Other services rendered                        42
                   Accrued Liabilities                         7,607
                   Notes Payable                               5,094
                                                       --------------
                   Total Non Cash Settlements                 14,726
                                                       --------------

NOTE 19 - Equity Financing

          On February 14, 2005, the Company completed the sale of 20 million
          shares of its common stock to certain investors at a price of $0.41
          per share. The net proceeds to the Company from this offering, after
          placement agent fees and offering expenses were $7,504,000.

                                       14

<PAGE>

          On April 15, 2005, the Company additionally completed the sale of 10
          million shares of its common stock to certain investors at a price of
          $0. 2035 per share. The net proceeds to the Company from this
          offering after placement agent fees were 1,935,000. This offering is
          a prospectus supplement connected to the shelf registration statement
          that the Company filed with the SEC using a "shelf" registration
          process. Under this registration statement, the Company registered
          the offering of up to 30 Million shares of common stock.

          During the nine months ended May 31, 2005, the Company entered into
          an agreement with a former employee whereby the Company utilized his
          services as an escrow agent. Under the agreement, the agent received
          shares of the Company's stock which were liquidated by the agent and
          the proceeds were used to discharge certain obligations of the
          Company. The escrow agent settled approximately $6,900,000 in
          liabilities. In connection with this agreement, the company incurred
          fees of approximately $1,700,000. The escrow agent also made cash
          advances to the company of approximately $1,400,000 which was repaid
          in stock. Fees and interest incurred by the Company associated with
          the advances were approximately $300,000.


NOTE 20 - Subsequent Events:

          In June 2005, the Company entered into note exchange agreements with
          Mr. Jonathan Hayden, Ms. Billie Mize, Mr. John Nagel and Mr. David
          Weisman in which the Company issued 7,954,085 shares of its common
          stock to fully satisfy the Company's outstanding guarantee
          obligations in the amount of $2,086,251, and any remaining obligations
          under the promissory notes. The note exchange agreements also fully
          satisfy the Company's contingent guarantee obligation with respect to
          unexercised options held by Mr. Hayden and Mr. Nagel.

          Additionally, as described in Note 5: Notes Payables, on June 23,
          2005, one of the investors converted $200,000 of the principal
          convertible debt into shares of common stock at $0.2035 per share.
          Additionally, a warrant to purchase 548,246 shares of common stock at
          $0.2035 per share was exercised on June 23, 2005.


Item 2. Management's Discussion and Analysis

Overview

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

          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 provider of broadband, Internet Protocol (IP)
          and communications technology and services that aim to create new
          revenue opportunities for broadband providers and enhance
          communications for government, military and corporate customers. The
          Company leverages years of proven experience delivering advanced
          IP-based broadband bundled services to provide service provider
          partners with a way to deliver advanced entertainment, communications
          and security services to their customers. The Company's product
          offerings include IPTVComplete(TM), a faster, lower cost way for
          broadband providers to deliver competitive IP video services; the
          MediPro line of standard and high definition IP set-top boxes that
          enable broadband providers and hotel operators to maximize revenues
          by delivering advanced interactive entertainment services; and the
          SatMAX(TM) satellite communications system that provides civilian
          government, military, homeland security and corporate customers with
          reliable, non-line-of-sight, satellite voice and data communications
          from any location on Earth.

Results of Operations

Three and Nine Months Ended May 31, 2005, Compared to Three and
Nine Months Ended May 31, 2004

          The following table sets forth summarized consolidated financial
          information for the three months and nine months ended May 31, 2005
          and May 31, 2004:

                                       15

<PAGE>

<TABLE>
<CAPTION>
         Condensed Financial Information

                                           Three Months Ended May 31,                  Nine Months Ended May 31,
                                 ---------------------------------------------- ----------------------------------------
        ($ in thousands)            2005         2004      $Change    % Change    2005       2004     $Change  % Change
                                 ------------ ----------- -------------------------------- ---------- ------------------
<S>                                   <C>         <C>       <C>             <C>    <C>       <C>      <C>            <C>
Total sales                           $2,976      $5,091    $(2,115)       -42%    $7,188    $11,232  $(4,044)      -36%
Cost of goods sold                     2,383       4,867     (2,484)       -51%     7,710      9,261   (1,551)      -17%
                                 ------------ ----------- ---------- ---------- ---------- ---------- -------- ---------
Gross profit                             593         224        369        165%      (522)     1,971   (2,493)     -126%
                                 ------------ ----------- ---------- ---------- ---------- ---------- -------- ---------
Percent of total sales                    20%          4%        16%       353%        -7%        18%     -25%     -141%
Operating expenses                     5,573       4,467      1,106         25%    17,844     17,632      212         1%
                                 ------------ ----------- ---------- ---------- ---------- ---------- -------- ---------
Loss from operations                  (4,980)     (4,243)      (737)        17%   (18,366)   (15,661)  (2,705)       17%
                                 ------------ ----------- ---------- ---------- ---------- ---------- -------- ---------
Other income/(expense)                 1,029        (130)     1,159       -892%      (407)    (7,944)   7,537       -95%
                                 ------------ ----------- ---------- ---------- ---------- ---------- -------- ---------
Net gain/(loss)                       (3,951)     (4,373)       422        -10%   (18,773)   (23,605)   4,832       -20%
Unrealized holding gain/(loss)                       (11)        11       -100%                   44      (44)     -100%
                                              ----------- ---------- ---------- ---------- ---------- -------- ---------
Comprehensive loss                   $(3,951)    $(4,384)      $433        -10%  $(18,773)  $(23,561)  $4,788       -20%
                                 ============ =========== ========== ========== ========== ========== ======== =========
</TABLE>

Overview

           For the three months ended May 31, 2005, the Company's business
           operations reflected increases in broadband, security and managed
           services. The Company's consolidated operations generated revenues of
           $2,976,000 with a corresponding gross margin of $593,000 for the
           three months ended May 31, 2005. The overall decrease of 42% in
           revenues for the three months ended May 31, 2005, as compared to the
           three months ended May 31, 2004, was primarily attributable to a
           $3,452,000 decrease in the Company's products sales, offset by an
           increase in broadband services of $1,088,000 and an increase in
           structured wiring services of $213,000.

           For the three months ended May 31, 2005, the Company incurred a net
           loss of $3,951,000 which was primarily attributable to increased
           operating expenses related to professional fees, taxes, depreciation
           and salary expense. The Company's net loss for the three months ended
           May 31, 2005, included approximately $805,000 in depreciation and
           amortization expenses and $1,787,000 in expenses associated with a
           net increase in professional services fees, $1,194,000 in salary
           expense, and $755,000 in taxes.


           During the quarter, the Company implemented a company-wide
           restructuring which included the formation of the three main
           operating divisions: IPTV Solutions, Satellite Communications and
           Broadband Services. Key components of the restructuring included:

               --   Reducing payroll-related expenses, lowering operational
                    overhead and carefully controlling expenditures.

               --   Hiring of additional experienced sales staff to accelerate
                    revenue growth.

               --   Realigning staff and resources to maximize efficiencies,
                    better serve customers and partners and concentrate on sales
                    of the Company's three core offerings: IPTVComplete,
                    MediaPro IP set top boxes and SatMAX satellite
                    communications system as the Company shifts its emphasis to
                    providing solutions to broadband and service provider
                    partners.

Sales Information

           The following table sets forth summarized sales information for the
           three months and nine months ended May 31, 2005, and May 31, 2004:

<TABLE>
                                                       Three Months Ended May 31,
                                   ------------------------------------------------------------------
             ($ in thousands)         2005     % of Total   2004     % of Total  $Change   % Change
                                   ----------- ---------- ---------- ----------- --------- ----------
<S>                                      <C>          <C>      <C>            <C>    <C>       <C>
Structured wiring                        $369         12%      $156           3%     $213      136.5%
Broadband services                      1,797         60%       709          14%    1,088      153.5%
Products                                  774         26%     4,226          83%   (3,452)     -81.7%
Other                                      36          1%         -           0%       36     -100.0%
                                   ----------- ---------- ---------- ----------- --------- ----------
Total sales                            $2,976        100%    $5,091         100%  $(2,115)     -41.5%
                                   =========== ========== ========== =========== ========= ==========


                                                       Nine Months Ended May 31,
                                   ------------------------------------------------------------------
             ($ in thousands)         2005     % of Total   2004     % of Total  $Change   % Change
                                   ----------- ---------- ---------- ----------- --------- ----------
Structured wiring                      $1,002         14%      $673           6%     $329       48.9%
Broadband services                      3,537         49%     4,805          43%   (1,268)     -26.4%
Products                                2,553         36%     5,673          51%   (3,120)     -55.0%
Other                                      96          1%        81           1%       15       18.5%
                                   ----------- ---------- ---------- ----------- --------- ----------
Total sales                            $7,188        100%   $11,232         100%  $(4,044)     -36.0%
                                   =========== ========== ========== =========== ========= ==========
</TABLE>

                                       16

<PAGE>

           For the three months ended May 31, 2005, net sales decreased to
           $2,976,000 from $5,091,000, compared to the three-months ended May
           31, 2004. The overall decrease of 42% was attributable to a
           $3,452,000 decrease in product sales, offset with an increase of
           $1,088,000 primarily attributable to $1,390,000 in the Company's
           broadband services related to sale of security monitoring contracts
           and an increase of $213,000 in structured wiring services. The
           $3,452,000 decrease in sales of the Company's products during the
           three months ended May 31, 2005, reflected lower product sales of
           $774,000 compared to $3,788,000 from a major customer in the same
           period a year ago. The $1,088,000 increase is primarily attributable
           to the recognition of revenue from the sale of security monitoring
           contracts of $1,390,000 from a $1,737,000 contract with a major
           customer that was executed with the Company's broadband services
           division. The remaining $347,000 associated with the contract sale
           has been deferred in conjunction with twelve month holdback provision
           of the contract. The $213,000 increase in structured wiring sales is
           attributable to the Company's increased sales force to pursue
           commercial structured wiring and cabling opportunities.

           For the nine months ended May 31, 2005, net sales decreased to
           $7,188,000 from $11,232,000 during the nine months ended May 31,
           2004. The overall decrease of 36% was attributable to a decrease of
           $3,120,000 in the Company's product sales and a decrease of
           $1,268,000 of broadband services, offset with an increase of $329,000
           in structured wiring. The $3,120,000 decrease in sales of Company's
           products during the nine months ended May 31, 2005, was primarily
           attributable to a decrease in prior year product sales of $3,788,000
           from a major customer. The $1,268,000 decrease in sales of the
           Company's broadband services during the nine months ended May 31,
           2004, was primarily attributable to a prior year sale of security
           monitoring contracts of $2,844,000 by the Company's
           security-monitoring subsidiary, DSS Security, Inc., and is offset by
           security systems sales to Sweetwater Capital LLC of $756,000 and the
           recognition of revenue from the sale of security monitoring contracts
           of $1,390,000 from a $1,737,000 contract with a major customer that
           was executed with the Company's broadband services division. The
           remaining $347,000 associated with the contract sale has been
           deferred in conjunction with twelve month holdback provision of the
           contract. The decrease also included $447,000 attributable to the
           decline in recurring security monitoring sales resulting from the
           sale of certain security monitoring contracts in the Company's
           portfolio to Sweetwater Capital, LLC.

           The increase of $329,000 in structured wiring sales is attributable
           to the Company's increased sales force to pursue commercial
           structured wiring and cabling opportunities.

Cost of Goods Sold

           The following table sets forth summarized cost of goods sold
           information for the three and nine months ended May 31, 2005, and May
           31, 2004:

<TABLE>
                                                       Three Months Ended May 31,           Nine Months Ended May 31,

                 ($ in thousands)                     2005    2004   $Change % Change     2005    2004   $Change % Change
                                                    ------- ------- -------- ---------  ------- ------- -------- ---------
<S>                                                   <C>     <C>      <C>     <C>      <C>     <C>        <C>       <C>
Direct labor and related costs                        $516  $  226  $   290    128.3%   $1,300  $1,078     $222      20.6%
Products and integration service                       799   3,937  $(3,138)   -79.7%    3,002   4,375  $(1,373)    -31.4%
Impairment slow moving and obsolete inventory          300          $   300    100.0%      300       -  $   300     100.0%
Structured wiring labor and material                   270     115  $   155    134.8%      776     376  $   400     106.4%
Broadband services costs                               207     304  $   (97)   -31.9%    1,465   2,550  $(1,085)    -42.5%
Depreciation and amortization                          291     285  $     6      2.1%      867     856  $    11       1.3%
Other manufacturing costs                                -       -  $     -                  -      26  $   (26)   -100.0%
                                                    ------- ------- -------- --------   ------- ------- -------- ---------
Total operating expenses                            $2,383  $4,867  $(2,484)   -51.0%   $7,710  $9,261  $(1,551)    -16.7%
                                                    ======= ======= ======== ========   ======= ======= ======== =========
</TABLE>

           For the three months ended May 31, 2005, cost of goods sold decreased
           by 51% to $2,383,000 from $4,867,000 as compared to the three months
           ended May 31, 2004. The overall decrease of $2,484,000 was primarily
           attributable to the Company's cost associated with prior year product
           sales to a major customer. The Company's overall gross profit
           percentage was 20% for the three months ended May 31, 2005, compared
           to an overall gross profit percentage of 4% for the three months
           ended May 31, 2004. This increase in gross profit percentage is
           primarily attributable the recognition of revenue from the sale of
           security monitoring contracts of $1,390,000 to a major customer
           executed with the Company's broadband services division.

           For the nine months ended May 31, 2005, cost of goods sold decreased
           by 17% to $7,710,000 from $9,261,000 as compared to the nine months
           ended May 31, 2004. The overall decrease of $1,551,000 was primarily
           attributable to the Company's costs associated with prior year
           product sales to a major customer. The Company's overall negative
           gross profit percentage is 7% for the nine months ended May 31, 2005,
           compared to an overall gross profit percentage of 18% for the nine
           months ended May 31, 2004. This decrease in gross profit percentage
           is primarily attributable to (i) additional costs of $759,000 for
           design changes and expedite charges incurred due to a change in
           product requirements from a key customer and (ii) depreciation
           expenses associated with the buildout of the Company's broadband
           services infrastructure.

                                       17

<PAGE>

Operating Expenses

           The following table sets forth summarized operating expense
           information for the three months and nine months ended May 31, 2005,
           and May 31, 2004:

<TABLE>
                                          Three Months Ended May 31,                  Nine Months Ended May 31,

        ($ in thousands)            2005       2004       $Change    % Change   2005       2004     $Change   % Change
                                  ---------  ---------   ----------  ------------------  ---------  --------- ---------

<S>                                 <C>          <C>          <C>         <C>   <C>        <C>       <C>            <C>
Salaries and related costs          $1,194     $  884       $  310        35%  $ 4,737    $ 7,686    $(2,949)      -38%
Advertising and promotion               (5)         -           (5)     -100%       45         20         25       125%
Depreciation and amortization          805        960         (155)      -16%    2,451      2,945       (494)      -17%
Research and development               197        129           68        53%      572        395        177        45%
Other support costs                  3,382      2,494          888        36%    8,989      6,586      2,403        36%
Impairment, write-downs and
  restructuring costs                               -            -         -     1,050          -      1,050       100%
                                             ---------   ----------  -------- ---------  ---------  --------- ---------
Total operating expenses            $5,573     $4,467       $1,106        25%  $17,844    $17,632    $   212         1%
                                  =========  =========   ==========  ======== =========  =========  ========= =========
</TABLE>

           The following  table breaks out "Other Support Costs" information for
           the three and nine months ended May 31, 2005, and May 31, 2004:


<TABLE>
                                         Three Months Ended May 31,                  Nine Months Ended May 31,

       ($ in thousands)            2005       2004      $Change   % Change     2005       2004      $Change   % Change
                                ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
<S>                                    <C>        <C>         <C>        <C>       <C>        <C>        <C>        <C>
Auto related                        $   14     $   11  $       3         27%   $    28    $    17  $      11        65%
Bad debt                                 3        176    (173.00)       -98%        23        372    (349.00)      -94%
Contract labor *                         -          -          -          0%         -          -          -
Delivery/postage                         7         12      (5.00)       -42%        35         37      (2.00)       -5%
Fees                                   144         91      53.00         58%       245        218      27.00        12%
Insurance and office                   318        167     151.00         90%       733        590     143.00        24%
Professional fees                    1,787      1,047     740.00         71%     5,741      3,139   2,602.00        83%
Rent                                   116        149     (33.00)       -22%       345        464    (119.00)      -26%
Repairs and maintenance                 32         16      16.00        100%        55         36      19.00        53%
Travel                                 113         75      38.00         51%       313        176     137.00        78%
Taxes                                  755        640     115.00         18%     1,080      1,199    (119.00)      -10%
Telephone and utilities                 93         99      (6.00)        -6%       310        289      21.00         7%
Other                                    -         11     (11.00)      -100%        81         49      32.00        65%
                                ----------- ---------- ----------            ---------- ---------- ----------
Total operating expenses            $3,382     $2,494  $      888         36%  $ 8,989    $ 6,586  $   2,403        36%
                                =========== ========== ==========            ========== ========== ==========
</TABLE>

Operating Expenses.

          For the three months ended May 31, 2005, operating expenses increased
          by 25% to $5,573,000 as compared to $4,467,000 for the three months
          ended May 31, 2004. The changes, which are reflected in the two
          preceding tables immediately above, are discussed below:

          o    A $310,000 increase in salaries and related costs. The increase
               was primarily attributable to the hiring of additional sales
               staff to grow revenues in the companies core IPTV, set top box
               and satellite communications product lines.

          o    A $155,000 decrease in depreciation and amortization, due
               principally to retirement of assets and full depreciation of some
               capital assets.

          o    An $888,000 increase in other support costs, the components of
               which are set forth on the table included immediately above.
               Included in this increase was a $740,000 increase in professional
               fees that included costs associated with corporate compliance,
               consulting and litigation, $151,000 increase in insurance and
               office expenses and $115,000 increase in taxes associated with
               sales tax audit; offset by a $173,000 decrease in bad debt.

          o    A $68,000 increase in research and development expenses primarily
               consisting of product development and engineering activities in
               the Company's IPTV, set top box and satellite communications
               product lines.

          For the nine months ended May 31, 2005, operating expenses increased
          by 1% to $17,844,000 as compared to $17,632,000 for the nine months
          ended May 31, 2004. The changes, which are reflected in the two
          preceding tables immediately above, are discussed below:

          o    A $2,949,000 decrease in salaries and related costs. The decrease
               was primarily attributable to a prior year non-cash expense of
               $4,493,000 incurred upon the modification of certain outstanding
               options to purchase 4,200,000 common shares, offset with a net
               market-to-market adjustment of additional $1,246,000 increasing
               the original guarantee liability net of principal payments to
               $4,010,000 at May 31, 2005. The adjustment to compensation is
               variable until all of the remaining options are exercised by key
               employees. This reflects a guaranteed compensation of the
               modified options equivalent to $1.75 less the warrant strike
               price. Subsequent to May 31, 2005 the Company entered into note
               exchange agreements whereby the note holders representing
               $2,086,000 agreed to accept 7,954,000 of the Company's common
               stock to fully satisfy such debt obligation. The remaining
               principal amount of $1,924,000 is currently in default and is
               accruing interest per the terms of the original agreement.
               Additional details are in Note 20 under subsequent events.

                                       18

<PAGE>
          o    A $494,000 decrease in depreciation and amortization, due
               principally to retirement of assets and full depreciation of some
               capital assets.

          o    A $2,403,000 increase in other support costs. Included in the
               increase was a $2,602,000 increase in professional fees that
               included costs associated with corporate compliance, audits,
               review fees, consulting and litigation, $143,000 increase in
               insurance and office expenses, and $137,000 increase in travel,
               offset by a $349,000 decrease in bad debt, $119,000 decrease in
               rent and a $119,000 one-time adjustment to capture the
               appropriate property tax accrued in prior years.

          o    A $177,000 increase in research and development expenses,
               primarily consisting of product development and engineering
               activities in the Company's IPTV, set top box and satellite
               communications product lines.

          o    A $1,050,000 increase in impairment primarily consists of Link 2
               Communications assets. Management determined that the value of
               the assets was nominal after a review of the marketplace.

Net Loss.

           For the three months ended May 31, 2005, the Company's net loss was
           $3,951,000, compared to a net loss of $4,373,000 during the three
           months ended May 31, 2004. For the nine months ended May 31, 2005,
           the Company's net loss was $18,773,000 compared to a net loss of
           $23,605,000 during the nine months ended May 31, 2004.


Changes in Cash Flow.

           The Company's operating activities increased net cash used to
           $9,200,000 in the nine months ended May 31, 2005, compared to use of
           net cash of $3,498,000 in the nine months ended May 31, 2004. The
           increase in net cash used by operating activities was primarily
           attributable to fund an increase in the Company's net operating loss,
           net of 6,286,000 non-cash charges combined with $3,287,000 of cash
           provided by fluctuations in working capital requirements consisting
           of the combination of accounts receivable, inventory, other assets,
           prepaid expenses, accounts payable and accrued expenses. The
           Company's investing activities used net cash of $1,151,000 in the
           nine months ended May 31, 2005, compared to use of net cash
           $1,296,000 in the nine months ended May 31, 2004. The decrease was
           due primarily to direct finance leasing and purchase of equipment
           associated with the prior years build out of the Company's network
           and infrastructure for the delivery of broadband services. The
           Company's financing activities provided net cash of $11,176,000 in
           the nine months ended May 31, 2005, compared to $5,597,000 of cash
           provided in the nine months ended May 31, 2004. The increase resulted
           from net proceeds of $9,439,000 from the sale of 30 million shares of
           common stock to certain investors and $1,949,000 from the exercise of
           stock options.

Liquidity and Capital Resources

           At May 31, 2005, the Company's current assets totaled $8,417,000
           (includes cash and cash equivalents of $2,876,000) and total current
           liabilities were $13,184,000, which gave the Company a negative
           working capital of $4,767,000. The Company's strategy is to utilize
           cash on hand and issue common stock to settle current liabilities and
           to raise additional capital through the sale of its securities to
           fund operations.

           The Company has historically used stock for retirement of certain
           liabilities on a negotiated basis. During the first nine months ended
           May 31, 2005, the Company retired $4,046,000 in debt with stock
           versus cash. Also, as of May 31, 2005, accrued liabilities in the
           amount of $4,010,000 were outstanding. Subsequent to May 31, 2005,
           $2,086,000 of the $4,010,000 in accrued liabilities was retired
           through the issuance of 7,954,085 shares of common stock and the
           remaining principal amount of $1,924,000 is currently in default and
           accruing interest (see note 2 for additional details). The Company
           expects to continue its practice of retiring certain liabilities as
           may be negotiated through a combination of cash and the issuance of
           shares of the Company common stock. The Company cannot quantify the
           amount of common stock expected to be issued to retire such debts at
           this time and there is no assurance that this strategy will be
           successful.

           Historically, we have financed operations through the sale of debt
           and equity securities. During the nine months ended May 31, 2005, we
           raised $12,082,000 cash through the issuance of common stock upon the
           exercise of derivative securities. The Company currently does not
           have credit facilities available with financial institutions or other
           third parties and historically we have relied upon best efforts
           third-party funding. 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 endeavors. The Company will continue to rely
           upon financing from external sources to fund its operations for the
           foreseeable future and it will need to raise additional capital to
           fund working capital requirements in the fourth quarter of 2005 or
           the first quarter of fiscal 2006. If we are unable to raise
           sufficient capital from external sources to fund our operations for
           the foreseeable future, the Company may need to sell assets to meet
           working capital needs or curtail operations.

                                       19
<PAGE>

Contractual Obligations

<TABLE>
                                                                      Payments Due by Period
                                             ------------------------------------------------------------------------
                                                              Less than 1                                More than 5
                                                  Total            Year      1-3 Years      3-5 Years        Years
                                             --------------  ---------------------------  -------------  ------------
<S>                                               <C>             <C>            <C>            <C>           <C>
Contractual obligations:
  Long-term debt obligations                      $    614        $   614        $    -         $    -        $    -
  Operating lease obligations                        1,250             75           931            244             -


                                             --------------  -------------  ------------  -------------  ------------
                   Total                          $  1,864        $   689        $  931         $  244        $    -
                                             ==============  =============  ============  =============  ============


                                                                      Payments Due by Period
                                             ------------------------------------------------------------------------
                                                              Less than 1                                More than 5
                                                  Total            Year      1-3 Years      3-5 Years        Years
                                             --------------  ---------------------------  -------------  ------------
Off-balance sheet obligations                        3,000          3,000             -              -             -
                                             --------------  -------------  ------------  -------------  ------------
                   Total                          $  3,000       $  3,000        $    -         $    -        $    -
                                             ==============  =============  ============  =============  ============



                                                                      Payments Due by Period
                                             ------------------------------------------------------------------------
                                                              Less than 1                                More than 5
                                                  Total            Year      1-3 Years      3-5 Years        Years
                                             --------------  ---------------------------  -------------  ------------
Contractual obligations:
  Long-term debt obligations                      $    614       $    614        $    -         $    -        $    -
  Operating lease obligations                        1,250             75           931            244             -
                                             --------------  -------------  ------------  -------------  ------------
Total contractual obligations                     $  1,864       $    689        $  931         $  244        $    -
                                             ==============  =============  ============  =============  ============

Off balance sheet obligations
  LLV                                             $  3,000       $  3,000        $    -         $    -        $    -
                                             --------------  -------------  ------------  -------------  ------------
Total off balance sheet obligations               $  3,000       $  3,000        $    -         $    -        $    -
                                             ==============  =============  ============  =============  ============
</TABLE>

           The Company's contractual obligations consist of long-term debt as
           set forth in Note 5 (Notes Payable) to the Company's financial
           statements. See Note 11 (Commitments and Contingent Liabilities) for
           certain obligations for office space operating leases requiring
           future minimal commitments under non-cancelable leases and for
           off-balance sheet contractual obligations. The Company has no off
           balance sheet arrangements other than with LLV Broadband, LLC.

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

Background

           Goodwill and other intangibles of $33,274,000 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.

Impairment Assessment

          Our long-lived assets predominantly include goodwill and other
          intangible assets and property and equipment. Statement of
          Financial Accounting Standards No. 142 (SFAS 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.

                                       20

<PAGE>

           Goodwill is primarily the Company rights to deliver broadband
           services such as Internet, telephone, cable television and security
           monitoring services to residential and business users. The Company
           obtained an independent appraisal as of August 31, 2004, 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 tested the fair value of its goodwill and intangibles as of
           August 31, 2004, and determined that these net assets totaling
           $35,238,000 were not impaired.

Revenue Recognition

           The Company designs, manufactures, markets and services its products
           and services under the name of Eagle Broadband, Inc., and its
           subsidiaries.

           The Company records revenues from its fixed-price, long-term
           contracts using the percentage-of-completion method, whereby
           revenues are recorded based on construction costs incurred to
           date as a percentage of estimated total cost at completion. The
           percentage-of-completion, determined by using total costs
           incurred to date as a percentage or estimated total costs at
           completion, reflects the actual physical completion of the
           project. This method of revenue recognition is used because
           management considers total cost to be the best available measure
           of progress on the contracts. Because of the inherent
           uncertainties in estimating costs, it is at least reasonably
           possible that the estimates used will change within the near
           term.

           The Company adopted EITF 00-21, "Revenue Arrangements with Multiple
           Deliverables," in the fourth quarter of fiscal 2003. The impact of
           adopting EITF 00-21 did not have a material effect to the Company's
           results of operations. The Company's contracts that contain multiple
           elements as of May 31, 2005, or prior were immaterial. When elements
           such as hardware, software and consulting services are contained in a
           single arrangement, or in related arrangements with the same
           customer, the Company allocates revenue to each element based on its
           relative fair value, provided that such element meets the criteria
           for treatment as a separate unit of accounting. The price charged
           when the element is sold separately generally determines fair value.
           In the absence of fair value for a delivered element, the Company
           allocates revenue first to the fair value of the undelivered elements
           and allocates the residual revenue to the delivered elements. In the
           absence of fair value for an undelivered element, the arrangement is
           accounted for as a single unit of accounting, resulting in a delay of
           revenue recognition for the delivered elements until the undelivered
           elements are fulfilled. the Company limits the amount of revenue
           recognition for delivered elements to the amount that is not
           contingent on the future delivery of products or services or subject
           to customer-specified return or refund privileges.

Deferred Revenues

           Revenues that are billed in advance of services being completed are
           deferred until the conclusion of the period of the service for which
           the advance billing relates. Deferred revenues are included on the
           balance sheet as a current liability until the service is performed
           and then recognized in the period in which the service is completed.
           The Company's deferred revenues primarily consist of billings in
           advance for cable, Internet, security and telephone services, which
           generally are for between one and three months of services. The
           Company had deferred revenues of $552,000 and $96,000 as of May 31,
           2005, and August 31, 2004, respectively.

Receivables

           For the nine months ended May 31, 2005, the Company's net accounts
           receivable increased to $2,823,000 from $1,470,000 at August 31,
           2004. The majority of this increase was due to the sale of retail
           security contracts to major customers in the third quarter of fiscal
           2005 in the amount of $1,390,000,

           The Company's accounts receivable aging as measured by days sales
           outstanding (DSO) totaled 28 days at May 31, 2005, and 29 days at
           August 31, 2004, on an adjusted basis after recording the write-off's
           and reserves. The primary decrease in DSO from 29 days at August 31,
           2004, to 28 days at May 31, 2005, was attributable to collecting on
           some past due accounts from slow paying customers during the first
           nine months.

           The Company's allowance for doubtful accounts totaled $2,324,000 and
           $2,396,000 for the nine months ended May 31, 2005, and the year ended
           August 31, 2004, respectively. These allowance for doubtful accounts
           amounts represented 45% and 62% of the gross accounts receivable
           balances for the nine months ended May 31, 2005, and the year ended
           August 31, 2004, respectively; while they likewise represented 53%
           and 7% of the Company's greater than 90-day accounts for these same
           respective time periods.

                                       21

<PAGE>

           The Company reviews its accounts receivable balances by customer for
           accounts greater than 90 days old and makes a determination regarding
           the collectability of the accounts based on specific circumstances
           and the payment history that exists with such customers. The Company
           also takes into account its prior experience, the customer's ability
           to pay and an assessment of the current economic conditions in
           determining the net realizable value of its receivables. The Company
           also reviews its allowances for doubtful accounts in aggregate for
           adequacy following this assessment. Accordingly, the Company believes
           that its allowances for doubtful accounts fairly represent the
           underlying collectability risks associated with its accounts
           receivable.

           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 May 31, 2005,
           the Company's inventory totaled $884,000 as compared to $403,000 at
           August 31, 2004. The majority of this increase was due to an increase
           in raw materials inventory associated with in-process set-top box
           manufacturing. The company had an impairment charge of $300,000 in
           the 3rd quarter related from partial impairment of inventory at
           August 31, 2004. Management had reasonably identified prospects for
           this inventory at August 31, 2004 which did not materialize as plan.
           The company does not for see any significant adjustments in
           subsequent quarters. Management has incorporated "just in time"
           inventory practices to avoid future inventory obsolescence. The
           Company is currently outsourcing a majority of production based on
           contract orders from customers.

Recent Accounting Pronouncements

           In March 2004, the FASB issued a proposed Statement, "Share-Based
           Payment, an amendment of FASB Statements Nos. 123 and 95," that
           addresses the accounting for share-based payment transactions in
           which a Company receives employee services in exchange for either
           equity instruments of the Company or liabilities that are based on
           the fair value of the Company's equity instruments or that may be
           settled by the issuance of such equity instruments. The proposed
           statement would eliminate the ability to account for share-based
           compensation transactions using the intrinsic method that the Company
           currently uses and generally would require that such transactions be
           accounted for using a fair-value-based method and recognized as
           expense in the consolidated statement of operations. The effective
           date of the proposed standard is for periods beginning after June 15,
           2005. It is expected that the final standard will be issued before
           December 31, 2004 and should it be finalized in its current form, it
           will have a significant impact on the consolidated statement of
           operations as the Company will be required to expense the fair value
           of stock option grants and stock purchases under employee stock
           purchase plan.

           In April 2004, the Emerging Issues Task Force ("EITF") issued
           Statement No. 03-06 "Participating Securities and the Two-Class
           Method Under FASB Statement No. 128, Earnings Per Share" ("EITF
           03-06"). EITF 03-06 addresses a number of questions regarding the
           computation of earnings per share by companies that have issued
           securities other than common stock that contractually entitle the
           holder to participate in dividends and earnings of the Company when,
           and if, it declares dividends on its common stock. The issue also
           provides further guidance in applying the two-class method of
           calculating earnings per share, clarifying what constitutes a
           participating security and how to apply the two-class method of
           computing earnings per share once it is determined that a security is
           participating, including how to allocate undistributed earnings to
           such a security. EITF 03-06 became effective during the quarter ended
           June 30, 2004, the adoption of which did not have an impact on the
           calculation of earnings per share of the Company.

           In July 2004, the EITF issued a draft abstract for EITF Issue No.
           04-08, "The Effect of Contingently Convertible Debt on Diluted
           Earnings per Share" ("EITF 04-08"). EITF 04-08 reflects the Task
           Force's tentative conclusion that contingently convertible debt
           should be included in diluted earnings per share computations
           regardless of whether the market price trigger has been met. If
           adopted, the consensus reached by the Task Force in this Issue will
           be effective for reporting periods ending after December 15, 2004.
           Prior period earnings per share amounts presented for comparative
           purposes would be required to be restated to conform to this
           consensus and the Company would be required to include the shares
           issuable upon the conversion of the Notes in the diluted earnings per
           share computation for all periods during which the Notes are
           outstanding. Currently, there would be no effect of this proposed
           statement on our financial position and results of operations

           In September 2004, the EITF delayed the effective date for the
           recognition and measurement guidance previously discussed under EITF
           Issue No. 03-01, "The Meaning of Other-Than-Temporary Impairment and
           Its Application to Certain Investments" ("EITF 03-01") as included in
           paragraphs 10-20 of the proposed statement. The proposed statement
           will clarify the meaning of other-than-temporary impairment and its
           application to investments in debt and equity securities, in
           particular investments within the scope of FASB Statement No. 115,
           "Accounting for Certain Investments in Debt and Equity Securities,"
           and investments accounted for under the cost method. Currently, there
           would be no effect of this proposed statement on its financial
           position and results of operations.

Item 3. 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
           previously had exposure that related 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.

                                       22

<PAGE>

           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 invested funds in
           mortgage and asset backed securities, mutual funds and money market
           accounts.

Credit Risks

           The Company monitors its exposure for credit losses and maintains
           allowances for anticipated losses, but does not require collateral
           from these parties. Three customers, Sweetwater Capital, LLC, Alarm
           Security Group, LLC and General Dynamics, represented greater than
           10% of the Company's revenues during the nine months ended May 31,
           2005. The Company does not believe that the credit risk posed by
           Sweetwater Capital, LLC, which has been fully collected, Alarm
           Security Group, LLC and General Dynamics or any other specific
           customer would have a material adverse affect on its financial
           condition.

Item 4. Controls and Procedures

           The Company's Chief Executive Officer and Principal Accounting
           Officer have evaluated the effectiveness of the Company's disclosure
           controls and procedures (as defined in Rule 13a-15(e) or Rule
           15d-15(e) under the Exchange Act) as of the end of our third fiscal
           quarter 2005. Based on such evaluation, such officers have concluded
           that the Company's disclosure controls and procedures are effective.

Changes in Internal Controls

           There has been no change in the Company's internal control over
           financial reporting identified in connection with our evaluation that
           occurred during our last fiscal quarter ended May 31, 2005, that has
           materially affected, or is reasonably likely to materially affect,
           the Company's internal controls over financial reporting.

Part 2. - Other Information

Item 1 - Legal Proceedings

           In July 2003, the Company 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, state
           and federal securities fraud and negligent misrepresentation.
           Plaintiff has also alleged that the Company 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. In November 2003, the
           principal balance of the debenture was repaid, although the suit
           remains outstanding. Cornell claims damages in excess of $1,000,000.
           The Company denies the claims and intends to vigorously defend this
           lawsuit and the claims against it. The Company has asserted
           counterclaims against Cornell for fraud and breach of contract in the
           amount of $2,000,000. The Company has not accrued any expenses
           against this lawsuit, as the outcome cannot be predicted at this
           time.

           In Dec. 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 court costs. ClearWorks denies the
           claims and intends to vigorously contest all claims in this case and
           to enforce its indemnification rights against the principals of
           Southeast Tire Recycling. The Company has not accrued any expenses
           against this lawsuit, as the outcome cannot be predicted at this
           time.

           In 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. Defendant has filed an
           answer, denies the claims and intends to vigorously defend this
           lawsuit and claims against it. The Company has not accrued any
           expenses against this lawsuit, as the outcome cannot be predicted at
           this time.

           In fiscal 2004, The Tail Wind Fund Ltd. sued Link Two Communications
           and Eagle, Civil Action 04-CV-05776, in the United States District
           Court for the Southern District of New York. Tail Wind claims breach
           of contract seeking $25 million. The Company intends to vigorously
           defend this claim. The Company has accrued $500,000 in expenses
           against this lawsuit, although the outcome cannot be predicted at
           this time.

           The Company is also subject to legal proceedings and claims that
           arise in the ordinary course of business. The Company's management
           does not expect that the results in any of these legal proceedings
           will have a material adverse effect on the Company's financial
           condition or results of operations (see Note 11).

                                       23

<PAGE>

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

           On April 28, 2005, the Company entered into a confidential settlement
           agreement with Palisades Master Fund L.P. pursuant to which the
           Company issued 1,500,000 shares of its common stock in settlement of
           a lawsuit filed in November 2004 by Palisades Master Fund L.P. The
           Company believes the securities issued in the above transaction was
           exempt from registration pursuant to Section 3 (a) (10) of the
           Securities Act. There were no underwritten offerings employed and no
           sales commissions were paid in connection with the sales and
           issuances of the unregistered securities in the transaction set forth
           above.


Item 3 - Defaults Upon Senior Securities

           None

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

           The transactions contemplated by the note exchange agreements entered
           into in June 2005 and reported in Form 8-K filed on June 29, 2005,
           closed as of June 30, 2005.

Item 5 - Other Information     None

Item 6--Exhibits

         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 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

                                       24

<PAGE>

SIGNATURES

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


         EAGLE BROADBAND, INC.


Date:  July 11, 2005


                                              By:  /S/David Micek
                                                   --------------
                                                   David Micek
                                                   President and
                                                   Chief Executive Officer
                                                   (Principal Executive Officer)



                                                   /S/Eric Blachno
                                                   ---------------
                                                   Eric Blachno
                                                   Chief Financial Officer



                                                   /S/Tom Matura
                                                   -------------
                                                   Tom Matura
                                                   Corporate Controller and
                                                   Principal Accounting Officer

                                       25