UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 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 November 30, 2006




or




** ̈** **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
              (State
                or other jurisdiction of incorporation or organization)
            76-0494995
              (I.R.S.
                Employer Identification Number)




101
      COURAGEOUS DRIVE


LEAGUE
      CITY, TEXAS 77573


(Address
      of principal executive offices) (Zip Code)




(281)
      538-6000


(Registrant’s
      telephone number, including area code)




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the
      registrant was required to file such reports), and (2) has been subject to
      such filing requirements for the past 90 days. x Yes o No




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.






Large
      accelerated filer o Accelerated
      filer o Non-accelerated
      filer x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). o Yes x No




As
      of
      January 9, 2006, the registrant had 21,266,162 shares of common stock
      outstanding.





**EAGLE
      BROADBAND, INC.**


**FORM
      10-Q**


**FOR
      THE QUARTER ENDED NOVEMBER 30, 2006**




**TABLE
      OF CONTENTS**




**PART
      I-FINANCIAL INFORMATION**




**Item
      1. Financial Statements**




Consolidated
      Balance Sheets




Consolidated
      Statements of Operations




Consolidated
      Statements of****Changes
      in Shareholders’ Equity




Consolidated
      Statements of Cash Flows




**Item
      2. Management’s Discussion and Analysis of Financial Condition
      and Results of Operations**




**Item
      4. Controls and Procedures**




**PART
      II-OTHER INFORMATION**




**Item
      1. Legal Proceedings**




**Item
      1A. Risk Factors**




**Item
      6. Exhibits**





**PART
      I-FINANCIAL INFORMATION**




**Item
      1.**  **Financial
      Statements** ***.***




**EAGLE
      BROADBAND, INC.**


**CONSOLIDATED
      BALANCE SHEETS**




***(Dollars
                in thousands*****)**
            
            November
                30, 2006
              (Unaudited)
            
            
            August
                31, 2006
              (Audited)**ASSETS****Current
                Assets**Cash
                and cash equivalents
            
            $
            1,117
            
            
            $
            3,139Accounts
                receivable, net
            
            
            828
            
            
            
            516Inventories
            
            
            685
            
            
            
            734Assets
                held for sale
            
            
            —
            
            
            
            899Prepaid
                expenses
            
            
            314
            
            
            
            322**Total
                Current Assets**
            
            
            **2,944**
            
            
            
            **5,610****Property
                and Equipment**Operating
                equipment
            
            
            19,223
            
            
            
            18,691Less:
                accumulated depreciation
            
            
            (7,552
            )
            
            
            (7,347
            )**Total
                Property and Equipment**
            
            
            **11,671**
            
            
            
            **11,344****Other
                Assets**Goodwill
            
            
            4,095
            
            
            
            4,095Contract
                rights, net
            
            
            380
            
            
            
            389Customer
                relationships, net
            
            
            126
            
            
            
            129Other
                intangible assets, net
            
            
            189
            
            
            
            197Other
                assets
            
            
            75
            
            
            
            —**Total
                Other Assets**
            
            
            **4,865**
            
            
            
            **4,810****Total
                Assets**
            
            **$**
            **19,480**
            
            
            **$**
            **21,764****LIABILITIES
                AND SHAREHOLDERS’ EQUITY****Current
                Liabilities**Notes
                payable & current portion of long-term debt
            
            $
            3,592
            
            
            $
            3,990Accounts
                payable
            
            
            6,220
            
            
            
            6,147Accrued
                expenses
            
            
            1,802
            
            
            
            1,929Accrued
                expenses - related party
            
            
            2,516
            
            
            
            2,430Compound
                embedded derivative
            
            
            1,197
            
            
            
            1,564Deferred
                revenue
            
            
            123
            
            
            
            163**Total
                Current Liabilities**
            
            
            **15,450**
            
            
            
            **16,223****Long-Term
                Liabilities**Long-term
                debt, net of current portion
            
            
            268
            
            
            
            1,443Compound
                embedded derivative
            
            
            1,901
            
            
            
            2,153Warrant
                liability
            
            
            79
            
            
            
            82**Total
                Long-Term Liabilities**
            
            
            **2,248**
            
            
            
            **3,678****Total
                Liabilities**
            
            
            **17,698**
            
            
            
            **19,901****Commitments
                and Contingencies**
            
            
            —
            
            
            
            —**Shareholders’
                Equity**Preferred
                Stock, $0.001 par value, 5,000,000 shares authorized, none
                issued
            
            
            —
            
            
            
            —Common
                Stock - $0.001 par value, 350,000,000 shares authorized,18,103,204
                and 12,092,758 issued and outstanding at November, 30, 2006 and August
                31,
                2006, respectively
            
            
            18
            
            
            
            12Additional
                paid in capital
            
            
            246,274
            
            
            
            242,900Accumulated
                deficit
            
            
            (244,510
            )
            
            
            (241,049
            )**Total
                Shareholders’ Equity**
            
            
            **1,782**
            
            
            
            **1,863****Total
                Liabilities and Shareholders’ Equity**
            
            **$**
            **19,480**
            
            
            **$**
            **21,764**




See
      accompanying notes to consolidated financial statements.





**EAGLE
      BROADBAND, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(Unaudited)**


***(Dollars
                in thousands*****)**
            
            For
                the three months ended
              November
                30,2006
            
            
            2005**Net
                Sales**Structured
                wiring
            
            $
            432
            
            
            $
            422Broadband
                services
            
            
            137
            
            
            
            250Products
            
            
            399
            
            
            
            622Other
            
            
            —
            
            
            
            38**Total
                Sales**
            
            
            **968**
            
            
            
            **1,332****Costs
                of Goods Sold**Direct
                labor and related costs
            
            
            173
            
            
            
            293Products
                and integration service
            
            
            438
            
            
            
            255Structured
                wiring labor and materials
            
            
            407
            
            
            
            289Broadband
                services costs
            
            
            22
            
            
            
            62Depreciation
                and amortization
            
            
            58
            
            
            
            229**Total
                Costs of Goods Sold**
            
            
            **1,098**
            
            
            
            **1,128****Gross
                Profit (Loss)**
            
            
            **(130**
            **)**
            
            
            **204****Operating
                Expenses**Salaries
                and related costs
            
            
            757
            
            
            
            1,144Advertising
                and promotion
            
            
            55
            
            
            
            31Depreciation
                and amortization
            
            
            167
            
            
            
            344Other
                support costs
            
            
            1,379
            
            
            
            1,056Research
                and development
            
            
            (14
            )
            
            
            105**Total
                Operating Expenses**
            
            
            **2,344**
            
            
            
            **2,680****Loss
                from Continuing Operations**
            
            
            **(2,474**
            **)**
            
            
            **(2,476**
            **)****Other
                Income/(Expenses)**Interest
                income
            
            
            11
            
            
            
            8Interest
                expense
            
            
            (695
            )
            
            
            (2
            )Derivative
                expense
            
            
            (159
            )
            
            
            —Loss
                on extinguishment of debt
            
            
            (144
            )
            
            
            —**Total
                Other Income (Expense)**
            
            
            **(987**
            **)**
            
            
            **6****Net
                Loss from Continuing Operations**
            
            
            **(3,461**
            **)**
            
            
            **(2,470**
            **)**Loss
                from discontinued operations
            
            
            —
            
            
            
            (164
            )**Net
                Loss**
            
            **$**
            **(3,461**
            **)**
            
            $
            (2,634
            )**Basic
                and diluted income (loss) per Common Share:**Loss
                from continuing operations
            
            $
            (0.23
            )
            
            $
            (0.30
            )Loss
                from discontinued operations
            
            $
            —
            
            
            $
            (0.02
            )Net
                loss
            
            $
            (0.23
            )
            
            $
            (0.32
            )




See
      accompanying notes to consolidated financial statements.







**EAGLE
      BROADBAND, INC.**


**CONSOLIDATED
      STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**




Common
                Stock
            
            
            
            Additional
                Paid in
            
            
            
            
            Total
                Shareholders’**(*****Shares
                and dollars in thousands*****)**
            
            Shares
            
            Value
            
            Preferred
                Stock
            
            Capital
            
            Retained
                Earnings
            
            
            Equity**Shareholders’
                Equity at August 31, 2005**
            
            
            **8,235**
            
            **$**
            **8**
            
            
            **—**
            
            **$**
            **237,212**
            
            **$**
            **(214,116**
            **)**
            
            **$**
            **23,104**Net
                loss for the year ended August 31, 2006
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (26,933
            )
            
            
            (26,933
            )Stock
                issued for services and compensation
            
            
            151
            
            
            —
            
            
            —
            
            
            244
            
            
            —
            
            
            
            244Stock
                issued for retirement of debt and accrued liabilities
            
            
            1,060
            
            
            1
            
            
            —
            
            
            957
            
            
            —
            
            
            
            958Proceeds
                from sale of common stock, net
            
            
            1,722
            
            
            2
            
            
            —
            
            
            1,593
            
            
            —
            
            
            
            1,595Stock-based
                compensation
            
            
            —
            
            
            —
            
            
            —
            
            
            642
            
            
            —
            
            
            
            642Reclassification
                of stock payable, net
            
            
            425
            
            
            —
            
            
            —
            
            
            2,008
            
            
            —
            
            
            
            2,008Incentive
                shares to Dutchess for note
            
            
            500
            
            
            1
            
            
            —
            
            
            244
            
            
            —
            
            
            
            245**Shareholders’
                Equity at August 31, 2006**
            
            
            **12,093**
            
            **$**
            **12**
            
            
            **—**
            
            **$**
            **242,900**
            
            **$**
            **(241,049**
            **)**
            
            **$**
            **1,863**Net
                loss for the three months ended November 30, 2006
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (3,461
            )
            
            
            (3,461
            )Stock
                issued for services and compensation
            
            
            169
            
            
            —
            
            
            —
            
            
            110
            
            
            —
            
            
            
            110Stock
                issued for retirement of debt
            
            
            2,713
            
            
            3
            
            
            —
            
            
            1,134
            
            
            —
            
            
            
            1,137Proceeds
                from sale of common stock, net
            
            
            3,128
            
            
            3
            
            
            —
            
            
            1,866
            
            
            —
            
            
            
            1,869Stock-based
                compensation
            
            
            —
            
            
            —
            
            
            —
            
            
            264
            
            
            —
            
            
            
            264**Shareholders’
                Equity at November 30, 2006**
            
            
            **18,103**
            
            **$**
            **18**
            
            
            **—**
            
            **$**
            **246,274**
            
            **$**
            **(244,510**
            **)**
            
            **$**
            **1,782**




See
      accompanying notes to consolidated financial statements.







**EAGLE
      BROADBAND, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(Unaudited)**




***(Dollars
                in thousands*****)**
            
            For
                the three months
              ended
                November 30,2006
            
            2005**Cash
                Flows from Operating Activities**Net
                Loss
            
            $
            (3,461
            )
            
            $
            (2,634
            )Adjustments
                to Reconcile Net Loss to Net CashStock
                for compensation expense
            
            
            110
            
            
            
            266Depreciation
                and amortization
            
            
            225
            
            
            
            590Loss
                on extinguishment of debt
            
            
            144
            
            
            
            —Amortization
                of debt discount
            
            
            392
            
            
            
            —Derivative
                expense
            
            
            159
            
            
            
            —Provision
                for bad debt
            
            
            2
            
            
            
            —Stock
                issued for services and compensation
            
            
            264
            
            
            
            —Change
                in Assets and Liabilities:Increase
                in accounts receivable
            
            
            (314
            )
            
            
            (368
            )Decrease
                in inventories
            
            
            49
            
            
            
            95(Increase)/decrease
                in prepaid expenses
            
            
            8
            
            
            
            (372
            )Increase/(decrease)
                in accounts payable
            
            
            73
            
            
            
            (2,140
            )Increase/(decrease)
                in accrued expenses
            
            
            (81
            )
            
            
            1,708Total
                Adjustment
            
            
            1,031
            
            
            
            (221
            )**Net
                Cash Used for Operating Activities**
            
            
            **(2,430**
            **)**
            
            
            **(2,855**
            **)****Cash
                Flows from Investing Activities**Purchase
                of property and equipment
            
            
            (532
            )
            
            
            (2
            )(Increase)/decrease
                in other assets
            
            
            (75
            )
            
            
            675Principal
                collections on direct financing leases
            
            
            —
            
            
            
            104Proceeds
                on the sale of direct financing leases
            
            
            899
            
            
            
            —**Net
                Cash Provided by Investing Activities**
            
            
            **292**
            
            
            
            **777****Cash
                Flows from Financing Activities**Proceeds
                from/(payments on) notes payable and long-term debt
            
            
            (1,753
            )
            
            
            91Proceeds
                from sale of common stock, net
            
            
            1,869
            
            
            
            —**Net
                Cash Provided by Financing Activities**
            
            
            **116**
            
            
            
            **91**Net
                decrease in cash
            
            
            (2,022
            )
            
            
            (1,987
            )Cash
                at the beginning of the period
            
            
            3,139
            
            
            
            4,020**Cash
                at the end of the period**
            
            **$**
            **1,117**
            
            
            $
            2,033**Supplemental
                Disclosure of Cash Flow Information**Net
                cash paid during the period for:Interest
            
            $
            209
            
            
            $
            1Income
                taxes
            
            $
            —
            
            
            $
            —Non-cash
                investing and financing disclosuresCommon
                stock issued for retirement of debt
            
            $
            1,137
            
            
            $
            —




See
      accompanying notes to consolidated financial statements.





**Eagle
      Broadband, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements November 30, 2006
      (Unaudited)**




**NOTE
      1 - Basis of Presentation**




The
      Consolidated Balance Sheet of the company as of November 30, 2006, the related
      Consolidated Statements of Operations for the three months ended November 30,
      2006 and 2005, the Consolidated Statements of Changes in Shareholders’ Equity as
      of November 30, 2006 and the Consolidated Statements of Cash Flows for the
      three
      months ended November 30, 2006 and 2005, included in the financial statements
      have been prepared by the company without audit. In the opinion of management,
      the accompanying financial statements include all adjustments (consisting of
      normal, recurring adjustments) necessary to summarize fairly the company’s
      financial position and results of operations. The results of operations for
      the
      three months ended November 30, 2006, are not necessarily indicative of the
      results of operations for the full year or any other interim period. The
      information included in this Form 10-Q should be read in conjunction with
      Management’s Discussion and Analysis and Financial Statements and notes thereto
      included in the company’s August 31, 2006, Form 10-K.




On
      May
      12, 2006, the company effected a 1-for-35 reverse stock split. In these Notes
      to
      the Consolidated Financial Statements, all previously reported stock information
      has been adjusted to reflect the effect of the reverse stock split.




In
      accordance with the provisions of SFAS No.144, Accounting for the Impairment
      or
      Disposal of Long-Lived Assets, the results of operations of the disposed assets
      and the losses related to the sale of the security monitoring business component
      have been classified as discontinued operations for all periods presented in
      the
      accompanying consolidated statements of operations. See Note 11 - Discontinued
      Operations.




**NOTE
      2 - Related Party Transactions**




H.
      Dean
      Cubley, a former director of the company, is the holder of a promissory note
      with a remaining principal amount of $1,924,000. The note is allegedly in
      default and the company is accruing interest under the terms of the original
      agreement. The note was issued upon the modification of outstanding options
      for
      57,143 common shares and reflects a guaranteed compensation of the modified
      options equivalent to $61.25 less the option strike price. Interest payable
      was
      $592,000 and $506,000 has been accrued as of November 30, 2006 and August 31,
      2006, respectively. In August 2006, Mr. Cubley filed a lawsuit against the
      company for non-payment of the note. (See Note 7 - Legal Proceedings.) The
      note
      payable and accrued interest are classified in the Balance Sheet as Accrued
      Expenses - Related Party.




**NOTE
      3 - 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:




November,
                30 2006
            
            August
                31, 2006Raw
                Materials
            
            $
            294
            
            $
            288Work
                in Process
            
            
            140
            
            
            169Finished
                Goods
            
            
            251
            
            
            277$
            685
            
            $
            734




**NOTE
      4 - Notes Payable and Long-Term Debt**




The
      following table lists the company’s note obligations as of November 30, 2006,
      and August 31, 2006 (in thousands):




Annual
                Interest Rate
            
            Due
                Date
            
            November
                30, 2006
            
            August
                31, 2006Notes
                payable & long-term debt:
            
            
            
            
            
            (Unaudited)
            
            (Audited)Dutchess
                convertible note and warrant, net ofdiscount
                of $73,996 at November 30, 2006 and$334,593
                at August 31, 2006
            
            
            12%
            
            
            May
                2007
            
            $
            250
            
            
            $
            480Dutchess
                promissory note, net of discount of $2,740,487at
                November 30, 2006 and $4,288,389 at August 31,2006
            
            
            
            
            
            July
                2008
            
            
            3,677
            
            
            
            3,835Tail
                Wind non-convertible promissory note andconvertibles
                notes, net of discount of $65,320 atNovember
                30, 2006 and $149,618 at August 31, 2006
            
            
            0%
            
            
            March
                2008
            
            
            3,050
            
            
            
            4,625Note
                with related party
            
            
            25%
            
            
            August
                2006
            
            
            —
            
            
            
            200Notes
                payable
            
            
            Various
            
            
            Various
            
            
            60
            
            
            
            92Less
                compound embedded derivative and warrant liability
            
            
            
            
            
            
            
            
            (3,177
            )
            
            
            (3,799
            )Total
                debt
            
            
            
            
            
            
            
            $
            3,860
            
            
            $
            5,433Less
                current maturities
            
            
            
            
            
            
            
            
            (3,592
            )
            
            
            (3,990
            )Total
                long-term debt
            
            
            
            
            
            
            
            $
            268
            
            
            $
            1,443




The
      convertible notes and warrants issued during the second quarter of 2006 have
      been accounted for in accordance with SFAS 133 and EITF No. 00-19, “Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock.”




**NOTE
      5 - Stock Options and Warrants**




In
      June
      2005, the Board of Directors adopted, and the company’s shareholders approved,
      the 2005 Employee Stock Option Plan under which 30,000,000 shares of the
      company’s common stock have been reserved for issuance. In February 2006, the
      Executive Committee of the Board of Directors of the company voted to amend
      the
      Plan to reduce the shares available for issuance under the Plan from 30,000,000
      to 20,000,000. On May 12, the company effected a 1-for-35 reverse stock split,
      which reduced the number of shares available for issuance under the Plan to
      571,429. As of November 30, 2006, 140,408 shares of common stock have been
      issued under the Plan, and options issued under the Plan covering 328,857 shares
      were outstanding, of which 226,762 were exercisable.




The
      weighted average fair value of the options granted during the quarter ended November
      30 ,
      2006,
      is estimated at $0.51 on the date of grant. The fair values of the options
      granted during the quarter ended November 30, 2006, were determined using a
      Black-Scholes option-pricing model with the following assumptions: dividend
      yield of 0%, volatility of 75%, risk-free interest rate of 4.45% and an expected
      life of 5 years.




Option
      and warrant activity, including employees and third parties, was as follows
      for
      the three months ended November 30, 2006:




Shares
            
            
            Weighted
                Average Exercise PriceOutstanding
                at beginning of period
            
            
            474,040
            
            
            $
            20.95Granted
            
            
            348,917
            
            
            
            0.61Assumed
                through acquisitions
            
            
            —
            
            
            
            —Exercised
            
            
            —
            
            
            
            —Forfeited/cancelled
            
            
            (4,693
            )
            
            
            10.87Outstanding
                at end of period
            
            
            818,264
            
            
            $
            12.09Exercisable
                at end of period
            
            
            710,454
            
            
            $
            12.48




information
      about options and warrants outstanding was as follows at November 30,
      2006:




Range
                of Exercise Prices
            
            Number
                Outstanding
            
            Avg.
                Remaining Contractual Life in Years
            
            Average
                Exercise Price
            
            Number
                Exercisable
            
            Average
                Exercise Price$0.60
                - $1.00
            
            449,872
            
            4.26
            
            $    
                0.62
            
            449,872
            
            $   
                 0.62$1.00
                - $9.45
            
            276,322
            
            3.23
            
            $   
                 6.45
            
            181,444
            
            $    
                6.34$14.00
                - $45.85
            
            69,213
            
            2.45
            
            $  
                26.46
            
            56,281
            
            $   25.56$262.50
            
            22,857
            
            1.65
            
            $
                262.50
            
            22,857
            
            $
                262.50818,264
            
            3.68
            
            $  
                12.09
            
            710,454
            
            $   12.48




**NOTE
      6 - Risk Factors**




Financial
      instruments that potentially subject the company to concentrations of credit
      risk consist principally of trade accounts receivable. The company controls
      credit risk associated with its receivables through credit checks and approvals,
      credit limits, and monitoring procedures. Generally, the company requires no
      collateral from its customers. Four customers comprise 18%, 14%, 11% and 11%,
      respectively, of outstanding receivables at November 30, 2006. Two customers
      comprise 34% and 13%, respectively, of outstanding accounts receivable at August
      31, 2006.




For
      the
      three months ended November 30, 2006, substantially all of the company’s
      business activities have remained within the United States. Approximately 22%
      of
      the company’s revenues and receivables have been created solely in the state of
      Texas, 0% in the international market, and the approximate 78% remainder
      relatively evenly over the rest of the nation during the three months ended
      November 30, 2006; whereas approximately 30% of the company’s revenues and
      receivables were created solely in the state of Texas, 0% in the international
      market, and the approximate 70% remainder relatively evenly over the rest of
      the
      nation during the three months ended November 30, 2005.




The
      company maintains cash deposits in banks which from time to time exceed the
      amount of deposit insurance available. Management periodically assesses the
      financial condition of the institutions and believes that any potential credit
      loss is minimal.




**NOTE
      7 - Commitments and Contingent Liabilities**




**Leases**




For
      the
      three months ended November 30, 2006 and 2005, rental expenses of approximately
      $76,000 and $77,000, respectively, were incurred. Future minimum rental payments
      under the company’s primary office lease are as follows:




August
                31,
            
            AmountFor
                the nine months ending
            2007
            
            $
            231,230For
                the year ending
            2008
            
            
            325,316For
                the year ending
            2009
            
            
            243,987Total
            
            $
            800,533


**Legal
      Proceedings**




In
      August
      2006, Eagle became a defendant in H. Dean Cubley vs. Eagle Broadband, Inc.
      Mr.
      Cubley, a former director of the company, filed a lawsuit against the company
      seeking to enforce a promissory note entered into by the company in December
      2003, in lieu of the issuance of shares for stock options then held by Mr.
      Cubley, who was at the time Chairman of the Board of the company. The lawsuit
      seeks recovery of the principal balance of approximately $1.9 million plus
      $541,000 in interest. The company has asserted defenses, including a defense
      that the execution of the promissory note by the company was induced by
      misrepresentations. The company believes Mr. Cubley’s claims are without merit
      and intends to vigorously defend the lawsuit. The company has accrued $2.4
      million in connection with this claim.




In
      May
      2006, Eagle filed a demand for arbitration before JAMS in Los Angeles,
      California, in connection with an agreement between the company and GlobeCast
      North America Incorporated. The company is seeking an arbitral award declaring
      that either (i) both parties are excused from performance due to the
      existence of a force majeure event or (ii) the company is excused from
      performance due to GlobeCast’s prior breach of the agreement. GlobeCast denies
      that the agreement was unenforceable, that Eagle’s alleged failure
      to perform is excused and that there was a failure of any of the conditions
      precedent under the agreement. GlobeCast also asserts that Eagle owes GlobeCast
      at least $250,000 for Eagle’s alleged failure to pay GlobeCast in accordance
      with the agreement, and, in the alternative, owes GlobeCast at least $1.5
      million under a claim for restitution. The company believes that its claims
      are
      meritorious and intends to vigorously pursue them, and that GlobeCast’s claims
      lack merit and intends to vigorously defend itself against them. The company
      has
      accrued $250,000 in connection with this lawsuit.




In
      September 2005, the State of Texas filed a lawsuit against United Computing
      Group, Inc., and H. Dean Cubley, individually, for unpaid sales and use tax,
      interest and penalties in the amount of $568,637 for the time period of March
      1998 through December 2001. The company has accrued $560,000 in connection
      with
      this lawsuit.




In
      July
      2003, Eagle became a defendant in Cornell Capital Partners, L.P., vs. Eagle
      Broadband, Inc., et al., Civil Action No. 03-1860 (KSH), in the United States
      District Court for the District of New Jersey. The suit presents claims for
      breach of contract, state and federal securities fraud and negligent
      misrepresentation. Cornell also alleged that Eagle defaulted on a convertible
      debenture for failing to timely register the shares of common stock underlying
      the convertible debenture and is seeking to accelerate the maturity date of
      the
      debenture. In November 2003, the principal balance of the debenture was repaid,
      although the suit remains outstanding. Cornell claims damages of approximately
      $1.3 million. Eagle asserted counterclaims against Cornell for fraud and breach
      of contract in the amount of $2 million. In March 2006, the court ruled in
      favor
      of Cornell on certain claims, granting Cornell’s motion for partial summary
      judgment on its breach of contract claim and denying all of Eagle’s
      counterclaims. The court ruled in favor of Eagle on other claims, granting
      Eagle’s motion for summary judgment on Cornell’s claims of common law fraud,
      state and federal securities fraud, and negligent misrepresentation. The company
      has accrued $750,000 in settlement expense against this lawsuit.




In
      December 2000, Clearworks.net, Inc. became a defendant in State of Florida
      Department of Environmental Protection vs. Reco-Tricote, Inc., and Southeast
      Tire Recycling, Inc., currently known as Clearworks.net, Inc., in the Circuit
      Court of the Tenth Judicial Circuit in and for Polk County, Florida. The Florida
      DEP included Clearworks in a lawsuit 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 million, attorneys’ fees and cost of
      court. Clearworks denies the claims against it 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.




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




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




**NOTE
      8 - Earnings per Share**




The
      following is a reconciliation of the numerators and the denominators of the
      basic and diluted earnings per share computations for net income for the three
      months ended November 30, 2006 and 2005 (in thousands, except per share
      amounts):




For
                the three months ended November 30,2006
            
            2005Net
                Income
              /(Loss)
            
            Shares
            
            Per
                Share
            
            Net
                Income
              /(Loss)
            
            Shares
            
            Per
                Share**Continuing
                Operations:**
            
            
            
            
            
            
            
            
            
            
            (1)Basic
                EPSIncome
                available to common shareholders
            $
            (3,461)
            
            15,142
            
            (0.23)
            
            $
            (2,470)
            
            8,295
            
            (0.30)Effective
                of dilutive securities
            
            —
            
            —
            
            —
            
            
            —
            
            —
            
            —Diluted
                EPS
            $
            (3,461)
            
            15,142
            
            (0.23)
            
            $
            (2,470)
            
            8,295
            
            (0.30)**Discontinued
                Operations:**Basic
                EPSIncome
                available to common shareholders
            $
            —
            
            15,142
            
            —
            
            $
            (164)
            
            8,295
            
            (0.02)Effective
                of dilutive securities
            
            —
            
            —
            
            —
            
            
            —
            
            —
            
            —Diluted
                EPS
            $
            —
            
            15,142
            
            —
            
            $
            (164)
            
            8,295
            
            (0.02)**Total:**Basic
                EPSIncome
                available to common shareholders
            $
            (3,461)
            
            15,142
            
            (0.23)
            
            $
            (2,634)
            
            8,295
            
            (0.32)Effective
                of dilutive securities
            
            —
            
            —
            
            —
            
            
            —
            
            —
            
            —Diluted
                EPS
            $
            (3,461)
            
            15,142
            
            (0.23)
            
            $
            (2,634)
            
            8,295
            
            (0.32)




(1)  The
      number of shares and per share amounts have been restated to reflect the impact
      of the May 12, 2006 one-for-thirty five reverse stock split.




**NOTE
      9 - Major Customer**




The
      company had gross sales of $968,000 and $1,332,000 for the three months ended
      November 30, 2006 and 2005, respectively. The company had three customers that
      represented approximately 14%, 12%, and 10%, respectively, of the gross sales
      for the three months ended November 30, 2006, and had two customers that
      represented 33% and 10%, respectively, of the gross sales for the three months
      ended November 30, 2005.




**NOTE
      10 - Industry Segments**




This
      summary reflects the company’s current and past operating segments, as described
      below. All have ceased operations except Eagle Broadband, Inc. and Eagle
      Broadband Services, Inc.




**Eagle:**




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




**EBS/DSS:**




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




D.S.S.
      Security, Inc. (DSS) was a wholesale security monitoring company.




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




**APC/HSI:**




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




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




**UCG:**




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




**Other:**




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




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




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




For
      the
      three months ended November 30 ,
      2006




APC/HSI
            
            EBS/DSS
            
            UCG
            
            Eagle
            
            Other
            
            Elim.
            
            ConsolRevenue
            
            
            
            
            $
            —
            
            
            137
            
            
            —
            
            
            831
            
            
            —
            
            
            —
            
            
            968Segment
                Loss
            
            
            
            
            
            —
            
            
            (182
            )
            
            —
            
            
            (2,292
            )
            
            —
            
            
            —
            
            
            (2,474
            )Total
                Assets
            
            
            
            
            
            (8,918
            )
            
            (28,132
            )
            
            (3,099
            )
            
            86,421
            
            
            16,320
            
            
            (43,112
            )
            
            19,480Capital
                Expenditures
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            532
            
            
            —
            
            
            —
            
            
            532Depreciation
                and amortization
            
            
            
            
            
            —
            
            
            178
            
            
            1
            
            
            46
            
            
            —
            
            
            —
            
            
            225




For
      the
      three months
      ended November
      30 ,
      2005




APC/HSI
            
            EBS/DSS
            
            UCG
            
            Eagle
            
            Other
            
            Elim.
            
            ConsolRevenue
            
            
            
            
            $
            —
            
            
            250
            
            
            —
            
            
            1,082
            
            
            —
            
            
            —
            
            
            1,332Segment
                Loss
            
            
            
            
            
            1
            
            
            (630
            )
            
            (1
            )
            
            (1,846
            )
            
            —
            
            
            —
            
            
            (2,476
            )Total
                Assets
            
            
            
            
            
            (8,975
            )
            
            (16,280
            )
            
            (3,778
            )
            
            94,989
            
            
            16,305
            
            
            (43,111
            )
            
            39,150Capital
                Expenditures
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            2
            
            
            —
            
            
            —
            
            
            2Depreciation
                and amortization
            
            
            
            
            
            —
            
            
            325
            
            
            1
            
            
            247
            
            
            —
            
            
            —
            
            
            573




Reconciliation
      of Segment Loss from Operations to Net Loss




Three
                Months Ended
              November
                30,2006
            
            2005Total
                segment loss from operations
            
            $
            (2,474
            )
            $
            (2,476
            )Total
                other income (expense)
            
            
            (987
            )
            
            6Net
                loss
            
            $
            (3,461
            )
            $
            (2,470
            )




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




**NOTE
      11 - Discontinued Operations**




On
      February 28, 2006, the company entered into an asset purchase agreement with
      a
      third party to acquire the assets of D.S.S. Security, Inc. for a purchase price
      of $1,400,000. The
      following table reports the results of the component of Eagle’s operations
      reported as discontinued operations:




Three
                months ended
              November
                30, 20062006
            
            
            2005Broadband
                services revenues:Sale
                of security contracts
            
            $
            —
            
            $
            383Security
                monitoring revenue
            
            
            —
            
            
            220Total
                revenue from discontinued operations
            
            
            —
            
            
            603Cost
                of goods sold for security contracts sold
            
            
            —
            
            
            290Operating
                expenses
            
            
            —
            
            
            477Net
                income (loss) on discontinued operations
            
            $
            —
            
            $
            (164
            )




In
      accordance with the provisions of Statement of Financial Accounting Standard, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* (“SFAS
      No. 144”), the results of operations of the disposed assets and the losses
      related to this sale have been classified as discontinued operations for all
      periods presented in the accompanying consolidated statements of
      operations.







**NOTE
      12 - Financial Condition and Going Concern**




The
      company has incurred a loss for the three months ended November 30, 2006, of
      $3,461,000 and has an accumulated deficit at November 30, 2006, of $244,510,000.
      Because of its losses, the company will require additional working capital
      to
      develop its business operations. The company intends to raise additional working
      capital through private placements, public offerings and/or bank
      financing.




There
      are
      no assurances that the company will be able to either (1) achieve a level of
      revenues adequate to generate sufficient cash flow from operations or (2) obtain
      additional financing through either private placements, public offerings and/or
      bank financing necessary to support the company’s working capital requirements.
      To the extent that funds generated from operations and any private placements,
      public offerings and/or bank financing are insufficient, the company will have
      to raise additional working capital. No assurance can be given that additional
      financing will be available, or if available, will be on terms acceptable to
      the
      company.




These
      conditions raise substantial doubt about the company’s ability to continue as a
      going concern. The financial statements do not include any adjustments that
      might be necessary should the company be unable to continue as a going
      concern.




Management
      is pursuing additional financing and is evaluating all financing options
      currently available to the company. The company currently has available a
      $5,000,000 equity line of credit to help fund working capital
      requirements.




Management
      will continue to direct all efforts to the delivery of the IPTVComplete solution
      to the market. During the year ended August 31, 2006, the company has exited
      the
      residential security monitoring business, entered into an operations agreement
      with a third party to operate the majority of Eagle’s traditional cable
      business, and materially reduced operating expenses and headcount. In continued
      efforts to improve the operating position of the company, management is
      implementing further cost cutting efforts which are expected to further reduce
      operating expenses during the current fiscal year. However, there can be no
      assurance that the company will be successful in achieving its
      objectives.




**NOTE
      13 - Subsequent Events**




In
      November 2006, the company received notice from the American Stock Exchange
      (the
“Amex”) that the company is not currently satisfying certain of the Exchange’s
      continued listing standards in Section 1003 of the Amex Company Guide concerning
      shareholders equity and losses from continuing operations. The company has
      been
      afforded the opportunity to submit a plan of compliance to Amex that
      demonstrates the company’s ability to satisfy Section 1003 of the Company Guide
      by May 29, 2008. The company submitted such a plan on January 5, 2007. With
      Amex’s acceptance of the plan, the company expects to continue its listing
      during the plan period of up to 18 months, during which time the company will
      be
      subject to periodic review to determine whether it is making progress consistent
      with the plan. If Amex does not accept the company’s plan, or if accepted, the
      company is not in compliance with the continued listing standards at the end
      of
      the plan period or the company does not make progress consistent with the plan
      during such period, then Amex may initiate delisting proceedings.




In
      December 2006, the company entered into an agreement with Connex Services,
      Inc.
      (“Connex”), pursuant to which the company acquired all of Connex’s customers
      effective January 2, 2007. Connex is a Houston-based IT services company
      providing national and international project management services for data,
      voice, fiber-optic, wireless, hospitality systems, access control, audio and
      satellite installations. The acquired customer base consists of more that 50
      clients, currently generating revenue at a rate of $600,000 annually. Connex
      received 1,203,774 shares of unregistered common stock of the company. In
      accordance with the agreement, on December 22, 2006, the company filed a
      registration statement with the SEC to register 754,717 of those shares for
      resale by Connex, which registration statement was declared effective by the
      SEC
      on January 10, 2007.




In
      December 2006, the company entered into a short-term promissory note with Ron
      Persons, the brother of Lorne Persons, Jr., a member of the company’s Board of
      Directors. The note has a principal balance of $250,000 and an annual interest
      rate of 25%. The note is to be paid in full by April 12, 2007. The proceeds
      were
      used for working capital requirements.




In
      December 2006, the company issued a total of 1,170,630 shares of common stock
      to
      The Tail Wind Fund Ltd. in connection with conversions of one of the convertible
      notes held by Tail Wind, reducing the balance of such note by
      $600,000.




In
      January 2007, the company entered into a private equity credit agreement with Brittany
      Capital Management Limited (“Brittany”) for a $5,000,000 equity line of credit.
      The company has agreed to file a registration statement to register shares
      for
      resale by Brittany that it may purchase from us under this
      agreement.







**Item
      2.****Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations**




The
      following discussion and analysis should be read in conjunction with the
      Financial Statements and Notes thereto appearing elsewhere in this Form 10-Q.
      Information included herein relating to projected growth and future results
      and
      events constitutes forward-looking statements. Actual results in future periods
      may differ materially from the forward-looking statements due to a number of
      risks and uncertainties, including but not limited to fluctuations in the
      construction, technology, communications and industrial sectors; the success
      of
      the company’s restructuring and cost reduction plans; the success of the
      company’s competitive pricing; the company’s relationship with its suppliers;
      relations with the company’s employees; the company’s ability to manage its
      operating costs; the continued availability of financing and
      working capital to fund business operations ;
      governmental regulations, risks associated with regional, national, and world
      economies ;
      and the
      ability to enter into strategic, profitable business relationships relating
      to
      our products and services .
      Any
      forward-looking statements should be considered in light of these factors. Eagle
      cannot guarantee future results, levels of activity, performance or
      achievements. Moreover, neither Eagle nor any other person assumes
      responsibility for the accuracy and completeness of these forward-looking
      statements. Eagle is under no duty to update any of the forward-looking
      statements after the date of this report to conform its prior statements to
      actual results.




**Executive
      Overview**




Eagle
      Broadband, Inc. (the “company” or “Eagle”), is a provider of Internet protocol
      (IP), information technology services and satellite communications products
      and
      services. The company’s product offerings are:




·
            IPTVCompleteTM,
                delivering over 250 channels of digital television and music content
                via
                IP to many market sectors, such as to multi-dwelling unit operators
                (e.g.,
                condominiums), triple-play operators (Internet data, phone and television,
                all over IP) or telephone companies, including our MediaPro standard
                or
                high-definition set-top boxes for both hospitality and IPTV
                customers;




·
            IT
                Services, through which we provide various IP and satellite-related
                technology implementations to a broad cross section of markets, including
                remote network management, structured cabling and IT integration
                services;
                and




·
            SatMAX®,
                our patented satellite telephony extension technology for indoor
                applications for enterprise, military and other government customers,
                especially in portable first responder situations with our Alpha
“SatMAX
                in a Suitcase” model.




In
      December 2006, the company entered into an agreement with Connex Services,
      Inc.
      (“Connex”), pursuant to which the company acquired all of Connex’s customers
      effective January 2, 2007. Connex is a Houston-based IT services company
      providing national and international project management services for data,
      voice, fiber-optic, wireless, hospitality systems, access control, audio and
      satellite installations. The acquired customer base consists of more that 50
      clients, currently generating revenue at a rate of $600,000 annually. Connex
      received 1,203,774 shares of unregistered common stock of the company. In
      accordance with the purchase agreement, on December 22, 2006, the company filed
      a registration statement with the SEC to register 754,717 of those shares for
      resale by Connex, which registration statement was declared effective by the
      SEC
      on January 10, 2007.




In
      September 2006, our super-headend facility in Miami, Florida, became
      operational. Over 250 channels of digital television and music content are
      now
      streaming in IP format from NewCom International’s Florida teleport to the NAP
      of the Americas for distribution over fiber to our IPTV customers. The
“light-up” of this facility gives us the operational capability to collect and
      digitize a wide range of television content from up to 30 satellites over North
      America plus other Latin-content satellites over the Atlantic Ocean. Using
      21
      signal feeds from seven satellite dishes, our new super-headend facility
      currently delivers a broad range of cable channel content.




In
      June
      2006, the company brought to market a new high definition set-top box, the
      IP3000HD. The IP3000HD is a highly capable, yet inexpensive solution for both
      hospitality markets and IPTV customers. This
      set-top box also supports the H.264 standard for MPEG-4 and, therefore, can
      be
      used by specialty content owners to deliver their IPTV content over the open
      Internet, which is a different approach than that used by IPTVComplete, which
      is
      a closed IP network solution.




During
      fiscal year 2006, the company exited the residential security monitoring
      business, entered into an operations agreement with a third party to operate
      the
      majority of Eagle’s traditional cable business, and materially reduced operating
      expenses and headcount. In continued efforts to improve the operating position
      of the company, management is implementing further cost cutting efforts which
      are expected to further reduce operating expenses over the next six
      months.




As
      of
      November 30, 2006, the company’s active subsidiaries were Eagle Broadband
      Services, Inc. and EBI Funding Corp. Additionally, Eagle has a number of
      inactive subsidiaries that had results in one or more of the periods included
      in
      the financial statements covered by this report. These inactive subsidiaries
      include: D.S.S. Security, Inc., Clearworks Communications, Inc., Clearworks.net,
      Inc., Clearworks Home Systems, Inc., Contact Wireless, Inc., United Computing
      Group, Inc., Atlantic Pacific Communications, Inc., and Link Two Communications,
      Inc. Eagle has incorporated certain ongoing operations of the inactive subsidiaries
      into the active subsidiaries listed above including Atlantic Pacific
      Communications, Inc. and Clearworks Communications, Inc. The consolidated
      financial statements include the accounts of the company and its subsidiaries.
      All significant intercompany transactions and balances have been eliminated
      in
      consolidation.




We
      intend
      for this discussion to provide the reader with information that will assist
      in
      understanding our financial statements, the changes in certain key items in
      those financial statements from year to year, and the primary factors that
      accounted for those changes, as well as how certain accounting principles affect
      our financial statements. The discussion also provides information about the
      financial results of the various segments of our business to provide a better
      understanding of how those segments and their results affect the financial
      condition and results of operations of the company as a whole. This discussion
      should be read in conjunction with our financial statements and accompanying
      notes for the three months ended November 30, 2006.




**Results
      of Operations**




**Three
      Months Ended November 30, 2006, Compared to Three Months Ended November 30,
      2005**




The
      following table sets forth summarized consolidated financial information for
      the
      three months ended November 30, 2006 and 2005:




**Condensed
      Financial Information**




*($
                in thousands)*
            
            Three
                Months Ended November 30,2006
            
            
            2005
            
            
            $
                Change
            
            
            %
                ChangeNet
                sales
            
            $
            968
            
            
            $
            1,332
            
            
            $
            (364
            )
            
            
            (27
            %)Cost
                of goods sold
            
            
            1,098
            
            
            
            1,128
            
            
            
            (30
            )
            
            
            (3
            %)Gross
                profit
            
            
            (130
            )
            
            
            204
            
            
            
            (334
            )Percent
                of sales
            
            
            (13.4%
            )
            
            
            15.3
            %Operating
                expenses
            
            
            2,344
            
            
            
            2,680
            
            
            
            (336
            )
            
            
            (13
            %)Loss
                from operations
            
            
            (2,474
            )
            
            
            (2,476
            )
            
            
            2
            
            
            
            —Other
                income (expense)
            
            
            (987
            )
            
            
            6
            
            
            
            (993
            )
            
            
            (16550
            %)Loss
                from continuing operations
            
            
            (3,461
            )
            
            
            (2,470
            )
            
            
            (991
            )
            
            
            40
            %Loss
                from discontinued operations
            
            
            —
            
            
            
            (164
            )
            
            
            164
            
            
            
            (100
            %)Net
                Loss
            
            $
            (3,461
            )
            
            $
            (2,634
            )
            
            $
            (827
            )
            
            
            31
            %




**Overview**




For
      the
      three months ended November 30, 2006, the results of operations reflects a
      continued emphasis on management’s strategy to focus on business opportunities
      in its three main operating divisions: IPTV solutions, satellite communications
      and information technology services. For the quarter ended November 30, 2006,
      the company’s consolidated operations generated net sales of $968,000, with a
      corresponding negative gross profit of $130,000. The overall decrease in net
      sales for the three months ended November 30, 2006, as compared to the three
      months ended November 30, 2005, was primarily attributable to sales
      in
      the prior quarter of $436,000 to a major customer and no similar sales to this
      customer in the current quarter. The company exited the residential security
      monitoring business in February 2006, and management anticipated replacing
      the
      recurring revenues from security monitoring with recurring revenues for delivery
      of the IPTVComplete solution. Due to unforeseen delivery complications, this
      did
      not occur for the quarter ended November
      30 ,
      2006.
      Management anticipates the revenue stream from IPTVComplete to begin occurring
      in the second quarter of the current fiscal year.




The
      company’s operating loss for the three months ended November 30, 2006, was
      basically unchanged from the three-month period ended November 30, 2005.
      However, in the three-month period ended November 30, 2005, the company
      recognized a credit to bad debt expense of approximately $900,000 due to the
      collection of a receivable in November 2005 of an account previously deemed
      uncollectible. Without this credit, the operating loss for that three-month
      period, would have been approximately $3.4 million, compared to $2.5 million
      for
      the current three-month period. The primary reason for this decline in operating
      loss was due to a reduction in operating expenses of approximately $1.2 million
      when compared to operating expenses for the prior three-month period excluding
      the $900,000 credit to bad debt expense. This operating expense reduction was
      partially offset by a $334,000 reduction in gross profit. The primary reason
      for
      the negative gross profit was due to low
      margins in IT services and product sales, a lower than expected volume of
      product sales and the absorption of product warranty costs during the
      quarter.




The
      company’s net loss from continuing operations for the three months ended
      November 30, 2006, was $3,461,000, which includes $695,000 in interest expense,
      $392,000 of which was a non-cash charge, and other non-cash charges of $144,000
      of losses on the retirement of debt with stock, $225,000 of depreciation and
      amortization expense and $159,000 of derivative expense. The net loss from
      continuing operations for the prior three-month period was $2,470,000. During
      this prior period, the company did not incur any losses on debt retirement
      or
      derivative expense, and only $2,000 in interest expense.




*Sales
      Information*




Set
      forth
      below is a table presenting summarized sales information for our business
      segments for the three months ended November 30, 2006 and 2005:




*($
                in thousands)*
            
            Three
                months ended November 30,2006
            
            %
                of Total
            
            
            2005
            
            %
                of Total
            
            
            $
                Change
            
            
            %
                ChangeStructured
                wiring
            
            $
            432
            
            
            45
            %
            
            $
            422
            
            
            32
            %
            
            $
            10
            
            
            
            2
            %Broadband
                services
            
            
            137
            
            
            14
            %
            
            
            250
            
            
            19
            %
            
            
            (113
            )
            
            
            (45
            %)Products
            
            
            399
            
            
            41
            %
            
            
            622
            
            
            47
            %
            
            
            (223
            )
            
            
            (36
            %)Other
            
            
            —
            
            
            —
            
            
            
            38
            
            
            2
            %
            
            
            (38
            )
            
            
            (100
            %)Total
            
            $
            968
            
            
            100
            %
            
            $
            1,332
            
            
            100
            %
            
            $
            (364
            )
            
            
            (27
            %)




For
      the
      three months ended November 30, 2006, net sales decreased to $968,000 from
      $1.3
      million in the three-month period ended November 30, 2005. This 27% decrease
      was
      attributable to a decrease in product sales and broadband services. The decrease
      in product sales reflects sales in the prior quarter of $436,000 to a major
      customer and no similar sales to this customer in the current quarter. The
      decrease of $113,000 in broadband services is primarily attributable to
      management’s decision to contract with a third party to operate a majority of
      the company’s bundled services business. The company expects sales from its
      IPTVComplete service to begin in the second quarter of fiscal 2007.




*Cost
      of Goods Sold*




The
      following table sets forth summarized cost of goods sold information for the
      three ended November 30, 2006 and 2005:




*($
                in thousands)*
            Three
                Months Ended November 30,2006
            
            2005
            
            $
                Change
            
            %
                ChangeDirect
                labor and related costs
            $
            173
            
            $
            293
            
            $
            (120)
            
            (41%)Products
                and integration services
            
            438
            
            
            255
            
            
            183
            
            72%Structured
                wiring labor and material
            
            407
            
            
            289
            
            
            118
            
            41%Broadband
                services costs
            
            22
            
            
            62
            
            
            (40)
            
            (65%)Depreciation
                and amortization
            
            58
            
            
            229
            
            
            (171)
            
            (75%)Total
                cost of goods sold
            $
            1,098
            
            $
            1,128
            
            $
            (30)
            
            (3%)




For
      the
      three months ended November 30, 2006, cost of goods sold was relatively
      unchanged from the prior three-month period. Direct labor and related costs
      and
      broadband services and costs decreased by an aggregate of $160,000 due to
      workforce reductions and reductions in other costs primarily related to
      management’s decision to contract with a third party to operate a majority of
      the company’s bundled services business. These reductions were offset by
      increases of $183,000 in products and integration services and $118,000 in
      structured wiring labor and materials. These increases were due to product
      warranty costs incurred during the quarter, higher than expected costs in
      structured wiring, and an increase in product costs. Depreciation expenses
      decreased by $171,000 due to the impairment of long-lived assets in the year
      ended August 31, 2006.




*Operating
      Expenses*




The
      following table sets forth summarized operating expense information for the three
      months ended November 30 ,
      2006
      and 2005:




*($
                in thousands)*
            
            Three
              Months Ended November 30,2006
            
            
            2005
            
            $
                Change
            
            
            %
                ChangeSalaries
                and related costs
            
            
            $
            757
            
            
            $
            1,144
            
            $
            (387
            )
            
            
            (34
            %)Advertising
                and promotion
            
            
            
            55
            
            
            
            31
            
            
            24
            
            
            
            77
            %Depreciation
                and amortization
            
            
            
            167
            
            
            
            344
            
            
            (177
            )
            
            
            (51
            %)Research
                and development
            
            
            
            (14
            )
            
            
            105
            
            
            (119
            )
            
            
            (113
            %)Other
                support costs
            
            
            
            1,379
            
            
            
            1,056
            
            
            323
            
            
            
            31
            %Total
                Operating Expenses
            
            
            $
            2,344
            
            
            $
            2,680
            
            $
            (336
            )
            
            
            (13
            %)




The
      following table breaks out “Other support costs” information as presented in the
      preceding table for the three
      months ended November 30 ,
      2006
      and 2005:




*($
                in thousands)*
            
            Three
                Months Ended November 30,2006
            
            2005
            
            
            $
                Change
            
            
            %
                ChangeAuto
                related
            
            
            $
            10
            
            $
            19
            
            
            $
            (9
            )
            
            
            (47
            %)Bad
                debt (recovery)
            
            
            
            2
            
            
            (904
            )
            
            
            906
            
            
            
            (100
            %)Delivery
                and postage
            
            
            
            6
            
            
            155
            
            
            
            (149
            )
            
            
            (96
            %)Fees
            
            
            
            11
            
            
            7
            
            
            
            4
            
            
            
            57
            %Insurance
                and office
            
            
            
            105
            
            
            93
            
            
            
            12
            
            
            
            13
            %Professional
                and contract labor
            
            
            
            842
            
            
            989
            
            
            
            (147
            )
            
            
            (15
            %)Rent
            
            
            
            76
            
            
            89
            
            
            
            (13
            )
            
            
            (15
            %)Repairs
                and maintenance
            
            
            
            6
            
            
            29
            
            
            
            (23
            )
            
            
            (79
            %)Travel
            
            
            
            78
            
            
            82
            
            
            
            (4
            )
            
            
            (5
            %)Taxes
            
            
            
            3
            
            
            167
            
            
            
            (164
            )
            
            
            (98
            %)Telephone
                and utilities
            
            
            
            72
            
            
            135
            
            
            
            (63
            )
            
            
            (47
            %)Other
            
            
            
            168
            
            
            195
            
            
            
            (27
            )
            
            
            (13
            %)Total
                Other Support Costs
            
            
            $
            1,379
            
            $
            1,056
            
            
            $
            323
            
            
            
            31
            %




For
      the
      three months ended November 30, 2006, operating expenses decreased by 13% to
      $2,344,000, as compared to $2,680,000 for the three months ended November 30,
      2005. Excluding the previously mentioned credit to bad debt expense related
      to
      the collection of receivables in November 2005 that were previously deemed
      uncollectible, operating expenses decreased about 35%, declining from
      approximately $3.6 million to approximately $2.3 million. The primary reasons
      for this reduction are discussed below:




·
            Salaries
                and related costs declined $387,000 due to a significant reduction
                in the
                company’s workforce.




·
            A
                $177,000 decrease in depreciation and amortization expense for long-lived
                assets and intangibles. These assets had impairment charges recorded
                for
                the year ended August 31, 2006, thus decreasing the depreciable basis
                and
                related depreciation expense for the quarter ended November 30,
                2006.




·
            Delivery
                and postage expenses were significantly lower as the prior quarter
                reflects higher than normal delivery costs associated with warranty
                work.




·
            A
                $147,000 decrease in professional and contract labor due to a reduction
                in
                legal, accounting and consultant
                fees.




·
            A
                $164,000 reduction in taxes due to a decrease in property tax valuations
                relating to the impairment of long-lived
                assets.




·
            Telephone
                and utilities declined $63,000 related to workforce reductions and
                a
                corresponding reduction in office space
                requirements.




The
      $14,000 credit amount in research and development expense is related to the
      reversal of an accrual of approximately $78,000 from the prior
      quarter. Research and development expense for the current quarter was
      approximately $64,000.




**Changes
      in Cash Flow**




Eagle’s
      operating activities used net cash of $2,430,000 in the three months ended
      November 30, 2006, compared to $2,855,000 in the three months ended November
      30,
      2005. The decrease in net cash used by operating activities was primarily
      attributable to a decrease in the company’s operating expenses. Eagle’s
      investing activities provided net cash of $292,000 in the three months ended
      November 30, 2006, compared to cash provided of $777,000 in the three months
      ended November 30, 2005. The decrease was due to capital expenditures of
      $532,000 primarily for the completion of the super-headend in Miami, Florida,
      which was offset by the sale of equipment leases for $899,000. Eagle’s financing
      activities provided net cash of $116,000 in the three months ended November
      30,
      2006, compared to $91,000, of cash provided in the three months ended November
      30, 2005. During the first quarter, the company raised approximately $1.9
      million under its equity credit line, which was offset by paying down
      approximately $1.8 million of notes payable.




**Liquidity
      and Capital Resources**




In
      February 2006, the company entered into a series of agreements with Dutchess
      Private Equities Fund, L.P. (“Dutchess”), pursuant to which Dutchess provides a
      $5,000,000 equity line of credit for the company. Under this agreement, the
      company makes drawdown requests on the equity line, and Dutchess purchases
      a
      number of shares at a price equal 93% of the market price of our stock to fund
      the drawdown requests. The company has been using the equity line to provide
      funding for working capital requirements. As of January 9, 2007, the company
      has
      drawn down approximately $3.8 million and issued approximately 5.6 million
      shares to Dutchess pursuant to the equity line.




In
      March
      2006, we filed a registration statement with the SEC to register 351,429 shares
      for resale by Dutchess pursuant to the equity line. This registration statement
      was declared effective by the SEC on April 27, 2006. In May and August 2006,
      we
      filed registration statements to register an additional 2,000,000 and 2,500,000
      shares, respectively, for resale by Dutchess. These registration statements
      were
      declared effective by the SEC on May 25 and August 16, 2006, respectively.
      In
      November 2006, we filed a registration statement to register an additional
      2,800,000 shares for resale by Dutchess; however, the SEC only allowed the
      company to register an additional 925,000 shares, and that registration
      statement, as amended, was declared effective by the SEC on December 15, 2006.
      In addition to this limitation, the SEC required the company to represent that
      it would not seek to register additional shares for resale by Dutchess for
      at
      least six months.




To
      provide additional capital during this six-month period, the company recently
      entered into an agreement with Brittany Capital Management Limited (“Brittany”)
      for a $5,000,000 equity line of credit. Under this agreement, the company may
      request drawdowns by delivering a “put notice” to Brittany stating the dollar
      amount of shares we intend to sell to Brittany. The purchase price Brittany
      is
      required to pay for the shares is equal to 93% of the “market price.” The
“market price” is equal to the lowest closing best bid price during the pricing
      period. The pricing period is the five-trading-day period beginning on the
      day
      Brittany receives a drawdown request. The amount we may request in a given
      drawdown is the lesser of (i) 200% of the average daily U.S. market trading
      volume of our common stock for the three trading days prior to the request
      multiplied by the average of the three daily closing best bid prices immediately
      preceding our request, or (ii) $500,000 The company has agreed to file a
      registration statement to register shares for resale by Brittany that it may
      purchase from us under this new equity line of credit. In addition to this
      new
      equity line, the company is considering options for short-term debt
      financing.




Historically,
      we have relied upon third-party funding. Though we have been successful at
      raising additional capital on this basis in the past, we can provide no
      assurance that we will be successful in any future financing endeavors. If
      we
      are unable to timely utilize the equity line or raise additional financing,
      we
      will need to curtail operations or sell assets. The company will continue to
      rely upon financing from external sources to fund its operations for the
      foreseeable future, and it will need to raise additional financing to fund
      working capital requirements.




**Contractual
      Obligations**




The
      following table sets forth contractual obligations to be settled in cash as
      of
      November 30, 2006:




(*Thousands
                of dollars*)
              **Contractual
                Obligations**
            
            **Total**
            
            **Less
                than**
              **1
                year**
            
            **1-3
                years**
            
            **3-5
                years**
            
            **More
                than**
              **5
                years**Debt
                Obligations (Current & Long Term)
            
            $
            6,722
            
            $
            2,841
            
            $
            3,881
            
            $
            —
            
            $
            —Operating
                Lease Obligations
            
            
            801
            
            
            231
            
            
            570
            
            
            —
            
            
            —Total
            
            $
            7,523
            
            $
            3,072
            
            $
            4,451
            
            $
            —
            
            $
            —




The
      company’s contractual obligations consist of long-term debt and interest as set
      forth in Note 4 to the company’s financial statements, Notes Payable and
      Long-Term Debt, and certain obligations for office space operating leases
      requiring future minimal commitments under non-cancelable leases set forth
      in
      Note 7 - Commitments
      and Contingent Liabilities. Contractual obligations does not include
      approximately $600,000 of debt obligations that the company intends to settle
      in
      stock. (See Note 13-Subsequent Events.)




**Off-Balance
      Sheet Arrangements**




As
      of
      November 30, 2006, we did not have any significant off-balance-sheet
      arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation
      S-K.




**CRITICAL
      ACCOUNTING POLICIES**




The
      Consolidated Financial Statements and Notes to Consolidated Financial Statements
      contain information that is pertinent to this management’s discussion and
      analysis. Management strives to report the financial results of the company
      in a
      clear and understandable manner, even though in some cases accounting and
      disclosure rules are complex and require us to use technical terminology. In
      preparing our consolidated financial statements, we follow accounting principles
      generally accepted in the United States. These principles require us to make
      certain estimates and apply judgments that affect our financial position and
      results of operations as reflected in our financial statements. These judgments
      and estimates are based on past events and expectations of future outcomes.
      Management believes it has exercised proper judgment in determining these
      estimates based on the facts and circumstances available to its management
      at
      the time the estimates were made. Actual results may differ from our
      estimates.




Management
      continually reviews its accounting policies, how they are applied and how they
      are reported and disclosed in our financial statements. Following is a summary
      of our more significant accounting policies and how they are applied in the
      preparation of the financial statements.




**Revenue
      Recognition**




The
      company’s revenue recognition policy is objective in that it recognizes revenue
      when products are shipped or services are delivered. Accordingly, there are
      no
      estimates or assumptions that have caused deviation from its revenue recognition
      policy. Additionally, the company has a limited amount of sales returns which
      would affect its revenue earned.




Eagle
      accounts for arrangements that contain multiple elements in accordance with
      EITF
      00-21, “Revenue Arrangements with Multiple Deliverables”. 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.




**Allowance
      Method Used to Record Bad Debts**




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




**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.




**Impairment
      Assessment**




Statement
      of Financial Accounting Standards No. 142 (SFAS 142), “Goodwill and Other
      Intangible Assets” 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. The carrying amount of an intangible asset is not recoverable
      if
      it exceeds the sum of the undiscounted cash flows expected to result from the
      use and eventual disposition of the asset. That assessment shall be based on
      the
      carrying amount of the asset at the date it is tested for
      recoverability.




The
      company performed, with the assistance of independent valuation experts, an
      impairment test of the carrying value of intangible assets. Eagle has intangible
      assets related to goodwill, contracts, customers and subscribers. For the year
      ended August 31, 2006, the company determined there had been continued erosion
      of contract rights, customer relationships and other intangible assets primarily
      attributable to the BDS assets acquired in the January 2001 merger of
      Clearworks.net, Inc.




The
      company evaluated and considered two separate methodologies in conducting the
      analysis and selected the approach assigning the greater value realized from
      the
      present value technique or the quoted market approach. The following factors
      were considered (i) current market conditions, (ii) the company’s current and
      future financial performance, (iii) intrinsic risks evident in the markets
      in
      which the company operates and (iv) the underlying nature of Eagle’s operations
      and business.




Utilizing
      a fair value standard as set forth in SFAS 142, as of August 31, 2006,
      management determined an impairment charge of $3,427,830 existed for the
      intangible assets of contract rights, customer relationships and other
      intangible assets primarily attributable to the BDS assets acquired in the
      January 2001 merger of Clearworks.net, Inc.




Utilizing
      a fair value standard as set forth in SFAS 142, as of August 31, 2005,
      management determined an impairment charge of $23,913,000 existed for the
      intangible assets of contract rights, customer relationships and other
      intangible assets primarily attributable to the BDS assets acquired in the
      January 2001 merger of Clearworks.net, Inc.




Management
      assessed the fair value of intangibles and concluded that no impairment exists
      for the quarter ended November 30, 2006.




Eagle
      assessed the fair value of goodwill as of August 31, 2006 and concluded that
      the
      goodwill valuations remain at an amount greater than the current carrying asset
      value. Eagle assessed the fair value of the intangible assets as of August
      31,
      2005 and concluded that the goodwill and other intangible assets valuations
      remain at an amount greater than the current carrying and other intangible
      assets value. Eagle assessed the fair value of the intangible assets as of
      August 31, 2004 and concluded that the goodwill and other intangible assets
      valuations remain at an amount greater than the current carrying and other
      intangible assets value.




**Impairment
      of Long-Lived Assets**




Statement
      of Financial Accounting Standards No. 144 (SFAS 144), “Accounting for the
      Impairment or Disposal of Long-Lived Assets” requires that long-lived assets
      (asset groups) shall be tested for recoverability whenever events or change
      in
      circumstances indicate that its carrying amount may not be recoverable. The
      company’s market capitalization for the years ending August 31, 2006 and 2005,
      has been below the book value of these assets which indicated the need to test
      for recoverability. The company performed, with the assistance of independent
      valuation experts, tests to determine if an impairment loss existed. For
      purposes of recognition and measurement of an impairment loss, a long-lived
      asset is grouped with other assets at the lowest level for which identifiable
      cash flows are largely independent of the cash flows of other
      assets.




These
      tests took into consideration a number of factors including (i) current market
      conditions, (ii) the company’s current and future financial performance, (iii)
      intrinsic risks evident in the markets in which the company operates and (iv)
      the underlying nature of Eagle’s operations and business.




Utilizing
      a fair value standard as set forth in SFAS 144 as of August 31, 2006, management
      determined an impairment of $10,341,262 existed for certain Houston-area
      communities where broadband infrastructure had been installed.




Utilizing
      a fair value standard as set forth in SFAS 144 as of August 31, 2005, management
      determined an impairment of $3,230,000 existed for certain Houston-area
      communities where broadband infrastructure had been installed.




Management
      assessed the fair value of long-lived assets and concluded that no impairment
      exists for the quarter ended November 30, 2006.




**Accounting
      for Stock-Based Compensation**




In
      December 2004, the FASB issued a revision to SFAS 123 (also known as SFAS 123R)
      that amends existing accounting pronouncements for share-based payment
      transactions in which an enterprise receives employee and certain non-employee
      services in exchange for (a) equity instruments of the enterprise or (b)
      liabilities that are based on the fair value of the enterprise’s equity
      instruments or that may be settled by the issuance of such equity instruments.
      SFAS 123R eliminates the ability to account for share-based compensation
      transactions using APB 25 and generally requires such transactions be accounted
      for using a fair-value-based method. SFAS 123R’s effective date would be
      applicable for awards that are granted, modified, become vested, or settled
      in
      cash in interim or annual periods beginning after December 15, 2005. SFAS 123R
      includes three transition methods: one that provides for prospective application
      and two that provide for retrospective application. The company adopted SFAS
      123R prospectively commencing in the first quarter of the fiscal year ending
      August 31, 2006. The adoption of SFAS 123R will cause the company to record
      as
      expense each quarter a non-cash accounting charge approximating the fair value
      of such share-based compensation meeting the criteria outlined in the provisions
      of SFAS 123R.




**Derivative
      Financial Instruments**




The
      company accounts for all derivative financial instruments in accordance with
      SFAS No. 133. Derivative financial instruments are recorded as liabilities
      in
      the consolidated balance sheet, measured at fair value.




In
      connection with the sale of debt or equity instruments, we may sell options
      or
      warrants to purchase our common stock. In certain circumstances, these options
      or warrants may be classified as derivative liabilities, rather than as equity.
      Additionally, the debt or equity instruments may contain embedded derivative
      instruments, such as embedded derivative features, which in certain
      circumstances may be required to be bifurcated from the associated host
      instrument and accounted for separately as a derivative instrument
      liability.




Derivative
      instrument liabilities are re-valued at the end of each reporting period, with
      changes in the fair value of the derivative liability recorded as charges or
      credits to income in the period in which the changes occur. For options,
      warrants and bifurcated embedded derivative features that are accounted for
      as
      derivative instrument liabilities, we estimate fair value using either quoted
      market prices of financial instruments with similar characteristics or other
      valuation techniques. The valuation techniques require assumptions related
      to
      the remaining term of the instruments and risk-free rates of return, our current
      common stock price and expected dividend yield, and the expected volatility
      of
      our common stock price over the life of the option. We have estimated the future
      volatility of our common stock price based on not only the history of our stock
      price but also the experience of other entities considered comparable to us.
      The
      fair value of the derivative liabilities are subject to the changes in the
      trading value of the company’s common stock. As a result, the company’s
      financial statements may fluctuate from quarter to quarter based on factors
      such
      as the price of the company’s stock at the balance sheet date and the amount of
      shares converted by note holders and/or exercised by warrant holders.
      Consequently, our financial position and results of operations may vary from
      quarter to quarter based on conditions other than our operating revenues and
      expenses.




Under
      SFAS No. 133, all derivative financial instruments held by the company are
      not
      designated as hedges.




**Discontinued
      Operations**




In
      accordance with the provisions of Statement of Financial Accounting Standard, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* (“SFAS
      No. 144”), the results of operations of the disposed assets and the losses
      related to the sale of the component of residential security monitoring have
      been classified as discontinued operations for all periods presented in the
      accompanying consolidated statements of operations.




**Item
      4.****Controls
      and Procedures.**




The
      company’s Chief Executive Officer and Principal Accounting Officer have
      evaluated the effectiveness of the company’s disclosure controls and procedures
      (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as
      of
      the end of November 30, 2006. Based on such evaluation, such officers have
      concluded that the company’s disclosure controls and procedures are
      effective.




**Changes
      in Internal Controls**




There
      has
      been no change in the company’s internal control over financial reporting
      identified in connection with our evaluation as of the end of the fiscal quarter
      ended November 30, 2006, that has materially affected, or is reasonably likely
      to materially affect, the company’s internal controls over financial
      reporting.







**PART
      II-OTHER INFORMATION**




**Item
      1.****Legal
      Proceedings.**




In
      October 2005, the company filed a lawsuit in the Superior Court of California,
      Santa Clara County, Civil Action 1-05-CV-050179, against certain individuals
      for
      unfair business practices and defamation. The company believes these individuals
      have deliberately posted false and misleading information on the Yahoo! Finance
      message board for the purpose of injuring the company in several ways including,
      but not limited to, deflating the price of the company’s stock and reaping
      profits from their illegal activities. The company is seeking to enjoin these
      individuals from continuing such conduct, in addition to the full measure of
      damages and other remedies permitted by law. In August 2006, the court granted
      one of the defendant’s motions for attorneys fees and ordered Eagle to pay such
      defendant’s legal fees of approximately $66,000. Eagle is currently appealing
      this order, as well as the order granting such defendant’s motion to strike the
      complaint.




In
      December 2005, the company sued Neva Holdings, LLC (“Neva”) and other entities
      affiliated with Neva, Civil Action 05-CV-1525, in the United States District
      Court for the District of Nevada, for breach of the Termination Agreement
      entered into in August 2005 between the company and Neva. In December 2006,
      the
      company reached a settlement with all of the defendants.




**Item
      1A.****Risk
      Factors.**




***We
      have a history of operating losses and may never achieve
      profitability.***




From
      inception through November 30, 2006, we have incurred an accumulated deficit
      in
      the amount of $244,510,000. For the quarter ended November 30, 2006, we incurred
      losses from operations in the amount of $2,474,000. We anticipate that we will
      incur losses from operations for the foreseeable future. Our future revenues
      may
      never exceed operating expenses, thereby making the continued viability of
      our
      company dependent upon raising additional capital.




***As
      we have not generated positive cash flow from operations, our ability to
      continue operations is dependent on our ability to either begin to generate
      positive cash flow from operations or our ability to raise capital from outside
      sources.***




We
      have
      not generated positive cash flow from operations and have relied on external
      sources of capital to fund operations. At November 30, 2006, we had
      approximately $1,117,000 in cash, cash equivalents and securities available
      for
      sale, and a working capital deficit of approximately $12,506,000. Our net cash
      used by operations for the year ended November 30, 2006, was approximately
      $2,430,000.




**Item
      6.****Exhibits.**




Exhibit
                Number
            
            Description31.1
            
            Certification
                of Chief Executive Officer and Principal Accounting Officer pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002.32.1
            
            Certification
                of Chief Executive Officer and Principal Accounting Officer pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of
                2002.







**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.(Registrant)By:
                /s/ DAVID MICEKDavid
                Micek
              President
                and Chief Executive Officer
              and
                Principal Accounting OfficerDate:
                January 16, 2007