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

                                   -----------

                                    FORM 10-Q

                                   -----------


[X]     QUARTERLY  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
        EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 29, 2004

[ ]     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: 001-15649


                              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 April 6, 2004, there were 191,315,329 shares of common stock outstanding.


<PAGE>






                     EAGLE BROADBAND, INC. AND SUBSIDIARIES
                                    Form 10-Q
                     For the Quarter Ended February 29, 2004

                                Table of Contents

<TABLE>
<CAPTION>
Part 1 - Financial Information                                                                   Page
          <S>           <C>                                                                        <C>
         Item 1.  Consolidated Financial Statements (Unaudited)

                  Consolidated Balance Sheets at February 29, 2004, and August 31, 2003            3

                  Consolidated Statements of Operations for the Three Months and
                  Six Months Ended February 29, 2004, and February 28, 2003                        4

                  Consolidated Statements of Changes In Shareholders' Equity for the
                  Six Months Ended February 29, 2004, and Twelve Months Ended
                  August 31, 2003                                                                  5

                  Consolidated Statements of Cash Flows for the Six Months Ended
                  February 29, 2004, and February 28, 2003                                         6

                  Notes to the Consolidated Financial Statements                                   7

         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                             26

         Item 3.  Quantitative and Qualitative Disclosures about Market Risk                      36

         Item 4.  Controls and Procedures                                                         36

Part 2 - Other Information

         Item 1.  Legal Proceedings                                                               37

         Item 2.  Recent Sales of Unregistered Securities or Changes
                  in Securities and Use of Proceeds.                                              37

         Item 3.  Defaults Upon Senior Securities                                                 37

         Item 4.  Submission of Matters to a Vote of Security Holders                             37

         Item 5.  Other Information                                                               37

         Item 6.  Exhibits and Reports on Form 8-K                                                38

Signatures                                                                                        39
</TABLE>




<PAGE>







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

<TABLE>
<CAPTION>


                                     ASSETS
                                                                           February 29,       August 31,
                                                                              2004              2003
                                                                              ----              ----

                                                                           (Unaudited)         (Audited)
<S>                                                                           <C>                  <C>
Current Assets:
     Cash and Cash Equivalents                                          $        3,615   $           824
     Securities Available for Sale                                               1,574             1,714
     Accounts Receivable, Net                                                    3,974             1,704
     Inventories                                                                 4,072             3,199
     Prepaid Expenses                                                              403               668
                                                                         -------------   ---------------
         Total Current Assets                                                   13,638             8,109

Property and Equipment:
     Operating Equipment                                                        35,900            36,422
     Less:  Accumulated Depreciation                                           (6,688)           (5,689)
                                                                         -------------    --------------
         Total Property and Equipment                                           29,212            30,733

Other Assets:
     Deferred Costs                                                                ---               334
     Goodwill                                                                   76,273            76,273
     Other Intangible Assets                                                     5,330             5,330
     Other Assets                                                                   94               227
                                                                         -------------    --------------

         Total Other Assets                                                     81,697            82,164
                                                                         -------------    --------------

Total Assets                                                             $     124,547    $      121,006
                                                                         =============    ==============

                                   LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
     Accounts Payable                                                    $       7,184    $        5,461
     Accrued Expenses                                                            3,825             7,560
     Notes Payable                                                               5,547             5,779
     Deferred Revenue                                                              452               230
                                                                         -------------    --------------

         Total Current Liabilities                                              17,008            19,030

         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 Shares at February 29, 2004, and
         August 31, 2003 -- 350,000,000 and 200,000,000, respectively
         Issued and Outstanding Shares at February 29, 2004, and
         August 31, 2003 -- 188,097,000 and 147,447,000, respectively              188               147
     Paid in Capital                                                           200,344           177,017
     Retained Earnings                                                        (92,320)          (74,461)
     Accumulated Comprehensive Income (Loss)                                     (673)             (727)
                                                                         -------------    --------------

         Total Shareholders' Equity                                            107,539           101,976
                                                                         -------------    --------------

Total Liabilities and Shareholders' Equity                               $     124,547    $      121,006
                                                                         =============    ==============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       3
<PAGE>






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

<TABLE>
<CAPTION>

                                                  For the Three Months ended February 29     For the Six Months ended February 29
                                                    (or February 28, as appropriate)           (or February 28, as appropriate)
                                                 ---------------------------------------    --------------------------------------


                                                          2004               2003                  2004               2003
                                                     ---------------     --------------     ---------------    ---------------

   <S>                                                       <C>               <C>                  <C>              <C>
Net Sales:
    Structured Wiring                                $       125         $     1,040       $        517        $     2,600
    Broadband Services                                     2,533                 888              4,096              1,562
    Products                                               1,086                 151              1,447              2,195
    Other                                                    ---                 984                 81              1,324
                                                     ---------------     --------------     ---------------    ---------------
Total Sales                                                3,744               3,063              6,141              7,681
                                                     ---------------     --------------     ---------------    ---------------
Costs of Goods Sold:
    Direct Labor and Related Costs                           391                 402                852                748
    Products and Integration Service                         301                 114                438              1,651
    Structured Wiring Labor and Materials                     56                 429                261                658
    Broadband Services Costs                               2,057                 254              2,246                530
    Depreciation and Amortization                            285                 114                571                228
    Other Manufacturing Costs                                  9                  31                 26                155
                                                     ---------------     --------------     ---------------    ---------------
Total Costs of Goods Sold                                  3,099               1,344              4,394              3,970
                                                     ---------------     --------------     ---------------    ---------------
Gross Profit                                                 645               1,719              1,747              3,711
                                                     ---------------     --------------     ---------------    ---------------
Operating Expenses:
    Selling, General and Administrative:
        Salaries and Related Costs                         5,844               1,355              6,802              2,863
        Advertising and Promotion                              2                  19                 21                 56
        Depreciation and Amortization                        293                 237                612                390
        Other Support Costs                                2,666                 977              4,091              1,911
        Research and Development                             147                  27                266                 59
                                                     ---------------     --------------     ---------------    ---------------
Total Operating Expenses                                   8,952               2,615             11,792              5,279
                                                     ---------------     --------------     ---------------    ---------------

Loss from Operations                                      (8,307)               (896)           (10,045)            (1,568)

Other Income / (Expenses):
    Interest Income - Net                                      6                  13                 11                  17
    Interest (Expense)                                      (569)                (96)            (7,649)               (259)
    Loss on Sale of Assets                                  (642)                ---               (642)               ---
    Gain on Sale of Marketable Securities                    114                 ---                466                ---
                                                     ---------------     --------------     ---------------    ---------------
       Total Other Income (Expense)                       (1,091)                (83)            (7,814)              (242)

Net Loss                                                  (9,398)               (979)           (17,859)            (1,810)
                                                     ---------------     --------------     ---------------    ---------------

Other Comprehensive Loss

Unrealized Holding Gain/(Loss)                              (255)               (954)                54               (941)
                                                     ---------------     --------------     ---------------    ---------------
Other Comprehensive Loss                               $  (9,653)          $  (1,933)        $  (17,805)         $  (2,751)
                                                     ===============     ==============     ===============    ===============
Net  Loss per Common Share:
Basic                                                     $ (0.05)            $ (0.01)           $ (0.10)            $ (0.10)
Diluted                                                   $ (0.05)            $ (0.01)           $ (0.10)            $ (0.10)
Comprehensive Loss                                        $ (0.05)            $ (0.01)           $ (0.10)            $ (0.10)
</TABLE>

See accompanying notes to consolidated financial statements.



                                       4
<PAGE>



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

<TABLE>
<CAPTION>


                                                                      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, 2002           73,051          $ 73        ---       $ 158,731        $(40,768)        $ (656)      $  117,380
                             ==========    ============  ==========   ============   ============   =============   ==============

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

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

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

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

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


Total Shareholders' Equity     147,447           147        ---         177,017         (74,461)           (727)         101,976
  As of August 31, 2003     ==========    ============  ==========   ============   ============   =============   ==============



Net Loss for the Six Months
Ended February 29, 2004           ---           ---        ---             ---          (17,859)                        (17,859)


New Stock Issued to
Shareholders
  Services and Compensation      4,729             5        ---           3,924             ---                           3,929
  Property and Other Assets                                 ---                             ---
  Retirement of Debt and
  Liabilities                   35,921            36        ---           7,998             ---                           8,034
  Interest for Beneficial
  Conversion Value                                          ---           6,912             ---                           6,912
  Retirements / Issuance of
 Warrants                                                                 4,493                                           4,493
Syndication Costs                                           ---                             ---

Treasury Stock                                              ---                             ---

Unrealized Holding Gain                                     ---                                              54              54

Total Shareholders' Equity     188,097          $188        ---         $200,344      $(92,320)         $ (673)        $107,539
   As of February 29, 2004  ==========    ============  ==========   ============   ============   =============   ==============

</TABLE>

See accompanying notes to consolidated financial statements.





                                       5
<PAGE>






                     EAGLE BROADBAND, INC., AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>


                                                                           For the Six Months Ended February 29,
                                                                             (or February 28, as appropriate)
                                                                      ------------------------------------------------

                                                                                  2004                 2003
                                                                              -------------        -------------

<S>                                                                             <C>                     <C>
Cash Flows from Operating Activities:
Net Loss                                                                       $ (17,859)              $ (1,810)

Adjustments to Reconcile Net Loss to Net Cash
Used by Operating Activities:
        Gain (Loss) on Sale of Assets                                                 611                   ---
        Interest for Beneficial Conversion Value                                    6,912                    91
        Depreciation and Amortization                                               1,183                   618
        Stock Issued for Interest Expense                                             108                   ---
        Stock Issued for Services Rendered                                          8,423                   201
        Allowance for Doubtful Accounts                                               196                   ---

        (Increase)/Decrease in Accounts Receivable                                (2,412)                  (80)
        (Increase)/Decrease in Inventories                                          (873)                 (406)
        (Increase)/Decrease in Prepaid Expenses                                       265                 (524)
        Increase/(Decrease) in Accounts Payable                                     1,723                   748
        Increase/(Decrease) in Accrued Expenses                                   (1,442)                  (40)
                                                                              -------------        -------------
                Total Adjustment                                                   14,694                   608
                                                                              -------------        -------------

Net Cash Used by Operating Activities                                             (3,165)               (1,201)

Cash Flows from Investing Activities:
        (Purchase)/Disposal of Property and Equipment                               (214)               (2,336)
        (Increase)/Decrease in Deferred Costs                                         334                 (669)
        (Increase)/Decrease in Marketable Securities                                  140                 1,831
        (Increase)/Decrease in Other Assets                                           133                   ---
                                                                              -------------        -------------

Net Cash Used by Investing Activities                                                 393               (1,174)
                                                                              -------------        -------------

Cash Flows from Financing Activities:
       Increase/(Decrease) in Notes Payable & Long-Term Debt                        5,563                 2,438
                                                                              -------------        -------------

Net Cash Provided by Financing Activities                                           5,563                 2,438
                                                                              -------------        -------------

Net Increase/(Decrease) in Cash                                                     2,791                    63
                                                                              -------------        -------------

Cash at the Beginning of Period                                                       824                 1,273
Cash at the End of Period                                                          $3,615                $1,336
                                                                              =============        =============

Supplemental Disclosure of Cash Flow Information:
Net Cash Paid During the Year for
       Interest                                                                      $312                 $ 153
       Income Taxes                                                                   ---                   ---

</TABLE>
Supplemental non-cash investing activities (See Note 21) and changes in
shareholder's equity.


See accompanying notes to consolidated financial statements.



                                       6
<PAGE>



                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                February 29, 2004



NOTE 1 - Basis of Presentation and Significant Accounting Policies:

         Eagle Broadband, Inc., (the Company or Eagle) incorporated as a Texas
         corporation on May 24, 1993, and commenced business in April of 1996.
         The Company is a supplier of broadband products and services, providing
         telecommunications equipment with related software, broadband products,
         and fiber and cable as used by service providers in the paging and
         other personal communications markets. The Company designs,
         manufactures, markets and services its products under the Eagle
         Broadband, Inc., and BroadbandMagic names. These products include
         transmitters, receivers, controllers, software, convergent set-top
         boxes, fiber, cable, and other equipment used in commercial and
         personal communications systems and radio and telephone systems.
         Additionally, the Company provides cable television, telephone,
         security, Internet connectivity, and related services under a bundled
         digital services package, commonly known as "BDS," through
         single-source billing. Also provided is last-mile cable and fiber
         installation services, as well as comprehensive IT products and
         services.

A)       Consolidation

         At February 29, 2004, the Company's subsidiaries were: Atlantic Pacific
         Communications, Inc. (APC) - operated as Eagle Communication Services;
         Etoolz, Inc. (ETI); Eagle Wireless International, Inc. (EWI);
         ClearWorks.net, Inc. (.NET); ClearWorks Communications, Inc. (COMM) -
         operated as Eagle BDS Services; ClearWorks Home Systems, Inc. (HSI) -
         operated as Eagle Residential Structured Wiring; Contact Wireless, Inc.
         (CWI) - operating as Eagle Paging Services; DSS Security, Inc., (DSS) -
         operated as Eagle Security Services; United Computing Group, Inc. (UCG)
         - operated as Eagle Technology Services; and Link Two Communications,
         Inc. (LINK II) - operated as Eagle Messaging Services. The consolidated
         financial statements include the accounts of the Company and its
         subsidiaries. All significant inter-company transactions and balances
         have been eliminated in consolidation.

B)       Cash and Cash Equivalents

         The Company has $3,615,000 and $824,000 of cash invested in interest
         bearing accounts and cash equivalents at February 29, 2004, and August
         31, 2003, respectively.

         The Company also has securities available for sale that include 967,500
         shares of common stock of Burst.com, 146,085,264 shares of Celerity
         Systems common stock and $350,000 Celerity Systems Bonds. These common
         stock and bond investments have an aggregate cost basis of $867,650 and
         an aggregate fair market value of $1,573,925 and are included in the
         Balance Sheet category of Securities Available for Sale as of February
         29, 2004. See (Note 8).


C)       Property and Equipment

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

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

         Expenditures for maintenance and repairs are charged against income as
         incurred whereas major improvements are capitalized. Eagle has acquired
         all of its property and equipment with either cash or stock and has not
         capitalized any interest expenses in its capital assets.


                                       7
<PAGE>


                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004


D)       Inventories

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

                                         February 29,             August 31,
                                            2004                     2003
                                        ------------              -----------

              Raw Materials              $   2,878               $    1,826
              Work in Process                1,018                    1,237
              Finished Goods                   176                      136
                                          --------                ---------
                                         $   4,072               $    3,199
                                         =========               ==========

E)       Revenue Recognition

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

         Eagle adopted EITF 00-21, "Revenue Arrangements with Multiple
         Deliverables," in the fourth quarter of fiscal 2003. The impact of
         adopting EITF 00-21 had no affect to Eagle's results of operations as
         Eagle did not have any contracts that have multiple elements as of
         February 29, 2004, or prior. When elements such as hardware, software
         and consulting services are contained in a single arrangement, or in
         related arrangements with the same customer, Eagle allocates revenue to
         each element based on its relative fair value, provided that such
         element meets the criteria for treatment as a separate unit of
         accounting. The price charged when the element is sold separately
         generally determines fair value. In the absence of fair value for a
         delivered element, Eagle allocates revenue first to the fair value of
         the undelivered elements and allocates the residual revenue to the
         delivered elements. In the absence of fair value for an undelivered
         element, the arrangement is accounted for as a single unit of
         accounting, resulting in a delay of revenue recognition for the
         delivered elements until the undelivered elements are fulfilled. Eagle
         limits the amount of revenue recognition for delivered elements to the
         amount that is not contingent on the future delivery of products or
         services or subject to customer-specified return or refund privileges.

         Deferred Revenues

         Revenues that are billed in advance of services being completed are
         deferred until the conclusion of the period of the service for which
         the advance billing relates. Deferred revenues are included on the
         balance sheet as a current liability until the service is performed and
         then recognized in the period in which the service is completed.
         Eagle's deferred revenues primarily consist of billings in advance for
         cable, internet, security and telephone services, which generally are
         between one and three months of services. Eagle had deferred revenues
         of $452,008 and $230,397 as of February 29, 2004, and August 31, 2003,
         respectively.

         Eagle Wireless International, Inc.
         Eagle designs, manufactures and markets transmitters, receivers,
         controllers and software, along with other equipment used in commercial
         and personal communication systems, radio and telephone systems.
         Revenues from these products are recognized when the product is
         shipped. Eagle's Wireless International Product revenues are reported
         under the category of Products on Eagle's Consolidated Statements of
         Operations included as page F-4 of this report and also under the
         category Eagle within Note 20 - Industry Segments.

         BroadbandMagic
         BroadbandMagic designs, manufactures and markets the convergent set-top
         boxes. Products are sent principally to commercial customers for a
         pre-sale test period of ninety days. Upon the end of the pre-sale test
         period, the customer either returns the product or accepts the product,
         at which time Eagle recognizes the revenue. Eagle's Broadband
         Multimedia and Internet Products revenues are reported under the
         category of Products on Eagle's Consolidated Statements of Operations
         included as page F-4 of this report and also under the category Eagle
         within Note 20 - Industry Segments. Revenue from software consists of
         software licensing. There is no post-contract customer support.
         Software revenue is allocated to the license using vendor specific
         objective evidence of fair value ("VSOE") or, in the absence of VSOE,
         the residual method. The price charged when the element is sold
         separately generally determines VSOE. In the absence of VSOE of a
         delivered element, Eagle allocates revenue to the fair value of the
         undelivered elements and the residual revenue to the delivered
         elements. Eagle recognizes revenue allocated to software licenses at
         the inception of the license.

                                       8
<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                February 29, 2004


         Eagle Broadband, Inc.
         Eagle Broadband, Inc., engages independent agents for sales principally
         in foreign countries and certain geographic regions in the United
         States. Under the terms of these one-year agreements the distributor or
         sales agents provide the companies with manufacturing business sales
         leads. The transactions from these distributors and agents are subject
         to Eagle's approval prior to sale. The distributorship or sales agent
         receives commissions based on the amount of the sales invoice from the
         companies to the customer. The sale is recognized at the time of
         shipment to the customer. These sales agents and distributors are not a
         significant portion of total sales in any of the periods presented.
         Eagle's Broadband, Inc., revenues are reported under the category of
         Products on Eagle's Consolidated Statements of Operations included as
         page F-4 of this report and also under the category Eagle within Note
         20 - Industry Segments.

         Eagle BDS Services - dba ClearWorks Communications, Inc.
         ClearWorks Communications, Inc., provides Bundled Digital Services to
         business and residential customers, primarily in the Texas market.
         Revenue is derived from fees charged for the delivery of Bundled
         Digital Services, which includes telephone, long distance, internet,
         security monitoring and cable services. This subsidiary recognizes
         revenue and the related costs at the time the services are rendered.
         Installation fees are recognized upon completion and acceptance. Eagle
         BDS Services' revenues are reported under the category of Broadband
         Services on Eagle's Consolidated Statements of Operations included as
         page F-4 of this report and also under the category EBS/DSS within Note
         20 - Industry Segments.

         Eagle Residential Structured Wiring - dba ClearWorks Home Systems, Inc.
         ClearWorks Home Systems, Inc., sells and installs structured wiring and
         audio and visual components to homes. This subsidiary recognizes
         revenue and the related costs at the time the services are performed.
         Revenue is derived from the billing of structured wiring to homes and
         the sale of audio and visual components to the homebuyers. Eagle's
         Residential Structured Wiring revenues are reported under the category
         of Structured Wiring on Eagle's Consolidated Statements of Operations
         included as page F-4 of this report and also under the category APC/HSI
         within Note 20 - Industry Segments.

         Eagle  Communication  Services - dba Atlantic Pacific  Communications,
         Inc. Atlantic Pacific Communications, Inc., provides project planning,
         installation,  project management,  testing and documentation of fiber
         and cable to commercial and industrial  clients  throughout the United
         States. The revenue from the fiber and cable installation and services
         is recognized  upon  percentage  of  completion  of the project.  Most
         projects  are  completed in less than one month,  therefore,  matching
         revenue  and expense in the period  incurred.  Service,  training  and
         extended  warranty  contract  revenues are  recognized as services are
         completed. Eagle's Communications Services revenues are reported under
         the category of Structured Wiring on Eagle's  Consolidated  Statements
         of  Operations  included as page F-4 of this report and also under the
         category APC/HSI within Note 20 - Industry Segments.

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

         Eagle Messaging Services - dba Link Two Communications, Inc.
         Link Two Communications, Inc., provides customers with one- and two-way
         messaging systems. The revenue from the sale of these products is
         recognized at the time the services are provided. Eagle's Messaging
         Services revenues are reported under the category of Other on Eagle's
         Consolidated Statements of Operations included as page F-4 of this
         report and also under the category Eagle within Note 20 - Industry
         Segments.

         Eagle Paging Services - dba Contact Wireless, Inc.
         Contact Wireless, Inc., provides customers with paging and mobile
         telephone products and related monthly services. Revenue from product
         sales is recorded at the time of shipment. Revenue for the mobile phone
         and paging service is billed monthly as the service is provided.
         Eagle's Paging Services revenues are reported under the category of
         Other on Eagle's Consolidated Statements of Operations included as page
         F-4 of this report and also under the category Other within Note 20 -
         Industry Segments.

         Eagle Security Services - dba DSS Security, Inc.
         DSS Security, Inc., provides security monitoring services to
         residential and commercial customers, purchases and resells and bundles
         and sells contracts from its own portfolio to independent third party
         companies. Security monitoring customers are billed three months in
         advance of service usage. The revenues are deferred at the time of
         billing and ratably recognized over the prepayment period as service is
         provided. Installation fees are recognized upon completion and
         acceptance. Revenues from the sale of security monitoring contracts,
         both purchased and owned, are recognized upon contract execution except
         for reserves, hold backs or retentions, which are deferred until the
         contract provisions are fulfilled. Eagle's Security Services revenues
         are reported under the category of Broadband Services on Eagle's
         Consolidated Statements of Operations included as page F-4 of this
         report and also under the category EBS/DSS within Note 20 - Industry
         Segments.

                                       9
<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004

         Eagle Technology Services - dba United Computing Group, Inc.
         United Computing Group, Inc., provides business-to-business hardware
         and software network solutions and network monitoring services. The
         revenue from the hardware and software sales is recognized at the time
         of shipment. The monitoring services recognition policy is to record
         revenue on completion. Eagle's Technology Services product revenues are
         reported under the category of "Products" while the services components
         are reported under the category "Other" on Eagle's Consolidated
         Statements of Operations included as page F-4 of this report and also
         under the category UCG within Note 20 - Industry Segments.


F)       Research and Development Costs

         For the three months ended February 29, 2004, and February 28, 2003,
         the Company performed research and development activities for internal
         projects related to its Orb'Phone Exchange, convergent set-top boxes as
         well as its multi-media entertainment centers. Research and development
         costs of $147,000 and $27,000 were expensed for the three months ended
         February 29, 2004, and February 28, 2003, respectively. Research and
         development costs of $266,000 and $59,000 were expensed for the six
         months ended February 29, 2004, and February 28, 2003, respectively.

         No research and development services were performed for outside parties
         for the three months ended February 29, 2004 and February 28, 2003.

G)       Income Taxes

         The Company adopted the provisions of Statement of Financial Accounting
         Standards (SFAS) No. 109, "Accounting for Income Taxes," which requires
         a change from the deferral method to assets and liability method of
         accounting for income taxes. Timing differences exist between book
         income and tax income, which relate primarily to depreciation methods.

H)       Net Earnings Per Common Share

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

                                                      February 29,   August 31,
                                                         2004          2003
                                                      -----------   -----------
           Weighted Average Number of Common
            Shares Outstanding Including

           Primary Common Stock Equivalents              174,614        95,465
           Fully Dilutive Common Stock Equivalents       174,614        95,465


I)       Impairment of Long-Lived Assets and Goodwill

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

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

                                       10
<PAGE>

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

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

         As of February 29, 2004, no impairment existed.

J)       Intangible Assets

         Goodwill represents the excess of the cost of companies acquired over
         the fair value of their net assets at the dates of acquisition.

         Other intangible assets consist of licenses and permits, which were
         being amortized using the straight-line method over their estimated
         useful life of twenty (20) years. Eagle's licenses include FCC licenses
         for designated narrowband personal communications services, radio
         frequencies or spectrum to service providers. Eagle does not maintain
         that these licenses have an indefinite life, but rather has ceased
         amortizing the remaining balance of $1,267,365 as management believes
         that this balance represents the salvage value of such assets. Eagle,
         to date, has maintained all operational requirements to keep its
         licenses current, and periodically assesses both future operating
         requirements as well as the salvage of such assets.

         Eagle is required to periodically assess the carrying value of goodwill
         and licenses associated with each of its distinct business units that
         comprise its business segments of the Company to determine if
         impairment in value has occurred. The Company updated its assessment as
         of August 31, 2003, and concluded that based on a valuation model
         incorporating expected future cash flows in consideration of historical
         cash flows and results to date, no impairment charge was necessary.

         Goodwill and other intangibles of $82,176,000 net of prior impairments
         and amortization were recorded under the purchase method for the
         purchases of ClearWorks.net, Inc.; Atlantic Pacific, Inc.; DSS
         Security, Inc.; Contact Wireless, Inc.; and Comtel, Inc. The majority
         of the intangibles were from the ClearWorks acquisition. ClearWorks was
         in the business of selling telecommunications services to residential
         neighborhoods. In fiscal 2003, Eagle realized it had failed to
         successfully achieve profits using the ClearWorks model of installing
         fiber optic cable to neighborhoods under the speculative attempt to
         capture enough individual homeowners in each neighborhood via
         individual selling methods to pay for the cable infrastructure. In
         early 2003, Eagle modified its strategy to deliver the ClearWorks
         developed bundled digital services approach including Internet,
         telephone, cable television and security monitoring services to
         residential and business users by targeting municipalities,
         homebuilders and residential real estate developers that finance and
         install the fiber optic cable backbone in every lot and offer Eagle
         exclusive rights to deliver digital bundled services to homeowners,
         using pre-selling promotions and other low-cost mass marketing
         techniques. In October 2003, Eagle hired a new Chief Executive Officer
         with an extensive sales and marketing background and proven senior
         management and operational skills leading high-growth technology
         companies to implement it's modified strategy.

         Eagle assessed the fair value of the intangible assets as of August 31,
         2003, and February 29, 2004, and concluded that the goodwill valuation
         remains at an amount greater than the current carrying value.

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

K)       Advertising Costs

         Advertising costs have been capitalized and amortized on the basis of
         contractual agreements entered into by the Company. These contracts are
         amortized over the life of the individual contracts or expensed in the
         period incurred. For the three and six months ended February 29, 2004,
         the Company has expensed $2,000 and $20,000. For the three and six
         months ended February 28, 2003, the Company has expensed $19,000 and
         $56,000.

                                       11
<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004


L)       Deferred Syndication Costs

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

M)       Use of Estimates

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

N)       Marketable Securities

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

O)       Other Comprehensive Income

         In 1997, the Financial Accounting Standards Board issued Statement of
         Financial Accounting Standards No. 130, "Other Comprehensive Income,"
         effective for fiscal years beginning after December 15, 1997. This
         statement considers the presentation of unrealized holding gains and
         losses attributable to debt and equity securities classified as
         available-for-sale. As stated, any unrealized holding gains or losses
         affiliated to these securities are carried below net income under the
         caption "Other Comprehensive Income." For the three months ended
         February 29, 2004, and February 28, 2003, the Company recorded a
         comprehensive loss of $255,000 and $954,000, respectively. For the six
         months ended February 29, 2004, and February 28, 2003, the Company
         recorded a comprehensive gain of $54,000 and a comprehensive loss of
         $941,000, respectively.

P)       Beneficial Conversion Values

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

Q)       Reclassification

         The Company has reclassified certain assets, costs and expenses for the
         three and six months ended February 29, 2004, and February 28, 2003, to
         facilitate comparisons.

R)       Recent Pronouncements

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

         In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
         "Guarantor's Accounting and Disclosure Requirements for Guarantees,
         Including Indirect Guarantees of Indebtedness of Others." For certain
         guarantees issued after December 31, 2002, FIN 45 requires a guarantor


                                       12
<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004

         to recognize, upon issuance of a guarantee, a liability for the fair
         value of the obligations it assumes under the guarantee. Guarantees
         issued prior to January 1, 2003, are not subject to liability
         recognition, but are subject to expanded disclosure requirements. The
         Company does not believe that the adoption of this Interpretation has
         had a material effect on its consolidated financial position or
         statement of operations.

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

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

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

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

S)       Product Warranties

         The Company warrants its products against defects in design, materials
         and workmanship generally for six months to a year. Other warranties
         from our vendors which are incorporated in our products are passed on
         to the customer at the completion of the sale. Provision for estimated
         warranty costs is made in the period in which such costs become
         probable. Historically, Eagle has not incurred any material warranty
         costs and, accordingly, Eagle has not accrued for these costs at
         February 29, 2004, and February 28, 2003. Eagle provides for the
         estimated cost of product warranties at the time it recognizes revenue.
         Eagle engages in product quality programs and processes, including
         actively monitoring and evaluating the quality of its component
         suppliers; however, ongoing product failure rates, material usage and
         service delivery costs incurred in correcting a product failure, as
         well as specific product class failures outside of Eagle's baseline
         experience, affect the estimated warranty obligation. If actual product
         failure rates, material usage or service delivery costs differ from
         estimates, revisions to the estimated warranty liability would be
         required.


NOTE 2 - Accounts Receivable:

            Accounts receivable consist of the following, in thousands:

                                                   February 29,   August 31,
                                                      2004           2003
                                                   -----------  ------------
            Accounts Receivable               $         4,395  $        2,116
            Allowance for Doubtful Accounts             (421)           (412)
                                                   -----------  ------------
            Net Accounts Receivable           $         3,974  $       1,704
                                                   ===========  ============

                                       13
<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004


NOTE 3 - Property, Plant and Equipment and Intangible Assets:

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

                                                      February 29,  August 31,
                                                         2004          2003
                                                      -----------   -----------
           Automobile                               $        143   $      143
           Headend Facility & Fiber Infrastructure        26,653       26,688
           Furniture, Fixtures & Equipment                 1,285        1,544
           Leasehold Improvements                            122          122
           Property, Manufacturing & Equipment             7,697        7,925
                                                      -----------  -----------
               Total Property, Plant & Equipment          35,900       36,422
                  Less: Accumulated Depreciation         (6,688)      (5,689)
                                                      -----------  -----------
               Net Property, Plant & Equipment      $     29,212   $   30,733
                                                      ===========  ===========

         Eagle expenses repairs and maintenance against income as incurred
         whereas major improvements are capitalized. Eagle defines major
         improvements as those assets acquired that extend the life of the
         underlying base asset while defining other improvements that do not
         extend the life as repairs and maintenance. Eagle expensed repairs and
         maintenance of $10,673 and $15,000 for the three months ended February
         29, 2004, and February 28, 2003, respectively, whereas it did not have
         any capitalized major improvements for the same time periods. Eagle
         expensed repairs and maintenance of $19,573 and $26,000 for the six
         months ended February 29, 2004, and February 28, 2003, respectively,
         whereas it did not have any capitalized major improvements for the same
         time periods.

         Eagle's headend facility and fiber infrastructure consist primarily of
         digital computing and telecommunications equipment that comprise
         Eagle's main headend facility at it headquarters, wireless headend
         equipment, a digital headend facility and a fiber backbone in the
         master planned communities in which it operates and a fiber ring
         connecting the various master planned communities in the Houston area.
         These fiber and headend infrastructures are similar to those that would
         exist in a major telecommunications or cable television provider that
         offers digital services for Internet, cable TV, telephone and security
         monitoring services. Eagle determined that a 20-year straight-line
         depreciation method is appropriate for its Headend Facility and Fiber
         Infrastructure based on industry standards for these asset types.

         Components of intangible assets are as follows, in thousands:

                                                      February 29,   August 31,
                                                         2004          2003
                                                      -----------   -----------
            Goodwill, Gross                         $     80,551   $    80,551
            Licenses & Permits                             5,330         5,330
                                                      -----------   -----------
                Total Intangible Assets                   85,881        85,881
                   Less: Accumulated Amortization        (4,278)       (4,278)
                                                      -----------   -----------
                Net Intangible Assets               $     81,603   $    81,603
                                                      ===========   ===========

         The changes in the carrying amount of goodwill, net of accumulated
         amortization for the six months ended February 29, 2004, are as follows
         (in thousands):



                                              Eagle        Other       Total
                                           -----------  -----------  ----------

            Balance on August 31, 2003       $74,711       $1,562     $76,273
            Acquisitions and Other             ---          ---         ---
                                           -----------  -----------  ----------

            Balance at February 29, 2004     $74,711       $1,562     $76,273
                                           ===========  ===========  ==========



NOTE 4 - Related Party Transaction - Sale of Assets:

         During the fiscal second quarter ended February 29, 2004, the Company
         completed a transaction with an effective date of October 1, 2003, with
         eRF, Inc., to sell certain assets of its subsidiary, Contact Wireless,
         Inc. eRF, Inc., is a private company engaged in providing products and
         services to the wireless industry. eRF, Inc., has a board member that
         is also a member of the Company's board of directors, namely, H. Dean
         Cubley. The assets sold related to the Contact Wireless paging network
         business and included a switch center lease and tower lease, network
         equipment, network contracts, paging licenses, accounts receivable,
         inventory and furniture and fixtures. The Company had downsized this
         subsidiary during the course of fiscal 2003 and during the three months
         ended February 29, 2004, elected to exit this business segment. The
         Company recorded approximately $329,000 in revenues with a
         corresponding segment loss of approximately $387,000 from this business
         segment in fiscal 2003 and recorded approximately $80,000 in revenues


                                       14
<PAGE>


                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004


         with a corresponding loss of $25,000 in the first quarter of fiscal
         2004. The Company had no competing offers with respect to the sale of
         assets and or sale of the business and the Company's board of directors
         determined that the offer from eRF, Inc., represented fair value. The
         Company terminated its remaining employees associated with this
         subsidiary and eRF, Inc., entered into new employment arrangements with
         certain of these employees. Additionally, eRF, Inc., assumed certain
         liabilities and subleased certain property from the Company in Houston
         and San Antonio. In conjunction with this transaction, the Company
         recorded a loss of $642,000 on the sale of assets and certain other
         costs incurred in the exit from this line of business.

NOTE 5 - Notes Payable:

         The  following  table  lists  the  Company's  note  obligations  as of
         February 29, 2004, and August 31, 2003, in thousands:


                                   Annual
                                  Interest              February 29,  August 31,
                                    Rate      Due Date     2004         2003
                                ------------------------------------------------
 Vehicles                         Various     Various     $   ---      $     4
 5% Convertible Debenture
 (Note 9)                          5 .0%      Demand          ---        1,200
 Tail Wind Convertible Debenture    2.0%      Demand          ---        1,595
 Notes Payable - Investor Group    10.0%    October 2003      ---          900
 Notes Payable - Q Series Bonds    12.0%      Various        5,275       1,363
 Other                            Various     Various          272         717

                                                            -------    --------
 Total notes Payable                                      $  5,547     $ 5,779
                                                            -------    --------
 Less Current Portion                                        5,547       5,779
                                                            -------    --------
 Total Long-Term Debt                                     $    ---     $   ---
                                                            =======    ========

NOTE 6 - Line of Credit:

         APC entered into a credit facility with Southwest Bank of Texas (SWBT)
         to provide working capital and fund ongoing operations. This credit
         facility is a purchase and sale agreement against accounts receivable
         and provides for borrowings up to $1,000,000 based on eligible accounts
         receivable and is secured by APC accounts receivable and guaranteed by
         Eagle Broadband, Inc. During the first quarter of fiscal 2004, APC
         repaid and canceled the line of credit.

         UCG entered into a credit facility with Southwest Bank of Texas (SWBT)
         to provide working capital, repay the IBM credit line and fund ongoing
         operations. The new credit facility is a purchase and sale agreement
         against accounts receivable, provides for borrowings up to $3,000,000
         based on eligible accounts receivable and is secured by UCG accounts
         receivable and guaranteed by Eagle Broadband, Inc. During the first
         quarter of fiscal 2004, APC repaid and canceled the line of credit,

NOTE 7 - Convertible Debentures:

         During October 2002, the Company entered into a $3,000,000 convertible
         debenture agreement with Cornell Capital Partners, LP (CCP). During the
         three month period ended November 30, 2003, the principal balance of
         the debenture was repaid, although a lawsuit remains outstanding - see
         Legal Proceedings. On July 16, 2002, the Company entered into a
         $20,000,000 line of credit with Cornell Capital Partners, LP (CCP). The
         Company has not drawn on the line of credit and currently has no plans
         to do so. One of the issues in the litigation between CCP and the
         Company (see Legal Proceedings below) is whether the Company owes CCP a
         commitment fee for this line of credit. Cornell contends that the
         Company owes $395,000 of stock; the Company denies the liability. The
         Company is currently negotiating to settle this contested liability and
         the cancellation of the line of credit.

         During 2001, the Company acquired ClearWorks.net, Inc., and as a
         result, ClearWorks is a wholly owned subsidiary of Eagle. Link Two
         Communications, Inc., is a subsidiary of ClearWorks. Link Two entered
         an agreement with The Tail Wind Fund Ltd., under which Tail Wind
         purchased from Link Two a 2% convertible note in the initial amount of
         $5,000,000. As a result of the acquisition, Eagle the parent of Link
         Two, has guaranteed the Link Two notes issued to Tail Wind and allowed
         Tail Wind to convert the above mentioned debt into Eagle common stock
         and warrants at various rates. During the three-month period ended
         February 29, 2004, the note was repaid.

         Between November 25, 2002, and June 9, 2003, the Company sold
         approximately $6.5 million of convertible debt securities to 45
         accredited investors. The securities consisted of $25,000, 12%
         five-year bonds. The bonds are due and payable upon maturity at the end
         of the five-year period. Interest on the bonds is payable at the rate
         of 12% per annum, and is payable semiannually. The bondholder may
         require the Company to convert the bond (including any unpaid interest)

                                       15
<PAGE>

         into shares of the Company's common stock at any time during the first
         year but not thereafter. The conversion rates vary from $0.16 to $0.34
         per share. The Company may redeem the bonds at any time after the first
         year.

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

NOTE 8 - Securities Available for Sale:

         At February 29, 2004 and August 31, 2003, all of the Company's
         marketable equity securities are classified as available-for-sale.

         Securities available for sale include 967,500 shares of common stock of
         Burst.com, 146,085,264 shares of Celerity Systems common stock and
         $350,000 Celerity Systems Bonds as of February 29, 2004. These common
         stock and bond investments have an aggregate cost basis of $867,650 and
         an aggregate fair market value of $1,573,925.

NOTE 9 - Income Taxes:

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

                                                    February 29,     August 31,
                                                       2004            2003
                                                        (%)             (%)
                                                    ------------     ----------
                 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 apply the U.S. Federal
         income tax rate of 34% to pretax income from continuing operations as a
         result of the following: (in thousands).

                                                    February 29,     August 31,
                                                       2004            2003
                                                    ------------     ----------
                 Computed Expected Tax Benefit      $ (6,072)        $  (11,456)
                 Increase in Valuation Allowance       6,072             11,456
                                                    ------------     ----------
                                                    $     0          $       0
                                                    ============     ==========

         The tax effects of temporary differences that give rise to significant
         portions of the deferred tax assets and deferred tax liabilities at
         February 29, 2004, and August 31, 2003, are presented below, in
         thousands, and include the balances of the acquired company
         ClearWorks.Net.

                                                      February 29,   August 31,
                                                          2004         2003
                                                      -----------   ----------
                 Deferred tax assets:
                 Accounts Receivable, Principally Due
                 to Allowance for Doubtful Accounts   $    ---     $      ---

                 Net Operating Loss Carry-Forwards      41,575         35,503
                 Less Valuation Allowance              (41,575)       (35,503)
                                                      -----------   ----------
                 Net Deferred Tax Assets                   ---            ---

                 Deferred Tax Liabilities:
                 Differences in Depreciation               ---            ---
                                                      -----------   ----------
                 Net Deferred Tax Liabilities         $    ---     $      ---
                                                      ===========   ==========


                                       16
<PAGE>


                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004


         The valuation allowance for deferred tax assets of February 29, 2004,
         and August 31, 2003, was $41,575,000 and $35,503,000, respectively. At
         February 29, 2004, the Company has net operating loss carry-forwards of
         $130,741,000, which are available to offset future federal taxable
         income, if any, with expirations from 2020 to 2021.

NOTE 10 - Issuance of Common Stock:

         For the six months ended February 29, 2004, the Company issued shares
         of common stock. The following table summarizes the shares of common
         stock issued, in thousands.

        Shares Outstanding August 31, 2003                             147,447
                                                                      ---------
        Shares Issued for Retirement of Debt and Liabilities            35,921
        Shares  Issued for  Services,  Compensation,  Property and       4,729
        Other Assets
                                                                      ---------
        Shares Outstanding February 29, 2004                           188,097
                                                                      =========

NOTE 11 - Preferred Stock, Stock Options and Warrants:
          -------------------------------------------

         In July 1996, the Board of Directors and majority shareholders adopted
         an employee stock option plan under which 400,000 shares of Common
         Stock have been reserved for issuance. Since that time, the Board of
         Directors have amended the July 1996, employee stock option plan under
         which 1,000,000 shares of Common Stock have been reserved for issuance.
         As of February 29, 2004, options to purchase 351,233 are outstanding
         and 648,767 are available to be issued.

         The Company has issued (or has acquired through its acquisitions) and
         has outstanding the following warrants which have not yet been
         exercised at February 29, 2004:

         50,000 stock purchase options issued to L. A. Delmonico Consulting,
         Inc., expiring April 4, 2005. The warrants are to purchase fully paid
         and non-assessable shares of the common stock, par value $.001 per
         share at a purchase price of $1.04 per share. The shares of common
         stock underlying these warrants were registered for resale on August 9,
         2002, under the Securities Act of 1933. As of February 29, 2004, none
         of these options have been exercised

         25,000 stock purchase warrants issued to Synchton, Inc., expiring
         January 1, 2004. The warrants are to purchase fully paid and
         non-assessable shares of the common stock, par value $.001 per share at
         a purchase price of $2.00 per share. As of February 29, 2004, these
         warrants have expired unexercised.

         41,667 stock purchase warrants issued to Peter Miles expiring July 20,
         2004. The warrants are to purchase fully paid and non-assessable shares
         of the common stock, par value $.001 per share at a purchase price of
         $2.00 per share. The shares of common stock underlying these have not
         been registered as of November 30, 2002, under the Securities Act of
         1933. As of February 29, 2004, none of these warrants have been
         exercised.

         41,667 stock purchase warrants issued to Peter Miles expiring July 20,
         2004. The warrants are to purchase fully paid and non-assessable shares
         of the common stock, par value $.001 per share at a purchase price of
         $2.25 per share. The shares of common stock underlying these warrants
         have not been registered or issued, under the Securities Act of 1933.
         As of February 29, 2004, none of these warrants have been exercised.

         25,000 stock purchase warrants issued to Synchton, Inc., expiring April
         1, 2004. The warrants are to purchase fully paid and non-assessable
         shares of the common stock, par value $.001 per share at a purchase
         price of $1.10 per share. The shares of common stock underlying these
         warrants were registered for resale on August 9, 2002, under the
         Securities Act of 1933. As of February 29, 2004, all of these warrants
         have been exercised.

         58,333 stock purchase warrants issued to Peter Miles expiring July 20,
         2004. The warrants are to purchase fully paid and non-assessable shares
         of the common stock, par value $.001 per share at a purchase price of
         $3.00 per share. The shares of common stock underlying these warrants
         have not been registered or issued, under the Securities Act of 1933.
         As of February 29, 2004, none of these warrants have been exercised.

         25,000 stock purchase warrants issued to Synchton, Inc., expiring July
         1, 2004. The warrants are to purchase fully paid and non-assessable
         shares of the common stock, par value $.001 per share at a purchase
         price of $1.35 per share. The shares of common stock underlying these
         warrants were registered for resale on August 9, 2002, under the
         Securities Act of 1933. As of February 29, 2004, none of these warrants
         have been exercised.

         25,000 stock purchase warrants issued to Synchton, Inc., expiring
         October 1, 2004. The warrants are to purchase fully paid and
         non-assessable shares of the common stock, par value $.001 per share at
         a purchase price of $0.69 per share. The shares of common stock
         underlying these warrants were not registered for resale under the
         Securities Act of 1933. As of November 30, 2003 none of these warrants
         have been exercised.

         25,000 stock purchase warrants issued to Synchton, Inc., expiring
         January 1, 2005. The warrants are to purchase fully paid and
         non-assessable shares of the common stock, par value $.001 per share at
         a purchase price of $0.61 per share. The shares of common stock
         underlying these warrants were not registered for resale under the
         Securities Act of 1933. As of February 29, 2004, none of these warrants
         have been exercised.

                                       17

<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004

         25,000 stock purchase warrants issued to Synchton, Inc., expiring April
         1, 2005. The warrants are to purchase fully paid and non-assessable
         shares of the common stock, par value $.001 per share at a purchase
         price of $0.38 per share. The shares of common stock underlying these
         warrants were not registered for resale under the Securities Act of
         1933. As of February 29, 2004, none of these warrants have been
         exercised.

         192,000 stock purchase warrants issued to Tech Technologies Services,
         LLC, expiring April 24, 2008. The warrants are to purchase fully paid
         and non-assessable shares of the common stock, par value $.001 per
         share at a purchase price of $7.50 per share. The shares of common
         stock underlying these warrants have not been registered or issued,
         under the Securities Act of 1933. As of February 29, 2004, none of
         these warrants have been registered, issued or exercised.

         25,000 stock purchase warrants issued to Synchton, Inc., expiring July
         1, 2005. The warrants are to purchase fully paid and non-assessable
         shares of the common stock, par value $.001 per share at a purchase
         price of $0.39 per share. The shares of common stock underlying these
         warrants were not registered for resale under the Securities Act of
         1933. As of February 29, 2004, none of these warrants have been
         exercised.

         240,000 stock purchase warrants issued to Shannon D. McLeroy expiring
         April 24, 2008. The warrants are to purchase fully paid and
         non-assessable shares of the common stock, par value $.001 per share at
         a purchase price of $7.50 per share. The shares of common stock
         underlying these warrants have not been registered or issued, under the
         Securities Act of 1933. As of February 29, 2004, none of these warrants
         have been registered, issued or exercised.

         168,000 stock purchase warrants issued to Michael T. McClere expiring
         April 24, 2008. The warrants are to purchase fully paid and
         non-assessable shares of the common stock, par value $.001 per share at
         a purchase price of $7.50 per share. The shares of common stock
         underlying these warrants have not been registered or issued, under the
         Securities Act of 1933. As of February 29, 2004, none of these warrants
         have been registered, issued or exercised.

         25,000 stock purchase warrants issued to Synchton, Inc., expiring
         October 1, 2005. The warrants are to purchase fully paid and
         non-assessable shares of the common stock, par value $.001 per share at
         a purchase price of $0.35 per share. The shares of common stock
         underlying these warrants were not registered for resale under the
         Securities Act of 1933. As of February 29, 2004, none of these warrants
         have been exercised.

         40,000 stock purchase warrants issued to Rachel McClere 1998 Trust
         expiring April 24, 2008. The warrants are to purchase fully paid and
         non-assessable shares of the common stock, par value $.001 per share at
         a purchase price of $7.50 per share. The shares of common stock
         underlying these warrants have not been registered or issued, under the
         Securities Act of 1933. As of February 29, 2004, none of these warrants
         have been registered, issued or exercised.

         160,000 stock purchase warrants issued to McClere Family Trust expiring
         April 24, 2008. The warrants are to purchase fully paid and
         non-assessable shares of the common stock, par value $.001 per share at
         a purchase price of $7.50 per share. The shares of common stock
         underlying these warrants have not been registered or issued, under the
         Securities Act of 1933. As of February 29, 2004, none of these warrants
         have been registered, issued or exercised.

         25,000 stock purchase warrants issued to Synchton, Inc., expiring
         January 1, 2006. The warrants are to purchase fully paid and
         non-assessable shares of the common stock, par value $.001 per share at
         a purchase price of $0.28 per share. The shares of common stock
         underlying these warrants were not registered for resale under the
         Securities Act of 1933. As of February 29, 2004, none of these warrants
         have been exercised.

          25,000 stock purchase warrants issued to Synchton, Inc., expiring
         April 1, 2006. The warrants are to purchase fully paid and
         non-assessable shares of the common stock, par value $.001 per share at
         a purchase price of $0.26 per share. The shares of common stock
         underlying these warrants were not registered for resale under the
         Securities Act of 1933. As of February 29, 2004, none of these warrants
         have been exercised.

         25,000 stock purchase warrants issued to Synchton, Inc., expiring July
         1, 2006. The warrants are to purchase fully paid and non-assessable
         shares of the common stock, par value $.001 per share at a purchase
         price of $0.38 per share. The shares of common stock underlying these
         warrants were not registered for resale under the Securities Act of
         1933. As of February 29, 2004, none of these warrants have been
         exercised.

         25,000 stock purchase warrants issued to Synchton, Inc., expiring
         October 1, 2006. The warrants are to purchase fully paid and
         non-assessable shares of the common stock, par value $.001 per share at
         a purchase price of $0.45 per share. The shares of common stock
         underlying these warrants were not registered for resale under the
         Securities Act of 1933. As of February 29, 2004, none of these warrants
         have been exercised.

         3,650,000 stock purchase warrants issued to Eagle Broadband employees
         under incentive clauses of employment contracts expiring September 1,
         2008. The warrants vest based on market performance of Eagle's common
         stock at market capitalization between $50 million and $200 million.
         The warrants are to purchase fully paid and non-assessable shares of
         the common stock, par value $.001 per share at a purchase price of
         $0.41 per share. The shares of common stock underlying these warrants
         were not registered for resale under the Securities Act of 1933. As of
         February 29, 2004, none of these warrants have been exercised.

                                       18
<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004

         400,000 stock purchase warrants issued to Eagle Broadband employee
         under incentive clauses of employment contracts expiring September 1,
         2008. The warrants vest based on market performance of Eagle's common
         stock at market capitalization between $50 million and $200 million.
         The warrants are to purchase fully paid and non-assessable shares of
         the common stock, par value $.001 per share at a purchase price of
         $0.60 per share. The shares of common stock underlying these warrants
         were not registered for resale under the Securities Act of 1933. As of
         February 29, 2004, none of these warrants have been exercised.

         500,000 stock purchase warrants issued to Eagle Broadband employee
         under incentive clauses of employment contracts expiring September 1,
         2008. The warrants vest based on market performance of Eagle's common
         stock at market capitalization between $50 million and $200 million.
         The warrants are to purchase fully paid and non-assessable shares of
         the common stock, par value $.001 per share at a purchase price of
         $0.75 per share. The shares of common stock underlying these warrants
         were not registered for resale under the Securities Act of 1933. As of
         February 29, 2004, none of these warrants have been exercised.

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


                  Warrants Issued & Outstanding        Warrants Exercisable
                  ------------------------------  ----------------------------

          Class of    February 29,     August 31,     February 29,    August 31,
          Warrants           2004           2003             2004          2003
        ----------------------------------------------------------------------
              0.26         25,000         25,000            25,000       25,000
              0.28         25,000         25,000            25,000       25,000
              0.35         25,000         25,000            25,000       25,000
              0.38         50,000         50,000            50,000       50,000
              0.39         25,000         25,000            25,000       25,000
              0.41      3,650,000      3,800,000         3,650,000    1,550,000
              0.45         25,000         25,000            25,000       25,000
              0.60        400,000        400,000           400,000            -
              0.61         25,000         25,000            25,000       25,000
              0.69         25,000         25,000            25,000       25,000
              0.75        500,000        500,000           500,000            -
              1.04         50,000         50,000            50,000       50,000
              1.10              -         25,000                 -       25,000
              1.35         25,000         25,000            25,000       25,000
              2.00         41,667         41,667            41,667       41,667
              2.25         41,667         41,667            41,667       41,667
              3.00         58,333         58,333            58,333       58,333
              7.50        192,000        192,000           192,000      192,000
              7.50        240,000        240,000           240,000      240,000
              7.50        168,000        168,000           168,000      168,000
              7.50        200,000        200,000           200,000      200,000
              ESOP        351,233 *      406,131 *         351,233 *    406,131
                  ---------------  -------------  ----------------   ----------
                        6,142,900 **   6,372,798 **      6,142,900 **  3,222,798
                  ===============  =============  ================   ==========


         *Denotes  warrants  which  would  have  an  anti-dilutive   effect  if
         currently  used to  calculate  earnings per share for the period ended
         February 29, 2004, and August 31, 2003.
         **Denotes 12,650,000 warrants for shares that have been excluded from
         this table that are subject to issuance to certain employees under
         incentive clauses of employment contracts expiring five years from the
         date of issuance. The warrants vest based on accumulated revenue
         targets ranging from $50 million to $500 million and on market
         performance of Eagle's common stock at market capitalization between
         $450 million and $1 billion. The warrants are to purchase fully paid
         and non-assessable shares of the common stock, par value $0.001 per
         share at purchase prices ranging from $0.41 to $10.00 per share. The
         Company has determined that the probability of the achievement of such
         targets is remote as of the date of the issuance of the Company's
         financial statements and thus has not included them in the outstanding
         warrant table above. The shares of common stock underlying these
         warrants were not registered for resale under the Securities Act of
         1933. As of February 29, 2004, none of these warrants have been either
         earned or exercised.

NOTE 12 - Capitalization Activities:

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


                                       19
<PAGE>


                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004


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

NOTE 13 - Risk Factors:

         For the six months ended February 29, 2004, and February 28, 2003,
         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
         industry. Approximately eighty percent of the Company's revenues and
         receivables have been created solely in the state of Texas, zero
         percent have been created in the international market, and the
         approximate twenty percent remainder have been created relatively
         evenly over the rest of the nation during the six months ended February
         29, 2004. Whereas approximately seventy-six percent of the Company's
         revenues and receivables have been created solely in the state of
         Texas, zero percent have been created in the international market, and
         the approximate twenty-four percent remainder has been created
         relatively evenly over the rest of the nation for the six months ended
         February 29, 2003. Through the normal course of business, the Company
         generally does not require its customers to post any collateral.

NOTE 14 - Foreign Operations:

         Although the Company is based in the United States, its product is sold
         on the international market. Presently, international sales total
         approximately 0% and 0% for the six months ended February 29, 2004, and
         February 28, 2003, respectively.

NOTE 15 - Commitments and Contingent Liabilities:

         Leases

         For the six months ending February 29, 2004, and February 28, 2003,
         rental expenses of approximately $314,000 and $472,000 respectively,
         were incurred.

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

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

         The Company's wholly owned subsidiary, Contact Wireless, Inc., leases
         office space in San Antonio, Texas with Wade Holdings. This
         non-cancelable lease expires June 2007. The monthly payments are
         $3,300.

         The Company's wholly owned subsidiary, Contact Wireless, Inc., leases
         office space in San Antonio, Texas with Cotter & Sons. This
         non-cancelable lease expires August 2004. The monthly payments are
         $2,697.50.

         Future obligations under the non-cancelable lease terms areas follows:


               Period Ending August 31,             Amount
                                                 -------------
                         2004                      $ 198,695
                         2005                        147,960
                         2006                         75,720
                         2007                         33,000
                                                 -------------
                        Total                      $ 455,375
                                                 =============

         Legal Proceedings

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

                                       20
<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004

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

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

         On December 14, 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.

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

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

         On January 31, 2004, Eagle became a defendant in Avnet, Inc. d/b/a
         Cilicon vs. Eagle Broadband, Inc. f/k/a Eagle Wireless International,
         Inc.; Cause No. 04CV0046; in the 56th Judicial Court, Galveston County,
         Texas. This suit presents claims for breach of contract, anticipatory
         breach, failure to pay money due on sworn account and quantum meruit.
         The suit seeks recovery of damages in the sum of $780,056.03, plus
         interest, attorney fees and court costs. The Company settled this
         lawsuit on April 6, 2004, for cash to be paid totaling $612,500 between
         April 30, 2004, and June 30, 2004, and consequently $612,500 was
         charged to operations in the Company's fiscal 2003 and 2004 financial
         statements.

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

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


                                       21
<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004

NOTE 16 - Earnings Per Share:

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

                                     For the six months ended February 29, 2004
                                     ------------------------------------------
                                         Income         Shares       Per-Share
                                       (Numerator)   (Denominator)    Amount
                                        ---------     -----------     --------
    Net Loss                          $(17,859)

    Basic EPS:
     Income Available to
     Common Stockholders               $(17,859)       174,614        $(0.10)

    Effect of Dilutive Securities
      Warrants                             ---             ---           ---
                                        --------      ----------     --------
    Diluted EPS:
      Income Available to
      Common Stockholders
        and Assumed Conversions.       $(17,859)       174,614        $(0.10)
                                       =========     ==========      ========

                                     For the six months ended February 28, 2003
                                     ------------------------------------------
                                         Income          Shares       Per-Share
                                       (Numerator)    (Denominator)    Amount
                                        ---------     -----------     --------
    Net Loss                             $(5,880)

    Basic EPS:
     Income Available to
     Common Stockholders                $(5,880)        60,707        $(0.10)

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


    Diluted EPS:
      Income Available to
      Common Stockholders
        and Assumed Conversions.       $(5,880)         60,707        $(0.10)
                                       =========     ==========      ========

         For the six months ended  February  29,  2004,  and February 28, 2003,
         anti-dilutive securities existed (see Note 11).

NOTE 17 - 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 February 29, 2004,  351,233  options
         have been issued and are outstanding 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. For the six months ended February 2004 and 2003, the impact
         on  net  income  is  minimal;  therefore,  the  pro  forma  disclosure
         requirements  prescribed  by  SFAS  123  are  not  significant  to the
         Company.  The  fair  values  were  determined  using  a  Black-Scholes
         option-pricing model with the following assumptions:

                                             February 29,        February 28,
                                                 2004                2003
                                           -----------------    ---------------
              Dividend Yield                    0.00%              0.00%
              Volatility                         0.91               0.91
              Risk-Free Interest Rate           4.00%              7.00%
              Expected Life                       5                  5


                                       22
<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004


         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-month period ended February
         29, 2004, and February 28, 2003:


<TABLE>
<CAPTION>

                                                                              2004           2003
                                                                          -------------  -------------
 <S>                                                                       <C>            <C>
 Net loss, as reported                                                    $   (17,859)   $    (1,810)
 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                (-)            (-)
                                                                          -------------  -------------

 PRO FORMA NET EARNINGS (LOSS)                                            $   (17,859)   $    (1,810)
                                                                          =============  ==============

 Net Loss Per Share:
   As Reported                                                            $     (0.10)   $     (0.10)
   Pro Forma                                                              $     (0.10)   $     (0.10)

 Diluted Net Loss Per Share
   As Reported                                                            $     (0.10)   $     (0.10)
   Pro Forma                                                              $     (0.10)   $     (0.10)

</TABLE>


   Option activity was as follows for the six months ended February 29, 2004:

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

           Outstanding at beginning of year       406,131       $          1.27
           Granted                                      -
           Assumed through acquisitions                 -                    -
           Exercised                              (54,898)                 0.66
           Forfeited/Cancelled                          -                    -

           Outstanding at end of year             351,233                  1.36

           Exercisable at year-end                351,233       $          1.36

S


   Information about options outstanding was as follows at February 29, 2004:

<TABLE>
<CAPTION>

                                             Options Outstanding                             Options Exercisable
                           ---------------------------------------------------------   ---------------------------------
<S>                            <C>                    <C>                <C>               <C>               <C>
                                                    Weighted-
                                                     Average           Weighted-                             Weighted-
                                                    Remaining           Average                               Average
                                 Number            Contractual          Exercise           Number            Exercise
Range of Exercise Prices      Outstanding         Life in Years          Price           Exercisable          Price
                           ------------------     --------------      -----------       -------------       -----------
$0-$1.00                        213,141                5.0                $0.55             213,141           $0.55
$1.01-$2.00                     112,532                5.0                $1.73             112,532           $1.73
$2.01-$7.50                      25,500                5.5                $6.55              25,500           $6.55

                                351,233                5.2                $2.32             351,233           $2.32
                           ==================    ================     ==============   ================   ==============
</TABLE>

NOTE 18 - Retirement Plans:

         During October 1997, the Company initiated a 401(k) plan for its
         employees, which is funded through the contributions of its
         participants. This plan maintains that the Company will match up to 3%
         of each participant's contribution. For the three months ended February
         29, 2004, and February 28, 2003, employee contributions were
         approximately $30,891 and $54,628, respectively. The Company matched
         approximately $0 and $22,065, respectively for those same periods.


                                       23
<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004

NOTE 19 - Major Customers:

         The Company had gross sales of $3,744,000 and $3,063,000 for the three
         months ended February 29, 2004, and February 28, 2003, respectively.
         The three month period ended February 29, 2004, included $2,007,335 or
         54% of the quarters total sales from Sweetwater Security Capital, LLC,
         in conjunction with a contract valued at $2,032,587 that was executed
         with the Company's security-monitoring service subsidiary, DSS
         Security, Inc. The remaining $25,252 associated with this contract has
         been deferred in conjunction with a six-month holdback provision of the
         contract. Additionally, the three months ended February 29, 2004,
         included $742,538 or 20% of the three months total sales from General
         Dynamics in conjunction with shipments of convergent set-top-boxes.

         The Company had gross sales of $6,141,000 and $7,681,000 for the six
         months ended February 29, 2004, and February 28, 2003, respectively.
         The six month period ended February 29, 2004, included $2,873,548 or
         47% of the six month period total sales from Sweetwater Security
         Capital, LLC, in conjunction with contracts valued at $3,115,354 that
         were executed with the Company's security-monitoring service
         subsidiary, DSS Security, Inc. The remaining $241,805 associated with
         these contracts has been deferred in conjunction with six-month
         holdback provisions of these contracts. Additionally, the six-month
         ended February 29, 2004, included $750,488 or 12% of the six months
         total sales from General Dynamics in conjunction with shipments of
         convergent set-top-boxes.

         There were no parties individually that represented greater than ten
         percent of the revenues in the three and six months ended February 28,
         2003.

NOTE 20 - Industry Segments:

         The Company has seven business units have separate management teams and
         infrastructures that offer different products and services. The
         business units have been aggregated into five reportable segments (as
         described below) since the long-term financial performance of these
         reportable segments is affected by similar economic conditions.

         Eagle  Broadband,  Inc.,  (Eagle)  is  a  supplier  of  broadband  and
         telecommunications  equipment  with  related  software  and  broadband
         products.    (Including    Eagle   Wireless    International,    Inc.;
         BroadbandMagic; and Etoolz, Inc., for this summary).

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

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

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

         United Computing Group, Inc., (UCG) is an accelerator company and
         computer hardware and software reseller. UCG / INT maintains a national
         market presence.

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

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

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

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

<TABLE>
<CAPTION>

                                         For the six months ending February 29, 2004
                <S>                         <C>      <C>          <C>      <C>          <C>     <C>         <C>
                (in thousands)           APC/HSI     EBS/DSS     UCG      Eagle     Other      Elim.     Consol.
                                       --------------------------------------------------------------------------
                Revenue                      517      4,097        428      1,019        81        ---      6,141
                Segment Loss                (499)     (706)       (21)    (8,785)      (33)        ---   (10,045)
                Total Assets                 461     23,283        182    174,592    57,026   (130,996)   124,547
                Capital Expenditures         228         12         33          0         0                   273
                Depreciation                  88        199         30        811        54        ---      1,183

</TABLE>


                                       24
<PAGE>

                     Eagle Broadband, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
                               February 29, 2004

<TABLE>
<CAPTION>

                                         For the six months ending February 28, 2003
                <S>                         <C>      <C>          <C>      <C>          <C>     <C>         <C>
                (in thousands)           APC/HSI     EBS/DSS     UCG      Eagle     Other      Elim.     Consol.
                                       --------------------------------------------------------------------------
                Revenue                    2,767      1,561      1,734      1,394       225        ---      7,681
                Segment Loss                 (95)      (68)      (585)      (672)     (148)        ---    (1,568)
                Total Assets               9,587     34,699      1,010    221,206    32,571   (167,620)   131,453
                Capital Expenditures          11      2,811          0          0       ---        ---      2,822
                Dep. and Amort.              112        308         62         78        58        ---        618


                                                                         February 29, 2004     February 28, 2003
                                                                       --------------------   -------------------
                Reconciliation of Segment Loss from Operations to Net
                Loss:
                Total Segment Loss from Operations                      $      (10,045)        $    (1,568)
                Total Other Income (Expense)                                    (7,814)               (242)

                Net Loss                                                $      (17,859)        $    (1,810)

</TABLE>

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

Note 21 - Supplemental Non-Cash Disclosures:

         During the quarter ended November 30, 2003, the Company issued
         $3,000,000 of convertible debt which was retired through the issuance
         of 2,000,000 shares of Series A Preferred Stock which was concurrently
         converted into 29,500,000 shares of the Company's Common Stock.
         Additionally, the Company received proceeds of $3,912,000 from the sale
         of convertible Q-Series Bonds. See Note 12 - Capitalization Activities.

         The beneficial conversion values associated with these financings
         aggregating $6,912,000 are calculated at the difference between the
         conversion price and the fair value of the common stock into which the
         debt is convertible, multiplied by the number of shares into which the
         debt is convertible. Since the beneficial conversion value exceeded the
         $6,912,000 raised on these convertible instruments, the value charged
         to interest expense during the quarter was limited to $6,912,000. This
         non-cash charge comprises $6,912,000 of the $7,080,000 interest expense
         on the Company's Statement of Operations and is shown as an adjustment
         to reconcile net loss to net cash on the Company's Statement of Cash
         Flows.

         During the three month period ended February 29, 2004, the Company
         recorded a non-cash expense of $4,494,000 in Salaries and Related Costs
         associated with the cancellation and re-issuance of warrants for
         4,200,000 common shares issued to certain officers and key employees
         under incentive clauses of employment contracts.




                                       25
<PAGE>





Item 2.  Management's Discussion and Analysis.

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

Results of Operations

Three and Six Months  Ended  February  29,  2004,  Compared to the Three and Six
Months Ended February 28, 2003

         The following table sets forth summarized consolidated financial
information for the three and six months ended February 29, 2004, and February
28, 2003

<TABLE>
<CAPTION>

Condensed Financial Information
-------------------------------
                                        Three Months Ended February 29                  Six Months Ended February 29
                                        (or February 28, as appropriate)               (or February 28, as appropriate)
                                 ---------------------------------------------  ----------------------------------------

($ in thousands)                         2004      2003  $Change  % Change              2004    2003   $Change  % Change
                                         ----     ------ -------  --------              ----    ----   -------  --------
<S>                                    <C>       <C>        <C>        <C>              <C>     <C>     <C>           <C>
Total Sales                            $3,744    $3,063     $681       22%             $6,141   $7,681   $(1,540)   -20%
Cost of Goods Sold                      3,099     1,344    1,755      131%              4,394    3,970       424     11%
                                 ---------------------------------------------------------------------------------------
Gross Profit                              645     1,719   (1,074)     -62%              1,747    3,711    (1,964)   -53%
                                 ---------------------------------------------------------------------------------------
   % of Total Sales                        17%       56%    -158%                          28%      48%      128%
Operating Expenses                      8,952     2,615    6,337      242%             11,792    5,279     6,513    123%
                                 ---------------------------------------------------------------------------------------
Loss from Operations                   (8,307)     (896)  (7,411)     827%            (10,045)  (1,568)   (8,477)   541%
                                 ---------------------------------------------------------------------------------------
Other Income (Expense)                 (1,091)      (83)  (1,008)    1214%             (7,814)    (242)   (7,572)  3129%
                                 ---------------------------------------------------------------------------------------
Net Loss                               (9,398)     (979)  (8,419)     860%            (17,859)  (1,810)  (16,049)   887%
                                 =======================================================================================
Unrealized Holding Loss                  (255)     (954)     699      -73%                 54     (941)      995   -106%
                                 ---------------------------------------------------------------------------------------
Other Comprehensive Loss              $(9,653)  $(1,933) $(7,720)     399%           $(17,805) $(2,751) $(15,054)   547%
                                 =======================================================================================
</TABLE>




Overview

         For the three-month period ended February 29, 2004, Eagle's business
operations reflected emphasis and further transition and expansion of its BDS
and convergent set-top box business segments including Eagle's broadband Bundled
Digital Services (Internet, video, voice and security) for residential and
business customers. This transition is consistent with the Company's previously
disclosed strategy to no longer pursue the direct sale of low-margin commodity
computer products and the direct sale of structured wiring and commercial
cabling opportunities outside of it BDS model. The Company's consolidated
operations generated revenues of $3,744,000 with a corresponding gross profit of
$645,000 for the three-month period ended February 29, 2004. The overall
increase of 22% in revenues for the three-month period ended February 29, 2004,
as compared to the corresponding period of 2003, was primarily attributable to a
$1,645,000 increase in the Company's broadband services segment combined with a
$935,000 increase in convergent set-top box product shipments; offset by
decreases of $915,000 in structure wiring operations and a $984,000 decrease in
other sales.

         The Company incurred a net loss of $9,398,000 for the three-month
period ended February 29, 2004. The loss was attributable to a non-cash expense
of $4,494,000 in Salaries and Related Costs associated with the cancellation and
re-issuance of warrants for 4,200,000 common shares issued to certain officers
and key employees under incentive clauses of employment contracts, an increase
in other support costs totaling $1,689,000; the components of which are set
forth on the table included below titled as Other Support Costs and an overall
decline in gross margins as the Company continues its transition strategy.
Included in the increase of other support costs was $760,000 in professional
fees associated with the Company's ongoing legal matters, a $120,000 increase in
investor relations and a $507,000 increase in property taxes recorded against
the Company's BDS infrastructure.

         The Company's net loss for the three month period ended February 29,
2004, also included approximately $578,000 in depreciation and amortization
expenses and a loss of sale of assets of $642,000 in conjunction with the
transaction between the Company's subsidiary, Contact Wireless, Inc., and eRF,
Inc. - See Note 4.


                                       26
<PAGE>

         The Company is continuing the development and expansion of the
Company's BDS model for distribution on a nationwide basis of voice, video and
data content; increased sales efforts in the telephone, cable, Internet,
security services and wireless segments; securing of long-term relationships for
content for the bundled digital services activities; and marketing/sales
agreements with other companies for the sale of broadband products and services.
On a nationwide basis, we are entering into business relationships with
financial and technology companies to provide bundled digital services (digital
content) to cities and municipalities that currently have or are in the process
of completing construction of their own fiber infrastructure to the home. We
believe that our companies have the technology, products and capabilities to
provide these fiber-ready cities with digital content set-top boxes and
structured wiring services.

The follow table sets forth summarized sales information for the three and six
months ended February 29, 2004, and February 28, 2003.


Sales Information
------------------
<TABLE>
<CAPTION>

                                 Three Months Ended February 29 (or February 28, as appropriate)

($ in thousands)              2004   % of Total            2003    % of Total      $Change       % Change
                         --------- -------------- -------------- --------------- ----------- ------------
<S>                          <C>            <C>             <C>        <C>          <C>              <C>
Structured Wiring             $125           3%          $1,040        34%          $(915)           -88%
Broadband Services           2,533          68%             888        29%          1,645            185%
Products                     1,086          29%             151         5%            935            619%
Other                            0           0%             984        32%           (984)          -100%
                           -------      -------         -------     ------        -------        --------
Total Sales                 $3,744         100%          $3,063       100%           $681             22%
                           =======      =======         =======     ======        =======        ========

                                  Six Months Ended February 29 (or February 28, as appropriate)

($ in thousands)             2,004   % of Total           2,003    % of Total      $Change       % Change
                         --------- -------------- -------------- --------------- ----------- ------------
Structured Wiring             $517           8%          $2,600        34%        $(2,083)           -80%
Broadband Services           4,096          67%           1,562        20%          2,534            162%
Products                     1,447          24%           2,195        29%           (748)           -34%
Other                           81           1%           1,324        17%         (1,243)           -94%
                           -------      -------         -------     ------        -------        --------
Total Sales                 $6,141         100%          $7,681       100%        $(1,540)           -20%
                           =======      =======         =======     ======        =======        ========

</TABLE>




         Net Sales. For the three-month period ended February 29, 2004, net
sales increased to $3,744,000 from $3,063,000 during the three-month period
ended February 28, 2003. The overall increase of 22% was attributable to a
$1,645,000 increase in the Company's broadband services segment combined with a
$935,000 increase in product shipments; offset by decreases of $915,000 in
structure wiring operations and a $984,000 decrease in other sales. The
$1,645,000 increase in sales of the Company's broadband services was primarily
attributable to a contract valued at $2,032,587 executed by the Company's
security-monitoring subsidiary, DSS Security, Inc.; against which the Company
realized sales of $2,007,335 during the quarter. Absent the security monitoring
contract transaction of $2,007,335, the Company's base broadband services sales
decreased by approximately $362,000 in the three-month period ended February 29,
2004; primarily attributable to the exit from the unprofitable Austin area BDS
market discussed in prior periods and 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, in the first
quarter of fiscal 2004. The $1,040,000 decrease in structured wiring sales
corresponded to the Company's previously announced strategy to no longer pursue
structured wiring and commercial cabling opportunities on a direct basis outside
of the its BDS model. The $1,086,000 increase in product sales was primarily
attributable to the shipment of convergent set-top boxes to a major client in
the second quarter of fiscal 2004 as compared to product fulfillment sales of
$151,000 in the second fiscal quarter of fiscal 2003.

         For the six-month period ended February 29, 2004, net sales decreased
to $6,141,000 from $7,681,000 during the six-month period ended February 28,
2003. The overall decrease of 20% was attributable to a $2,534,000 increase in
the Company's broadband services segment; offset by a decrease of $748,000 in
product sales, a decrease of $2,083,000 in structure wiring operations and a
$1,243,000 decrease in other sales. The $2,534,000 increase in sales of the
Company's broadband services was primarily attributable to contracts valued at
$3,111,354 executed by the Company's security-monitoring subsidiary, DSS
Security, Inc., against which the Company realized sales of $2,873,548 during
the six months ended February 29, 2004. Absent the security monitoring contract
transaction of $2,873,548, the Company's base broadband services sales decreased
by approximately $340,000 in the six-month period ended February 29, 2004,
primarily attributable to the exit from the unprofitable Austin area BDS market
discussed in prior periods and 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, in the first quarter of fiscal
2004. The $2,083,000 decrease in structured wiring sales corresponded to the
Company's previously announced strategy to no longer pursue structured wiring
and commercial cabling opportunities on a direct basis outside of the its BDS
model. The $748,000 decrease in product sales was primarily attributable to the
previously announced strategy to no longer pursue the direct sales of low-margin
commodity products partially offset by the shipment of convergent set-top boxes
to a major client in the second quarter of fiscal 2004.

                                       27
<PAGE>

The following table sets forth summarized cost of goods sold information for the
three and six months ended February 29, 2004, and February 28, 2003

<TABLE>
<CAPTION>

Costs of Goods Sold:
-------------------

                                          Three Months Ended February 29           Six Months Ended February 29
                                         (or February 28, as appropriate)         (or February 28, as appropriate)
                                       ---------------------------------------    ------------------------------------
<S>                                   <C>           <C>    <C>         <C>            <C>     <C>      <C>      <C>
($ in thousands)                         2004      2003    $Change   % Change        2004    2003  $Change   % Change
                                       -------  --------  --------- ----------    -------- ------- --------  ---------

Direct Labor and Related Costs           $391      $402        (11)        -3%       $852    $748     $104         14%
Products and Integration Service          301       114        187        164%        438   1,651   (1,213)       -73%
Structured Wiring Labor and Materials      56       429       (373)       -87%        261     658     (397)       -60%
Broadband Services Costs                2,057       254      1,803        710%      2,246     530    1,716        324%
Depreciation and Amortization             285       114        171        150%        571     228      343        150%
Other Manufacturing Costs                   9        31        (22)       -71%         26     155     (129)       -83%
                                       -------  --------  --------- ----------    -------- ------- --------  ---------
Total Operating Expenses               $3,099    $1,344     $1,755        131%     $4,394  $3,970     $424         11%
                                       -------  --------  --------- ----------    -------- ------- --------  ---------
</TABLE>

         Cost of Goods Sold. For the three-month period ended February 29, 2004,
cost of goods sold increased by 131% to $3,099,000 from $1,344,000 as compared
to the three-month period ended February 28, 2003. The overall increase of
$1,755,000 was primarily attributable to the purchase and resale of certain
security monitoring contracts with a cost of sale component valued at
$1,900,534. The Company's overall gross profit percentage was 17% and 56% for
the three-month periods ended February 29, 2004, and February 28, 2003. This
substantial decrease in gross profit percentage is primarily attributable to
dilutive effect of the security monitoring transaction recorded in the second
fiscal quarter, i.e., sales recorded of $2,007,335 with corresponding cost of
sales of $1,900,534, a heavy sales mix of product shipment of convergent set-top
boxes versus the prior year period and an increase in depreciation expenses
associated with the build-out of the company's BDS infrastructure.

         For the six-month period ended February 29, 2004, cost of goods sold
increased by 11% to $4,394,000 from $3,970,000 as compared to the six-month
period ended February 28, 2003. The overall increase of $424,000 was primarily
attributable to the purchase and resale of certain security monitoring contracts
with a cost of sale component valued at $1,900,534. The Company's overall gross
profit percentage was 28% and 48% for the six-month periods ended February 29,
2004, and February 28, 2003. This substantial decrease in gross profit
percentage is primarily attributable to dilutive effect of the security
monitoring transactions recorded in the six-months ended February 29, 2004,
i.e., sales recorded of $2,873,548 with corresponding cost of sales of
$1,900,534, a heavy sales mix of product shipment of convergent set-top boxes
versus the prior year period, the decision to no longer pursue structured wiring
outside of its BDS model and an increase in depreciation expenses associated
with the build-out of the company's BDS infrastructure.

The following table sets forth summarized operating expense information for the
three and six months ended February 29, 2004, and February 28, 2003.

<TABLE>
<CAPTION>

Operating Expenses:
-------------------
                                      Three Months Ended February 29           Six Months Ended February 29
                                     (or February 28, as appropriate)         (or February 28, as  appropriate)
                               --------------------------------------------    ----------------------------------------
<S>                                  <C>        <C>     <C>         <C>         <C>     <C>      <C>          <C>
($ in thousands)                     2004      2003      $Change   % Change       2004     2003   $Change     % Change
                               -----------  --------   ----------  ---------   --------  -------  -------- ------------

Salaries and Related Costs         $5,844    $1,355       $4,489        331%    $6,802   $2,863    $3,939          138%
Advertising and Promotion               2        19          (17)       -89%        21       56       (35)         -63%
Depreciation and Amortization         293       237           56         24%       612      390       222           57%
Other Support Costs                 2,666       977        1,689        173%     4,091    1,911     2,180          114%
Research and Development              147        27          120        444%       266       59       207          351%
                               -----------  --------   ----------  ---------   --------  -------  -------- ------------
Total Operating Expenses           $8,952    $2,615       $6,337        242%   $11,792   $5,279    $6,513          123%
                               -----------  --------   ----------  ---------   --------  -------  -------- ------------
</TABLE>



                                       28
<PAGE>



The following table breaks out other support costs information for the three and
six months ended February 29, 2004, and February 28, 2003.

<TABLE>
<CAPTION>

Other Support Costs:
--------------------
                                 Three Months Ended February 29              Six Months Ended February 29
                                (or February 28, as appropriate)            (or February 28, as appropriate)
                            ------------------------------------------     ----------------------------------

($ in thousands)              2004      2003     $Change     % Change         2004    2003  $Change  % Change
                            -------  --------  ---------- ------------     -------- ------- -------- ---------
<S>                              <C>      <C>        <C>           <C>          <C>     <C>     <C>        <C>
Advertising and Conventions  $  -       $  -        $  -        -NA-          $  -    $  -     $  -    -NA-
Auto Related                     2        27         (25)         -93%          12      38      (26)      -68%
Bad Debt                        92         0          92        -NA-           196       0      196    -NA-
Contract Labor                 266        80         186          233%         592     104      488       469%
Delivery and Postage             9         5           4           80%          25      66      (41)      -62%
Fees                           284        82         202          246%         346     190      156        82%
Insurance                      139         0         139        -NA-           250       0      250    -NA-
Office                         107        51          56          110%         186     114       72        63%
Other                           26        47         (21)         -45%          38      70      (32)      -46%
Professional                   874       114         760          667%       1,281     198    1,083       547%
Rent                           177       244         (67)         -27%         314     472     (158)      -33%
Repairs and Maintenance          0        15         (15)        -100%           0      26      (26)     -100%
Travel                          46        78         (32)         -41%         102     153      (51)      -33%
Taxes                          555        48         507         1056%         558      65      493       758%
Telephone and Utilities         89       186         (97)         -52%         191     415     (224)      -54%
                            -------  --------  ---------- ------------     -------- ------- -------- ---------
Total Other Support Costs   $2,666      $977      $1,689          173%      $4,091  $1,911   $2,180       114%
                            -------  --------  ---------- ------------     -------- ------- -------- ---------
</TABLE>

         Operating Expenses. For the three-month period ended February 29, 2004,
operating expenses increased by 242% to $8,952,000 as compared to $2,615,000 for
the three-month period ended February 28, 2003. The primary fluctuations that
occurred as evidenced by the two preceding tables immediately above are
discussed below:

          --   A $4,489,000  increase in salaries and related costs.  The entire
               increase  was  attributable  to  non-cash   compensation  expense
               recorded against the cancellation and re-issuance of warrants for
               4,200,000  common  shares  issued  to  certain  officers  and key
               employees under incentive clauses of employment contracts.

          --   A $17,000  decrease in  advertising  and promotion as the Company
               placed more  emphasis  on directly  marketing  its  products  and
               services  to its  customers  as well as  entering  into  business
               relationships with financial and technology  companies to provide
               BDS  services  to  cities  and   municipalities   and   decreased
               attendance at conventions and tradeshows.

          --   A $56,000  increase  in  depreciation  and   amortization,   due
               principally  to the  additional  build-out of the  Company's  BDS
               infrastructure in fiscal 2003.

          --   A $1,689,000  increase in other support costs;  the components of
               which  are set  forth on the table  included  immediately  above.
               Included  in this  increase  was  $760,000 in  professional  fees
               associated with the Company's  ongoing legal matters,  a $120,000
               increase  in  investor  relations,  and a  $507,000  increase  in
               property taxes recorded against the Company's BDS infrastructure.

          --   An  $120,000  increase  in  research  and  development  expenses,
               primarily  consisting  of the Company's  continued  investment in
               HDTV-ready multimedia set-top boxes for hospitality and broadband
               customers and the  Orb'Phone  Exchange  satellite  voice and data
               communications  products for military,  government and commercial
               customers.

         For the six-month period ended February 29, 2004, operating expenses
increased by 123% to $11,792,000 as compared to $5,279,000 for the six-month
period ended February 28, 2003. The primary fluctuations that occurred as
evidenced by the two preceding tables immediately above are discussed below:

          --   A $3,939,000 increase in salaries and related costs. The increase
               was attributable to non-cash  compensation  expense of $4,494,000
               recorded against the cancellation and re-issuance of warrants for
               4,200,000  common  shares  issued  to  certain  officers  and key
               employees  under  incentive   clauses  of  employment   contracts
               partially  offset by a decline  in  salaries  and  related  costs
               associated  with the  Company's  reduction in personnel in fiscal
               2003. Excluding this non-cash  compensation  expensed recorded in
               the second  quarter of fiscal 2004,  salaries  and related  costs
               declined by $555,000 in the six-month  period ended  February 29,
               2004,  as compared to the  six-month  period  ended  February 28,
               2003.


                                       29
<PAGE>

          --   A $36,000  decrease in  advertising  and promotion as the Company
               placed more  emphasis  on directly  marketing  its  products  and
               services  to its  customers  as well as  entering  into  business
               relationships with financial and technology  companies to provide
               BDS  services  to  cities  and   municipalities   and   decreased
               attendance at conventions and tradeshows.

          --   A  $222,000  increase  in  depreciation  and  amortization,   due
               principally  to the  additional  build-out of the  Company's  BDS
               infrastructure in fiscal 2003.

          --   A $2,180,000  increase in other support costs,  the components of
               which  are set  forth on the table  included  immediately  above.
               Included in this  increase was  $1,083,000 in  professional  fees
               associated with the Company's  ongoing legal matters,  a $120,000
               increase in investor  relations and $493,000 increase in property
               taxes recorded against the Company's BDS infrastructure.

          --   An  $207,000  increase  in  research  and  development  expenses,
               primarily  consisting  of the Company's  continued  investment in
               HDTV-ready multimedia set-top boxes for hospitality and broadband
               customers and the  Orb'Phone  Exchange  satellite  voice and data
               communications  products for military,  government and commercial
               customers.

         Net Loss. For the three months ended February 29, 2004, Eagle's net
loss was $9,398,000, compared to a net loss of $979,000 during the three month
period ended February 28, 2003. For the six months ended February 29, 2004,
Eagle's net loss was $17,859,000, compared to a net loss of $1,810,000 during
the six month period ended February 28, 2003.

         Changes in Cash Flow. Eagle's operating activities used net cash of
$3,165,000 in the six-month period ended February 29, 2004, compared to use of
net cash of $1,201,000 in the six-month period ended February 28, 2003. The
increase in net cash used by operating activities was primarily attributable to
$2,739,000 of cash utilized for working capital requirements consisting of the
combination of accounts receivable, inventory, prepaid expenses, accounts
payable and accrued expenses and an increase in the Company's net operating
loss, net of non-cash charges, totaling $426,000. Eagle's investing activities
produced net cash of $393,000 in the six-month period ended February 29, 2004,
compared to $1,174,000 in the six-month period ended February 28, 2003. The
decrease was due primarily to a significant decline in investment activities and
purchase of equipment associated with the prior years build out of Eagle's
network and infrastructure for the delivery of broadband services. Eagle's
financing activities provided cash of $5,563,000, in the six-month period ended
February 29, 2003, compared to $2,438,000 of cash provided in the six-month
ended February 28, 2003. The increase is attributable to an increase in
convertible notes aggregating a net of $5,608,000 in conjunction with the
Company's financing activities in the first fiscal quarter of 2004.

         Liquidity and Capital Resources. Current assets for the period ended
February 29, 2004, totaled $13,638,000 (includes cash and cash equivalents of
$3,615,000 and securities available for sale of $1,574,000) as compared to
$8,109,000 reported for the year ended August 31, 2003. During the first six
months ended February 29, 2004, Eagle received net proceeds of $6,174,000 from
the sale of convertible bonds and notes and through the sale of marketable
securities held as short-term investments and has retired or reduced certain of
its notes payable and accrued expenses including numerous lawsuits, thereby
reducing the Company's current and contingent liabilities.

         The Company anticipates that it will incur significantly less capital
expenditures for broadband fiber infrastructure for the balance of the current
fiscal year as a result of an emphasis of the sale of its BDS services to
municipalities, real estate developers, hotels, multi-tenant units and service
providers that own or will build a fiber network. Historically, the Company
built out these networks, thereby incurring significant capital expenditures.
The Company incurred approximately $214,000 in capital expenditures in the first
six months of fiscal 2004 ended February 29, 2004. The Company expects to spend
$1,000,000 or less on capital expenditures in fiscal 2004; an anticipated
reduction of at least $1,121,000 as compared to $2,121,000 for fiscal 2003.
However, the Company could adjust its capital expenditure plan in the second
half of the current fiscal year if future business opportunities dictate.

         The Company expects that certain of its liabilities listed on the
balance sheet under the headings Accounts Payable, Accrued Liabilities and Notes
Payable will be retired by issuing stock versus cash during the next 12 months.
The Company has historically used stock for retirement of certain liabilities on
a negotiated basis. The Company issued stock for retirement of certain
liabilities aggregating $5,696,000, $3,586,000 and $13,878,000 for fiscal years
2001, 2002, and 2003, respectively. During the first six months ended February
29, 2004, the Company retired approximately $8,034,000 in liabilities with stock
versus cash Eagle Broadband expects to continue its practice of retiring certain
liabilities as may be negotiated through a combination of cash and the issuance
of shares of Eagle common stock. The Company cannot quantify the amount of
common stock expected to be issued to retire such debts at this time and as such
will report these results on a quarterly basis. In the first six months of
fiscal 2004, the Company completed $5,563,000 in net financing activities. The
Company's management believes it has sufficient capital to fund operations for
the next twelve months based on: (i) the Company's reduced capital expenditure
requirements for fiscal 2004, (ii) the Company's annualized cost savings
expected from personnel and operating expense reductions, and (iii) the
Company's current cash and cash equivalents, including recent net financing
proceeds and sale of marketable securities received during the first six months
of fiscal 2004.

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

                                       30
<PAGE>

either obtain financing from external sources or generate internal liquidity
from operations in the future, we may need to curtail operations or sell assets.


<TABLE>
<CAPTION>

Contractual Obligations

                                                Payments Due by Period
                                                    (in Thousands)
                             -------------------------------------------------------------
  Contractual Obligations                Less than                              More than 5
                              Total        1 year      1-3 years   3-5 years       years
------------------------------------------------------------------------------------------
<S>                                <C>         <C>       <C>        <C>           <C>
Long-Term Debt Obligations      5,547       5,547        ---          ---         ---

Operating Lease Obligations       455         198        257          ---         ---
                              -------     -------    -------      -------     -------
           Total                6,002       5,745        257          ---         ---
                              =======     =======    =======      =======     =======
</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 and
certain off-balance sheet obligations for office space operating leases
requiring future minimal commitments under non-cancelable leases. See Item 2 -
Management's Discussion and Analysis under non-cancelable leases as described in
Note 15 to the Company's financial statements under the heading Commitments and
Contingent Liabilities.

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 $82,164,000 net of prior impairments
and  amortization  were recorded under the purchase  method for the purchases of
ClearWorks.net,  Inc.;  Atlantic  Pacific,  Inc.;  DSS Security,  Inc.;  Contact
Wireless,  Inc.; and Comtel,  Inc. The majority of the intangibles were from the
ClearWorks   acquisition.   ClearWorks   was  in   the   business   of   selling
telecommunications services to residential neighborhoods.

                                       31
<PAGE>

         Impairment Assessment:

         Our long-lived assets predominantly include goodwill. 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.

         Goodwill is primarily the Company rights to deliver bundled digital
services such as Internet, telephone, cable television and security monitoring
services to residential and business users. The Company obtained an independent
appraisal as of August 31, 2003, 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 February 29, 2004, and August 31,
2003, and determined that these assets totaling $81.6 million were not impaired.

Revenue Recognition

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

         Eagle adopted EITF 00-21, "Revenue Arrangements with Multiple
Deliverables," in the fourth quarter of fiscal 2003. The impact of adopting EITF
00-21 had no affect to Eagle's results of operations as Eagle did not have any
contracts that have multiple elements as of January 2004 or prior. When elements
such as hardware, software and consulting services are contained in a single
arrangement, or in related arrangements with the same customer, Eagle allocates
revenue to each element based on its relative fair value, provided that such
element meets the criteria for treatment as a separate unit of accounting. The
price charged when the element is sold separately generally determines fair
value. In the absence of fair value for a delivered element, Eagle allocates
revenue first to the fair value of the undelivered elements and allocates the
residual revenue to the delivered elements. In the absence of fair value for an
undelivered element, the arrangement is accounted for as a single unit of
accounting, resulting in a delay of revenue recognition for the delivered
elements until the undelivered elements are fulfilled. Eagle limits the amount
of revenue recognition for delivered elements to the amount that is not
contingent on the future delivery of products or services or subject to
customer-specified return or refund privileges.

Deferred Revenues

         Revenues that are billed in advance of services being completed are
deferred until the conclusion of the period of the service for which the advance
billing relates. Deferred revenues are included on the balance sheet as a
current liability until the service is performed and then recognized in the

                                       32
<PAGE>

period in which the service is completed. Eagle's deferred revenues primarily
consist of billings in advance for cable, internet, security and telephone
services, which generally are between one and three months of services. Eagle
had deferred revenues of $452,000 and $230,397 as of February 29, 2004, and
August 31, 2003, respectively.


Eagle Wireless International, Inc.

         Eagle designs, manufactures and markets transmitters, receivers,
controllers and software, along with other equipment used in commercial and
personal communication systems, radio and telephone systems. Revenues from these
products are recognized when the product is shipped. Eagle's Wireless
International Product revenues are reported under the category of Products on
Eagle's Consolidated Statements of Operations included as page F-4 of this
report and also under the category Eagle within Note 20 - Industry Segments.


BroadbandMagic

         BroadbandMagic designs, manufactures and markets the convergent set-top
boxes. Products are sent principally to commercial customers for a pre-sale test
period of ninety days. Upon the end of the pre-sale test period, the customer
either returns the product or accepts the product, at which time Eagle
recognizes the revenue. Eagle's Broadband Multimedia and Internet Products
revenues are reported under the category of Products on Eagle's Consolidated
Statements of Operations included as page F-4 of this report and also under the
category Eagle within Note 20 - Industry Segments. Revenue from software
consists of software licensing. There is no post-contract customer support.
Software revenue is allocated to the license using vendor specific objective
evidence of fair value ("VSOE") or, in the absence of VSOE, the residual method.
The price charged when the element is sold separately generally determines VSOE.
In the absence of VSOE of a delivered element, Eagle allocates revenue to the
fair value of the undelivered elements and the residual revenue to the delivered
elements. Eagle recognizes revenue allocated to software licenses at the
inception of the license.


Eagle Broadband, Inc.

         Eagle Broadband, Inc., engages independent agents for sales principally
in foreign countries and certain geographic regions in the United States. Under
the terms of these one-year agreements the distributor or sales agents provide
the companies with manufacturing business sales leads. The transactions from
these distributors and agents are subject to Eagle's approval prior to sale. The
distributorship or sales agent receives commissions based on the amount of the
sales invoice from the companies to the customer. The sale is recognized at the
time of shipment to the customer. These sales agents and distributors are not a
significant portion of total sales in any of the periods presented. Eagle's
Broadband, Inc., revenues are reported under the category of Products on Eagle's
Consolidated Statements of Operations included as page F-4 of this report and
also under the category Eagle within Note 20 - Industry Segments.


Eagle BDS Services - dba ClearWorks Communications, Inc.

         ClearWorks Communications, Inc., provides Bundled Digital Services to
business and residential customers, primarily in the Texas market. Revenue is
derived from fees charged for the delivery of Bundled Digital Services, which
includes telephone, long distance, Internet, security monitoring and cable
services. This subsidiary recognizes revenue and the related costs at the time
the services are rendered. Installation fees are recognized upon completion and
acceptance. Eagle's BDS Services revenues are reported under the category of
Broadband Services on Eagle's Consolidated Statements of Operations included as
page F-4 of this report and also under the category EBS/DSS within Note 20 -
Industry Segments.


Eagle Residential Structured Wiring - dba ClearWorks Home Systems, Inc.

         ClearWorks Home Systems, Inc., sells and installs structured wiring,
audio and visual components to homes. This subsidiary recognizes revenue and the
related costs at the time the services are performed. Revenue is derived from
the billing of structured wiring to homes and the sale of audio and visual
components to the homebuyers. Eagle's Residential Structured Wiring revenues are
reported under the category of Structured Wiring on Eagle's Consolidated
Statements of Operations included as page F-4 of this report and also under the
category APC/HSI within Note 20 - Industry Segments.


Eagle Communication Services - dba Atlantic Pacific Communications, Inc.

         Atlantic Pacific Communications, Inc., provides project planning,
installation, project management, testing and documentation of fiber and cable
to commercial and industrial clients throughout the United States. The revenue
from the fiber and cable installation and services is recognized upon percentage
of completion of the project. Most projects are completed in less than one
month, therefore, matching revenue and expense in the period incurred. Service,
training and extended warranty contract revenues are recognized as services are
completed. Eagle's Communications Services revenues are reported under the
category of Structured Wiring on Eagle's Consolidated Statements of Operations
included as page F-4 of this report and also under the category APC/HSI within
Note 20 - Industry Segments.


                                       33
<PAGE>


Etoolz, Inc.

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

Eagle Messaging Services - dba Link Two Communications, Inc.

         Link Two Communications, Inc., provides customers with one- and two-way
messaging systems. The revenue from the sale of these products is recognized at
the time the services are provided. Eagle's Messaging Services revenues are
reported under the category of Other on Eagle's Consolidated Statements of
Operations included as page F-4 of this report and also under the category Eagle
within Note 20 - Industry Segments.


Eagle Paging Services - dba Contact Wireless, Inc.

         Contact Wireless, Inc., provides customers with paging and mobile
telephone products and related monthly services. Revenue from product sales is
recorded at the time of shipment. Revenue for the mobile phone and paging
service is billed monthly as the service is provided. Eagle's Paging Services
revenues are reported under the category of Other on Eagle's Consolidated
Statements of Operations included as page F-4 of this report and also under the
category Other within Note 20 - Industry Segments.


Eagle Security Services - dba DSS Security, Inc.

     DSS Security,  Inc., provides security monitoring services to residential
and commercial customers, purchases and resells and bundles and sells contracts
from its own portfolio to independent third party companies. Security monitoring
customers are billed three months in advance of service usage. The revenues are
deferred at the time of billing and ratably recognized over the prepayment
period as service is provided. Installation fees are recognized upon completion
and acceptance. Revenues from the sale of security monitoring  contracts,  both
purchased and owned, are recognized upon contract execution except for reserves,
hold backs or retentions, which are deferred until the contract provisions are
fulfilled. Eagle's Security Services revenues are reported under the category of
Broadband Services on Eagle's Consolidated Statements of Operations included as
page F-4 of this report and also under the category EBS/DSS within Note 20 -
Industry Segments.


Eagle Technology Services - dba United Computing Group, Inc.

         United Computing Group, Inc., provides business-to-business hardware
and software network solutions and network monitoring services. The revenue from
the hardware and software sales is recognized at the time of shipment. The
monitoring services recognition policy is to record revenue on completion.
Eagle's Technology Services product revenues are reported under the category of
"Products" while the services components are reported under the category "Other"
on Eagle's Consolidated Statements of Operations included as page F-4 of this
report and also under the category UCG within Note 20 - Industry Segments.

Receivables

         For the three-month period ended February 29, 2004, Eagle accounts
receivable increased to $3,974,000 from $1,704,000 at August 31, 2003. The
majority of this increase was due to the increased sales in the Company's
security-monitoring subsidiary, DSS Security, Inc., in conjunction with the
contract recorded in the second quarter ended February 29, 2004, totaling
$2,032,587, as discussed earlier herein.

     The  Company's  accounts  receivable  aging  as  measured  by  day's  sales
outstanding  (DSO)  totaled 96 days at February 29, 2004, as compared to 90 days
at November 30, 2003, and 75 days at August 31, 2003, on an adjusted basis after
recording the write-off's and reserves in the fourth quarter of fiscal 2003. The
primary  increase in DSO from 75 days at August 31, 2003, to 96 days at February
29,

                                       34
<PAGE>

2004, was attributable to deferred revenue components of the transactions
entered into with Sweetwater Security, LLC, totaling $241,805 and the impact of
large dollar volume transactions associated with customers comprising greater
than ten percent of the Company's revenues during the period ended February 29,
2004. DSO as measured by a moving average calculation totaled 72 days as of
February 29, 2004.

         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 February 29, 2004, Eagle's
inventory totaled $4,072,000 as compared to $3,199,000 at August 31, 2003. The
majority of this increase was due to an increase in raw materials inventory
associated with in process set-top box manufacturing.

Recent Accounting Pronouncements

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

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

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

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

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

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


                                       35
<PAGE>

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.

         The Company's cash and cash equivalents and securities available for
sale 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 rollover 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; however, the company does have both cash and liquidity risks
associated with its common stock investments aggregating $1,573,925 in market
value as of February 29, 2004.

Credit Risks


         The Company monitors its exposure for credit losses and maintains
allowances for anticipated losses, but does not require collateral from these
parties. The company had two customers that represented greater than 10% of its
revenues during the three- and six-month period ended February 29, 2004. See
Note 19 - Major Customers. With respect to transactions entered into with
Sweetwater Capital, LLC, for the six months ended February 29, 2004, the Company
had collected $757,937 of the aggregate contract value of $3,115,354 while
$2,357,417 remained in accounts receivable, of which $241,805 related to
deferred revenue. Subsequent to the period ended February 29, 2004, the Company
collected $2,007,335 in accounts receivable associated with this client. With
respect to transactions entered into with General Dynamics for the six months
ended February 29, 2004, the Company had collected $318,737 of the six-month
sales totaling $750,488 while $431,751 remained in accounts receivable at
February 29, 2004. Subsequent to the period ended February 29, 2004, the Company
collected $133,101 in accounts receivable associated with this client. Given
collections to date totaling $3,217,110 against these two accounts, the Company
believes that it has mitigated any significant credit risk posed by specific
customers which could have had a material adverse affect on its financial
condition.


Item 4.  Controls and Procedures

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

         There were no changes in Eagle's internal control over financial
reporting that occurred during the quarter ended February 29, 2004, that have
materially affected, or reasonably likely to materially affect, Eagle's internal
control over financial reporting.

         Eagle's disclosure controls and procedures are designed to provide a
reasonable level of assurance of reaching Eagle's desired disclosure control
objectives and are effective in reaching that level of reasonable assurance.



                                       36
<PAGE>



Part 2. - Other Information

Item 1 - Legal Proceedings

         For a description of certain legal matters, refer to Note 15.
"Commitments and Contingent Liabilities" under the heading Legal Proceedings in
Part 1, Item 1.,"Consolidated Financial Statements."

          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 (Note 15).

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

         None

Item 3 - Defaults Upon Senior Securities

         None

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


         The Annual Meeting of Shareholders of Eagle Broadband,  Inc., was held
         on February 17, 2004, for the following purposes:


                  1. Election of Directors. To elect seven directors to the
         Board of Directors to serve until our next annual meeting of
         shareholder's, or until their respective successors are elected and
         qualified.


                    - The  following  Directors  were elected to serve until our
                    next  annual  meeting  of  shareholder's,   or  until  their
                    respective  successors  are  elected  and  qualified:   Dave
                    Weisman,  H.  Dean  Cubley,  Christopher  W.  Futer,  A.  L.
                    Clifford,  Glenn Allan Goerke, C.J. Reinhartsen and Lorne E.
                    Persons, Jr.


                  2. Approval of Amendment of Voting Percentages. To amend our
         Articles of Incorporation to add a section permitting amendments to the
         Articles of Incorporation to be accomplished through the vote of a
         majority of the shares entitled to vote at the meeting, as opposed to
         66 2/3% of the shares entitled to vote at the meeting.


                    - Not Passed.


                  3. Approval of Amendment to Special Meeting Rules. To amend
         our Articles of Incorporation to provide that special meetings of the
         shareholders may only be called by a majority of the Board of
         Directors, the Chairman of the Board, the Chief Executive Officer, or
         the holders of at least 50% of all the shares entitled to vote at the
         proposed special meeting.


                    - Not Passed.


                  4. Approval of Amendment to increase authorized common shares.
         To amend our Articles of Incorporation to increase the common shares
         that we have authority to issue from 200 million to 350 million.


                    - Passed.


                  5. Ratification of Auditors. To ratify the selection of Malone
         & Bailey, P.C., as auditors for Eagle for the fiscal year ending August
         31, 2004.


                    - Passed.


Item 5 - Other Information

         None


                                       37
<PAGE>

Item 6 - Exhibits, Financial Statement Schedules and Reports on Form 8-K -
(Brewer & Pritchard to review and Advise)


(a)      Financial Statements and Schedules:

         The financial statements are set forth under Item 1 of this Quarterly
Report on Form 10-Q. Financial statement schedules have been omitted since they
are either not required, not applicable, or the information is otherwise
included.

(b) Reports on Form 8-K

         The following reports were furnished on Form 8-K during the three
months ended February 29, 2004:

         A report on Form 8-K, announcing information under Item 5 of the
report, was filed on January 21, 2004, with the Securities and Exchange
Commission.

         A report on Form 8-K, announcing information under Item 9 of the
report, was filed on February 18, 2004, with the Securities and Exchange
Commission.

<TABLE>
<CAPTION>

 (c)     Exhibit Listing

         EXHIBIT NO.              IDENTIFICATION OF EXHIBIT

         <S>                         <C>
         Exhibit 3.1              Eagle Broadband, Inc. Articles of Incorporation, as Amended and Restated, dated February 13, 2002
                                  (incorporated by reference to Exhibit 3.1 (a) of Form 1-KSB/A Amendment No. 2 for the fiscal year
                                  ended August 31, 2003, filed March 30, 2004).
         Exhibit 3.2              Eagle Broadband, Inc. Articles of Incorporation, as Amended, dated February 17, 2004 (incorporated
                                  by reference to Exhibit 3.1 (b) of Form 1-KSB/A Amendment No. 2 for the fiscal year ended August
                                  31, 2003, filed March 30, 2004).
         Exhibit 3.3              Amended and Restated Eagle Broadband, Inc. Bylaws (incorporated by reference to Exhibit 3.2 of
                                  Form 10-KSB for the fiscal year ended August 31, 2001, filed November 16, 2001).
         Exhibit 4.1              Form of Common Stock Certificate (incorporated by reference to Exhibit 4 of Form S-3/A, file no.
                                  333-111160, filed March 26, 2004).
         Exhibit 4.2              Purchase Agreement by and between Eagle Broadband and Investors dated August 23, 2003, including
                                  registration rights and security agreement attached as an exhibit thereto (incorporated by
                                  reference to Exhibit 10.1 of Form S-3 file no. 333-109481).
         Exhibit 4.3              Convertible Debt Agreement (incorporated by reference to Exhibit 10.3 of Form S-3, file
                                  no. 333-106074).
         Exhibit 4.4              Addendum to Convertible Debt Agreement (incorporated by reference to Exhibit 10.4 of Form S-3,
                                  file no. 333-106074).
         Exhibit 4.5              Form of Subscription Agreement for Convertible Debt, between Eagle Broadband and certain
                                  investors (incorporated by reference to Exhibit 10.5 of Form S-3, file no. 333-106074).
         Exhibit 10.1             Asset Purchase Agreement between Eagle Telecom International, Inc., a Delaware corporation and
                                  Eagle Telecom International, Inc., a Texas corporation (incorporated by reference to Exhibit 10.1
                                  of Form SB-2 file no. 333-20011).
         Exhibit 10.2             1996 Incentive Stock Option Plan (incorporated by reference to Exhibit 10.1 of Form S-8 file no.
                                  333-72645).
         Exhibit 10.3             2002 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of Form S-8 file no.
                                  333-97901).
         Exhibit 10.4             2002 Stock Incentive Plan, as Amended (incorporated by reference to Exhibit 10.1 of Form S-8 file
                                  no. 333-102506).
         Exhibit 10.5             2003 Stock Incentive and Compensation Plan (incorporated by reference to Exhibit 10.1 of Form S-8
                                  file no. 333-103829).
         Exhibit 10.6             2003 Stock Incentive and Compensation Plan, as Amended (incorporated by reference to Exhibit 10.1
                                  of Form S-8 file no. 333-105074).
         Exhibit 10.7             2003 Stock Incentive and Compensation Plan, as Amended (incorporated by reference to Exhibit 10.1
                                  of Form S-8 file no. 333-109339).
         Exhibit 10.8             2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of Form S-8 file no.
                                  333-110309).
         Exhibit 10.9             Agreement and Plan of Reorganization by and between Eagle Wireless International, Inc.
                                  Clearworks.net, Inc., and Eagle Acquisition Corporation dated September 15, 2000 (incorporated by
                                  reference to Exhibit 10.1 of Form S-4 file no. 333-49688)

</TABLE>
                                       38
<PAGE>
<TABLE>

         <S>                         <C>
         Exhibit 10.10            Stock Purchase Agreement between Eagle Wireless International, Inc. and the shareholders of Comtel
                                  Communications, Inc. (incorporated by reference to Exhibit 10.4 of Form 10-KSB for the fiscal year
                                  ended August 31, 2000, filed December 13, 2000).
         Exhibit 10.11            Stock Purchase Agreement between Eagle Wireless International, Inc. and the shareholders of
                                  Atlantic Pacific Communications, Inc. (incorporated by reference to Exhibit 10.5 of Form 10-KSB
                                  for the fiscal year ended August 31, 2000, filed December 13, 2000).
         Exhibit 10.12            Stock Purchase Agreement between Eagle Wireless  International,  Inc. and the shareholders of
                                  Etoolz, Inc.  (incorporated by reference to Exhibit 10.6 of Form 10-KSB for the fiscal year ended
                                  August 31, 2000, filed December 13, 2000).
         Exhibit 10.13            Purchase Agreement between Eagle Broadband,  Inc.'s subsidiary, Contact Wireless, Inc.
         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.
</TABLE>

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.
<TABLE>


        <S>                                                             <C>
         Date: April 14, 2004                                 By:      /s/David A. Weisman
                                                                       --------------------------
                                                                       David Weisman
                                                                       Chief Executive Officer
                                                                       (Principal Executive Officer)

                                                                       /s/ Richard R. Royall
                                                                       Richard R. Royall
                                                                       Chief Financial Officer
                                                                       (Principal Financial & Accounting Officer)
</TABLE>


                                       39